Genesee Brewing Co., Inc. v. Village of Sodus Point

• Citation: 482 N.Y.S.2d 693,126 Misc.2d 827
• Parties: The GENESEE BREWING COMPANY, INC., Plaintiff, v. VILLAGE OF SODUS POINT, New York, Defendant.
• Decision Date: 04 December 1984
• Court: United States State Supreme Court (New York)

Page 693

482 N.Y.S.2d 693

126 Misc.2d 827

The GENESEE BREWING COMPANY, INC., Plaintiff, v. VILLAGE OF SODUS POINT, New York, Defendant.

Supreme Court, Wayne County.

Dec. 4, 1984.

Nixon, Hargrave, Devans & Doyle, Rochester (David M. Lascell, Rochester, of counsel), for plaintiff.

Nesbitt & Nesbitt, Palmyra (John B. Nesbitt, Palmyra, of counsel), for defendant.

DECISION

DAVID O. BOEHM, Justice.

The defendant, Village of Sodus Point (Village) moves to dismiss the complaint of the plaintiff, Genesee Brewing Company (Genesee), which is suing to recover payments made under the Village's sewer rent law. By cross motion, Genesee seeks to amend its complaint.

In the middle 1970's the Village constructed a sewage treatment plant to treat wastewater discharged by its residents and its only industrial user, Genesee. This project was funded in part by a grant made by the Environmental Protection Agency (EPA) pursuant to the Federal Water Pollution Control Act (FWPCA); (33 U.S.C. § 1251 et seq., as amd. by 86 Stat. 816 ).

EPA's authority to make such grants was subject to certain limitations and conditions. One such condition, added by amendment in 1972, was the so-called Industrial Cost Recovery (ICR) provision, which required the grantee to recover some of the construction cost from the industrial users of the facility (see 33 U.S.C. § 1284 former (b)(1)(B)). Under this provision grantees could retain a percentage of the charges collected, but were required to return the remaining percentage to the EPA. In May of 1976 the Village enacted its local sewer rent law, which provided for sewer rents to be paid by all users, and also adopted the ICR formula for payments by industrial users.

On December 27, 1977, Congress amended the FWPCA and established a moratorium on the enforcement of its ICR provisions (91 U.S.Stat. 1609). By implementing regulations (40 CFR § 35.928) grantees were given the option to postpone collection of ICR payments during the moratorium and collect the total accrued ICR payment at the end of the moratorium, or to collect the ICR payments and hold them in federally secured accounts pending the termination of the moratorium. Subsequently, Congress extended the moratorium to June 30, 1980 (93 U.S.Stat. 1088), and thereafter, on October 21, 1980, entirely repealed the ICR collection requirements, effective retroactively to December 27, 1977 (94 U.S.Stat. 2360).

During the moratorium period the Village chose to continue collection of the ICR payments. Genesee alleges that between June 30, 1977 and August 4, 1980 it made ICR payments totaling $56,120.00 to the Village pursuant to the provisions of the local sewer rent law.

On December 11, 1980, the EPA published a notice in the Federal Register regarding the disposition of ICR funds collected before and during the moratorium. That notice provided in part that grantees which had collected ICR payments during the moratorium, "should determine what action is appropriate with respect to those funds. No funds from ICR payments to grantees for treatment works after December 27, 1977, should be paid to EPA." (45 Fed.Reg. No. 240 ) (emphasis in original).

By letter dated March 20, 1981, Genesee demanded that the Village refund all ICR payments made after December 27, 1977, plus interest, together with refund of such payments made prior to December 27, 1977, which were not previously expended pursuant to the FWPCA.

On May 28, 1981, the Village solicited the opinion of the State Comptroller as to its obligation to refund Genesee's ICR payments. In reply, on July 20, 1981, an associate counsel of the State Comptroller wrote that an answer to the inquiry required an interpretation of Federal law. Accordingly, the Village solicited the opinion of the EPA which, on August 12, 1981, wrote that ICR payments made for use of a treatment facility prior to December 27, 1977 must be used by the municipality in accordance with EPA-ICR regulations in effect at that time. It noted, "ICR charges for industrial use of a treatment facility after December 27, 1977 are no longer required by Federal law. Therefore, the collection and retention of any ICR charges for industrial use of a treatment facility after December 27, 1977 are solely matters for local decision to be made in accordance with State and local law. Charges collected for industrial use after December 27, 1977 should not be paid to EPA, and may be utilized by the grantee, or returned to the industry, as the grantee deems appropriate."

