Hurricane Deck Holding v. Psc

• Decision Date: 23 June 2009
• Docket Number: No. WD 69643.,WD 69643.
• Citation: 289 S.W.3d 260
• Parties: HURRICANE DECK HOLDING COMPANY, Appellant, v. PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Respondent.
• Court: Missouri Court of Appeals

289 S.W.3d 260

HURRICANE DECK HOLDING COMPANY, Appellant, v. PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Respondent.

No. WD 69643.

Missouri Court of Appeals, Western District.

June 23, 2009.

Gregory David Williams, Esq., Sunrise Beach, MO, for appellant.

Jennifer Leigh Heintz, Esq., Jefferson City, MO, for respondent.

Before ALOK AHUJA, P.J., THOMAS H. NEWTON, C.J., and HAROLD L. LOWENSTEIN, J.

ALOK AHUJA, Judge.

Appellant Hurricane Deck Holding Company appeals a decision of the Circuit Court of Cole County, which denied its petition for review of an adverse decision of the Public Service Commission (the "PSC" or "Commission"). We affirm.

Factual Background

The relevant facts are largely undisputed. Hurricane Deck is a Missouri corporation that developed residential subdivisions in Camden County collectively referred to as the Chelsea Rose Service Area ("Chelsea"). In developing these residential areas, Hurricane Deck constructed water and sewer systems, which it owned. Initially, the Osage Water Company ("Osage"), a public utility which held a certificate of convenience and necessity from the PSC, operated these systems and provided water and sewer services to Chelsea's residents. However, at the PSC's request a receiver was appointed for Osage on October 21, 2005.¹

Hurricane Deck sent a letter to the landowners of Chelsea on December 30, 2005, informing them of Osage's receivership. The letter, written by Hurricane Deck Secretary Debra J. Williams, stated in relevant part:

Several years ago we entered into an agreement with Osage Water Company to provide operation and maintenance of the water and sewer systems we built for our subdivisions, as [Hurricane Deck President] Greg [Williams] and I did not wish to be in the utility business. . . . Since [Osage indicated its inability to continue operating] I have been managing temporarily until the systems could be sold.

. . . .

Fortunately, Hurricane Deck Holding Company never transferred ownership of its water and sewer systems to OWC. The receiver has elected not to enter into an agreement providing operation and maintenance to HDHC. . . .

Therefore, we have determined the best course of action at this point is to turn the systems over to the homeowners. Articles of Incorporation [for the Chelsea Rose Landowners Association (the "Association")] have already been filed with the Secretary of State, and a copy is enclosed for your information.[²] Also enclosed is an accounting for the past two (2) months which itemizes a portion of the actual costs for your systems for that period. I have divided the total amount spent by the number of customers (30) and am billing you for that amount, which is due on January 22.

. . . .

The Water Company telephone line has been disconnected, and until the Board [for the Association] is elected you may call . . . me . . . for billing matters.

Attached to this letter was a statement entitled "HDHC/Quarterly Water & Sewer Assessment/September 22 — December 30." The statement listed itemized costs for electricity, testing, and a "[l]icensed operator." The statement specified that payment should be made to Hurricane Deck.

On January 23, 2006, the PSC Staff filed a complaint against Hurricane Deck.³ Staff's Complaint alleged that Hurricane Deck had engaged in the "unlawful provision of water and sewer services to the public, for gain, without certification or other authority from the Missouri Public Service Commission." The Complaint consisted of five counts. The crux of the Complaint was that, "[b]y billing [Osage's] customers in Chelsea Rose Service Area for water and sewer services," Hurricane Deck was functioning as a public-utility water and sewer company, and was thus subject to Commission regulation.

On July 11, 2006, Staff filed a Motion for Summary Disposition, alleging that there were no material disputed facts, and that Staff was entitled to judgment as a matter of law. After the parties had an opportunity to fully brief the motion, the PSC issued an order on August 31, 2006, granting Staff's Motion in part. In granting summary disposition on Counts I, II, III, and V of the Complaint as it pertained to Hurricane Deck, the PSC reached the following conclusions:

The key fact is that by sending out bills to the residents, Hurricane Deck Holding Company offered service to all residents of the given subdivisions. It is not purporting to merely offer services to a few friends. By offering water and sewer utility services to the public, even if that public is confined to the residents of a few subdivisions, Hurricane Deck Holding Company has made itself subject to regulation as a public utility.

