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Condemnation by Valley Rural Electric Cooperative, Inc. v. Shanholtzer

IN THE COMMONWEALTH COURT OF PENNSYLVANIA


October 16, 2009

CONDEMNATION BY VALLEY RURAL ELECTRIC COOPERATIVE, INC.
v.
BRUCE E. SHANHOLTZER AND LAURA F. SHANHOLTZER, ROGER E. MEINHART AND GRACE N. MEINHART, ANDREW D. MARTIN AND CYNTHIA D. MARTIN, ROBERT L. SHAWVER AND MILDRED F. SHAWVER, TROY D. HENSON AND CANDICE P. HENSON, MILAN TOMASEVICH, JR., AND FREIDA TOMASEVICH, PATRICK H. HUGHES AND MILDRED HUGHES, JAMES ARMELLEI AND KATHY ARMELLEI, DAVID M. CARMAN AND DREMA L. CARMAN, GREG S. POWELL AND TRACY S. POWELL, JOHN R. FIGARD AND TRENA L. FIGARD, JEROME C. VODZAK AND GERALDINE M. VODZAK, DENNIS E. HAMIL AND CONNIE L. HAMIL
APPEAL OF: ROGER E. MEINHART AND GRACE N. MEINHART

The opinion of the court was delivered by: RENÉE Cohn Jubelirer, Judge

Argued: September 14, 2009

BEFORE: HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE JIM FLAHERTY, Senior Judge.

Before this Court is the appeal of Roger E. Meinhart and Grace N. Meinhart (together, Meinharts) from the order of the Court of Common Pleas of Huntingdon County (trial court) that denied Meinharts' preliminary objections to the Declaration of Taking of Valley Rural Electric Cooperative, Inc. (Valley Rural). Meinharts argue that the trial court erred in determining that Valley Rural was not required to apply to the Public Utilities Commission (PUC) for a determination, pursuant to Section 1511(c) of the Business Corporation Law of 1988, 15 Pa. C.S. § 1511(c), that the service Valley Rural sought to provide through its exercise of eminent domain "is necessary or proper for the service, accommodation, convenience or safety of the public." 15 Pa. C.S. § 1511(c). Alternatively, Meinharts argue that, if the PUC is not required to make such a determination, the matter should be remanded to the trial court for a factual determination as to whether Valley Rural's exercise of eminent domain "is necessary or proper for the service, accommodation, convenience or safety of the public." (Meinharts' Br. at 2.)

Meinharts are the developers of the Longhorn Ranch Subdivision (Longhorn Ranch) in Huntingdon County. Approximately 12 lots in Longhorn Ranch are owned by individuals other than the Meinharts; the Meinharts own the remaining unsold lots. Among these individuals are Bruce E. Shanholtzer and Laura F. Shanholtzer (together, Shanholtzers). The deeds to the lots in Longhorn Ranch contain restrictive covenants which state, inter alia, that:

No Right of Ways [sic] for roadways, power lines, pipe lines or for any other purpose may be granted across any lot to the lands of others. The only Right of Ways [sic] that may be granted are for utilities servicing the immediate Longhorn Ranch Subdivision. No lot may be used as a means of access or egress to or from any other real estate.

(Declaration of Taking ¶ 10.)

Valley Rural is an electric cooperative corporation organized pursuant to the Electric Cooperative Corporation Act of 1937*fn1 and now subject to the Electric Cooperative Law of 1990 (Law).*fn2 On October 8, 2008, Valley Rural filed a Declaration of Taking pursuant to Section 7321(a)(5) of the Law, 15 Pa. C.S. § 7321(a)(5), condemning an easement on Shanholtzers' property to provide for "an additional electric distribution line [which] will extend underground from an existing Valley Rural utility pole located on the condemned easement to an adjacent 20' private road." (Declaration of Taking ¶ 6.) At argument, the parties did not dispute that the length of the underground line is to be approximately ten feet. The Declaration of Taking states that the purpose of this easement is to "allow[] for the installation, repair, replacement, and maintenance of an electric distribution line, and electric utility distribution devices." (Declaration of Taking ¶ 5.)*fn3 Valley Rural also named the Meinharts as condemnees, along with all other property owners in Longhorn Ranch, condemning "certain rights granted by the restrictive covenants only to the extent that the covenants would serve to prevent Valley Rural from extending electrical service from the condemned easement on the Shanholtzer property to properties located outside of the Longhorn Ranch Subdivision." (Declaration of Taking ¶ 11.)

