OS Farms, Inc. v. New Mexico American Water Co.

2009 NMCA 113, 218 P.3d 1269, 147 N.M. 221
CourtNew Mexico Court of Appeals
DecidedAugust 19, 2009
Docket28,353
StatusPublished
Cited by7 cases

This text of 2009 NMCA 113 (OS Farms, Inc. v. New Mexico American Water Co.) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
OS Farms, Inc. v. New Mexico American Water Co., 2009 NMCA 113, 218 P.3d 1269, 147 N.M. 221 (N.M. Ct. App. 2009).

Opinion

OPINION

SUTIN, Judge.

{1} In this action, we determine whether the New Mexico Public Regulation Commission (the Commission) has the jurisdiction to void a public utility’s sale of real property when the sale required but did not receive prior approval by the Commission pursuant to NMSA 1978, Section 62-6-12(A)(4) (1989). The district court ruled that the Commission did not have jurisdiction to void the sale transaction and prohibited it from deciding the validity of the consummated sale and its accompanying deeds. The Commission appeals and contends that the Commission had exclusive jurisdiction over the sale transaction, including making determinations that would render the sale transaction void.

{2} We hold that the Commission has exclusive jurisdiction under Section 62-6-12(A) to determine whether the sale was required to be approved. We further hold that because that issue has not been adjudicated by the Commission, because it is uncertain from a legal standpoint what will occur once this determination is made, and because the record is inadequately developed as to whether the Commission or the district court is to address whether the sale transaction is void, the issues of jurisdiction and action to void the sale transaction and deeds are premature and not ripe for our review. Accordingly, we remand this case for further proceedings.

BACKGROUND

{3} In 2004, OS Farms, Inc. (Farms) pui'chased 5,325 acx’es of land, located in Cuny and Roosevelt Counties, New Mexico (the property), from New Mexico American Water Co., Inc. (American), a public water utility regulated by the Commission. After Farms and American signed a purchase agreement covering the property and Farms paid the purchase price, American executed and delivered deeds to Farms. American reserved or attempted to reserve all water rights to its own use. The deeds were recorded. We refer to this transaction involving the property as “the sale of the property.” Farms has continuously occupied and farmed the property and has paid the related property taxes.

{4} In May 2006, American filed an advice notice and proposed revised rates with the Commission pursuant to which American sought to adjust its service rates for its Clovis and Edgewood, New Mexico, service districts. A hearing examiner considered the rate-related issues, and in February 2007, issued a 114-page recommended decision, two pages of which were devoted to the sale of the property. The hearing examiner stated the following:

[American] purchased the ... property to acquire water rights, existing irrigation wells and equipment, and potential locations for additional wells for its Clovis district. Recognizing that the land had potential value for dry-land agricultural uses, [American] decided the land should be sold, reserving the necessary easements and water rights. [American] argued that the sale would reduce utility plant investment and decrease the cost of maintaining the property. [American] asserted that, at the time, it believed that Commission approval was only required to sell regulated assets or assets deemed used and useful in its utility operations. Since dry land was not used and useful, [American] did not believe that Commission approval was required.

{5} The hearing examiner noted that Commission staff asserted that “prior Commission approval was required for the sale of the ... [property] ... under ... Section 62-6-12(A)(4).” Section 62-6-12 reads, in pertinent part, as follows:

Acquisitions, consolidations, etc.; consent of commission.
A. With the prior express authorization of the commission, but not otherwise:
(4) any public utility may sell, lease, rent, purchase^] or acquire any public utility plant or property constituting an operating unit or system or any substantial part thereof; provided, however, that this paragraph shall not be construed to require authorization for transactions in the ordinary course of business.
B. Any consolidation, merger, acquisition, transaction resulting in control or exercise of control, or other transaction in contravention of this section without prior authorization of the commission shall be void and of no effect.

{6} The hearing examiner found that substantial evidence supported “the conclusion that this property and its accompanying water rights were purchased to provide service to the Clovis District, and that the unauthorized sale of this property potentially affects water service in [American’s] Clovis district.” The hearing examiner also determined that “[t]he sale of the property was not in the ordinary course of business.” The hearing examiner concluded that American failed to obtain the Commission’s prior approval of the sale and that pursuant to Section 62-6-12, the sale was void and should be declared void by the Commission.

{7} In June 2007, the Commission entered a final order partially adopting the hearing examiner’s recommended decision. The Commission stated:

[American] states that it entered into the sale in order to reduce its utility plant investment and decrease the cost of maintaining the property. [American] initially believed that Commission approval was not required for the sale. However, because it now appears that [Farms] may be able to appropriate limited amounts of water for [Farms’] livestock that is now on the property, [American] now agrees with Staff that prior Commission approval was required for the sale of land ... under [Section] 62-6-12(A)(4).

The Commission declined, however, to either decide the issue of prior approval or to declare the sale void without first providing Farms with notice and an opportunity to respond. The Commission required American to file a petition for a declaratory order requesting the Commission to determine whether the sale of the property was void under Section 62-6-12(B) and to serve Farms with the petition.

{8} In August 2007, American filed a petition with the Commission to declare the sale of the property void under Section 62-6-12. Farms filed a motion to intervene for the limited purpose of moving to dismiss for lack of jurisdiction. The Commission permitted Farms to intervene. In an order denying Farms’ motion to dismiss, the Commission described Farms’ contentions and American’s response as follows. Farms contended in its motion that because the Commission’s jurisdiction extended only to public utilities, the Commission had no jurisdiction over Farms or to affect Farms’ property rights. Farms argued that, under case precedent, the Commission had no power to adjudicate purely private matters between a utility and an individual and that the only action the Commission could take under American’s petition was to assess a penalty against American pursuant to NMSA 1978, Section 62-12-4 (1993), which permits penalties for failure to comply with the Public Utility Act. American responded to Farms’ motion and argued that the Commission was not attempting to assert jurisdiction over Farms and that Farms voluntarily participated by filing its motion to intervene.

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Cite This Page — Counsel Stack

Bluebook (online)
2009 NMCA 113, 218 P.3d 1269, 147 N.M. 221, Counsel Stack Legal Research, https://law.counselstack.com/opinion/os-farms-inc-v-new-mexico-american-water-co-nmctapp-2009.