City of Mesa v. Salt River Project Agr. Imp. and Power Dist.

• Decision Date: 05 July 1962
• Docket Number: No. 6976,6976
• Citation: 373 P.2d 722,92 Ariz. 91
• Parties: CITY OF MESA, a municipal corporation, Appellant, v. SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district, Appellee.
• Court: Arizona Supreme Court

Page 722

373 P.2d 722

92 Ariz. 91

CITY OF MESA, a municipal corporation, Appellant, v. SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district, Appellee.

No. 6976.

Supreme Court of Arizona, In Banc.

July 5, 1962.

Rehearing Denied Sept. 18, 1962.

J. LaMar Shelley, City Attorney, Mesa, Kramer, Roche, Burch & Streich, Phoenix, for appellant.

Jennings, Strouss, Salmon & Trask, Phoenix, for appellee.

William G. Barnes, City Atty., Avondale & Tempe, Fred Talmadge, Town Atty., Benson, Eldon H. Towner, Town Atty., Buckeye, William E. Platt, City Atty., Coolidge, W. Shelley Richey, City Atty., Douglas, William Chester, Town Atty., El Mirage, Kenneth Biaett, City Atty., Glendale, F. Britton Burns, Town Atty., Goodyear, Melvyn T. Shelley, Town Atty., Holbrook, Sam Lazovich, Town Atty., Miami, Nasib Karam, City Atty., Nogales, Alvin Moore, Town Atty., Parker, Norman Wykoff, Town Atty., Peoria, H. J. Wolfinger, City Atty., Prescott, M. V. Gibbons, City Atty., St. Johns, George Song, City Atty., Scottsdale, Keith Benton, Town Atty., Somerton, James A. Yankee, City Atty., Tolleson, Frank Stanlis, Town Atty., Wickenburg, Denzil G. Tyler, City Atty., Winslow, John B. Wisely, Jr., City Atty., Yuma, amici curiae.

WILLIAM W. NABOURS, Superior Court Judge.

This action was brought by the City of Mesa, hereinafter called the City, for a declaratory judgment against the Salt River Project Agricultural Improvement and Power District, called the District, to determine the respective rights of the parties to serve electrical energy in certain areas within and adjacent to the corporate limits of the City. The District counterclaimed asking that the City be permanently restrained from competing with the District or interfering in any manner with the electric service to any area being served by the District. From a judgment in favor of the District the City appeals.

The City was first incorporated on the 1st day of June, 1883, as the Town of Mesa pursuant to the general territorial laws pertaining to cities and towns then in effect. Later it increased in size and population and was organized under the general laws of the State now Title 9 of the Arizona Revised Statutes. In October 1917, the City acquired the electrical distribution system of the Southside Gas and Electric Company serving the town, together with water and gas distribution systems and since has furnished all three utilities to its residents. The City's incorporated limits were then and for some thirty years thereafter an area of one square mile; however in 1949 and thereafter it annexed certain areas adjacent to the original townsite. In some instances territory was annexed which was unimproved in the sense that in part, at least, it was still devoted primarily to agricultural pursuits.

The District is an agricultural improvement district organized pursuant to the provisions of what is now Chapter 4, Title 45, A.R.S.1956, for the purpose of reclaiming lands susceptible of irrigation. The predecessor in interest to the District was the Salt River Valley Water Users Association, incorporated in 1903, under the General Corporation Laws of the Territory of Arizona. At the time of its organization the townsites of Phoenix, Tempe and Mesa were excluded from its boundaries. On or about March 22, 1937, the Salt River Valley Water Users Association, subject to the rights of the United States, transferred and assigned all its properties, real and personal, and rights therein, and all water and power rights, franchises and privileges to the District but continued to operate the works and facilities. In September of 1949 the District assumed and took over the maintenance and operation of the electric power system from the association and has continued the maintenance and operation to the present time, constructing canals, laterals and electric transmission and distribution lines over and along certain rights of way theretofore granted by the United States and the individual landowners.

