                            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                      HARRISON COUNTY SPECIAL COURT OF EMINENT
APPEALED:                             DOMAIN
ATTORNEYS FOR                         GARY WHITE
APPELLANT:
                        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    1/14/99
FILED:
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 The motion for rehearing is granted, the original opinion is withdrawn, and this opinion is substituted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.
