City of Wetumpka v. Central Elmore Water Authority

• Decision Date: 12 September 1997
• Citation: City of Wetumpka v. Central Elmore Water Authority, 703 So.2d 907 (Ala. 1997)
• Parties: CITY OF WETUMPKA; and Water Works and Sewer Board of the City of Wetumpka v. CENTRAL ELMORE WATER AUTHORITY; and Elmore County Commission. 1951162.
• Court: Alabama Supreme Court

Page 907

703 So.2d 907

CITY OF WETUMPKA; and Water Works and Sewer Board of the City of Wetumpka v. CENTRAL ELMORE WATER AUTHORITY; and Elmore County Commission.

1951162.

Supreme Court of Alabama.

Sept. 12, 1997.

Keith A. Howard of Howard, Dunn, Howard & Howard, Wetumpka, for appellants (on rehearing).

Ronald G. Davenport and William H. Webster of Rushton, Stakely, Johnston & Garrett, Montgomery, for appellees (on rehearing).

Robert E. Sasser, Dorothy W. Littleton, and Tamara A. Stidham of Sasser & Littleton, P.C., Montgomery, for amicus curiae Alabama Water and Wastewater Institute (on rehearing).

Kenneth Smith, League counsel, and Joseph Kettler, asst. League counsel, Montgomery, for amicus curiae Alabama League of Municipalities, in support of the appellants (on rehearing).

James R. Seale and Charles B. Paterson of Robison & Belser, P.A., Montgomery, for amicus curiae Water Works and Sanitary Sewer Board of the City of Montgomery (on rehearing).

On Application for Rehearing

MADDOX, Justice.

The opinion of May 16, 1997, is withdrawn, and the following substituted therefor.

This appeal involves a dispute between, on the one side, a public water authority, incorporated under provisions of state law, and, on the other side, the City of Wetumpka and the Water Works and Sewer Board of the City of Wetumpka. The dispute is over which entity or entities have the right to serve a newly developed subdivision, which was within the service area of the public water authority, but which was also located within the city limits of the City of Wetumpka after having been annexed by the City on August 7, 1995, before this action was filed.

The Central Elmore Water Authority ("Central Elmore"), a public water authority created under the provisions of § 11-88-1 et seq., Ala.Code 1975, filed an action for injunctive relief and a declaratory judgment. In that action, it claimed that the City of Wetumpka and the Water Works and Sewer Board of the City of Wetumpka ("the Water Board") had infringed upon its territorial jurisdiction.

The trial court entered a summary judgment in favor of Central Elmore and the Elmore County Commission (which had been added as a plaintiff). The City and the Water Board appeal, raising these questions:

(1) Did the trial court err in failing to hold that federal law, specifically the provisions of 7 U.S.C. § 1926(b), pre-empt the provisions of state law, such as the provisions of § 11-50-1.1, Ala.Code 1975, which prohibit municipalities from "acquiring, or duplicating any services of, any waterworks system or any part thereof, operated by a corporation or association which has been organized under ... Sections 11-88-1 through 11-88-21, without the consent of a majority of the members of the governing board of said corporation or association"?

(2) Did the trial court err in ruling that the City and the Water Board had breached a written Water Purchase Agreement between the Water Board and Central Elmore?

(3) Did the trial court err in ruling that the City and the Water Board had breached an oral agreement between the chairman of the Water Board and Central Elmore not to lay water lines?

The evidence indicates that the Wetumpka City Council incorporated and formed the Water Board on March 21, 1949, and gave the Water Board the authority to operate in "the City of Wetumpka, Alabama, and in the territory in the vicinity thereof." (Excerpt from the Articles of Incorporation of the Water Board, March 1949.)

In April 1973, the Redland Water and Fire Protection Authority was incorporated and given a specific designated jurisdiction, and in April 1974, a certificate of incorporation was issued to the Wallsboro-Santuck Water and Fire Protection Authority. The jurisdiction of the Wallsboro-Santuck Water and Fire Protection Authority included what eventually became known as the "Crutchfield property," which is the property that is the subject of this dispute. Central Elmore was created in June 1988 by the merger of the Redland Water and Fire Protection Authority and the WallsboroSantuck Water and Fire Protection Authority. ¹

The City of Wetumpka is a municipal corporation subject to the prohibition of § 11-50-1.1, Ala.Code 1975, and the Elmore County Commission is duly elected pursuant to the provisions of §§ 11-3-1 through 11-3-26, Ala.Code 1975. The Commission is the body legally empowered "[t]o direct, control and maintain the property of [Elmore County] as it may deem expedient according to law." § 11-3-11(a)(1), Ala.Code 1975.

