712 P.2d 174 | Or. Ct. App. | 1986
Defendant appeals from a declaratory judgment construing provisions of a contract dealing with a water rate to be paid by plaintiff to defendant. Under the contract, defendant agreed to treat and deliver water to plaintiff. The trial court declared that defendant had overcharged plaintiff, beginning January 5, 1981, established a method for determining the water rate and ordered defendant to repay the overcharges. We reverse and remand.
Plaintiff is a domestic water supply district organized under ORS Chapter 264. Defendant is a municipal corporation. In the early 1970’s problems surfaced with respect to the respective water systems. In order to meet state standards, major improvements and expenditures were required. A preliminary engineering study showed that the state standards could be met and substantial savings could be achieved if the water systems were combined as recommended by the study. The parties agreed to do that and, in October 1973, they signed a statement of intent memorializing their agreement. In essence, defendant would build a new water treatment facility and a Siletz River intake and pumping station, with plaintiff paying part of the cost. Plaintiff would build a pipeline to a point where it would connect with defendant’s system, and plaintiff would pay part of the cost of the line that defendant would have to build to join with plaintiffs. Plaintiff would also pay a portion of the annual operation and maintenance costs.
The parties succeeded in raising the necessary funds and proceeded to build the facilities. During that period, plaintiff acquired its own water right on the Siletz River. On August 30, 1976, the parties signed a contract to implement the statement of intent. Defendant agreed to treat and deliver to plaintiff up to one million gallons of water a day. The water rate provision which precipitated this action provides:
“[Plaintiff] agrees to pay to [defendant] for the treatment and delivery of such water the rates as shown on Exhibit ‘A’ to this agreement which is by this reference incorporated herein. Provided however, that said per gallon rate to be charged to [plaintiff] shall be reviewed annually and adjusted in accordance with [defendant’s] actual experience in its cost to produce treated water exclusive of amortization of capital improvements.”
Although plaintiffs actual consumption of water has increased since 1976, it has never approached one million gallons a day; in 1982, the last year for which there is evidence in the record, it averaged below 400,000 gallons a day in the month of greatest use. Plaintiff originally paid 18 cents per thousand gallons; by the end of 1980 it was paying 28 cents per thousand.
The consultant determined the amount plaintiff should pay for water under the utility enterprise system. He identified the facility and operating costs for which he believed plaintiff should be charged, credited it for its capital contributions, estimated its consumption for the next year and recommended a price per thousand gallons which would produce an amount approximately equal to what he believed to be plaintiffs proper share of defendant’s costs. Because he construed “amortization” narrowly to mean payments to a sinking fund to retire bonded indebtedness, he did not believe that the contract between plaintiff and defendant limited the facility costs which defendant could include in its charges. Defendant accepted the consultant’s approach and increased its charge to plaintiff to 58 cents per thousand gallons effective January 5, 1981, and to 80 cents per thousand gallons
The trial court rejected the application of the utility enterprise system method of setting rates under the contract and instead required that the rate be determined each year by projecting forward one year the average of defendant’s previous five years’ actual experience. It identified certain portions of defendant’s annual budget for inclusion in the five-year base; it excluded items of no benefit to plaintiff, along with any consideration of loss of profit, return on investment, depreciation and reserves for replacement of facilities.
The first issue is whether we review the court’s factual findings de novo or only to determine if there is evidence to support them. Whether a declaratory judgment is legal or equitable depends on its underlying nature, including the relief requested. North Pac. Ins. Co. v. Forest Indus. Ins. Exch., 280 Or 313, 317, 571 P2d 138 (1977). Although plaintiff requested both equitable relief and money damages, its basic demand is that the court construe the contract between it and defendant. Construction of a contract is usually a legal matter. See C & B Livestock v. Johns, 273 Or 6, 10, 539 P2d 645 (1975). That is the underlying nature of this case, and so our review is. as of an action at law. See Salem Resources v. U.S. Consultants, 75 Or App 249, 251-52, 706 P2d 920 (1985). Accordingly, our review is limited to determining whether the trial court’s findings of fact are supported by any substantial evidence and whether such findings are sufficient to support the judgment. Hawkins v. Teeples and Thatcher, 267 Or 151, 160, 515 P2d 927 (1973).
The 1973 version of the Uniform System of Accounts for Class A and B Water Utilities, which the Public Utility Commissioner adopted for all utilities which he regulated,
If anything is clear in this case, it is that the utility enterprise system of pricing water services has nothing to do with the agreement between the parties. Neither party used it at the time and, so far as the record shows, neither party was even aware of it. No matter how correct it may be as an economic matter, defendant simply had no contractual right to impose it unilaterally.
The difficult part of the case is determining from the record what defendant’s “actual experience” has been. Defendant’s annual budgets, which are the only relevant evidence in the record, and which may be the only evidence available, do not break down its costs in a way which clearly makes possible the necessary calculations. Defendant objects to the formula which the court fashioned from that information. The court took certain portions of the city’s budget pertaining to its water department, excluded line items which it determined were of no benefit to plaintiff,
There is substantial evidence in the record to support the findings of the trial court. The difficulty is that the findings are insufficient to support the judgment. We reverse the judgment and remand to the trial court to take evidence on what it costs to treat and deliver water to plaintiff. On remand, the trial court may make appropriate additional findings, determine what the proper rate has been for all appropriate periods since January 5,1981, establish a method for making future rate changes that is consistent with the parties’ original intent and award judgment to plaintiff for all overcharges, if any, with interest at the statutory rate.
Reversed and remanded for further proceedings not inconsistent with this opinion.
The contract does not say who is to set the rate but only that it is to be based on defendant’s experience. It appears that plaintiff simply acquiesced in the increases which led to the 28 cent rate.
At the same time defendant restructured its charges to its own consumers in line with the consultant’s recommendations.
The consultant had included all of the excluded elements in his determination of facilities costs and thus in his recommendations of what defendant should charge plaintiff.
Because plaintiff and defendant are municipalities, neither is subject to PUC regulation. However, this definition is evidence of the meaning of “amortization” in the industry and thus is relevant to determining what the parties meant when they used the word.
Defendant objected to the admission of this evidence on the ground that it would change the plain meaning of the term. ORS 42.250 provides:
“The terms of a writing are presumed to have been used in their primary and general acceptation, but evidence is admissible that they have a technical, local, or otherwise peculiar signification and were used and understood in the particular instance, in which case the agreement shall be construed accordingly.”
The evidence was admissible.
Defendant attacks the trial court’s action, because “it has precluded defendant from replacing its pricing model with another * * The court did not do that; defendant did when it made the contract with plaintiff.
This limitation on defendant’s charges does not, of course, affect plaintiffs continuing obligation for yearly payments on the unpaid portion of its capital contribution.
Defendant points out that the trial court listed only examples of the excluded line items and ended its list with “etc.” Any vagueness in the court’s description is the result of the difficulty of using defendant’s budget documents for this purpose. In the circumstances, the court adequately described the kinds of line items to be excluded, even if it did not name them all. However, as we will discuss, the budget documents are inadequate to achieve the court’s purposes.