Thereafter discussions were had between the parties regarding refund of the ICR payments. The Village assured Genesee that it was making good faith efforts to resolve the matter, especially the question of its right to make repayment. It also cited other reasons for delay, including the delay of others in responding to Village inquiries, internal difficulties confronting the new Village Board, and the temporary incapacity of the mayor due to a heart attack. Finally, on October 8, 1982, the Village informed Genesee that it would not refund the ICR payments. Genesee contends that it justifiably relied throughout upon the Village's representations that it was willing to refund the ICR payments if it was legally authorized or empowered to do so.

Thereafter, on December 1, 1982, Genesee served a notice of claim on the Village, and on December 16, 1982 commenced this action against the Village for refund of ICR payments under State law, asserting four causes of action: unjust enrichment, conversion, violation of 42 U.S.C. § 1983, and violation of the New York State Constitution.

Genesee also brought suit in Federal District Court, asserting five causes of action, the first and second under Federal law for violation of 42 U.S.C. § 1983 and claiming that recoupment of the ICR payments was implicit in the law which repealed the ICR collection requirements (94 U.S.Stat. 2360). The remaining three causes of action were based on state law (unjust enrichment, conversion and violation of the New York State Constitution, respectively) and were asserted under the principle of pendent jurisdiction.

On August 3, 1983, the Federal action was dismissed for failure to state a claim upon which Federal relief could be granted, the District Court holding that Federal law did not compel the Village to refund the ICR payments (The Genesee Brewing Co., Inc. v. Village of Sodus Point, New York, US Dist Ct., WDNY Aug. 2, 1983). In affirming (733 F.2d 258 ), the Circuit Court of Appeals upheld the District Court's finding that no Federal right was involved, but noted that lack of subject matter jurisdiction was a more appropriate ground for dismissal than, what it termed, the "secondary reason to dismiss" relied on by the lower court (733 F.2d at 259, supra ).

In this motion the Village seeks dismissal of the complaint on various grounds: res judicata, failure to comply with the notice of claim and statute of limitations provisions in CPLR 9802, and the failure to make the ICR payments under protest.

The doctrine of res judicata, collateral estoppel or issue preclusion bars relitigation of issues previously adjudicated (Matter of American Ins. Co. 43 N.Y.2d 184, 189, n. 2, 401 N.Y.S.2d 36, 371 N.E.2d 798). It applies when the issue as to which preclusion is sought is identical to the issue decided in the prior proceeding, the issue was necessarily decided in the prior proceeding, and the litigant sought to be precluded had a full and fair opportunity to litigate (Capitol Tel. Co. v. Pattersonville Tel. Co., 56 N.Y.2d 11, 17-18, 451 N.Y.S.2d 11, 436 N.E.2d 461; see also, Gilberg v. Barbieri, 53 N.Y.2d 285, 291, 441 N.Y.S.2d 49, 423 N.E.2d 807). The burden of establishing the first two elements rests upon the proponent for preclusion; it is the opponent's burden to establish the lack of a full and fair opportunity (Capitol Tel. Co. v. Pattersonville Tel. Co., supra, 56 N.Y.2d 11, 18, 451 N.Y.S.2d 11, 436 N.E.2d 461; Schwartz v. Public Administrator of County of Bronx, 24 N.Y.2d 65, 73, 298 N.Y.S.2d 955, 246 N.E.2d 725).

Paragraph 15 of the State and Federal complaints contains identical language: "retroactive effect of the repeal, and its legislative history, evince Congress' intention that ICR funds collected pursuant to Federal regulation, and not properly expended pursuant to Section 204 of the Federal Clean Water Act and its implementing regulations, be returned to the payors." The thrust of this allegation is that Federal law requires the return of ICR payments, which as it turned out is not so. This issue is identical to the one decided by the Federal Court and was necessarily decided there. Lastly, Genesee clearly had the opportunity to contest the issue. Therefore, the actions of unjust enrichment, conversion, and violation of 42 U.S.C. § 1983, being premised upon the same allegation in both complaints, must be dismissed.

The fourth cause of action alleges that the Village's sewer rent law is void under the New York State Constitution. Since it does not depend upon the paragraph 15 allegation, issue preclusion does not bar it. Furthermore, as the District Court emphasized in its decision, "local ordinance under which the ICR payments were collected was enacted pursuant to State law. If plaintiff is entitled to a refund of these payments, it is State law which must provide the remedy." (The Genesee Brewing Co., Inc. v. Village of Sodus Point, New York, Civ.U.S.Dist.Ct., supra, slip opn. p. 6). It may be concluded that the dismissal by that court was without prejudice to any claim the plaintiff might have under State law (see, McLearn v. Cowen & Co., 60 N.Y.2d 686, 468 N.Y.S.2d 461, 455 N.E.2d 1256), and the Village's motion to dismiss this cause of action on res judicata grounds is denied.

The Village also argues that Genesee's failure to comply with the requirements of CPLR 9802, which sets forth time limits for notices of claim to be filed and actions commenced against villages,...