Robertson Properties v. Public Water Supply

• Decision Date: 21 January 2005
• Docket Number: No. WD 62968.,WD 62968.
• Citation: 153 S.W.3d 320
• Parties: ROBERTSON PROPERTIES, INC., Respondent, v. In the Matter of the DETACHMENT OF TERRITORY FROM PUBLIC WATER SUPPLY DISTRICT NO. 8 OF CLAY COUNTY, Missouri, Appellant.
• Court: Missouri Court of Appeals

153 S.W.3d 320

ROBERTSON PROPERTIES, INC., Respondent, v. In the Matter of the DETACHMENT OF TERRITORY FROM PUBLIC WATER SUPPLY DISTRICT NO. 8 OF CLAY COUNTY, Missouri, Appellant.

No. WD 62968.

Missouri Court of Appeals, Western District.

January 21, 2005.

Jeremiah D. Finnegan, Kansas City, MO, for Appellant.

John W. Roe, Kansas City, MO, for Respondent.

Before ULRICH, P.J., LOWENSTEIN and SMITH, JJ.

OVERVIEW

HAROLD L. LOWENSTEIN, Judge.

This is an appeal from a judgment in an action brought by Robertson Properties (Robertson) under Section 247.031¹ to detach approximately fifty-five acres of land from the defendant Public Water Supply District No. 8 of Clay County, Missouri (District), a non-profit association. This overview is presented since the alignment of the parties and relief sought differs from the cases cited by the parties and the trial court. The typical case involves a public water district filing suit against a defendant municipality that seeks to serve drinking water to consumers in a congruent area. This case is different, in that the area in issue is located within a public water district's domain and has been annexed into a municipality's boundary, and the land is being developed by a plaintiff who wants a city to supply drinking water.

Generally, as will be set out infra, the purpose of public water supply districts is to provide drinking water to areas in which service would be economically difficult to sustain. Congress set up a mechanism to help finance these districts in the delivery of potable water. In providing financial aid to the states to fulfill this purpose, the United States government has prescribed measures to ensure repayment of these obligations.

Much of the litigation that has resulted from this federal-state cooperation has involved situations where the public water supply district, financed in part by federal money, has been formed within a state to serve a remote or unpopulated area. As the area served by the public district grew, communities with a municipal or other water supplier developed and expanded into the district's territory. Consequently, developers, residents, and others who had land in both the district and in the municipality could potentially have two different water suppliers. In instances where the landowner elects to be served by the municipal provider, but the water supply district does not agree to detach the affected area from its territory, Section 247.031 sets out the mechanism for detachment in Missouri.

In this case, the plaintiff Robertson, is a developer of residential real estate. One hundred thirty-four acres of Robertson's land had been annexed by the City of Kearney approximately one year before the filing of this suit. Robertson worked closely with Kearney since beginning the development, and it was assumed that Kearney would supply all the water. Robertson brought suit under the auspices of state law, seeking to detach the fifty-five acres² from the District. Robertson's evidence in favor of detachment was to the effect that neither Roberston, nor Kearney, knew that this land was located in the District's territory.

The District answered Robertson's petition by raising the affirmative defense that 7 U.S.C. § 1926³ protected its territory from competitors. It also counterclaimed for a declaration of law and an injunction protecting its supply area. The trial court ruled in favor of Robertson, denying all relief requested by the District.

The ultimate question now on appeal concerns which entity — Kearney or the District — will supply drinking water to the Overlap Area. However, the answer to this question lies in yet another question: Where a state trial court is presented with a property owner's detachment suit filed under state law, and the public water supply district raises federal law as a defense to the detachment, must the trier of fact first decide the issues prescribed in the federal act, and upon finding the federal act does not apply, then decide if the elements contained in the state detachment action are met? This court finds that it must.

FACTS

In 1999, Robertson purchased a tract of undeveloped land and entered into an agreement with the seller, whereby Kearney would annex one hundred thirty-four acres of the land. Robertson began developing its land in phases, with Kearney supplying water. During development, it was discovered that fifty-five acres of the land annexed by Kearney was already within the District's territory. By the time this discovery was made, however, Kearney had already obtained easements and had extended an eighteen-inch and a fourteen-inch water main to service the Overlap Area (Phase IV). Accordingly, Robertson brought suit to detach the Overlap Area from the District.

