Contracts; Utilities--first priority option--right of first refusal--res judicata
The trial court did not err by granting summary judgment in favor of defendant village
and by dismissing plaintiff utility company's summary judgment claim based on a contract
entered into by the parties to build a water line from Caswell Beach to Bald Head Island where
the contract contained a first priority option and a right of first refusal for defendant to purchase
the water and sewer utility assets of plaintiff, because: (1) a valid contract was created between
plaintiff and defendant after months of negotiation between two experienced utility lawyers; (2)
plaintiff is barred by res judicata from claiming the pertinent option is void since plaintiff failed
to appeal the 19 February 2001 order of the Utilities Commission, thus meaning the issue had
been decided; (3) plaintiff's motion to declare the option void while upholding the rest of the
contract would violate established North Carolina contract law when the evidence tends to show
that both parties intended to be bound by both the contract and the option; (4) defendant did not
exceed its governmental authority by agreeing to this contract since it is sanctioned by the
Utilities Commission and serves the public welfare; (5) defendant has neither relinquished its
authority nor abandoned its responsibility to its citizens by selecting by agreement a method of
resolving disputes over terms; and (6) when parties have dealt at arms length and contracted, the
Court of Appeals cannot relieve one of them even though the contract has proven to be a hard
one.
Fletcher, Ray & Satterfield, L.L.P., by George L. Fletcher and
Kimberly L. Moore, for plaintiff-appellant.
Womble, Carlyle, Sandridge & Rice, P.L.L.C., by Christopher T.
Graebe, for defendant-appellee.
HUDSON, Judge.
Plaintiff appeals the trial court's decision granting summary
judgment to the defendant and dismissing its own summary judgment
claim. Plaintiff and defendant entered into a contract to build a
water line from Caswell Beach to Bald Head Island. The contract
contained a first priority Option and a Right of First Refusal forthe defendant, and was approved by an order of the North Carolina
Utilities Commission (NCUC) on 19 February 2001. The evidence
tends to show that both parties intended to be bound by the
contract and that the option was essential for the defendant's
participation. Both parties acted in accordance with the contract
and defendant timely gave notice of its intent to exercise its
option to purchase the tangible and intangible assets used or
useful in providing the water and sewer service as written in the
contract. Plaintiff now contends that the option is void. For the
reasons stated below, we affirm the trial court's decision.
“For the purpose of conducting hearings, making decisions, and
issuing orders, . . . the [Utility] Commission shall be deemed to
exercise functions judicial in nature and shall have all the powers
and jurisdiction of a court of general jurisdiction as to all
subjects over which the Commission has or may hereafter be given
jurisdiction by law.” N.C. Gen. Stat. § 62-60 (2003) (emphasis
added). If an appeal from a North Carolina Utilities Commission
Order is not made within 30 days, then the right of appeal is
waived and this Court has no jurisdiction. See State ex rel.
Utils. Comm'n. v. Services Unlimited, Inc., 9 N.C. App. 590, 591,
176 S.E.2d 870, 871 (1970), N.C. Gen. Stat. § 62-90 (2003). “Only
specific questions actually heard and finally determined by the
Commission in its judicial character are res judicata, and then
only as to the parties to the hearing.” State ex rel. Utilities
Comm'n v. Carolinas Comm. for Indus. Power Rates, etc., 257 N.C.
560, 570, 126 S.E.2d 325, 333 (1962). Here, the NCUC's Order held that a valid contract was created
between the plaintiff utility company and defendant village after
months of negotiation between two experienced utility lawyers. The
Order states that “[i]n addition to the other provisions of the Use
Agreement, the Village is granted an option and right of first
refusal to purchase the water and sewer utility assets of Utilities
for a two-year period beginning on July 1, 2001.” Plaintiff did
not appeal this Order, and carried out the provisions of the
contract until plaintiff filed a complaint on 4 April 2002
claiming, inter alia, that the option was void. However, we
conclude that plaintiff's failure to appeal the 19 February 2001
order of the NCUC means the issue has been decided. Plaintiff is
barred by res judicata from arguing it here.
Additionally, plaintiff's motion to declare the option void
while upholding the rest of the contract would violate established
North Carolina contract law:
The controlling purpose of the court in
construing a contract is to ascertain the
intention of the parties as of the time the
contract was made, and to do this
consideration must be given to the purpose to
be accomplished, the subject-matter of the
contract, and the situation of the parties.
The intention of the parties is to be gathered
from the entire instrument and not from
detached portions. An excerpt from a contract
must be interpreted in context with the rest
of the agreement. When the language of a
contract is clear and unambiguous, effect must
be given to its terms, and the court, under
the guise of constructions, cannot reject what
the parties inserted or insert what the
parties elected to omit. It is the province of
the courts to construe and not to make
contracts for the parties.
Weyerhaeuser Co. v. Carolina Power & Light Co., 257 N.C. 717, 719,
127 S.E.2d 539, 541 (1962) (internal citations omitted).
Here, the evidence tends to show that both parties intended to
be bound by both the contract and the option. The contract
language is clear, providing specific actions and guidelines to
govern future negotiations. Thus, this Court will not reject the
option term that was mutually agreed upon by the parties.
Further, Plaintiff contends that defendant has exceeded its
governmental authority by agreeing to this contract. However,
defendant, by providing water and sewer service for the public
welfare, acted within its authority using powers “necessarily or
fairly implied in or incident to the powers expressly granted . .
. and essential to the accomplishment of the declared object of the
corporation.” Rockingham Square Shopping Ctr. v. Town of Madison,
45 N.C. App. 249, 251-252, 262 S.E.2d 705, 707 (1980). Limitations
on these governmental body contractual powers exist to prevent too
much authority being delegated away to parties that may not
represent the people's best interests. Id. at 252, 262 S.E.2d at
707-708. We do not find that this contract violates this principle
as this contract is clear, sanctioned by the NCUC, and serves the
public welfare.
Plaintiff also argues that the delegation of authority to a
mutually-agreed arbitrator to resolve certain disputes divests the
defendant village of its decision-making powers. Here, the
contract was initially approved by the NCUC and specifies that the
courts will appoint an arbitrator if the parties cannot agree.
Thus, the defendant village has neither relinquished its authoritynor abandoned its responsibility to its citizens. Rather, it has
selected by agreement a method of resolving disputes over terms.
Furthermore, “when parties have dealt at arms length and
contracted, the Court cannot relieve one of them because the
contract has proven to be a hard one.” Weyerhaeuser Co. at 722,
127 S.E.2d at 543.
Affirmed.
Judges GEER and THORNBURG concur.
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