Glenpool Utility Services Authority v. Creek County Rural Water Dist. No. 2, s. 86-2226

• Decision Date: 21 November 1988
• Docket Number: 86-2410,Nos. 86-2226,s. 86-2226
• Citation: 861 F.2d 1211
• Parties: GLENPOOL UTILITY SERVICES AUTHORITY, a Utility Trust, Plaintiff-Appellee, v. CREEK COUNTY RURAL WATER DISTRICT NO. 2, Defendant-Third-Party-Plaintiff- Appellant, and Jody Sweetin, an Individual, Defendant-Intervenor, v. FARMERS HOME ADMINISTRATION, UNITED STATES DEPARTMENT OF AGRICULTURE, United States of America, Third-Party-Defendants. GLENPOOL UTILITY SERVICES AUTHORITY, a Utility Trust, Plaintiff-Appellee, v. CREEK COUNTY RURAL WATER DISTRICT NO. 2, Defendant-Third-Party-Plaintiff- Appellee, and Jody Sweetin, an Individual, Defendant-Intervenor, v. FARMERS HOME ADMINISTRATION, UNITED STATES DEPARTMENT OF AGRICULTURE, United States of America, Third-Party-Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1211

861 F.2d 1211

GLENPOOL UTILITY SERVICES AUTHORITY, a Utility Trust, Plaintiff-Appellee, v. CREEK COUNTY RURAL WATER DISTRICT NO. 2, Defendant-Third-Party-Plaintiff- Appellant, and Jody Sweetin, an Individual, Defendant-Intervenor, v. FARMERS HOME ADMINISTRATION, UNITED STATES DEPARTMENT OF

AGRICULTURE, United States of America,

Third-Party-Defendants.

GLENPOOL UTILITY SERVICES AUTHORITY, a Utility Trust, Plaintiff-Appellee, v. CREEK COUNTY RURAL WATER DISTRICT NO. 2, Defendant-Third-Party-Plaintiff- Appellee, and Jody Sweetin, an Individual, Defendant-Intervenor, v. FARMERS HOME ADMINISTRATION, UNITED STATES DEPARTMENT OF

AGRICULTURE, United States of America,

Third-Party-Defendants-Appellants.

Nos. 86-2226, 86-2410.

United States Court of Appeals Tenth Circuit.

Nov. 21, 1988.

Peter Steenland and Stephen L. Andrew (D. Kevin Ikenberry of McCormick, Andrew & Clark, A P.C., Tulsa, Okl., with them on the briefs), of McCormick, Andrew & Clark, A P.C., Tulsa, Okl., for defendant-appellant and third party plaintiff-appellant Creek County Rural Water Dist. No. 2.

Phil Frazier of Frazier, Smith & Phillips, Tulsa, Okl., for plaintiff-appellee Glenpool Utility Services Authority, a Utility Trust.

F. Henry Habicht II, Asst. Atty. Gen., Layn R. Phillips, U.S. Atty., and Peter Bernhardt, Asst. U.S. Atty., Tulsa, Okl., and Peter R. Steenland, Jr., Martin W. Matzen, Laura E. Frossard, Attys., Dept. of Justice, Washington, D.C., on the brief, for the third party defendant-appellant Farmers Home Admin.

Neal E. McNeill, City Atty., and Patrick T. Boulden, Asst. City Atty., Tulsa, Okl., filed an amicus curiae brief for the City of Tulsa, Okl.

Michael R. Vanderburg, Broken Arrow, Okl., filed an amicus curiae brief for the City of Broken Arrow, Okl Louis T. Rosenburg, Rosenburg & Gray, San Antonio, Tex., filed supplemental authority for City of Broken Arrow, Okl.

Jay M. Galt of Looney, Nichols, Johnson & Hayes, Oklahoma City, Okl., filed an amicus curiae brief for the Oklahoma Rural Water Assn.

Ronald D. Cates of the Owasso Public Works Authority, Owasso, Okl., filed an amicus curiae brief for the Owasso Public Works Authority.

Lynn C. Rogers of the Oklahoma Ass'n of Mun. Attys., and Diane Pedicord, of the Oklahoma Mun., League, filed an amicus curiae brief for the Oklahoma Ass'n of Mun. Attys. and the Oklahoma Ass'n of Mun. Attys.

Before TACHA, BARRETT and EBEL, Circuit Judges.

TACHA, Circuit Judge.

This is an appeal from a final judgment of the district court denying declaratory and injunctive relief in a suit concerning the rights to furnish water service to an annexed area of land. The issues on appeal are whether the defendant rural water district possesses a right, as against Glenpool, to furnish water service to the area in question; if such a right exists, whether it was granted by the Oklahoma Legislature; and, if such a grant was made, whether it violates provisions of the Oklahoma Constitution or the United States Constitution. We reverse in part and remand.

In 1964, the Board of County Commissioners of Creek County, Oklahoma, incorporated Creek County Rural Water District No. 2 (District No. 2) to provide water service within specific territorial limits. District No. 2 obtained a loan from the Farmers Home Administration (FmHA) and used the funds as construction money for its rural water system. As security for the loan, the FmHA received a mortgage covering rights, facilities, and real property owned by District No. 2. In 1967, District No. 2 annexed additional territory within Creek and Tulsa Counties, including an area now known as Eden South.

