Forsyth County v. Waterscape Serv. LLC

• Decision Date: 01 November 2010
• Docket Number: No. A09A1964.,A09A1964.
• Citation: 303 Ga.App. 623,694 S.E.2d 102
• Parties: FORSYTH COUNTYv.WATERSCAPE SERVICES, LLC.
• Court: Georgia Court of Appeals

303 Ga.App. 623

694 S.E.2d 102

FORSYTH COUNTYv.WATERSCAPE SERVICES, LLC.

No. A09A1964.

Court of Appeals of Georgia.

March 16, 2010.

Certiorari Denied Nov. 1, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kilpatrick Stockton, Curtis A. Garrett, Jr., Matthew H. Patton, Atlanta, for appellant.

George E. Butler II, Bruce M. Endenfield, Dahlonega, for appellee.

SMITH, Presiding Judge.

Forsyth County (“the county”) and Waterscape Services, LLC (“Waterscape”) entered into a contract under which Waterscape agreed to design and construct a wastewater treatment plant and then to convey the plant to the county after successfully operating the plant for a minimum of three consecutive months. After the plant was constructed and became operational, Waterscape advised that it was terminating the contract because of a dispute regarding a change order, and it refused to convey the plant to the county, leading the county to commence this action for specific performance, breach of contract damages, and expenses of litigation. Waterscape answered and counterclaimed, seeking, among other things, a declaratory judgment that it had validly terminated the contract; a declaratory judgment that Waterscape enjoyed a perpetual easement by estoppel to utilize the county's permits and wastewater disposal infrastructure; and an injunction preventing the county from stopping Waterscape from using the permits and infrastructure.

The trial court denied the county's motion for summary judgment on its claim for specific performance and on the three counterclaims asserted by Waterscape, and sua sponte granted summary judgment in favor of Waterscape on the counterclaims. The county appeals these summary judgment rulings. For the reasons discussed below, we reverse and remand with direction.

Summary judgment is appropriate if the pleadings and evidence show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. On appeal from the grant or denial of summary judgment, we conduct a de novo review, with all reasonable inferences construed in the light most favorable to the nonmoving party.

(Citations and punctuation omitted.) Ins. Co., etc. of Pennsylvania v. APAC-Southeast, 297 Ga.App. 553, 677 S.E.2d 734 (2009); see also OCGA § 9-11-56(c). Guided by these principles, we turn to the record in the present case.

Overview of the Agreement. On August 11, 2004, the county and Waterscape entered into the “Design-Build Agreement in Aid of Construction of a New Waste Water Treatment Plant in Forsyth County, Georgia” (the “agreement”). Waterscape agreed to design and complete construction of a new wastewater treatment facility to serve customers in the James Creek basin in Forsyth County (the “facility”) within 24 months of execution of the agreement, and then to “donate” the completed facility to the county after a minimum of three consecutive months of successful operation. In return, Waterscape would be compensated out of certain payments made by third-party developers in an amount to exceed $10,000,000, and would be allowed to use the county's wastewater disposal infrastructure and obtain necessary regulatory permits using the county's name. For purposes of this appeal, the most relevant contractual provisions are those governing (1) Waterscape's payment arrangement; (2) the permitting process and related termination provision; (3) Waterscape's obligation to “donate” the facility to the county; and (4) the county's right to “buy out” Waterscape's residual compensation rights at the time of donation.

Waterscape's Payment Arrangement. The parties agreed that Waterscape's compensation for designing and constructing the facility would come from “sewer tap fees” and other contributions collected from third-party developers whose developments would be served by the facility. The compensation was tied to Waterscape's anticipated costs and was set at a maximum amount of $10,614,000, referred to as the “Total Tap Fee Compensation.” The Total Tap Fee Compensation, however, could be increased by “future change orders requested by the County ... agreed to in writing by both parties, whose consent shall not be unreasonably withheld or delayed.”

The Permitting Process and Related Termination Provision. A wastewater treatment plant may only discharge its byproducts onto Georgia land or into Georgia waters in accordance with permits issued by the Environmental Protection Division of the Georgia Department of Natural Resources (“EPD”). See Ga. Comp. R. & Regs. rr. 391-3-6-.06(3)(a); 391-3-6-.11(3). The parties agreed that Waterscape would obtain EPD permits “in the name of the County” and that the construction of the facility would be “deemed to be completed upon the issuance of a final start-up authorization” from the EPD.

