### IN THE COURT OF APP EALS OF TENNESS EE AT JAC KSON A PR IL 18, 200 7 S es sio n
DY ERS BUR G SU BUR BAN CO NS OLIDA TED UT ILITY D ISTR ICT

v. TH E CIT Y OF DYERSBURG, ET AL 

### .
Direc t Appeal from the Chancer y Court for DyerCounty No. 06C139 J. Steve n Staf ford, Ch ancellor

No. W2006-01704-C OA-R3-C V - F iled Jun e 29, 2007

Th is a pp e a l in vo lve s a

dis pu te be tw e e n a

c ity and a ru ra l w a te r a sso c ia tio n a s to wh ic h e nti ty is entitled to provi d e wa t er s ervic e to a pr oposed subdivision. The rura l association has a define d
se rv ic e dis tr ic t in

wh ic h it is e mpo we re d to pr ov ide wate r se rv ic e , and mos t of the dis pu te d p ro pe rt

y lies within the rural a ssociation’s boundar ies. Howe ver, the city annexed the propose d subdivision and now claims that it has the exclusive rig ht to provide wate r ser vice to the pr operty . The rur al association arg ues t hat 7 U.S .C. § 1926(b), the Anti-Curtailment Provision of the Consolidated Fa rm and Rural De velopment Act, pr otects its service are a and pr ohibit s t h e city from providing water service to the proper

ty . The trial c ourt g rante d summary judgme n t to the city , finding the fe dera l statute inapplicable . For

the following rea sons, we af firm in part, re verse in par t and re mand for fu rt he r p ro c e e din g s.

Tenn. R. App . P . 3; Appeal as of Right; Judgme nt of th e Chancer y Court Affi rm ed in Par t, Reve rsed in Par t and Rem anded

A L AN E. H I G H ERS , J. , d e li v e r e d th e o p in io no f th e c o u rt, in

w h ic h W. F RAN K C RAW FORD , P.J ., W.S ., and H OL L Y M. K I RBY , J ., joined.

J ohn W. P almer, Jason L adon Hudson, Dy ersbur g , TN, for Appellant

J ohn M. L annom, J ames Sampson Wilder, I I I , Dy ersbur g , TN, for Appellee

Donald L ee Schole s, Nashville, TN, for Amicus Curiae , T e nn e sse e As so c ia tio n o f U til ity Di str ic ts-2- OP IN ION

I. F A C TS & P R OC EDU R A L H I S T ORY Dy ersbur g Suburban Consolidated Utility District (“D SCUD”) is a public utilit y district that provides water service to a rea s of Dy er County , Tenne ssee. DSCUD’s district se rvice boundarie s were e sta bli sh e d b y

19 61 Te nn . Pr iv. Ac ts c h. 28 7. Th e City of Dy e rs burg(“ the City” ) i s a municipal corpor ation also locate d in Dy er County . The City provides water an d sewe r ser vice within and bey ond its city limit s.
On June 22 , 200 5, Pe nn wa rd s A sso c ia te s, L .P. , ( “ the De ve lop e r” ) p ur c ha se d a pp ro xima te ly 73 acr es of undevelope d far mland west of the c ity

limit s of Dy ersbur g , which is desig nated a s Parce l 97 on the c ounty

ta x ass e sso r’ s ma

p. Th e so uth e rnmos t tw o- thi rd s o f t he p arcel li es w ith in DSC UD ’s dis tr ic t se rv ic e bo un da ri e s. Th e De ve lop e r ha s p ro po se d to su bd ivi de the pr op e rt

y int o a 18 2 -l o t s u b d i v i sion known as Cree k Wood S ubdivision. On J uly 18, 2005, the City

approve d
ann e xati on

of the e nti re pa

rc e l, an d the re le va

nt or din anc e state d: “Wate r fo r dom e sti c is c ur re ntl y provided. The rea fter the annexation new lines will be extended in ac corda nce w ith the established policies of the City

of Dy ersbur g .”

On Octobe r 13, 2005, Mr. B en Edwa rds, co- owner

of the D ev el o p er, attended DSCUD’s Commi ssioners’ mee ting a nd reque sted that DSCUD provide water service to the proposed Cre ek Wood S ubdivision. S pecif ical ly , h e r e q

u e s te d that DSCUD install a water line c onnectingDSCUD’s closest exist ing w ater line along Hig hway 104 to the southern boundary of the subdivision. The ne w water line would have to c ross over a nother fa rm, but Mr. Edwar ds proposed that the line c ould be installed along a sew er e aseme nt th at t h e De veloper was obtaining acr oss the far m. The DSCUD Commi ssioners unanimously passed a motion to i nstall the water line to the s ubdivision at DSC UD’s expense. Appar ently , the Deve loper subsequently abandone d its plan to obta in water from DSCUD, and the City

installed a water line to the northe rn boundar y o f t h e p ro perty

with intentions of pr ov idi ngwate r t o th e e nti re su bd ivi sio n, inc lud ingthe are a wi thi n D SCU D’ s ser

vic e bo un da

ri e s. DSCUD filed the prese nt action ag ainst the City and the De veloper

on Marc h 29, 2006, reque sting
a de c larator

y jud g me nt re g ard ing its bo un da ri e s and its ri g ht t o s up ply wate r w ith in i ts b ound a ri e s, and it soug ht an injunction preve nting the City from installing water lines within DSC UD’s se rvice
are a and othe rwise inter fer ing w ith DSC UD’s se rvice rig hts.

Th e City and the De ve lop e r f

ile d moti on s to dismi ss t

he c omp la int

fo r f a ilure to s ta te a

c la im,
asser ting that whe n the City

annexed t h e p ro p erty , it ga ined the exclusive rig ht to provide wate r service to the are a. B oth defe ndants also claimed that any disputes betwee n an anne x ing municipality

and an e x isting utility

district must be arbitrate d pursuant to Tenn. Code A nn. § 6-51- 111. I n response , DSCUD claimed that 7 U.S.C. § 1926(b) protec ted its service are a fr om any e nc ro a c hme nt b y

an a nn e xing mun ic ipa lity

be c a us e DSC UD is a

ru ral wat e r a sso c ia tio n w ith outstanding de bts to Rural Development, a n ag ency of the United States De partment of A g riculture.-3-

B oth pa rt ie s su bmi tte d a ff

ida vit s i n su pp ort of th e ir

argume nts , a

nd the tr ia l c ourt

tr e a te d b oth defe ndants’ motions to dism iss as motions for summary judgme nt.

