*1 Corpora- COMPANY, POWER MONTANA a Montana ELEC- VIGILANTE tion, Appellant, Plaintiff COOPERATIVE, INC., TRIC Corporation, al., et Re- spondents. No. 10580

Submitted 1963. Decided December 1963. October 387 P.2d 718 *2 Butte, Coldiron, John Cyr, Hauek and ¥m. H. John C. Krest (ar- Coldiron, Butte Hauck, Butte, (argued), H. William C. appellant. gued), for Missoula, Dillon, Smith, Karlberg, & Davis, Boone

Schulz & Smith, E. Mis- Schulz, Dillon, (argued), A. Bussell Leonard respondents. soula, (argued), for Opinion of the Court. delivered the MR. CASTLES JUSTICE appeal deny- of district court judgment from a the This is an enjoin application permanently to defendants ing plaintiff’s City grant- furnishing service in the of Dillon and from electric cross-appeal declaratory on its ing relief to the defendants as hereinafter shown. will be plaintiff below, Company,

Appellant, The Montana Power is Utility. Bespondents, be to as the and will hereinafter referred Co-operative, below, Vigilante Electric are The defendants manager, as and will persons named its trustees and certain collectively Co-op. to the hereinafter be referred furnishing Utility sought enjoin to elec- The energy City Dillon, to tric and service customers within Montana, particularly within the area annexed to the 1960, will be to as City in which area referred the annexed area. corporation public utility organized ais under

The engaged furnishing Montana and has been and laws Montana, City including in the State of electric surrounding It areas. holds a fran- Dillon, and nonexclusive- anywhere within energy and service supply electric cliise jurisdic- subject and is the territorial limits state of Montana. of the Public Commission tion and control Service co-operative membership cor- a rural electric 14, Chapter 5, poration, organized existing under Title engaged in the 1947, has been as amended. The R.C.M. persons energy sale of and service distribution and County and elsewhere. residing in areas rural Beaverhead on north the conflict occurs is a tract The area which City Dillon, by of Dillon which area was annexed side council, 1, 1960. City as of November action effective energy supplying electric November was On within the annexed area. and service eleven customers Co-op in was the annexed area first service installation proceeding, was year 1940, last, prior to this in the September 1959. made 13, 1939, Company en-

Prior to June the Union *3 public utility, elec- gaged, as a in the sale and distribution of to energy Dillon, to and a limited tric and services residents city living adjacent limits, in- number of inhabitants to the 13, 1939, pur- cluding Utility the area. the annexed On June plant, system the and Elec- chased lines distribution Union years Co-op Utility’s the the tric. In the with and agreement, knowledge, encouragement, constructed full and system purpose supplying for the an electrical distribution residing energy persons adjacent in rural areas and service to including city area, annexed Dillon, limits of the Co-op engaged supplying in the has been since December 1939 to such areas. is, City year of Dillon the an incor- The and was Utility population 3,500. city having The porated excess purchase offer, for a reasonable offered, and continues Co-op existing lines from the and facilities owned value Co-op has Co-op within area and the refused the annexed Co-op Utility that the not extend The demanded such offer. its lines or the annexed area and construct facilities within existing facili- that it not make additional connections to its any existing, ties and that it not furnish additional services area. other or additional customers within the annexed Co-op above, Despite mentioned the offer and demand perimeter right serving within the asserted the to continue proceeded existing of its within the annexed area services plans and to with construct facilities to extend its lines and existing, other and additional furnish additional service to customers within the annexed area. thereupon Utility brought Co-op

The enjoin this action to doing By way cross-complaint, such acts. right only existing claimed the not to serve its customers area, within the annexed but also to serve additional customers perimeter who within should desire service the outside of a line through drawn the farthest extensions of its facilities in the right annexed area. also claimed the to serve additional energy by means of facilities in the area. Utility’s application

