Community Tele-Communications, Inc. v. Heather Corp., TELE-COMMUNICATION

• Citation: 677 P.2d 330
• Decision Date: 21 February 1984
• Docket Number: INC,TELE-COMMUNICATION,No. 81SC371,81SC371
• Parties: COMMUNITY, a Nevada corporation, and the City of Cortez, Colorado, a Colorado municipal corporation, Petitioners, v. The HEATHER CORPORATION, a Colorado corporation, and Wayne Gangwish, Respondents.
• Court: Supreme Court of Colorado

Page 330

677 P.2d 330

COMMUNITY TELE-COMMUNICATIONS, INC., a Nevada corporation, and the City of Cortez, Colorado, a Colorado municipal corporation, Petitioners, v. The HEATHER CORPORATION, a Colorado corporation, and Wayne

Gangwish, Respondents.

No. 81SC371.

Supreme Court of Colorado,

En Banc.

Feb. 21, 1984.

Sherman & Howard, Stephen M. Brett, Robert E. Youle, David Swinton, Denver, for petitioners.

Friedman, Hill & Robbins, Robert F. Hill, Karen A. Tomb, Denver, for respondents.

ROVIRA, Justice.

We granted certiorari to review the decision of the court of appeals in Heather Corp. v. Community Tele-Communications, Inc., 642 P.2d 24 (Colo.App.1981), holding that a city of Cortez ordinance, which granted a cable television company a permit to use the streets and public ways to install a cable television system, was invalid because it granted a franchise without a vote of the electorate. We affirm.

I.

In September 1979, the city council of Cortez, a Colorado home rule city, enacted Ordinance No. 532, entitled "An Ordinance Granting a Permit to Community Telecommunications, Inc., Its Successors and Assigns, to Construct, Operate and Maintain a Cable Television System in the City of Cortez ...." Section 2 of the ordinance outlines the specific grant of authority to Community Tele-Communications (CTI) "There is hereby granted by the City to [CTI] the right and privilege to engage in the business of operating and providing a CATV [cable television] system in the City, and for that purpose to erect, install, construct, repair, replace, reconstruct, maintain and retain in, on, over, under, upon, across and along any public street now laid out or dedicated and all extensions thereof and additions thereto in the permit area, such poles, wires, cable, conductors, ducts, conduit, vaults, manholes, pedestals, amplifiers, appliances, attachments, and other property as may be necessary and appurtenant to the CATV system; and in addition so to use, operate, and provide similar facilities or properties rented or leased from other persons, including but not limited to any public utility or other grantee franchised or permitted to do business in the City."

In essence, this grant authorizes CTI to "use and occupy" the streets and other public ways in Cortez for the purpose of laying its coaxial cable and constructing and operating a cable television system.

Other sections of the ordinance explain the terms and conditions of CTI's "permit." Section 3 provides that the grant to CTI is not exclusive, that the city reserves the right to grant a similar use to any other person, and that the ordinance creates a permit and not a franchise in CTI. Section 4 provides that the term of the permit is for ten years and that, upon application by CTI, "the permit may be renewed for subsequent ten ... year periods" provided CTI faithfully performs all of the conditions of the permit. Section 15 provides that if CTI fails to perform, the city "may, after hearing, determine such substantial failure," at which point CTI has three months "to remedy the conditions" or the permit will be forfeited. Finally, section 22 provides that "it shall be unlawful for any person to construct, install or maintain" along the streets of Cortez "any equipment or facilities for distributing any television signals ... through a CATV system, unless a permit authorizing such use ... has first been obtained" from the city.

After Ordinance 532 was passed, respondent Heather Corporation (Heather) filed a complaint ¹ against CTI and the city of Cortez pursuant to section 13-51-106, C.R.S.1973, the Uniform Declaratory Judgments Law. The complaint sought an order from the Montezuma County District Court declaring the ordinance to be unlawful and permanently enjoining the defendants from proceeding under it. Heather claimed that, instead of granting a true permit to CTI, Ordinance 532 actually granted a cable television "franchise." According to article X, section 1 of the Cortez City Charter, however, "[n]o franchise shall be granted except upon the vote of the taxpaying electors." Since Ordinance 532 was enacted by the city council rather than by popular vote, Heather argued that it violated the city charter and was void.

