                                                                                         05/10/2019
               IN THE COURT OF APPEALS OF TENNESSEE
                           AT NASHVILLE
                                March 6, 2019 Session

    MILCROFTON UTILITY DISTRICT OF WILLIAMSON COUNTY,
      TENNESSEE v. NON POTABLE WELL WATER, INC. ET AL.

               Appeal from the Chancery Court for Davidson County
                 No. 18-455-IV     Russell T. Perkins, Chancellor
                     ___________________________________

                           No. M2018-01431-COA-R3-CV
                       ___________________________________


Appellant, a public utility, appeals the Davidson County Chancery Court’s dismissal of
its complaint for declaratory judgment and injunctive relief for lack of subject matter
jurisdiction. Appellant argues that it has an exclusive right to provide water service
under Tennessee Code Annotated section 7-82-301 and that Appellee is usurping its
exclusive right by providing water to residents of a subdivision within Appellant’s
service area. Because the gravamen of Appellant’s complaint is to maintain its exclusive
franchise by the grant of injunctive relief prohibiting Appellee from providing water
service, the case does not fall within the purview of Tennessee Code Annotated section 4-
5-225. As such, we affirm the trial court’s conclusion that it does not have subject matter
jurisdiction over the case.

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                                     Affirmed

KENNY ARMSTRONG, J., delivered the opinion of the court, in which ARNOLD B. GOLDIN,
J., joined. J. STEVEN STAFFORD, P.J., W.S., filed a separate concurring and dissenting
opinion.

Michael J. Wall, Benjamin A. Gastel, and Daniel Patrick Hull, Nashville, Tennessee, for
the appellant, Milcrofton Utility District of Williamson County, Tennessee.

Phillip B. Jones, Nashville, Tennessee, for the appellees, Non Potable Well Water, Inc.,
and John Powell.

Ryan L. McGehee, and Kelly Cashman Grams, Nashville, Tennessee, for the appellee,
Tennessee Public Utility Commission.
                                         OPINION

                                      I. Background

        Appellant Milcrofton Utility District of Williamson Co. (“Milcrofton”) is a water
utility district created under the Utility District Law of 1937, Tennessee Code Annotated
section 7-82-101, et seq. As such, Milcrofton is a municipality or public corporation.
The Tennessee Public Utility Commission (the “TPUC”) is the state agency that regulates
privately-owned utility providers. As a public utility district, Milcrofton owns and
operates a public water system in Williamson County. Milcrofton has the exclusive right
to provide water service within its chartered boundaries and can also provide water
service outside its boundaries. Tenn. Code Ann. § 7-82-301, infra.

        John Powell is the developer of a residential subdivision called King’s Chapel
Subdivision (“King’s Chapel”). King’s Chapel was initially located within Milcrofton’s
chartered boundaries, but later Mr. Powell expanded the subdivision into the
Nolensville/College Grove Utility District of Williamson County. In 2008, the two utility
districts entered into a Service Area Agreement, under which Milcrofton obtained the
exclusive right to serve all of King’s Chapel.

      In 2015, Mr. Powell asked Milcrofton to build water lines from a well in King’s
Chapel to distribute water to lot owners for irrigation. Milcrofton denied the request, and
Mr. Powell proceeded to provide the irrigation to owners by using Non Potable Well
Water, Inc. (“Non Potable,” and together with Mr. Powell and the TPUC, “Appellees”).
Non Potable charges King’s Chapel residents a fee to connect to its system.