On J uly 5, 2006, the cour

t entere d an orde r dismissing all claims aga i n s t the Deve loper, finding that no claim had be en stated a g ainst the Deve loper, and that the Developer was not a prope r party to the lawsuit. The cour

t desig nated its order

as final pur suant to Tenn. R. Civ. P. 54.02.

On July 17 , 2 00 6, an o rd e r w a s e nte re d g ra nti ng the City ’s mot ion

fo r s umm ary

jud g me nt. The trial c ourt deter

mined that althoug h the disputed proper ty was located mostly

within DSC UD’s define d service are a, DSCUD had not a ctually provided or m ad e wa t er service available to the proper ty , and ther efor e it was not entitled to the protec tion of the fede ral statute. This finding was based upon the fac t that, in order to ser ve the subdivi s i o n , DS C UD wo u ld have to extend a line approximately

1900 fee t acr oss another f ar m , and DSCUD did not prese ntly have a n ease ment
a uth or izin g it t o do so

. B e c a us e the c ourt fo un d the fe de ra l statut e ina pp lic a ble , it he ld that th e City ha d th e e xclu siv e ri g ht to s e rv e the pr op e rt y it a nn e xed un de r s ta te law, and

that any dis a g re e me nts must be arbitrated.
On Aug ust 10, 2006, DSCUD filed its noti ce of appea l of the trial cour t’s order g ranting
s u m m a r y j u d g m e n tt o t h e C i t y.

II. I SSU ES P R ESENTED Appellant has timely

filed its notice of a

ppeal a nd prese nts th e fol lowing issue, a s we perc eive it, for r eview:

Whether t he trial court erre d in g ranting the City ’s motion for summary judgme nt and finding that T.C.A. § 6-51-111 a pplied rathe r than Title 7 of the United States Code § 1926(b), be cause a dis puted i ssue of fac t exis ted as to whether DSCUD provided
o r m a d e w a t e r

s e r v i c e a v a i l a

b l e t o t h e p r o p e rt y.
For the following rea sons, w e reve rse the decision of the chanc ery court and rema nd fo r f u rt h er proce eding s.

III
. S TA N D A R D O F R EVIEW No pre sumption of corre ctness attac hes to a trial c ourt’s fi n d i ng s in a summary judgme nt
case

. Burgess v. Harley , 9 3 4 S

. W

. 2 d 5 8 , 6 2 (c i t i n g Carvell v. Bottoms , 900 S.W .2d 23, 26 (Tenn. 1995)). A summar

y judgme nt is appropriate only when ther e is no g enuine dispute of mater ial fac t wi th r e g ard

to t he c la im o r d e fe ns e a sse rt e d in the mot ion , a

nd wh e n th e mov ingpa

rt y is e nti tle d to a judg ment as a matter of law

. Id. (c i t i n g By rd v . H all , 847 S.W .2d 208, 2 10 (Tenn. 1993) ; Anderson v. Standard Re gister Co. , 857 S.W .2d 555, 559 (Tenn. 1993) ).-4-

The c ritical foc us is lim ited to th o s e fa ct s d eeme d “mater ial,” mea ning f acts that must be decide d in or der to r esolve the substantive claim or de fense at which the motion is directe d. By rd
v . Ha ll , 847 S.W .2d 208, 211 (Tenn. 1993)

. We must t ake the strong est leg itimate view of the evidenc e in f

avor of the nonmoving party , allow all rea sonable infere nces in f avor of that party , and discard a ll counterva iling evide nce. Id. at 210-11 (c itations omi tted). A court is not to weig h the evidenc e in eva luating a

summary judgme nt motion. Id. at 211. A summary judgme nt should not be af firmed if a

ny doubt or uncer

tainty exis ts with reg ard to the f acts or the conclusions to be dra wn from the f acts. Burg

ess , 9 3 4 S

. W

. 2 d

at 6 2 (c i t i n g Carv e ll , 9 00 S.W. 2d a t 26 ; By rd , 847 S.W .2d at 211). When the evide nce e stablishes a disputed fa ct, and the f act is mater ial, the cour

t must t hen deter mine whether

the disputed materia l fac t cre ates a g enuine issue. By rd , 847 S.W .2d at 215. The test for a “g enuine issue” is whether a rea sonable jury

could leg itimately fi n d i n favor of one side or the other

. Id.
“[T] he par

ty seekingsummary

judgme nt must car

ry the burde n of per suading the cour t that no g enuine a

nd materia l fac tual issues exis t a nd that it is, there fore , entitled to judgment a s a matter of law.” By rd , 847 S.W .2d at 211. Summary judgme nt w ill be a ppropriate when, a fter be ing g iven
a re asonable opportunity

to substantiate its cl ai m s , t h e nonmoving party is unable to establish an essential element of i ts case on which it will have the burden of proof at trial. Id. (c i t i n g Celotex Cor p. v . Ca tre tt , 477 U.S. 317, 321-25, 106 S.Ct. 2548, 2552-53, 91 L .Ed.2d 265 (1986))

.
IV. D I S CUS S I ON A. DSCUD’s righ ts wit hin its service are a before annexation As previously

mentioned, DSCUD is a public util i t y district. Tenn. Code Ann. § 7- 82- 30 1( a )( 1) (2 00 5) a dd

re sse s a uti lity dis tr ic t’ s st a tus and

pr ov ide s, in r e le va

nt p art :

Fr om and after the date of the makingand filing of an or der of incorpora tion, the district so incorporate d shall be a “ municipality ” or public corpor ation in perpe tuity under i t s corporate name, and the district shall in that name be a body politic and corpor ate with power of per petual succ ession, but wi thout any power to levy or collec t taxes. . . . S o l o n g as the district continues to furnish any of the service s that it is authorized to furnish in this chapter, it shall be the sole public corporation e mpowered to furnish such services i n the district , and no other

person, f

irm or cor

poration shall furnish or attemp t t o furnish any

of the ser

vices in the a

rea embra ced by

the dis tr ic t, un le ss and un til it ha s be e n e sta bli sh e d that th e pu bli c c on ve nie nc e and

ne c e ssi ty

re qu ir e s o the r o r ad dit ion a l se rv ic e s; provided , t h at this chapter shall not amend or a lter §§ 6-51-101- -6-51- 111, and 6-51- 301. (empha sis added).A s p r e v i o u s l y n o t e d , o n l y t w o
- t h i r d s o f t h e d i s p u t e d p a r c e l l i e s w i t h i n DS C UD’ s s e r v i c e b o u n d a r i e s

