Pennichuck Corp. v. City of Nashua
| Decision Date | 16 November 2005 |
| Docket Number | No. 2004–717.,2004–717. |
| Citation | 152 N.H. 729,886 A.2d 1014 |
| Court | New Hampshire Supreme Court |
| Parties | PENNICHUCK CORPORATION and another. v. CITY OF NASHUA. |
McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Thomas J. Donovan and Sarah B. Knowlton on the brief, and Mr. Donovan orally), for the plaintiffs.
Office of Corporation Counsel, of Nashua (David R. Connell on the brief and orally), and Upton & Hatfield, LLP, of North Conway (Robert Upton, II on the brief), for the defendant.
Kelly A. Ayotte, attorney general (Edith L. Pacillo, attorney, on the brief), for the State, as amicus curiae.
The plaintiffs, Pennichuck Corporation, Pennichuck Water Works, Inc., Pennichuck East Utility, Inc. and Pittsfield Aqueduct Company, Inc. (Pennichuck), appeal an order by the Superior Court (Lynn , C.J.) granting summary judgment to the defendant, City of Nashua (City), and ruling that the provisions of RSA chapter 38 (2000 & Supp.2005) do not constitute a per se inverse condemnation in violation of the New Hampshire Constitution. The court also ruled that the City filed its petition with the New Hampshire Public Utilities Commission (PUC) within a reasonable time and that it was not barred by laches. We affirm.
The following summary of RSA chapter 38 procedures, taken primarily from the well-reasoned superior court order, provides necessary context for the facts of this case.
RSA chapter 38 empowers municipalities to take by eminent domain privately owned electric, gas and water utilities in order to maintain and operate them as publicly owned facilities. RSA 38:2, I, II (2000). In order to initiate the process of acquiring a utility, there must first be an affirmative vote by two-thirds of the members of the municipal governing body. This vote must then be confirmed by a majority vote of the municipality's qualified voters at a regular election or special meeting called for this purpose. RSA 38:3 (2000). A favorable confirming vote creates a rebuttable presumption that the acquisition is in the public interest. Id. Within thirty days of the confirming vote, the municipality must notify the utility and inquire if it is willing to sell the identified plant and property located within the municipality, as well as "that portion, if any, lying without the municipality which the public interest may require, pursuant to RSA 38:11 as determined by the [PUC]." RSA 38:6 (2000). The utility is given sixty days to respond. RSA 38:7 (2000).
The parties may then negotiate and reach a tentative agreement on the assets to be sold and the sale price, subject to ratification by a vote of the municipality to issue the necessary revenue bonds for the acquisition price. RSA 38:8 (2000), :13 (2000). If no agreement is reached, either party may petition the PUC to determine whether it is in the public interest for the municipality to purchase some or all of the utility's property located inside or outside of the municipality. RSA 38:9, I (2000). The PUC also determines the amount of "just compensation" or damages that the municipality must pay for the assets in question. RSA 38:9, I, III (2000), :10 (2000). The statute contains a "second-look provision," which provides that after the PUC sets the acquisition price, the municipality must decide whether or not to purchase the assets for that price by a vote to issue revenue bonds pursuant to RSA 33–B:2 (Supp.2005). RSA 38:13. If the vote is in the affirmative, the municipality may proceed to acquire the assets at the price set by the PUC. Id. If the vote is in the negative, no further proceedings under RSA chapter 38 can be commenced for a period of two years. Id.
The trial court found the following facts. Pennichuck and its subsidiaries operate public utilities providing water supply services to approximately 35,000 customers in New Hampshire. Most of these customers are in Nashua and surrounding communities; however, Pennichuck's services extend to communities as far away as Pittsfield. Pennichuck's headquarters are in Nashua.
On April 29, 2002, Pennichuck entered into an "Agreement and Plan of Merger" with Philadelphia Suburban Corporation (PSC) whereby Pennichuck was to become a direct and wholly owned subsidiary of PSC. Pennichuck filed a petition with the PUC seeking approval of the merger on June 14, 2002. The City moved to intervene in the PUC proceedings and objected to the merger.
On November 26, 2002, Nashua's board of aldermen voted fourteen to one to adopt a resolution to acquire the plant and property of Pennichuck's water works system. By referendum held on January 14, 2003, the Nashua electorate voted to pass a resolution authorizing the City to acquire all or a portion of the water works system then serving the inhabitants of Nashua.
