West Valley Land Co., Inc. v. Nob Hill Water Ass'n

• Decision Date: 04 December 1986
• Docket Number: No. 52334-7,52334-7
• Parties: WEST VALLEY LAND COMPANY, INC., Appellant, v. NOB HILL WATER ASSOCIATION formerly known as Nob Hill Water Company, Respondent.
• Court: Washington Supreme Court

Page 359

107 Wn.2d 359

729 P.2d 42

WEST VALLEY LAND COMPANY, INC., Appellant, v. NOB HILL WATER ASSOCIATION formerly known as Nob Hill Water

Company, Respondent.

No. 52334-7.

Supreme Court of Washington,

En Banc.

Dec. 4, 1986.

Walters, Whitaker, Finney & Falk, F. Joe Falk, Jr., Yakima, for appellant.

Brooks & Larson, P.S., Thomas Gish, Terry Brooks, Yakima, for respondent.

CALLOW, Justice.

West Valley Land Company, Inc. (West Valley) is a real estate developer. It seeks recovery of all charges for water service for the past 2 years on the theory that Nob Hill Water Association, f/k/a Nob Hill Water Company (Nob Hill) is a public water service company. West Valley also seeks a judgment declaring that Nob Hill is a water company subject to public regulation by the State Utilities and Transportation Commission (UTC) and attorney's fees together with treble damages under the Consumer Protection Act. RCW 19.86. The purpose of Nob Hill is to construct and operate a water supply system to provide water to its members for residential and domestic use and irrigation. West Valley appeals the denial of its motion for partial summary judgment and the grant of Nob Hill's motion for a summary judgment dismissing the complaints of West Valley with prejudice.

West Valley asserts that Nob Hill is a public service company subject to regulation by the UTC. This presents two issues: (1) whether Nob Hill is a public service company as defined by RCW 80.04.010; and (2) whether Nob Hill is a public service company as defined in Inland Empire Rural Elec., Inc. v. Department of Pub. Serv., 199 Wash. 527, 92 P.2d 258 (1939). Other issues of secondary importance also have been raised. We affirm the trial court which held that Nob Hill is a nonprofit cooperative, not a public service corporation, and is not subject to regulation by the UTC.

Nob Hill was originally incorporated in 1908 under the name of Nob Hill Water Company. At that time Nob Hill had 50 members. It now has over 3700 shareholder-members. In the original Articles of Incorporation of Nob Hill (1908), article 4, section 2 stated indirectly that Nob Hill would operate as a nonprofit corporation and will

[charge] ... as may be necessary to cover the cost and expense of procuring such supply of water and of carrying and delivering the same to the stockholders.

(Italics ours.) Article 4, section 5 of the Articles of Incorporation read in part

but no such funds raised from such charges and rentals shall ever be applied to the payment of dividends ... it being intended to furnish, carry and deliver said water ... at actual cost.

(Italics ours.)

Article 4, section 6, reads:

The business of this corporation shall be conducted strictly upon the cooperative basis and no service shall be rendered to or for any person, firm or corporation other than stockholders of this corporation and there shall be no profit earned by the corporation nor any dividends declared from any accumulations in its treasury nor any division of the assets of the corporation among the stockholders thereof at any time unless upon the dissolution and liquidation of the corporation in which event each stockholder shall be entitled to take pro rata with every other stockholder of the corporation in any such liquidation.

The articles were amended numerous times, but the language in the relevant articles remained identical or retained the same meaning. In June of 1983 two Articles of Amendment were concurrently executed and filed. The first changed the name of the corporation to Nob Hill Water Association and declared that the corporation had no capital stock, either past or present. The second explicitly describes the corporation as a "non-profit association" for the first time.

West Valley decided to develop 14 acres of land which it owned within the Nob Hill service area. On August 15, 1983, the Yakima County Board of Commissioners approved a preliminary plot for West Valley's subdivision. On August 16, the Nob Hill Board of Directors adopted a resolution that the company charge a "membership fee" of $450 for all new service connections. In addition, Nob Hill was charging a service connection fee of $300 for a 1-inch meter and up to $1900 for a 2-inch meter. Nob Hill did not seek approval from the UTC for these charges and policies. Nob Hill felt such approval was unnecessary partly because of past communications with the UTC in which the UTC informed Nob Hill that Nob Hill was not subject to UTC jurisdiction.