. DS C UD 1 d o e s n o t cla im a n y rig h t t o p ro v id e se rv ic e to the no rth e rn o n e -third o f t h e p ro p e rty tha t l ie s o u tsid e it s d istric t.
-5- This statute preve nts c ities f rom providing water service in utility districts’ service a rea s without a deter

mination that public convenienc e and ne cessity requires additional servic es. F or example, in Chan dle r In v . Co . v . W hite hav e n Ut

il. Di st. of She lby Coun ty , 44 Tenn. App. 1, 4, 311 S.W .2d 603, 604 (Tenn. Ct. App. 1957), a develope r was constructing a subdi vision on proper ty that was located within the g eog raphic al boundaries of t he W hitehaven Utilit y District, but just out side the Memphis city

limit s. The deve loper inq u i red about the ava ilability of water ser

vice f rom the Whit ehave n District and wa s told that water lines would ne ed to be e x tended a pproxi mately

two miles to the property , requiring a partially ref undable deposit of $88,000 from the deve loper. Id. at 6, 311 S.W .2d at 605. The City of Memphis had water mai n s ex tending within 100 feet of the proposed subdivision but also require d a larg e deposit. Id. at 7, 311 S.W .2d at 606. The de veloper soug ht and re ceive d a declaratory judgme nt allowing it to contra ct wit h the City of Memphis in order to obtain more adva

ntag eous terms of se rvice

. Id. at 9, 311 S.W.2d at 606. On appeal, this Court
reve rsed, f

inding that the City of Memphis could not operate within the Whit ehave n Utility District without a prior adjudication that public convenienc e and nece ssity require d additional service s in the district. Id. at 24, 311 S.W.2d at 613.

More r ece ntly , in To wn of Rog e rsv ill e , e x rel . Roge rsv ill

e Wa te r Comm ’n v

. M id H awkins Coun ty Ut il. Di st. , 122 S

. W

. 3 d 1 3 7 , 140 (Tenn. Ct. App. 2003), w e held that the so le reme dy available to parties dissatisfied with a utilit y ’s s ervic e is to petition to modify the utility ’s exclusive fra nchise under Tenn. Code Ann. § 7-82-301( a). Also, in de termining whether public convenie nce and ne c e ssi ty re qu ir e s a dd iti on a l se rv ic e s, it i s in a pp ro pr ia te to p e rf

or m a “ c omp arativ e anal y sis ” betwee n the two servic e provide rs. Id. at 140, n.2. I nstead, the inquiry is whether the utilit y

district ref uses or is not able to provide utilit y service to that are a. Id.

I n this case, pr ior to the City ’s anne x ation of the Cre ek Wood property , Tenn. Code Ann. § 7- 82 -3 01 (a )( 1) e mpo we re d D SCU D w iththe e xclu siv e ri g ht t o f ur nis h w a te r s e rv ic e s w ith in i ts district unless and until it was established t hat public conve nience and nec essity require d additional 1 service s. Howeve r, the City claims that once it annexed the par ce l , an ad d i tional statute was trig g ere d g iving it the ex clusive right t o provide ser vice to prope rties within its boundaries. We now turn to an examination of that statute.

B. T he City ’s rig

hts w he n it a nne

xe s p ro pe rty The City claims that, upon anne x ation, it ga ined the exclusive rig ht to pr ovide utilit ies to the pr op e rt y a s p ro vid e d in

Te nn . Co de Ann. § 6 -5 1- 11 1 ( 20 05 ), a s f oll ow s: (a) U p o na d o p ti o no f

anan n e xa ti o no r d in an c e o r u p o nr e f e r e ndum approva l of an a

nnexation resolution as provided in this part, an annexing municipality

and any aff ecte d instrumentality

of the state of Tenne ssee, including , but not lim ited to, a utility dis t ri ct, sanitary-6- district, school district, or other public service district, sha ll attempt to rea ch ag ree ment in writing f or al l o cation and c onvey ance to the
ann e xing mun ic ipa lity

of any or a ll p ub lic fu

nc tio ns , r ig hts , d

uti e s, proper ty , as s et s an d

l i ab i l i t i es o f s u ch s t at e i n s t ru m en t al i t y t h at j u s t i ce an d re ason m ay

require in the circ umstances. . . . Th e a n n e x ing
mu n i ci p a l i ty, if and to the extent that it may choose , shall have the
exc lusive right to perform or provide municipal and utility functions and service

s in any territory tha t

it annexes , n o t wi t h s t an d i n g § 7-82-301 or

any other statute, subjec t, howeve r, t o the provisions of thi s se c tio n w ithre sp e c t to e le c tr ic c oo pe ra tiv e s. (b) Subject to such ex clusive right, any such matters upon w hich the respe ctive par

ties are not in ag ree ment in writ i n g wi t hin six ty (60) day s after the oper ative date o f such a nnexation shall be settled by arbitration with th e laws of a rbitration of the state of Tenne ssee . . .

. (empha sis added). This statute clear ly allowed the City

to choose to provide utility functions in the
are a it ann e xed de sp ite DSC UD ’s ri g hts un de r Te nn

. Cod e Ann. § 7- 82 -3 01

. Th e statut e is s a id t o express the L eg islature’s intention that befor e any corpor ation may furnish utilit y service s within the territory of a municipa lity , it must have the permission of that mu n icipality even w here the
c o r p o r a t i o nh a s , a s i s t h e c a s e h e r e , b e e n s e r v i n g th e ar e a

b e f o r e i tb e c a m e a

p arto f t h e m u n i c i p a l i t y. Frankl in Power & Ligh t Co. v. Middle Tenn. El ec. Mem bership Corp. , 222 Tenn. 182, 188, 434 S.W. 2d 82 9, 83 1 ( Te nn . 1 96 8) . A lth ou g h a n a nn e xing mun ic ipa lity

c an a llo w a

c ur re nt util ity provider to c o n ti n u e s e r

v in g th e a r e a , th e mu

n ic ip a li ty a c qu ir e s th e e xc lu s iv e r ig h t t o ma k e the elec tion, and a cur

rent provide r has no a

uthority to refuse to arbitrate as re quired by the statute. City of Lenoir City v. State ex rel. City of Loudon , 571 S.W .2d 297, 299 (Tenn. 1978)

.
No tw ith sta

nd ingthe un a

m b i g u o u s l a n g u a g e o f T e nn

. Cod e Ann. § 6 -5 1- 11 1 g ra nti ngthe City
e xclu siv e ri g hts to se rv e an ar e a it an ne xes, DSC UD c la ims that 7 U .S. C. § 19 26 (b ) p re ve nts the City from doing so in this case.