        Milcrofton initially filed suit with the TPUC. Milcrofton asked the TPUC to
declare Non Potable a “public utility” under Tennessee Code Annotated section 65-4-
101(6) (“‘Public utility’ means every individual, copartnership, association, corporation,
or joint stock company . . . that own, operate, manage or control, within the state, any . . .
water . . . services . . . affected by and dedicated to the public use . . . .”). Such
designation would require Non Potable to obtain a certificate of public convenience
(“CPC”) under Tennessee Code Annotated section 65-4-201(a) (“No public utility shall
establish or begin the construction of, or operate any line, plant, or system, or route in or
into a municipality or other territory already receiving a like service from another public
utility, or establish service therein, without first having obtained from the commission,
after written application and hearing, a certificate that the present or future public
convenience and necessity require or will require such construction, establishment, and
operation.”). It is undisputed that Non Potable did not obtain a CPC before commencing
its services to King’s Chapel residents. Therefore, Milcrofton asked the TPUC to take
action to stop Non Potable from providing water to King’s Chapel. By order of October
6, 2017, the TPUC dismissed Milcrofton’s complaint on the ground that the TPUC lacked
the authority to grant CPCs or to eject a competitor from Milcrofton’s exclusive service
                                            -2-
area. Tenn. Code Ann. § 7-82-104(a) (“Neither the Tennessee public utility commission
nor any other board or commission of like character . . . shall have jurisdiction over the
district in the management and control of any system . . . except to the extent provided by
this chapter.”).

       Milcrofton did seek judicial review of the TPUC’s ruling within 60 days as
required under Tennessee Code Annotated section 4-5-322. Instead, seven months later,
on April 23, 2018, Milcrofton filed a complaint in the Davidson County Chancery Court
alleging that Non Potable was illegally competing with Milcrofton by serving water to
customers within Milcrofton exclusive service area. Milcrofton sought, inter alia, a
declaratory judgment that Non Potable may not provide water service anywhere in
Milcrofton’s service area. Milcrofton alleged that Davidson County had subject matter
jurisdiction to issue such declaratory judgment under Tennessee Code Annotated section
4-5-225(a), infra.

      On May 24, 2018, the TPUC filed a motion to dismiss asserting that Davidson
County lacked subject matter jurisdiction. Rather, the TPUC asserted that Williamson
County had exclusive subject matter jurisdiction . Mr.Powell and Non Potable also filed
motions to dismiss asserting lack of jurisdiction. By order of July 13, 2018, the Davidson
County Chancery Court granted the Appellees’ motions to dismiss on its finding that the
Davidson County court lacked subject matter jurisdiction.

                                         II. Issue

      Milcrofton appeals. The sole issue for review is whether the trial court erred in
dismissing Appellant’s complaint for lack of subject matter jurisdiction.

                                III. Standard of Review

       This case was decided on grant of Appellees’ motions to dismiss. The resolution
of a Tennessee Rule of Civil Procedure 12.02 motion to dismiss is determined by an
examination of the pleadings alone. Leggett v. Duke Energy Corp., 308 S.W.3d 843,
851 (Tenn. 2010); Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 696
(Tenn. 2002). A defendant who files a motion to dismiss “‘admits the truth of all of the
relevant and material allegations contained in the complaint, but . . . asserts that the
allegations fail to establish a cause of action.’” Brown v. Tenn. Title Loans, Inc., 328
S.W.3d 850, 854 (Tenn. 2010) (quoting Freeman Indus., LLC v. Eastman Chem. Co.,
172 S.W.3d 512, 516 (Tenn. 2005)).

       In considering a motion to dismiss, courts “must construe the complaint liberally,
presuming all factual allegations to be true and giving the plaintiff the benefit of all
reasonable inferences.” Tigg v. Pirelli Tire Corp., 232 S.W.3d 28, 31-32 (Tenn. 2007)
(citing Trau-Med., 71 S.W.3d at 696). A trial court should grant a motion to dismiss
                                          -3-
“only when it appears that the plaintiff can prove no set of facts in support of the claim
that would entitle the plaintiff to relief.” Crews v. Buckman Labs Int’l, Inc., 78 S.W.3d
852, 857 (Tenn. 2002); see also Lanier v. Rains, 229 S.W.3d 656, 660 (Tenn. 2007). We
review the trial court’s legal conclusions regarding the adequacy of the complaint de
novo with no presumption that the trial court’s decision was correct. Webb v. Nashville
Area Habitat for Humanity, Inc., 346 S.W.3d 422, 429 (Tenn. 2011).

