Moongate Water Co. v. City of Las Cruces
| Decision Date | 23 July 2009 |
| Docket Number | No. 26,386.,26,386. |
| Citation | 219 P.3d 517,2009 NMCA 117 |
| Parties | MOONGATE WATER COMPANY INC., a New Mexico public utility, Plaintiff-Appellee, v. CITY OF LAS CRUCES, Defendant-Appellant. |
| Court | Court of Appeals of New Mexico |
William H. Lazar, Tesuque, NM, Kyle W. Gesswein, Las Cruces, NM, for Appellee.
Edward Ricco, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, Harry S. "Pete" Connelly, Marcia B. Driggers, Office of the City Attorney, Las Cruces, NM, William L. Lutz, Martin, Lutz, Roggow, Hosford & Eubanks, P.C., Las Cruces, NM, for Appellant.
{1} The opinion filed in this case on June 19, 2009, is hereby withdrawn, and the following opinion is filed in its place. The motion for rehearing is denied.
{2} This case arises from a dispute between the City of Las Cruces and Moongate Water Company over the right to supply water in a disputed area within the City's territorial limits. The district court granted summary judgment in favor of Moongate on Moongate's theory that it is a third-party beneficiary of a settlement agreement entered into by the City and Doña Ana Mutual Domestic Water Consumers Association (Doña Ana) to resolve an earlier lawsuit between those parties and that the settlement agreement constitutes an enforceable promise by the City to refrain from serving the area in dispute in this case. Consequently, the district court declared that the City is contractually prohibited from providing water service in the disputed area. The district court also declared that Moongate's utility franchise with the City expired and is of no effect and that Moongate is not required to have a franchise from the City in order to continue serving its customers within the City. Moongate had sought this declaration in order to continue to provide water service to its customers without the burden of the terms and conditions of the franchise agreement. The City appealed, arguing that the franchise should continue as an implied contract as long as the parties continue to operate as they did when the franchise was in effect. We agree, and for the following reasons we hold that the franchise between Moongate and the City remained in effect beyond its expiration as an implied contract.
{3} In 1988, the City granted a franchise to Moongate allowing Moongate to operate a water distribution system. The franchise gave Moongate the right to lay its pipes and other distribution equipment on public land and delineated Moongate's obligations to avoid interfering with public ways when placing its equipment. The franchise gave detailed instructions regarding Moongate's obligations to obtain permits, consult with the City's utility director, repair any damage to municipal property caused by its excavations, and restore public ways to their original condition. In addition, the franchise authorized the City to require Moongate to move its equipment under certain circumstances and required Moongate to pay a yearly franchise fee based on the number of customers it served. The franchise expired on December 31, 2002.
{4} Prior to the franchise's expiration, the City notified Moongate that due to the uncertainty over Moongate's service area caused by litigation between the City and Doña Ana, and due to uncertainty regarding changes that the Legislature intended to make to the Public Utility Act (PUA), NMSA 1978, §§ 62-3-1 to -5 (1967, as amended through 2008), in 2003, it would delay negotiating a new franchise until the litigation had been resolved and the PUA had been amended. The City noted that the expired franchise would continue on a month-to-month basis until a new franchise could be drafted.
{5} During the litigation over the third-party beneficiary issue, Moongate contended that the franchise had terminated in 2002 and that there was no longer a franchise agreement governing its relationship with the City. In response to this assertion, the City argued that if Moongate did not have a franchise, Moongate could not continue using the City's property to operate its water distribution system. Moongate then filed a motion for a declaratory judgment that the franchise had expired and that it had a right to provide water using City property without a franchise. The district court agreed with Moongate and granted partial summary judgment in favor of Moongate, ruling that Moongate's "franchise has expired and is of no force and effect" and that Moongate "is not required to have a franchise from the City ... to serve water customers within the City."
{6} On appeal from summary judgment, we review the whole record in the light most favorable to the party opposing summary judgment to determine if there is any evidence that places a genuine issue of material fact in dispute. Rummel v. Lexington Ins. Co., 1997-NMSC-041, ¶ 15, 123 N.M. 752, 945 P.2d 970; Hamberg v. Sandia Corp., 2007-NMCA-078, ¶ 6, 142 N.M. 72, 162 P.3d 909. If no material issues of fact are in dispute and an appeal presents only a question of law, we do not review in the light most favorable to the party opposing the motion, and we apply de novo review. Rutherford v. Chaves County, 2003-NMSC-010, ¶ 8, 133 N.M. 756, 69 P.3d 1199. Here, neither party argues that any material issues of fact are in dispute, and resolution of this appeal depends solely on whether an expired franchise continues by operation of law under implied terms after its expiration. Thus, this appeal presents a question of law that we review de novo.
