Southwest Gas Corp. v. Mohave County

• Court: Arizona Court of Appeals
• Writing for the Court: KLEINSCHMIDT; THOMPSON, P.J., and GRANT
• Citation: Southwest Gas Corp. v. Mohave County, 188 Ariz. 506, 937 P.2d 696 (Ariz. App. 1997)
• Decision Date: 06 February 1997
• Docket Number: No. 1,CA-CV,1
• Parties: , Util. L. Rep. P 26,586, 236 Ariz. Adv. Rep. 14 SOUTHWEST GAS CORPORATION, Plaintiff-Appellee, v. MOHAVE COUNTY; Mohave County Board of Supervisors; Pat Holt, Sam Standerfer and Joan C. Ward, in their capacities as Members of the Mohave County Board of Supervisors, Defendants-Appellants. 96-0347.

Page 696

937 P.2d 696

188 Ariz. 506, Util. L. Rep. P 26,586, 236 Ariz. Adv. Rep. 14

SOUTHWEST GAS CORPORATION, Plaintiff-Appellee, v. MOHAVE COUNTY; Mohave County Board of Supervisors; Pat Holt, Sam Standerfer and Joan C. Ward, in their capacities as Members of the Mohave County Board of Supervisors, Defendants-Appellants.

No. 1 CA-CV 96-0347.

Court of Appeals of Arizona Division 1, Department C.

Feb. 6, 1997.

Review Granted June 5, 1997.

[188 Ariz. 507] Wachtel, Biehn & Malm by James B. Wyss, Lake Havasu City, and Southwest Gas Corporation by Andrew W. Bettwy, Las Vegas, NV, for Plaintiff-Appellee.

William J. Ekstrom, Jr., Mohave County Attorney by Lance B. Payette, Deputy County Attorney, Kingman, for Defendants-Appellants.

OPINION

KLEINSCHMIDT, Judge.

The question in this case is whether a county has the authority to charge a public utility a fee as a condition of granting the utility a franchise to place its transmission lines under county roads and highways. We hold that a county does not have the power to charge such a fee because the legislature has not expressly conferred that power on counties, and it is not a power which is necessarily implied from the right to grant a franchise.

FACTS AND PROCEDURAL HISTORY

Southwest Gas Corporation provides natural gas service to customers in Mohave County. Arizona law requires a utility to obtain a franchise from the county in which it operates before it can construct and maintain its transmission lines. Arizona Revised Statutes Annotated ("A.R.S.") section 40-283 (1996). Southwest originally obtained such a franchise from Mohave County in 1957. Although that franchise specified that Southwest would pay the County a fee equal to two percent of its gross receipts from the operation of the franchise, such payment was never made or demanded.

In 1990, the County claimed the franchise had expired in 1982 under a policy which limits franchises to twenty-five years. Ariz. Const. art. 13, sec. 4. Still later, the County questioned Southwest's authority to continue to use County rights-of-way, in part on the grounds that Southwest had failed to pay the franchise fee. As negotiations proceeded, Southwest questioned the County's authority to charge a fee based on a percentage of profits. The parties finally entered into a new franchise agreement calling for a franchise fee of two percent of gross receipts, conditioned on Southwest's right to challenge the legality of such a fee in court.

Southwest did file a declaratory judgment action challenging the right to charge a revenue-based franchise fee, and ultimately, the trial court granted summary judgment in its favor, finding that "in the absence of a voluntarily-negotiated 'percentage of gross receipts' fee, Mohave County is not empowered by a constitutional or statutory provision to condition the grant of a franchise to Southwest Gas Corporation on the payment of such a fee...." This appeal ensued. By the time the case reached oral argument, Southwest's position had evolved into an argument that the County had no authority to impose any franchise fee whatsoever, no matter how the fee was calculated. ¹

THE RIGHT TO CHARGE A FRANCHISE FEE IS NOT A NECESSARY IMPLICATION OF THE RIGHT TO GRANT A FRANCHISE

The case turns on whether A.R.S. section 40-283, the statute which requires public utilities to obtain a franchise, gives the County the authority to charge a franchise fee. The statute provides:

A. Any person engaged in transportation or transmission business within the state may construct and operate lines connecting any points within the state and connect at the state boundary with like lines, except that within the confines of municipal corporations the use and occupancy of streets shall be under rights acquired by franchises.... The use of highways, except state highways, by public utilities not within any incorporated city or town shall be regulated by the board of supervisors of the county by license or franchise.

B. A board of supervisors in granting a license or franchise, or at any time after it is granted, may impose restrictions and limitations upon the use of the public roads as it deems best for the public safety or welfare.

C. Every franchise granted under this article shall include provisions requiring the grantee thereof to bear all expenses, including damage and compensation for any alteration of the direction, surface, grade or alignment of a county road, made for the purpose of such franchise.

