109 A.3d 412
Vt.2014Background
- In 1997 Newport (City) and Derby Center (Village) entered an interlocal water agreement: City granted 10,000 gpd, to be charged 90% of the Village’s rate schedule; Village reserved right to set rate schedule with 60 days’ notice.
- In 2006 the Village adopted an ordinance adding a "ready-to-serve" (unused-allocation) fee and a large-user surcharge; Village billed the City 90% of that schedule; City paid under protest and sued.
- Disputes also arose over (1) whether the City connected three non–industrial-park customers without required notice and (2) whether the master meter underreported City usage for multiple periods.
- The superior court ruled for the City: held the ready-to-serve fee was unauthorized by the contract and by statute (24 V.S.A. § 3311), found no credible evidence of unauthorized connections, and referred the underreporting claim to mediation; entered judgment against Village for withheld amounts.
- On appeal the Vermont Supreme Court reversed in part: it concluded the contract and § 3311 authorize the Village to include ready-to-serve/unused-allocation charges as part of its rate schedule and that the 2006 notice was adequate; it found ambiguity over whether the contract limited City connections to the industrial park and remanded that issue for factual findings; it also remanded the meter-underreporting counterclaim for court resolution rather than mediation.
Issues
| Issue | City (Plaintiff) Argument | Village (Defendant) Argument | Held |
|---|---|---|---|
| Whether the 1997 contract authorized the Village’s 2006 ready-to-serve (unused-allocation) fee | Contract requires City pay only for actual water used; no authorization for unused-capacity charges | Contract allows Village to set a rate schedule based on operating/project/reserve/contingency costs, permitting charges for maintaining capacity | Reversed: Contract language unambiguously permits charges beyond metered usage (rate schedule and operating costs include facility maintenance and other non-usage costs) |
| Whether 24 V.S.A. § 3311 permits ready-to-serve/reservation fees | Statute contemplates meter-based rates; fee is not a statutory "rate" | § 3311 gives municipal waterworks broad discretion to set rates, including annual rents or reservation fees; rates get presumption of reasonableness | Reversed: § 3311 allows municipal water utilities to adopt reservation/ready-to-serve fees; court will defer if rates are nondiscriminatory and not arbitrary or capricious |
| Whether Village provided sufficient contractual notice of the rate change | Notice letter was generic and failed to specify the ready-to-serve fee or resulting rates | Letter referenced the interlocal agreement and advised of rate increases; ordinance enactment provided constructive notice | Affirmed: 60-day notice requirement satisfied; contract/statute do not require disclosure of exact future quarterly bills |
| Whether the City breached by connecting three customers outside the industrial park without notice | City treated the City system as single user; permit filings and location do not extend the line beyond scope; Article II does not require prior notice for such connections | Village contends agreement limited service to Phase I industrial park and required prior notice before connections outside that scope | Remanded: Article IV ("Intent of Agreement") is ambiguous; factual determination of parties’ intent and whether connections were authorized must be made by trial court on remand |
| Whether the master meter underreported City usage and Village is entitled to additional payment | City raised meter problems as defense; readings were sometimes zero and disputed | Village claims meter malfunction caused substantial underbilling and seeks recovery; court had permitted counterclaim | Remanded: Trial court improperly referred counterclaim to mediation post-trial; given late discovery of the issue, court must resolve the counterclaim on remand rather than requiring further mediation |
Key Cases Cited
- Ianelli v. Standish, 592 A.2d 901 (Vt. 1991) (contract construction: clear terms are construed as a matter of law)
- Ferrill v. N. Am. Hunting Retriever Ass’n, Inc., 795 A.2d 1208 (Vt. 2002) (ambiguity in contract terms makes meaning a factual question)
- Bonanno v. Verizon Bus. Network Sys., 93 A.3d 146 (Vt. 2014) (appellate review: mixed questions of law and fact reviewed de novo for legal conclusions)
- Madowitz v. Woods at Killington Owners’ Ass’n, 6 A.3d 1117 (Vt. 2010) (court will not imply terms inconsistent with express contract language)
- Kipp v. Estate of Chips, 732 A.2d 127 (Vt. 1999) (read contract as a whole; intent of parties governs)
- Isbrandtsen v. North Branch Corp., 556 A.2d 81 (Vt. 1988) (consider surrounding circumstances only when writing is ambiguous)
- Downtown Barre Dev. v. C & S Wholesale Grocers, Inc., 857 A.2d 263 (Vt. 2004) (plain and unambiguous contract terms are enforced)
- Elkins v. Microsoft Corp., 817 A.2d 9 (Vt. 2002) (statutory construction reviewed de novo)