{7} The City first argues that the question of whether the franchise continued after its expiration is not justiciable because there is not a "concrete controversy between the parties" and that Moongate's motion for partial summary judgment on the franchise issue therefore "amounted to [nothing] more than a request for an advisory opinion."
{8} The district court's jurisdiction in a declaratory action is limited to cases of actual controversy. State ex rel. Stratton v. Roswell Indep. Sch., 111 N.M. 495, 507, 806 P.2d 1085, 1097 (Ct.App.1991). A case presents an actual controversy "if the question posed to the court is real and not theoretical, the person raising it has a real interest in the question, and there is another person having a real interest in the question who may oppose the declaration sought." Id. The decision whether to assume jurisdiction in a declaratory judgment action is within the district court's discretionary power and is therefore reviewed for an abuse of discretion. Allstate Ins. Co. v. Firemen's Ins. Co., 76 N.M. 430, 433, 415 P.2d 553, 555 (1966).
{9} We cannot conclude that the district court abused its discretion when it determined that it had jurisdiction to resolve Moongate's request for a declaratory judgment. Here, the franchise between the City and Moongate had expired, and no new franchise had been negotiated. The City argued that the franchise remained in effect past its expiration date, but Moongate contended that it was no longer bound by the terms of the franchise. Thus, there was a real question as to whether the expired franchise continued to remain in effect past its expiration, Moongate had a real interest in determining whether it was bound by a franchise agreement, and the City had a real interest in determining whether the franchise had continued beyond its expiration such that it could oppose Moongate's motion. Therefore, the district court did not abuse its discretion in ruling on Moongate's motion for declaratory judgment.
{10} It is undisputed that the franchise between Moongate and the City expired by its terms on December 21, 2002. Moongate argues that upon the expiration of the franchise, it was relieved of all of its obligations under the franchise and that the franchise ceased to have any effect on its relationship with the City.
{11} Whether a public utility franchise continues past its expiration is a matter of first impression in New Mexico. Ordinarily, a public utility ceases to have any contractual relationship with a municipality upon the expiration of a franchise. See 12 Eugene McQuillin, The Law of Municipal Corporations § 34:69, at 256 (2006). However, if "the parties to a franchise agreement continue to perform after the expiration of the franchise in the same manner they did when the franchise was formally in effect," then the public utility operates "under an implied contract, cancelable upon reasonable notice, under the same terms and conditions as the franchise ordinance." Id. The rationale behind this rule is that "a public utility may not continue to reap the benefits of a franchise agreement after its expiration and be relieved of the burdens of the same agreement." Id. at 257.
{12} This general rule has been adopted by a number of jurisdictions that have considered the question. The Tenth Circuit, in City of Roswell v. Mountain States Telephone & Telegraph Co., 78 F.2d 379, 386 (10th Cir.1935), noted that while a municipality's continued acceptance of telephone services past the expiration of a franchise did "not vest the [utility] with a perpetual right in the streets and alleys," the continued use and provision of services did "constitute an implied agreement of indefinite duration, terminable within a reasonable time after their acceptance has ceased." Other jurisdictions have reached the same result. The Kansas Supreme Court, for example, applied this rule in Baker v. City of Topeka, 231 Kan. 328, 644 P.2d 441, 445 (1982), concluding that the utility "could [not] continue to reap the benefits of the [franchise] after its expiration ... yet be relieved of the burdens of the same agreement." See also, e.g., Village of Lapwai v. Alligier, 69 Idaho 397, 207 P.2d 1025, 1027 (1949) (...
To continue reading
Request your trial
-
Qwest Corp. v. City of Mex.
...a franchise agreement to extend beyond twenty-five years. N.M. STAT. ANN. § 3-42-1 (1978); see also Moongate Water Co. v. City of Las Cruces, 219 P.3d 517, 524 (N.M. Ct. App. 2009). It is indisputable that Section 9 is an integral part of the 1975 Agreement, given that it sets out the terms......