City of Surprise v. acc/lake Pleasant

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
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.
No. CV-18-0137-SA
Filed March 28, 2019
Special Action from the Arizona Corporation Commission
No. W-03510A-18-0095
JURISDICTION ACCEPTED; RELIEF GRANTED IN PART;
ORDER MODIFIED
COUNSEL:
Andrew M. Jacobs (argued), Timothy J. Sabo, Snell & Wilmer L.L.P.,
Phoenix; and Robert Wingo, Surprise City Attorney, Surprise, Attorneys for
City of Surprise
Andy M. Kvesic (argued), Robin R. Mitchell, P. Robyn Poole, Arizona
Corporation Commission Legal Division, Phoenix, Attorneys for Arizona
Corporation Commission, Commissioner Tom Forese, Commissioner Bob
CITY OF SURPRISE v. ACC/LAKE PLEASANT, et al.
Opinion of the Court
Burns, Commissioner Andy Tobin, Commissioner Boyd W. Dunn, and
Commissioner Justin Olson
Dale S. Zeitlin (argued), Zeitlin & Zeitlin, P.C., Phoenix; and Garry D. Hays,
Law Offices of Garry Hays, Phoenix, Attorneys for Lake Pleasant 5000,
L.L.C. and Harvard Investments, Inc.
Meghan H. Grabel (argued), Osborn Maledon, P.A., Phoenix, Attorney for
Circle City Water Company, L.L.C.
Christina Estes-Werther, General Counsel, League of Arizona Cities and
Towns, Phoenix, Attorney for Amicus Curiae League of Arizona Cities and
Towns
VICE CHIEF JUSTICE BRUTINEL authored the opinion of the Court, in
which CHIEF JUSTICE BALES and JUSTICES TIMMER, GOULD, LOPEZ
and PELANDER (RETIRED) joined. JUSTICE BOLICK filed an opinion
concurring in part and dissenting in part.
______________
VICE CHIEF JUSTICE BRUTINEL, 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
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Opinion of the Court
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, 233 Ariz. 119, 121 ¶ 6
(2013). Special action jurisdiction is appropriate in cases that involve
“purely legal questions of statewide importance” or that require an
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Opinion of the Court
“immediate and final resolution,” id. at 121 ¶¶ 7–8, and particularly
appropriate when a defendant “has proceeded or is threatening to proceed
without or in excess of jurisdiction or legal authority,” Ariz. R.P. Spec. Act.
3(b). But special action jurisdiction is not appropriate when parties have an
“equally plain, speedy, and adequate remedy by appeal.” Id. 1(a).
¶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, 171 Ariz. 286, 288
(1992) (granting special action review because “this court can best serve the
public interest and principles of judicial economy by resolving fundamental
legal questions regarding the Commission’s constitutional power at this
time”).
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,
192 Ariz. 65, 71 ¶ 24 (1998). Whether to deny standing in Arizona is a matter
of “prudential or judicial restraint.” Dobson, 233 Ariz. at 122 ¶ 9 (quoting
Armory Park Neighborhood Ass’n v. Episcopal Cmty. Servs. in Ariz., 148 Ariz.
1, 6 (1985)). Our courts exercise restraint to ensure they “refrain from
issuing advisory opinions, that cases be ripe for decision and not moot, and
that issues be fully developed between true adversaries.” Bennett v.
Brownlow, 211 Ariz. 193, 196 ¶ 16 (2005).
¶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
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Opinion of the Court
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 id.
§ 12-1842 (“This article is declared to be remedial; its purpose is to settle
and to afford relief from uncertainty and insecurity with respect to rights,
status and other legal relations; and is to be liberally construed and
administered.”); Dobson, 233 Ariz. at 122 ¶ 11; cf. Merrill v. Phelps, 52 Ariz.
526, 529 (1938) (noting that action under the declaratory judgment statute
was “the simplest and the best way” of resolving conflicting claims
regarding statutory and constitutional authority of public officials). The
Commission’s indirect assertion of regulatory authority over the City is
sufficient injury to provide standing.
