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Natural Gas Service Co. v. Serv-Yu Cooperative, Inc.

Supreme Court of Arizona

January 24, 1950

NATURAL GAS SERVICE CO. et al.
v.
SERV-YU COOPERATIVE, Inc.

Judgment reversed and case remanded with instructions.

Stanley A. Jerman and Harold L. Jerman, Walter Roche, of Phoenix, for appellant Natural Gas Service Co.

Knapp, Boyle, Bilby & Thompson, Arthur Henderson, of Tucson, for appellant El Paso Natural Gas Co.

Evo De Concini, Attorney General, Perry M. Ling, Chief Assistant Attorney General, for appellant Corporation Commission.

Dougherty, Chandler & Connor, of Phoenix, for appellee.

Stanford, Justice. La Prade, C. J., and Udall and Phelps, JJ., concurring.Note. Justice DE CONCINI, whose name appears on the briefs as Attorney General, did not participate in this opinion.

OPINION

Stanford, Justice.

Page 678

[69 Ariz. 329] Appellee, plaintiff below, brought its action in the Superior Court praying for a declaratory judgment asking: (1) that the court adjudicate and determine the status of the plaintiff; (2) that the court adjudicate and determine that the plaintiff is not legally bound to secure a certificate of public convenience and necessity before purchasing natural gas of the El Paso Natural Gas Company; (3) that the court adjudicate and determine that the plaintiff is not a public service corporation; and (4) that the court adjudicate and determine that plaintiff is not subject to the jurisdiction of the Corporation Commission of the State of Arizona.

Appellee was incorporated by a group of farmers owning land in Pinal County in and about township 7 south, range 8 east, and townsite 7 south, range 7 east of the G. & S. R. B. & M. The land in question is in a farming area in what is known as [69 Ariz. 330] the "Casa Grande Valley," Pinal County, Arizona, and extends along and in the vicinity of the main pipe line of the El Paso Natural Gas Company, one of the appellants herein, and is more specifically described as land located some fifteen miles south of Coolidge, Arizona, and approximately three miles north of Eloy, Arizona. It was incorporated on the 4th day of June, 1946 (articles were filed September, 1947) for the purposes, as in its articles stated, "of manufacturing, purchasing, acquiring and accumulating natural gas and to transmit, distribute, furnish, sell and dispose of such gas to its members only for all purposes." The members of appellee have constructed private pipe lines, some of which cross public highways.

At the time this action was filed the appellant, Natural Gas Service Company, a duly certificated public service corporation, owned and maintained pipe lines in the general area as that of the individual members of the plaintiff corporation. The appellant Natural Gas Service Company has been serving the towns of Superior, Florence, Coolidge, Casa Grande and Eloy, as well as individual farmers in Pinal County who use natural gas for pumping irrigation purposes and holds a franchise issued by the Board of Supervisors of Pinal County to cross all public highways in said county. Members of the appellee have been and now are being served by Natural Gas Service Company with natural gas for pumping for irrigation purposes from approximately five taps.

The appellee alleged that before the institution of this action it made application to the El Paso Natural Gas Company for the purpose of purchasing natural gas to be sold and delivered to its members only; that the appellant El Paso Natural Gas Company at first refused to sell said gas to appellee until it secured a certificate of public convenience and necessity from the Corporation Commission of Arizona, but while this case was on appeal to this court the appellant El Paso Natural Gas Company stipulated with appellee that it would serve appellee under the rules and regulations of the Federal Power Commission if it is held by this court that appellee is entitled to distribute gas to its members without securing a certificate of convenience and necessity. Appellant El Paso Natural Gas Company also agreed that if this court required a certificate of convenience and necessity, it would serve appellee gas under

Page 679

the rules and regulations of the Corporation Commission of Arizona. The Corporation Commission holds that in order that the appellee may operate or serve its members, that it must first obtain a certificate of public convenience and necessity.

This case was tried to the court without a jury. Judgment was rendered for appellee, from which judgment all appellants joined in the notice of appeal.