C. The Protection of § 1926(b) fo r Rural W ate r As so c iat

ion s Congr ess passed the Ag ricultural Ac t of 1961 seekingto preser ve and pr otect rur al fa

rm life in a number of

respe cts. Le-A x W

ate r D ist . v . Ci ty of Athe ns, Ohio , 346 F.3d 701, 704 ( 6th Cir. (Ohio) 2003)

. Title I I Iof the Ac t, known as the Consolidated F arm a nd Rural De v e lo p me nt Act, was larg ely conce rned w ith issues of ag ricultural c redit. Id. On e se c tio n o f t he Ac t, n owc od if

ie d at 7 U.S.C. § 1926(a), made fede ral loans available to w ater service associations. Id. Section 1926(b), which is called the Anti-Curtailment Provision of the Act, protec ted the rec ipients of such loans fr om c omp e tit ion , to a

c e rt a in e xten t, a

nd it r e a ds : (b) Curtailment or limitation of service prohibited –T he f ormer Far mers H om e Adm i ni s t r at i on i s now kn own as t he U

. S. D epar t ment of Agr i cul t ur e Rur al U t i l i t i es 2
S e rv ic e

. See 7 C. F. R. § 17 80

. 3( a )

. Fo r pu r po s e s of ou r a n a l y s i s , w e w i l l c on t i n u e t o r e f e r t o t h e r e l e v a n t age ncy as Fm H A i n ord er t o avo i d co nf usi o n.
-7- The ser vice pr ovided or made available throug h any such assoc iation shall not be curta iled or limited by incl u s i o n o f the ar ea se rved by such assoc iation within the boundarie s of any municipal corpor ation or other public body , or by the g ranting of any

private f ranc hise for
s im il ar s e r

v ic e w it h in s u c h ar e a d

ur in g th e te r

m o f s u c h loan; nor shall the happening of any such eve nt be the basis of r equiring such association to secur e any

fra nchise, lice nse, or pe rmit as a condition to continuing to ser

ve the are a serve d by the association at the time of the oc c ur re nc e of su c h e ve nt. 7 U.S.C. § 1926(b). Ba sically , this provision “preven t s l o cal gove rnments from e x panding into a
rura l water

association’s a

rea and stea ling its customers.” Le-A x , 346 F.3d at 705. The leg islative history indicates that § 1926(b) wa s intended to protec t the territory serve d by

rura l water associations fr om other compe titive facilities such as loca l govern m en t s , as otherw ise rura l water service might be thr eate ned by municipalities ex panding their boundarie s into a rea s serve d by

rura l sy stems. Id.

The Ac t aims to provide fre sh and cle an water to rur al households, and to pr otect the fe dera l g overnme nt as insurer of

the loans to the rur al associations. Le-A x , 346 F.3d at 705. By protec ting
a rur al water association’s customer base, the association can sprea d its fixed costs o v er a l ar ge g roup of use rs and preve nt costs from bec oming pr ohibitively expensive to any

particula r rur al user. Id. As one c ourt observe d, to a llow e x panding municipalities to “skim the cre am” by annexing a nd
c on de mni ngthe pa

rt s o f a wate r a sso c ia tio n w iththe hig he st p op ulatio n d e ns ity (a nd thu s th e low e st per- user c ost) would undermine Cong ress’s pur pose of f acilitating inexpensive water supplies f or rura l residents. City of Madi son, Miss. v. B ear C

reek Water Ass’n, In c. , 8 16 F .2 d 1 05 7, 10 60 (5 th Cir. (Miss.) 1987).

I n order to s t ate a claim under

§ 1926(b), a

plaintiff must establish that (1) it is an

“ a sso c ia tio n” wi thi n th e me anin g of the Ac t; ( 2) it h a s a

qu a lif y ingou tst and ingF arm e rs Ho me Administration (FmHA) loan; and (3) it has “provided or made se rvice available ” in the disputed 2

are a. Le-A x , 346 F.3d at 705. Section 1926(b) ha s been c onstrued as “ unambig uously prohibiting
an y c u rta il me n t o r

li mi tati o no f

a nF mH A

- in d e b te d

w a te r a s s o c iati o n ’ s s e r

v ic e s r e s u lt in g from municipal annexation or inclusion.” Lexington-S. Elkh orn Water Dist. v. City of Wilm ore, Ky. , 93 F. 3 d 2 3 0 , 2 3 5 (6 t h C i r. (Ky

. ) 1 9 9 6 ) ( qu o t i n g Bear Creek W ater Ass’n , 816 F.2d at 1059). The provision is to be g iven a liberal int erpr etation t hat protects rura l water associations indebted to the FmHA f rom municipal enc roac hment. Id.

I n the pre sent ca se, t h e p ar t i es do not dispute that DSCUD is an “association” within the meaningof the Ac t with qualify ing F mHA l oans. Therefor e, the ke y issue is whether D SCUD has “provide d or made service available ” to the disputed par cel. Sec tion 1926(b), by its terms, providesI t i s cl ear t hat i n de t erm i ni ng whet her a r ural ass o ci at i o n ha s “mad e ser vi ce avail ab l e” t o a pro p ert y , we are 3

n o t t o re la tive ly co m p a re the se rv ic e s o ff e re d b y the C ity w ith tho se o ff e re d b y D S C U D

. See Ro ber t s on P r op er t i es , I

nc.
v . D e ta c h m e n t o

f T e rrito ry f

ro m P u b lic W a te r S u

p p ly D ist. N o . 8 o

f C la y C o u n ty , 153 S. W

. 3d 320, 328 ( M o. Ct

. App. 20 05 ) ( “ W het her i t i s ea s i er or che aper f or [ a c i t y ] t o provi de s er vi ce i s i r r el eva nt

. T he t es t i s s i mp l y wh et her t he D i s t r i ct has mad e ser vi ce avail ab l e t o t hi s area. ”); but s ee Rur al W at er D i s t
. N o. 1, El l

s wor t h Count

y, Kans as v . Ci t

y of Wi l s on, Kans as , 243 F. 3d 1263, 1271 ( 10t h Ci r

. ( K an

. ) 2001) ( i f c os t s w er e s o e x ce s s i v e as t o p ract i ca l l y de pr i v e a u s er of

ser vi ce, t hen ser vi ce m ay no t have b een “avai l ab l e”).

