St. Joseph's Utillity Operating Co., LLP v. Alexander Municipal Property Owners' Multipurpose Improvement District No. 43 , 2022 Ark. App. 108 ( 2022 )

Cite as 2022 Ark. App. 108ARKANSAS COURT OF APPEALS
DIVISION I
CV-21-42
No.
Opinion Delivered March 2, 2022
ST. JOSEPH’S UTILITY OPERATING
COMPANY, LLC APPEAL FROM THE SALINE
APPELLANT COUNTY CIRCUIT COURT
[NO. 63CV-12-1817]
V.
HONORABLE GRISHAM A.
ALEXANDER MUNICIPAL PROPERTY PHILLIPS, JUDGE
OWNERS’ MULTIPURPOSE
IMPROVEMENT DISTRICT NO. 43;
ALEXANDER MUNICIPAL PROPERTY
OWNERS’ MULTIPURPOSE
IMPROVEMENT DISTRICT NO. 86;
AND ST. JOSEPH’S GLEN PROPERTY
OWNERS ASSOCIATION
APPELLEES REVERSED AND REMANDED
LARRY D. VAUGHT, Judge
Appellant St. Joseph’s Utility Operating Co., LLC (“SJUOC”), and appellees Alexander
Municipal Property Owners’ Multipurpose Improvement District No. 43 (“District 43”);
Alexander Municipal Property Owners’ Multipurpose Improvement District No. 86 (“District
86”); and St. Joseph’s Glen Property Owners Association (collectively “appellees”), filed cross-
motions for summary judgment claiming ownership of sewer improvements within the
subdivision of St. Joseph’s Glen (“Subdivision”) located in Alexander, Arkansas. The Saline
County Circuit Court entered an order granting summary judgment to appellees and denying
SJUOC’s motion. SJUOC has appealed. We reverse and remand.
A. Jones Investments, LLC (“AJI”), was the original owner and developer of the
Subdivision.1 AJI also owned property adjacent to the Subdivision. In 2004, AJI purchased a
wastewater treatment plant and pumping station to service the Subdivision from Tipton
Environmental International, Inc. (“Tipton”). Tipton installed the sewer treatment plant on
AJI’s property (“Plant Property”) adjacent to the Subdivision in May 2004. AJI paid for the
purchase and installation of the sewer treatment plant.
The Subdivision was developed in seven phases. Between June 2004 and September
2005, AJI transferred title to all the developed lots in Phases 1, 2, 3, and 4; the unplatted
property that would become Phases 5, 6, and 7; and the Plant Property to Josie Company,
LLC (“JC”), a property-development and single-family-dwelling construction company. One
of the members and officers of JC was Michele Stephens.
In December 2005, JC filed the plats for Phases 5 and 6 in the Subdivision and
proceeded with constructing and selling homes on the lots. Between November 2006 and July
2007, by a series of warranty deeds, JC conveyed its interest in the Subdivision to a related
entity, Stephens-Baker Development, Inc. (“SBDI”).2 SBDI filed a replat for Phase 6 and the
final plat for Phase 7 of the Subdivision. In March 2011, JC conveyed the Plant Property to
SBDI by warranty deed. On August 16, 2013, SBDI conveyed the Plant Property to WWTP
1Aaron Jones formed AJI.
2According to Stephens’s affidavit, in 2006, she and her ex-husband formed SBDI,
which was a property-development and a single-family-dwelling construction company. All
the assets of JC were transferred to SBDI. Stephens was a shareholder and officer in SBDI.
2
I, LLC (“WWTP”),3 by warranty deed. And in November 2017, WWTP conveyed the Plant
Property to SJUOC by warranty deed.
District 43 is an improvement district formed by the City of Alexander Ordinance No.
10-04-03 on October 6, 2003. District 43 encompasses the land that represents Phases 1, 2, 3,
4, 5, and 6 of the Subdivision, less a small portion of Phase 6 that would later be included in
District 86. Jones was one of the commissioners of District 43. District 43 was created
for the purpose of constructing and installing facilities for waterworks, recreation,
drainage, gas pipelines, underground trenches and excavations necessary for the
installation of electric and telephone distribution systems, sanitary sewers, streets,
including curbs and gutters, sidewalks, together with facilities related to any of the
foregoing within the district.
