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Prairie Land Electric Coop., Inc. v. Kansas Electric Power Coop., Inc.

Supreme Court of Kansas

May 16, 2014

PRAIRIE LAND ELECTRIC COOPERATIVE, INC., A Kansas Electric Cooperative, Plaintiff/Appellee,
v.
KANSAS ELECTRIC POWER COOPERATIVE, INC., Defendant/Appellant, and SUNFLOWER ELECTRIC POWER CORPORATION, Defendant/Appellee

Review of the judgment of the Court of Appeals in an unpublished opinion filed November 12, 2010.

Appeal from Phillips District Court; WILLIAM B. ELLIOTT, judge.

Judgment of the Court of Appeals reversing the district court is reversed. Judgment of the district court is affirmed.

SYLLABUS

BY THE COURT

1. Declaratory judgment actions provide relief from uncertainty and insecurity with respect to disputed rights, status, and other legal relations.

2. Appellate courts exercise unlimited review over the interpretation and legal effect of written instruments and are not bound by a lower court's interpretation of those instruments.

3. The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the contract language without applying rules of construction.

Timothy J. Sear, of Polsinelli Shughart PC, of Overland Park, argued the cause, and Kevin J. Breer and Brett C. Randol, of the same firm, and R. Douglas Sebelius, of Sebelius and Griffiths, LLP, of Norton, were with him on the briefs for defendant/appellant Kansas Electric Power Cooperative, Inc.

John F. McClymont, of Ryan, Walter & McClymont, Chtd., of Norton, argued the cause and was on the briefs for plaintiff/appellee Prairie Land Electric Cooperative, Inc.

James M. McVay, of Watkins Calcara, Chtd, of Great Bend, argued the cause and was on the briefs for defendant/appellee Sunflower Electric Power Corporation.

OPINION

Page 1271

MORITZ, J.

We granted review in this declaratory judgment action to consider a unique contract question involving three parties, one of which entered into two separate " all-requirements" contracts, agreeing to purchase all of its wholesale electricity needs from each of the other two parties. The district court ruled in favor [299 Kan. 361] of the supplier that entered into the first all-requirements contract, and the Court of Appeals reversed the district court.

Simply stated, the parties have presented the court with two seemingly irreconcilable contracts. Nevertheless, we are not asked to determine whether any party breached its obligations under either contract, but to consider which party has superior rights under the competing contracts. We conclude that under the facts of this case, the party that chose to enter into two temporally overlapping all-requirements contracts must meet its obligations under its contract with the first supplier before it may comply with any obligations under its contract with the second supplier. Consequently, we reverse the Court of Appeals' decision and affirm the district court's judgment.

Factual and Procedural Background

Prairie Land Electric Cooperative, Inc. (Prairie Land) purchases wholesale electricity from multiple suppliers and distributes that electricity to retail consumers within a certified service area in northwest and north central Kansas. The Kansas Corporation Commission establishes the boundaries of Prairie Land's certified service area. Within its certified service area, Prairie Land's distribution system consists of all the " facilities, transmission lines, distribution lines and substation equipment as owned and operated by Prairie Land." The dispute in this case arises from Prairie Land's decision to enter into temporally overlapping, long-term all-requirements contracts with two different wholesale electricity suppliers.

The Sunflower Contract

Nearly 50 years before the current litigation arose, Prairie Land entered into an all-requirements contract with Sunflower Electric Power Corporation (Sunflower). The Sunflower Contract, entered into in February 1958, remains in effect until April 2021 and in relevant part provides:

" 1. General. [Sunflower] shall sell and deliver to [Prairie Land] and [ Prairie Land ] shall purchase and receive from [ Sunflower ] all electric power and energy which [ Prairie Land ] shall require for the operation of [ Prairie Land's ] system to the extent that [Sunflower] shall have such power and energy available, provided, however, that ...

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