                                      IV. Analysis

      As discussed above, by its complaint, Milcrofton sought a declaratory judgment,
by the Davidson County Chancery Court, that Mr. Powell and Non Potable “may not
provide water service to customers in King’s Chapel Subdivision or anywhere else in
Milcrofton’s exclusive service area.” As grounds for such declaratory judgment,
Milcrofton’s complaint averred, in relevant part:

      29. Milcrofton has petitioned the TPUC for a declaratory order . . . but the
      TPUC refuses to issue one.

      30. The definition of “public utility” in Tenn. Code Ann. § 65-4-101(6)
      applies to [Non Potable] and [its] water system in King’s Chapel
      Subdivision. Furthermore, the requirement of a certificate of public
      convenience and necessity in Tenn. Code Ann. § 65-4-201(a) and other
      requirements in Title 65, Chapter 4 of the Tennessee Code apply to [Non
      Potable] and [its] water system in King’s Chapel Subdivision.

      31. [Mr. Powell and Non Potable’s] violation of such requirements along
      with the TPUC’s refusal to enforce such requirements, interferes with
      Milcrofton’s exclusive legal right to serve water to customers in King’s
      Chapel Subdivision.

      32. The exception to the TPUC’s jurisdiction in Tenn. Code Ann. § 7-82-
      104(a) did not apply to Milcrofton’s petition because Milcrofton was not
      asking the TPUC to exercise control over Milcrofton in the management
      and control of its water system. Rather, Milcrofton was asking the TPUC
      to exercise control over . . . a privately-owned and illegally-operated water
      system.

      33. TPUC’s misinterpretation of Tenn. Code Ann. § 7-82-104(a) and
      refusal to grant Milcrofton’s petition interfere with Milcrofton’s exclusive
      legal right to serve water to customers in King’s Chapel Subdivision.

      34. Pursuant to Tenn. Code Ann. § 4-5-225(a), Milcrofton is entitled to
      declaratory judgment and ancillary relief from the Court.
                                          -4-
Many of the foregoing averments concern the TPUC’s refusal to grant Milcrofton’s
relief. In fact, Milcrofton reiterates the arguments it made in its petition to the TPUC,
i.e., that Non Potable meets the definition of a “public utility” and is illegally operating
without a CPC. Milcrofton further contends that the TPUC erred in declining to exercise
jurisdiction over the case. Specifically, Milcrofton states that “[t]he exception to the
TPUC’s jurisdiction . . . did not apply to Milcrofton’s petition,” and “TPUC[]
misinterpret[ed] . . . Tenn. Code Ann. § 7-82-104(a) [by] refus[ing] to grant Milcrofton’s
petition . . . .” These averments are ostensibly an appeal of the TPUC decision.

      Tennessee Code Annotated section 4-5-223 of the Uniform Administrative
Procedures Act (“UAPA”) provides:

       (a) Any affected person may petition an agency for a declaratory order as to
       the validity or applicability of a statute, rule or order within the primary
       jurisdiction of the agency. The agency shall:

       (1) Convene a contested case hearing pursuant to this chapter and issue a
       declaratory order, which shall be subject to review in the chancery court of
       Davidson County, unless otherwise specifically provided by statute, in the
       manner provided for the review of decisions in contested cases; or

       (2) Refuse to issue a declaratory order, in which event the person
       petitioning the agency for a declaratory order may apply for a declaratory
       judgment as provided in § 4-5-225.

      The record of the TPUC proceedings is not included in our appellate record.
Rather, we have the Appellant’s averment, in which Milcrofton avers that,

       [o]n October 6, 2017, TPUC dismissed Milcrofton’s petition. The hearing
       officer did not reach the merits. She reasoned that TPUC did not have
       jurisdiction, due to Tenn. Code Ann. § 7-8-104(a), and that “Milcrofton
       should seek a resolution of its complaint elsewhere.” The order dismissing
       Milcrofton’s petition is final.