. . . [T]he statutory definitions of water corporation and sewer corporation do not include a requirement that the owner of the corporation actually receive payment for such services. Rather, the definitions depend upon an intent to supply water or sewer service for gain or compensation. Sending a bill to customers for the provision of water and sewer service meets the definition of operating a system for gain, regardless of whether any customer actually pays the bill.

Staff later dismissed Count IV of its complaint — the sole count on which the PSC had not granted summary disposition — and all parties other than Hurricane Deck, thereby rendering the PSC's summary disposition order a final ruling.

Hurricane Deck sought review of the PSC's Order in the Circuit Court of Cole County, which affirmed on April 22, 2008. Hurricane Deck now appeals to this Court.

Standard of Review

We recently set forth the applicable standard of review in State ex rel. Public Counsel v. Public Service Commission, 274 S.W.3d 569, 573 (Mo.App. W.D.2009) (citations omitted):

Our review of commission decisions is limited to determining whether or not the commission exceeded its constitutional and statutory authority or otherwise acted unlawfully; whether or not competent and substantial evidence on the whole record supported its decision; whether or not its decision was based on lawful procedure or a fair trial; and whether or not the commission acted arbitrarily, capriciously, unreasonably, or abused its discretion.

"An order's lawfulness turns on whether the PSC had the statutory authority to act as it did." State ex rel. Mobile Home Estates, Inc. v. Pub. Serv. Comm'n, 921 S.W.2d 5, 9 (Mo.App. W.D.1996). "When determining whether the PSC's order is lawful, the appellate courts exercise unrestricted, independent judgment and must correct erroneous interpretations of the law." Id.

"On appeal, this court reviews the decision of the Commission, not the judgment of the trial court." Deaconess Manor Ass'n v. Pub. Serv. Comm'n, 994 S.W.2d 602, 608 (Mo.App. W.D.1999). "The Commission's order is presumed to be valid," and "[t]he challenger bears the burden of disproving its validity." Id.

Analysis

Hurricane Deck asserts two Points Relied On, both of which argue that the PSC's order was unlawful in declaring Hurricane Deck to be a water corporation and sewer corporation subject to PSC regulation. In Point I, Hurricane Deck argues that the PSC's order improperly declared it a "public utility" because its conduct "did not constitute or affect a public interest or act and was a private matter." In Point II, Hurricane Deck argues that the PSC's order was also unlawful because "Appellant did not intend to, and did not, provide services for gain."

I.

"Under Missouri's Public Service Commission Law, public utilities, such as telephone, telegraph, electric, gas, water, and sewer companies, are regulated by the Missouri Public Service Commission on a statewide basis." Ogg v. Mediacom, L.L.C., 142 S.W.3d 801, 813 (Mo.App. W.D. 2004) (footnote omitted). Section 386.020(43)⁴ defines "public utility" to include:

[E]very pipeline corporation, gas corporation, electrical corporation, telecommunications company, water corporation, heat or refrigerating corporation, and sewer corporation, as these terms are defined in this section, and each thereof is hereby declared to be a public utility and to be subject to the jurisdiction, control and regulation of the commission and to the provisions of this chapter[.]

(Emphasis added.) The legislature in turn defined a "sewer corporation" to include:

[E]very corporation . . . or person . . . owning, operating, controlling or managing any sewer system, plant or property, for the collection, carriage, treatment, or disposal of sewage anywhere within the state for gain, except that the term shall not include sewer systems with fewer than twenty-five outlets[.]

§ 386.020(49). A "water corporation" is defined to include:

[E]very corporation . . . and person . . . owning, operating, controlling or managing any plant or property, dam or water supply, canal, or power station, distributing or selling for distribution, or selling or supplying for gain any water[.]

§ 386.020(59).

Although the relevant statutory definitions contain no explicit requirement that an entity be operated for a public use in order for it to constitute a "public utility," the Missouri Supreme Court long ago held that such a "public use" requirement was intended:

While the definitions quoted supra [of "electric plant" and "electrical corporation," found now at §§ 386.020(11) and (12),] express therein no word of public use, or necessity that the sale of the electricity be to the public, it is apparent that the words "for public use" are to be understood and to be read therein. For the operation of the electric plant must of necessity be for a public use, and therefore be coupled with a public interest; otherwise the Commission can have no authority whatever over it. The electric plant must, in short, be devoted to a public use before it is subject to public regulation.

State ex rel. M.O. Danciger & Co. v. Pub. Serv. Comm'n, 275 Mo. 483, 205 S.W. 36, 38 (1918) (citations omitted). The statutory provisions on which Danciger relied remain...