Prairie Land Electric Cooperative, Inc. v. Kansas Electric Power Cooperative, Inc.
299 Kan. 360
| Kan. | 2014Background
- Prairie Land Electric Cooperative (Prairie Land) had a 1958 all‑requirements wholesale contract with Sunflower requiring Prairie Land to buy all power for its “system,” except where Sunflower lacked capacity or Prairie Land had preexisting supplier obligations.
- In 1977 Prairie Land executed a second all‑requirements contract with KEPCo that on its face mirrored the Sunflower all‑requirements obligation but contained paragraph 6(b) attempting to limit Sunflower’s scope to the “areas … presently served with power procured from Sunflower.”
- Sunflower was not a party to the KEPCo contract; KEPCo knew of the preexisting Sunflower contract when it drafted its agreement.
- In 2005 Prairie Land planned a new delivery point (Jayhawk pumping station). Sunflower could serve it; KEPCo claimed the KEPCo contract required KEPCo to serve it under paragraph 6(b).
- Prairie Land filed a declaratory judgment action. The district court held Sunflower had the right to serve the new delivery point. The Court of Appeals reversed, reading paragraph 6(b) as an unambiguous geographic limitation favoring KEPCo.
- The Kansas Supreme Court granted review to resolve which contract governs and whether the KEPCo provision can limit Prairie Land’s preexisting Sunflower obligation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Prairie Land must take power for the new Jayhawk delivery point from Sunflower or KEPCo | Prairie Land/Sunflower: the 1958 Sunflower all‑requirements contract (prior in time) requires Sunflower to serve the new load because neither exception (Sunflower capacity or preexisting third‑party obligation) applies | KEPCo: paragraph 6(b) of the 1977 KEPCo contract unambiguously limits Sunflower to areas then served by Sunflower, so KEPCo has the right to serve the new load | Court holds Sunflower has the superior right; KEPCo’s agreement is limited by Prairie Land’s prior Sunflower obligations and cannot unilaterally narrow them because Sunflower did not consent |
| Whether paragraph 6(b) of the KEPCo contract is controlling and unambiguous | Sunflower/Prairie Land: paragraph 6(b) cannot alter Sunflower’s prior all‑requirements right because Sunflower wasn’t a party and the provision conflicts with the Sunflower contract and KEPCo’s own paragraph 1 | KEPCo: paragraph 6(b) is clear and geographically limits Sunflower’s future supply rights to areas then served by Sunflower | Court finds paragraph 6(b) conflicts with the prior Sunflower contract and paragraph 1 of the KEPCo contract; must be read in light of the Sunflower contract and therefore does not displace Sunflower here |
| Whether the court should ignore the Sunflower contract on appeal | KEPCo (Court of Appeals panel): panel treated Sunflower’s "prior in time" argument as not properly before it | Sunflower/Prairie Land: both contracts are squarely at issue in the declaratory judgment and must be considered together | Supreme Court rejects ignoring Sunflower; exercises unlimited review over contract interpretation and considers both contracts |
| Proper method to reconcile temporally overlapping all‑requirements contracts | Sunflower/Prairie Land: interpret KEPCo in light of preexisting Sunflower obligations so both contracts are given effect where possible | KEPCo: give effect to its own contracting language (paragraph 6(b)) to the extent unambiguous | Court holds the later KEPCo contract must be read and limited by the prior Sunflower contract; Prairie Land must satisfy the first contract’s obligations before turning to the second |
Key Cases Cited
- Osterhaus v. Toth, 291 Kan. 759 (court has unlimited review over contract interpretation)
- McGinley v. Bank of America, N.A., 279 Kan. 426 (principles for reviewing written instruments)
- Anderson v. Dillard's, Inc., 283 Kan. 432 (primary rule: ascertain parties’ intent; clear terms control)
- Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943 (declaratory judgment purpose: resolve uncertainty as to rights and legal relations)