The statute is silent as to the right to charge a franchise fee. The powers accorded to counties under Arizona law are very limited, generally even more limited than the powers accorded to cities and towns. Maricopa County v. Black, 19 Ariz.App. 239, 241, 506 P.2d 279, 281 (1973). It is well established that a county has only those powers that have been expressly, or by necessary implication delegated to it by the legislature or the constitution. Associated Dairy Products Co. v. Page, 68 Ariz. 393, 395, 206 P.2d 1041, 1043 (1949); Maricopa County v. Maricopa County Mun. Water Conservation Dist. No. 1, 171 Ariz. 325, 330, 830 P.2d 846, 851 (App.1991); Maricopa County v. Black, 19 Ariz.App. at 241, 506 P.2d at 281.

The question devolves into what is meant by "necessary implication." The only Arizona case we have found that considers the meaning of that term is Mahoney v. County of Maricopa, 49 Ariz. 479, 68 P.2d 694 (1937). In Mahoney, the supreme court held that a broad statutory scheme which created a welfare board repealed, by necessary implication, other statutes authorizing counties and the governor to dispense welfare funds. Id. at 497, 68 P.2d at 702. The court, relying on Gilbert v. Craddock, 67 Kan. 346, 72 P. 869 (1903), defined the term as follows:

"A necessary implication means not natural necessity, but so strong a probability of an intention that one contrary to that which is imputed to the party using the language cannot be supposed."

49 Ariz. at 492, 68 P.2d at 700 (quoting Gilbert, 72 P. at 871).

The Gilbert case, which dealt with the implied repeal of an election statute, discussed the meaning of "necessary implication" in great detail:

To be sure, the implication must be a necessary one. It may be drawn from public policy; past acts; the entire terms, purposes, and scope of the act to be considered; the inconvenience, inconsistencies, and absurdities involved in the contrary consideration; indeed from all the things found in the act, the conditions surrounding it, the purposes to be accomplished by it, and the policy dictating it. An act of the Legislature is like any other writing in this respect. Its purpose is to be gathered from all of its terms. Sutherland, Stat. Con. § 239. A necessary implication does not mean to shut out every other possible or imaginary conclusion, and from which there is no possible escape, but means one leading to such a conclusion as, under the circumstances, a reasonable view impels us to take, the contrary of which would be improbable or absurd. Speaking upon the matter of implications in the consideration of statutes, it is said in Black on Interpretation of Laws, § 33: " * * * This doctrine does not empower the courts to go to the length of supplying things which were intentionally omitted from the act. But it authorizes them to draw inferences from the general meaning and purpose of the Legislature, and from the necessity of making the act operative and effectual, as to those minor or more specific things which are included in the more broad or general terms of the law, or as to those consequences of the enactment which the Legislature must be understood to have foreseen and intended...." * * * On the same subject, it is said in Sutherland on Statutory Construction, § 336: " * * * A necessary implication means not natural necessity, but so strong a probability of an intention that one contrary to that which is imputed to the party using the language cannot be supposed."

72 P. at 871.

Other cases which construe the term "necessary implication" concern either the construction of statutes or the terms of wills. One of them, Atlas Acceptance Corp. v. Pratt, 85 Utah 352, 39 P.2d 710, 714 (1935), discusses the long and consistent history of the meaning of the term. All of the cases give the term the same meaning--so strong a probability of an intention that one contrary to that which is imputed to the party using the language cannot be supposed--that our supreme court used in Mahoney v. County of Maricopa. See United States v. Jones, 204 F.2d 745, 754 (7th Cir.1953); Harris Trust & Sav. Bank v. Donovan, 203 Ill.App.3d 259, 148 Ill.Dec. 578, 582, 560 N.E.2d 1175, 1179 (1990), rev'd on other grounds, 145 Ill.2d 166, 163 Ill.Dec. 854, 582 N.E.2d 120 (1991); Russell v. Russell, 16 N.J.Super. 589, 85 A.2d 296, 298 (App.Div.1951); Hunt v. Furman, 132 W.Va. 706, 52 S.E.2d 816, 818 (1949); Palfreyman v. Trueman, 105 Utah 463, 142 P.2d 677, 679 (1943); Tuttle v. Woolworth, 74 N.J. Eq. 310, 77 A. 684, 686 (N.J.Ch.1908); Hewitt v. Shipley, 169 Md. 221, 181 A. 345, 347 (1935). One case gives the term an even more restrictive meaning. See Attorney General ex rel. Gregg v. Sands, 68 N.H. 54, 44 A. 83, 85 (1894) (necessary implication when construing statute means an implication that is absolutely necessary and unavoidable). We are aware of no case which adopts a less restrictive definition of the term.

The question then, rephrased in the positive, devolves further into whether it is possible to suppose that the legislature intended to give counties the power to grant a franchise without also giving them the power to impose a franchise fee. For several reasons, we think such is entirely possible. First: There is nothing particularly compelling about the idea that the legislature wanted the counties to charge a franchise fee. The legislature may have recognized that franchises are necessary to avoid the chaos that would ensue from competing utilities putting their...