Chasan v. Village Dist. of Eastman

• Decision Date: 28 September 1983
• Docket Number: Civ. No. 83-144-D.
• Citation: 572 F. Supp. 578
• Parties: Bruce J. CHASAN, on behalf of himself and all others similarly situated v. VILLAGE DISTRICT OF EASTMAN; Franklyn W. Phillips, Individually and as Commissioner of the Village District of Eastman; Raymond Manning, Individually and as Commissioner of the Village District of Eastman; Kyle Wing, Individually and as Commissioner of the Village District of Eastman; Eastman Community Association; Town of Springfield, N.H.; John Chiarella, Individually and as Selectman of the Town of Springfield; Louise Jacewicz, Individually and as Selectman of the Town of Springfield; Arnold Putney, Individually and as Selectman of the Town of Springfield.
• Court: U.S. District Court — District of New Hampshire

572 F. Supp. 578

Bruce J. CHASAN, on behalf of himself and all others similarly situated v. VILLAGE DISTRICT OF EASTMAN; Franklyn W. Phillips, Individually and as Commissioner of the Village District of Eastman; Raymond Manning, Individually and as Commissioner of the Village District of Eastman; Kyle Wing, Individually and as Commissioner of the Village District of Eastman; Eastman Community Association; Town of Springfield, N.H.; John Chiarella, Individually and as Selectman of the Town of Springfield; Louise Jacewicz, Individually and as Selectman of the Town of Springfield; Arnold Putney, Individually and as Selectman of the Town of Springfield.

Civ. No. 83-144-D.

United States District Court, D. New Hampshire.

September 28, 1983.

Laurence F. Gardner, Hanover, N.H., for plaintiff.

Thomas H. Richards, Manchester, N.H., for defendants.

OPINION AND ORDER

DEVINE, Chief Judge.

Plaintiff files an extensive complaint and asks this Court to relieve him and others similarly situated from paying various assessments made by defendants. Jurisdiction is founded upon 28 U.S.C. §§ 1331 and 1343. Defendants move to dismiss, and the Court grants defendants' motion.

In ruling on the motion, the Court follows the well-established and familiar requirement that the material facts alleged in the complaint are to be construed in the light most favorable to the plaintiff and taken as admitted, with dismissal to be ordered only if the plaintiff is not entitled to relief under any set of facts he could prove. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Melo-Tone Vending, Inc. v. United States, 666 F.2d 687, 688 (1st Cir.1982); Harper v. Cserr, 544 F.2d 1121, 1122 (1st Cir.1976); Dunlap v. Aulson Corporation, 90 F.R.D. 647, 654 (D.N.H.1981).

Facts

The Court abridges the amended complaint. Controlled Environment Corporation ("CEC") developed Eastman, a planned community, from contiguous lands located in the Towns of Enfield, Grantham, and Springfield, New Hampshire. Amended Complaint ¶ 22. Property owners in Eastman automatically became members of the Eastman Community Association ("ECA"). ¶ 25. Plaintiff bought two lots in Eastman from CEC. ¶ 23. He built a vacation home on one of the lots in 1978-79. Id. In 1983 he conveyed the undeveloped lot and acquired a one-half interest in a condominium at Eastman. ¶ 23. Plaintiff acquired another lot in Eastman in 1979. ¶ 24. At the time, Eastman Water Company ("EWC"), a wholly-owned subsidiary of CEC, provided water in Eastman. ¶ 26. Owners of undeveloped lots paid an annual water availability fee of $60 to EWC as required by the covenants which created ECA. ¶ 27. Homeowners who had metered services paid $20 minimum per quarter, regardless of usage. Id. The New Hampshire Public Utilities Commission ("PUC") regulated EWC. Id.

In 1981, CEC proposed to sell to ECA the Eastman golf course and EWC. ¶ 28. The ECA Council approved the acquisition on February 15, 1981, and made the following plans. ¶ 29. ECA proposed one method to purchase the golf course and another method to purchase EWC. ECA would assess every lot, home and condominium owner $245 each to raise money for the outright acquisition of the golf course. ¶ 29(a). ECA would also form a village district pursuant to New Hampshire law in order to issue bonds for the purchase of EWC. ¶ 29(b). The new water company would charge an average of $250 per year per household, and would maintain the $60 per year per undeveloped lot water availability fee. ¶ 29(c). ECA intended to have water consumers pay the debt service on the bonds issued for the purchase of EWC. ¶ 29(e).

With the approval of the Selectmen of the Towns of Enfield, Grantham, and Springfield, the Village District of Eastman ("VDE") formed on or about March 28, 1981. ¶ 30. On or about April 1, 1981, CEC conveyed EWC to ECA. ¶ 31. ECA earlier decided to own and operate the water company from date of acquisition to date of transfer to VDE. ¶ 29(d). Administrators of ECA operated the water company, and ECA obtained interim financing from a commercial lender pending transfer of the water company to VDE. ¶ 31.