C. Standard of Review
¶10 We review the interpretation of statutes de novo, seeking to
effectuate the legislature’s intent. Stambaugh v. Killian, 242 Ariz. 508, 509 ¶ 7
(2017). If the statute is subject to only one reasonable interpretation, we
apply it without further analysis. Id. To make this determination, we look
to the statute’s words and context. Id. If the statute is susceptible to more
than one reasonable interpretation, we consider secondary interpretive
principles such as “the context of the statute, the language used, the subject
matter, its historical background, its effects and consequences, and its spirit
and purpose.” State ex rel. Polk v. Campbell, 239 Ariz. 405, 406 ¶ 5 (2016)
(quoting Ariz. Citizens Clean Elections Comm’n v. Brain, 234 Ariz. 322, 325
¶ 11 (2014)).
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
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Opinion of the Court
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, 910 P.2d 906, 909 ¶ 10, 910 ¶ 14 (N.M. 1996)
(rejecting the public utility commission’s assumption of jurisdiction over
the transfer of utilities from a public utility to a city, reasoning that the
statute granting power to the commission contained terms—“sell, lease,
rent, purchase or acquire”—addressing only voluntary acts). Even a so-
called “friendly” condemnation is ultimately not voluntary because Circle
City has no choice but to accede to the taking of its assets pursuant to court
order. See A.R.S. §§ 12-1114(1), -1114(6), -1116(A); cf. United Water N.M.,
Inc., 910 P.2d at 910 ¶15 (stating “a contract or agreement for sale or
purchase is a consensual, voluntary relationship” because “both a seller and
a buyer have the right to select with whom each will contract, and neither
can be forced to agree” (emphasis added) (quotation omitted)). And even if
the parties can reach agreement, the City’s exercise of the power of eminent
domain requires it to pay just compensation for the assets condemned.
Ariz. Const. art. 2, § 17; Salt River Project Agric. Improvement & Power Dist. v.
Miller Park, L.L.C., 218 Ariz. 246, 249 ¶ 11 (2008). Agreeing on just
compensation rather than litigating the issue makes the condemnation no
less coercive.
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Opinion of the Court
¶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, 194 Ariz. 314, 330 ¶ 81 (1999); see also Antonin Scalia &
Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 107 (2012).
Noscitur a sociis—a word’s meaning cannot be determined in isolation, but
must be drawn from the context in which it is used—is appropriate when
several terms are associated in a context suggesting the terms have some
quality in common. See Ariz. Dep’t of Water Res. v. McClennen, 238 Ariz. 371,
376 ¶ 26 (2015); see also Scalia & Garner, supra, at 195–96.
¶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,
51 Ariz. 280, 283 (1938) (“We think that no plainer language could have been
used by the makers of the Constitution to state that the constitutional
powers conferred upon the Corporation Commission, in regard to the
government and regulation of public utilities, were not intended to, and did
not, include those owned and operated by municipal corporations of any
character.”). The Commission conceded before this Court that § 40-285(A)
neither authorizes it “to participate in the condemnation proceedings” nor
requires the City to obtain Commission permission to commence a
condemnation. Nevertheless, it argues the statute allows it to order Circle
City to provide information regarding its transfer of assets to the City so
that the Commission itself can determine whether the transfer falls under
its authority.
¶16 But the power to solicit information is nowhere conferred by
the text of § 40-285(A), nor did the Commission merely solicit information.
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Opinion of the Court
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, 51 Ariz. at 283. The Commission’s argument is therefore
inconsistent with the statute’s language, the Arizona Constitution, and the
Commission’s own recognition that it may not regulate municipal utilities.
¶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, 189 Ariz. 147, 151 (App. 1997) (citing Am. Cable Television, Inc. v.
Ariz. Pub. Serv. Co., 143 Ariz. 273, 277 (App. 1983)). The constitutional
requirement that public property generally be taken only for “public use”
already prevents the City from “looting” any public utilities’ assets to the
detriment of the public. See Ariz. Const. art. 2, § 17; City of Phoenix v.
Superior Court, 137 Ariz. 409, 411 (1983) (“[G]enerally no condemning body
may exercise the power of eminent domain unless the property which is to
be taken is to be put to a ‘public use.’”). Applying
§ 40-285(A) to condemnations would render this constitutional guarantee
wholly superfluous.
