RASPBERRY JUNCTION HOLDING, LLC v. SOUTHEASTERN CONNECTICUT WATER AUTHORITY
SC 19974
Supreme Court of Connecticut
April 9, 2019
Robinson, C. J., and Palmer, McDonald, D‘Auria, Mullins, Kahn and Ecker, Js.
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Syllabus
The plaintiff sought to recover damages from the defendant municipal water authority, S Co., for the loss of revenue resulting from the interruption of water service at its hotel property. The plaintiff alleged that the interruption was caused by S Co.‘s negligence in its maintenance and operation of a pumping station. S Co. had been created by a special act of the General Assembly (33 Spec. Acts 478, No. 381 [1967]) that set forth S Co.‘s powers and duties, including the power to be sued and the power to make rules for the “sale of water and the collection of rents and charges therefor.” S Co. thereafter adopted rules governing its water service, including a rule limiting its liability for its negligence in supplying water. Citing that rule, S Co. moved for summary judgment on the ground that it was immune from liability for the plaintiff‘s damages and that the rule was a proper exercise of its authority under the special act‘s grant of power to make rules for the sale of water and the collection of rents and charges. The plaintiff opposed the motion, claiming that S Co., as a municipal corporation engaged in a proprietary function, was not immune from suit and that the special act did not provide any authority, express or implied, to promulgate rules that waive liability for negligence. The trial court recognized that, generally, S Co. could be sued like a private water company but that, as an administrative agency, it had the power to promulgate regulations having the force and effect of law. The court, relying on authority from other jurisdictions, determined that reasonable rates for the provision of water services depended in part on a rule limiting liability, enforceable only to the extent that ordinary negligence was involved. The trial court therefore found that S Co.‘s rule limiting liability for service outages was a reasonable exercise of its rule-making authority, and, because the plaintiff alleged only ordinary negligence, the rule limiting S Co.‘s liability was enforceable as to the plaintiff‘s action. In light of this conclusion, the court did not address S Co.‘s alternative ground for summary judgment, granted S Co.‘s motion for summary judgment, and rendered judgment thereon, from which the plaintiff appealed. Held that the trial court improperly granted S Co.‘s motion for summary judgment on the ground that S Co. had the authority to promulgate a rule that limited its liability for disruptions to water service, and, accordingly, the judgment was reversed and the case was remanded for consideration of the defendant‘s alternative ground for summary judgment: it was clear, from the text of the special act, that the legislature did not expressly empower the defendant to promulgate a rule immunizing itself from liability for the failure to supply water, and the defendant‘s authority to limit its liability for the negligent disruption of water could not be necessarily implied, as there was no textual or rational basis in the special act to infer that such authority was necessary to effectuate any other authority expressly conferred, the imposition of liability for the disruption of water service would not impair S Co.‘s authority to set rates and sell water, or impair the ability of S Co. to set rates sufficient to cover costs, and S Co. was not subject to comprehensive regulation of its rates, services and facilities by the state‘s public utilities regulatory authority and, therefore, faced no impediment to setting rates sufficient to cover the cost of insurance or its liability in the absence of insurance; moreover, S Co.‘s reliance on both the special act‘s catchall provision granting S Co. the power to do all things necessary or convenient to carry out the provisions of the special act and the act‘s statement of purpose did not provide S Co. with authority to limit its liability for the disruption of water service.
Argued November 13, 2018—officially released April 9, 2019
Procedural History
Action to recover damages sustained as a result of the alleged negligence of the defendant, and for other relief, brought to the Superior Court in the judicial district of New London, where the court, Vacchelli, J., granted the defendant‘s motion for summary judgment and rendered judgment thereon, from which the plaintiff appealed. Reversed; further proceedings.
Stephanie S. Berry, with whom were Ryan L. McLean and, on the brief, Lloyd L. Langhammer, for the appellee (defendant).
Opinion
MCDONALD, J. The dispositive question in this appeal is whether the special act creating the defendant, Southeastern Connecticut Water Authority, authorized the defendant to promulgate a rule immunizing itself from liability for failures or deficiencies in its supply of water to its customers. The plaintiff, Raspberry Junction Holding, LLC, appeals from the trial court‘s judgment rendering summary judgment in favor of the defendant on the basis of such a rule. We reverse the judgment of the trial court.
