Mohave Disposal, Inc. v. City of Kingman

• Decision Date: 27 August 1996
• Docket Number: No. CV-95-0407-PR,CV-95-0407-PR
• Parties: MOHAVE DISPOSAL, INC., Appellant, v. CITY OF KINGMAN, an Arizona municipal corporation, Appellee.
• Court: Arizona Supreme Court

Page 308

922 P.2d 308

186 Ariz. 343

MOHAVE DISPOSAL, INC., Appellant, v. CITY OF KINGMAN, an Arizona municipal corporation, Appellee.

No. CV-95-0407-PR.

Supreme Court of Arizona, In Banc.

Aug. 27, 1996.

[186 Ariz. 345] Bonn, Luscher, Padden & Wilkins by Paul V. Bonn, John H. Cassidy, Randall D. Wilkins, Phoenix, for Appellant.

Charlotte A. Wells, Kingman City Attorney, Kingman, for Appellee.

Shelley & Bethea by J. LaMar Shelley, Mesa, for Amicus Curiae League of Cities and Towns.

Gammage & Burnham, P.L.C. by Michael B. Withey, Cameron C. Artigue, Phoenix, for Amicus Curiae National Solid Waste Management Association.

OPINION

JONES, Justice.

In this appeal, we review the superior court's dismissal of a complaint filed by Mohave Disposal, Inc., a solid waste transportation and collection company, against the City of Kingman. The complaint alleged, inter alia, that Kingman violated A.R.S. § 9-516(A) by annexing a portion of Mohave Disposal's service area and thereafter imposing garbage collection and disposal fees on residents of the annexed territory in connection with the city's competing service. The court of appeals affirmed the dismissal. Our jurisdiction is predicated on Ariz. Const. art. VI, § 5(3), and Ariz.R.Civ.App.P. 23. We vacate the court of appeals' opinion, reverse the dismissal of Mohave Disposal's complaint, and remand the case to the trial court for further proceedings consistent with this opinion.

PROCEDURAL HISTORY

Mohave Disposal's complaint sets forth three counts, one of which is the subject of this review, namely, whether the city failed to comply with Arizona Revised Statutes § 9-516(A). The statute provides:

It is declared as the public policy of the state that when adequate public utility service under authority of law is being rendered in an area, within or without the boundaries of a city or town, a competing service and installation shall not be authorized, instituted, made or carried on by a city or town unless or until that portion of the plant, system, and business ... in which the city or town seeks to serve, has been acquired.

(Emphasis added.) The count in question asserts that Kingman failed to compensate Mohave Disposal for lost service contracts, business, and physical equipment after Kingman (a) annexed the area of Mohave County called "Kingman Camelback," which allegedly was part of Mohave Disposal's service area, and (b) imposed its garbage collection fees regardless of whether residents of the annexed area used Kingman's services.

Mohave Disposal moved for summary judgment on this issue, and Kingman moved to dismiss the complaint for failure to state a claim. The trial court denied Mohave Disposal's motion and granted Kingman's motion to dismiss, deciding, pursuant to the statute, that Mohave Disposal does not provide a "public utility service under authority of law." The court made no findings of fact or conclusions of law and dismissed the other two counts of the complaint. The court of appeals affirmed. Mohave Disposal, Inc. v City of Kingman, 184 Ariz. 368, 909 P.2d 435 (App.1995).

DISCUSSION

On review of a trial court's decision granting a motion to dismiss, we assume the truth of the allegations set forth in the complaint and uphold dismissal only if the plaintiffs would not be entitled to relief under any facts susceptible of proof in the statement of the claim. Menendez v. Paddock Pool Constr. Co., 172 Ariz. 258, 836 P.2d 968 (App.1991). The complaint alleges:

Mohave Disposal had agreed with Mohave County authorities to provide solid waste transportation and disposal services, on an at-cost basis, to those residents of the out-lying and thinly-populated portions of Mohave Disposal's service area, in order to protect the public health and safety which would otherwise be harmed by an absence of solid waste transportation and disposal services.

For purposes of this review, we therefore assume, as alleged in the complaint, the existence of a contractual arrangement to provide garbage collection services within a designated area.

The case turns on the meaning of the statutory phrase "public utility service under authority of law." A.R.S. § 9-516(A). The court of appeals, construing the statute, addressed only the first part of the phrase and concluded that Mohave Disposal did not perform a "public utility service." 184 Ariz. at 372-74, 909 P.2d at 439-41. Having reached that conclusion, the court saw no need for further analysis and held that the statute afforded Mohave Disposal no relief. We disagree with the court's analysis and conclusion.