¶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., 143 Ariz. at 278 (finding § 40-285 consistent with § 851 of
California’s Public Utility Code). In People ex rel. Public Utilities Commission
v. City of Fresno, the California Court of Appeal recognized that “eminent
domain is an attribute of sovereignty and must not be restricted by judicial
interpretation in the absence of a clear legislative intent to so restrict.” 62
Cal. Rptr. 79, 84 (Ct. App. 1967). The statute in City of Fresno did not
“precisely mention the taking of such property by a public entity through
the exercise of the power of eminent domain.” Id. As such, the statute
permitted only a “very weak inference[]” that condemnation proceedings
required commission approval. Id. The court found this weak inference
untenable in light of a more specific statutory provision that
“[u]nequivocally empower[ed] a city to condemn public utility property
even though it ha[d] already been appropriated to a public use,” id., and
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Opinion of the Court
concluded that the general statute was therefore not a restriction on the city,
nor did it prevent the city from exercising its right of eminent domain, id.
at 87.
¶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 . . . .”); id. § 9-516(B) (“The city or town which seeks to acquire
the facilities of a public service corporation shall have the right to do so
under eminent domain.”). We decline to interpret § 40-285 as granting the
Commission power over condemnations, thereby restricting the City’s
power of eminent domain, without clear legislative intent to do so.
¶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, 64 Ariz. 129,
139 (1946).
¶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.
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¶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., No. CV-18-0080,
2019 WL 905192, at *3 ¶ 15 (Ariz. Feb. 25, 2019), not on law.
¶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, 175 Ariz. 549, 568
(1993) (noting that when “[t]he record does not show” a fact, “we will not
speculate” about it).
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¶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.
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JUSTICE BOLICK, CONCURRING IN PART AND IN THE RESULT
BOLICK, J., concurring in part and dissenting 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, 225 Ariz. 586, 589 ¶ 14 (2010). The majority
suggests that, because several other statutes deal with the issue of
condemnations generally, it is necessary to rewrite A.R.S. § 40-285(A) for it
to have any effect in this circumstance. See supra ¶¶ 19, 24, 28. To the
contrary, the eminent domain statutes and the Commission’s authorizing
statute can both apply here.
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
¶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, 243 Ariz. 299, 302 ¶ 11
(2017) (applying general terms canon and noting that courts should not
create “ad hoc exceptions” to otherwise broad, general terms (quoting
Scalia & Garner, supra, at 101)). Moreover, while the majority invokes the
noscitur a sociis canon, it rejects where the canon leads. The noscitur a sociis
canon suggests “words grouped in a list should be given related
meanings.” Scalia & Garner, supra, at 195 (quoting Third Nat’l Bank in
Nashville v. Impac Ltd., 432 U.S. 312, 322 (1977)); see also Estate of Braden ex rel.
Gabaldon v. State, 228 Ariz. 323, 326 ¶ 13 (2011) (applying noscitur a sociis
canon). “Otherwise dispose of,” like the terms that precede it, connotes a
voluntary transfer, as the majority recognizes, supra ¶¶ 11–14. Thus, where
eminent domain is the product of voluntary agreement, § 40-285(A) applies
and the Commission has jurisdiction over the voluntary transfer.
¶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
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JUSTICE BOLICK, Concurring in Part and Dissenting in Part
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, 239 Ariz. 121, 125
¶¶ 26–27 (App. 2016) (relying on Attorney General opinion in interpreting
statute in absence of relevant case law (citing Ruiz v. Hull, 191 Ariz. 441, 449
¶ 28 (1998))). The opinion observes that although § 40-285’s main purpose
is to prevent looting of assets, the statute also ensures that “the rights of the
customers of the utility will be adequately protected.” Op. Ariz. Att’y Gen.
62-7, supra, at 12; see also Babe Invs. v. Ariz. Corp. Comm’n, 189 Ariz. 147, 151
(App. 1997) (“The legislature enacted A.R.S. section 40-285 to prevent
‘looting’ of a utility’s facilities and impairment of service to the public.”
(emphasis added) (citation omitted)). Consequently, when a municipality
seeks to acquire the assets of a public utility “by negotiation[,] . . . [b]efore
[the seller-utility] can become a party to a valid agreement it must secure
permission of the Corporation Commission under A.R.S. § 40-285.” Op.
Ariz. Att’y Gen. 62-7, supra, at 11–12.