The Shanholtzers did not oppose Valley Rural's Declaration of Taking; however, Meinharts filed their Preliminary Objections to Declaration of Taking (Preliminary Objections). In their Preliminary Objections, Meinharts argued that Valley Rural had failed to comply with Section 1511(c) by not obtaining the approval of the PUC for the taking and had failed to allege "that the exercise of eminent domain is necessary or proper for the service, accommodation, convenience or safety of the public." (Preliminary Objections ¶ 2.)

The trial court held a hearing at which it heard arguments from Meinharts and from Valley Rural. The trial court held that Valley Rural, as an electric cooperative corporation, is not under the jurisdiction of the PUC and is, therefore, not required to comply with Section 1511(c) or to show that its exercise of eminent (Meinharts' Br. at 3-4.) Meinharts state that Mr. Bowser initiated a declaratory judgment action against Meinharts, which is still pending. Meinharts allege that the current condemnation by Valley Rural is an attempt to "short-circuit the judicial process." (Meinharts' Br. at 8.)

Meinharts' attorney made similar arguments before the trial court. (Trial Ct. Hr'g Tr. at 12, December 4, 2008.) Valley Rural's counsel made statements during the hearing that appear to corroborate the assertion that the purpose of the easement is to provide electrical service to Mr. Bowser's property. (Trial Ct. Hr'g Tr. at 13.) However, no testimony or evidence was adduced on this issue. Valley Rural states in its brief only that the purpose of the easement is to "provide power to certain properties located outside of the Longhorn Ranch subdivision." (Valley Rural Br. at 10.) domain is necessary for public safety or convenience (a standard which Meinharts derived from Section 1511(c)). The trial court, therefore, overruled Meinharts' Preliminary Objections. Meinharts now appeal to this Court.*fn4

Before this Court, Meinharts argue that Valley Rural is required by Section 1511(c) to apply to the PUC for a determination that the service Valley Rural sought to provide through its exercise of eminent domain power "is necessary or proper for the service, accommodation, convenience or safety of the public." 15 Pa. C.S. § 1511(c). Alternatively, Meinharts argue that the case should be remanded to the trial court for a similar determination.*fn5

This Court holds that Valley Rural is not required to apply to the PUC for a determination that its exercise of eminent domain power "is necessary or proper for the service, accommodation, convenience or safety of the public." 15 Pa. C.S. § 1511(c). As an electric cooperative corporation, Valley Rural's authority to exercise eminent domain power stems from Section 7321(a)(5), which states that electric cooperative corporations shall "have and exercise the power of eminent domain for the purpose and in the manner provided by the condemnation laws of this Commonwealth relating to public utility corporations for acquiring private property for public use." 15 Pa. C.S. § 7321(a)(5). The authority for the exercise of eminent domain power by public utility corporations is found at Section 1511.

Meinharts, therefore, argue that electric cooperative corporations should be subject to all of the provisions of Section 1511, including subsection (c), which states that the power of eminent domain:

may be exercised to condemn property outside the limits of any street, highway, water or other public way or place for the purpose of erecting poles or running wires or other aerial electric, intrastate aerial telephone or intrastate aerial telegraph facilities only after the [PUC], upon application of the public utility corporation, has found and determined, after notice and opportunity for hearing, that the service to be furnished by the corporation through the exercise of those powers is necessary or proper for the service, accommodation, convenience or safety of the public.

15 Pa. C.S. § 1511(c). We do not agree that the PUC has the authority to make such a determination with respect to an electric cooperative corporation.

Section 7334 of the Law states that "all electric cooperative corporations subject to this chapter shall be exempt in any and all respects from the jurisdiction and control of the Pennsylvania Public Utility Commission." 15 Pa. C.S. § 7334. Moreover, the PUC only has that authority which the Legislature has delegated to it by statute. City of Philadelphia v. Philadelphia Electric Company, 504 Pa. 312, 318, 473 A.2d 997, 1000 (1984). Such a grant of authority must be clear. Id. There is no clear statutory grant of authority for the PUC to make a determination as to the necessity or propriety of service furnished by an electric cooperative corporation. Therefore, even if Valley Rural were to seek such a determination, as Meinharts assert that it must, the PUC would lack the statutory authority to grant it. This Court holds that Section 1511(c) is not applicable to electric cooperative corporations.

Next, we address Meinharts' alternative argument that, because Section 7321(a)(5) states that the exercise of eminent domain by an electric cooperative corporation shall be for the purpose relating to the exercise of eminent domain by public utilities, Valley Rural should be required to make a factual showing before the trial court that its exercise of eminent domain in this case "is necessary or proper for the service, accommodation, convenience or safety of the public" as required by Section 1511(c). 15 Pa. C.S. § 1511(c). Meinharts argue that, without such a showing, their due process rights will be violated, and electric cooperative corporations will be able to exercise the power of eminent domain without any limitation. We do not agree.