Public Utility Service

This court determined previously that refuse collection companies are not public service corporations under article XV, section 2, of the Arizona Constitution. Visco v. State, 95 Ariz. 154, 163-64, 388 P.2d 155, 161-62 (1963). Relying on Visco, the court of appeals correctly pointed out that Mohave Disposal is not a public service corporation. 184 Ariz. at 371, 909 P.2d at 438.

The court of appeals then turned its attention to the important question whether an entity that does not enjoy status under law as a public service corporation may nevertheless perform a "public utility service" within the meaning of section 9-516(A). Seeking to define "public utility service," the court relied on our language in City of Mesa v. Salt River Project that section 9-516(A) "is all embracive, reaching every service wherein the public interest is affected by the character of the business conducted." 92 Ariz. 91, 102, 373 P.2d 722, 730 (1962). We held that the Salt River Project (SRP), though not a public service corporation, nevertheless performed a public utility service, thus entitling it to the same statutory protection claimed here by Mohave Disposal. The court of appeals in the instant case, however, distinguished Mohave Disposal and SRP on the basis that SRP is, by law, a political subdivision of the state and provides a service, i.e., transmission and delivery of electric power, identical to that provided by public service corporations. 184 Ariz. at 373, 909 P.2d at 440. The court of appeals wrote:

Monopolies are the exception, and free enterprise the rule. From this principle and existing case law, we find no sound basis to conclude that Mohave Disposal is a public utility within the meaning of section 9-516. Accordingly, we hold that "public utility" as used in section 9-516.A includes (a) public service corporations and (b) political subdivisions of the state, including cities, towns, and special districts providing the services or products of public service corporations.

184 Ariz. at 374, 909 P.2d at 441. This constitutes a decidedly narrower view of section 9-516(A) than we think the legislature intended and certainly narrower than the prior decisions of this court would require.

In City of Mesa, we analyzed SRP's legal status, concluding that it was not a public service corporation but that it was a political subdivision of the state. 92 Ariz. at 97, 373 P.2d at 726. We thus interpreted section 9-516(A) in a case in which, if the court of appeals' analysis in the instant case were correct, the simple solution would have been to rely on SRP's status as a political subdivision. We did not, however, rely on that status; instead, we concluded that while SRP is not a public service corporation as defined in the state constitution, the sale of electricity by SRP nevertheless constituted a public utility service:

[W]hatever may be the District's exact status, plainly, the effect of selling electricity to the ultimate consumer at retail is to place the District in the position of engaging in business as a public utility for this is a business traditionally affected with public interest.

Id.

Therefore, this court's "all embracive" definition, expressed in City of Mesa, suggests strongly that "public utility service," within the meaning of section 9-516(A), may be performed by an entity that is neither a public service corporation nor a political subdivision, so long as it otherwise satisfies the requisite qualifications of a business traditionally affected with the public interest.

The court of appeals in this case stated that "despite the broad language of Mesa v. Salt River Project, we have found no cases in which the court has interpreted 'public utility' to mean a refuse disposal business or any other type of business that is not providing public service corporation-like services or products." 184 Ariz. at 373, 909 P.2d at 440. In support of this statement, the court cited Trico Elec. Coop., Inc. v. Arizona Corp. Comm'n, 86 Ariz. 27, 33-34, 339 P.2d 1046, 1051 (1959), Natural Gas Serv. Co. v. Serv-Yu Coop., 70 Ariz. 235, 219 P.2d 324 (1950), and City of Mesa v. Salt River Project, supra. Trico and Serv-Yu Coop, however, involved companies' attempts to avoid classification as public service corporations, raising the same issue in each case--whether the Arizona Corporation Commission could assert jurisdiction over the entity in question. Here, the issue is quite different, namely, whether the City of Kingman, as a governmental competitor, must compensate Mohave Disposal for the loss of business and service contracts, and perhaps other assets, pursuant to the statute, as in the case of a taking. The Corporation Commission's jurisdiction is not an issue in the instant case.

Serv-Yu Coop pre-dates our decision in City of Tucson v. Polar Water, 76 Ariz. 126, 259 P.2d 561 (1953), as modified, 76 Ariz. 404, 408, 265 P.2d 773, 775 (1954), and the enactment of A.R.S. § 9-516(A) (adopted 1954). In Polar Water, we held that municipalities could compete in annexed areas with existing public service corporations operating under certificates of public convenience and necessity, but we also stated that "[t]here is no constitutional basis for saying that the legislature may not require its municipalities to pay just compensation for the damage or destruction of the business, franchise, or property...