Alexander, Ark., Ordinance 10-04-03 (Oct. 6, 2003). The “Notice of Levy” issued by District
43 to property owners on October 8, 2004, in accordance with the ordinance, stated that
District 43 was formed “for the purpose of constructing and installing facilities for
waterworks, recreation, drainage, gas pipelines, underground trenches and excavations
necessary for installation of electric and telephone distributions systems, sanitary sewers . . . .”
District 43 issued three improvement bonds to finance improvements for Phases 1
through 6 of the Subdivision. On May 3, 2004, District 43 issued an improvement bond in the
principal amount of $88,000 to fund improvements in Phase I, cost of issuance, and other
preliminary expenses of the district. On September 29, 2004, District 43 issued an
improvement bond in the principal amount of $152,000 to fund improvements in Phase 2,
costs of issuance, and other preliminary expenses of the district. On August 3, 2005, District
Stephens states in her affidavit that she and her ex-husband formed WWTP in
3
2012 and that she was a member and officer of WWTP.
3
43 issued an improvement bond in the principal amount of $440,000 to fund improvements
in Phases 3–6, costs of issuance, and other preliminary expenses of the district.
District 86 is an improvement district formed by the City of Alexander Ordinance No.
2008-02 on June 16, 2008. District 86 encompasses a small area of Phase 6 and the entirety of
Phase 7 of the Subdivision. District 86 was created
for the purpose of constructing and installing facilities for waterworks, recreation,
drainage, gas pipelines, underground trenches and excavations necessary for the
installation of electric and telephone distribution systems, sanitary sewers, streets,
including curbs and gutters, sidewalks, together with facilities related to any of the
foregoing within the district.
Alexander, Ark., Ordinance 2008-02 (June 16, 2008). Section 4 of the District 86 ordinance
states that “[t]he improvement district being formed shall continue in existence after acquiring,
constructing, and completing the improvement(s) contemplated by the petitioners.” This
section further provides that “[p]ursuant to Ark. Code Ann. § 14-94-128, the improvement
district shall continue to exist for the purpose of preserving, maintaining, and operating the
improvement(s), replacing equipment, paying salaries to employments (sic) and performing
any other functions or services authorized by law.”
On August 15, 2008, District 86 issued an improvement bond in the principal amount
of $147,690 for the purposes of financing the acquisition of public roads, storm water drains,
and other public-infrastructure improvements to benefit the land within District 86 and paying
the first two interest payments on the bonds.
In Jones’s affidavit, he states that proceeds from bonds issued by the districts were
used to pay a portion of the development costs of the Subdivision, including the water and
sewer-collection system. He further states that the districts’ bond proceeds accounted for
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approximately $4,000 of the total development cost of $10,000 per lot. Stephens also states in
her affidavit that some proceeds from bonds issued by the districts were used to complete the
improvements in the Subdivision.
As noted above, in November 2017, WWTP conveyed the Plant Property on which
the sewer treatment plant is located to SJUOC. WWTP also executed a bill of sale on
November 3, 2017, in favor of SJUOC whereby WWTP sold its assets to SJUOC, which
SJUOC alleges in its complaint included, among other things, all of WWTP’s sewer-service
facilities, equipment, lines, plant, pipes, manholes and appurtenances along with all other assets
located in Saline County and used or are useful to operate the sewer system.
Also on November 3, 2017, SBDI issued a general assignment to SJUOC. The general
assignment states that it is being entered into concurrently with SJUOC’s purchase of the Plant
Property “together with improvements located in the Subdivision” and certain other personal
property referenced within the bill of sale between WWTP and SJUOC. The assignment
further states:
In order to assure that [SJUOC] obtains all rights, title, and interest to the assets and
components of the Sewer System . . . including all easement interests that may be held
in [SBDI’s] name, [SBDI] has agreed to transfer to [SJUOC] all right, title, and interest
in and to easements located on the Subdivisions.
....
[SBDI] has agreed to assign to [SJUOC] all of [SBDI’s] right, title and interest in and
to any easements and other real property interests pertaining to or helpful in the
provision of mainline sewer service in and to [the Subdivision] . . . .
