City of Blue Mound v. Sw. Water Co.

Decision Date13 November 2014
Docket NumberNo. 02–13–00343–CV.,02–13–00343–CV.
PartiesCITY OF BLUE MOUND, Texas, Appellant v. SOUTHWEST WATER COMPANY and Monarch Utilities I, LP, Appellees.
CourtTexas Court of Appeals

Tim G. Sralla, Daniel R. Barrett, Frederick “Fritz” Quast, Taylor, Olson, Adkins, Sralla & Elam, L.L.P., Fort Worth, for Appellant.

Stephen I. Adler, Christopher M. Clough, Barron & Adler, LLP, Austin, for Appellee.

PANEL: GARDNER, WALKER, and McCOY, JJ.

OPINION

SUE WALKER, Justice.

I. Introduction

The primary issue that we address in this summary judgment appeal is whether Appellant City of Blue Mound, Texas, may condemn in district court the Blue Mound Water and Wastewater System—a water and wastewater system owned and operated by Appellee Monarch Utilities I, LP, a subsidiary of Appellee Southwest Water Company that is currently serving residents of the City—so that the City may own and operate it. Because we hold that no statutory procedures exist permitting a municipality's condemnation in a Texas district court of a privately-owned public utility as a going concern, we will affirm the trial court's summary judgments for Appellees.

II. Background

As the owner and operator of Blue Mound Water and Wastewater System, Monarch holds certificates of convenience and necessity (CCNs) numbers 12983 and 20899 that were issued by the Texas Commission on Environmental Quality (TCEQ), permitting Monarch to serve its approximately 800 water and 800 wastewater connections with the City.

The City filed condemnation proceedings for the acquisition of the real property and fixtures of the Blue Mound Water and Wastewater System. The City's condemnation petition alleged that the City sought to exercise its powers of eminent domain under Texas Local Government Code section 251.001 and Texas Property Code chapter 21 to acquire Monarch's entire water and wastewater system,

including without limitation the real property, easements, if any, including sanitary control easements, utility easements and access easements, any and all improvements and fixtures affixed to the land, including buildings, a water well (Water Well No. 1), water tower and water tanks located at 1601 Bell Avenue and buildings, water wells (Water Well No. 2 and Water Well No. 3) and water tanks located at 1825 Fagan Drive, distribution lines, including water and sewer lines and water and sewer mains, fixed equipment, fire hydrants and generators, and water rights more particularly described for illustrative purposes in the [attachments to its “Third Amended Original Petition for Condemnation”]; provided, in no event does the City intend to acquire personal property.

The petition alleged that the City sought to condemn and acquire the Blue Mound Water and Wastewater System with all rights of possession and access, free and clear of any encumbrances or restrictions which may burden the utility system so that the City may own and operate its own water and wastewater utility system that will serve residential and commercial customers in Blue Mound.

Three special commissioners were appointed to assess “the value of the property which is the subject matter of this proceeding.” They issued an award of $2,748,000 “for land more specifically described in Plaintiff's Original Petition for Condemnation, according to the rules of damages set forth in Section 21.042 of Texas Property Code.” Appellees objected to the special commissioners' award, arguing that the City does not have authority, and that the district court does not have jurisdiction, to take Appellees' property and that the taking is precluded under Texas law.

Monarch filed a combined no-evidence and traditional motion for summary judgment asserting four grounds for summary judgment. Monarch's first ground for summary judgment asserted that the City possesses no authority to condemn an entire, ongoing utility business under local government code section 251.001 —the statutory authority relied upon by the City for its attempted condemnation. Monarch also moved for summary judgment on the grounds that the legislature had passed a comprehensive system for the taking, i.e., a transfer of ownership, of a certificated utility via chapter 13 of the water code and that such a proceeding must be brought in a proceeding before the TCEQ, not in district court. Monarch's other grounds for summary judgment asserted that the City was attempting through its condemnation action to regulate water rates and to “work an end-run” around the established and preemptive procedures in Texas for utility rate cases and that the City's condemnation was not for a public purpose because the Blue Mound Water and Wastewater System was already being used for the very same purpose that the City wanted to use it for—the provision of water and wastewater services to the citizens of the City.

