City of Laramie v. Univ. of Wyo.

542 P.3d 607

2024 WY 13

CITY OF LARAMIE, Wyoming, Appellant (Plaintiff),

v.UNIVERSITY OF WYOMING and University of Wyoming Board of Trustees, Appellees (Defendants).

S-23-0062

Supreme Court of Wyoming.

January 31, 2024

Appeal from the District Court of Albany County, The Honorable Misha E. Westby, Judge

Representing Appellant: Thomas Szott and Korry D. Lewis of The Bernhoft Law Firm, S.C., Cheyenne, Wyoming. Argument by Mr. Szott.

Representing Appellees: Patrick J. Crank and Abbigail C. Forwood of Crank Legal Group, P.C., Cheyenne, Wyoming. Teresa R. Evans, University of Wyoming General Counsel, Laramie, Wyoming. Argument by Mr. Crank.

Representing the Attorney General’s Office Pursuant to W.R.A.P. 7.07: Bridget L. Hill, Attorney General; D. David DeWald, Deputy Attorney General; Christoper M. Brown, Senior Assistant Attorney General; Abigail C. Boudewyns, Senior Assistant Attorney General. Argument by Ms. Boudewyns.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

FENN, Justice.

[¶1] The City of Laramie (the City) appeals from the district court’s orders dismissing some of its claims and granting summary judgment on its remaining declaratory judgment claims against the University of Wyoming and its Board of Trustees (collectively the University) pertaining to the drilling and operation of specified water wells. The City contends the district court erred when it found legislation exempting the University from the application of a city ordinance pertaining to the operation of those wells constitutional. The City also asserts the district court erred when it determined the City could not enforce a covenant in a l965 deed, which prohibited the University from drilling one of the wells, due to sovereign immunity. We affirm.

ISSUES

[¶2] The parties raise a number of issues, which we consolidate and rephrase as follows:

I. Does sovereign immunity preclude the City from enforcing the restrictive covenant in the 1965 deed?

II. Is Wyoming Statute § 21-17-126 unconstitutional as a "special law" under Article 3, § 27 of the Wyoming Constitution?

III. Is Wyoming Statute § 21-17-126 unconstitutional as an impermissible delegation of municipal power under Article 3, § 37 of the Wyoming Constitution?

IV. Can the City enforce Laramie Municipal Code § 13.04.360 against the University?

FACTS

[¶3] Dating back to Wyoming’s territorial days, the Union Pacific Railroad (Union Pacific) owned large portions of land in Albany County, including all of Section 35, Township 16 North, Range 73 West of the 6th P.M. Water sources known as the City Springs are located underneath the southern half of Section 35, and both Union Pacific and the City appropriated water from the City Springs under an adjudicated 1868 water right.

[¶4] On October 26, 1965, Union Pacific donated the north half of Section 35, Township 16 North, Range 73 West of the 6th P.M. to the University to be used "as a part of the campus" of the University. The deed contained a restrictive covenant prohibiting the premises from being used for the construction, maintenance, or operation of water wells (the 1965 Covenant).

[¶5] In the spring of 2019, the University filed two applications with the State Engineer’s Office to drill two test wells: Well A and Well B. Well B is located in Section 35. The applications were approved, and the wells were completed. In the fall of 2019, the University filed applications with the State Engineer’s Office to convert these wells to production wells. The applications indicated the ground water from the wells would be comingled with other University wells and used to water athletic fields, lawns, trees, shrubs, and flowers, on University lands, including the Jacoby Golf Course.

[¶6] In August of 2020, the City passed Laramie Municipal Code § 13.04.360 (the City Ordinance), which provides in pertinent part:

It is unlawful to do the following unless a franchise or permit is granted by the city council upon a determination that such franchise or permit is in the best interest of the city:

A. To develop, drill, construct, operate, maintain, or use any water line, system, well, or works within the corporate limits of the city in order to sell, distribute, provide, or use non-municipal water (potable and/or non-potable) within the city;

B. To interconnect any building, facility, landscape, lot, premises, or structure of any kind within the corporate limits of the city to any water line, system, well, or works other than to the city’s water utility; or C. To use any portion of the city’s streets, alleys, easements, or rights-of-way, or other property owned or managed by the city, for such purposes.

