City of Bisbee v. Arizona Water Co.

• Decision Date: 08 February 2007
• Docket Number: No. 2 CA-CV 2006-0106.,2 CA-CV 2006-0106.
• Parties: CITY OF BISBEE, a municipal corporation of the State of Arizona, Plaintiff/Appellee, v. ARIZONA WATER COMPANY, an Arizona corporation, Defendant/Appellant.
• Court: Arizona Court of Appeals

153 P.3d 389

214 Ariz. 368

CITY OF BISBEE, a municipal corporation of the State of Arizona, Plaintiff/Appellee, v. ARIZONA WATER COMPANY, an Arizona corporation, Defendant/Appellant.

No. 2 CA-CV 2006-0106.

Court of Appeals of Arizona, Division 2, Department A.

February 8, 2007.

John A. MacKinnon, Bisbee City Attorney, Bisbee, Attorney for Plaintiff/Appellee.

Bryan Cave, LLP By Steven A. Hirsch, Mitchell J. Klein, Rodney W. Ott, Phoenix, Attorneys for Defendant/Appellant.

OPINION

PELANDER, Chief Judge.

¶ 1 In this quo warranto and declaratory relief action, the trial court granted partial summary judgment in favor of appellee, the City of Bisbee, and against appellant, the Arizona Water Company ("AWC"). AWC appeals from the ensuing judgment, entered pursuant to Rules 54(b) and 56, Ariz. R. Civ. P., 16 A.R.S., Pt. 2. On appeal, AWC argues, inter alia, the Arizona Corporation Commission had exclusive jurisdiction of the issues presented and the trial court erred in granting partial summary judgment in favor of the City. Finding no reversible error, we affirm.

BACKGROUND

¶ 2 In reviewing a grant of summary judgment, we view the facts in the light most favorable to AWC, the party against whom judgment was entered. Bothell v. Two Point Acres, Inc., 192 Ariz. 313, ¶ 2, 965 P.2d 47, 49 (App.1998). AWC is a public service corporation that provides water service within the City of Bisbee. It is the successor in interest to the Arizona Public Service Company, which previously provided water utility services to the City and to the surrounding, then unincorporated communities. In a 1955 "opinion and order," the Arizona Corporation Commission ("the Commission") authorized AWC's purchase and acquisition of the Arizona Public Service Company's operations in Bisbee and the surrounding areas.

¶ 3 That 1955 order granted AWC a "Certificate of Convenience and Necessity for the rendition of water public service and the operation of a water public service corporation business" in the surrounding unincorporated areas, including the Townsite of Lowell, the Villages of Tin Town and Don Luis, Mason Addition, Johnson Addition, Bakerville and Cochise Row, but "excepting the Town of Warren and the City of Bisbee." With respect to the City, the Commission "granted an Order preliminary to issuance of a Certificate of Convenience and Necessity . . . subject only to [AWC's] procuring . . . [the] appropriate consents, franchises or permits for water service . . . from the appropriate authorities of . . . the City of Bisbee." At that time, a franchise from Cochise County authorized the provision of water services to the unincorporated areas surrounding Bisbee, excluding the Town of Warren.¹

¶ 4 A few years later, in 1959, the City annexed the unincorporated areas mentioned above, including the Town of Warren, bringing Bisbee to its current status. AWC has continued to provide water services to the City since 1955 and several times has been granted various permits for, inter alia, relocating or installing water lines. In 1973, in response to the City's request for a copy of a franchise from the City to AWC, AWC stated it could not "locate a franchise per se" from the City and asked how to proceed. The City apparently made no issue of AWC's lack of a franchise until filing this action in April 2005.

¶ 5 In its complaint, however, the City claimed that AWC was operating without an "approved and ratified franchise from this City," which would "authoriz[e] its use of the public streets and rights-of-way for utility purposes." It also alleged that "conflicts [existed] between [AWC's] use of the City's streets for water transmission lines and the City's use of these same streets in connection with the City's pending sewer improvement project." AWC admitted that it had never obtained a franchise but denied that it "lack[ed] permission to use [the City's] public streets and rights-of way for utility purposes."