The City filed a response and a plea in abatement. The trial court granted the City's plea in abatement and abated the case while the City attempted to obtain legislation, HB 1160, purporting to amend the local government code by providing procedures for the TCEQ to transfer Monarch's CCNs to the City so that the City could take over the operation of the Blue Mound Water and Wastewater System.1

After the Governor vetoed the bill,2 the trial court reinstated the condemnation suit and granted summary judgment for Monarch. Southwest Water Company subsequently filed a motion for summary judgment mirroring Monarch's motion, and the trial court granted it. The trial court's orders granting Appellees' motions for summary judgment do not state the grounds on which summary judgment was granted. The trial court then signed a judgment finally dismissing the case as to both Appellees. The City perfected this appeal.

The City raises four issues on appeal that track Appellees' four grounds for summary judgment, attacking each ground on which the summary judgments could have been granted.

III. Standard of Review

We review a summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005). We will affirm a traditional summary judgment only if the movant established that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law on the grounds expressly set forth in the motion. Browning v. Prostok, 165 S.W.3d 336, 344 (Tex.2005). Because the parties here agree that there are no genuine issues of material fact, we review only whether Appellees were entitled to judgment as a matter of law.3 When the trial court's order does not state the ground on which the trial court granted summary judgment, we must affirm the trial court's judgment if any ground for summary judgment is meritorious. Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173 (Tex.1995).

IV. The City's Taking Is Not Authorized In District Court

In its first issue, the City asserts that its proposed taking of Monarch's water and wastewater system through its condemnation suit in district court is authorized by Texas condemnation law so that the trial court could not have granted summary judgment on the ground that it was not.

A. The City is Taking the Blue Mound Water and Wastewater System as a Going Concern

Before analyzing whether Texas law provides for the taking attempted by the City, we must first determine exactly what the City is seeking to condemn. The City argues that it seeks only condemnation of real property and the fixtures attached to that property, not the condemnation of the entire Blue Mound Water and Wastewater System as an ongoing business. Appellees, on the other hand, argue that the City is attempting to condemn the entire Blue Mound Water and Wastewater System as an ongoing business solely to effectuate a change in ownership of the system so that the City, instead of Monarch, may own and operate the system.

As set forth and quoted above, the City's condemnation petition pleaded that the City sought to acquire the entire Blue Mound Water and Wastewater System. The City pleaded that by its condemnation action it sought to acquire the entire Blue Mound Water and Wastewater System including without limitation not only real property but also numerous fixtures, easements, buildings, water rights, and water and sewer lines and mains.

Additionally, the City provided as summary judgment evidence a resolution approved by the City's city council, Resolution No. 10–11, authorizing the filing of eminent domain proceedings to acquire the water and wastewater utility company, not the real property. The resolution provides in pertinent part:

A RESOLUTION OF THE CITY OF BLUE MOUND, TEXAS AUTHORIZING THE FILING OF EMINENT DOMAIN PROCEEDINGS FOR THE PUBLIC PURPOSE OF ACQUIRING THE LOCAL WATER AND WASTEWATER UTILITY COMPANY SERVING THE CITY, OR FOR OTHER PUBLIC PURPOSES PERMITTED BY LAW; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Blue Mound, Texas (the “City”), is a Type A general-law municipality located in Tarrant County, created in accordance with the provisions of Chapter 6 of the Local Government Code and operating pursuant to the enabling legislation of the State of Texas; and
WHEREAS, the City is currently served with water and wastewater by a privately owned utility company (the “Utility”); and
WHEREAS,the City desires to acquire the complete Utility, including without limitation the real property, buildings, easements, wells, pipes and transmission lines, meters, storage tanks, equipment, water rights and certificates of convenience and necessity (“CCN's”), so that the City owns and operates its own water and wastewater utility systems (the “Project”); and
WHEREAS, the Utility appears to have been originally installed or constructed by Saginaw Park Utility Company, and was subsequently purchased by Tecon Water Company, then purchased by Monarch Water Utilities, Southwest Water Company, and J.P. Morgan and Water Asset Management; and
WHEREAS, the City and the owners of the Utility have been unable to reach an agreement on the acquisition of the
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