GST Tucson Lightwave, Inc. v. City of Tucson, 2

CourtCourt of Appeals of Arizona
Writing for the CourtPELANDER; DRUKE, C.J., and LIVERMORE
Citation190 Ariz. 478,949 P.2d 971
Parties, 235 Ariz. Adv. Rep. 19 GST TUCSON LIGHTWAVE, INC., an Arizona corporation, Plaintiff/Appellant, v. CITY OF TUCSON, a municipal corporation, Defendant/Appellee. 96-0092.
Docket NumberCA-CV,No. 2,2
Decision Date23 January 1997

Page 971

949 P.2d 971
190 Ariz. 478, 235 Ariz. Adv. Rep. 19
GST TUCSON LIGHTWAVE, INC., an Arizona corporation, Plaintiff/Appellant,
v.
CITY OF TUCSON, a municipal corporation, Defendant/Appellee.
No. 2 CA-CV 96-0092.
Court of Appeals of Arizona,
Division 2, Department A.
Jan. 23, 1997.
Review Dismissed Aug. 22, 1997.

Page 974

Belin Harris Lamson McCormick by Edward M. Mansfield, Des Moines, IA, and Nancy M. Coomer, Tucson, for Plaintiff/Appellant.

Gabroy, Rollman & Bosse, P.C. by Richard M. Rollman and Richard A. Brown, Tucson, for Defendant/Appellee.

OPINION

PELANDER, Presiding Judge.

I. FACTS AND PROCEDURAL BACKGROUND

Plaintiff GST Tucson Lightwave (Lightwave) provides telephone services in competition with local telephone companies. Generally, access to long distance carriers is provided by the local telephone company. Lightwave, a competitive access provider, uses fiberoptic cable to provide digital communications between a customer and a long distance carrier.

In July 1994, the City of Tucson granted Lightwave a 25-year non-exclusive license to install fiberoptic cable for the purpose of providing long distance telecommunication service and local linkage to long-distance telecommunications services in Tucson. 1 The license was amended in September 1994 to include an attached route map (designated as Exhibit 1 to the amended license) which the City's Mayor and Council had approved.

In June 1995, the City adopted Chapter 7B of the Tucson City Code, a comprehensive regulatory scheme pertaining to competitive access providers. Chapter 7B provides that companies may obtain licenses for long distance competitive access service and franchises for local service. The license/franchise under Chapter 7B differs from Lightwave's license in several respects. For example, Chapter 7B provides for a 15-year term, while Lightwave's license was for 25 years. A provider under Chapter 7B must pay the City a fee of 5 1/2% of total gross revenues, while Lightwave's license fee was 2%. In addition, the City determined that long distance licenses and local franchises would not be granted separately under Chapter 7B. Rather, companies are required to apply for both a license for long distance service and a franchise for local service. Conditional proposals are not acceptable. The Chapter 7B license/franchise also gives providers equal access to power poles owned by Tucson Electric Power Company in City rights of way. Finally, the new license/franchise offers geographic flexibility by allowing companies to build their network throughout the city without seeking amendments from the Mayor and City Council.

Pursuant to § 7B-29, the City issued a Request for Proposals (RFP) to Lightwave and other companies. The RFP required

Page 975

companies submitting proposals to apply for both a license for long distance competitive access service and a franchise for local service. In a June 26, 1995 letter to Lightwave, the City explained that if Lightwave obtained a new license and franchise under Chapter 7B, Lightwave's existing license "would be relinquished, and Tucson Lightwave would then be operating under the terms of the model license and the ordinance."

In response to the RFP, Lightwave submitted an application on certain "express conditions." Desiring to retain its license under the original terms and obtain a separate franchise for local service under Chapter 7B, Lightwave rejected the City's requirement that applicants apply for both a local franchise and a long-distance license. The City returned the application, explaining again that Lightwave had to apply for both a license and franchise under Chapter 7B and that once the license/franchise issued, Lightwave's existing license would be subsumed.

In late June 1995, Lightwave also sent a letter to the City Engineer requesting two modifications to its route map. 2 The City responded that modifications to the route required formal amendment approved by Mayor and Council, not just the City Engineer. The City further stated that if Lightwave sought to amend its license, City staff would recommend that the Mayor and Council "deny this request and instead require Lightwave to obtain a new license under Chapter 7B."