The district court per- denied for a injunction. Utility’s specifications manent of error are five going in number judgment. the conclusions of law and As expressed by Utility’s brief, question whether, the basic Montana, any right under the laws of has to furnish city within having popu- electric service the boundaries of a 3,500. cross-assignment lation excess of makes a concluding of error to the effect that the district court erred law that party as a matter of is a real in interest has a to maintain an action to restrain unlawful competition. questions posed think neither of the two

We above *4 appeal. preface of this parties is determinative To our dis- quote judge’s we shall certain of the cussion district con- clusions. prior 1,

“II. That at all times 1960, November meaning within a rural area area’ was ‘annexed 14, R.C.M.1947. Chapter Title Vigilante Electric the defendant at the time

“III. That annexed into the lines Inc., extended its Co-operative, by provided sec- purposes as were within its area its acts granted power as its R.C.M.1947, within 14-502, tion 14-504, R.C.M.1947. section an act is corporation to do power of a That the “IV. where done, and corporate act is judged the time the

be at corporate power, corporation good faith exercises money in exercise expends amounts of substantial power not does exercise power the continued of that population or changes in by reason of unlawful become of an boundaries, the absence municipal corporation legislative declaration.” express beyond go far conclusions these

It will be seen appeal. It question on this as the question posed right to furnish electric Co-op has a simply whether the is not population in city having a boundaries of a within the serving Co-op is where once the 3,500, but rather excess authority agree- statutory or whether rightfully, customers displaced because of acts of acquiescence, can it be ment and city council annexation? parties such as the third pertinent parts by quoting approach our discussion Ve shall Chapter 5 of Title R.C.M.1947. amended, provides: R.C.M.1947, 14-502, as § corpora- membership Cooperative, nonprofit, “Purpose. following this act for may organized under tions be purposes: supplying energy and purpose of

“(a) for the areas, in rural extending the use thereof promoting and otherwise and service are not current which electrical * # (Em *.” available, plants; facilities supplied.) phasis amended, provides: 14-503,

R.C.M.1947, § *5 * * * power: cooperative “Powers. A have shall “(1) corporations organized under the the case of provisions paragraph 14-502, (a) of of section Revised Montana, 1947, 2 of Codes of as amended section this act: manufacture, purchase, acquire,

“(1) generate, To ac distribute, energy, cumulate and transmit electric and to sell, dispose energy in supply and of electric rural areas political members, governmental agencies to its and per subdivisions, persons not in excess of ten and to other # * members; *.” (10%) centum of the number of its (Emphasis supplied.)

R.C.M.1947, 14-530, amended, provides: § act, In this unless the context otherwise

“Definitions. requires: applied

“(a) corporations organ- ‘Rural area’ as to all provisions paragraph under the of (a) ized of section 14- Montana, 1947, of Revised Codes as amended sec- act, any 2 of tion this means area not included within the any incorporated unincorporated city, town, boundaries or village borough having population or a thirty- excess (3500) persons hundred at the time passage five approval chapter Montana, 1939, Session Laws ' * * thereto; subsequent (Emphasis or supplied.) foregoing It will be seen from statutes, sections 14-502, 14-503, 14-530, clearly unambiguously right electricity has no to serve in a non-rural area. Thus, question posed by appeal if simply this were whether right a to furnish has electric service within the city having population 3,500, boundaries of a in excess of it clearly not. would concluded, prior

As the district court found and to Novem- 1, 1960, the “annexed area” ber rural area. It was the changed of annexation that a rural area act to a non-rural area. been considered Cooperative Act has

The Rural Electric Electric cases, first of which was Sheridan this court two 84, 270 Mont. Co-operative Co., 128 v. Montana-Dakota Utilities Legislature did 742. court held that the P.2d In that case this furnish elec- give not intend to an exclusive energy tric in rural areas. was considered Cooperative Act

