Varilek v. Charles Mix Electric Ass'n

409 N.W.2d 117, 1987 S.D. LEXIS 299
CourtSouth Dakota Supreme Court
DecidedJuly 1, 1987
DocketNo. 15211
StatusPublished

This text of 409 N.W.2d 117 (Varilek v. Charles Mix Electric Ass'n) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Varilek v. Charles Mix Electric Ass'n, 409 N.W.2d 117, 1987 S.D. LEXIS 299 (S.D. 1987).

Opinion

McMURCHIE, Circuit Judge.

The plaintiffs are farmers and ranchers in Charles Mix County, South Dakota, who irrigated their land using electricity sold by the defendant, Charles Mix Electric Association. The defendant is a cooperative corporation which furnishes electrical services throughout rural Charles Mix County and portions of Douglas County. To obtain electrical service, each plaintiff became a member of the cooperative by signing an application form and paying a membership fee.

The plaintiffs also signed a contract for each electric motor they used. Each of the thirty-one contracts involved in this case had a term of at least five years. These contracts required the irrigators to pay an annual minimum charge each year during the term of the contract, whether electricity was used or not. The contract and application form provided that the irriga-tors would be bound by the cooperative’s by-laws and would pay the electric rates as periodically established by the cooperative. The by-laws also granted the cooperative the power to periodically change the rates it charged its members. The only written limitation of the cooperative’s power to modify these rates was contained in the contract: “The Consumer agrees that if, at any time, the rate under which the Seller purchases electric energy at wholesale is modified, the Seller may make a corresponding modification in the rate for service hereunder.” Other legal and equitable principles govern the cooperative’s exercise of this power, but since the plaintiffs sue only on the contract, these other principles will not be addressed.

By resolution dated August 10, 1967, the cooperative board of directors established its original electricity prices for irrigation purposes in a rate schedule called Schedule VII. Under the method of billing first adopted, the irrigators paid an annual minimum charge in the spring, which was computed based on the horsepower rating of each motor used by the irrigators. This annual minimum charge was designed to pay fixed costs and a certain amount of variable costs of the cooperative. Payment of this annual minimum charge entitled the irrigator to a certain amount of electricity without additional charge. In effect, this annual minimum charge was a nonrefundable prepayment. Although the prices charged under this rate structure were modified periodically, it retained its essential features until September 22, 1977.

On that date the board of directors established the irrigation rates for the following year (1978) using a KW Demand rate structure. Under this structure, which was identified as Schedule G, the irrigators paid an annual minimum charge based upon the horsepower rating of each motor used. However, theoretically, under this new rate structure and method of billing, the irrigator did not receive a fixed amount of electricity after paying the annual minimum charge. Instead, the irrigator paid directly for each unit of electricity he used. The cooperative argues that the new rate structure and method of billing abrogated the necessity of credits, while the plaintiffs claim the contract could not be modified to abolish these credits.

The present dispute arose in 1983. The plaintiffs had decided to enroll in the federal government’s Payment in Kind program (PIK), and they decided that the cooperative’s electricity would not be necessary. The plaintiffs individually and informally expressed their intentions to various employees of the cooperative, stating essentially they would not be using electricity that year. The cooperative later informed the irrigators that the contract required that termination of electric service be in [119]*119writing, and insisted that the plaintiffs pay the annual minimum demand charge whether they used electricity or not. The cooperative board of directors later reduced the annual minimum charges for those irrigators who did not use electricity in 1983. The plaintiffs were not satisfied with this reduction and they joined in this action against the cooperative.

The plaintiffs presented three claims to a Yankton County jury. Plaintiffs claimed they terminated their respective irrigation service agreements and alleged that the cooperative could not require annual minimum charges for 1983. They also claimed that if the annual minimum charges were owing, they should be determined according to the original rate schedule (Schedule VII). Finally, and principally, plaintiffs claimed their contracts required the annual minimum charges to be credited to their accounts from 1978 through 1982.

The defendant presented several defenses, including modification of contract and waiver of the original terms of the agreements. The defendant also raised a counterclaim for the plaintiffs' unpaid 1983 annual minimum charges.

The jury returned a verdict for the defendant against all but two plaintiffs. The jury found that Ralph Dertien had terminated his irrigation service agreement and would not be liable on defendant’s counterclaim for the 1983 minimum charge. The jury also reduced defendant’s award under its counterclaim for Elvern Varilek’s 1983 minimum charges. Plaintiffs have appealed, citing four errors by the trial court. Plaintiffs request reversal of only that part of the judgment denying them a credit for the annual minimum charges paid from 1978 to 1982.

I.

DID THE TRIAL COURT ERR BY REFUSING TO INSTRUCT THE JURY THAT THE ANNUAL MINIMUM CHARGES PAID FROM 1978 TO 1982 MUST BE “CREDITED” TO THE PLAINTIFFS’ ELECTRICITY BILLS DURING THOSE YEARS?

The plaintiffs claim they are entitled to a credit against their electricity bills equivalent to the annual minimum charges paid from 1978 to 1982, arguing essentially they were charged twice for the same energy consumption. The contracts between the parties state that the annual minimum charge will be applied against the consumer’s electric energy bill each month until all has been paid. Under the original rate structure and method of billing, payment of the annual minimum charge entitled the irrigator to a fixed amount of electricity without additional charge. As stated previously, this changed in 1978.

The plaintiffs proposed the following instruction, which was refused by the trial court:

You are instructed that the contracts between the parties provide:
The annual minimum charge shall be applied against the consumer’s monthly electric energy bill each month until all has been used.
You are instructed that this provision is clear and unambiguous. The plaintiffs and defendant are bound by this contract provision and you are directed to apply clear meaning and intent to this contractual provision. You are directed not to consider any testimony or evidence that has been presented in relation to any acts or omissions on behalf of plaintiffs which would alter or change the meaning of this contractual provision.

This instruction was properly refused for several reasons. The instruction impliedly mandates that the provision is binding and not subject to modification. See Dougherty v. Beckman, 347 N.W.2d 587 (S.D.1984). In addition, the proposed instruction unduly emphasizes this contractual provision to the exclusion of other relevant provisions. The entire instrument must be considered in determining the meaning of the contract. Chord v. Pacer Corp., 326 N.W.2d 224 (S.D.1982).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Dougherty v. Beckman
347 N.W.2d 587 (South Dakota Supreme Court, 1984)
Evanenko v. Farmers Union Elevator
191 N.W.2d 258 (North Dakota Supreme Court, 1971)
Chord v. Pacer Corp.
326 N.W.2d 224 (South Dakota Supreme Court, 1982)
Oakes Farming Ass'n v. Martinson Bros.
318 N.W.2d 897 (North Dakota Supreme Court, 1982)
GMS, INC. v. Deadwood Social Club, Inc.
333 N.W.2d 442 (South Dakota Supreme Court, 1983)

Cite This Page — Counsel Stack

Bluebook (online)
409 N.W.2d 117, 1987 S.D. LEXIS 299, Counsel Stack Legal Research, https://law.counselstack.com/opinion/varilek-v-charles-mix-electric-assn-sd-1987.