The dispute in this case arose when Districts 43 and 86 sought to connect the sewer
improvements within their districts in the Subdivision to the Little Rock Water Reclamation
Authority. The sewer improvements include the sewer pipes, manholes, and appurtenances
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located in the utility easements throughout the Subdivision. On August 31, 2018, SJUOC filed
a declaratory-judgment action seeking a declaration that it is the owner of the sewer system
serving the Subdivision, including the sewer improvements within Districts 43 and 86.
Appellees answered and filed a counterclaim seeking their own declaration of ownership of
the improvements. After SJUOC filed an answer to appellees’ counterclaim, appellees filed a
motion to strike SJUOC’s answer and for default judgment. The parties later filed competing
motions for summary judgment, and on October 6, 2020, the circuit court entered an order
granting appellees’ motion for summary judgment and denying SJUOC’s motion for summary
judgment.4
In its order, relevant to this appeal, the court made three findings: Districts 43 and 86
are the owners of the sewer improvements, SJUOC has no ownership interest in the sewer
improvements, and Districts 43 and 86 are authorized by Arkansas Code Annotated sections
14-94-101 et seq. (Repl. 1998 & Supp. 2021) to carry the existing sewer infrastructure located
within the districts to another system within or without the districts. On appeal, SJUOC argues
that the circuit court erred in granting appellees’ motion for summary judgment and in denying
SJUOC’s motion for summary judgment.5
4The circuit court also denied appellees’ motion to strike answer to counterclaim and
for default judgment. Appellees do not challenge these findings on appeal.
5Normally, we do not review an order denying a summary judgment because we have
held that such an order, being interlocutory, is not appealable. Wilson v. McDaniel, 247 Ark.
1036, 1041, 449 S.W.2d 944, 947 (1970). However, certain interlocutory orders are reviewable
in conjunction with a final judgment; an order granting a summary judgment is a final order
and therefore appealable. Id., 449 S.W.2d at 947. Because both parties claim ownership of the
sewer improvements, it is necessary to discuss the circuit court’s finding that SJUOC failed to
establish as a matter of law that it owned the improvements.
6
Ordinarily, on appeal from a summary-judgment disposition, the evidence is viewed in
the light most favorable to the party resisting the motion, and any doubts and inferences are
resolved against the moving party. St. Francis River Reg’l Water Dist. v. City of Marmaduke, 2021
Ark. App. 305, at 4, 626 S.W.3d 168, 170. However, when the parties agree on the facts, we
simply determine whether the appellee was entitled to judgment as a matter of law. Id., 626
S.W.3d at 170–71. When parties file cross-motions for summary judgment, as was done in this
case, they essentially agree that there are no material facts remaining, and summary judgment
is an appropriate means of resolving the case. Id., 626 S.W.3d at 171. As to issues of law
presented, our review is de novo. Id., 626 S.W.3d at 171.
Further, we review issues of statutory interpretation de novo. Id., 626 S.W.3d at 171.
Our supreme court has directed that the basic rule of statutory construction is to give effect
to the intent of the General Assembly. Id. at 4–5, 626 S.W.3d at 171. In determining the
meaning of a statute, our first rule is to construe it just as it reads, giving the words their
ordinary and usually accepted meaning in common language. Id. at 5, 626 S.W.3d at 171. We
construe the statute so that no word is left void, superfluous, or insignificant, and meaning
and effect are given to every word in the statute if possible. Id. at 5, 626 S.W.3d at 171. When
the language of a statute is plain and unambiguous and conveys a clear and definite meaning,
there is no need to resort to rules of statutory construction. Id., 626 S.W.3d at 171.
SJUOC’s first argument on appeal is that the circuit court erred in granting appellees’
motion for summary judgment because the court found that appellees own the sewer
improvements. The court made the following findings in support of its decision: (1) the
districts’ bonds were used to pay a portion of the construction of the sewer improvements,
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(2) the districts have not conveyed or otherwise transferred their interest in the improvements,
(3) the districts still exist, and (4) the districts are authorized by Arkansas Code Annotated
section 14-94-110 to take certain action with respect to the sewer improvements at issue that
are “consistent with the ownership of the improvements.”
The circuit court’s first three findings are supported by the evidence. Jones, who owned
AJI and was the original developer of the Subdivision, and Stephens, who was a member
and/or officer of JC, SBDI, and WWTP, state in their affidavits that proceeds from bonds
issued by the districts were used to pay a portion of the construction of the sewer system.
