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West Anderson Water District v. City of Anderson

Court of Appeals of South Carolina

June 15, 2016

West Anderson Water District, Appellant,
v.
City of Anderson, South Carolina, Respondent. Appellate Case No. 2014-002488

          Heard March 16, 2016

         Appeal From Anderson County R. Keith Kelly, Circuit Court Judge

          Sarah Patrick Spruill and Boyd Benjamin Nicholson Jr., both of Haynsworth Sinkler Boyd, PA, of Greenville, for Appellant.

          Frank H. Gibbes, III, of Gibbes Burton, LLC, of Spartanburg, and J. Franklin McClain, of Anderson, for Respondent.

          GEATHERS, J.

         In this declaratory judgment action, Appellant West Anderson Water District (the District) seeks review of the circuit court's order interpreting a contract between the District and Respondent City of Anderson, South Carolina (the City) that allowed the City to provide water service to a certain site within the District's boundaries. The District argues the individuals serving on the District's governing board at the time the contract was executed did not have authority to bind successor boards. The District also argues the circuit court's interpretation of the disputed contractual provision substantially compromised the District's central, primary function, i.e., the provision of water and sewer service. We affirm.

         FACTS/PROCEDURAL HISTORY

         Prior to February 2002, Duke Energy Corporation (Duke) owned and operated a water system serving wholesale and retail water customers throughout various parts of Anderson County. On February 20, 2002, Duke sold the system's retail component to the City and its wholesale component to the members of the Anderson County Joint Municipal Water System (the Joint System).[1] The Joint System was created pursuant to the Joint Municipal Water Systems Act, [2] S.C. Code Ann. §§ 6-25-5 to -170 (2004), which allows two or more municipalities to form a joint municipal water system to meet the needs of their service areas or to create a finance pool. S.C. Code Ann. § 6-25-30 (2004).[3] The Joint System's members include the District; the City; the municipalities of Clemson, Pendleton, and Williamston; Starr-Iva Water and Sewer District; Sandy Springs Water District; Powdersville Water District; Hammond Water District; Homeland Park Water District; Broadway Water and Sewerage District; and Big Creek Water and Sewerage District.

         On March 21, 2002, the Joint System entered into an agreement to sell water to its members (the Water Sale and Purchase Agreement).[4] Included in this agreement was a provision in which the District consented to the City providing water service to a facility owned by Michelin North America, Inc. (Michelin) and at least partially located within the District's historical service area. The agreement also included a provision referencing an attached territorial map designating the respective new service areas for each party. The attached territorial map designated the property on which the Michelin facility was located as included within the City's new service area.

         In 2012, the District learned Michelin was building a second facility on the property it occupied. Subsequently, the District received a letter from the City stating the City would be providing water service to the second facility and requesting the District to "cease contact with Michelin regarding water service to the site." The District later filed a summons and complaint seeking a declaratory judgment that the City may not provide water service to Michelin's second facility and an injunction against the City's provision of water service to the second facility. The City answered and filed a counterclaim seeking a declaration that it was entitled to provide water service to Michelin's second facility pursuant to the Water Sale and Purchase Agreement.

         The circuit court conducted a bench trial and subsequently issued an order declaring that the Water Sale and Purchase Agreement authorized the City to provide water service to Michelin's second facility. In its order, the circuit court concluded the District's enabling legislation authorized the District to bind members of future boards to the terms of the Water Sale and Purchase Agreement. The circuit court also concluded the District's delegation of power to the City to provide water service to the Michelin property did not substantially compromise the District's central, primary function. The circuit court denied the District's motion to amend its order pursuant to Rule 59(e) of the South Carolina Rules of Civil Procedure. This appeal followed.

         ISSUES ON APPEAL

1. Did the circuit court err in finding the Water Sale and Purchase Agreement allowed the City to provide water service to the entire Michelin site?
2. Did the circuit court err in concluding the District's board could bind successor boards to the Water Sale and Purchase Agreement?
3. Did the circuit court err in concluding the District's delegation of its power to the City would not substantially compromise the District's primary function?