The second case in which the Co-op, 140 Company v. Park was Montana Power *6 sought Utility to en- 293, 1. In that case the Mont. 371 P.2d any members join Co-op supplying service to the from Livingston. The City of or customers within an addition completion rushing through to electrical succeeded prior just days four to annexation service installations Livingston. In that case a “rural City of Star Addition to the by action of changed to “nonrural” or urban area area” was a opinion, pointed in the the city council, although as out the not, contemplation of the rural electrification Addition was planned, promoted contemplated, act, rural it was a area since Livingston. Then City of organized a subdivision to the as goes point on to out opinion Co-op situation the in the Park of the area Utility lines on three sides that the had service existing from and thus that electrical current and plants were otherwise available. facilities and Co-op, opinion in v. Park Electric In the Montana Power Co. Mont., page 5 at supra, pointed page 300 of 140 it was out at 371 P.2d that: statute,

“It is observed that Montana’s section 14-502is any than similar more restrictive statute other states. spells Co-operative service, It out the limits of the restrict- ing it and where to rural areas service is not otherwise avail- plants. Legislature able The facilities language. public policy has used restrictive declared Legislature (Empha- is one for the and not for this court.” supplied.) sis then, Utility argues

Now since the is limited

126 14- the words section above, Legislature when the used passage (a), defining “rural area” at the time subd. contemplated that an thereto, clearly subsequent it act or commenced area, at the time that service which was rural 14-530 appearing in section might language This cease to be so. appear 1949 amend- (“or subsequent thereto”) until did not Legislature. ment foregoing think Utility begs

We assertion question. serving legally When a rural area rightfully, subsequent the words “or thereto” do not terminate interpretation A status. reasonable would seem to be that language operate any use was to at time service was contemplated. example, if 1, 1960, For after November to, were extend its service what had on October area, service, been rural it without available would not be concerning authorized to so do. More will be herein said later this feature. Co-op Corp. cites Farmers Electric v. Arkansas Co., Light &

Power Ark. S.W.2d 837. that case question the Arkansas Court stated as follows: point Coopera- at “The issue is whether Farmers Electric Corporation patrons tive is entitled to serve now within *7 city Newport, in limits of but who were a non-urban Commission,through when area the Public Service its cer- necessity, Coopera- tificate of convenience and authorized occupy territory.” tive to The Arkansas held that the could not continue Court in an area. In the course of its to serve members annexed opinion the Arkansas said: Court legislative

“In Act co the instant case excludes population operative cities towns where the is in 2,500. Newport, by population, is ad excess reason mittedly proscribed territory, we can within the unless city’s were say occupancy that the when boundaries appellant operations continue its extended leaves free to Light & has a spite that Arkansas Power in the fact * * # permit city. to serve the entire “Apprehension expressed that an affirmance precedent under judgment Circuit Court would establish operating good faith in an cooperative, which a after in unquestioned beginning popu- rural area where power company not major lation that a would was such it it, might from the mere fact that extend lines to suffer appellees, developing community. This, says aided might population passed 2,500. It be occur if the must provide for an extreme conceded that the law does not opinion, by contingency kind, of this not in this and we do otherwise, suggest cooperative that a would inference or automatically be with of the maximum ousted attainment population figure. quite

“The here terri- circumstances are different. The tory assigned appellant contiguous city. city build,

normal trend a town or is to hence one claim- ing rights pertaining only territory to rural enters such an very with municipal corporation area notice that the will likely expand, Newport did in this case. An anomalous judicially situation would result it should be determined if rights essentially by city rural could not be disturbed difficulty compensa-' expansion. The serious arises when bar, however, appellee tion is considered. In the ease at pay appraisal it has offered to on a fair basis and is not suggested litigants agree.” that the cannot opinion, 1952, At the time of the Arkansas the Arkansas membership statute not restrict to “rural areas” as now. did Upshur Texas State v. Rural Cooperative Corp., 805, Supreme Tex. S.W.2d Court followed the Arkansas case insofar as it held that residents of qualified an annexed area are not to be members of a Co- operative. Then the Texas Court went on as follows: question experienced