The parties considered the issuance of two EPD permits of particular importance to the construction and operation of the facility: an expanded Land Application System (“LAS”) permit, pursuant to which a permit previously issued to the county's existing Fowler plant would be expanded to include the discharge of the byproducts from the completed facility; and a new Cold Weather Discharge (“CWD”) permit for handling the increased flow generated by the completed facility. Indeed, at the time of contracting, these two permits were considered so critically important that either party could terminate the agreement if both permits were not obtained within six months:

2.1.... Waterscape shall cause the [facility] to be constructed in a good and workmanlike manner[,] ... provided that Waterscape is allowed by EPD (i) to jointly permit in the name of the County both [the existing Fowler plant] and the [facility] and obtain a new increased LAS Permit therefore and (ii) to receive the requisite [CWD] permit as part of that process (collectively, “EPD Conditions”). If either of the EPD [c]onditions are not met within six (6) months of the execution of this Agreement, this Agreement shall be null and void at the written election of either party made prior to the satisfaction of both EPD Conditions; and in the event of such timely election by either party neither party shall thereafter have any further rights, obligations, or responsibilities hereunder, except for those arising under Section 2.8 ^[1]....

2.2.... The [facility] construction will start within six (6) months after satisfaction of the aforesaid EPD Conditions and shall be completed within twenty-four (24) months after the date of the execution of this Agreement by all parties.

Waterscape's Obligation to Donate the Facility. The parties further agreed that after constructing and completing the facility, Waterscape would operate the facility for a minimum of three months, after which it would “donate” the fully functioning facility to the county. Specifically:

2.6.... Upon satisfactory completion of the [facility] and successful operation thereof within design parameters for a minimum of three (3) consecutive months, the entire [facility], including but not limited to all necessary appurtenant easements and infrastructure for the [facility] and its associated collection and distribution systems, ... will be donated and deeded “fee simple” to the County in an unencumbered, lien-free condition (“Donation”). Waterscape will provide written notice to the County of the intended date of Donation at a minimum of twenty (20) days prior to the intended date of Donation so that the County may consider its buy-out rights under Section 7.

Upon donation of the facility, the county would become responsible for its “operation, maintenance, and repair” (subject to certain limitations not relevant here), and would “provide monthly sewer service to all present and future [c]ustomers” of the facility.

The County's Buy-Out Right. Under the agreement, if Waterscape had not yet collected its total agreed-upon compensation by the time the facility was completed and donated to the county, the balance owed to Waterscape could be paid in one of two ways at the county's election. Under the first option, the county could continue collecting the developers' fees and contributions and remit those funds, along with accrued interest, to Waterscape in due course. Under the second option, the county could buy out Waterscape's residual compensation rights by immediately paying the balance using its own funds. The buy-out provision stated in pertinent part:

Notwithstanding anything provided herein to the contrary, the County shall have the right-upon giving written notice to Waterscape at least ten (10) days prior to Donation of its election under this Section 7-to buy out all of Waterscape's post-Donation rights for a payment in cash or equivalent funds at the time of the Donation equal to the balance of the unpaid Total Tap Fee Compensation, subject to all adjustments [resulting from change orders].

Hence, if the county chose to exercise its buy-out right at the time of donation, the county could end the parties' relationship: Waterscape would receive its total monetary compensation, and the county would receive the facility.

Performance of the Agreement. Following the execution of the agreement, the EPD issued an expanded LAS permit that allowed for the discharge of byproducts from the facility. The LAS permit was issued to the “Forsyth County Department of Water and Sewer” and did not make reference to Waterscape.

Significantly, a CWD permit for the facility was not obtained within six months of execution of the agreement or thereafter. Although according to the agreement, the failure to obtain the CWD permit could result in either party declaring the agreement null and void, Waterscape proceeded with the construction of the facility. Waterscape also began collecting fees and contributions from third-party developers, which were held in an escrow account from which Waterscape could make draws to pay project-related expenses during the course of...