Interstate Telephone Cooperative, Inc. v. Public Utilities Commission

518 N.W.2d 749, 1994 S.D. LEXIS 88

• Court: South Dakota Supreme Court
• Decided: June 29, 1994
• Docket: 18182
• Status: Published

Opinions

SABERS, Justice (on reassignment).

Telephone Cooperative appeals from the circuit court’s affirmance of the Public Utilities Commission’s decision setting a new service area. We affirm.

FACTS

Interstate Telephone Cooperative (ITC), formerly Brookmgs-Lake Telephone Company, offers telecommunications services within service areas defined by the South Dakota Public Utilities Commission (PUC). The portion of ITC’s service area relevant to this case surrounds, but specifically excludes, the City of Brookings, South Dakota. Brookings Municipal Telephone Company (Telephone Company), Intervenor in this matter, provides telephone services for the City of Brookings (Brookings).

As Brookings grows, it annexes parcels of outlying properties. The record reveals that since 1958, at least fifteen annexations of multiple land parcels have occurred, significantly expanding the Brookings city limits. See SDCL 9^4-1. ITC does not challenge the right of Brookings to annex these properties, but challenges the loss of service area to the Telephone Company. Telephone Company has petitioned the PUC to revise the assigned telephone service areas as the Brookings’ city limits continue to encroach on ITC’s service areas. This has resulted in disputes and litigation between the two entities resulting in several court decisions. See City of Brookings v. Brookings Lake Tel. Co., 85 S.D. 96, 177 N.W.2d 489 (1970) [Brookings I]; Brookings-Lake Tel. Co. v. City of Brookings, 430 N.W.2d 575 (S.D.1988) [Brookings II].

The most recent annexations involve four parcels of land. Parcel One is reserved as a clear landing zone near the airport. No future telephone service is anticipated on that parcel. Parcels Two and Three are small properties, each containing one present ITC customer. Telephone Company claims no service rights to those parcels. The significant property in this dispute is Parcel Four, a large tract on the east side of Brookings, fronting on Interstate 29, and described as “diagonally across” from the Holiday Inn Motel and Convention Center. Brookings purchased this property in February 1991, and annexed the parcel to Brookings in March 1991. Parcel Four, known as the “Industrial Park Property,” is reserved for industrial development and is available for prospective businesses wishing to locate in Brookings.

Following these recent annexations, Telephone Company filed a request with the PUC to revise the service area to transfer the service rights for Parcel Four from ITC to Telephone Company. In a 2-1 decision, the PUC granted Telephone Company’s request. According to the PUC’s Decision and Order, the previous decision of this court, Brookings II, 430 N.W.2d at 575, provided precedent for its decision in this case. Commissioner Laska Schoenfelder dissented with a writing, stating in part that Telephone Company should compensate ITC for the loss of future service rights.

The circuit court affirmed the PUC’s decision. ITC appeals.

STANDARD OF REVIEW

The standard of review is governed by SDCL 1-26-36¹ and 1-26-37. In re Northwestern Bell Tel. Co., 382 N.W.2d 413, 415-16 (S.D.1986). We make the same review of the administrative agency’s decision as did the circuit court, unaided by any presumption that the circuit court’s decision was correct. In re Templeton, 403 N.W.2d 398, 399 (S.D.1987) (citing Northwestern Bell, 382 N.W.2d at 415-16; Raml v. Jenkins Methodist Home, 381 N.W.2d 241, 242-43 (S.D.1986)). Questions of law are fully reviewable, with no deference given to the agency’s conclusions of law. In re State & City Sales Tax Liab. of Quality Serv. Railcar Repair Corp., 437 N.W.2d 209, 210-11 (S.D.1989) (citing Permann v. Dep’t of Labor, 411 N.W.2d 113 (S.D.1987)); see also U.S. West Comm'n., Inc. v. Public Util. Comm’n, 505 N.W.2d 115, 122-23 (S.D.1993). We note that none of the facts of this case are disputed by the parties.