The Water Board and Central Elmore entered into a Water Purchase Agreement on or about March 29, 1993, whereby Central Elmore agreed to construct and operate a water treatment facility and the Water Board agreed to purchase a guaranteed amount of the water treated at that facility. The Water Purchase Agreement provides, in part, as follows:

"10. TERRITORIAL INTEGRITY: Nothing contained herein shall alter or modify the territorial integrity of the respective systems. Neither party shall sell water to customers from transmission lines or other facilities which might be located within the territorial jurisdiction of the other party unless it is by specific separate agreement. This restriction does not apply to any presently existing arrangements whereunder one party is providing service to customers in the other party's jurisdictional area.

"11. PERMITS AND REGULATIONS: All parties agree to cooperate in obtaining and maintaining all necessary local, state, and federal permits and meeting all regulations [related] to operation and maintenance of water supply systems. If in the future either party should be unable, after making all reasonable efforts, to obtain any necessary permit, maintain any such permit, or meet particular regulations or requirements then, to the extent such failure prevents compliance hereunder such party shall be excused from its obligations unless and until it can reasonably obtain such permit or compliance.

"12. BREACH AND DEFAULT PROVISIONS: Unless otherwise specifically excepted, failure of any party to meet or maintain its duties and obligations hereunder shall constitute a default and breach of agreement. In the event of any breach or default the party at fault shall be responsible for all losses, costs and expenses of the other party including lost revenues, court costs and reasonable attorney fees.

"....

"17. GENERAL PROVISIONS: All matters relating to the application, and interpretation, and enforcement of this agreement shall [be] subject to a requirement of good faith and reasonableness on the part of all parties hereto. Both parties are public corporations established under statutes and/or ordinances and are managed by duly appointed boards of directors acting for the sole purpose of providing water (and in the case of Wetumpka providing sewer) service now and in the future in a financially and operationally sound manner at the lowest reasonable rate. Consequently neither party shall act in an arbitrary or unreasonable manner or take unfair advantage in any situation to the detriment of the other party and/or its customers."

In December 1994, Donald Estes approached Central Elmore about the possibility of extending service to a new subdivision he intended to develop on U.S. Highway 231 North; this property is known as the Crutchfield property. It is undisputed that the Crutchfield property lies within Central Elmore's service area. Central Elmore agreed to share the cost of extending an eight-inch water main from the existing main.

Donald Estes died soon thereafter, and Earl Crutchfield was named executor of the estate of Donald Estes. Crutchfield telephoned Danny Ingram, general manager of Central Elmore, in February 1995 and asked the status of Central Elmore's plan to run a water main to the Crutchfield property. Ingram explained to Crutchfield that an agreement had been reached between Estes and the board of Central Elmore and that he was going to abide by the agreement.

Ingram sent Crutchfield an estimate of the cost of extending the water main and told him that Central Elmore could have the water main installed by October 1995. In February 1995, Crutchfield suggested to the Wetumpka City Council that he would allow the City to annex the Crutchfield property if the City would provide water service to it. Crutchfield sent Ingram a letter stating that Crutchfield had contacted the City about running the line because, Crutchfield said, Central Elmore had indicated that it would be unable to install the line by what he claimed was a May deadline. Ingram then telephoned Crutchfield and told him that he had not thought or understood that there was a May deadline and that he had operated under the assumption that they had agreed that the line was to be placed by the October date that had been given to Central Elmore by Estes. Ingram also told Crutchfield that the property was within the jurisdiction of Central Elmore Water Authority and that in his opinion the City of Wetumpka did not have authority or jurisdiction to run a water line to his property. Ingram said he then thought that Crutchfield understood the situation and understood that Central Elmore would have the water line run to his property.

In the interim, the Wetumpka City Council discussed Crutchfield's proposal and decided to act. On August 7, 1995, seventy acres of land, including the Crutchfield property, were annexed into the City. Following the annexation, the City contracted with an engineering firm to draw plans for providing water to the Crutchfield property. The City made the contract and was the one in direct contact with the contractor; the City had solicited bids by advertising in the newspaper. Ingram read the City's newspaper solicitation for bids to lay a water line to the Crutchfield property.

Joe Lambrecht, the chairman of the Central Elmore board, telephoned Bill Sahlie, who was a City Council member and the mayor pro tem., in August 1995 and...