City of Surprise v. acc/lake Pleasant
City of Surprise v. acc/lake Pleasant
Opinion of the Court
¶1 The Arizona Corporation Commission ("Commission") has broad authority under A.R.S. § 40-285(A) to approve the sale or disposition of a public service corporation's assets. In this special action, we hold that § 40-285(A) does not give the Commission power over a city's exercise of eminent domain. Accordingly, we vacate the portion of the Commission's March 30, 2018 order requiring the public utility to apply for Commission approval of the proposed condemnation.
I. BACKGROUND
¶2 In October 2017, the City of Surprise ("City") entered into a letter of intent with Circle City Water Company, L.L.C. ("Circle City"), documenting the City's intent to condemn substantially all the assets of Circle City, including the right to almost four thousand acre-feet of water per year from the Central Arizona Project ("CAP"). Pursuant to statute, Surprise voters authorized the condemnation and the Surprise City Council approved the filing of a condemnation action. A residential developer contends that Circle City is obliged under an existing contract to allocate its CAP water for a planned development. Upon inquiry by the developer, the City advised that it has no obligation to provide water under the existing contract. The developer then asked the Commission to enter an order preventing the sale of Circle City's CAP allocation to the City.
¶3 The Commission opened an investigation. On March 30, 2018, the Commission ordered Circle City to file an application under § 40-285 and Arizona Administrative Code ("A.A.C.") R14-2-402(D), seeking Commission authorization "to abandon, sell, lease, transfer, or otherwise dispose of its utility." At the time of the order, the Commission was aware that the negotiations between the City and Circle City were intended to result in condemnation, not a sale. Circle City filed the application under protest. Commission staff determined that Circle City did not fully comply with the March 30 order by failing to include a copy of the draft condemnation agreement between Circle City and the City. At the Commission's direction, Circle City provided a copy of the draft agreement under seal. The Commission then required Circle City to confirm in writing whether the City would assume Circle City's water contract with the developer.
¶4 Shortly thereafter, the City filed this special action, alleging the Commission acted without jurisdiction in entering the March 30 order. This Court stayed further administrative proceedings pending resolution of this case.
¶5 We accepted jurisdiction over this special action to clarify the scope of the Commission's authority over eminent domain proceedings pursuant to A.R.S. § 40-285(A). We have jurisdiction pursuant to article 6, section 5(1) of the Arizona Constitution and A.R.S. §§ 12-2001 and 12-2021.
II. DISCUSSION
A. Jurisdiction
¶6 This Court has original jurisdiction to issue "mandamus, injunction and other extraordinary writs to state officers." Ariz. Const. art. 6, § 5 (1);
see also
A.R.S. §§ 12-2001, -2021. Such jurisdiction is discretionary and is requested through a special action petition.
Dobson v. State ex rel. Comm'n on Appellate Court Appointments
,
¶7 Here, the scope of Commission authority involves a purely legal question of statutory interpretation: whether the Commission has exceeded its statutory authority. The City cannot presently appeal the Commission's order because it is not a party to the administrative proceedings, and the City has no other means to challenge the Commission's actions. For those reasons, special action review is appropriate.
See
Ariz. Corp. Comm'n v. State ex rel. Woods
,
B. Standing
¶8 The Commission asserts that the City lacks standing to bring this action and the City's case is not ripe for decision. This Court is "not constitutionally constrained to decline jurisdiction based on lack of standing" because the Arizona Constitution, unlike the Federal Constitution, contains no "case or controversy" requirement.
Sears v. Hull
,
¶9 The Commission argues that because it has taken no action against the City and has not attempted to "regulate the condemnation," the City has not suffered any injury. But its March 30 order requiring Circle City to file an application pursuant to § 40-285"for authority to abandon, sell, lease, transfer, or otherwise dispose of its utility" in the face of the City's proposed condemnation constitutes an injury to the City. While facially directed only at Circle City, the assertion of authority under that statute, if valid, would give the Commission the authority to void the City's condemnation action. Further, standing is suggested by Arizona's declaratory judgment statute, which provides that a party whose "rights, status or other legal relations are affected by a statute" may seek declaratory relief regarding the statute's construction. A.R.S. § 12-1832 ;
see also
Dobson
,
C. Standard of Review
¶10 We review the interpretation of statutes de novo, seeking to effectuate the legislature's intent.