1. Res Judicata

Telephone Company and PUC² urge that the doctrine of res judicata prohibits our consideration of the substantive issues in this case. In particular, it is urged that our affirmance of the agency determination in Brookings II prohibits any change in position by either the PUC or this court. The doctrine of res judicata is not applicable to this situation. The doctrine of res judicata serves to prevent relitigation of issues actually litigated or which could have been raised and determined in a prior action. Black Hills Jewelry Mfg. v. Felco Jewel Indus., Inc., 336 N.W.2d 153, 157 (S.D.1983) (citations omitted). It is true that the same parties are involved in this appeal as were involved in both Brookings I and Brookings II. Nevertheless, this appeal involves different parcels of land, at a later point in time. Although we are considering similar issues, they do not arise from the same set of facts. See, e.g., Bank of Hoven v. Rausch, 449 N.W.2d 263 (S.D.1989) (bringing second action for payment involving the same bank note and debt); Black Hills Jewelry, 336 N.W.2d at 153 (bringing common law trademark infringement action involving the same facts, after earlier statutory trademark infringement case was decided); Butler Bros. v. Mason, 52 S.D. 349, 217 N.W. 510 (S.D.1928) (questioning whether bulk sales act applied to the same transaction). In the present ease, the wrong for which redress is sought is not the same wrong for which redress was sought in the earlier action.³ Melbourn v. Benham, 292 N.W.2d 335, 337-38 (S.D.1980). Especially in the administrative setting, we note that “res judicata is at its best in foreclosing a second determination of issues of fact,” rather than issues of law— as are presented here. 4 Kenneth Culp Davis, Administkative Law Tkeatise § 21:2 at 49 (2d ed. 1983).

2. Precedent

ITC claims the decision of the PUC in this matter was based in part on an error of law, the error being that our decision in Brookings II is controlling precedent in this matter and that the PUC incorrectly felt strictly bound by precedent. At the time of the hearing, the PUC commissioners were informed by general counsel for the PUC that there was “clear precedent” and since “the facts are very similar,” the application of Telephone Company should be granted. When casting his vote, at least one of the PUC commissioners expressed his feeling that there was not “much latitude” and that he was under the impression that the previous stance on similar or related issues could not be altered, although he was disturbed at how easily the certified franchise service territories can be changed, simply by annexation. The PUC’s Conclusion of Law #2 states:

The Commission’s Decision and Order in Docket F-3555 and the Supreme Court’s affirmance of that decision in Brookings-Lake Telephone Company v. City of Brookings, 430 N.W.2d 575 (S.D.1988) provide precedent for its decision in this docket.

This is a clear statement that the “precedent” of the 1988 case served as a central rationale for the PUC’s decision in the present matter. In a letter filed with this court, PUC’s general counsel continues to argue that Brookings II is “determinative” and “controls this appeal.”⁴ Whether an administrative agency is bound by such precedent, embodying the application of stare decisis in the field of administrative law, is important in this decision. This is a question of law, fully reviewable by this court.

In the judicial setting, previously decided questions of law involving similar fact situations often provide precedential value, embodying the concept of stare decisis. Both federal and state courts have repeatedly noted, however, that administrative agencies are not bound by stare decisis as it applies to previous agency decisions. The U.S. Supreme Court has stated that, “An agency’s view of what is in the public interest may change, either with or without a change in circumstances.” Motor Vehicle Mfrs. Ass’n of the United States, Inc., v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, 57, 103 S.Ct. 2856, 2874, 77 L.Ed.2d 443, 466 (1983) (citation omitted). See also City of Alma v. United States, 744 F.Supp. 1546, 1561 (S.D.Ga.1990) (“An agency is not forever bound by its prior determinations, as its view of what is in the public interest may change, even if the circumstances do not.”).