The record reveals the following undisputed facts and procedural history. The defendant was created in 1967 by a special act of the General Assembly as a body politic and corporate of the state, designated to perform the “essential government function” of planning, operating, and maintaining
On the basis of the authority purportedly granted to it by § 14 of the special act, the defendant adopted “Rules Governing Water Service,” including rule 5, entitled “SUPPLY OF WATER.” Rule 5 provides in relevant part: “It is expressly agreed that the [defendant] shall not be liable for a deficiency or failure in the supply of water or the pressure thereof for any cause whatsoever, or for any damage caused thereby, or for the bursting or breaking of any main or service pipe or any attachment to the [defendant‘s] property. . . .”2
In 2016, the plaintiff commenced the present action against the defendant, seeking damages on the basis of a loss of water service at The Bellissimo Grande Hotel in North Stonington, operated by the plaintiff. In its one count complaint, the plaintiff alleged that the hotel lost water service for several days in June, 2015, due to the explosion of a hydropneumatic tank at a pumping station operated by the defendant as a result of the defendant‘s negligent construction, operation, inspec-tion or maintenance of the tank and its valves. The plaintiff further alleged that the water outage caused the plaintiff to lose revenue due to its inability to rent rooms and the need to give refunds to hotel guests during the water outage.
The defendant moved for summary judgment on two grounds. First, it contended that rule 5 immunized it from liability for the plaintiff‘s damages, and that the rule was a proper exercise of its authority under the special act‘s grant of power to make “rules for the sale of water and the collection of rents and charges therefor.” See 33 Spec. Acts 483, No. 381, § 14 (i) (1967). Second, it contended that, because the plaintiff was seeking damages for monetary loss only, the claim is barred by the common-law economic loss doctrine.3 The plaintiff opposed the motion,
The trial court rendered summary judgment in favor of the defendant. The court recognized that the defendant‘s authority to promulgate rule 5 depended on an express or implied grant in the special act. It further recognized that, as a general matter, the defendant could be sued like a private water supply company. Nonetheless, it reasoned that, unlike a private company, the defendant is an administrative agency that has the power to promulgate regulations having the force and effect of law. On the basis of that conclusion, the court focused its analysis exclusively on the question of whether a rule limiting a water company‘s liability for service outages was a reasonable exercise of the defendant‘s rule-making authority. Finding no Connecticut authority on this question, it relied on authority from other jurisdictions holding that reasonable rates required for such services depend in part on a rule limiting liability. It also noted that other jurisdictions generally have held that such limitations on liability are enforceable only to the extent of ordinary negligence. Because the present case alleged only ordinary negligence, the court held that rule 5 was enforceable as to the present action.4 In light of this conclusion, the court did not address the applicability of the economic loss doctrine. The plaintiff appealed from the trial court‘s judgment to the Appellate Court, and, pursuant to
On appeal, the plaintiff renews its claim that rule 5 is unenforceable because the special act does not expressly or impliedly grant to the defendant the power to promulgate a rule limiting its liability otherwise established when it acts in its proprietary capacity. The plaintiff further asserts that rule 5 would not be a reasonable exercise of authority because the defendant is not subject to regulation that might otherwise circumscribe its ability to set rates to cover liability costs.5 In response, the defendant contends that rule 5 was validly promulgated pursuant to the special act‘s express grant of power to set reasonable rates for service and make rules for the sale of water. Alternatively, the defendant asserts that such authority is properly implied because it is necessary to carry into effect its stated purpose under the special act of benefitting the people of its region and the state, and for the improvement of their health, welfare and prosperity. The defendant also argues that rule 5 is enforceable because it is essential to its duty to set reasonable rates.
