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Keywords

contracteminent domain
contractlitigationsummary judgmenteminent domain

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City of Starkville v. 4-County Elec. Power Ass’n, 819 So.2d 1216

Facts

In 1963, the City of Starkville and 4-County Electric Power Association entered into a Service Area Agreement allowing the City to purchase 4-County's service rights and distribution facilities upon annexation of property. After the City annexed property in 1994, it attempted to enforce the agreement, but 4-County refused, claiming the agreement was invalid due to changes in the law that removed the City's unqualified right to exercise eminent domain. The City then filed suit to enforce the agreement, but the chancery court ruled in favor of 4-County.

In 1963, the City and 4–County agreed in a Service Area Agreement that upon the City's annexation of property within 4–County's service area, the City would either purchase 4–County's service rights and distribution facilities or grant 4–County a franchise. Following an annexation in 1994, the City attempted to purchase 4–County's rights and facilities. 4–County refused, contending that changes in the law had invalidated the agreement. The City sought to specifically enforce the agreement in the Oktibbeha County Chancery Court. The chancery court granted summary judgment in favor of 4–County, finding that the agreement was invalid.

Issue

Whether the Service Area Agreement between the City of Starkville and 4-County Electric Power Association remains valid and enforceable despite the legislative changes affecting the City's right of eminent domain.

The overarching concern in this litigation is whether the contract at issue remains valid and enforceable despite the removal of the right of eminent domain, which was probably the motivating factor for 4–County's decision to enter into the agreement. We answer that question in the affirmative.

Rule

A contract remains valid and enforceable unless explicitly voided by legislative action or if performance becomes impossible or impracticable due to unforeseen circumstances.

If the Legislature wishes to invalidate existing contracts between entities delivering public utilities, it should say so plainly. It has not done so in the legislation here at issue, and there is no just reason for this Court writing legislation which is not there.

Analysis

The court determined that the legislative changes did not void the contract, as the agreement did not explicitly condition its validity on the City's right of eminent domain. The court found that the contract was clear and unambiguous, and the changes in law did not render performance impossible or impracticable. The court emphasized that the parties could have included provisions in the contract to address potential changes in the law but chose not to do so.

The record indicates that Starkville and 4–County Electric entered into a contract with which they honored for more than thirty years. This Service Area Agreement provided that in the event of Starkville's annexation of property within 4–County's service area, Starkville would purchase, and 4–County would sell, 4–County's service assets in that area at a price to be determined by a formula set forth in the agreement or, alternatively, Starkville would grant a franchise to 4–County at no cost.

Conclusion

The Supreme Court reversed the chancery court's ruling, holding that the Service Area Agreement was valid and enforceable, and remanded the case for further proceedings.

We now address in turn, the other grounds upon which the chancellor relied. 4–County argues that its obligations under the contract have been discharged under the doctrine of 'supervening impracticability.' It relies upon the Restatement (Second) of Contracts § 261 'Discharge by Supervening Impracticability' (1981) which provides, 'where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.'

Who won?

The City of Starkville prevailed in the case because the Supreme Court found that the Service Area Agreement remained valid despite the changes in law regarding eminent domain.

The City of Starkville prevailed in the case because the Supreme Court found that the Service Area Agreement remained valid despite the changes in law regarding eminent domain.

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