City of Hamilton v. Public Water Supply Dist. No. 2 of Caldwell County

• Decision Date: 26 January 1993
• Docket Number: No. WD,WD
• Parties: CITY OF HAMILTON, Missouri, Appellant, v. PUBLIC WATER SUPPLY DISTRICT # 2 OF CALDWELL COUNTY, Respondent. 45493.
• Court: Missouri Court of Appeals

Page 96

849 S.W.2d 96

CITY OF HAMILTON, Missouri, Appellant, v. PUBLIC WATER SUPPLY DISTRICT # 2 OF CALDWELL COUNTY, Respondent.

No. WD 45493.

Missouri Court of Appeals Western District.

Jan. 26, 1993.

Motion for Rehearing and/or Transfer to

Supreme Court Denied March 2, 1993.

Application to Transfer Denied April 20, 1993.

J.D. Gorham, McCalley, Gorham & Bowman, Richmond, for appellant.

Donald G. Kimball, Heavner, Jarrett & Kimball, Kanss City, for respondent.

Before ULRICH, P.J., and SHANGLER and FENNER, JJ.

SHANGLER, Judge.

This action for declaratory judgment presents for adjudication the interpretation of a contract by the City of Hamilton to sell potable water to Public Water Supply District No. 2 of Caldwell County for resale to its customers. The contract was concluded in March 1969 for a term of thirty-five years. The City agreed to supply the District up to 2,000,000 gallons of potable water at a flat rate of sixty cents per thousand gallons. The contract by its terms was subject to modification.

The modification term prescribes:

That the provisions of this contract pertaining to the schedule of rates to be paid by the District for water delivered are subject to modification at the end of every Five (5) year period. Any increase or decrease in rates shall be based on a demonstrable increase or decrease in the costs of performance hereunder, but such costs shall not include increased capitalization of the City system. Other provisions of this contract may be modified or altered by mutual agreement.

In 1989 the City engaged the E.T. Archer firm to provide a rate study in advance of an anticipated sale of a million-dollar bond issue for capital improvements to the municipal waterworks to increase raw water supply. The water rate study concluded that the fiscal integrity of the system was in jeopardy because the City was unable to accumulate excess revenues after satisfying all operation and maintenance expenses. The study proposed an immediate 35% rate increase in order to establish the fiscal stability of the utility prior to the issuance of the bonds. The study concluded also that once the bonds were sold, in order to service that indebtedness and accumulate revenue, the charges for water would need to be increased by a total of 257%.

The rate then in effect called for the District to pay the City a flat $1.07 per one thousand gallons not to exceed 2,000,000 gallons per month. This is the rate that the District continues to pay the City.

In April 1989 the electorate approved the $1,000,000 water works revenue bond issue. In May 1989 the City supplied the District with a copy of the water rate study. The ostensible purpose was to satisfy the proviso of the modification term that any increase in rates be based on a "demonstrable increase" in the cost of performance. Then, the City notified the District that there would be an increase in the charges for potable water. The rates in the notice were the same as those thereafter adopted by the City in June 1989. The municipal resolution increased all water rates to $4.10 for the first 1,000 gallons; $2.75 per 1000 for the next 9,000 gallons; $2.55 per 1000 for the next 10,000 gallons; $2.20 per 1000 for the next 30,000 gallons; and $1.80 per 1000 for all gallons over 50,000. The City billed the District according to this schedule, but the District refused to pay.

Then in July 1989, the City adopted yet another resolution which increased the rates to $6.10 for the first 1,000 gallons; $4.30 per 1000 for the next 9,000 gallons; $4.00 per 1000 for the next 11,000 gallons; $3.50 per 1000 for the next 29,000 gallons; and $3.00 per 1000 for all gallons over 50,000. The City billed the District according to this schedule, but the District refused to pay.

In July 1989, the City enacted an ordinance to authorize the issuance and sale of $870,000 worth of bonds. The ordinance included a covenant to the bondholders to "fix, establish, maintain and collect such rates, fees and charges" for the use of the waterworks as would be sufficient to operate and maintain the system and to protect the bondholders.

