IN THE SUPREME COURT OF MISSISSIPPI

NO. 97-CA-00867-SCT

CITY OF GULFPORT

v.

ORANGE GROVE UTILITIES, INC.

AND HANCOCK BANK

ON MOTION FOR REHEARING

DATE OF JUDGMENT: 06/24/97

TRIAL JUDGE: HON. MICHAEL L. CARR, JR.

COURT FROM WHICH

APPEALED:

HARRISON COUNTY SPECIAL COURT OF EMINENT

DOMAIN

ATTORNEYS FOR

APPELLANT:

GARY WHITE

JAMES B. WRIGHT, JR.

ATTORNEY FOR APPELLEES: J. ADRIAN SMITH

NATURE OF THE CASE: CIVIL - EMINENT DOMAIN

DISPOSITION: AFFIRMED IN PART; REVERSED IN PART; AND

REMANDED - 3/31/1999

MOTION FOR REHEARING

FILED:

1/14/99

MANDATE ISSUED: 4/15/99

EN BANC.

MILLS, JUSTICE, FOR THE COURT:

¶1. The motion for rehearing is granted, the original opinion is withdrawn, and this opinion is substituted

therefor.

STATEMENT OF THE CASE

¶2. The City of Gulfport filed an eminent domain action to condemn the water and sewage facilities and

certificates of public convenience and necessity of Orange Grove Utilities on October 6, 1996. Orange

Grove then filed a motion to dismiss. The trial court granted Orange Grove's motion to dismiss and held that

the City of Gulfport was without authority to condemn any of the Orange Grove certificated areas or

facilities lying beyond the City of Gulfport's corporate limits. The Court also held that the City of Gulfport
was first required to cancel Orange Grove Utilities' certificate of public convenience and necessity in order

to acquire the certificated area within the city limits. The city submits that the ruling of the trial judge was

erroneous and specifically assigns the following issues as error:

I. WHETHER THE TRIAL COURT ERRED IN HOLDING THAT WATER AND

SEWER UTILITIES ARE NOT EXCLUDED FROM THE CANCELLATION

REQUIREMENTS OF MISS. CODE ANN. § § 77-3-17 & 77-3-21.

II. WHETHER THE TRIAL COURT ERRED IN HOLDING THE CITY WAS WITHOUT

AUTHORITY TO CONDEMN ORANGE GROVE'S FACILITIES AND CERTIFICATES

BEYOND THE CITY LIMITS.

III. WHETHER THE TRIAL COURT ERRED IN HOLDING THAT THE CITY'S

ACQUISITION OF A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY

IS A PREREQUISITE FOR CONDEMNATION OF ORANGE GROVE'S CERTIFICATE

OUTSIDE THE CITY LIMITS.

IV. WHETHER THE TRIAL COURT ERRED IN ALLOWING ORANGE GROVE TO

OFFER EVIDENCE AND TESTIMONY ON ITS MOTION TO DISMISS OVER THE

OBJECTION OF THE CITY.

V. WHETHER THE TRIAL COURT ERRED IN FAILING TO ADVISE THE CITY

THAT THE MOTION TO DISMISS WAS BEING CONVERTED TO A MOTION FOR

SUMMARY JUDGMENT AND FAILING TO ALLOW THE CITY ADEQUATE TIME

TO RESPOND.

VI. WHETHER THE TRIAL COURT ERRED IN GRANTING ORANGE GROVE'S

MOTION TO DISMISS.

STATEMENT OF THE FACTS

¶3. In 1991, the Harrison County Chancery Court granted the annexation of a portion of land north of

Interstate 10 to the City of Gulfport. The annexation brought a large part of the Orange Grove Utilities, Inc.

certificated area within the City of Gulfport. The remaining Orange Grove area is within five miles of the city

limits. Due to this annexation, the City of Gulfport filed an eminent domain action to condemn Orange

Grove's water and sewage facilities and certificates of public convenience and necessity. Orange Grove is a

private utility and has a certificate of public convenience and necessity from the Public Service Commission.

¶4. In the annexation proceeding, the Harrison County Chancery Court found that because of septic tanks

in the area, "A potential health hazard exists within the PAA (proposed annexation area) which poses a

threat to the health of the residents of both the PAA and the City." Orange Grove was not a party to the

annexation and the utility claims there were no findings by the court which involved public necessity for the

condemnation. Both parties agree that if the city were to acquire only a portion of the Orange Grove utility

area, several residents in the area outside the corporate limits of Gulfport would be left without supply

facilities or pumping stations. This would leave these citizens without water or sewer service. The city

appeals from the Harrison County Chancery Court's decision to dismiss the condemnation proceedings.