Stambaugh v. Killian
,
D. Commission Authority Over Condemnation Proceedings
¶11 The Commission argues it has authority to regulate condemnations under § 40-285(A) and A.A.C. R14-2-402(D). Section 40-285(A) provides:
A public service corporation shall not sell, lease, assign, mortgage or otherwise dispose of or encumber the whole or any part of its railroad, line, plant or system necessary or useful in the performance of its duties to the public ... without first having secured from the commission an order authorizing it so to do. Every such disposition, encumbrance or merger made other than in accordance with the order of the commission authorizing it is void.
A.A.C. R14-2-402(D)(1) provides that "[a] utility shall not abandon, sell, lease, transfer, or otherwise dispose of its facilities or operation without first obtaining authority therefor from the Commission." The City argues § 40-285(A) does not apply because the statutory language does not reference condemnation proceedings and because a condemnation is neither a sale nor other voluntary transfer, as the statute otherwise contemplates. The Commission asserts that the phrase "or otherwise dispose of" is sufficiently broad to include a transfer resulting from a condemnation. Because § 40-285(A) does not expressly include transfers through condemnation proceedings, we must decide whether condemnations are included by the phrase "or otherwise dispose of."
¶12 The Commission's interpretation of "otherwise dispose of" is inconsistent with the context of the statute. "[S]ell, lease, assign" and "mortgage" are all voluntary transactions; a condemnation, in contrast, is an involuntary governmental taking of assets.
See
United Water N.M., Inc. v. N.M. Pub. Util. Comm'n
,
¶13 Our conclusion is supported by the interpretive canons
expressio unius est exclusio alterius
and
noscitur a sociis
.
Expressio unius est exclusio alterius
-the expression of one item implies the exclusion of others-is appropriate when one term is reasonably understood as an expression of all terms included in the statutory grant or prohibition.
Jennings v. Woods
,
¶14 Applying the expressio unius canon, we infer that the legislature's decision to include the terms "sell, lease, assign," and "mortgage," but not "condemn" or any variant thereof was intentional. Similarly, the doctrine of noscitur a sociis requires us to read the phrase "otherwise dispose of" in light of its surrounding terms "sell, lease, assign" and "mortgage." We decline to stretch the phrase "otherwise dispose of" in § 40-285(A) to cover transfers so markedly different from those the legislature expressly included.
¶15 The Commission has no authority to regulate the City's utilities.
See
Ariz. Const. art. 15, §§ 2, 3 (excluding municipal corporations from the Commission's regulatory authority);
Menderson v. City of Phoenix
,
¶16 But the power to solicit information is nowhere conferred by the text of § 40-285(A), nor did the Commission merely solicit information. And if the Commission is correct that § 40-285(A) applies to eminent domain proceedings in any respect, then, by the plain language of the statute, Circle City must obtain Commission approval to transfer its assets to the City. Failure to obtain Commission approval would render the City's condemnation void. This would effectively create a Commission veto over municipal acquisition of utilities-a result at odds with our constitution's clear exclusion of municipalities from Commission regulation.
See
Menderson
,
¶17 The Commission's argument is also in tension with legislative intent in enacting § 40-285(A), which was "to prevent 'looting' of a utility's facilities and impairment of service to the public."
Babe Invs. v. Ariz. Corp. Comm'n
,
¶18 We find further support in the California Court of Appeal's interpretation of a statute nearly identical to § 40-285(A).
See
Am. Cable Television, Inc.
,
¶19 Here, as in
City of Fresno
, any inference of Commission power over eminent domain permitted by § 40-285(A) 's text is untenable in light of the City's express authorization to condemn public utilities.
See
A.R.S. § 9-511(C) ("The municipality may exercise the right of eminent domain either within or without its corporate limits for the purposes as stated in subsection A ....");
¶20 Lastly, to the extent the Commission argues that A.A.C. R14-2-402(D) confers jurisdiction where the statute does not, we disagree. "The Corporation Commission has no implied powers and its powers do not exceed those to be derived from a strict construction of the Constitution and implementing statutes."