“The which we have most diffi- *8 128 may continue

culty deciding Cooperative whether persons in areas annexed who now reside to those service the Co- were members City to the of Gilmer who lawful city. annexed to operative the time such areas were at above right. it has The cases court that that trial held Supreme Court cited, particularly cases from the recognize that the deny right. we Arkansas, that "While upon it susceptible placed Act is of the construction agree to with the court, are constrained Arkansas still we terminated trial court that lawful annexation. membership once ^[*] * * Since members acquired is not retain that Cooperative is ex- annexation, and since status after mem- supply energy to its pressly authorized to bers, it to continue our view that is authorized it is to them after annexation.” Membership Cor- Electric examined Pee Dee We have also 610, 117 Light, & 253 N.C. S.E.2d poration Power v. Carolina under which 764, in statutes which North Carolina Court language of “rural nor have the restrictive do not define area” an area statutes, that when a entered the Montana hold prior annexation, continue serve e., i. it could rightfully, significantly North Court after But the Carolina annexation. only presently served. those restricted the City Colquitt Co., In County of Moultrie v. Rural Elec. it was Ga. S.E.2d held that the limitation on a Co- operative application, to be at time the determined for And, too, Georgia service is made. here Court denied relief extending Co-operative the issue of on its service. We shall return now to Montana Power Co. Park Co-op, case, appeal supra. the issue on was whether the guilty laches the trial court had held. In we leading order to determine that issue reviewed situation analysis up pointed of laches. We out an that under the statutes, terms of our two situations demonstrated Park Co-op’s They statutory lack authorization. were: *9 contemplation (1) area, not, the was in Star Addition statutes, area; of the a rural and

(2) existing There was service available from facilities. in it- Either of these situations would have been sufficient authority. case, self to show In that the Park Electric a lack of they area had stressed the fact that had entered the area, is, days while it was still a rural that four before annexa- tion. present situation, our at the time of service of electric

power by Co-op, the neither situation existed. There was no in statutory sense, facilities, and the prior “annexed area” to annexation a every rural area in sense of the definition Thus, contained in the statute. we con- clude that the Park controlling case is not here.

By reason of our heretofore, discussion analy and our sis of authority, other we hold that authority of a service a customer in an area is not change lost of status of that area from rural to urban. In regard, the District Court was correct.

Subsequent to appeal, submission of this our attention was by respondent Co-op’s called counsel to the Oklahoma case of Co-operative Caddo Electric Whelan, County State ex rel. Atty. County, al., of Canadian (1963) et opin- Okl. P.2d..... The ion in that reported ease has not yet been being and is still considered on a rehearing by motion for the Oklahoma Court. have, however, We carefully opinion examined the itas now stands, substantially and find it in conformity with holding our It herein. is not upon. otherwise cited nor relied appellant Utility asserts the introduction in Legislative Session of Bill subsequent Senate No. and its passage light failure of public policy sheds some on the of this Utility State. The asserts that the meaning intent and of the language in contained section 14-530 was made clear this legislative approval failure of of S.B. No. 194. Bill entitled,

Senate 194 was “An Act Relating to the Service, Duplication of Such Supplying Restricting of Electric in Service, Providing for of Such Service the Continuance reading 2 of Bill indi- Urban Areas.” A of sections rural purpose Bill was cates that to have allowed co-operative to continue to electric customers serve serving in co-operative was areas annexed to cities where such approved prior Also it have area to annexation. would “perimeter theory” have as the what we referred hereinafter duplication It asserted restricted of service that area. pre- the facts of this case were briefs case, light our de- counsel in this in the sented case, supra, intent and, the Park Electric that thus the cision in clearly law Legislature refusing change *10 established. legis- reject argument no in the this because reference

We under considera- proceedings to the sections of our law lative effect, out- made, arguments brief, in are tion in the and the Hospital Murray legislative proceedings. In the record of side 577, 583, it said: 10 P.2d Angrove, Mont. authorities, it “However, by foregoing indicated by the contemporaneous and construction action may to which we resort in order determine legislature rejecting enacting or an body in a law the intent that thereto. amendment cited, found, holding or