Following the referendum, PSC withdrew from merger talks with Pennichuck. On February 5, 2003, the City sent written notification to each of Pennichuck's utilities, describing the assets it sought to acquire and inquiring whether Pennichuck was willing to sell these assets to the City. On March 25, 2003, Pennichuck responded that it did not intend to sell any of its assets to the City. The next day, the City informed Pennichuck that it intended to petition the PUC to condemn the Pennichuck assets identified in its inquiry letters.
Pennichuck then entered into negotiations with the City concerning terms of a possible sale of some or all of Pennichuck's assets. On November 30, 2003, the City made a formal offer to purchase Pennichuck's assets for $121 million. Pennichuck rejected this offer on December 15, 2003, and terminated negotiations with the City on January 27, 2004.
Pennichuck filed suit in the superior court on February 4, 2004, seeking a declaratory judgment to terminate or limit the City's condemnation efforts. On March 24, 2004, the City filed a condemnation petition with the PUC, asking it to find the condemnation of Pennichuck's assets in the public interest and to determine damages the City must pay Pennichuck as a result of the taking. The City then moved to dismiss Pennichuck's claim for declaratory judgment in superior court. Pennichuck objected and filed a motion for summary judgment, which was supported by its verified petition. The City objected and filed a cross-motion for summary judgment, which was supported by the affidavits of Nashua's mayor, Bernard Streeter, and alderman at large, Brian McCarthy.
On August 31, 2004, the trial court granted summary judgment in favor of the City. On appeal, Pennichuck argues that the superior court erred by: (1) ruling that the procedures of RSA chapter 38 do not create a per se inverse condemnation in violation of the New Hampshire Constitution; (2) ruling that the City filed its petition within a reasonable time; and (3) ruling that the petition was not barred by laches.
Pennichuck argues that RSA 38:1 – :13 are facially unconstitutional and result in inverse condemnation because they permit the City or any other condemnor to initiate the taking process, but then walk away years later with no liability for the costs imposed on the condemnee. Pennichuck argues:
The sequence of events, allowable under RSA [chapter] 38, has the devastating effect of keeping a utility frozen and unable to operate its business in a normal fashion [and] makes it a practical impossibility that other businesses would consider acquiring or being acquired by the condemned company while the cloud of threatened condemnation persists. It is precisely this effect of depriving an individual or business from the economic use of its property that New Hampshire inverse condemnation law is designed to protect against.
We review the trial court's determination of the constitutionality of the statute de novo . Webster v. Town of Candia, 146 N.H. 430, 434, 778 A.2d 402 (2001).
"Inverse condemnation occurs when a governmental body takes property in fact but does not formally exercise the power of eminent domain." Sundell v. Town of New London, 119 N.H. 839, 845, 409 A.2d 1315 (1979) (citation omitted). Inverse condemnation may be effected through either physical act or regulation. Appeal of Public Service Co. of New Hampshire, 122 N.H. 1062, 1071, 454 A.2d 435 (1982). We look to the individual circumstances of each case to determine whether there is an unconstitutional taking. Burrows v. City of Keene, 121 N.H. 590, 598, 432 A.2d 15 (1981). We have found no greater right of the government to "take" merely because a regulated utility is involved. Appeal of Public Service Co. of New Hampshire, 122 N.H. at 1071, 454 A.2d 435.
To determine whether an inverse condemnation has occurred, we consider whether "arbitrary or unreasonable restrictions which substantially deprive the owner of the economically viable use of his [property] in order to benefit the public in some way constitute a taking within the meaning of our New Hampshire Constitution." Burrows, 121 N.H. at 598, 432 A.2d 15 (quotations omitted). Limitations on use create a taking if they are so restrictive as to be economically impracticable, resulting in a substantial reduction in the value of the property and preventing the private owner from enjoying worthwhile rights or benefits in the property. Id. at 601, 432 A.2d 15.
Pennichuck asks us to find that RSA chapter 38 effects inverse condemnation because it substantially interferes with Pennichuck's investment-backed expectations for operating a long-lasting and successful utility. Pennichuck relies upon Appeal of Public Service Co. of New Hampshire , in which we stated that the extent to which a regulation has interfered with "distinct investment-backed expectations" is a particularly significant consideration in determining whether a taking has occurred. Appeal of Public Service Co. of New Hampshire, 122 N.H. at 1071, 454 A.2d 435. In Appeal of Public Service Co. of New Hampshire , the utility was unable to operate a plant as a result of a PUC order denying it the...
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