The UTC historically has not regulated nor asserted jurisdiction over and presently does not regulate nor assert jurisdiction over cooperatives or nonprofit water providers. Nob Hill has certain criteria to be met in order to qualify for service. Specific instances exist where Nob Hill has denied service to potential customers. Excess revenues, if any, are retained by Nob Hill to sustain company operations. West Valley now seeks a judgment that all charges paid by West Valley to Nob Hill during the 2 years prior to commencement of this action were overcharges.

We turn to the issue of whether Nob Hill is a public service company subject to regulation by the UTC. RCW 80.01 et seq. West Valley contends that Nob Hill is a water company under RCW 80.04.010 and therefore is a public service company subject to UTC regulation. Nob Hill answers that it operates strictly as a nonprofit cooperative and is not a public service company.

The public service commission law, adopted in 1911, came into existence through an act entitled "An Act relating to public service properties and utilities, providing for the regulation of the same, fixing penalties for the violation thereof, making an appropriation and repealing certain acts." Laws of 1911, ch. 117, p. 538. The law has been amended numerous times.

The current section of the Act, codified as RCW 80.04.010, was amended three times during the 1985 regular session of the Legislature, each without reference to the others. Pursuant to the directive of RCW 1.12.025, we give effect to each act to the extent that the amendments do not conflict in purpose. We set forth the definitions reflected in the last act filed in the office of the Secretary of State as controlling. (Laws of 1985, ch. 450) RCW 1.12.025. The definitions are set forth for purpose of discussion and such differences in definitions as exist in the chapters 161, 167 and 450 of the Laws of 1985 are not material to our discussion of the issue presented in this case. RCW 80.04.010 (Laws of 1985, ch. 450) contains the following definitions:

"Water system" includes all real estate, easements, fixtures, personal property, dams, dikes, head gates, weirs, canals, reservoirs, flumes or other structures or appliances operated, owned, used or to be used for or in connection with or to facilitate the supply, storage, distribution, sale, furnishing, diversion, carriage, apportionment or measurement of water for power, irrigation, reclamation, manufacturing, municipal, domestic or other beneficial uses for hire.

"Water company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, and every city or town owning, controlling, operating, or managing any water system for hire within this state: Provided, That it shall not include any water system serving less than sixty customers where the average annual gross revenue per customer does not exceed one hundred twenty dollars per year.

"Public service company" includes every gas company, electrical company, telecommunications company, and water company. Ownership or operation of a cogeneration facility does not, by itself, make a company or person a public service company.

The term "service" is used in this title in its broadest and most inclusive sense.

Under a literal application of the definitions set forth in RCW 80.04.010, Nob Hill would come within the scope of the regulatory provisions in RCW 80.04, because Nob Hill is a "water company" operating a "water system" in this state as an association that owns, controls, operates and manages a water system for power, irrigation, domestic and other beneficial uses. West Valley seeks to have Nob Hill subject to regulation pursuant to RCW 80.04 and RCW 80.28. Nob Hill contends that it is a nonprofit cooperative under the public service act.

"[Such cases] must be determined by the character of the business actually carried on by the carrier and not by any secret intention or mental reservation it may entertain or assert when charged with the duties and obligations which the law imposes."

Cushing v. White, 101 Wash. 172, 181-82, 172 P. 229, L.R.A. 1918F 463 (1918), quoted in State ex rel. Addy v. Department of Pub. Works, 158 Wash. 462, 465, 291 P. 346 (1930). "It does business ... and the important thing is what it does, not what its charter says." Terminal Taxicab Co. v. Kutz, 241 U.S. 252, 253-54, 36 S.Ct. 583, 584, 60 L.Ed. 984 (1916).

The fact that the Articles of Incorporation state that Nob Hill is a nonprofit cooperative does not end the inquiry. It must be ascertained what Nob Hill does.

Regulation by the department [UTC] is predicated upon the proposition that the service rendered is public service and, further, if the person sought to be regulated is a corporation, that it be a public service corporation ...

Inland Empire Rural Elec., Inc. v. Department of

Pub. Serv., 199 Wash. 527, 536, 92 P.2d 258 (1939); see also State ex rel. Webster v. Superior Court, 67 Wash. 37, 120 P. 861 (1912); State ex rel. Pub. Serv. Comm'n v. Spokane & Inland Empire R.R., 89 Wash. 599, 154 P. 1110 (1916); Sunset Shingle Co. v. Northwest Elec. & Water Works, 118 Wash. 416, 203 P. 978 (1922); Clark v. Olson, 177 Wash. 237, 31 P.2d 534 (1934); State ex rel. Spokane United Rys. v. Department of Pub. Serv., 191 Wash. 595, 71 P.2d 661 (1937); Port of Seattle v. Utilities & Transp. Comm'n, 92 Wash.2d...