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Ex parte East Central Baldwin County Water

Supreme Court of Alabama

June 30, 2017

Ex parte East Central Baldwin County Water, Sewer and Fire Protection Authority In re: East Central Baldwin County Water, Sewer and Fire Protection Authority
v.
Town of Summerdale et al.

         Baldwin Circuit Court, CV-09-901240; Court of Civil Appeals, 2130708

          PETITION FOR WRIT OF CERTIORARI TO THE COURT OF CIVIL APPEALS

          MURDOCK, Justice.

         East Central Baldwin County Water, Sewer and Fire Protection Authority ("ECBC") petitioned this Court for a writ of certiorari seeking review of the decision of the Court of Civil Appeals in East Central Baldwin County Water, Sewer & Fire Protection Authority v. Town of Summerdale, [Ms. 2130708, July 22, 2016] ___ So.3d ___ (Ala. Civ. App. 2016) ("Summerdale III"). In that decision, the Court of Civil Appeals affirmed a partial summary judgment of the Baldwin Circuit Court declaring that two amendments to the certificate of incorporation of ECBC approved by the Baldwin County Commission ("the county commission") -- one in 2002 and the other in 2008 -- were void. We granted the petition; we reverse the decision of the Court of Civil Appeals and remand the cause for further proceedings.

         I. Procedural History

         In October 2009, the Town of Summerdale ("Summerdale") filed a complaint against ECBC and the county commission seeking a judgment declaring that the 2002 and 2008 amendments to ECBC's certificate of incorporation were void.[1] The 2002 amendment expanded ECBC's geographic service area, and the 2008 amendment authorized ECBC to include sewer services in certain parts of its service area. Summerdale sought a declaration that the 2002 amendment and the 2008 amendment were void because the county commission's approval of the amendments was based on incorrect facts set forth in the applications for the amendments. Specifically, Summerdale contended that the application for the 2002 amendment falsely stated that there was no other public water system adequate to serve the expanded geographic service area and that the application for the 2008 amendment falsely stated that there was no other public sewer system adequate to provide sewer services in ECBC's proposed sewer-service area. The City of Robertsdale ("Robertsdale") and Baldwin County Sewer Services, LLC ("BCSS"), also filed similar suits, which the trial court consolidated with Summerdale's suit. (Summerdale, Robertsdale, and BCSS are sometimes hereinafter referred to collectively as "the plaintiffs.")

         In June 2012, the trial court entered a partial summary judgment declaring the 2002 amendment void, which it certified as final under Rule 54(b), Ala. R. Civ. P. On appeal, the Court of Civil Appeals, by order, set aside the Rule 54(b) certification and dismissed the appeal because the partial summary judgment did not address the validity of the 2008 amendment. East Central Baldwin Cty. Water, Sewer & Fire Prot. Auth. v. Town of Summerdale, (No. 2120106, Oct. 23, 2013), ___ So.3d ___ (Ala. Civ. App. 2013) (table). The trial court then entered a new order stating that its partial summary judgment also applied to the 2008 amendment.[2] ECBC appealed.

         On appeal, the Court of Civil Appeals held that the plaintiffs lacked standing to challenge the 2002 amendment and the 2008 amendment. The Court of Civil Appeals dismissed the appeal with instructions to the trial court to set aside the void judgment and to dismiss the complaints to the extent that they challenged the 2002 amendment and the 2008 amendment. East Central Baldwin Cty. Water, Sewer & Fire Prot. Auth. v. Town of Summerdale, [Ms. 2130708, Feb. 27, 2015] ___ So.3d ___ (Ala. Civ. App. 2015) ("Summerdale I"). Summerdale, Robertsdale, and BCSS then petitioned this Court for a writ of certiorari. This Court granted the writ (except as to one claim by Summerdale[3]), and it reversed the judgment of the Court of Civil Appeals and remanded the case for further proceedings. Ex parte Town of Summerdale, [Ms. 1140793, May 13, 2016] ___ So.3d ___ (Ala. 2016) ("Summerdale II").

         On remand, the Court of Civil Appeals addressed the remaining issues presented on appeal. The Court of Civil Appeals affirmed the partial summary judgment, concluding that the county commission's approval of the 2002 amendment and the 2008 amendment was void because the county commission had no authority to approve an application that contained incorrect statements of fact. Specifically, the Court of Civil Appeals held that the application for the 2002 amendment incorrectly stated that there was no adequate public water system in the expanded service area and that the application for the 2008 amendment incorrectly stated that there was no adequate public sewer system in the proposed sewer-service area.