T h e S ixth C irc u it h a s a d o p te d the sa m e a p p ro a c h tha t the E igh th a n d T e n th C irc u its ha v e tak e n

. See Le

- Ax , 4
3 4 6 F.3d at 70 6 (di scus si ng t he vari o us f act o rs us ed by di f

f erent ci rcui t s)

. -8- that “ser vice pr ov ide d o r m ad

e av ail ab le throug h any

such ass o ci at i o n shall not be curta iled or limit ed by

inclusion of the ar ea se rved by such assoc iation within the boundaries of a ny municipal
co rp o ra t ion . . . .” (e mphasis added) . Unfortunately , neither the statute itself nor the leg islative history explains t his phrase. Le-A x , 34 6 F .3 d a t 70 5. Th e me re fa c t th a t th e dis pu te d p ro pe rt y is 3 located w ithin DSC UD’s de fi n ed s ervic e ar ea doe s not automatically mean that DSCUD made service available to the Creek Wood prope rty

. See Le xin gto n- S. El kho rn , 93 F.3d at 233 (finding service was not ma de ava ilable eve n though the proper ty was within the utility ’s def ined terr itorial boundary ). Diffe rent fede ral circ uits use differ ent fac tors to determine w hether a water a ssociation ha s “ pr ov ide d o r m a de se rv ic e a va ila ble ,” bu t th e Sixth Cir c uit us e s a tw o- pa rt te st. Le-A x , 346 4 F.3d a t 706. First, we consider w hat has be en desc ribed a s the “pipes in the g round” or “phy sical ability ” require ment. Id. Se c on d, we loo k to whe the r t he a sso c ia tio n h a s “ the le g a l r ig ht u nd e r s ta te law to serve the ar ea in que stion.” Id.
Reg ardingthe first “pipe s in the g round” e lem en t , t h e par ties ag ree that DSCUD has not
a c tua lly pr ov ide d w a te r s e rv ic e to t he dis pu te d p ro pe rt

y . T he Cr e ek Wood p ro pe rt y and its neig hboring parc els are curr ently undevelope d far mland. “I f an association does not a lrea dy have service in exi stence , water lines must either be within or adja cent to the pr op er t y cl ai m ed to be protec ted by

Section 1926(b) pr ior to the time an alleg edly encr oaching association beg ins providing service in order to be elig ible for Sec tion 1926(b) protec tion.” Le xin gto n- S. El kho rn , 9 3 F.3d at 237. I nteg ral to the concept of making service available is the c ap ab ili ty of providing service , or, at a minimum, of providing the s ervic e withi n a reasonable time afte r a reque st for service is made. To wn of Rog e rsv ill e , e x rel . Roge rsv ill

e Wa te r Co mm ’n v

. M id H awkins C ount y Ut il. Di st. , 122 S.W .3d 137, 141 (Tenn. Ct. App. 2003).

For example, in V

ill ageof Graf ton v . Rur al L orain Coun ty

Wa te r Aut

h. , 419 F.3d 562, 564- 66 (6th Cir. (Ohio) 2005), a rura l water

association had tr ansmis s i on lines “runningup to” the
su bd ivi sio n at is su e that c ou ld b e e xten de d to su pp ly wate r “o ve rn ig ht, ” and thi s me t th e “ pip e s in the g round” require ment. Howeve r, in Le-A x , the Six th Circuit clarified that it is not nece ssary that
a rur al association be able to provide service imm ediately . 346 F.3d at 707. The rur al association in t hat c a se ha d a

wate r l ine imm e diate ly

a dja c e nt t o th e disput e d p ro pe rt y , b ut i t w ou ld n e e d to ins ta ll a pr e ssu re -r e du c ingva lve , s ome ta p- ins , a nd a pumpi ngstatio n b e fo re it c ou ld a c tua lly provide ser

vice. Id. The court deter

mined that an association ca n have the ph

y sic al a bil ity

to serve-9-

a prope rty within the meaning of the “pipes in the g round” te st even if a dditional work would have to be done. Id. The c ourt noted:

To argue , a s A the ns do e s, that w a te r se rvi ce mus t be a va ila ble imm e diate ly (evide ntl y

in t he se ns e that so me on e a t U niv e rs ity Estates must be able to g o over to the f auce t and turn on the water), woul d b e t o ignor e our state ment in Lexington-S. Elkhorn that the “made available ” require ment is satisfied not only when the pipes are

“ w i t h i n , ” b u ta l s o w h e nt h e y ar e m e r e l y “ a d j a c e n tt o ” t h e p r o p e rt y. The e vidence h er e admi ts of only one conc lusion, that L e-A x “has
a de qu a te fa c ili tie s w ith in or a dja c e nt to the are a to p ro vid e se rv ic e to the are a within a rea sonable time a fter a re quest for se rvice is made.” (q u o t i n g Sequoyah County Rural W ater Dist. No. 7 v. Town of Muldrow , 191 F.3d 1192, 1203 ( 10th Cir.1999)). Le-A x , 346 F.3d at 707. See also Pittsbu rg Coun ty Rural W ater Dist. N

o. 7 v. City of McAlester , 358 F.3d 694, 713 ( 10th Cir. (Okla.) 2004) (rur al associat i o n n ee d not be able to pr ovide servic e

“ tod ay ,” if

it h a s a de qu a te fa c ili tie s a dja c e nt to the are a and c an pro vid e se rv ic e wi thi n a re a so na ble time).