¶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
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
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, 160 Ariz. 285, 286
(App. 1988) (“[T]he Commission should examine all the evidence available
to it to determine whether or not the transfer is detrimental to the public
interest.”). It appears that is exactly the role the Commission was
attempting to fill in this case.
¶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., 189 Ariz. at 151 (noting § 40-285
“prevent[s] . . . impairment of service to the public”). And the “public use”
requirement of eminent domain, Bailey v. Myers, 206 Ariz. 224, 230 ¶ 23
(App. 2003), is not a substitute for the public-interest objectives served by
§ 40-285(A). Reading the statutes to permit a municipality and a water
company to extinguish contracted water services by agreeing to proceed
through eminent domain rather than a sale of assets would defeat the
important consumer protection purpose of § 40-285(A). See James P. Paul
Water Co. v. Ariz. Corp. Comm’n, 137 Ariz. 426, 429 (1983) (“[T]he public
interest is the controlling factor in decisions concerning service of water by
water companies.”).
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
¶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., 641 N.E.2d 1368, 1372 (N.Y. 1994);
see also St. Joe Corp. v. McIver, 875 So. 2d 375, 378 n.1 (Fla. 2004) (“In a friendly
condemnation, the State agrees to condemn property that the owner desires
for the State to condemn, and the State buys the property at an arms-length
negotiated price.”). The concept of friendly condemnation encompasses
not only situations where the parties agree to the terms of condemnation,
which happens frequently, but also the far more troubling situation where
the parties agree to invoke eminent domain to divest the Commission of its
duty and authority to protect utility consumers’ water rights. In the latter
situation, the transaction as a whole is entirely voluntary (even if some terms
are disputed) yet clothed in the façade of a government power that
otherwise is by its nature coercive.1 Indeed, a friendly condemnation bears
the indicia of a voluntary sale.
¶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, 176 Ariz. 190, 193 (1993) (emphasis
added). The verb “appropriate” commonly means “to take without
permission.” Appropriate, Webster’s Third New International Dictionary
(3d ed. 2002). If the exercise of the power of eminent domain means to take
private property without permission, then a voluntary agreement by the
parties to use eminent domain simply cannot be viewed as a true
condemnation.
¶43 A decision by the New Mexico Supreme Court that I, like the
majority, deem highly persuasive, appears to be the only decision to
1 Although the eminent domain power is broad, it is not boundless, as the
majority observes, supra ¶ 17. See Ariz. Const. art. 2, § 17; Bailey, 206 Ariz.
at 230 ¶ 23. Just as a court should look behind the government’s bare
assertion that a particular exercise of eminent domain is for a public use, so
also under the statutes should it determine whether the exercise of eminent
domain is truly involuntary in this context.
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
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.” 910 P.2d 906, 909–10 (N.M.
1996). The court held that a “forced condemnation of a utility by a
municipality is not a voluntary, affirmative act of that utility,” and therefore
the public utility commission had no authority over it. Id. In contrast to the
apparent situation here, the utility in that case vigorously contested the
condemnation. Id. at 911. In fact, the court premised its decision entirely
on the involuntary nature of the transaction, and expressly reserved “the
issue of a utility agreeing with a municipality to submit willingly to a
condemnation action in lieu of a consensual sale simply to avoid”
commission approval. Id. at 909 n.4. Like the New Mexico Supreme Court,
we should not foreclose a case where the use of eminent domain may
constitute a wholly voluntary transaction.
¶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.
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CITY OF SURPRISE V. ACC/LAKE PLEASANT et al.
JUSTICE BOLICK, Concurring in Part and Dissenting in Part
Weisman, 505 U.S. 577, 595 (1992). The majority errs in holding that an
exercise of a municipality’s eminent domain power categorically
evaporates the Commission’s consumer protection authority even if the
transaction is voluntary and designed to eliminate valuable water rights.
The parties vigorously dispute whether those rights exist, and the record
does not yet illuminate whether the transfer of assets here is truly
involuntary. That is because the City launched a preemptive strike to
foreclose the Commission’s inquiry into that very question. The majority
vindicates the City’s actions by short-circuiting the Commission’s
jurisdiction over the public utility which otherwise would have continued
until the acquisition was consummated. With great respect to my
colleagues, I dissent from the majority’s decision to prematurely terminate
the Commission’s inquiry.
18