The fundamental error of Meinharts' argument is their conflation of the purpose of a public utility corporation and the purpose of an electric cooperative corporation. The purpose of an electric cooperative corporation is not to provide electric service to the general public, but to engage:

in rural electrification by any one or more of the following methods:

(1) Furnishing of electric energy to persons in rural areas who are not receiving central station service.

(2) Assisting in the wiring of the premises of persons in rural areas or the acquisition, supply or installation of electrical or plumbing equipment therein.

(3) Furnishing of electric energy, wiring facilities, electrical or plumbing equipment or services to any other corporation or to the members thereof.

15 Pa. C.S. § 7305. Section 7321(a)(5) provides that electric cooperative corporations may exercise the power of eminent domain: 1) for the purpose and; 2) in the manner relating to public utility corporations. One purpose for which a public utility corporation may exercise the power of eminent domain is for the transmission of electricity for the public. 15 Pa. C.S. § 1511(a)(2). But, where a public utility corporation exists to provide utility service to the general public, electric cooperative corporations exist to provide electric service to their members. Therefore, a legitimate purpose for the exercise of the eminent domain power by an electric cooperative corporation is to provide electric service to its members.*fn6 ,*fn7

While this purpose is not identical to the purpose for which public utilities exercise the power of eminent domain, it does "relat[e] to" such a purpose. 15 Pa. C.S. § 7321(a)(5). With regard to the manner of exercising the power of eminent domain, Section 1511(g) provides that a public utility corporation may exercise the power of eminent domain by proceeding, as Valley Rural has, in accordance with the Eminent Domain Code (Code), 26 Pa. C.S. §§ 101 -- 1106.

Meinharts rely upon Appeal of Swidzinski, 579 A.2d 1352, 1357 (Pa. Cmwlth. 1990), for the proposition that condemnees, like themselves, must have some mechanism by which they can challenge the validity of a proposed taking. Although Swidzinski does stand for this proposition, it is limited to its very unique facts. Swidzinski dealt, in part, with the issue of under what circumstances and by what mechanism condemnees could challenge the validity of a taking where a public utility, because of the special circumstances involved, was not required to seek a determination of public necessity from the PUC. Because of the particularly unusual procedural posture of that case, the condemnees were unable to challenge any aspect of the taking. Id. at 1357. Therefore, the condemnees alleged a denial of due process. Relying in part on Redding v. Atlantic City Electric Company et. al., 440 Pa. 533, 269 A.2d 680 (1970), and McConnell Appeal, 428 Pa. 270, 236 A.2d 796 (1968),*fn8 this Court determined that, where the PUC had not determined the validity of the proposed taking by a public utility corporation, an action in equity, and not preliminary objections to the declaration of taking in that case, was the proper method to challenge the validity of the taking. Swidzinski, 579 A.2d at 1357. Because the unusual circumstances present in Swidzinski do not exist here, Swidzinski is inapplicable. Moreover, those circumstances are unlikely to occur again due to the amendment of the Code in 1988.

As noted above, the manner in which electric cooperative corporations are to exercise the power of eminent domain is through the provisions of the Code. As Valley Rural points out, Section 306(a)(3)(i) of the Code provides that a condemnee may file preliminary objections to a taking in order to challenge "[t]he power or right of the condemnor to appropriate the condemned property." 26 Pa. C.S. § 306(a)(3)(i). If Meinharts believed that Valley Rural's exercise of the power of eminent domain was without authority or for an improper purpose, for example, if that exercise was not for the purpose of providing electricity to a person eligible to be a member of Valley Rural, then this should have been raised as a preliminary objection to the Declaration of Taking so that the trial court could have taken evidence on this issue. Instead, Meinharts averred that Valley Rural had "not alleged in its Declaration of Taking that the exercise of eminent domain is necessary or proper for the service, accommodation, convenience or safety of the public." (Preliminary Objections ¶ 2.) As discussed above, Valley Rural is not required to allege that its exercise of eminent domain is for the purpose of public service, convenience or accommodation, but must allege that its exercise of eminent domain is necessary to serve one of the purposes enumerated in Section 7305. One of these purposes is to provide electricity "to persons in rural areas who are not receiving central station service" (i.e., a member of the public who otherwise would not be able to receive electric service). 15 Pa. C.S. § 7305(1). Meinharts acknowledge that the purpose of Valley Rural's exercise of eminent domain is to provide electrical service to an individual owning property bordering Longhorn Ranch who is not receiving electricity from a public utility. (Meinharts' Br. at 3-4.) We, therefore, affirm the order of the trial court.

ORDER :

NOW, October 16, 2009, the order of the Court of Common Pleas of Huntingdon County in the above-captioned matter is hereby AFFIRMED.


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