¶ 6 In moving for partial summary judgment below, the City again claimed, inter alia, that without a franchise, AWC had "no continuing legal right to make use of the public streets and rights-of-way" in Bisbee and that AWC was "legally responsible for the relocation costs associated with the City's sewer improvements." The City also sought a declaration that a broad reservation of rights in the subsurface of certain streets, purportedly retained by AWC's predecessor in interest, was void as against public policy. AWC moved to dismiss the City's complaint pursuant to Rule 12(b)(1), Ariz. R. Civ. P., 16 A.R.S., Pt. 1, arguing the superior court lacked jurisdiction to hear the matter, and alternatively cross-moved for partial summary judgment. Following argument on the motions, the trial court granted the City's motion and denied AWC's motions. Although issues relating to the amount of relocation costs and reimbursement remained unresolved, at AWC's request, the trial court included language of Rule 54(b), Ariz. R. Civ. P., in its judgment, permitting this appeal. While this appeal was pending, AWC applied to the City for a franchise, which the City's electorate approved in September 2006. Thus, AWC is currently operating under a valid franchise.²

DISCUSSION

I. Jurisdiction of the Arizona Corporation Commission

¶ 7 AWC argues "[t]he trial court erred when it allowed this action to proceed in violation of the exclusive jurisdiction of the Arizona Corporation Commission." As noted above, AWC moved to dismiss the City's complaint pursuant to Rule 12(b)(1), Ariz. R. Civ. P., claiming the superior court "lack[ed] subject matter jurisdiction" "because the relief requested and the claims brought by the City invade[d] the exclusive jurisdiction of the Arizona Corporation Commission." After hearing argument, the court denied the motion. "We review de novo the superior court's exercise of jurisdiction and any issue of statutory interpretation." Stapert v. Ariz. Bd. of Psychologist Exam'rs, 210 Ariz. 177, ¶ 7, 108 P.3d 956, 958 (App.2005).

¶ 8 AWC maintains "[t]he Arizona Constitution provides the Corporation Commission with broad and pervasive jurisdiction and authority over public service corporations." It relies on article 15, § 3, which states:

The Corporation Commission shall have full power to, and shall, prescribe just and reasonable classifications to be used and just and reasonable rates and charges to be made and collected, by public service corporations within the State for service rendered therein, and make reasonable rules, regulations, and orders, by which such corporations shall be governed in the transaction of business within the State....

As the City points out, however, "rates, charges and classifications are not at issue." And we fail to see how this constitutional provision lends any support for AWC's argument that the Commission had exclusive jurisdiction of this matter.

¶ 9 In discussing the Commission's jurisdiction in relation to municipal authorities, our supreme court noted, "[i]t is after the public utility has secured its rights and privileges and franchises, including those of occupying the streets and alleys of a municipality, that the power of supervision over the public utility by the Corporation Commission is intended to be operative and controlling." Phoenix Ry. Co. of Ariz. v. Lount, 21 Ariz. 289, 300, 187 P. 933, 936 (1920) (emphasis added). Therefore, a public utility company must first obtain appropriate permission from the municipality in which it operates before the Commission has exclusive jurisdiction to regulate the company's particular operations in that locale. When the City filed this action and thereby effectively required AWC to obtain a franchise, AWC had not yet done so. Although AWC previously operated in Bisbee pursuant to the City's implied consent and therefore was subject to the Commission's regulation, the issues raised here did not fall within the Commission's exclusive jurisdiction.³

¶ 10 Further, and importantly, this action did not involve the type of regulatory authority exclusive to the Commission. In Qwest Corp. v. Kelly, 204 Ariz. 25, 59 P.3d 789 (App.2002), this court summarized the powers of the Commission as follows: "`The [C]ommission's power goes beyond strictly setting rates and extends to enactment of the rules and regulations that are reasonably necessary steps in ratemaking.' In addition to this executive and legislative authority, the Commission has the judicial jurisdiction to hear grievances and consumer complaints." Id. ¶ 13, 59 P.3d 789, quoting State ex rel. Corbin v. Ariz. Corp. Comm'n, 174 Ariz. 216, 218, 848 P.2d 301, 303 (App.1992) (alterations in Qwest); see also City of Casa Grande v. Ariz. Water Co., 199 Ariz. 547, n. 3, 20 P.3d 590, 594 n. 3 (App.2001). This action does not invoke or infringe on any of those types of powers.

¶ 11 Rather, this case is primarily concerned with the rights and obligations of the City vis-à-vis AWC and the issue of which party should bear the costs of relocating equipment. Cases involving similar if not identical disputes have been brought before the superior court rather than the Commission. See, e.g., Paradise Valley Water Co. v. Hart, 96 Ariz. 361, 395 P.2d 716 (1964); El Paso Natural Gas Co. v. State, 135 Ariz. 482, 662 P.2d 157 (App.1983). Further, our supreme court has ruled that determinations of contractual rights between a public utility and an electric co-operative are within the province of the courts, not the Commission. See Trico Elec. Coop. v. Ralston, 67 Ariz. 358, 365, 196 P.2d 470, 474 (1948). In those cases, resolution of the dispute was based on the trial court's determination of the rights and liabilities of the respective parties and did not interfere with the Commission's expertise, which is regulating the business of public service corporations. See Qwest, 204 Ariz. 25, ¶ 13, 59 P.3d at 794. Because the same can be said here, this action, though not involving any contract claims, was appropriately...