There is no evidence in the record that the districts have conveyed or transferred their interest
in the improvements. And it is undisputed that the districts still exist. Section 4 of the District
86 ordinance expressly provides that the improvement district shall continue in existence after
acquiring, constructing, and completing the improvement and that the improvement district
shall continue to exist for the purpose of preserving, maintaining, and operating the
improvements, replacing equipment, paying salaries to employees, and performing any other
functions or services authorized by law.6 While District 43’s ordinance does not contain this
language, there is no evidence on this record that District 43 no longer exists.
6See also Ark. Code Ann. § 14-94-128 (Repl. 1998), which provides:
If the petition for formation of the district provides therefor or the owners of
real property in the district agree thereto, a district shall not cease to exist upon the
acquiring, construction, or completion of the improvement, but it shall continue to
exist for the purpose of preserving, maintaining, and operating the improvement,
replacing equipment, paying salaries to employees, and performing any other functions
or services authorized in this chapter.
8
However, these findings do not establish that the districts own the sewer improvements
as a matter of law. The circuit court did make a fourth finding under this point: “Both District
43 and District 86 are also authorized by statute to take certain action with respect to the sewer
improvements at issue, such authority and action being consistent with the ownership of the
improvements.” The statute is Arkansas Code Annotated section 14-94-110, which provides:
(a) Any district, in furtherance of any of the purposes set forth in § 14-94-105, shall
have the authority to hire managers and other employees and to pay their salaries
incident to the operation and maintenance of any of the improvements authorized by
this chapter. It shall also have the authority to acquire and purchase equipment and
machinery incident to the operation and maintenance of these improvements and shall
be further authorized to do any and all other acts which shall be deemed necessary in
order to purchase, construct, accept as a gift, operate, and maintain any and all
improvements authorized by this chapter.
(b) Any district shall have the power to sell or lease any improvements owned by it
to any nearby municipality or district or other improvement district within the nearby
municipality serving on behalf of the property owners of the district or to any other
person. The district may make contracts with any person, or it may operate any
improvement and may connect any improvement with the improvements, systems, and
transmission lines of any nearby municipality or other district or improvement district
and, with respect to sewers, may carry its sewers to any proper outlet within or without
the district.
Ark. Code Ann. § 14-94-110(a), (b) (Repl. 1998). Construing the statute just as it reads, giving
the words their ordinary and usually accepted meaning in common language, there is no
wording that conveys or grants ownership of improvements to a district on the sole basis that
the district contributed a portion of the installation cost of the improvements.
We acknowledge that the language of the statute provides that the districts can own
improvements: the statute expressly provides authority for the districts to not only purchase
them but to also sell and lease improvements that they own. Ark. Code Ann. § 14-94-110(a),
(b). The statute also grants authority to the districts “to do any and all other acts which shall
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be deemed necessary in order to purchase . . . any and all improvements authorized by this
chapter.” Id.An easement or right-of-way is an interest in land and must be conveyed by deed in
the same manner as land is conveyed. White v. Zini, 39 Ark. App. 83, 87, 838 S.W.2d 370, 372
(1992). Generally, acts necessary to convey real property include the signing of documents. 23
Am. Jur. 2d Deeds § 1 (1965) (defining a deed as a written document that on its face conveys
title or an interest in real property). The districts are authorized by statute to make contracts.
Ark. Code Ann. § 14-94-110(b). But there is no evidence on this record that the districts did
this. They have offered no evidence that they hold easements (or deeds or assignments) for
the improvements and have not established or even alleged that they hold prescriptive
easements to the improvements. Therefore, we hold that the circuit court erred in finding that
as a matter of law the districts own the sewer improvements.
One final note on this point. The districts cite Page v. Highway No. 10 Water Pipe Line
Improvement District No. 1, 201 Ark. 512, 515, 145 S.W.2d 344, 345 (1940), for the proposition
that Arkansas courts have repeatedly held that an improvement district can exercise only such
powers as it is authorized by statute to exercise; that is, those necessarily or fairly implied or
incident to the powers expressly granted. They then contend that to the extent that the
Municipal Property Owners’ Improvement District Law does not expressly state that the
districts own the improvements, “such ownership is necessarily or fairly implied and incident
to the powers expressly granted.”
