City of Billings v. County Water Dist. of Billings Heights, 96-462
| Citation | 281 Mont. 219,935 P.2d 246 |
| Decision Date | 28 February 1997 |
| Docket Number | No. 96-462,96-462 |
| Parties | CITY OF BILLINGS, Plaintiff and Respondent, v. COUNTY WATER DISTRICT OF BILLINGS HEIGHTS, Defendant and Appellant. |
| Court | United States State Supreme Court of Montana |
Bruce A. Fredrickson, Antoinette M. Tease, Crowley, Haughey, Hanson, Toole & Dietrich, Billings, for Appellant.
James L. Tillotson, Billings City Attorney, Billings, for Respondent.
Appellant County Water District of Billings Heights (the District) appeals from the order issued by the Thirteenth Judicial District Court, Yellowstone County, denying its application for a preliminary injunction.
We reverse.
The question before us is whether the District Court manifestly abused its discretion in denying the District's application for a preliminary injunction that would enjoin the City of Billings (the City) from enforcing against the District water rate increases approved by the Billings City Council.
In 1963, the City and the District entered into a contract whereby the District agreed to purchase water from the City. The District in turn intended to sell the water to its own customers. The contract states, in relevant part:
(3) Water Rate:
In addition to building the aforesaid 16-inch main from Sixth Avenue North and North Twelfth Street to the pumping facilities, the District agrees to pay for the water obtained from the City each month at the "OP" rate as follows:
Water Rate per 100 Cubic Feet
First 1M $.37
Next 1M .23
Next 48M .16
Next 50M .12
Next 900M .08
Over 1,000,000 .07
Payment of the charges for water used by the District shall be subject to the same discount and other rules applying to the accounts of other users of City water.
The City agrees that it shall not apply to any court, commission or other authority for any increase in the District's aforesaid "OP" rate unless it applies simultaneously for the same percentage of increase in the rates which apply to all other users of the City's water.
At the time the parties entered into the contract, the Montana Public Service Commission (PSC) controlled the setting of municipal utility rates. In City of Billings v. Public Service Commission (1981), 193 Mont. 358, 631 P.2d 1295, this Court held that the PSC could set water rates that were inconsistent with the water rate provisions of the 1963 contract between the City and the District, but that its authority to do so could only be exercised "if the contract poses an immediate threat to the utility's ability to serve or if the contract adversely affects the utility's rate structure." City of Billings, 631 P.2d at 1304.
However, in 1981, the Montana Legislature enacted the first of a number of statutes which effectively abrogated the PSC's power to oversee water rates. Section 69-7-101, MCA (1981), gave to municipalities the "power and authority to regulate, establish, and change, as it considers proper, rates, charges, and classifications imposed for utility services to its inhabitants and other persons served by municipal utility systems." The rates charged by the municipality had to be "reasonable and just," and could not be raised to yield more than a 12% increase in total annual revenues unless the increase was approved by the PSC. Sections 69-7-101 and -102, MCA (1981). Section 69-7-201, MCA, also enacted in 1981, authorized municipal utilities to create, with some limitations, their own operating rules. By 1995, with the amendment of § 69-7-101, MCA and the repeal of § 69-7-102, MCA, effectively allowing municipalities to set their own utility rates without PSC review, the control PSC once had over utility rates had diminished dramatically; the control and oversight of municipal utility rates was now largely in the hands of the municipalities themselves.
In 1993, the City increased its water rates. While the average city water customer experienced a 9.2% increase in her monthly water bill as a result of the rate increase, the District experienced a 32% increase in its monthly water bill. The District, in accordance with its belief that the 1963 contract prohibited the City from raising the District's water rate payment obligations by a percentage greater than the percentage increase imposed on its other customers, increased its monthly payment to the City by 9.2%.
In August 1994, the City initiated this action to recover from the District the difference between the water rate it enacted in 1993 and the rate the District has been paying since that time. The District answered, alleging that the rate increase was, in a number of respects, unconstitutional.
On May 13, 1996, the Billings City Council enacted another water rate increase. This increase, effective July 1, 1996, raised the District's water bill by 123% over the 1993 rates. No other City water customer experienced as dramatic a percentage increase as did the District.