I n Sequoyah Coun ty R ural Water Dist. No. 7 v. Town of Muldrow , 191 F.3d 1192, 1205 (10th Cir. (Okla.) 1999), a r ural water association had water lines appr ox imately one mile awa

y from
a c e rt a in d isp ute d p ro pe rt

y that c ou ld b e e xten de d to m e e t th e c us tom e r’ s n e e ds fo r a pp ro xima te ly $5 0, 00 0. Th e Ten th Circ uit he ld t hat th is c on sti tut e d s uf

fi c ie nt e vid e nc e fo r t

he a sso c ia tio n to withstand summary

judgme nt with respec t to whether its fa cilities w ere sufficie ntly proxi mate to the customer a

nd whether

it had the ca

pacity to serve the customer within a r easona ble time. Id.

I n s ho rt , a lth ough add ition a l c lari fy ingpr oo f m ay

be ne e de d to establish the exact distance s betwee n Plai nti f f ’ s line s and the disputed customers’ pr operties, a s well as Plaintiff’s prec ise ca pacity to serve the disputed customers within a r easona ble time, we c onclude that Plaintiff has established genuine issues of m ater ial fac t with respec t to whether

it made servic e ava ilable t o the custom ers. Indeed, the

. .

. evidenc e showing longe r distances betwee n Plaintiff’s pipes and the customers’ pr operties clea rly raises questions of fac t on the issue of proxi mity

. Viewing the evidence in a li g ht most favorable to Plainti ff, we ther efor e conc lude that s ummary judgme nt was improper

on the issue of whe ther Plaintiff made service available

. . . . Id. at 1205-1206. On t h e o t h er h an d, when a n association has de monstrated mer ely a desire and ability to provide ser

vice to a disputed a

rea in the future, the protec tions of § 1926(b) ar e not trig g ere d. See N. Ohi

o Rural Wat

e r v. Erie Coun ty Bd. of

Coun ty Comm’rs , 347 F. Supp. 2d 511, 515 (N.D. O hio 2004) (plans to provide se rvice to are a including a main highw ay and surr ounding roads wa s insufficient whe n exis ting water lines we re only in ar eas surrounding the disputed territory ).T he C i t y al so cl ai m ed t hat b ecause i t wi l l b e p rovidi ng sewer ser vi ces t o t he ent ire su b d ivisio n , al l o wi ng 5
D SC U D t o pro vi d e wat er s ervic e to p art of t he subd i vi si o n wi l l be co nf usi ng and dif

f i cul t

. H o wever, co urt s have

r out i nel y he l d t hat § 19 26 ( b) w as en act ed t o cover wat er s er vi ce, an d an a s s oci at i on’ s abi l i t y t o provi de ot her s er vi ces is irre le v a n t t o it s e n tit le m e n t t o § 1 9 2 6 (b ) p ro te c tio n

. See S e q u o y a h C o u n ty , 1 9 1 F .3 d a t 1 2 0 4 , n.1 0 (a sso c ia tio n ’s

a b ili ty to p ro v id e fi re p ro te c tio n is i rr e le v a n t); R ob er t s on Proper t i es , I

nc. v. D et achm ent of T er r i t ory f r om P ub. Wat er S u p p ly D ist. N o . 8 o

f C la y C o u n ty , 1 53 S

. W

. 3d 320 , 326 ( M o. Ct

. Ap p. 200 5) ( “ a D i s t r i ct s uppl y i ng wat er t o f i gh t f i r es
o r f aci l i t i es f

o r s ewer co l l ect i o n s i m p l y s ho ul d not ent er i nt o a Sec t i o n 19 2 6 anal y si s”)

. -10- I n the ca se at ba

r, we find that DSCUD prese nted sufficie nt e vidence to w ithstand summary judgme nt as to whether

it had “pip es i n t h e g round” to ser ve the disputed prope rty . DSCUD’s district manag er state d in her affidavits that service was available to t he prope rty at issue, Parc el 97, by vir tue of DSC UD ’s wate r lin e ru nn ing a lon g the pa

rc e l to the imm e diate so uth , Pa rc e l 96 .Sh e a lso stated that DSCUD had a water line running along Parce l 95 to the i mmediate east of the disputed proper ty . And finally , DSCUD had a third a cce ssible line running al o n g t h e proper ty to the immediate west of the Creek Wood prope rty , which is Parce l 98. The mana ger al s o stated that DSCUD could install a water line t o t h e boundary

of the Cre ek Wood Subdivi sion within a
rea sonable, re latively

short amount of time. She furthe r explained the situation involving the motion passed at the DSCUD Commi ssioners’ m eeting , wher eby the association had ag ree d, at the Deve loper’s r equest, to install the necessar y water line at i ts own ex pense connec ting with the wate r line south of the prope rty

. Th e City c la ime d th a t th e a sso c ia tio n d id n ot h a ve the re qu isi te “ pip e s in the g ro un d” be c a

us e DSCUD’s closest water line was 1980 fee t, or 0.375 miles, f rom the boundary of the Cre ek Wood proper ty . Howeve r, we do not consider this fac t to be fata l to DSC UD’s § 1926( b) cla im, entitli ng the City to a judgme nt a s a matter of law. In Se quo y ah Co unty , 191 F.3d at 1205, ge nuine issues of fac t e x isted as to w hether service was made available to a cer tain parc el even t h o u gh t he association’s water lines we re a pproxi mately

one mil e aw ay

. And as noted in Le-A x , the Act contemplat es t h at addit ional work will nee d to be done in orde r to serve a prope rty , and it is not
nece ssary that someone at the proper ty can “g o over to the fauc et and turn on the water .” 346 F .3d at 707. Althoug h additional proof will be nece ssary to determine D SCUD’s prec ise ca pacity to serve the prope rty

within a rea sonable time, a t the time of the proce eding s below, the Deve loper had y et to r e c or d a

fi na l a pp ro ve d p la t o f th e su

bd ivi sio n s o th e pa

rt ie s d id n ot e ve n k

no w h owmany

lot s wo uld b e l o c a t e d i n e a c h d i s t r i c t

. W e b e l i e v e t h a t a t l e a s t a g e n u i n e i s s u e o f f a c t e xiste d a s to 5 whether DSCUD had “a dequate fac iliti es within or adjac ent to the ar ea to pr ovide servic e to the ar ea within a rea sonable time af ter a reque st for ser

vice is made .” Le-A x , 346 F.3d at 707 ( quoting Se qu oy ah Cou nty , 191 F.3d at 1203).In L ex i n g t o n -S