Commercial Life Ins. Co. v. Wright
,
¶21 The partial dissent does not dispute that the City has the right to condemn public utilities. Nor does it dispute that if a public utility refuses to cooperate in a sale of its assets, the City may invoke its power of eminent domain. Nonetheless, relying on dicta in a case from another jurisdiction, the dissent draws a line between contested and uncontested condemnations, giving the Commission authority over the latter but not the former. Effectively, the dissent empowers the Commission to veto a municipal corporation's eminent domain decision based only on the determination that it is not sufficiently adversarial. This approach makes sense only if we accept the dissent's selective use of dictionary definitions, see infra ¶ 42 (defining the power of eminent domain by selecting one of six entries for a term, ignoring the more relevant entries with contrary implications), and its strained application of the general terms canon, see Scalia & Garner, supra , at 101-03 (general terms canon instructs that terms like " all persons" and " any property" not be arbitrarily limited, but does not apply when context provides " some indication to the contrary " (emphasis added)). This we decline to do.
¶22 The dissent argues that a "friendly" condemnation, which it understands as one that "bears the indicia of a voluntary sale," is subject to the Commission's jurisdiction under § 40-285(A).
Infra
¶ 41. Under the dissent's expansive view, if the condemnee-utility fails to object to either the inevitable condemnation or the amount of the City's monetary offer, the City must obtain Commission approval for the sale. But by drawing a line between contested and uncontested condemnations, giving the Commission authority over the latter but not the former, the dissent misconstrues the power of eminent domain. The government has the right to condemn property for public use irrespective of the condemnee's mindset. And this makes sense: why should a condemnee's willingness to sell his property limit the government's inherent power (and here, the City's express statutory right,
see
§ 9-516(B)) to condemn
it? Such a rule would "turn on serendipity,"
Saban v. Ariz. Dep't of Trans.
,
¶23 More problematic, the dissent's view would expand the Commission's power well beyond the limits set by our legislature. By claiming that the Commission's "jurisdiction over a public utility is not extinguished until the transfer is complete," infra ¶ 44, the dissent would give the Commission power over the condemnation proceeding itself. Not even the Commission makes this claim.
¶24 The dissent worries that our decision risks leaving Circle City customers (here, the developer) without service. Regardless, our constitution and our legislature bestowed the exclusive authority to regulate municipal utilities upon municipalities, along with the authority to condemn the property of public service corporations. See Ariz. Const. art. 15, §§ 2, 3 (excluding municipal corporations from the Commission's regulatory authority); § 9-511 (empowering municipal corporations to own, operate, and condemn utilities). This Court should not rewrite § 40-285(A) to expand the regulatory authority of the Commission.
¶25 The dissent's related concern that the legislative remedy of issuing a new certificate of convenience and necessity ("CC&N") "may prove illusory" because other providers "might" not exist has no basis in the record and we do not consider it.
See
State v. Bible
,
¶26 The Attorney General opinion, relied on by the dissent, expressly disclaims the dissent's premise by acknowledging that a condemnation divests the Commission of jurisdiction over a utility and its CC & N. Op. Ariz. Att'y Gen. 62-7, at 12 (1962) (stating that "the Commission continues to retain jurisdiction over the utility and its certificate" during the pendency of a voluntary sale to a municipality but "[a]s an alternative procedure, the municipality may of course condemn" the utility to avoid Commission oversight).
¶27 To the extent the dissent suggests the City's proposed condemnation is fraudulent, an abuse of discretion, or otherwise improper with respect to the developer, any remedy for a claim to future water from Circle City is outside the scope of this litigation. We here express no opinion on the merits of such a claim or the remedies in such an action.
¶28 Our decision today does not preclude the Commission from continuing to regulate any portion of Circle City's service area left unserved following the City's condemnation. The Commission can issue a new CC&N to a public utility if the City declines to provide water service to customers in Circle City's service area, including the developer who originally contracted with Circle City. See § 9-516(D) ("[I]f [after the condemnation] the city or town refuses to provide utility service to a portion or part of the area or territory previously authorized to the public utility, the [Commission] may issue a new certificate of convenience and necessity or franchise to a public utility to provide utility service in that portion or part of the area or territory."). The Commission simply has no role to play in condemnations.
III. CONCLUSION
¶29 We vacate paragraph 1 of the Commission's March 30, 2018 order. We deny the City and Circle City's requests for attorney fees.