         STANDARD OF REVIEW

         "Declaratory judgments in and of themselves are neither legal nor equitable. The standard of review for a declaratory judgment action is therefore determined by the nature of the underlying issue." Kinard v. Richardson, 407 S.C. 247, 256, 754 S.E.2d 888, 893 (Ct. App. 2014) (citation omitted) (quoting Campbell v. Marion Cty. Hosp. Dist, 354 S.C. 274, 279, 580 S.E.2d 163, 165 (Ct. App. 2003)). "An action to construe a contract is an action at law reviewable under an 'any evidence' standard." Pruitt v. S.C. Med. Malpractice Liab. Joint Underwriting Ass'n, 343 S.C. 335, 339, 540 S.E.2d 843, 845 (2001). "In an action at law, tried, without a jury, the appellate court's standard of review extends only to the correction of errors of law." Sherlock Holmes Pub, Inc. v. City of Columbia, 389 S.C. 77, 81, 697 S.E.2d 619, 621 (Ct. App. 2010) (quoting Pope v. Gordon, 369 S.C. 469, 474, 633 S.E.2d 148, 151 (2006)).

         LAW/ANALYSIS

         I. Construction of the Water Sale and Purchase Agreement

         The District contends the circuit court erred in finding the Water Sale and Purchase Agreement allows the City to provide water service to the entire Michelin site. The District argues the Water Sale and Purchase Agreement allows the City to provide service to only those customers existing when the agreement was executed and Michelin's second facility, a new "customer, " did not exist when the agreement was executed. We disagree.

         "When interpreting a contract, a court must ascertain and give effect to the intention of the parties." Laser Supply & Servs., Inc. v. Orchard Park Assocs., 382 S.C. 326, 334, 676 S.E.2d 139, 143 (Ct. App. 2009). "To determine the intention of the parties, the court 'must first look at the language of the contract . . . .'" Id. (quoting C.A.N. Enters. v. S.C. Health & Human Servs. Fin. Comm'n, 296 S.C. 373, 377, 373 S.E.2d 584, 586 (1988)).

         When the language of a contract is clear and unambiguous, the determination of the parties' intent is a question of law for the court. See Hawkins v. Greenwood Dev. Corp., 328 S.C. 585, 592, 493 S.E.2d 875, 878 (Ct. App. 1997) ("The construction of a clear and unambiguous contract is a question of law for the court."). Whether an ambiguity exists in the language of a contract is also a question of law. S.C. Dep't of Nat. Res. v. Town of McClellanville, 345 S.C 617, 623, 550 S.E.2d 299, 302-03 (2001). "A contract is ambiguous when the terms of the contract are reasonably susceptible to more than one interpretation." Id. at 623, 550 S.E.2d at 302. "Once the court decides the language is ambiguous, evidence may be admitted to show the intent of the parties." Id. at 623, 550 S.E.2d at 303. "The determination of the parties' intent is then a question of fact." Id.

         Here, the circuit court concluded the Water Sale and Purchase Agreement was ambiguous due to the conflict between the "prefatory clause" in the "Background and Findings" section of the agreement and section 6.02 of the agreement, which discusses territorial boundaries.[5] The prefatory clause states,

It is presently intended by the parties hereto that the City of Anderson will serve (1) two industries; BASF and Owens-Corning, located within the boundaries of Starr-Iva Water and Sewer District; and (2) the industrial facilities of Michelin, which are located within the boundaries of West Anderson Water District. Both Starr-Iva Water and Sewer District and West Anderson Water District consent to the City of Anderson's providing such services to these industries. However, such consent is strictly limited to the provision of service to these named industrial customers and no further provision of service by the City of Anderson shall be made to any customer located within the boundaries of Starr-Iva Water and Sewer District or within West Anderson Water District without the written consent of such Purchaser.

(emphases added). On the other hand, section 6.02 of the agreement states,

In order to successfully plan and finance additions to each Purchaser's System, and to avoid future disputes, the parties have agreed upon a Territorial Map of the territories of the parties to this Agreement in order to set out the areas each intends ...

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