I. WHETHER THE TRIAL COURT ERRED IN HOLDING THAT WATER AND
SEWER UTILITIES ARE NOT EXCLUDED FROM THE CANCELLATION

REQUIREMENTS OF MISS. CODE ANN. § § 77-3-17 & 77-3-21.

¶5. The trial court ruled :

Section 77-3-17 requires the City of Gulfport to first cancel Orange Grove Utilities' certificate before

seeking to take by eminent domain the Orange Grove Utilities, Inc. certificated area within the city

limits.

The city contends this ruling was error and that according to the same statutes water and sewer are

excluded from this requirement. Orange Grove submits that a reading of Miss. Code Ann. § 77-3-17 will

make it clear that water and sewer are included in the cancellation requirement.

¶6. Section 77-3-17 states in pertinent part:

Any municipality shall have the right to acquire by purchase, negotiation or condemnation the facilities

of any utility that is now or may hereafter be located within the corporate limits of such municipality;

provided, however, prior to any municipality exercising the right of eminent domain as provided

herein, the commission shall determine that the certificate of public convenience and necessity granted

to the utility pursuant to Section 77-3-13 for the service area wherein such facilities are located, shall

be cancelled as provided in Section 77-3-21.

Miss. Code Ann. § 77-3-17 (1991).

¶7. Section 77-3-21 provides:

Prior to any municipality exercising the power of eminent domain as provided in Section 77-3-17, the

commission shall determine that the certificate of public convenience and necessity granted to the

utility pursuant to Section 77-3-13 for the service area wherein such facilities are located, shall be

cancelled as provided in this section. Nothing in this paragraph shall be construed to include

service for water and sewage.

Miss. Code Ann § 77-3-21 (Supp. 1998)(emphasis added). From a plain reading, it is abundantly clear

that contrary to Orange Grove's supposition, water and sewage utilities are excluded from the cancellation

requirement.

¶8. Orange Grove opines that because the last sentence of § 77-3-21 was changed in 1992 to read

"nothing in this paragraph" from its' earlier reading "nothing in this section," this must mean the paragraph is

not applicable to § 77-3-17. However, § 77-3-17 specifically includes by reference the language in § 77-

3-21. We fail to see how the change of the word "section" to "paragraph"affects interpretation. Orange

Grove states, "The last sentence of Miss. Code Ann. § 77-3-21(Rev. 1991) is confusing and appears

almost as an afterthought." This sentence has been reviewed by the legislature on at least two occasions; it

was added in 1987 and the wording was changed in 1992. The last sentence is not an afterthought and

must be interpreted along with the rest of the statute. Interpreted according to plain meaning, the

cancellation requirement is not applicable to water and sewage utilities. The Public Service Commission

shared this conclusion and issued an order in this case on November 17, 1997. The PSC found Miss.

Code Ann. Section 77-3-21 specifically excludes water and sewer utilities. Therefore, the commission

found the city is not required to cancel the certificate in issue for areas within the city limits and newly
annexed areas.

¶9. In addition to the construction argument, Orange Grove contends that if we interpret Sections 77-3-17

et. seq. to exclude water and sewage, the statutes are unconstitutional. When a party challenges the

constitutionality of a Mississippi statute, we have held that party must prove unconstitutionality beyond a

reasonable doubt. Cities of Oxford, Carthage, Louisville, Starkville, and Tupelo v. Northeast

Mississippi Elec. Power Ass'n, 704 So.2d 59, 65 (Miss. 1997).

We adhere here to the rule that one who assails a legislative enactment must overcome the strong

presumption of validity and such assailant must prove his conclusions affirmatively, and clearly

establish it beyond a reasonable doubt. All doubts must be resolved in favor of validity of a statute. If

possible, a court should construe statutes so as to render them constitutional rather than

unconstitutional if the statute under attack does not clearly and apparently conflict with organic law

after first resolving all doubts in favor of validity.

Id. (quoting Loden v. Mississippi Pub. Serv. Comm'n, 279 So.2d 636, 640 (Miss. 1973)).

¶10. Orange Grove submits a reading excluding water and sewage utilities constitutes a "willful deprivation

of [Orange Grove's] valuable property rights without due process of law and would constitute an official

policy of prejudicial favoritism by denial of equal protection of the laws of the Constitution of the State of

Mississippi and the laws of the Constitution of the United States." Orange Grove argues there is no rational

basis to protect other utilities in a condemnation suit and not provide the same protection to water and

sewage utilities.