         ECBC filed a petition for a writ of certiorari. This Court granted the petition.[4]

         II. Facts

         The parties stipulated to the following facts, which were set forth in the opinion of the Court of Civil Appeals in Summerdale I:

"'ECBC is an Authority organized under Article 1, Chapter 88, Title 11, Code of Ala. (1975), as amended.
"'....
"'... On or about February 4, 2002, the Board of Directors of ECBC ... adopted a resolution proposing [an] amendment to [ECBC's] Certificate of Incorporation for the purpose of enlarging ECBC's service area to include certain additional territory for the purpose of providing water and fire protection services.
"'... On or about February 5, 2002, the Board of Directors of ECBC filed a written application with [the county commission] describing the proposed amendment and requesting that [the county commission] adopt a resolution declaring that it had reviewed the contents of the application, and after review, had found and determined as a matter of law that the statements contained in the application were true.
"'... On or about February 19, 2002, [the county commission] ... adopted a resolution in which it declared that it had reviewed the contents of said application, and after the review, had found and determined as a matter of law, that the statements contained in said application were true.
"'... On or about March 28, 2002, an Amendment to the Certificate of Incorporation of ECBC was recorded in the Office of the Judge of Probate of Baldwin County, Alabama, Instrument Number: 650808. Said Amendment added additional territory to ECBC's service area.
"'... On or about June 10, 2008, the Board of Directors of ECBC adopted a resolution proposing another amendment to its Certificate of Incorporation to make provision for the operation of a sewer system and requested that its name be changed to East Central Baldwin County Water, Sewer and Fire Protection Authority. The request was for all of the lands in its service area except for those areas already being serviced by BCSS....
"'... On or about June 18, 2008, the Board of Directors of ECBC filed a written application with [the county commission] which described the proposed amendment to the Certificate of Incorporation and requested that [the county commission] adopt a resolution declaring that it had reviewed the contents of the application and, after review, had found and determined as a matter of law that the statements contained in the application were true.
"'... The application states that "there is no public sewer system adequate to serve the territory in which it is proposed that [ECBC] will render sewer service."
"'... [The county commission] approved the application by adopting a resolution on about September 16, 2008.'"

Summerdale I, ___ So.3d at ___ (emphasis added).

         The opinion of the Court of Civil Appeals in Summerdale I also set forth additional facts:

"Further, the evidentiary materials submitted by the parties indicate the following. David Wilson, the mayor of Summerdale, testified in his deposition that, in 2002, Summerdale did not have definite plans to service the ECBC 2002 expanded service area. He testified that whether Summerdale would do so would depend on need and whether it was economically feasible to do so. He testified that Teresa Lucas, the engineer for ECBC, and Roy Dyess, a director for ECBC, had explained to the Summerdale city council before the adoption of the 2002 amendment that, if Summerdale ever annexed portions of the ECBC 2002 expanded service area into the city, Summerdale would have the option to purchase ECBC's system or lay water lines parallel to ECBC's lines. Wilson testified, and the minutes of the February 11, 2002, Summerdale city council meeting reflect, that he repeated Lucas's and Dyess's explanations at the council meeting and that Lucas had not objected to his statement. He testified that he had since learned that the federal statute under which ECBC has borrowed money prohibits parallel lines. John Resmondo, the manager of the public works for Summerdale, also testified that Summerdale could not afford to run water lines in the ECBC 2002 expanded service area.
"Charles Murphy, Robertsdale's mayor, testified in his deposition that he had not known what ECBC's service area was until 2005. He testified that Robertsdale had water lines that were located in the ECBC 2002 expanded service area before the 2002 amendment. Murphy testified that Robertsdale had had over 12 customers in one section of the ECBC 2002 expanded service area since 1994 or 1995, over 6 customers in another section since before 1994, about 10 customers in another section, and over 20 in another section. He testified that, at the time of the 2002 amendment, Robertsdale did not have definitive plans to offer further water services in the ECBC 2002 expanded service area. Since that time, Robertsdale had sought to purchase a portion of ECBC's service area. He testified that, at the time of his deposition, Robertsdale did not intend to provide services in the northern portion of the ECBC 2002 expanded service area unless it could make money there and that he did not expect that to happen in the foreseeable future. He testified, however, that if there were sufficient customers to pay for the cost of the expansion to get the desired rate of return, Robertsdale's system would have adequate capacity to provide water services in the northern portion of the ECBC 2002 expanded service area.
"Murphy testified that ECBC's authority to provide sewer services in its service area would pose a problem because ECBC would try to charge a franchise fee if Robertsdale were to seek to install sewer lines in the ECBC 2002 expanded service area.
"Murphy testified in his affidavit that 'ECBC's service area has been extended to include approximately one third (1/3) of Baldwin County, including the logical and abutting areas of [Robertsdale] and other service providers.' He further testified that, before the 2002 proposed expansion of the water-service area by ECBC, Robertsdale's 'water capacity and service capability quadrupled ECBC's existing water capacity and service capability.' He testified that, '[p]rior to the 2002 expansion request by ECBC, no one from ECBC ... came before a Robertsdale work session or city council meeting with any details of a proposed water expansion area or a map outlining their intentions.' He testified that, had he known the specifics of the proposed plan, he would have requested that the Robertsdale city council oppose the expansion. He testified that 'Lucas[] met with [him] and explained that she worked for ECBC and they were considering putting some water somewhere east of Robertsdale, but [that she had] never produced a map with these exact details. The primary purpose of the meeting ... was that she wanted to introduce herself ... to solicit work from the City Of Robertsdale.' He testified that the first he had learned of the details of the 2002 expansion was in 2005 when he discovered that an area that Robertsdale was trying to provide service to was part of ECBC's service area. He testified that the ECBC 2002 expanded service area included Robertsdale's existing sewer-treatment plant where Robertsdale was already providing water. He testified that, '[p]rior to the 2002 expansion request by ECBC, ... Robertsdale was ready and adequate to provide water service to the [ECBC 2002 expanded service area].' Murphy also testified that, before the 2008 amendment, Robertsdale's 'sewer capacity and service capability dwarfed ECBC's existing sewer capacity and service capability ... [and] was ready and adequate to provide sewer service to the area encompassed by ECBC.'
"Wilson also testified that Summerdale had entered into an agreement on July 27, 2007, with BCSS to provide sewer services. Murphy testified that he did not want ECBC to have sewer authority because, he said, if Robertsdale were to annex any of the areas in the ECBC service area, Robertsdale would have to pay ECBC a franchise fee. Charles Hall, the manager for ECBC, testified that ECBC had borrowed money from the United States Department of Agriculture to construct its water system in the ECBC 2002 expanded service area. Hall testified that ECBC has the capacity to provide water services, but not sewer services, throughout its service area. He testified that ECBC was servicing all the parts of its service area where people had requested water services except a few places where it had not been feasible. He testified that ECBC has a protected service area regarding water services due to its agreement with the United States Department of Agriculture.
"Hall testified that, in 2005, ECBC had contracted with Alabama Utilities Services, Inc. ('AUS'), to provide sewer services in ECBC's service area but that that contract had expired. Hall testified that, on January 1, 2009, ECBC had entered into a franchise agreement with Integra Water Baldwin, LLC, to provide sewer services in ECBC's service area and that that franchise agreement was still in effect. He testified that, before the 2008 amendment, ECBC did not have an agreement with any provider to provide sewer services.
"Lucas testified by deposition that Wilson had dropped his objection to the 2002 amendment at the public hearing before the Summerdale city council. She testified that Summerdale and Robertsdale had been aware of the 2002 amendment and that neither city could adequately provide water for the ECBC 2002 expanded service area because none of them were providing it at the time. Lucas testified that she had met with Murphy before the 2002 amendment and that he had said that Robertsdale could not provide water services to the ECBC 2002 expanded service area. She testified that she had assured Murphy that the expansion would not affect Robertsdale's ability to annex parts of that area and that Murphy, therefore, had had no concerns about the amendment. Lucas testified that there was no demand for sewer services in ECBC's service area.
"Lucas testified in her deposition that the 2002 expansion had taken ECBC's service area up to the city limits of Summerdale and Robertsdale, where those cities stopped providing water and sewer services. Lucas testified that, in July 2003, ECBC had obtained a 'Rural Utility Service Loan' from the United States Department of Agriculture in the amount of $3, 037, 500, and a grant in the amount of $2, 362, 500 for part of the 2002 expansion. She testified that she had known that no city would be able to lay a parallel water line once ECBC obtained a federal loan for its water system.
"In 2008, Robertsdale, Summerdale, and BCSS objected to the county commission's approving ECBC's application regarding the 2008 amendment. Two work sessions and one public hearing were held concerning the application. The minutes from those meetings reflect that Bob Willis, from ECBC, represented to the county commission that ECBC did not intend to actually provide sewer services in its service area and that ECBC did not have any definite plans for contracting to provide sewer services. Willis stated that ECBC did not intend to stop providers from servicing ECBC's service area but that he wanted providers to come to ECBC for oversight so that ECBC could realize revenue. Willis noted that ECBC had not sought to provide sewer services in the few places in its service area where there were existing sewer lines from other providers. Dan Blackburn, a representative of BCSS, stated that BCSS and some municipalities have sewer lines in the ECBC service area and that BCSS had the ability at that time to expand sewer services throughout ECBC's service area. Larry Sutley, a representative of Summerdale, stated that Summerdale and all the other surrounding cities had plans to expand sewer services into the ECBC service area. A representative of Robertsdale stated that Robertsdale had the same plan that ECBC had -- if there is a need, it would provide sewer services in the ECBC service area. He stated that Robertsdale had the capability to do so.
"On November 17, 2008, ECBC demanded that BCSS 'submit to it any and all plans and specifications concerning the placement and construction of sewer lines for which it has received permitting from Baldwin County and, further, that no action be taken by BCSS to construct or put said lines into place until ECBC has had an opportunity to review said plans and specifications.' It also requested that 'any plans for the placement or construction of sewer lines and/or sewer systems within ECBC's service area be submitted to it prior to making permit application with Baldwin County.' Finally, it requested that no 'permits for any portion of a sewer system to be located in our service area be issued by the [county commission] without prior approval from ECBC.'
"ECBC stipulated: 'It is undisputed that at the time ECBC made application to [the county commission] in 2002 to expand its service area that there were a number of small pockets where the City of Robertsdale actually had some water lines in the ground. The total number of ...

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