In 1929 the Central Arizona Light & Power Company, the City of Mesa and the District served electrical energy in Maricopa County. In general the service areas of the Central Arizona Light & Power Company were the incorporated areas of Maricopa County excluding the City of Mesa. The service of the City was confined to its incorporated limits with certain exceptions not of importance here. Prior to 1929 the Salt River Valley Water Users Association provided some retail electric service in rural areas, and supplied power at wholesale to Central Arizona Light & Power Company, and after 1922 and until 1949 to the City. In 1928 the Salt River Valley Water Users Association embarked upon a plan to provide electric service to rural areas in the Salt River Valley not then being served. Hydro-generating plants were constructed on the Salt River and a transmission system covering the entire area was shortly thereafter completed. Funds for this program were provided by the issuance of bonds.

In 1928 and 1929 as prerequisite for the issuance of bonds territorial agreements establishing service boundaries were entered into with the Central Arizona Light & Power Company and with the City. The agreement with the City which also provided for the sale of electric energy for distribution to the City's customers was for a five year term, renewed in 1934 for five years and again in 1939 for ten years. Upon its expiration in 1949, the agreement was not renewed nor has any agreement been made since reserving to either party territory which each may serve to the exclusion of the other.

The great growth and development of the Salt River Valley and Maricopa County consistent with suburban living has resulted in the District greatly expanding its facilities and service. In the years following the adoption of the District's rural electrification program tens of thousands of people established homes within the District's boundaries and the District has increased and continues to increase its generative and distributive facilities. Its bonded indebtedness at the time of trial was $55,000,000. As a result of the District's expanding its lines and increasing its services and facilities together with the annexations made by the City whereby it extended its incorporated limits, the District is now serving customers within the City whom the City wishes to supply by its electrical services and facilities. The District refuses either to remove, abandon or sell its facilities now valued at over $900,000 in the areas in dispute or to desist from serving new customers where it has been doing business, claiming the right to continue to serve without competition and to expand its service therein without limit.

The City claims as a minimum that it has the exclusive right to serve all areas within its corporate limits, even though the same were acquired or extended by annexation and were being served by the District prior to annexation. It urges that a municipal corporation has the exclusive control of its streets and alleyways and only the City can authorize the use of such streets and alleys for public utility purposes, and that no municipality or political subdivision may acquire a franchise to serve or a right to use the City's streets and alleyways within its territorial limits without its consent.

The District's exact status escapes a simple definition. It is not a 'public service corporation' as set forth in the Constitution, Art. 15, § 2, A.R.S. and is not subject to regulation by the corporation commission as to its services and rates. State ex rel. Jones v. MacDonald, 76 Ariz. 401, 265 P.2d 454. It is denominated a political subdivision of the state and entitled to all the immunities and benefits granted to municipalities by the Constitution or statutes, Constitution, Art. 13, § 7 [Amendment of 1940]. Yet as a political subdivision its powers are obviously limited to the purposes justifying its political existence. The privileges and immunities granted extend only so far as they have a legitimate relationship to the legal objectives for which the District is organized. But whatever may be the District's exact status, plainly, the effect of selling electricity to the ultimate consumer at retail is to place the District in the position of engaging in business as a public utility for this is a business traditionally affected with public interest.

Essentially, three principal questions are raised by the overlapping of interest. First, can the District be required to terminate its electric service within the disputed areas by reason of the City's annexation. The answer to this question compels an examination of the District's precise legal position.

The District asserts an unrestricted right to use the streets and alleyways of the City by reason of the Constitution of Arizona and legislative enactment. As to the Constitution, the District claims by reason of Art. 13, § 7 thereof that its powers are as broad and its immunities equal to those of a municipal corporation. Still the District may not claim by this provision more than a municipality could claim under like circumstances. Elsewhere in either the orgrnic law, the statutes or the common law must be found support for the claimed right.

The District in part rests its claim to a continued use of the City's streets and alleyways on A.R.S. § 45-936, subd. A wherein the sale of electric power by the District is authorized in order to reduce the cost of irrigation. The District here is really claiming two lights: first, the right to sell electric power and second, to that end, the right to utilize the streets and alleyways within the incorporated limits of the City without its consent. The first, if construed to include the latter, would conflict with the express language of A.R.S. § 9-240, subd. B, providing that the common councils of cities shall have the right to exercise exclusive control over their streets, alleys,...