¶11. The city argues authority exists for the disproportionate treatment of water and sewer utilities. We have

held that water and sewage are health hazards and should be treated differently from gas, electric, and

communication utilities. Hinds-Rankin Metropolitan Water & Sewer Ass'n v. Mississippi Pub. Serv.

Comm'n, 263 So.2d 546, 554 (Miss. 1972). We stated, "Discrimination is not illegal where there is

between the classes some natural and substantial difference germane to the subject and purposes of the

legislation." Id. at 553(quoting 16A C.J.S. Constitutional Law § 490 at 249-251(1956)). The city contends

this is a rational reason for the distinction drawn by the statute and submits the reason is exemplified in its

situation.

¶12. The city cites the chancery court's findings in the prior annexation proceeding which noted a potential

health hazard existing within the PAA (proposed annexation area). The chancery court found septic tanks in

the Orange Grove area pose a threat to the health of residents in the city and the PAA. The city suggests

other rational reasons for treating water and sewer utilities differently. For health and safety, the city submits

the cancellation requirement should not apply to sewer utilities since municipalities have the power to

connect citizens to a central sewer system while a private sewer company might not. Finally, the city is

unable to provide fire protection without control of the water system. The city suggests this is a rational

reason to treat water utilities differently with regard to the cancellation requirement.

¶13. We find the arguments of the city persuasive, and since any doubts should be resolved in favor of the

state, the trial court's ruling was in error. According to a plain meaning interpretation of the statute, water

and sewer utilities are excluded from the eminent domain cancellation requirement as prescribed by Miss.

Code Ann. Sections 77-3-13 et. seq.
II. WHETHER THE TRIAL COURT ERRED IN HOLDING THE CITY WAS WITHOUT

AUTHORITY TO CONDEMN ORANGE GROVE'S FACILITIES AND CERTIFICATES

BEYOND THE CITY LIMITS.

¶14. The city asserts that its power of eminent domain is derived from the general powers given

municipalities in sections 21-27-23 et. seq. since water and sewer are excluded from the specific provisions

set out in chapter 77 of the code. The city submits that since a municipality is authorized to service areas up

to five miles beyond the city limits, it should be able to condemn facilities that are within five miles of the city

limits. Miss. Code Ann. § 21-27-39 (1990).

¶15. To the contrary, Orange Grove asserts Sections 21-27-23 et. seq. convey no authority for a

municipality to condemn property. If there is any authority, Orange Grove submits the more specific statutes

set out in Chapter 77 include water and sewer utilities and control over these general statutes. Orange

Grove asserts that interpretation of the statutes as the city suggests is absurd since the specific statutes

would provide more protection for utility companies within the city limits than the general statutes would

provide for utilities outside. Since the city's interest is much stronger within the city limits, Orange Grove

asserts this is nonsensical.

¶16. A review of the legislative history has yielded no simple answers. There is a dearth of legislative history

on this topic. The bill approving the amendments to these statutes was vetoed by Governor William A.

Allain in 1987, and the bill was passed after both the house and senate voted to override. However, Gov.

Allain's concerns centered around stripping municipalities of eminent domain rights by enacting new

safeguards for private utilities. There was no reference to the exemption of water and sewer utilities in his

comments to the Mississippi Senate nor were there any comments from the House or Senate members on

the topic. See 1987 Mississippi Senate Journal, Vol I Regular Session, 1118. Orange Grove is incorrect.

Section 21-27-23 does give municipalities the authority to condemn property necessary for creation and

maintenance of public utilities. As the title of the section suggests, this part of the code gives municipalities

the authority to acquire property in order to create, maintain, and operate public utility service. Miss. Code

Ann. § 21-27-23 (f) (Supp. 1998).

¶17. If the property is acquired through eminent domain, this section requires the exercise be consistent

with Sections 11-27-1 through 11-27-51. Id. In this regard, we have held, "municipal utility statutes are

subordinate to contrary provisions of the 1956 Act if it is clear that the legislature so intended." Cities of

Oxford, Carthage, Louisville, Starkville & Tupelo,704 So.2d at 69 (citing Mississippi Pub. Serv.

Comm'n v. City of Jackson, 328 So.2d 656 (Miss. 1976)). The provisions of the 1956 Act include the

Municipally Owned Utilities Act and the Municipal Electric Power Plant Law of 1936 (§ § 21-27-11, et.

seq. and 77-5-401, et. seq.). Cities of Oxford, Louisville, Starkville & Tupelo, 704 So.2d at 69.