. E l k h o rn , t h e wa t er as s oci at i on di d not ha v e t h e l eg al r i g h t t o s er v e t h e pr oper t y i n qu es t i on 6 bec au s e i t ha d not obt ai n ed a “ Cer t i f i ca t e of C on v en i en ce an d N ec es s i t y ” f r om t h e K en t u ck y Publ i c Se r v i ce Commi s s i on t o ext end i t s l i nes i nt o t hat ar ea. 93 F. 3d at 2 38

. W i t hout havi ng reques t ed t he au t hor i t y t o cons t r uct t he f aci l i t i es ne eded to s e rv e th e a re a a t issu e , th e a v a ilab ili ty o f se rv ic e fro m the a sso c ia tio n w a s m e re ly sp e c u la tive

. I d. T h e p a rtie s in th is

c a se d id no t alle g e tha t D S C U D fac e d su c h a n o b sta c le to p ro v id ing se rv ic e . In T e n n e sse e , a u til ity is no t re q u ire d to ob t ai n s uch a c er t i f

i cat e t o provi de ex t ens i ons of s er vi ce wi t hi n i t s own def i ned t er r i t ory

. T enn

. C od e A nn

. § 65

- 4- 20 1(a) (S u p p . 2 0 0 6 ); s ee P eo

p l es T el

. C o . v . T en n. P ub

. Serv. C o m m ’n , 21 6 T enn. 60 8 , 61 3 , 39 3 S.W

. 2 d 28 5 , 28 7 (T enn. 1 9 6 5 ).

-11- Next, we consider D SCUD’s leg al right under state law to serve the area in question. The 6 Six th Circuit has only

require d a state la

w rig ht (not a dut y

) t o serve the ar ea in or der to invoke the protec tions of § 1926(b). Le-A x , 346 F.3d at 706, n.1.

Th e City fi rs t c on te nd s th a t D SCU D l a c ke d th e le g a l r ig ht to s e rv e the pr op e rt y be c a us e it would have to obtain a

n ease ment acr oss a private far m to acce ss its closest l ine, and DSCUD ha d
no t y e t ob ta ine d a

n e a se me nt. Ho we ve r, we do no t c on sid e r D SCU D’ s la c k o f an e a se me nt a t th is p o i n ta s p r e v e n t i n g i tf

r o m h a v i n g t h e l e g a l r i g h t u n d e r s t a t e l aw t o p r o v i d e s e r v i c e t o t h e p r o p e rt y. DSCUD h as t h e p o we r t o purcha se or c ondemn a r ight of way for its pipelines pursuant to Te nn. Code Ann. § 65-27- 101 (1993). The district manag er of DS C UD ex plained in her aff idavit that DSCUD had re lied upon the ac tions of the Deve loper in per suading the association to use the sewer
ease ment that it was obtaining acr oss the farm , s o DS C UD had not y et attempted to obtain an
ease ment itself. Fur

thermore , beca

use it is sufficie nt for an association to have lines adjac ent to a pr op e rt y , we be lie ve the Ac t e nc omp a sse s an und e rs tand ingtha t an a sso c ia tio n w ill have to o bta in
an ea sement bef

ore it ca n extend those lines. As DSCUD noted, i t would have to obtain an e aseme nt
re g ard le ss of wh e the r it wa s e xten din g its lin e te n f e e t or on e tho us and

fe e t. T o r e qu ir e DSC UD to have a n ease ment alre ady

in place in or der f

or § 1926(b) protec tion to attach would in eff ect r equire associations to have undescr ibed, universa l ease ments on proper ties, even be fore the nee d to ext end its lines or the threat of municipal encr oachme nt ha d arisen. See Le xin gto n- S. El kho rn , 93 F.3d at 237 (ser vice must have been available prior to the time an alleg edly encr oachingassociation beg ins providing service in order to be eligible for Section 1926(b) pr otection). This would not serve the purposes of the Act and w ould cer tainly not be a liber al interpre tation of the Ac t’s require ments that protec ted rura l water

associations. See id. at 235. The City only cites to one c ase in whic h a rur al association’s failure to obtain an ease ment preve nted i t from having the leg al right to serve a proper ty . I n N. Ohio Rura l Wa te r v . ErieCoun ty Bd. of Coun ty Comm’rs , 347 F.Supp.2d 511, 51 5 (N

. D. Oh i o 2004), an a ssociation had not y et complied with 7 C.F.R. 1780.44(g )(1) , which re quires assoc iations ap p l y ing f or a f eder al loan or g rant to fund a

water projec t to have ac quired any nece ssary ease ments prior to obta ining a loan, and the c ourt fo un d th a t th e a sso c ia tio n f a c e d “ sig nif

ic ant le g a l hurd le s” be fo re it c ou ld do so . T he re is
no ind ic a tio n in

thi s c a se that D SCU D w ill be a pp lying fo r a wate r pr oje c t loa n to e xten d it s li ne so that it would be require d to comply with this reg ulation.
Next, the Ci ty

argues t hat DS CUD did not have the le g al rig ht under state la w to serve the pr op e rt y be c a us e Te nn

. Cod e Ann. § 6- 51 -1 11 too k awa y DSC UD ’s e xclu siv e ri g ht w he n th e City-12-

annexed the prope rty

. As p re v i ously discussed, DSCUD had the e x clusive rig ht, prior to the annexation, to provide wate r ser vice in it s d i s t rict pursua

nt to Tenn. Code Ann. § 7-82- 301(a) (1). Where fe dera l § 1926(b) prote ctions have attached, § 1926( b) pre empts local or state law that can be used to j u s tify

a municipality ’s enc roac hment upon a disputed ar ea in whic h the indebted association is leg ally

providing service under state law. Pittsbu rg Coun ty Rural W ater Dist. No. 7 v. City of McAlester , 358 F.3d 694, 715 (10th Cir. (Okla.) 2004). Section 1926 takes pre cede nce over inc onsistent state law pursuant to the Supremac y Clause, U.S. Const. art. VI , cl. 2, which state s that laws of the U nited States made in pursua nce of the Constitut ion shall be the supre me law of the land, and judge s of every state ar e bound ther eby

