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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
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.
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.
Judges GEER and THORNBURG concur.
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