Concurring in Part
¶30 I agree with the majority that the Arizona Corporation Commission has no authority "to regulate the condemnation of water utilities," the narrow question the City presented to us on special action review, and that the City has standing to pursue the action. However, the Court goes further to divest the Commission of authority to protect the interests of water consumers in the event the transfer of the water utility here is actually a voluntary transaction dressed up as an exercise of eminent domain.
¶31 The majority correctly identifies the usual dividing line regarding which governmental acquisitions of private water facilities require Commission approval: if they are voluntary transactions, they do; if they are involuntary transactions effectuated through eminent domain, they do not. Unfortunately, the majority ignores the more difficult question that may be presented here: what happens when the acquisition is voluntary and consummated through eminent domain? The majority holds that the moment a municipality announces its intention to use eminent domain, the Commission's authority to protect water consumers dissolves. I cannot join that holding for it elevates form over substance and defeats important statutory objectives underlying the Commission's jurisdiction.
¶32 I wish I could share the majority's certitude that this scenario is resolved through clear statutory language. But neither the statutes creating the Commission's authority to protect water consumers nor those pertaining to a municipality's eminent domain authority speak directly to this circumstance.
¶33 When two sets of statutes address a situation, we should endeavor to harmonize them and give effect, if possible, to all the provisions.
State v. Bowsher
,
¶34 Under § 40-285(A), the Commission possesses authority over a public service company when it "sell[s], lease[s], assign[s], mortgage[s] or otherwise dispose[s] of" its system. The term "otherwise dispose of" is broad enough to encompass a transfer through eminent domain that is the product of voluntary agreement. Indeed, broad general terms, like "otherwise dispose of," must be "accorded their full and fair scope" and may not be "arbitrarily limited." Antonin Scalia & Bryan A. Garner,
Reading Law: The Interpretation of Legal Texts
101 (2012). By refusing to recognize "otherwise dispose of" as including a voluntary transfer by eminent domain, the majority ignores the term's expansive breadth and arbitrarily creates an ad hoc exception.
See
Phillips v. O'Neil
,
¶35 Although municipal power to acquire public utilities through eminent domain is unquestioned, see A.R.S. § 9-516, nothing in the eminent domain statutes expressly divests the Commission of authority to investigate the nature of the transaction or to protect the public's access to water before the acquisition. The majority correctly states that the Commission has no jurisdiction over municipal water facilities after the assets are acquired; but even then, the Commission retains authority to assure continuation of service through a new CC&N if the municipality fails to serve all prior customers under § 9-516(D). See supra ¶ 28.
¶36 Indeed, the enabling statute conflates eminent domain and voluntary acquisition. Section 9-515(A) provides that before "constructing, purchasing, acquiring or leasing" a facility for customers who are already served by a public utility, the municipality "shall first purchase and take over the property and plant of the public utility." Regardless of how the acquisition is effectuated, "[t]he fair valuation of the public utility shall be the equivalent of the compensation to be paid for the taking of private property for public use," as determined by agreement between the municipality and the public utility, by arbitration, or by a court in the eminent domain context. § 9-515(C).
¶37 The best explanation of how the Commission's authority relates to the acquisition of private water companies is provided by a 1962 Attorney General opinion, which although not legally binding is illuminating, especially in the absence of directly applicable Arizona case law. Op. Ariz. Att'y Gen. 62-7 (1962).
See
Benevolent & Protective Order of Elks #2656 v. State ex rel. Dep't of Liquor Licenses & Control
,
¶38 The majority deems that analysis irrelevant because it views the transaction here as inherently involuntary, noting that the Attorney General opinion itself states that "[a]s an alternative procedure, the municipality may of course condemn as provided in A.R.S. § 9-515(C)(3), by court action."
Id.
at 12. But the opinion emphasizes that "[u]ntil [the public utility company] is relieved by the Commission of its duties, and the [CC&N] is retired, it is subject to the Commission's regulation."
Id.
at 11. In the interim, between the time the municipality begins the process of obtaining the public utility's assets and the culmination of that process, the Commission has the authority to ensure "that there are no other customers or persons who have been served by the private utility and that it will, in fact, have been relieved of all its duties to serve such customers."
Id.
at 14. Specifically, "[t]he duties and powers of the Commission are limited to the necessary hearings and orders to make sure that sale by the utility will not leave persons served neither by the utility nor the municipality."
