Mount Olive Water Ass'n v. City of Fayetteville, 93-162
| Decision Date | 28 June 1993 |
| Docket Number | No. 93-162,93-162 |
| Citation | 313 Ark. 606,856 S.W.2d 864 |
| Parties | MOUNT OLIVE WATER ASSOCIATION, Appellant, v. CITY OF FAYETTEVILLE, Appellee. |
| Court | Arkansas Supreme Court |
Kevin C. Murry, Elkins, for appellant.
LaGayle D. McCarty, Asst. City Atty., Fayetteville, for appellee.
This is an appeal from a summary judgment awarded in favor of the appellee, the City of Fayetteville (City), against the appellant, the Mount Olive Water Association (Association). The City provides water to the Association by contract entered February 2, 1981. The contract term is 20 years with the price to be set by the City from time to time.
On November 20, 1990, the City passed an ordinance establishing current water rates at an amount higher than those being paid. The Association refused to pay the higher rate. The City sued for damages amounting to the difference between the higher rate and the amount paid by the Association. A declaratory judgment was also sought to the effect that the Association is liable for payment for future water service in accordance with the prices set out in the ordinance. The City moved for summary judgment which was granted for damages of $139,833.33 and included a declaration that the 1990 ordinance rates were valid.
The Association argues that summary judgment was improper (1) because the Court was required to regard as true assertions in the affidavit of Jerry Paschal, Manager of the Association, that the rates charged are unreasonable and disproportionate to the cost of delivery, (2) because there was no evidence presented by the City to support the Court's conclusion that the rates were reasonable, and (3) because the City failed to comply with discovery. We affirm the decision because there remained no genuine issue of material fact to be decided by the Court. Ark.R.Civ.P. 56(c).
The burden of showing that there is no remaining genuine issue of material fact and entitlement to judgment as a matter of law is upon the summary judgment movant, and all proof submitted must be viewed most favorably to the party resisting the motion. Any doubt and all inferences must be resolved against the moving party. Lively v. Libbey Memorial Physical Medical Center, 311 Ark. 41, 841 S.W.2d 609 (1992). Once the movant makes a prima facie showing of entitlement, however, the respondent must meet proof with proof to show a remaining genuine issue as to a material fact. Anderson v. First Nat'l Bank, 304 Ark. 164, 166, 801 S.W.2d 273, 274 (1990). An affidavit stating only conclusions is not sufficient. Miskimins v. The City Nat'l Bank, 248 Ark. 1194, 456 S.W.2d 673 (1970). The response and supporting material must set forth specific facts showing that there is a genuine issue for trial. Id. at 1205, 456 S.W.2d at 679.
The resolution of this case requires some consideration of the obligations imposed upon each of these parties. The contract provides in relevant part:
* * * * * *
B. The Buyer Agrees:
1. .... Buyer shall purchase water from the City and not from some other source.
2. To pay the City not later than the due date given on the bill for water delivered in the preceding reading period, in accordance with the rates as established by the City from time to time that may hereinafter be established by the City from time to time. The rates for water and meter service charges presently in effect are illustrated by the attached schedule, marked Exhibit "B", but it is understood and agreed that the City is in no way bound by said schedule, and that the City in its sole discretion has the right to increase or decrease the rates and charges shown therefor, at any time, for the Buyer as for outside City users.
The rates set by the original schedule mentioned in the contract put water rates at $.765 per 1000 gallons and $35.00 per month meter charge. The rates set in the 1990 ordinance set prices effective 8-1-90 at $1.67, effective 1-1-91 at $2.00, effective 1-1-92 at $2.29, effective 1-1-93 at $2.49 and effective 1-1-94 at $2.40 per 1000 gallons.
In support of its motion for summary judgment the City asserted that by virtue of Ark.Code Ann. § 14-234-110 (1987) it is permitted to extend water services at such rates as the legislative body may deem just and reasonable and that such rates were established by enactment of Ordinance # 3519. The statute provides:
14-234-110. Waterworks operated in governmental capacity--services to nonresident consumers.
(a) A municipality owning a waterworks system shall operate its entire system in a governmental and not proprietary capacity.
(b)(1) The municipality shall have the option of extending its services to any consumer outside the municipal boundaries, but it shall not be obligated to do so.
(2) No municipality shall be obligated to supply any fixed amount of water or water pressure to nonresident consumers, nor shall a municipality be obligated to increase the number or size of, or change the location of, any mains or pipes outside its boundaries.
(3) Water may be supplied to nonresident consumers at such rates as the legislative body of the municipality may deem just and reasonable, and the rates need not be the same as the rates charged residents of the municipality.
The responses to interrogatories show that the City is charged $1.01 per 1,000 gallons and provides water to four nonresident wholesale water customers including the Association. Three of the other nonresident customers paid the same rate as the Association, $2.00 per 1000 gallons, as of January 1991. The responses further explain that the fourth of these customers pays less because it installed additional storage facilities which reduced its maximum day demand usage. The reduced demand factor rate was offered by the City to all other wholesale customers, including the Association, but each failed to construct adequate storage facilities.
The responses also indicate that the rates charged pursuant to the ordinance are based on recommendations found in the Report on Revenue Requirements, Cost of Service, and Rates for Water and Sewer Services for Fayetteville, Arkansas prepared by Black and Veatch/Engineers-Architects of Kansas City. The recommendations include a charge for a rate of return equal to 9.8% based on the utility basis method of computing revenue requirements set out in Water Rates, American Water Works Association M-1, 3rd Ed. The method of computation, the report from which the recommendations were taken and the treatise from which the these recommendations arose were provided to the Association in response to requests for production of documents.
In resisting summary judgment the Association submitted the affidavit of Jerry Paschal which, as abstracted, provides:
The City of Fayetteville provides water to Mount Olive Water Association for distribution to retail customers of Mount Olive Water Association. The City of Fayetteville only transports the water and it does not bear any responsibility or costs of distributing water to the retail customers of Mount Olive Water Association. Mount Olive Water Association, pursuant to the terms of the contract, paid all of the costs involved in the construction of the water line by which the City provides water to Mount Olive Water Association. Ark.Code Ann. § 14-234-110(b)(3) states that: "Water may be supplied to nonresident consumers at such rates as the legislative body of the municipality may deem just and reasonable". However, the rate the City of Fayetteville charges per 1000 gallons of wholesale water is not just or reasonable because it is not only disproportionate to the cost of transporting that water to Mount Olive Water Association, but that rate is also significantly greater than the wholesale rate charged by other municipalities in Northwest Arkansas.
The Association had requested that the City provide information concerning water rates charged by other cities in the region but the City responded that it had no accurate knowledge of such rates. The record is silent concerning the rates charged by any other city in the region.
The pivotal question here becomes whether the assertions of Paschal that the "rate the City of Fayetteville charges per 1000 gallons of wholesale water is not just or reasonable because it is not only disproportionate to the cost of transporting that water ... but is also significantly greater than the wholesale rate charged by other municipalities in Northwest Arkansas" are, if taken as true, sufficient to raise an issue of material fact with respect to the "reasonableness" of the rates.
We have stated no hard and fast rule regarding what constitutes a reasonable rate or the variables properly employed by which a municipality may...
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