In Page, the appellees’ ownership of the improvement was not in dispute. Neither was
the appellees’ statutory authority to build the pipeline and then sell it. What the appellants’
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disputed was the appellees’ statutory authority to enter into a contract to sell the pipeline
before it was built. Id. at 515, 145 S.W.2d at 345. Our supreme court held that if the statute
contemplates that the improvement district can employ someone to build the pipeline and
then sell it, it is implied in the statute that the district can enter into a contract to sell it before
it has actually been constructed. Id., 145 S.W.2d at 345.
We decline to conclude that Districts 43 and 86’s statutory authorization to operate,
maintain, sell, and lease the improvements “fairly implies” that they own the improvements
without any other indicia of ownership. Assuming that implication could be made, such a
conclusion cannot be resolved on summary judgment in this case. In Page, there was no dispute
as to the owner of the improvements. The evidence showed that the district alone installed,
or hired a contractor to install, the improvements. In contrast, ownership is the primary issue
in this case. And while there are facts presented that the districts contributed funds to the
construction of the sewer improvements, there are other facts presented that AJI, JC, and
SBDI installed the improvements; paid for the majority of the improvements; and paid for the
maintenance, repairs, and operation of the improvements thereafter. Therefore, we hold that
on this record, it cannot be determined as a matter of law that Districts 43 and 86 own the
sewer improvements.
SJUOC argues on appeal that the circuit court erred in finding that it failed to establish
as a matter of law that it owns the sewer improvements. It contends that its ownership is
established by WWTP’s bill of sale that conveyed SJUOC the improvements. The circuit court
11
rejected this argument on the basis of its finding that the improvements are fixtures and
therefore real property, and a bill of sale does not convey real property. 7
The question of whether particular property constitutes a fixture is sometimes one of
fact only but usually is a mixed question of law and fact. Adamson v. Sims, 85 Ark. App. 278,
284, 151 S.W.3d 23, 26 (2004). A fixture has been defined by our supreme court as property,
originally a personal chattel, that has been affixed to the soil or to a structure legally a part of
the soil and, being affixed or attached to the realty, has become a part of the realty. Id., 151
S.W.3d at 26. It is annexed to the freehold for use in connection therewith and so arranged
that it cannot be removed without injury to the freehold. Id., 151 S.W.3d at 26. The courts
have devised a three-part test to determine whether an article is a fixture: (1) whether it is
annexed to the realty; (2) whether it is appropriate and adapted to the use or purpose of that
part of the realty to which it is connected; (3) whether the party making the annexation
intended to make it permanent. Id., 151 S.W.3d at 26–27. The third factor—the intention of
the party who made the annexation—is considered of primary importance. Id., 151 S.W.3d at
27. The courts use an objective test to arrive at the annexer’s intention. Id., 151 S.W.3d at 27.
In Pledger v. Halvorson, our supreme court stated:
One of the primary factors giving rise to a finding that the affixed item is or is
not a fixture has to do with the relationship of the party to the real estate. If the item
being affixed is owned by the same person who owns the land, then the act of attaching
the item to the realty is generally considered a sufficient basis for an objective observer
to regard the item as having become part of the real estate. If, on the other hand, the
owner of the item affixes it as a tenant to the property owned by the landlord, the
opposite presumption generally arises. The likely intent of the tenant negates the fixture
characterization because the tenant has probably installed the item for his own
7A bill of sale is a written agreement by which one person assigns or transfers his or
her right to or interest in goods or personal chattels to another. Black’s Law Dictionary 164 (6th
ed. 1990).
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enjoyment, convenience or use and will generally be regarded as intending to preserve
rights in the item as personalty.
324 Ark. 302, 306, 921 S.W.2d 576, 578 (1996) (citing 5 Richard R. Powell, The Law of Real
Property ¶ 652[1] (1987)).