“Our review of the trial court‘s decision to grant [a] motion for summary judgment is plenary.” (Internal quotation marks omitted.) Boone v. William W. Backus Hospital, 272 Conn. 551, 559, 864 A.2d 1 (2005). Because the resolution of the issue concerning the defendant‘s authority to promulgate rule 5 presents a question of statutory interpretation over which we also exercise plenary review, we are guided by settled principles of construction. See Hicks v. State, 297 Conn. 798, 800-801, 1 A.3d 39 (2010) (setting forth process of ascertaining legislative intent pursuant to
In considering whether the legislature, through the special act, conferred on the defendant the authority to immunize itself from liability for failures or deficiencies in its water supply, we also must be mindful of certain settled principles that inform the nature and source of the defendant‘s powers. By virtue of the special act, the defendant is a municipal corporation. See, e.g., Monroe v. Middlebury Conservation Commission, 187 Conn. 476, 483, 447 A.2d 1 (1982); Rocky Hill Convalescent Hospital, Inc. v. Metropolitan District, 160 Conn. 446, 450, 280 A.2d 344 (1971); see also Sachem‘s Head Property Owners’ Assn. v. Guilford, 112 Conn. 515, 517-18, 152 A. 877 (1931) (explaining attributes of municipal corporation). As a creation of the state, a municipal corporation has no inherent legislative authority. See, e.g., Monroe v. Middlebury Conservation Commission, supra, 484. Rather, “[i]t can exercise only such powers as are expressly granted or necessarily implied to enable it to carry into effect the objects and purposes of its creation.” Id. “In determining whether a municipality has the authority to adopt a challenged . . . provision, we do not search for a statutory prohibition against such an enactment; rather, we must search for statutory authority for the enactment.” (Internal quotation marks omitted.) Simons v. Canty, 195 Conn. 524, 530-31, 488 A.2d 1267 (1985).
It is clear from the text of the special act that the legislature did not expressly empower the defendant to promulgate a rule immunizing itself from liability for the failure to supply water. To the contrary, § 14 specifically provides that the defendant may “be sued . . . .” See 33 Spec. Acts 481, No. 381, § 14 (a) (1967). This provision appears to incorporate long-standing, common-law principles, since codified in large part, dictating the contours of a municipality‘s liability and immunities. See Considine v. Waterbury, 279 Conn. 830, 841-44, 905 A.2d 70 (2006) (setting forth common-law principles of municipal immunity and recognizing that
One example of such a clear expression is found in § 28 of the special act. That section immunizes the defendant‘s members from personal liability for torts committed while acting within the scope of their author-ity. See 33 Spec. Acts 492, No. 381, § 28 (1967) (“[n]either the members of the authority, nor any person acting in its behalf, while acting within the scope of their authority, shall be subject to any personal liabilities resulting from the erection, construction, reconstruction, maintenance or operation of the properties or any of the improvements of the authority or from carrying out any of the powers expressly given in this act“).7 There is no other language in the special act expressly addressing the subject of liability or immunity.
Moreover, even if we were to assume, without deciding, that the grant of authority to “make . . . rules for the sale of water” indicates an intent to confer lawmaking authority on the defendant,8 providing immunity to the defendant for its negligent disruption of water service would not expressly constitute a rule “for the sale of water.” The relationship between the sale of water and liability for disruption to water service is too attenuated. If the defendant‘s construction prevailed, every municipality and municipal corporation authorized to regulate a given matter would have express authority to immunize itself for its negligence in the performance of those matters. Such an absurd result would largely obliterate § 52-557n and its common-law foundation. See footnote 6 of this opinion.
Because there is no explicit authorization in the special act, rule 5 can stand only if the defendant‘s authority to immunize itself from negligent disruption of water supply can be “necessarily implied to enable it to carry into effect the objects and purposes of its creation.” Monroe v. Middlebury Conservation Commission, supra, 187 Conn. 484. In considering this question, we underscore that “[m]unicipal corporations are more strictly limited in respect to their implied power than private corporations. The test of their right by implication to exercise any particular power is the necessity of such power, not its convenience.” Wallingford v. Wallingford, 15 Conn. Supp. 344, 347 (1948); see also City Council v. Hall, 180 Conn. 243, 248, 429 A.2d 481 (1980). “Necessary implication refers to a logical neces-sity; it means that no other interpretation is permitted by the words of the [statute] construed; and so has been defined as an implication which results from so strong a probability of intention that an intention contrary to that imputed cannot be supported.” United States v. Jones, 204 F.2d 745, 754 (7th Cir.), cert. denied, 346 U.S. 854, 74 S. Ct. 67, 98 L. Ed. 368 (1953). “If there is reasonable doubt as to the existence of the power, it does not exist. . . . Any doubt or ambiguity arising out of the question as to whether or not a municipal corporation has certain powers by implication must be resolved in favor of the public.” (Citations omitted.) Wallingford v. Wallingford, supra, 347; see also Pratt v. Litchfield, 62 Conn. 112, 118, 25 A. 461 (1892).
