Cortaro Water Users' Ass'n v. Steiner

• Court: Arizona Supreme Court
• Writing for the Court: GORDON; HOLOHAN; HOLOHAN
• Citation: Cortaro Water Users' Ass'n v. Steiner, 714 P.2d 807, 148 Ariz. 314 (Ariz. 1986)
• Decision Date: 30 January 1986
• Docket Number: Nos. 82-28 and 82-29,No. 18266-PR,No. 10,066,s. 82-28 and 82-29,10,066,18266-PR
• Parties: CORTARO WATER USERS' ASSOCIATION, an Arizona non-profit corporation, and Cortaro-Marana Irrigation District, Pima County, Arizona, a political subdivision of the State of Arizona, Plaintiffs-Appellants-Appellees, v. Wesley E. STEINER, Director of the Department of Water Resources; the Department of Water Resources, an agency of the State of Arizona; the State of Arizona; City of Tucson, a political subdivision of the State of Arizona, Defendants-Appellants-Appellees, and Lewis McGinnis, a beneficial owner under Transamerica Title Insurance Company, Trust; Jackson-McGinnis Industrial Properties, an Arizona Joint Venture as beneficial owner under a Fidelity National Title Trust Company, Trust; Trans-America Title Insurance Company, as Trustee; and Fidelity National Trust Company, as Trustee, Intervenors-Appellees.

Page 807

714 P.2d 807

148 Ariz. 314

CORTARO WATER USERS' ASSOCIATION, an Arizona non-profit corporation, and Cortaro-Marana Irrigation District, Pima County, Arizona, a political subdivision of the State of Arizona, Plaintiffs-Appellants-Appellees, v. Wesley E. STEINER, Director of the Department of Water Resources; the Department of Water Resources, an agency of the State of Arizona; the State of Arizona; City of Tucson, a political subdivision of the State of Arizona, Defendants-Appellants-Appellees and Lewis McGinnis, a beneficial owner under Transamerica Title Insurance Company, Trust Nos. 82-28 and 82-29; Jackson-McGinnis Industrial Properties, an Arizona Joint Venture as beneficial owner under a Fidelity National Title Trust Company, Trust No. 10,066; Trans-America Title Insurance Company, as Trustee; and Fidelity National Trust Company, as Trustee, Intervenors-Appellees.

No. 18266-PR.

Supreme Court of Arizona, In Banc.

Jan. 30, 1986.

Supplemental Opinion Feb. 25, 1986.

Reconsideration Denied March 18, 1986.

Martinez & Curtis, P.C. by Michael A. Curtis, Jay M. Martinez, William P. Sullivan, Phoenix, for Cortaro.

Bill Stephens, P.C. by Bill Stephens, Karen Tarr, Phoenix, for City of Tucson.

State of Arizona, Dept. of Water Resources by Kathleen Ferris, Chief Counsel, Scott Larmore, Deputy Counsel, Phoenix, for Dept. of Water Resources and Wesley E. Steiner, Director of the Dept. of Water Resources.

Roger Weissman, Tucson, for Lewis McGinnis, Jackson-McGinnis Industrial Properties, Trans-America Title Ins. Co., and Fidelity Nat. Trust Co.

Lewis & Roca by Tom Galbraith, Susan Freeman, Jessica Youle, Phoenix, for Lincoln Sav. & Loan Ass'n.

GORDON, Vice Chief Justice.

The facts in this case are not in dispute. A detailed account is provided by the court of appeals in Cortaro Water Users' Association, et al v. Steiner, et al, 714 P.2d 836 (1985). In this appeal we must decide whether the Cortaro Water Users' Association and Cortaro-Marana Irrigation District (Cortaro) are entitled to an award of attorneys' fees pursuant to A.R.S. § 12-348(A)(3). In order to reach our decision a factual statement is necessary. We approve the court of appeals' resolution of all other issues.

This case involved the construction and application of various provisions of the Arizona Groundwater Code, A.R.S. § 45-401 et seq. In October 1980 the City of Tucson (Tucson) filed applications with the Arizona Department of Water Resources (Department) to drill three new water wells within the Tucson Active Management Area pursuant to A.R.S. § 45-599. The proposed well sites were located in a planned development known as Peppertree Ranch. A portion of Peppertree Ranch is located within the boundaries of the Cortaro-Marana Irrigation District.

The Department held a public hearing pursuant to A.R.S. §§ 45-105(A)(10) and 45-599(E) at which Cortaro intervened and protested Tucson's applications. Cortaro was designated as "Protestant" after intervention in the Department proceedings. The hearings consumed five days over several months. During the course of the hearings, Cortaro learned that Tucson was pumping or about to begin pumping from an existing well on Peppertree Ranch which Tucson acquired by quitclaim deed. Cortaro claimed ownership of the well and also alleged that the well was outside Tucson's service area or alternatively that use of the well constituted an illegal attempt to extend Tucson's service area. See A.R.S. § 45-493. Cortaro filed a complaint and a request for a cease and desist order with the Department. The Department responded to Cortaro by letter which essentially indicated that the service area issue of the existing hearing was of primary importance and that no enforcement hearing was required to be held nor was a formal order required to be issued on every complaint.