CTI and Cortez moved to dismiss the complaint for failure to state a claim upon which relief can be granted, see C.R.C.P. 12(b)(5), and Heather responded with a motion for summary judgment. See C.R.C.P. 56(a). The parties then requested the district court to decide the issues as if each party had filed a motion for summary judgment. In September 1980, the court entered a judgment declaring Ordinance No. 532 to be unlawful and in violation of article X, section 1 of the Cortez City Charter and article XX of the Colorado Constitution. ² As a basis for its decision, the court adopted the following conclusions of law:

"C. 'Franchise' is not limited to a special right granted to a public utility.

D. Consent of a municipality to use its streets, alleys and public places has been recognized as a franchise.

E. A franchise need not be exclusive.

F. The right to operate a Cable TV service in a city is a subject for a franchise.

G. Ordinances substantially similar to Ordinance 532 are usually determined to be grants of a franchise ...."

The court concluded that "Ordinance 532 does not grant a temporary permit but is rather an attempt to evade the provisions of the Charter by calling the grant a permit when in reality it has all the earmarks of a franchise." (emphasis in original). It then enjoined CTI and Cortez from proceeding under the ordinance to establish a cable television system without the approval of the taxpaying electors of Cortez.

A divided panel of the Colorado Court of Appeals affirmed the judgment of the district court. Heather Corp., 642 P.2d 24 (Colo.App.1981) (Tursi, J., dissenting). The court determined that Ordinance 532 grants a special right or privilege which does not ordinarily belong to citizens in general and that the privilege is absolutely essential to the performance of CTI's purpose. It agreed with the district court that the privilege granted by the ordinance is in fact a franchise rather than a license or permit. As such, the ordinance amounts to "an unlawful avoidance of the public election requirement" of article X, section 1 of the city charter. ³

II.

Although the majority opinion of the court of appeals did not address the issue of whether Heather has standing to bring an action against CTI and Cortez challenging the validity of Ordinance 532, we think it necessary to resolve this issue. Applying the test we established in Wimberly v. Ettenberg, 194 Colo. 163, 570 P.2d 535 (1977), we conclude that Heather has standing under the Uniform Declaratory Judgments Law, section 13-51-101 et seq., C.R.S.1973. In view of our resolution of the standing issue as to Heather, we need not consider whether the other respondent, Wayne Gangwish, ⁴ also has standing.

Heather claims that it was "formed for the express purpose of constructing a cable television system and providing cable television service to Cortez, Colorado, and surrounding areas." It claims that it has notified city officials of its desire to apply for a franchise to install and operate a cable television system, but that Cortez "has not offered Heather the opportunity to apply for a franchise." Instead, the city has adhered to its position that it can grant a permit to one or more cable television companies and thereby avoid a franchise election. Consequently, Heather argues,

"[u]ntil the question of what constitutes the proper authority is resolved, Heather is precluded from engaging in the business it was organized to pursue. It is unreasonable for Heather to make the commitment of time and expense that is necessary to provide a high quality cable television system to Cortez when there is uncertainty as to the propriety of the only operating authority Cortez will presently grant and to the legality of Ordinance No. 532." ⁵

This uncertainty, according to Heather, creates "a triple dilemma." Heather must either apply for a permit which it considers to be in violation of the charter, commit a criminal offense by proceeding to install and operate a cable television system without a permit, or discontinue the business it was organized to pursue. Under the circumstances, Heather maintains, the method chosen to resolve its dilemma, namely the filing of a declaratory judgment action, was appropriate. We agree.

Section 13-51-106 of the Uniform Declaratory Judgments Law describes who may obtain a declaratory judgment. It states: "Any person ... whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder." ⁶ The purpose of this statute is to afford relief from the uncertainty surrounding legal rights and legal relations; it is remedial in nature and should be liberally construed and administered. Colorado State Board of Optometric Examiners v. Dixon, 165 Colo. 488, 440 P.2d 287 (1968); Silverstein v. Sisters of Charity, 38 Colo.App. 286, 559 P.2d 716 (1976); section 13-51-102, C.R.S.1973; C.R.C.P. 57(k).

We recognize that a declaratory judgment action must be based on an actual controversy. Beacom v. Board of County Commissioners, 657 P.2d 440 (Colo.1983); Farmers Elevator Co. v. First National Bank, 176 Colo. 168, 489 P.2d 318 (1971). To have standing, Heather must establish that its rights are adversely affected by Ordinance 532. This requirement does not mean, however, that Heather must risk the imposition of fines or imprisonment or the loss of property or profession in order to secure the adjudication of uncertain legal rights. See CF & I Steel Corp. v. Colorado Air Pollution Control...