The District sent the City a letter that, in effect, rejected the increased rate charges. The letter gave two grounds of objection: (1) The City had raised its rates for potable water sold to the District before the City had demonstrated an "increase in the costs of performance" as required by the modification term of the contract; (2) The District was entitled to a detailed list of costs which were directly related to the City's cost to sell water to the District. The letter informed the City that the District would continue to pay the City at the rate of $1.07 per 1000 gallons until a new rate could be determined.

Thereupon the City brought a petition for declaratory judgment alleging the contract dispute and seeking declarations (1) that the water rate study was a sufficient demonstration under the contract to increase the water rates to the District; (2) that the City is authorized under the contract, and is required by Missouri law, to increase its water rates conformably with the covenants of the water revenue bond so that the charges are sufficient to pay for the costs of the operation of the water system as well as the capital improvements; (3) for judgment for water used since May 1989 at the rates adopted.

The case was tried to the court, and at the close of the City's evidence, the District moved for a directed verdict, and was sustained. ¹ The City appeals from that ruling.

The City raises two points on appeal and posits them as errors in sustaining the District's "motion for directed verdict" at the close of the City's case. The City cites In re Estate of Mapes, 738 S.W.2d 853 (Mo. banc 1987), for the rule that, on review of a motion for directed verdict at the close of the plaintiff's case, the evidence is to be viewed in the light most favorable to the plaintiff, so that the "cause may not be withdrawn from the jury" unless the reasonable inferences which may be drawn are so strongly against the plaintiff as to leave no reasonable minds to differ. Id. at 855[4, 5]. The City then argues that "viewing the water rate study [and the other evidence] in the light most favorable to the City," there was a sufficient showing of demonstrable increase in the City's cost of performing its contractual duty to supply water to the District, calculated without regard to the costs of capital improvements, to avoid a directed verdict.

The trial, of course, was to the court and not to a jury. The cause was not "withdrawn from the jury" as in Mapes and so the rationale of directed verdict does not appertain. In a trial without a jury, the judge is not only the trier of the facts but also the determinant of whether the plaintiff has shown a right to relief. Wyrozynski v. Nichols, 752 S.W.2d 433, 435 (Mo.App.1988). It is for this reason that the motion for directed verdict, so apt in a jury case to differentiate the judge function as to whether the evidence is submissible from the jury function to find the facts and return a verdict under the instructions of the court, has no role or function in a trial to the court without a jury. Id. It is for this reason also that the "motion for directed verdict" in a case tried to the court submits the issue for decision on the merits, so that the appeal from such a ruling is from a final determination of the issues and is compassed by Rule 73.01 and Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976). Brassfield v. Allwood, 557 S.W.2d 674, 677[6, 7] (Mo.App.1977); Wyrozynski v. Nichols, 752 S.W.2d at 435.

Accordingly, we review not for submissibility, but under Murphy v. Carron, 536 S.W.2d at 30. We sustain the judgment of the trial court unless "there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law." Id. at 32[1-3].

Points on Appeal

Thus interpolated, the first point on appeal posits that the judgment is against the weight of the evidence. The second posits that the judgment rests on an erroneous declaration of law. These points, although taken up in turn, interdepend, so that neither can be adjudicated separately.

The judgment of the court was accompanied by findings and conclusions, among them:

The entire [water rate study] report is made for the purpose of determining the necessary rate to charge the citizens of Hamilton if the $1,000,000 capital improvement was consummated.

[T]he contract provision for the increase in rates requires the City to provide to the District a demonstration of its increased cost of performance excluding any capital improvement costs.

The study delivered to the District does not provide for the increase in actual cost of operating the City's water system without taking into consideration capitalization of the City's system. This study does not provide any evidence to the District as to what was the increase of the cost to the City to perform under the 1969 contract.

The City argues that these determinations misinterpret the water rate study "as one dealing solely with capitalization costs" and so are, in effect, against the weight of the evidence. The City acknowledges the conclusion of the study that calls for a total rate increase of 257% in order to accommodate the debt of the new improvement, but points to Part III of the study which explains that existing expenses will require an annual 35% rate increase regardless of the issuance of any bonds. Accordingly, argues the City, the evidence shows a "demonstrable increase" in the cost of performance under the contract as to the 35% rate increase without regard to the costs of capital improvements.

The trial court found nevertheless that the rate projections of the study were based not on actual costs, but on budgeted costs, and so a 35% increase in the cost of performance by the City under the contract was...