Opinion ID: 782799
Heading Depth: 5
Heading Rank: 1

Heading: Application to trench cut ordinance

Text: 28 Having considered the trench cut ordinance and 1938 Franchise in their entirety, including the various sections referred to by the parties, we conclude that the trench cut ordinance substantially impairs the Gas Company's rights, obligations and reasonable expectations for two reasons. 29
30 First, the trench cut ordinance requires the Gas Company to pay for a right it already possesses under the 1938 Franchise — namely the right to conduct excavations without paying an additional fee. 5 According to the preamble and section 2, the purpose of the 1938 Franchise is to authorize the Gas Company to lay and use pipes and appurtenances ... under... streets.... If Santa Ana can unilaterally increase the cost of exercising this right, then the 1938 Franchise does not secure the principal right it was designed to convey. Other than the franchise fee in section 3, no provision of the 1938 Franchise requires payment of any fees as a condition of the Gas Company's exercise of its rights. 31 Nevertheless, Santa Ana believes section 8(b) of the 1938 Franchise provides for trench cut fees because it allows Santa Ana to demand[] the cost of all repairs to public property made necessary by any operations of the grantee.... It views the trench cut ordinance as such a demand. Def.'s Statement of Genuine Issues in Opp'n, ¶ 5. Santa Ana does not explain how this interpretation is consistent with the purpose of the franchise or section 10. Upon our review, we find no suggestion that section 8(b) authorizes demands for loss of useful life or future repaving costs. 32 Section 8(b) only covers repairs. The word repairs indicates the damage in question has already occurred. But the trench cut ordinance imposes fees for some harms that may not be realized for over a quarter-century. See Alvarez Decl. 33 ¶ 9 (service life of street with less than three trench cuts is twenty-six years). By referring to the cost of all repairs, section 8(b) also indicates that the amount recoverable must be for actual harms, not estimated ones as established in the trench cut ordinance. 34 Moreover, while section 8(b) authorizes demands for harms to public property in general, section 10 specifically provides remedies for damage to streets. A standard rule of contract interpretation is that when provisions are inconsistent, specific terms control over general ones. See, e.g., Cal.Code Civ. Proc. § 1859 (2001) ([A] particular intent will control a general one that is inconsistent with it.). Thus, even assuming section 8(b) authorizes demands for as-yet-unrealized estimated future harms, section 10 supercedes it in the context of damage to streets. 35 Regardless, the parties' past practice removes any doubt as to whether Santa Ana can impose trench cut fees. During oral argument, Santa Ana admitted the Gas Company has performed thousands of trench cuts since 1938. To Santa Ana's knowledge, the Gas Company always patched trenches in conformity with section 10 of the 1938 Franchise. Santa Ana never demanded further or additional repairs pursuant to section 10, let alone repaving of streets, at least before the 1990s. 6 For more than fifty years, Santa Ana treated patch repairs as adequate to return streets to as good a condition as existed before the trench cuts in conformity with the 1938 Franchise. This practice is consistent with the fact that the parties anticipated trench cuts would damage the foundation of streets, see Franchise § 9; Def.'s Opp'n, p. 13, yet only provided for immediate repairs to be performed by the Gas Company, see Franchise § 10. In light of the 1938 Franchise's language and the parties' past practice, we discern no basis for Santa Ana to impose or demand a fee for the loss of useful life or higher costs of repaving. 7 36 Furthermore, the interference is more substantial than in either Cayetano or U.S. Trust. The statute in Cayetano did not alter the amount of money paid to employees, only the timing, and even then only by a few days and on a limited number of occasions per year. Santa Ana wishes to indefinitely increase the Gas Company's financial obligations beyond those specified in the 1938 Franchise for regularly recurring activities. In U.S. Trust, the financial harm to the bondholders was uncertain but nevertheless substantial because it affected the overall security of the bonds. See U.S. Trust, 431 U.S. at 19, 97 S.Ct. 1505. Here, the additional cost is direct, immediate and measurable and affects a central provision of the franchise. 37 As in U.S. Trust, when considering substantial impairment, we focus on the importance of the term which is impaired, not the dollar amount. Santa Ana has already imposed fees on the Gas Company pursuant to the trench cut ordinance. Alvarez Decl. ¶ 14. Though the fees charged to date are relatively small, Santa Ana was only able to do so by impairing a right at the heart of the 1938 Franchise. Thus, we conclude the trench cut ordinance substantially impairs the Gas Company's right to install and maintain pipes and appurtenances under Santa Ana's streets. 38
39 Separate from the right to excavate, the 1938 Franchise provides that the Gas Company shall repair streets after excavations. See 1938 Franchise §§ 10-11. If repairs are inadequate, Santa Ana may demand the Gas Company commence further repairs within ten days. Id. § 11. Santa Ana can only declare the franchise forfeited if the Gas Company subsequently fails to perform the repairs. Id. 40 In contrast, the trench cut ordinance imposes, in advance, an estimated fee regardless of the actual quality of repairs, without proof of actual harm, and without affording an opportunity to perform repair work. For example, the trench cut ordinance does not adjust fees even though Santa Ana admits high quality trench cuts reduce structural damage. See Alvarez Decl. ¶ 7. By presuming damage regardless of the quality of workmanship, the trench cut ordinance impairs the Gas Company's right to attempt repairs and thereby avoid paying Santa Ana to do so. At the same time, the Gas Company still has the burden of complying with section 10, except it now also incurs fees for future repairs not specified in the 1938 Franchise. 41 The right to fix street damage caused by trenches is closely related to the right to excavate without paying additional fees. By making the repairs, the Gas Company avoids the cost of reimbursing Santa Ana for repairs and the complication of determining the value of such repairs. While not as central as the right to excavate, the impairment is nevertheless substantial. The right to perform repairs relates to the financial burdens assumed by the Gas Company. As a specifically contracted for provision, it is at least as important as the right to receive a paycheck on a particular day, Cayetano, 183 F.3d at 1104, or the right to an additional source of security, U.S. Trust, 431 U.S. at 19, 97 S.Ct. 1505. 42 Consequently, the trench cut ordinance substantially impairs the separate right to repair damage to streets pursuant to sections 10 and 11 of the 1938 Franchise. 43