On or about July 1, 1981, the water company administrator, after consultation with the Commissioners of VDE, established new water rates effective April 1, 1981. ¶ 32. The new rates increased the minimum quarterly charge for homeowners from $20 to $25, and increased the water availability fee for lot owners from $60 to $80. ¶ 32. The PUC did not review or approve these rate changes. ¶ 32. In the fall of 1981, ECA transferred the water company to VDE, which maintained the new rates and issued bonds for financing. ¶ 33. At the first annual meeting of VDE in 1982, an ad valorem tax was approved to pay a portion of the debt service on bonds issued by VDE. ¶ 35.

Complaint

Plaintiff pleads four counts: impairment of contractual rights and three claims of violations of due process and equal protection. Count I, his claim for impairment of contractual rights, alleges that the increased water availability fees paid by lot owners, the increased minimum quarterly charge for home owners, ¶ 37, and the ad valorem tax, ¶ 38, are contrary to the intention of the ECA Council that the bond debt service be taxed on the basis of water consumption.

Count II claims violations of equal protection and due process. Plaintiff argues that increased water availability fees, minimum quarterly water use rate, and ad valorem tax benefited water consumers, i.e., resident homeowners, and did not benefit nonresident homeowners and lot owners, and, therefore, amounted to a taking without justification in violation of the due process and equal protection clause of the Fourteenth Amendment, and the New Hampshire Constitution, part 1, articles 12 and 15.

Count III requires some factual elaboration. Plaintiff owns a vacation home which he built in 1978-79 in the Spring Glen area of Eastman. ¶¶ 23, 44. Spring Glen is within the Town of Springfield and comprises a small part of Eastman and Springfield. ECA decided in 1981 that it would attempt to form a village district under N.H. RSA 52:1¹ in order to issue bonds to finance the purchase of EWC. ¶ 29(b). In 1981 Spring Glen did not have ten or more legal voters. ¶¶ 23, 44. The petition for approval of the village district presented to the Selectmen of the Town of Springfield in 1981 did not contain the names of ten or more legal voters from Spring Glen, but contained names of persons who did not own property in Spring Glen and who were not eligible to vote in the general election of Springfield. ¶ 45. In 1981 the Selectmen of the Town of Springfield approved the village district and Spring Glen became part of VDE. ¶¶ 30, 44. Plaintiff argues that if the approval of the village district is valid under N.H. RSA 52:1, then the statute has been applied unconstitutionally and in violation of the New Hampshire Constitution, part 1, articles 1, 12, 15, and 28, and the due process and equal protection clauses of the United States Constitution. Plaintiff argues alternatively that the aforesaid constitutional provision of N.H. RSA 52:1 is unconstitutional on its face.

Count IV alleges violations of due process and equal protection by the imposition of an ad valorem property tax by VDE. The Court further elaborates. The Towns of Enfield, Grantham, and Springfield independently valuate real property within their towns and tax at different percentages of assessed value. ¶ 49. The Commissioners of VDE did not valuate property but adopted the town valuations. ¶ 50. Plaintiff claims that VDE imposed an unequal and nonproportional tax when VDE adopted the valuations of the towns and failed to adjust for local factors, e.g., differing percentages of assessed value.

Law

Plaintiff contends that defendants have impaired his contractual rights. Plaintiff argues that the action of ECA in voting and approving the acquisitions of the golf course and EWC created a contract between ECA and its members. Plaintiff claims that VDE violated Article 1, Section 10, Clause 1,² of the United States Constitution when VDE continued to charge water rates that had been increased by ECA and established taxes, thus avoiding its alleged contractual obligation to distribute the cost of EWC on the basis of water consumed.

Plaintiff argues that VDE violated the Contract Clause when VDE charged increased water rates and established taxes. Plaintiff seems to contend that N.H. RSA ch. 52 enabled VDE to avoid its alleged contractual relationship with plaintiff. Viewed in the most favorable light, plaintiff claims that ECA's February 1981 contract with its members set forth the agreed-upon method and rate of payment for acquisition of the water company, and that VDE then "impaired" the contract when it increased water rates and established taxes. The claim is inapt.

The Supreme Court in the context of the contract clause has drawn a distinction between a breach of contract and impairment of the obligation of the contract. The distinction depends on the availability of a remedy in damages in response to the state's (or its subdivision's) action. If the action of the state does not preclude a damage remedy the contract has been breached and the non-breaching party can be made whole. If this happens there has been no law impairing the obligation of the contract. Hays v. Port of Seattle, 251 U.S. 233, 237, 40 S.Ct. 125 126, 64 L.Ed. 243 (1920); Hale, supra at 891. The example of a private agreement is illustrative. When a private party breaks a contract it has breached the contract and has become liable for damages. When it pays the damages the obligation of the contract is dissolved. A state or its subdivision also may breach a contract and when it pays damages the obligation of the contract has also been dissolved. Hale, supra at 638. However, if a state or its subdivision passes

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