City of Jackson v. Creston Hills, Inc.

• Decision Date: 22 February 1965
• Docket Number: No. 43353,43353
• Citation: 172 So.2d 215,252 Miss. 564
• Parties: , 58 P.U.R.3d 128 CITY OF JACKSON, Mississippi, v. CRESTON HILLS, INC.
• Court: Mississippi Supreme Court

Page 215

172 So.2d 215

252 Miss. 564, 58 P.U.R.3d 128

CITY OF JACKSON, Mississippi, v. CRESTON HILLS, INC.

No. 43353.

Supreme Court of Mississippi.

Feb. 22, 1965.

E. W. Stennett, W. T. Neely, Jackson, for appellant.

Young & Young, Jackson, for appellee.

GILLESPIE, Justice.

This case involves a suit by Creston Hills, Inc., a certificated public utility operating a water company supplying water to more than 200 residences outside of the City of Jackson when the city limits were extended to include the area served by the water utility. The City invaded the area certificated to the private water utility, causing it to go out of business. This suit was to recover from the City for damaging the property of the private utility without paying compensation therefor as required by section 17 of the Mississippi Constitution of 1890. We affirm on liability and reverse for assessment of damages.

For a number of years prior to September 13, 1956, one J. A. Barnhill operated a water company in an area several miles south of the City of Jackson, Mississippi, hereinafter referred to as Creston area. Barnhill had no certificate of public convenience and necessity on September 13, 1956, when he conveyed to Creston Hills, Inc., a Mississippi Corporation, hereinafter designated Creston, certain real property and the water mains and appurtenances owned by him in connection with the operation of the water company. Approximately 225 customers were being served by the water company at that time. The system consisted of two deep wells, two submersible pumps, two pressure tanks, water mains, service lines and other sundry property.

Pursuant to a petition filed by Creston Hills, the Public Service Commission, on March 4, 1958, issued to Creston a certificate of public convenience and necessity under the provisions of the 'grandfather clause' of the Public Utility Act of 1956. Mississippi Code Annotated Sec. 7716-01(b) et seq. (1956). In March 1960, while Creston was operating the water utility pursuant to its certificate, City extended its corporate limits so as to include the entire area served by Creston. On July 14 City expressed its intention to lay water mains in the area served by Creston by declaring in a resolution the necessity of installing water mains, fire plugs, connections and appurtenances in said area. In December 1960, City began laying a complete water system in Creston's certificated area, paralleling Creston's lines. Representatives of City contacted every customer then being served by Creston and told each of them that while the new water system was being laid by the City's contractor the customer could have a water line laid to the premises ready for attachment of the meter at a cost far less than would be possible at a later time. The representative of the City also told each of Creston's customers that city water was available if the customer desired it, and 156 of Creston's customers had City's service lines or 'stub-outs' run from the main to their property line. About 15 of Creston's customers discontinued purchasing water from Creston at that time, or between that time and June 1963, and began purchasing water from the City, whose rates appeared to be lower than those of Creston.

After it became known that City was preparing to extend its water mains and other facilities into Creston's certificated area, on August 26, 1960, Creston filed a petition with the Public Service Commission for a cease and desist order against the City of Jackson. After hearing, the Public Service Commission, on January 30, 1961, ordered City to cease and desist taking applications for water service from residents of Creston's certificated area. City appealed from that order and on September 26, 1961, the Chancery Court of Hinds County reversed the order of the Public Service Commission and dissolved the cease and desist order and dismissed Creston's petition.

The decree of the chancery court made the opinion of the chancellor a part of the decree by reference, and in the opinion of the chancellor it was stated that the Public Service Commission had no jurisdiction of the matter. The opinion went on further to state that the extension of the city limits ipso facto cancelled Creston's certificate of public convenience and necessity. No appeal was taken from the decree of the chancery court reversing the Public Service Commission's cease and desist order.

Creston's revenues from the sale of water declined after the City began competing in the area, and in June 1963, one of Creston's submersible pumps, apparently an expensive piece of machinery, burned out, and Creston, according to its sole stockholder, decided to discontinue business because it was unable to compete with City and any money paid out in repairing the disabled machinery would be lost. Whereupon Creston notified its customers that it was ceasing business, and on or about June 13 all of Creston's customers were connected to the city water system. Creston then petitioned the Public Service Commission and surrendered its certificate of public convenience and necessity.

City built its own water mains and distribution system and did not take over the system abandoned by Creston. The proof shows that Creston's system was not suitable for the purposes of the City and did not meet its specifications.

I.

City contends that the decree of the Chancery Court of Hinds County reversing the cease and desist order of the Public Service Commission bars the present action under the doctrine of res judicata. Within a few weeks after City made known its intention to extend water service to the Creston area, the petition for a cease and desist order was filed by Creston with the Public Service Commission and all that Creston requested was a cease and desist order to protect itself from competition by City in Creston's certificated area. The City resisted and a hearing was had and the petition was granted. City appealed to the chancery court and that court reversed the order of the Commission, dissolved the cease and desist order, and dismissed Creston's petition. Based on statements in the chancellor's opinion, it is contended by City that the litigation, beginning before the Commission and ending in the chancery court on appeal thereto was a judicial determination that Creston's certificate of public convenience and necessity had been cancelled and held for naught and that this constituted a bar to the present litigation. The proceedings before the Public Service Commission were for a cease and desist order, and did not involve any damages that Creston might be entitled to for the wrongful damaging of its property. The proceedings before the Public Service Commission sought to avoid threatened competition which Creston deemed unlawful under the Public Utility Act of 1956. Therefore, the object of the proceedings before the Public Service Commission and the object of the present suit were not the same. The first was to avoid competition and the present suit is to recover for the wrongful damaging of property. We are also of the opinion that the collateral estoppel aspect of res judicata is not available to City. It was not necessary for the chancery court to find that Creston's certificate of public convenience and necessity was either valid or invalid in order for that court to conclude that the Public Service Commission had no jurisdiction to hear the petition for a cease and desist order. The Public Utility Act of 1956 specifically excluded municipalities from the jurisdiction of the Commission. The Commission had no jurisdiction over the City of Jackson, so the chancery court on an appeal from the Public Service Commission had no jurisdiction of the matter. We hold that City was not in a position to claim that Creston had no authority to litigate in the present suit the question of damages for the damaging of its water system.

II.

City assigns as error the granting of a peremptory instruction directing the jury to find for Creston as a matter of law. The disposition of this assignment makes it necessary for the Court to determine what rights the parties had with reference to the Creston area after expansion of the city limits. It also raises the question whether the proof showed without dispute that City did invade the Creston area by establishing its water system in competition with Creston.

City's contention is that under the statutes it has the privilege and the duty to furnish water to all of the inhabitants of the City and, notwithstanding the fact that Creston had theretofore been granted a certificate of public convenience and necessity to serve the Creston area before expansion of the city limits, when the city limits were expanded to include the Creston area the certificate of public convenience and necessity held by Creston was automatically cancelled. City contends that after such expansion of the city limits Creston had no further rights and City had the exclusive right to furnish water to the Creston area residents. City also contends that Creston had no property rights in the water lines because they were laid in dedicated streets without any easement.

The Public Utility Act, Mississippi Code Annotated section 7716-01(H), provides that any public utility as defined in the Act, owned and operated by a municipality shall not be subject to the provisions of the Act. Chapter 19, Laws of...