United Cities Gas Co. v. Wigington

815 S.W.2d 506, 1991 Tenn. LEXIS 339
CourtTennessee Supreme Court
DecidedSeptember 3, 1991
StatusPublished
Cited by2 cases

This text of 815 S.W.2d 506 (United Cities Gas Co. v. Wigington) is published on Counsel Stack Legal Research, covering Tennessee Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United Cities Gas Co. v. Wigington, 815 S.W.2d 506, 1991 Tenn. LEXIS 339 (Tenn. 1991).

Opinion

OPINION

REID, Chief Justice.

The Tennessee Association of Utility Districts, et al., defendants-appellants, appeal from the decision of the Court of Appeals affirming the trial court’s judgment that a contract between United Cities Gas Company (United Cities) and Horton Highway Utility District (Horton District), plaintiffs-appellees, is valid. The issue presented for review by the appeal is whether the utility district has the legal authority to sell its system to a purchaser that is not a municipality or a county. Review of the record and the applicable statutes discloses that utility districts have not been granted that authority by the General Assembly, and, therefore, the contract entered into between United Cities and Horton District is not valid.

Horton District was organized in 1958 pursuant to the Utility District Law of 1937, T.C.A. §§ 7-82-101, et seq. Pursuant to that statute, Horton District is a “ ‘municipality’ or public corporation,” a “body politic and corporate with power of perpetual succession.” T.C.A. § 7-82-301(a)(l). Horton District owns and operates a natural gas distribution system in an area composed of portions of Marshall, Rutherford, and Williamson Counties. United Cities is a private, investor-owned corporation authorized to do business in Tennessee and engaged in the business of distributing natural gas in several cities in'Tennessee pursuant to franchises issued by those cities. United Cities is regulated as a “public utility” by the Tennessee Public Service Commission. T.C.A. §§ 65-4-101, -104.

Horton District and United Cities entered into an agreement dated November 23, 1988, for the sale of the system, including all real and personal property and “franchise or other service rights,” the distribution of Horton District’s assets (the proceeds from the sale), and the dissolution of Horton District as a legal entity. The sale was conditioned upon approval by the Public Service Commission, the county executives of Marshall, Rutherford, and Williamson Counties, the chancery court, and the state comptroller of the treasury.

The county executives found the contract for the sale of the system and distribution of the proceeds from the sale to be “fair, just and reasonable and in the public interest” and approved the contract. The county executives’ order provides that upon approval of the sale by the Tennessee Public Service Commission and distribution of the assets, “the Executives shall declare that said District be dissolved.”

The Utility District Law of 1937 (T.C.A. §§ 7-82-101, et seq.) authorizes the development and operation of systems for the furnishing of water, sewage disposal, natural gas, garbage collection, police and fire protection, street lighting, recreational facilities, and other services. Part 2 of Chapter 82 sets forth the procedure whereby a utility district is created, Part 3 states the powers of the district and the manner of operation, Part 4 provides for audits and the regulation of rates charged for services, Part 5 authorizes the issuance of revenue bonds and notes for capital expenditures, and Part 6 authorizes multi-county districts. The Utility District Law contains no express provision for the termination or dissolution of a district, except in Part 2, which authorizes the merger or consolidation of two or more utility districts and also the sale and transfer of a utility district system to a municipality, metropolitan government, or county.

United Cities and Horton District acknowledge that the sale of the system other than to a municipality or county and dissolution of the district is not specifically authorized by statute. However, they contend that the authority is contained in the general grant of powers to the district and the board of commissioners. The parties to the contract find the authority for Horton District to execute and perform according to the contract in the provisions of T.C.A. [508]*508§ 7-82-304, which grants to the district the power to

(3) Acquire by purchase, gift, devise, lease or exercise of the power of eminent domain or other mode of acquisition, hold and dispose of real and personal property of every kind within or without the district, whether or not subject to mortgage or any other liens;
(4) Make and enter into contracts, conveyances, mortgages, deeds of trust, bonds or leases;
(5) Incur debts, to borrow money, to issue negotiable bonds and to provide for the rights of holders thereof;
(6) Fix, maintain, collect and revise rates and charges for any service;
(7) Pledge all or any part of its revenues;
(8) Make such covenants in connection with the issuance of bonds, or to secure the payment of bonds, that a private business corporation can make under the general laws of the state, notwithstanding that such covenants may operate as limitations on the exercise of any power granted by this chapter.

The contracting parties also cite for authority to enter into such a contract the provisions of T.C.A. §§ 7-82-306 and 7-82-309(a)(4). Under T.C.A. § 7-82-306,

[a]ny district created pursuant to the provisions of this chapter shall be vested with all of the powers necessary and requisite for the accomplishment of the purpose for which such district is created, capable of being delegated by the legislature. No enumeration of particular powers herein created shall be construed to impair or limit any general grant of power herein contained nor to limit any such grant to a power or powers of the same class or classes as those enumerated. The district is empowered to do all acts necessary, proper or convenient in the exercise of the powers granted herein.

Furthermore, T.C.A. § 7-82-309(a) empowers the commissioners of a utility district to

(4) Lease, purchase, sell, convey and mortgage the property of the district and to execute all instruments, contracts, mortgages, deeds or bonds on behalf of the district in such manner as the board shall direct; ....

The powers granted under § 7-82-304 are general corporate powers necessary for the transaction of the district’s business. The exercise of these powers is, however, limited by the heading of § 7-82-304— “Powers in carrying out purposes ” (emphasis added). Those powers granted under that section can be exercised only in furtherance of the purposes for which the district was created which, in this case, was the distribution of natural gas. The same limitation on the exercise of “general implementing powers” is found in § 7-82-306. The vesting of those powers is plenary in scope, not confined to those enumerated, but is limited to those powers "necessary and requisite for the accomplishment of the purpose for which such district is created.” Section 7-82-309 designates the board of commissioners as the executive and administrative officials of the district and provides that they are authorized to exercise the powers granted to the district. This section does not, however, vest in the commissioners any powers not possessed by the district. It only authorizes the commissioners to act on behalf of the district. See § 7-82-301(a).

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Cite This Page — Counsel Stack

Bluebook (online)
815 S.W.2d 506, 1991 Tenn. LEXIS 339, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-cities-gas-co-v-wigington-tenn-1991.