Untitled California Attorney General Opinion ( 1997 )

TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL
State of California
DANIEL E. LUNGREN
Attorney General
______________________________________
OPINION :
: No. 97-801
of :
: October 17, 1997
DANIEL E. LUNGREN :
Attorney General :
:
ANTHONY Da VIGO :
Deputy Attorney General :
:
______________________________________________________________________
MESA CONSOLIDATED WATER DISTRICT has requested this office to grant leave to
sue in quo warranto upon the following question of fact or law:
Did the "de facto annexation" of an area known as Santa Ana Heights by the Irvine Ranch
Water District Water Service Company, following its merger with the Santa Ana Heights Water Company
which had previously served that area, without the approval of the Local Agency Formation Commission of
Orange County and without a certificate of public convenience and necessity issued by the Public Utilities
Commission, violate state law?
CONCLUSION
Granting leave to sue in quo warranto would not serve the public interest in determining
whether the "de facto annexation" of an area known as Santa Ana Heights by the Irvine Ranch Water District
Water Service Company, following its merger with the Santa Ana Heights Water Company which had
previously served that area, without the approval of the Local Agency Formation Commission of Orange
County and without a certificate of public convenience and necessity issued by the Public Utilities
Commission violated state law.
PARTIES
MESA CONSOLIDATED WATER DISTRICT ("Mesa") contends that for the purpose of
providing water service, IRVINE RANCH WATER DISTRICT ("District"), IRVINE RANCH WATER
DISTRICT WATER SERVICE COMPANY, LLC ("Company"), et al., have unlawfully effected a "de facto
annexation" of an area known as Santa Ana Heights, previously served by SANTA ANA HEIGHTS WATER
COMPANY ("Santa Ana").
MATERIAL FACTS
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MATERIAL FACTS
Prior to June 20, 1997, Santa Ana, a mutual water company, provided water service to an
area known as Santa Ana Heights, consisting of portions of the cities of Costa Mesa and Newport Beach, as
well as portions of unincorporated territory in Orange County. Mesa, a county water district in Orange
County, holds stock in Santa Ana and, pursuant to contract, has provided maintenance and operation of the
Santa Ana Heights water system, meter reading, reservoir storage, and interconnections to the area
continuously for more than 20 years.
On June 20, 1997, a supermajority of Santa Ana shareholders tendered their shares to the
District and voted to merge with the Company, a new limited liability company, owned and controlled by the
District. As a result of the merger and dissolution of Santa Ana, including the cancellation of its outstanding
shares, the Company has completed its assumption and takeover of water services to Santa Ana Heights.
Mesa, relator herein, contends that the assumption and takeover of Santa Ana's services by
the Company constitutes an unauthorized "de facto annexation" in that neither the District nor the Company
secured the requisite approval of the merger by the Local Agency Formation Commission of Orange County
("LAFCO"), in violation of Government Code section 56133, or the requisite certificate of public
convenience and necessity from the Public Utilities Commission ("Commission"), in violation of Public
Utilities Code section 1001.
ANALYSIS
We first examine whether the disputed extension of services by a water company into an
area previously served by another water company, after the companies had merged, without the approval of
LAFCO or the Commission, is cognizable in an action in the nature of quo warranto. Code of Civil Procedure
section 803 Footnote No. 1 provides in part:
"An action may be brought by the attorney general, in the name of the people of this
state, . . upon a complaint of a private party, . . against any corporation . . . which usurps,
intrudes into, or unlawfully holds or exercises any franchise, within this state. . . ."
In its common currency, the terms "franchise" is used synonymously with the terms "right" or "privilege." (6
Ops.Cal.Atty.Gen. 37, 38 (1945); compare People v. Volcano Canyon Toll-Road Co. (1893) 100 Cal. 87
[franchise to collect tolls on public highway]; People ex rel. Adams v. Oakland (1891) 92 Cal. 611 [power of
municipal corporation to tax inhabitants not within its territorial limits]; People ex rel. Attorney General v.
Dashaway Assn. (1890) 84 Cal. 114 [misapplication of corporate funds to purposes not within franchise];
People ex rel. Beltner v. City of Riverside (1885) 66 Cal. 288 [franchise to operate as a municipal
corporation]; Citizens Utilities Co. v. Superior Court (1976) 56 Cal. App. 3d 399 [franchise to conduct water
system]; Gurtz v. City of San Bruno (1935) 8 Cal. App. 2d 399 [authority of a city to enter into contract for
collection and disposal of garbage]; 6 Ops.Cal.Atty.Gen. 37, supra, [privilege of county housing authority to
operate in city].)
While it would appear that a section 803 action in the nature of quo warranto would resolve
the "de facto annexation" dispute in question, we note that such disputes are normally the subject of lawsuits
not requiring the Attorney General's participation. With respect to the issue of whether LAFCO must approve
the transaction between the District, Company, and Santa Ana, we look to provisions of the Cortese-Knox
Local Government Reorganization Act of 1985 (Gov. Code, §§ 56000-57385) governing the authority of
LAFCOs. Government Code section 56133 provides:
"A city or district may provide new or extended services by contract or agreement
outside its jurisdictional boundaries only if it first requests and receives written approval from
th i i i th ff t d t "
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the commission in the affected county. . . ."
Government Code section 56103 states:
"An action to determine the validity of any change of organization or reorganization
completed pursuant to this division shall be brought pursuant to [sections 860-870] of the Code
of Civil Procedure."
Government Code section 860 in turn provides:
"A public agency may upon the existence of any matter which under any other law is
authorized to be determined pursuant to this chapter, and for 60 days thereafter, bring an action
in the superior court of the county in which the principal office of the public agency is located to
determine the validity of such matter. The action shall be in the nature of a proceeding in rem."
Government Code section 863 additionally states:
"If no proceedings have been brought by the public agency pursuant to this chapter,
any interested person may bring an action within the time and in the court specified by Section
860 to determine the validity of such matter. . . ."
Hence, we find that Government Code sections 860 and 863 provide a legal remedy to challenge the merger
in question without the necessity of the Attorney General's granting of leave to sue in quo warranto.
With respect to the alleged requirement of Commission approval of the merger between
Santa Ana and the Company, we note the provisions of Public Utilities Code section 1001:
"No . . . water corporation . . . shall begin the construction of . . . a line, plant, or
system, or of any extension thereof, without having first obtained from the commission a
certificate that the present or future public convenience and necessity require or will require such
construction. . . ."
A violation of Public Utilities Code section 1001 may be presented to the Commission for resolution under
the terms of Public Utilities Code section 1702:
"Complaint may be made . . . by any corporation or person . . . by written petition or
complaint, setting forth any act or thing done or omitted to be done by any public utility, in
violation or claimed to be in violation, of any provision of law. . . ."
Accordingly, a remedy is available for challenging the absence of a certificate of public convenience and
necessity from the Commission that, again, does not require the Attorney General's granting of leave to sue in
quo warranto.
From the pleadings filed before us, it appears that both administrative and judicial
proceedings raising essentially the same issues of fact and law as herein presented, which are still pending,
have been initiated by one or more of the interested parties to this proceeding. Where such alternatives have
been undertaken, we do not deem it within the public interest to try the same issues in multiple proceedings.
(75 Ops.Cal.Atty.Gen. 70, 74 (1992); 74 Ops.Cal.Atty.Gen. 31, 32 (1991); 12 Ops.Cal. Atty.Gen. 340, 342
(1949).)
Accordingly, the application for leave to sue in quo warranto is denied.
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Footnote No. 1
All references hereafter to the Code of Civil Procedure are by section number only.
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