. Robertson Properties, Inc. v. In the Matter of the De tac hment of Te rri

tor y from Pub . W

ate r Sup ply Di st. No . 8of

Cla y Coun ty , 153 S.W .3d 320, 32 6 ( Mo . Ct . App . 2 00 5)

. Onl y a ft e r f ir st d e te rm ini ngthat on e of § 1 92 6' s p ro ng s is ina

pp lic a ble may the cour t consider the inc onsistent state law. Id. ; see also V illage of Grafton , 419 F.3d at 567 (a vil la g e ’s e xclu siv e ri g ht u nd e r t he Oh io C on sti tu ti on to p ro vid e uti lity se rv ic e s w ith in i ts bo un da ries was he ld t o b e “ lim ite d” by § 1 92 6( b) ); Moore Bayou Water Ass’n, In c. v. T own of Jo ne sto wn, M iss

. , 628 F.Supp. 1367, 1370 (N.D . Miss. 1986) (Sec tion 1926(b) bar red a n annexing
mu n ic ip a li ty f

r o m c o n d e mn in g a w a te r a s s o c iati o n ’ s w a te r s e r v ic e r ig h ts an d f

a c il it ie s w hile the association re mained indebted to the F mHA).

Th e state statut e a t is su e he re , T e nn. Co de Ann. § 6 -5 1- 11 1, is c le arl y inc on sis te nt w ith Con g re ss’ s p ur

po se s and ob je c tiv e s a s se t f

orth in § 19 26 (b ). Th e re fo re , if § 1 92 6( b) a

pp lie s to protec t DSCUD from municipal enc roac hment, the f e d e r a l s ta tu te p r eempts Tenn. Code Ann. § 6-51- 111 so that the City

could not simply

take ove r the provision of water service when it a nnexed the
are a.

Takin g the str on g e st le g iti ma te vie w of the e vid e nc e in fa vo r of DSC UD , a

nd a llo wi nga ll
rea sonable infe renc es i n its favor, we find that g enuine a nd materia l fac tual issues exi st about whether DSCUD had ade quate f

acilities withi n o r adjacent to the ar ea to pr ovide servic e within a
re a so na ble tim e a ft e r a re qu e st fo r se rv ic e is ma de

. On re mand , DSC UD ’s § 19 26 (b ) d e fe ns e mus t first be a ddresse d. Then, only if the trial cour

t determines that DSCUD ha d not made ser vice available to the parc el does Tenn. Code Ann. § 6-51-111 apply to a llow the City to choose to provide water service to the entire subdivision.
D. DSCUD’s request for a de claratory judgm ent regarding it s boun daries

I n DSCUD’s orig inal complaint, it alleg ed that ther e we re othe r prope rties adjac ent t o the proposed subdivision at issue that wer e also subjec t to future deve lopment and to which ther e wa s a dispute as to who ha d the rig ht to provide wate r ser vice. DSCUD stated that there was a need f or re so lut ion of the c on tr ov e rs y

re g ard ingthe loc a tio n o f i ts b ound ari e s a s it re la te d to its ri g ht t o s up ply water to the are as. The c omplaint did not i nclude an y specific fac tual details about these othe r pr op e rt ie s and

the a lle g e d disp ute s. I t a pp e ars tha

t D SCU D w a s r e qu e sti ngthe c ourt to d e c lare its rig ht to provide wate r ser vice to any

proper ty within its boundarie s. R el ev an t t o this request for relief , the trial cour

t only held that DSCUD had no rig ht to se rve the portion of the subdivision that lay be y on d D SCU D’ s b ound ari e s.-13-

A trial court’s discretion in refusing a dec laration is “very wide,” a nd will not be disturbed
o n appea l unless the trial judg e has a cted a rbitrar ily

. St

a te e x r e l. Ea rha r t v

. Ci ty of Bristol , 970 S

. W

. 2 d 9 4 8 , 9 5 4 (T en n

. 1 9 9 8 ) ( ci t i n g Sta nd ard A c c ide nt I

ns . Co . v . Ca rv in , 217 Tenn. 662, 400 S.W. 2d 23 5, 23 6 ( 19 66 ); S. Fi r e a n d Cas. Co. v. Cooper , 200 Tenn. 283, 292 S.W.2d 177, 178 (Tenn. 1956) ). As we have pr eviously d i s cu s s ed, a rural wa ter a ssociation cannot c laim the protec tion of § 1926(b) in orde r to preve nt a city from ser ving a ny proper ty within the a ssociation’s b o u n d ar ies. S

ee Le xin gto n- S. El kho rn , 93 F.3d at 233. Th e iss ue of wh e the r § 19 26 (b ) p ro te c ts DSCUD’s rig ht to serve other are as will depend upon specific fac ts that ha ve not yet bee n prese nted, such as the proxi mity of DSCUD’s exis ting water lines to the parc els at issue, an d DS C UD’s capa bility of ser ving the prop er t y wi t h i n a reasonable time. See, e .g. , Rural Water Dist. No. 1, Ellsw orth C

ount y, Kansas v. City of Wilson , Kansas , 243 F.3d 1263, 1271 ( 10th Cir. (Ka n.) 2001) ( tr ia l c o u rt d id n o t e r

r in r e f u s in g to is s u e d e c la

r a to r y ju d g me n t r e g ar d in g § 1 9 2 6 ( b ) p r o te ction of
surr ound ingare a s w ith ou t e vid e nc e that de ve lop me nt w a s p lann e d o r t hat di str ic t ha d c a

pa c ity to
serve potential users). We find that the trial cour t did not abuse its discretion in refusingto declar e DSC UD ’s ri g ht t o s e rv e oth e r d isp ute d p ro pe rt ie s w ith in i ts b ound ari e s.

V. C ONCL US I ON

For the af oreme ntioned rea sons, we re verse the orde r o f th e chanc ery

court g ranting summary judgme nt to the C ity and remand for further proce eding s. We affirm the tr ial court’s de cision not to issue a dec laratory

judgme nt conce rning the surroundingproper ties. Costs of this appeal a re ta x ed t o A p p e l l e e , t h e C i t y o f

D ye r s b u r g , f

o r w h i c h e x e c u t i o nm ay i s s u e i f n e c e s s ar y.



### ____ ____ ____ ____ ____ ____ ____ __ AL AN E. HI GHERS, J UDGE