Taking the foregoing averment as true (which we must do under the standard of review
for motions to dismiss), the TPUC did not issue a declaratory order, i.e., did not answer
the question posed by Milcrofton. Accordingly, we need not determine whether the
TPUC “convene[d] a contested case” so as to trigger appellate review “in the chancery
court of Davidson County,” under Tennessee Code Annotated section 4-5-223(a)(1),
supra. Rather, it appears that the TPUC simply “refuse[d] to issue a declaratory order,”
thus triggering review under the mechanism outlined at Tennessee Code Annotated
                                         -5-
section 4-5-225. Before we turn to address the requirements of section 4-5-225,
concerning the question of whether Milcrofton’s filing in the Chancery Court of
Davidson County was timely, where the TPUC refuses to convene a contested case, a ten-
year statute of limitations applies. Hughley v. State, 208 S.W.3d 388, 395 (Tenn. 2006)
(“Where an agency declines to convene a contested case hearing in response to a petition
for declaratory order made pursuant to Tennessee Code Annotated section 4-5-223 and
issues only a letter of denial, a petitioner has ten years in which to file a suit for
declaratory judgment pursuant to Tennessee Code Annotated section 4-5-225.”).
Therefore, taking the averments in Milcrofton’s complaint as true, we conclude that the
filing in Davidson County Chancery Court was not untimely. However, this conclusion
does not, ipso facto, mean that Davidson County had subject matter jurisdiction to issue
the requested declaratory ruling that Non Potable and Mr. Powell “may not provide water
service to customers in King’s Chapel Subdivision or anywhere else in Milcrofton’s
exclusive service area.”

       Subject matter jurisdiction refers to a court’s “lawful authority to adjudicate a
controversy brought before it.” Northland Ins. Co. v. State, 33 S.W.3d 727, 729 (Tenn.
2000). A court’s subject matter jurisdiction is derived—“either explicitly or by necessary
implication”—from the state constitution or statute. Benson v. Herbst, 240 S.W.3d 235,
239 (Tenn. Ct. App. 2007). The existence of subject matter jurisdiction depends on “the
nature of the cause of action and the relief sought.” Landers v. Jones, 872 S.W.2d 674,
675 (Tenn. 1994). If subject matter jurisdiction is lacking, the court must dismiss the
case. Dishmon v. Shelby State Cmty. Coll., 15 S.W.3d 477, 480 (Tenn. Ct. App. 1999).
Whether a court lacks subject matter jurisdiction presents a question of law, which we
review de novo. Chapman v. DaVita, Inc., 380 S.W.3d 710, 712–13 (Tenn. 2012).

       Milcrofton asserts that Tennessee Code Annotated section 4-5-225(a) vests subject
matter over this case in the Davidson County Chancery Court. The statute provides:

      The legal validity or applicability of a statute, rule or order of an agency to
      specified circumstances may be determined in a suit for a declaratory
      judgment in the chancery court of Davidson County, unless otherwise
      specifically provided by statute, if the court finds that the statute, rule or
      order, or its threatened application, interferes with or impairs, or threatens
      to interfere with or impair, the legal rights or privileges of the complainant.
      The agency shall be made a party to the suit.

Tenn. Code Ann. § 4-5-225(a).



      In dismissing Milcrofton’s complaint, the trial court found, in relevant part, that

                                           -6-
      . . . the complaint does not set forth sufficient grounds for this Court to
      exercise jurisdiction under § 4-5-225(a). The court concludes, therefore,
      that subject matter jurisdiction does not exist over this case. This is
      because the case does not challenge the legal validity or applicability of a
      statute, rule or Order of an agency that interferes with or impairs the legal
      rights or privileges of the complainant. Accordingly, the court concludes
      that the entire case should be DISMISSED.