Plaintiff Glenpool Utility Services Authority (Glenpool) is a public trust, with the City of Glenpool, Oklahoma, as its beneficiary. It was created pursuant to the laws of the State of Oklahoma for the purpose of providing utility services, including water and sewer service, to areas inside and outside the corporate limits of the City of Glenpool. In 1983, the City of Glenpool annexed new territory into its city limits. The newly annexed property included the area known as Eden South, although Eden South also remained within the territory of District No. 2. At the time of the annexation, Glenpool was aware that District No. 2 claimed the exclusive right to serve the Eden South area with water.

Plaintiff Glenpool brought an action in Oklahoma state court against defendant District No. 2 requesting a declaratory judgment that Glenpool possessed the exclusive right to furnish water to the Eden South area. Defendant District No. 2 counterclaimed, asking for a declaratory judgment that it had the exclusive right to furnish water to the Eden South area and requesting an injunction enjoining the plaintiff from constructing water service lines to the area. After District No. 2 brought a third party petition joining FmHA as the holder of a real estate mortgage on land that included the Eden South area, the action was removed to federal district court. That court allowed Mr. Jody Sweetin, owner of the Eden South property, to intervene as a defendant. At the time of the trial, plaintiff Glenpool was providing the water service to the individuals residing in Eden South.

The district court found that District No. 2 had a water line that ran within fifty feet of the Eden South property and that any prospective user within the District No. 2 territory could receive water service from District No. 2 simply by making application to it. The water district would then be under an obligation to provide the service, even if that provision would require a line extension or a road bore. Because of these facts, the district court found that District No. 2 could and would provide water service to Eden South within a reasonable time of an application for such service.

The district court applied the state statute that empowers a rural water district to borrow funds from the federal government, Okla.Stat. tit. 82, Sec. 1324.10 (Supp.1988), the Oklahoma constitutional prohibition against the legislature granting an exclusive right, Okla. Const. art. 5, Sec. 51, and the federal statute that protects an association which has borrowed federal funds from certain curtailments of its service during the term of the loan, 7 U.S.C. Sec. 1926(b). The court held that in light of these statutory and constitutional provisions, neither Glenpool nor District No. 2 had an exclusive right to furnish water service to the Eden South property. District No. 2 and FmHA appealed.

We review the district court's conclusions of law denying relief to District No. 2. Conclusions of law are subject to de novo review upon appeal, Boise City Farmers Coop. v. Palmer, 780 F.2d 860, 866 (10th Cir.1985), even if the appellate court relies upon the findings of fact below, United States v. Mississippi Valley Generating Co., 364 U.S. 520, 526, 81 S.Ct. 294, 297, 5 L.Ed.2d 268 (1961).

Congress enacted 7 U.S.C. Sec. 1926(b) as part of a federal statutory scheme to extend loans and grants to certain associations providing soil conservation practices, water service or management, waste facilities, or essential community facilities to farmers, ranchers, and other rural residents. 7 U.S.C. Sec. 1926. Regarding those associations, the statute states:

The service provided or made available through any such association shall not be curtailed or limited by inclusion of the area served by such association within the boundaries of any municipal corporation or other public body, or by the granting of any private franchise for similar service within such area during the term of such loan; nor shall the happening of any such event be the basis of requiring such association to secure any franchise, license, or permit as a condition to continuing to serve the area served by the association at the time of the occurrence of such event.

7 U.S.C. Sec. 1926(b).

In construing a statute, a court must begin with the statutory language itself. Wilson v. Stocker, 819 F.2d 943, 948 (10th Cir.1987). When, as in this case, the statute is unambiguous and free of irrational result, that language controls. Edwards v. Valdez, 789 F.2d 1477, 1481 (10th Cir.1986).

We agree with the Fifth Circuit that section 1926(b) "indicates a congressional mandate that local governments not encroach upon the services provided by [federally indebted water] associations, be that encroachment in the form of competing franchises, new or additional permit requirements, or similar means." City of Madison, Miss. v. Bear Creek Water Ass'n, Inc., 816 F.2d 1057, 1059 (5th Cir.1987); accord Jennings Water, Inc. v. City of North Vernon, Ind., 682 F.Supp. 421, 425 (S.D.Ind.1988) ( "[S]tatute ... should be applied broadly to protect rural water associations indebted to the FmHA from competition from expanding municipal systems."); Rural Water Dist. No. 3 v. Owasso Utils. Auth., 530 F.Supp. 818, 824 (N.D.Okla.1979) (statute prohibits municipalities' exercise of their powers to sell water "when their exercise would result in competition with a Rural Water District"). The present case, however, is a simpler one than that confronted by the Fifth Circuit.

The face of the statute makes clear that Congress protected the indebted rural association from curtailment or limitation by impinging municipal corporations. The district court correctly held that District No. 2 came within the purview of section 1926(b) and had met the statute's threshold requirements, having a continuing indebtedness under section 1926 and having "made [service] available" to the area, by virtue of its line adjacent to the property and its responsibilities to applicants within its territory. The statute prohibits Glenpool from using annexation of Eden South to curtail or limit the service made available by District No. 2. Glenpool may not legally use "inclusion" of Eden South "within the boundaries of any municipal corporation" as a springboard for providing water service to the area, and thereby...