Id.
at 12;
see also
Pueblo Del Sol Water Co. v. Ariz. Corp. Comm'n
,
¶39 In November 2013, Circle City initiated an action before the Commission to remove the development from its CC&N, which would divest the developer of any CAP water rights. Circle City alleged that the developer had abandoned the project. The Commission rejected Circle City's application, finding that the developer had not abandoned the project. Only thereafter did the City initiate condemnation proceedings, and it has taken the position that it has no obligation to provide the developer with water service.
¶40 If the City and Circle City voluntarily entered into eminent domain proceedings in order to divest the developer of valuable water rights, there could be a collision between the City's eminent domain powers, which are beyond the Commission's jurisdiction, and the Commission's broad authority under § 40-285(A) that ensures that customers' service rights are protected in a voluntary transfer of assets. In such circumstances, the remedy of approving a new CC&N under § 9-516(D) may prove illusory because no other provider might exist to provide such services; only the remedy of disapproval would preserve the customers' rights.
See
Babe Invs.
,
¶41 Although ordinarily the exercise of eminent domain is coercive and involuntary, a "friendly condemnation," which is widely recognized in the law, is one "in which the condemnee desires the condemnation as ardently as does the condemnor," a situation in which "important community concerns may receive short shrift."
E. Thirteenth St. Cmty. Ass'n v. N.Y. State Urban Dev. Corp.
,
¶42 In contrast, eminent domain is "the sovereign right of the state to
appropriate
private land for the public good, subject to the constitutional limitation that the property owner is justly compensated."
Calmat of Ariz. v. State ex rel. Miller
,
¶43 A decision by the New Mexico Supreme Court that I, like the majority, deem highly persuasive, appears to be the only decision to expressly contemplate this scenario. In
United Water New Mexico, Inc. v. New Mexico Public Utility Commission
, the court applied a statute similar to § 40-285(A), construing the terms "sell, lease, rent, purchase or acquire" as "address[ing]
voluntary acts
by a public utility."
¶44 I agree with the majority that if the acquisition here is involuntary, the Commission has no authority to veto the acquisition. But if the public utility and the City agreed to use eminent domain to avoid a contractual liability, the transaction cannot properly be characterized as involuntary. It was, and still is, unclear whether the City intended to condemn Circle City's public utility assets with or without Circle City's agreement. In other words, as far as the Commission knew, what the City and Circle City were really proposing was a voluntary, arms-length transaction to purchase Circle City under the guise of a condemnation. Section 40-285 assigns to the Commission the responsibility and authority to protect consumers' rights where a public utility seeks to voluntarily transfer its assets. The Commission has the power to investigate to meet this responsibility, and its jurisdiction over a public utility is not extinguished until the transfer is complete. Without the power to investigate, there is no way for the Commission to determine whether a transfer is voluntary-and thus subject to the Commission's jurisdiction under § 40-285-or involuntary, which would take the transfer out of the Commission's jurisdiction.
¶45 The upshot of the majority's decision is this: a municipality may evade the Commission's authority to protect consumers' water rights by substituting an entirely consensual contract with an entirely consensual exercise of eminent domain. But "[l]aw reaches past formalism."
Lee v. Weisman
,
Although the eminent domain power is broad, it is not boundless, as the majority observes,
supra
¶ 17.
See
Ariz. Const. art. 2, § 17 ;
Bailey
,
Reference
- Full Case Name
- CITY OF SURPRISE, an Arizona Municipal Corporation, Petitioner, v. ARIZONA CORPORATION COMMISSION; Tom Forese, in His Official Capacity as a Member of the Arizona Corporation Commission; Bob Burns, in His Official Capacity as a Member of the Arizona Corporation Commission; Andy Tobin, in His Official Capacity as a Member of the Arizona Corporation Commission; Boyd W. Dunn, in His Official Capacity as a Member of the Arizona Corporation Commission; And Justin Olson, in His Official Capacity as a Member of the Arizona Corporation Commission, Respondents, and Lake Pleasant 5000, L.L.C., an Arizona Limited Liability Company; Harvard Investments, Inc., a Nevada Corporation; And Circle City Water Company, L.L.C., an Arizona Limited Liability Company, Real Parties in Interest.
- Cited By
- 42 cases
- Status
- Published