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Commissioners of Public Works of City of Laurens v. City of Fountain Inn

Supreme Court of South Carolina

September 18, 2019

Commissioners of Public Works of the City of Laurens, South Carolina, also known as the Laurens Commission of Public Works, Respondent,
v.
City of Fountain Inn, South Carolina, Petitioner Appellate Case No. 2018-001309

          Heard June 12, 2019

          Appeal From Laurens County J. Cordell Maddox, Jr., Circuit Court Judge.

         ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

          Sarah P. Spruill and Boyd B. Nicholson Jr., both of Haynsworth Sinkler Boyd, PA, and David W. Holmes, of Holmes Law Firm, all of Greenville, for Petitioner.

          Robert L. Widener, of Burr & Forman, LLP, of Columbia, and Bernie W. Ellis, of Burr & Forman, LLP, of Greenville, for Respondent.

          KITTREDGE JUSTICE.

         This case concerns a municipality's statutory ability to provide utility services beyond its corporate limits. Section 5-7-60 of the South Carolina Code (2004) authorizes a municipality to provide specified services, such as utilities, outside of its corporate limits "by contract" except within a so-called "designated service area for all such services of another municipality or political subdivision." The dispositive issue here centers on the meaning of the following provision in section 5-7-60: "For the purposes of this section designated service area shall mean an area in which the particular service is being provided or is budgeted or funds have been applied for as certified by the governing body thereof." For reasons explained below, we hold the requirement for certification "by the governing body thereof" applies in all of the enumerated circumstances for the establishment of a designated service area.

         Several years ago, an industrial park was built in an unincorporated area in Laurens County between the City of Laurens (Laurens) and the City of Fountain Inn (Fountain Inn). Both municipalities provided natural gas service beyond their respective borders, and each sought to serve the industrial customers in the new industrial park. However, Laurens-through its subsidiary, the Laurens Commission of Public Works (LCPW)-claimed Fountain Inn could not compete for the industrial customers' business because LCPW had established a designated service area and therefore was the sole authorized natural gas provider to the industrial park. Fountain Inn believed the industrial park was not part of a designated service area, and thus LCPW did not have an exclusive right to provide natural gas to customers in the industrial park.

         In support of its claim, LCPW asserted it had satisfied the requirements of section 5-7-60 by providing natural gas in the general vicinity for twenty years pursuant to a 1992 boundary line that was informally agreed to by Laurens and Fountain Inn. Agreeing with LCPW that it had properly created a designated service area, the circuit court enjoined Fountain Inn from providing natural gas service to the industrial park, and the court of appeals affirmed. Comm'rs of Pub. Works of the City of Laurens v. City of Fountain Inn, 423 S.C. 461, 815 S.E.2d 21 (Ct. App. 2018). Because there is no reasonable interpretation of section 5-7-60 that would permit LCPW to claim a designated service area over the industrial park, we reverse.

         I.

         The facts here are not in dispute. In 1992, officials from both municipalities met to discuss establishing a boundary line in the unincorporated area between the two cities for the purpose of providing natural gas outside their respective corporate limits. Following the meeting, LCPW's general manager sent a letter to Fountain Inn's natural gas system manager and enclosed a map (the 1992 Map) memorializing the proposed boundary line. Fountain Inn's system manager replied to the letter, expressing his agreement as to the accuracy of the proposed boundary line and stating the 1992 Map was "in agreement with the Fountain Inn City Council." LCPW's general manager then sent a second letter stating he was "in the process of preparing a resolution for adoption by both of our governing bodies." The boundary line was never formally ratified by either municipality's city council or LCPW. Since 1992, the parties generally treated the 1992 Map as a gentlemen's agreement, although disputes did arise, which the parties usually settled without resort to litigation.

         However, the parties did not come to an informal resolution when the current dispute involving Owings Industrial Park arose. LCPW argues that the industrial park was constructed entirely on its side of the 1992 Map's boundary line. ZF Transmissions (ZF) was the first company to build in the industrial park and, unaware of the informal boundary line, solicited competing bids for its natural gas service from LCPW and Fountain Inn.

         Believing the 1992 Map prohibited Fountain Inn from competing for ZF's business (or the business of any other future customer in the industrial park), LCPW filed a complaint, (1) asserting claims for breach of contract and promissory estoppel based on the 1992 Map; (2) seeking a declaratory judgment that it had established a designated service area pursuant to section 5-7-60; and (3) requesting an injunction prohibiting Fountain Inn from providing natural gas service in the designated service area, i.e., in any area past the boundary line established by the 1992 Map.[1] LCPW later withdrew its breach of contract and promissory estoppel claims, relying only on the claim that it had satisfied the statutory requirements of a designated service area.

         During the bench trial, several witnesses testified LCPW generally provided natural gas service to customers all throughout the territory established by the boundary line on the 1992 Map. However, the area in and around Owings Industrial Park was unserved until the industrial park was completed because there were no customers there. Ultimately, the circuit court (1) found, pursuant to section 5-7-60, that LCPW had established a designated service area defined by the boundary line marked on the 1992 Map; ...


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