On May 14, 1996, the District filed an application for a preliminary injunction to prevent the City from enforcing the 1996 rate increase against the District until the court had an opportunity to rule on the constitutional issues raised by the District in its answer to the City's 1994 complaint. After a hearing, the court issued an order on June 28, 1996, denying the District's application. The District appeals from this order.
A ruling on a motion for preliminary injunction is subject to the discretion of the district court. Van Loan v. Van Loan (1995), 271 Mont. 176, 178-79, 895 P.2d 614, 615. We will review a district court's decision regarding a preliminary injunction motion to determine if the court has manifestly abused its discretion. Van Loan, 895 P.2d at 615 (citation omitted). If, however, the district court arrives at a conclusion of law, "no discretion is involved, and therefore, we review the district court's conclusions of law to determine whether the district court's interpretation of the law is correct." Knudson v. McDunn (1995), 271 Mont. 61, 64, 894 P.2d 295, 297 (citation omitted).
Did the District Court manifestly abuse its discretion in denying the District's application for a preliminary injunction that would enjoin the City from enforcing against the District water rate increases approved by the Billings City Council?
The purpose of a preliminary injunction is to prevent "further injury or irreparable harm by preserving the status quo of the subject in controversy pending an adjudication on the merits." Knudson, 894 P.2d at 297-98. The District applied for a preliminary injunction pursuant to § 27-19-201(3), MCA, which states that a preliminary injunction may be granted
(3) when it appears during the litigation that the adverse party is doing or threatens or is about to do or is procuring or suffering to be done some act in violation of the applicant's rights, respecting the subject of the action, and tending to render the judgment ineffectual; .... (Emphasis added.)
The District contends that the application here of the statutory scheme which replaced PSC control over utility rates with municipal control (§ 69-7-101, MCA (1981) (amended 1995); § 69-7-102, MCA (1981) (repealed 1995); and, § 69-7-201, MCA (1981) ()) impairs its contractual relationship with the City in violation of the Montana and United States Constitutions. The District further contends that because of the nature of a constitutional right violation, a legal judgment of monetary damages would not effectively remedy its injuries.
In Knudson we explained that a preliminary injunction may issue if the applicant can establish a prima facie case. Knudson, 894 P.2d at 298. The District contends that it has established a prima facie case of a violation of its constitutional contract clause rights, and that the court therefore erred in failing to grant the preliminary injunction.
However, the City argues that because statutes are presumed to be constitutional, City of Billings v. Laedeke (1991), 247 Mont. 151, 154, 805 P.2d 1348, 1349, and because the District is raising a constitutional challenge, to be successful here the District must prove "beyond a reasonable doubt" that the statutes are unconstitutional as applied, Fallon County v. State (1988), 231 Mont. 443, 445, 753 P.2d 338, 339. We cannot agree with the City that the District must "prove beyond a reasonable doubt" that the statutes are unconstitutional as applied; rather, the District must make out a prima facie case of unconstitutionality.
While the City's contention that a statute's presumption of constitutionality must be overcome by proof beyond a reasonable doubt is correct, that rule is nevertheless inapplicable here. In Laedeke and Fallon County, cited by the City, the rule was applied in the context of trials on the merits of constitutional challenges to a municipal ordinance and a legislative tax apportionment, respectively. See Laedeke, 805 P.2d at 1349-50; Fallon County, 753 P.2d at 339-40. Here, however, in the context of an application for a preliminary injunction, requiring the District to prove the statutes unconstitutional beyond a reasonable doubt would be directly at odds with this Court's holdings that a successful applicant for a preliminary injunction need only establish a prima facie case, Knudson, 894 P.2d at 298, and that "[an] applicant [for a preliminary injunction] need not make out such a case as would entitle him to final judgment on the merits," Porter v. K & S Partnership (1981), 192 Mont. 175, 183, 627 P.2d 836, 840 (citing Atkinson v. Roosevelt County (1923), 66 Mont. 411, 422, 214 P. 74, 78.) Therefore, in support of its application for preliminary injunction, the District must establish a prima facie case of a violation of its rights under the contract clauses of the Montana and United...
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