¶18. It was not the legislature's intent to subordinate the 1987 amendments (including sections 77-3-17 et.

seq.) to the 1956 Act. It is clear and has been discussed supra that Section 77-3-21 exempted water and

sewer utilities from the amendments requiring cancellation of the existing utility's certificate of public

convenience and necessity; however, Section 77-3-17 provides:

Any municipality shall have the right to acquire by purchase, negotiation or condemnation the facilities

of any utility that is now or may hereafter be located within the corporate limits of such municipality.

Miss. Code Ann. § 77-3-17(1991)(emphasis added).
¶19. The fact that a part of this same statute excludes water and sewer utilities from the cancellation

requirement does not mean the language of section 77-3-17 is subordinate to the 1956 Act. Therefore, this

more specific statute controls over the general grant of authority found in Sections 21-27-11 et. seq. The

plain meaning of this statute leaves no doubt that the city has no authority to condemn areas lying outside its

corporate limits. The PSC agreed with this decision in its order in this case. It found:

Mississippi Code Annotated, § 77-3-17, which provides that a municipality may have the right to a

condemnation of facilities which are now or may hereafter be located within the corporate limits of a

municipality refers to the time of enactment, and not that a municipality may condemn facilities outside

the corporate limits prior to annexation of said area. Therefore, the Commission finds that the City

does not have standing to bring an action for persons located outside the City's corporate limits.

There was no error in the lower court's finding that the City of Gulfport was without standing to bring a

condemnation action for the area located outside its corporate limits. This assignment is without merit.

III. WHETHER THE TRIAL COURT ERRED IN HOLDING THAT THE CITY'S

ACQUISITION OF A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY

IS A PREREQUISITE FOR CONDEMNATION OF ORANGE GROVE'S CERTIFICATE

OUTSIDE THE CITY LIMITS.

¶20. Because we have already addressed the City's inability to condemn areas outside the city limits in the

second assignment of error, this assignment is moot.

IV. WHETHER THE TRIAL COURT ERRED IN ALLOWING ORANGE GROVE TO

OFFER EVIDENCE AND TESTIMONY ON ITS MOTION TO DISMISS OVER THE

OBJECTION OF THE CITY.

V. WHETHER THE TRIAL COURT ERRED IN FAILING TO ADVISE THE CITY

THAT THE MOTION TO DISMISS WAS BEING CONVERTED TO A MOTION FOR

SUMMARY JUDGMENT AND FAILING TO ALLOW THE CITY ADEQUATE TIME

TO RESPOND.

VI. WHETHER THE TRIAL COURT ERRED IN GRANTING ORANGE GROVE'S

MOTION TO DISMISS.

¶21. This Court has ruled that when the trial court considers matters beyond the mere pleadings, a motion

to dismiss is ordinarily converted to a motion for summary judgment. M.R.C.P. 56. These two motions are

"interchangeable and readily convertible procedural vehicles." Bias v. Bias, 493 So.2d 342, 344 n.2 (Miss.

1986). When a trial judge converts a motion to dismiss to a motion for summary judgment by review of

matters outside the pleadings, the judge must give the parties involved ten days notice. Palmer v. Biloxi

Reg'l Med. Ctr., 649 So.2d 179, 183 (Miss. 1994). To avoid prejudice, it is necessary to strictly enforce

this rule and give the parties a chance to present material in opposition to the motion. Id. It is apparent that

the original motion to dismiss was converted by the court into a motion for summary judgment and the city

should have been allowed more time.

¶22. In this case, a witness was allowed to testify and bring a chart which she explained. Upon objection,

the trial judge overruled counsel's request for additional time to prepare and present evidence consistent
with a motion for summary judgment. The court stated: "Well, you've got one hour. Give them the name of

your witnesses, and where they are, and when he can get them in here, and I'll give him time to talk to them

before they take the witness stand." Counsel again objected that he would not have time to find his

witnesses. He stated opposing counsel should have filed an affidavit prior to the hearing. The court replied,

"I feel like an hour is reasonable." The lower court erred in allowing Orange Grove to introduce testimony

and evidence outside the pleadings in a motion to dismiss or in the alternative failing to give notice to

opposing counsel of the decision to treat the motion as one for summary judgment. Due to this error and our

discussion in assignments I and II, this matter is remanded to the trial court for consistent proceedings.

CONCLUSION

¶23. The trial court erred in its decision that water and sewer utilities are subject to the cancellation

requirements of Section 77-3-21. In addition, errors were committed in granting the Motion to Dismiss.

Therefore, the judgment below is affirmed in part and reversed in part, and this cause is remanded for

proceedings consistent with this opinion.

¶24. AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

PRATHER, C.J., SULLIVAN AND PITTMAN, P.JJ., BANKS, McRAE, SMITH AND

WALLER, JJ., CONCUR.