We agree with the trial court’s conclusion. The crux of Milcrofton’s complaint, as set out
in the introductory paragraph thereof, is that Non Potable and Mr. Powell “are illegally
competing with Milcrofton, a public entity, by serving water to customers in Milcrofton’s
exclusive area.” Likewise, the relief sought in the complaint is a declaration that Non
Potable is a public utility, which is operating in violation of the statutory requirements
concerning CPCs, and an “injunction prohibiting [Non Potable and Mr. Powell] from
providing water service to customers in King’s Chapel Subdivision or anywhere else in
Milcrofton’s exclusive service area.”

       In arguing for subject matter jurisdiction in Davidson County under section 4-5-
225(a), Milcrofton’s appellate brief contends that the case concerns Non Potable’s
“threatened application of TPUC statutes—which is to say their ongoing violation of
them—impairs Milcrofton’s rights.” Milcrofton’s framing of the case is specious in view
of the averments in its complaint. As noted above, Milcrofton’s complaint requests a
declaration that Non Potable is a public utility operating in violation of the statutory
requirement that it obtain a CPC. Even assuming, arguendo, that Tennessee Code
Annotated section 4-5-225(a) would authorize the Davidson County Chancery Court to
make such a determination, Milcrofton’s complaint specifically seeks injunctive relief
preventing Non Potable from providing water service to King’s Chapel. As noted above,
a court’s subject matter jurisdiction rests on both “the nature of the cause of action and
the relief sought.” Landers, 872 S.W.2d, at 675 (emphasis added). As explained by the
Tennessee Supreme Court:

      “Declaratory judgments” are so named because they proclaim the rights of
      the litigants without ordering execution or performance. 26 C.J.S.
      Declaratory Judgments § 1 (2001). Their purpose is to settle important
      questions of law before the controversy has reached a more critical stage.
      26 C.J.S. Declaratory Judgments § 3 (2001). The chief function is one of
      construction. Hinchman v. City Water Co., 167 S.W.2d 986, 992 (Tenn.
      1943) (quoting Newsum v. Interstate Realty Co., 278 S.W. 56, 56–57
      (Tenn. 1925)). While findings of fact are permitted in a declaratory
      judgment action, “the settlement of disputed facts at issue between the
      parties will ordinarily be relegated to the proper jurisdictional forums
      otherwise provided.” Id.
                                         -7-
Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 837 (Tenn. 2008).

       Allowing all reasonable inferences in favor of Milcrofton, the gravamen of its
complaint is enforcement of its exclusive rights under Tennessee Code Annotated section
7-82-301(a)(1)(B) (“So long as the district continues to furnish any of the services that it
is authorized to furnish in this chapter, it shall be the sole public corporation empowered
to furnish such services in the district, and no other person, firm or corporation shall
furnish or attempt to furnish any of the services in the area embraced by the district,
unless and until it has been established that the public convenience and necessity requires
other or additional services.”). Tennessee Code Annotated section 4-5-225(a) simply
does not grant the Davidson County Chancery Court the authority to arbitrate the
exclusive rights of a utility district. As such, we conclude that the Davidson County
Chancery Court did not err in dismissing Milcrofton’s complaint for lack of subject
matter jurisdiction.

       We note that the sole question urged on this Court is whether the Davidson County
Chancery Court has subject matter jurisdiction under Tennessee Code Annotated section
4-5-225(a). The parties have not asked this Court to issue a holding concerning where
jurisdiction lies in this case. Nonetheless, our holding does not preclude Milcrofton from
seeking relief in a court, agency, or county of proper jurisdiction.

                                      V. Conclusion

       For the foregoing reasons, we affirm the trial court’s order dismissing Appellant’s
complaint. Costs of the appeal are assessed against the Appellant, Milcrofton Utility
District of Williamson County, Tennessee, for all of which execution may issue if
necessary.



                                                 _________________________________
                                                 KENNY ARMSTRONG, JUDGE




                                           -8-