3. Decision

In Brookings II, this court decided that the property right of ITC, if any, surrounding a municipality is a very qualified right, available to ITC only if it is in fact serving a customer in the area to be annexed. In effect, if ITC is not serving a customer in the area to be annexed, it has no absolute property right in that area. See Brookings II, 430 N.W.2d at 578 (“SDCL 49-31-20 limits City’s ability to expand telephone services into annexed areas which are occupied or served by another telephone company-[A]n annexed area is ‘occupied and served by another telecommunications company,’ under SDCL 49-31-20, when a telephone company already serves one or more customers in the annexed area.”). This court fully reviewed SDCL 49-31-20, and concluded that PUC’s interpretation of SDCL 49-31-20 was “consistent with both the legislative intent and the underlying policy considerations of the statutes for balancing the competing interests involved.” 430 N.W.2d at 578. Therefore, for those reasons, this court affirmed the PUC in Brookings II5

In this ease, the majority of the PUC Commissioners chose not to modify their previously affirmed definition of an area “occupied and served by another telecommunications company” under SDCL 49-31-20. Id. In its opinion in this case, the PUC stated its previous decision in Brookings II, and this court’s subsequent affirmance, provided precedent for its conclusion of law—it did not claim it was unequivocally bound by that precedent.

Under different facts and circumstances “consistent with both the legislative intent and the underlying policy considerations of the statutes for balancing the competing interests involved,” the PUC’s definition of an area “occupied and served by another telecommunications company” may have changed. Id. When the facts of a particular case tip the balance of those competing interests, the PUC may choose to modify its definition—and such modification could be appealed to this court. Until the PUC, however, is called, upon to interpret SDCL 49-31-20⁶ and SDCL 49-31-21 as amended, the definition affirmed in Brookings II stands as precedent.

ITC is not serving a customer in the area annexed AND it has no property right in that area. Therefore, this is a matter properly regulated by the PUC and the PUC regulated it properly. The facts of this case are controlled by the precedent of Brookings II and the 2-1 decision of the PUC. We affirm.

MILLER, C.J., and HENDERSON, J., concur. WUEST and AMUNDSON, JJ., dissent.

1 . SDCL 1-26-36 provides:

The court shall give great weight to the findings made and inferences drawn by an agency on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the statutory authority of the agency;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Clearly erroneous in light of the entire evidence in the record; or

(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

A court shall enter its own findings of fact and conclusions of law or may affirm the findings and conclusions entered by the agency as part of its judgment. The circuit court may award costs in the amount and maimer specified in chapter 15-17.

2 . The PUC filed no brief in this matter, relying on Telephone Company to defend the PUC’s decision.

3 . Describing the doctrine of res judicata, one administrative law treatise stated:

In res judicata the first judgment is conclusive, not only on all matters which were actually litigated, but on all matters which could have been litigated. This is because the effect of the first judgment was to extinguish the cause of action. Where the subsequent suit is on a different cause of action, these principles cannot operate.

1 Charles H. Koch, Jr, Administrative Law and Practice § 6.63 at 510 (1985) (emphasis added). Thus, as an example, if subsequent to our decision in Brookings II, Brookings-Lake (now ITC) had brought another action on those same facts but raising a new issue that could have been decided on those facts, res judicata would apply to bar the second action.

4 . Letter from S.D. Public Util. Comm’n (May 3, 1993) (informing the court that PUC would not file a brief and that Telephone Company would defend the PUC decision).

5 . As we stated in Brookings II:

The interpretation offered by Coop would preclude City from any further expansion of telephone service into newly annexed areas, since the entire city is surrounded by Coop's service area. Such an absolute prohibition would be inconsistent with the provisions of SDCL 49-31 and SDCL 9-41.

430 N.W.2d at 578.

6 . SDCL 49-31-20 was rewritten in 1992 and now provides:

No person who owns telecommunications facilities in this state may consolidate with or hold a controlling interest in the stock, bonds or assets of another telecommunications company owning a competing line, switch, exchange or other telecommunications facilities.

A person may file with the commission an application to consolidate or merge telecommunications companies. If the commission finds after an investigation, notice and, with or without, public hearing that the public interest will be benefited by the consolidation or merger, the commission may issue a permit granting the consolidation or merger.