[¶7] In November of 2020, the State Engineer’s Office granted the University’s applications to convert Wells A and B into production wells. The State Engineer capped the amount of water the University could use from Wells A and B and other University wells at 540 acre-feet annually.

[¶8] In the following months, the City and the University discussed the City’s concerns about the University’s operation of Wells A and B and the potential application of the City Ordinance to the University, but they were ultimately unable to reach a resolution. In March 2021, the legislature passed what became Wyoming Statute § 21-17-126 (Lexis-Nexis 2021). 2021 Wyo. Sess. Laws. Ch. 93, § 1. The statute reads:

(a) Subject to title 41 of the Wyoming statutes and notwithstanding any municipal or county ordinance, the University of Wyoming may:

(i) Develop, drill, construct, operate, maintain and use any water line, system, well or works on property owned by the university for the purposes of distributing, providing and using nonpotable water on property owned or leased by the university for miscellaneous use where water is to be used for landscape watering, lawns, athletic fields, trees, shrubs and flowers;

(ii) Connect a building, facility, landscape, lot, premises or structure owned by the university to any water line, system, well or works operated, maintained or used by the university.

(b) No city or county shall restrict or prohibit the university from developing, drilling, constructing, operating, maintaining or using any water system independent of the city’s or county’s water system.

[¶9] The legislature also amended Wyoming Statute § 15-7-701, which gives a city the authority to grant the right to construct, maintain, and operate waterworks within the city to a corporation, by adding subsection (d). 2021 Wyo. Sess. Laws. Ch. 93, § 1. The new subsection reads: "Nothing in this article shall be construed to restrict, prohibit or otherwise affect the rights of the University of Wyoming under W.S. 21-17-126." Wyo. Stat. Ann. § 15-7-701(d) (LexisNexis 2021).

[¶10] The City filed this action in June 2021 seeking the following relief: 1) a declaration it has the right to enforce the 1965 Covenant and prohibit the University from producing water from Well B without the City’s consent; 2) a declaration Wyoming Statute § 21-17-126 is unconstitutional; 3) a declaration the University has to comply with the City Ordinance; 4) a declaration the City has the right to prohibit the University’s pipeline from crossing the City’s right-of-way from the State for its transmission line or 30th Street without its consent; and 5) a preliminary injunction preventing the University from producing water from Wells A and B while the suit was pending.

[1] [¶11] The University moved to dismiss all the City’s claims under Rule 12(b)(6) of the Wyoming Rules of Civil Procedure (W.R.C.P.). The district court entered an order dismissing four of the City’s claims. The district court found Wyoming Statute §21-17-126 was constitutional under both Article 3, § 27 and Article 3, § 37 of the Wyoming Constitution. The district court also found the City failed to exhaust its administrative remedies before the Office of State Land and Investments, Board of Land Commissioners, so its claims regarding whether the University could cross the City’s transmission line right of way had to be dismissed. The district court also found the City failed to allege the University planned to cross 30th Street in order to connect the new wells to its existing irrigation system, so this claim had to be dismissed.¹ The only two claims that survived the motion to dismiss were: 1) whether the City had the right to enforce the drilling restrictions contained in the 1965 Covenant as a third-party beneficiary,² and 2) whether the University had to comply with the City Ordinance.

[¶12] After the district court granted the motion to dismiss in part, the University filed four counterclaims. The University alleged: 1) the City did not have the authority to regulate the University, which was a constitutionally created sovereign entity; 2) the City did not have statutory authority to pass the City Ordinance; 3) the City had no standing to be granted declaratory relief because it failed to exhaust its administrative remedies before the State Engineer related to any alleged interference with its water rights caused by Wells A and B; and 4) Wyoming Statutes §§ 21-17-126 and 15-7-701(d) expressly prohibited the City from regulating the University’s use of non-potable water to irrigate University lands.

[¶13] The University moved for summary judgment under W.R.C.P. 56 or for judgment on the pleadings under W.R.C.P. 12(c) on all its counterclaims and on the City’s two remaining claims. The University argued it was entitled to judgment as a matter of law on all its counterclaims and the City’s remaining claims because the City Ordinance was not enforceable against the University, and the City could not enforce the 1965 Covenant because the University enjoyed sovereign immunity from breach of contract actions at the time the deed was executed. The City filed its own motion for partial summary judgment on the University’s second counterclaim, arguing it had both constitutional and statutory authority to pass the City Ordinance.

[¶14] ...