Moreover, the defendant is not subject to comprehensive regulation of its rates, services, and facilities by this state‘s public utilities regulatory authority. See 33 Spec. Acts 490, No. 381, § 24 (1967).10 It faces no impediment to setting rates sufficient to cover the cost of insurance or its liability in the absence of insurance. It is not compelled to serve customers regardless of their ability to pay for services. As such, the case law from other jurisdictions on which the trial court relied, which involved water authorities subject to such regulatory restrictions and thus implicated a corresponding public policy justification for the right to limit liability, are inapposite.11 See Los Angeles Cellular Telephone Co. v. Superior Court, 65 Cal. App. 4th 1013, 1018, 76 Cal. Rptr. 2d 894 (1998) (“it is an equitable trade-off—the power to regulate rates and to set them below the amount an unregulated provider might otherwise charge requires a concomitant limitation on liability“); see also Fax Telecommunicaciones, Inc. v. AT&T, 138 F.3d 479, 489 (2d Cir. 1998) (liability limitation provisions serve two goals—prevention of price discrimination among rate
Finally, the defendant cites both the special act‘s catchall provision, granting it the power to “do all things necessary or convenient to carry out the powers expressly given in this act“; 33 Spec. Acts 484, No. 381, § 14 (p) (1967); and its statement of purpose, creating the defendant to benefit the people of its region and the state and to improve their health, welfare and prosperity; 33 Spec. Acts 481, No. 381 § 1 (1967); but does not explain how either provides the requisite authority. We previously explained why it is not necessary to immunize the defendant from liability to carry out the powers granted and that mere convenience is not enough. Moreover, we previously have required a clearer relationship between a general statement of purpose and the authority claimed. See Kuchta v. Arisian, supra, 329 Conn. 544-45 (This court noted the expansive safety and aesthetic purposes of zoning regulations but concluded that “[t]he mere fact that a broader interpretation of advertising might more fully accomplish these purposes does not permit us to ignore the meaning of the term compelled under the applicable rules of construction. We are obliged to construe the grant of authority narrowly, as it is in derogation of common-law property rights.“). Indeed, it is hardly conceivable that the legislature would have delegated to one of its creations the wholesale power to establish its own public policy with regard to its exposure to liability by virtue of such aspirational terms. See generally Simons v. Canty, supra, 195 Conn. 532 (“[w]e have consistently rejected claims that municipalities may exercise important functions based solely on their power to promote good government“). The legislature has established the public policy of this state with regard to municipal liability, and, “[i]n areas where the legislature has spoken . . . the primary responsibility for formulating public policy must remain with the legislature.” State v. Whiteman, 204 Conn. 98, 103, 526 A.2d 869 (1987).
We conclude that the trial court improperly granted the defendant‘s motion for summary judgment on the basis of immunity under rule 5. Therefore, the trial court must consider the defendant‘s alternative ground for summary judgment on the basis of the economic loss doctrine.
The judgment is reversed and the case is remanded for further proceedings in accordance with the preceding paragraph.
In this opinion the other justices concurred.
MCDONALD, J.
SUPREME COURT JUSTICE
Notes
At oral argument before this court, the defendant asserted that the preface to subdivision (1), the phrase “[e]xcept as otherwise provided by law,” acknowledges that a municipal corporation with the power to promulgate rules having the force and effect of law can adopt such rules to bar liability otherwise imposed by statute. We disagree. Although this savings clause includes common-law doctrines that implicate the liabilities and immunities of municipalities; see Grady v. Somers, 294 Conn. 324, 334, 984 A.2d 684 (2009); the statute prescribes the rule, and, therefore, a coequal governmental body must also prescribe the exception, or at least the legislature must clearly delegate the power to do so to another body with legislative powers.