Among the findings of fact are the following:

"VIII. That the Serv-Yu Gas Cooperative, Inc. has never in anywise held itself out as a public service corporation or made [69 Ariz. 331] any offer or offers to serve the public or any others than its members; that it has never by any solicitation, declaration, act or any other means, indicated any intention of serving the public generally, or of serving any others than the members of the Cooperative.

"IX. That the Serv-Yu Gas Cooperative, Inc., before the institution of this action, made application to the El Paso Natural Gas Company for the purpose of purchasing natural gas from said company to be sold and distributed, as alleged aforesaid, to the members only of this Cooperative; that the El Paso Natural Gas Company has refused, and continues to refuse, to sell natural gas to this Cooperative, and will continue to refuse to sell gas to this Cooperative until this Cooperative either (a) secures a Certificate of Public Convenience and Necessity from the Corporation Commission of the State of Arizona, or, (b) until such time as it is judicially determined by a Court of competent jurisdiction that plaintiff is not subject to the jurisdiction of the Corporation Commission of the State of Arizona, and is not required to secure such a Certificate; * * *"

"XI. That the Corporation Commission of the State of Arizona, acting in this capacity by the members of said Commission, asserts regulatory jurisdiction over said Serv-Yu Gas Cooperative, Inc. and has insisted and now insists that, in order to operate or serve its members, the Serv-Yu Gas Cooperative, Inc. must obtain a Certificate of Public Convenience and Necessity from said Commission. * *"

Appellant El Paso Natural Gas Company submitted the two following assignments of error:

"1. The Court erred in denying defendant El Paso Company's Motion to Dismiss directed to the complaint, and in denying the said defendant's Motion to Dismiss made at the conclusion of the plaintiff's case, and renewed at the conclusion of all of the evidence, for the reason that the complaint and the evidence adduced at the trial of the action thereunder, failed to present to the Court below any actual justiciable controversy between the plaintiff and the El Paso Company defendant within the terms and the meaning of Article VII, Chapter 27, Arizona Code Annotated 1939.

"2. The Court erred in making its Finding of Fact XIII and in making its conclusion of Law III, and in entering its judgment against the appellant-defendant, El Paso Natural Gas Company, for the reason that there was no evidence whatsoever to support said finding of fact and said conclusion of law based thereon and said judgment rendered, providing or tending to prove in any way that there existed at any time an actual justiciable controversy between plaintiff, appellee, and said appellant within the terms and the meaning of Article VI, Chapter 27, Arizona Code Annotated 1939."

[69 Ariz. 332] The appellant Natural Gas Service Company submitted the following four assignments of error:

"1. That the Court erred in its Conclusion of Law No. I in holding that plaintiff is a duly organized nonprofit corporation, organized and existing under and by virtue of the laws of the State of Arizona, and duly authorized and qualified to accomplish its corporate purposes and perform its corporate functions for the reason that there is no law, either statutory or constitutional, in Arizona, under which plaintiff could or is authorized to incorporate to carry out its corporate purposes.

"II. That the Court erred in its Conclusion of Law No. II in holding that the plaintiff corporation, if duly authorized to exist under the laws of the State of Arizona) is not subject to the regulatory powers

Page 680

of the Arizona Corporation Commission and is not required to obtain a certificate of Convenience and Necessity for the reason that plaintiff corporation, by virtue of its proposed objectives, is in substance a public utility and is subject to the control and jurisdiction of the Corporation Commission.

"III. That the Court erred in its Finding of Fact Nos. I and IV in finding that the plaintiff corporation will serve natural gas at cost and is a nonprofit corporation for the reason that the evidence does not support such a finding.

"IV. That the Court erred in its Finding of Fact No. VIII in finding the plaintiff corporation has never indicated any intention of serving the public generally, for, in fact, the evidence shows that the plaintiff corporation must take in any member who can comply with the bylaws and can, and will, deny admission and service to no person or groups who comply therewith."

The appellant Corporation Commission of Arizona submitted the following assignment of error: "The lower court erred in determining that appellee is not a public service corporation, is not subject to supervision, regulation and control by the Arizona Corporation Commission and is not required to obtain a certificate of convenience ...


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