“No case has been that the rec- journals subsequent legislature sessions of the ords any probative in determining value the intent of the have already books, in on legislature passing laws the statute or attempted of an to a law which defeat amendment years any for light on the books sixteen throws has been assembly upon which enacted that law.” intent quoted point is that raised Conclusions of Law The next VI, which are as V follows: numbers That the acts of the since defendant construct- “V. done, area’ in the ‘annexed were lawful when ing facilities the use of such facilities for customers or for additional existing perimeter additional service to customers within a through marked a line drawn the farthest extension of such is not facilities unlawful. provisions 14-503,

“VI. That virtue of the of Section R.C.M.1947, per- the defendant has a ‘other serve per (10%) sons not in excess of ten cent of the number of members,’ its and that the rural area limitation does not apply persons,’ plaintiff to such ‘other That has failed to proving persons sustain the burden of served per within the ‘annexed area’ are excess of ten cent (10%) of the number of its members.” foregoing in paragraph conclusions are V referred “perimeter theory.” provide counsel as the Our statutes no authority theory. previously for such a As indicated our discussion, corporations our statutes organized restrict under Chapter 5 of Title 14 to areas, service to rural and where service is not otherwise available. Also as what is discussed may once rural does, become urban. authority When it ceases, except and is previously restricted as we have dis- cussed. previously quoted

We have and referred to authorities jurisdictions. in other them, each of disagree while there is ment as to whether a can continue to serve cus tomers, they agreement are all in that a cannot extend its services authority after annexation. We have found no contrary.

But, Co-op up VI, sets Conclusion of Law number quoted above, permitting percent them to serve 10 of the number of its persons, they members who are other and thus percent reason that 10 can be other than in a rural area. R.C.M.1947, 14-503, (d), provides part: subd. § * * * * * *

“(d) generate, To and to distribute, dispose of energy electric in rural areas to its members, to governmental agencies political subdivisions, and to of per (10%) centum persons not in excess ten

other of its number members.” that the statutes it is clear From our discussion heretofore supply limit to Co-ops right The of the to rural areas. per ten in excess of energy persons not to “other subject is its centum number of members” (10%) Company Power (See The Montana “rural areas limitation.” supra.) County Co-operative, v. Park Electric of law Having found that the district court’s conclusions erroneous, judgment VI modified numbers V and are accordingly. subject more That cross-

One needs discussion. is the assignment error that the asserted effect concluding that the district court erred in as a matter law Utility party a real in interest maintain and has competition. an action restrain unlawful arguments on this The contentions and made cross-assignment of those error are identical to made support appear in its brief in of motion to amicus its Mon- Rehearing for in the case of The curiae on Petition Co-operative, Company County tana v. Park Power rejected arguments Inc., in that In the supra. We these case. County Park case we said: # *

«* Utility had no Co-operative insists that only sue, Co-operative capacity arguing that the act, only by doing and that charged with an ultra vires inquired Attorney it be into. General could action attack; properly denied this and even The trial court appeal, not this an on this we though we do consider issue holdings analogous stating court clear- point out this do standing to contest unlawful ly does have that the Ry. Bennett, v. 83 Mont. competition. See Northern Pacific 987; Underseth, 11, 18, Mont. 483, 272 P. Stoner 437.” P. opinion in Co-op argues that this court overlooked its *12 Holmes, making v. its Waite 133 Mont. 327 P.2d holding, Ry. Pacific v. cited, and that the two Northern cases Underseth, Bennett acts done in absolute and Stoner v. involve Waite v. contravention law. We have not overlooked Holmes. clearly Holmes, supra, pointed out fran- Waite it is having license, prop- utilities,

chised more than a mere have a erty right protected. Therefore, which can be we reiterate party is a real to main- interest and has tain the action.

By what said, judgment we have heretofore is affirmed cooperative insofar as it may holds that the continue serve area, customers in the annexed but is reversed as to other indicated, party matters hereinbefore each to pay its own' costs.

MR. CHIEF JUSTICE JAMES T. HARRISON and MR. JUSTICE CONWAY HARRISON and MR. JUSTICE JOHN. DOYLE concur.

MR. ADAIR dissenting: JUSTICE

I dissent. opinion In my judgment of the district court in this cause was and it is judgment correct and such should be affirmed entirety in its with the costs appeal on this to be against taxed appellant herein.