Following the hearing the Department conditionally granted Tucson's well permit applications based on its interpretation of the Groundwater Code. The Department's decision and order did not mention the cease and desist order requested by Cortaro. Both parties filed motions for rehearing and each was denied. Both parties then filed complaints in the Superior Court seeking review of the Department's decisions and orders. A.R.S. § 12-909. Tucson's complaint was dismissed with prejudice at Tucson's request. Cortaro's complaint named the Department and Tucson as defendants. Cortaro alleged that Peppertree Ranch was outside Tucson's service area and requested the Department's order be set aside and further asked the court to enjoin Tucson from pumping from the existing well. Cortaro sought attorneys' fees (A.R.S. § 12-348) and costs.

Cortaro filed a motion for summary judgment and the trial court agreed with the moving position. A minute entry order found the issuance of the well permits to Tucson was a legal nullity. A permanent injunction was granted prohibiting Tucson from withdrawing water from the existing well.

The Peppertree Ranch owners filed a motion to intervene regarding the injunction and to appear amicus curiae as to the service area issue. The trial court granted the motion to intervene in an order which also reversed the injunction due to Cortaro's failure to exhaust administrative remedies and failure to name indispensable parties in the claim for injunction. The court adhered to its previous ruling that the issuance of the well permits was a legal nullity and remanded the case to the Department with instructions to cancel and revoke the three well permits. These rulings were incorporated in a final judgment which also denied Cortaro's request for attorneys' fees, but allowed Cortaro costs against the Department.

Cortaro, Tucson, the Department and Peppertree Ranch all appealed the judgment. Peppertree's appeal was dismissed since it was not a party aggrieved by the judgment. The court of appeals affirmed the superior court's ruling that the proposed wells were not in Tucson's service area and therefore the Department erred in issuing the permits. The court also affirmed the dismissal of Cortaro's claim for an injunction. This was so because Cortaro had not exhausted its administrative remedies as to this issue, thus there was no final order of the Department from which to appeal. We agree with the disposition of these issues.

The court of appeals reversed the denial of attorneys' fees under A.R.S. § 12-348 and affirmed the award of costs in the superior court. Cortaro was denied attorneys' fees incurred in the administrative proceedings before the Department. Cortaro, Tucson and the Department all requested review by this Court. We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and Rule 23, Ariz.R.Civ.App.P.

The issue to be decided is whether A.R.S. § 12-348(A)(3) authorizes an award of attorneys' fees against a state agency charged with administration of a legislative enactment, which includes a quasi-judicial function and is a party to such a case on appeal pursuant to A.R.S. § 12-908. We hold there can be an award of attorneys' fees against such an agency.

In Arizona we follow the general American rule that attorneys' fees are not recoverable unless they are expressly provided for either by statute or contract. DVM Co. v. Stag Tobacconist Ltd., 137 Ariz. 466, 671 P.2d 907 (1983). The Arizona legislature has enacted more than 60 statutes authorizing awards of attorneys' fees, none of which expressly exempts the state from liability. New Pueblo Construction, Inc. v. State, 144 Ariz. 95, 696 P.2d 185 (1985).

The statutory provision currently in question is A.R.S. § 12-348(A)(3), which provides:

"A. In addition to any costs which are awarded as prescribed by statute, a court shall award fees and other expenses to any party other than this state or a city, town or county which prevails by an adjudication on the merits in any of the following:

....

"3. A court proceeding to review a state agency decision, pursuant to chapter 7, article 6 of this title, or any other statute authorizing judicial review of agency decisions." ¹

Under § 12-348, attorneys' fees can be denied or reduced only for the reasons set forth in subsection B. Tanner Companies v. Arizona State Land Department, 142 Ariz. 183, 196, 688 P.2d 1075, 1088 (App.1984). Recovery is allowed only if the party prevails by an adjudication on the merits. Id. The reasonableness of the state's conduct is not a ground for denying recovery. So long as the litigation falls within one of the categories of subsection A and is not excluded under subsection G an award of fees is proper. American Cable Tel., Inc. v. ACC, 143 Ariz. 273, 280, 693 P.2d 928, 935 (App.1983). The historical note accompanying the provision states that the purpose of this section is to reduce the economic deterrents and the disparity between the government and individuals seeking review of government action by entitling prevailing parties to recover an award of reasonable attorney fees, expert witness fees and other costs against the state.

The Department relies on the following provisions of subsection G in its argument as to why the statute is inapplicable. The relevant provisions are set forth as follows:

"G. This section does not:

1. Apply to an action arising from a proceeding before this state or a city, town or county in which the role of this state or a city, town or county was to determine the eligibility or entitlement of an individual to a monetary benefit or its equivalent, or to adjudicate a dispute or issue between private parties or to establish or fix a rate.

....

4. Apply to proceedings involving eminent domain, foreclosure, collection of judgment debts or proceedings in which the state or a city, town or county is a nominal party."

I.

The Department first argues that it is a nominal party to the proceedings and therefore protected per A.R.S. § 12-348(G)(4). Pursuant to A.R.S. § 12-908, in an action to review a final decision of an administrative agency, the agency...