In entering judgment for Kearney and granting detachment, the trial court made extensive findings that it would be cheaper, more feasible, and less cumbersome for all phases of Robertson's development to be served by Kearney. It found that (1) the District had not supplied water to the subject Overlap Area, (2) did not have sufficient mains to immediately provide service, and (3) that Robertson had requested service from the District in October of 2002, but had not received assurance that it could provide service by May 1, 2003. Additionally, the court found that Kearney could better provide water for fire protection.

The court concluded that because the District had over eight hundred customers in an area of approximately eighteen thousand acres, detachment of the fifty-five acre Overlap Area would neither result in a curtailment of service by the District nor hinder it from repaying its obligation on existing bonds. Although the court did not determine whether the outstanding bonds were "special obligation bonds" within the meaning of Section 247.031, it did conclude that since the District did not have any lines or other facilities in the Overlap Area, consent of the bondholders was not required for detachment.

REVIEW AND ANALYSIS

Review is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976), and Rule 73.01. Accordingly, the trial court's judgement will not be overturned "unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law." Murphy, 536 S.W.2d at 32.

In this case, the trial court erroneously applied the law by focusing its analysis on Section 247.031. Instead of first engaging in a formal Section 1926 analysis, the trial relied on Chance v. Public Water Supply District No. 16, 41 S.W.3d 523, 525 (Mo.App.2001), to conclude that Section 1926 was inapplicable because the detachment was sought by a private individual rather than a municipality. This reliance is misplaced and constitutes a misapplication of law. Chance did involve a landowners' suit to detach under Section 247.031 and a contention by the defendant water district that Section 1926 afforded it protection. Beyond those facts, however, any similarity to the facts in Chance and the case at bar ceases.

In Chance, the landowner owed a ten-acre tract located in an unincorporated area within the water district's boundaries. Id. at 524. The tract was later divided into two separate lots. Id. Although the City of Independence was already providing water to the lot on which the Chance's house was located, the city refused to provide service to the second lot unless it was detached from the water district. Id. Because they wanted Independence to service both lots, the Chances filed a detachment suit against the water district. Id. The trial court ruled in favor of the Chances and detached the property from the water district. See id. at 526.

This court affirmed, relying on Section 247.031. Id. at 524. Section 247.031(1) provides that "[t]erritory included in a district that is not being served by such district may be detached from such district provided that there are no outstanding general obligation or special obligation bonds." Subsection (4) further requires the circuit court to detach the property in question "if the court finds that the detachment [1] will be in the best interest of the inhabitants and landowners of the territory to be detached and [2] will not adversely affect the remainder of the district." § 247.031(4).

The Chance court noted that, under the federal statute, the requirement that a district be indebted to the federal government was not met because the district itself was not the entity that had received a federal loan. 41 S.W.3d at 524-25. It also said that the Section 1926(b) requirement, that service of a district provided or made available shall not be curtailed by inclusion in the district's area of a city boundary (i.e., annexation), was not involved. Id. at 525 ("Independence has not annexed the Chance's property[.]").

This case is different in that the property sought to be detached was annexed with the landowner's permission by Kearney in March 1999, well before the filing of the detachment suit. Kearney planned to provide water to one hundred forty-five houses, until later discovering that fifty-five acres of the project were within the District's territory. Although not the de jure plaintiff, Kearney had made prior arrangements with the landowner to provide water service. Therefore, it was not an innocent bystander to Robertson's dispute with the District. Despite Chance's language that suggests blanket authority be given to municipal water systems supplying water where "service areas" coincide with federally indebted public water districts, this language should not be taken out of context. Specifically, neither Chance, nor its interpretation of federal and state law, should be read to allow automatic circumvention of Section 1926(b)'s protection where the municipality seeks to provide water to property it has annexed from within the distributor's boundaries and over the water...