Lightwave filed this action in August 1995, seeking mandamus and special action relief as well as damages. In Count One, Lightwave asked the trial court to order the City Engineer to approve the route modifications requested in June. In Count Two, Lightwave sought an order requiring the City to process Lightwave's response to the RFP and deleting the "offending condition" requiring Lightwave to give up its existing license to obtain a franchise. Count Three sought damages pursuant to 42 U.S.C. § 1983 for the conduct described in Counts One and Two.

The court held a three-day evidentiary hearing in September 1995. Counsel stipulated that the hearing would be the trial on the merits as to Counts One and Two and that no further evidence would be presented. The court subsequently issued findings of fact and conclusions of law and dismissed Counts One and Two with prejudice. The City then moved for summary judgment on Count Three, on the grounds that all the issues had already been decided in the City's favor. The court granted that motion and denied Lightwave's motion to amend its complaint. This appeal followed.

II. DISCUSSION

When the trial court assumes jurisdiction of the merits in a special action proceeding, the court of appeals may review the determination of the merits. Bilagody v. Thorneycroft, 125 Ariz. 88, 92, 607 P.2d 965, 969 (App.1979). Review of the trial court's factual findings is deferential. Federoff v. Pioneer Title & Trust Co., 166 Ariz. 383, 388, 803 P.2d 104, 109 (1990). "Our duty begins and ends with inquiring whether the trial court had before it evidence that might reasonably support its action when viewed in the light most favorable to sustaining the findings." Id. As for the trial court's conclusions of law, "this court is not bound by that finding and is free to draw its own legal conclusions from the evidence presented." Ayala v. Hill, 136 Ariz. 88, 90, 664 P.2d 238, 240 (App.1983).

A. Count One

A franchise or license agreement between the City and its grantee is a contract. City and Borough of Juneau v. Alaska Electric Light & Power Co., 622 P.2d 954, 955 n. 2 (Alaska 1981); Alpert v. Boise Water Corp., 118 Idaho 136, 795 P.2d 298 (1990). Thus, we review the trial court's interpretation of the agreement de novo. U.S. West Communications, Inc. v. Arizona Corporation Commission, 185 Ariz. 277, 280, 915 P.2d 1232, 1235 (App.1996).

Page 976

Section 3 of Lightwave's license defines its scope as extending to and including

only those portions of streets, alleys, avenues and other public grounds as are designated in Exhibit 1 and the plans and specifications submitted to the City by Company on file with the City Clerk as of September 12, 1994, or as subsequently may be approved by the City Engineer as necessary to carry out the purpose of this non-exclusive license. (emphasis added).

The trial court interpreted that section to authorize "the City Engineer to approve construction plans and specifications which may be subsequently submitted in order to carry out the purpose of the license," but found that it "does not authorize the City Engineer to change the route granted by Mayor and Council." We agree with that interpretation.

As the trial court noted, a license granted by a city for use of public rights of way is to be construed strictly in favor of the public.

Franchises granted by municipal corporations, being considered in derogation of the right of the public to free and unobstructed use of the streets, are strictly construed, and if the terms of the franchise are doubtful and susceptible of two or more constructions, they are to be construed strictly against the grantee and liberally in favor of the public. A franchise is not to be construed more strongly against the municipality than the public service company because it was prepared with care and leisure by the former, and accepted by the latter without like opportunity to consider its provisions. In case of doubt, a grant will be presumed to be for a public as distinguished from a private purpose.

12 McQuillin, The Law of Municipal Corporations § 34.45 at 148 (3d ed.1995). 3 "Nothing passes by grant unless it is clearly stated or necessarily implied." Id. See also Knoxville Water Co. v. City of Knoxville, 200 U.S. 22, 26 S.Ct. 224, 50 L.Ed. 353 (1906); City of Tucson v. Polar Water Co., 76 Ariz. 126, 259 P.2d 561 (1953), modified on other grounds, 76 Ariz. 404, 265 P.2d 773 (1954); City of Richmond v. Chesapeake and Potomac Tel. Co. of Virginia, 205 Va. 919, 923, 140 S.E.2d 683, 686 (1965).

In light of this principle, we cannot construe section 3 of Lightwave's license to permit, let alone require, the City Engineer to modify the license by approving expansion or alteration of the route map without resort to the formal amendment process and approval by the Mayor and City Council. Rather, the phrase "or as subsequently may be approved by the City Engineer as necessary to carry out the purpose of this non-exclusive license" in section 3 refers to the "plans and specifications submitted to the City by...

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