We reject SJUOC’s argument that the sewer improvements are not fixtures. All three
fixture elements are satisfied. First, the sewer improvements are annexed to the realty in that
the sewer pipes are buried in the ground, and the manholes are affixed to the land. Second,
the sewer improvements are appropriate and adapted to the use of the real property to which
they are connected in that they serve as an integral part of the sanitary sewer system servicing
the homes located within Subdivision. These sewer improvements cannot be removed or
severed from the realty without extensive, expensive efforts or injury to the real property. And
third, the sewer improvements were affixed by the same entities (AJI, JC, and SBDI) who
owned and developed the real property at the time; therefore, the developers’ acts of attaching
the improvements to the realty can be considered a sufficient basis for an objective observer
to regard the improvement as having become part of the real estate. Pledger, 324 Ark. at 306,
921 S.W.2d at 578.
SJUOC maintains that the evidence shows the districts did not “manifest an intent” to
own or control the sewer improvements. For example, the districts did not install the
improvements; hire contractors to install the improvements; secure the necessary permits to
operate the system; operate the system; perform or pay for any upgrades to, repairs to, general
maintenance to, or replacements of the improvements; or operate, bill for, hook up a customer
to, or address customer concerns about the system. This argument is not well taken. The intent
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of the districts is irrelevant because they were not the entity that affixed the improvements to
the real property.
SJUOC also argues that the uncontested proof demonstrates that the developers of the
Subdivision that purchased and installed the sewer system did not intend for the pipes in the
utility easement to be fixtures. For support, SJUOC cites the affidavits of Jones and Stephens
wherein they state that it was the intent of AJI, JC, and SBDI to retain ownership of the sewer
treatment plant and system servicing the Subdivision. This argument is flawed too. The
ownership intentions of AJI, JC, and SBDI are irrelevant. The only intent that matters is
whether the developers of the Subdivision intended to make the sewer improvements
permanent. And because AJI, JC, and SBDI were the companies that installed the sewer
improvements, there is a sufficient basis for an objective observer to regard the improvements
as having become part of the real estate, i.e., permanent. Accordingly, we affirm the circuit
court’s finding that as a matter of law the sewer improvements are fixtures upon real property
and were not conveyed to SJUOC via the bill of sale.
SJUOC further argues that its ownership interest in the sewer improvements was
established as a matter of law by the November 2017 general assignment that SBDI executed
in favor of SJUOC. SBDI’s general assignment purportedly conveyed its right, title, and
interest in sewer easements in the Subdivision to SJUOC. As an interest in land, an easement
must be conveyed in the same manner as any other interest in realty. White, 39 Ark. App. at
88, 838 S.W.2d at 373. There is no evidence in the record demonstrating that SBDI had an
easement to the sewer improvements to assign to SJUOC; therefore, a question of fact remains
14
on this issue. Accordingly, we affirm the circuit court’s finding that SBDI’s general assignment
failed as a matter of law to convey title to the sewer easement to SJUOC.8
After finding the districts own the sewer improvements that service the Subdivision,
the court then found that the districts are vested with statutory authority, pursuant to section
14-94-110(a) and (b), to connect the sewer improvements to another water authority. Because
we are unable to determine whether the circuit court’s statutory-authorization finding was
contingent upon its ownership finding, we must reverse the finding that the districts are vested
with statutory authority to connect the sewer improvements to other outlets.
Reversed and remanded.
KLAPPENBACH and BROWN, JJ., agree.
Barber Law Firm, PLLC, by: Mark W. Hodge, for appellant.
Rose Law Firm, a Professional Association, by: Peter G. Kumpe and Russell P. Bailey, for
appellees.
8The record reflects that AJI, JC, and SBDI conveyed water-line easements in the
Subdivision to the Arkansas Waterworks and Sanitary Public Facilities Board, an Arkansas
Public Facilities Board, created by Ordinance #87-29 of the Saline County Quorum Court on
September 24, 1987, doing business as Woodland Hills (“WH”) in 2004 (Phase 1), 2005 (Phase
2), 2011 (Phase 3), 2006 (Phase 4), and 2011 (Phases 5–7). Assuming the water lines and sewer
lines are the same and WH had easements to the sewer improvements, there is nothing in the
record showing that WH conveyed the sewer-improvement easements to SBDI so that it could
assign them to SJUOC. There is a statement in Stephens’s affidavit that WH’s sewer plant was
at full capacity and could not accept the sewer outflow from the Subdivision, so the Stephens
Companies retained all ownership of the sewer treatment and the related system, but there is
no evidence in the record to establish that WH conveyed its easements back to AJI, JC, or
SBDI.
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