N. Idaho Bldg. Contractors Ass'n, an Idaho Non-Profit Corp. v. City of Hayden

Decision Date28 December 2018
Docket NumberDocket No. 45181
Citation164 Idaho 530,432 P.3d 976
CourtIdaho Supreme Court
Parties NORTH IDAHO BUILDING CONTRACTORS ASSOCIATION, an Idaho Non-Profit Corporation; Termac Construction, Inc., an Idaho Corporation, on Behalf of Itself and All Others Similarly Situated, Plaintiffs-Respondents, Cross Appellant, and John Does 1-50, Whose True Names Are Unknown, Plaintiffs, v. CITY OF HAYDEN, an Idaho Municipality, Defendant-Appellant-Cross Respondent.

Hawley Troxell Ennis & Hawley LLP, Boise, and Givens Pursley LLP, Boise, attorneys for appellant. Merlyn W. Clark argued.

Risch Pisca, PLLC, Boise, attorneys for respondent. Jason S. Risch argued.

BEVAN, Justice


This case was brought by the North Idaho Building Contractors Association, Termac Construction, Inc., and other class members (collectively, "NIBCA"), to declare a sewer connection/capitalization fee the City of Hayden enacted in 2007 (the "2007 Cap Fee"), to be an impermissible tax. The action was originally dismissed on the City's motion for summary judgment; but, on appeal this Court vacated the judgment of the district court and remanded the case for further proceedings because the record did not contain sufficient evidence to establish that the 2007 Cap Fee complied with controlling Idaho statutes and case law. See N. Idaho Bldg. Contractors Ass'n v. City of Hayden , 158 Idaho 79, 81, 343 P.3d 1086, 1088 (2015) (" NIBCA I "). On remand, the parties filed cross motions for summary judgment and the district court found that the 2007 Cap Fee was an impermissible tax and taking of property without just compensation in violation of federal takings law. In doing so, the district court refused to consider expert evidence propounded by the City which opined that the 2007 Cap Fee complied with the applicable Idaho legal standards and was reasonable.

The district court subsequently ruled on stipulated facts that NIBCA was entitled to damages in the amount paid above $774 per connection, together with interest, costs, and attorney fees. The City timely appealed the district court's refusal to consider its evidence and NIBCA cross-appealed the award of damages. We vacate the judgment because the district court improperly refused to consider the City's evidence on remand.


The facts of this case are set forth in NIBCA I . The City of Hayden provides sewer service to residents, and charges each customer a bi-monthly fee. NIBCA I , 158 Idaho at 80, 343 P.3d at 1087. The City also charges a one-time "sewer capitalization fee" for each new structure, whether residential or commercial, and for any addition to an existing commercial structure that will result in an increase in the volume of sewage generated. Id . The capitalization fee is charged when a building permit is issued. Id .

According to the City's administrator, "The City's portion of the sewer capitalization fee (the collection system component) for one [Equivalent Residence] was $580.00 during 2001 to 2005, $737.00 during 2005 to 2006, and $774.00 during 2006 and the first half of 2007." Id . The City raised the fee to $2,280 in June 2007. Id . Thereafter, NIBCA filed this action to have the fee declared unlawful because it was an impermissible tax rather than a fee for services. Id . The district court held that the 2007 Cap Fee was lawful and entered a judgment dismissing the complaint. Id . NIBCA appealed and this Court vacated the judgment and remanded the case for further proceedings. Id . at 86, 343 P.3d at 1093. We noted that there were no facts in the record "showing that the fee was based upon the value of that portion of the existing City sewer system that the new user will be utilizing." Id . at 82, 343 P.3d at 1089.

The import of the NIBCA I holding was disputed on remand. The district court requested that the City and NIBCA submit briefing explaining each side's interpretation of this Court's decision. The City argued that NIBCA I was not dispositive of the case, but merely provided a framework for how the City was to properly calculate the fee charged. Accompanying the City's memorandum was an explanation of a new study conducted by Financial Consulting Services Group, Inc., (the "FCS study") that the City commissioned after NIBCA I to demonstrate the reasonableness of the 2007 Cap Fee. Conversely, NIBCA argued that this Court's decision resolved the action and the case was remanded solely to assess class certification and damages. On August 17, 2015, the district court entered a memorandum decision which held that NIBCA I merely vacated the order granting summary judgment, putting the case in the same posture it was in before the first appeal. As viewed by the district court at that time, NIBCA I was not dispositive of the case.

Based on the FCS study, the City filed a motion for summary judgment on September 18, 2015. The City maintained its position that this Court's intent on remand was for the parties to submit evidence to determine whether the amount of the 2007 Cap Fee was reasonable. NIBCA moved to exclude the FCS study, which the district court denied, recognizing that "[a]t the appropriate time and following the appropriate procedure the court will determine whether [the City's] new engineering study will convert [the City's] impermissible tax to a permissible fee." While the City's motion for summary judgment was still pending, NIBCA filed its own motion for summary judgment that argued: (1) the 2007 Cap Fee was inconsistent with Idaho law, and (2) the City cannot retroactively justify the 2007 Cap Fee through the FCS study.

On February 26, 2016, the district court entered a memorandum decision granting NIBCA's motion for summary judgment and denying the City's motion for summary judgment. Refusing to give the City's FCS study any weight, the district court held that the City had imposed the 2007 Cap Fee in order to expand the current system, rather than basing the 2007 Cap Fee on the portion of the system people were using. Thus, the City's 2007 Cap Fee constituted an impermissible tax. Relying on Loomis v. City of Hailey , 119 Idaho 434, 807 P.2d 1272 (1991) and what it called "three decades of decisions relating to the authority of a municipality to impose a fee," the district court determined that it could not reach the issue of whether the 2007 Cap Fee was reasonable; instead, the district court held that its role was to determine whether the fee was authorized — and only if authorized, would the court determine whether the fee was reasonable. The district court then held that the fee was not authorized because this Court had resolved that issue in NIBCA I . The district court viewed NIBCA I as holding that "the fee was an impermissible tax enacted without authority and without basis in Idaho law." The court also concluded that it was bound by what it viewed to be a final decision by this Court that the City's stated basis for imposing the 2007 Cap Fee was invalid. Thus, the district court would not entertain any argument based on the City's FCS study.

On May 17, 2016, the City filed its third motion for summary judgment to address its affirmative defenses, which the district court granted in part and denied in part. The court held: (1) NIBCA's state law claims were barred because of their failure to comply with the Idaho Tort Claims Act (ITCA) and Idaho Code section 50-219 ; (2) NIBCA's federal claims were not barred despite the failure to comply with available state remedies; (3) any federal claims arising before the two-year statute of limitation (June 4, 2010) were barred; and (4) the City's equitable defenses were not appropriate because whether a benefit was conferred upon NIBCA by the City was largely in dispute. The City filed a motion for reconsideration. The district court denied all of the City's claims except it recharacterized the 2007 Cap Fee as a regulatory taking and vacated its prior decision in that regard. After analyzing the 2007 Cap Fee as a regulatory taking, the court determined that NIBCA's federal claims were still ripe.

In November 2016, the parties entered into a stipulation as to the undisputed facts, vacating the trial. The parties also filed another document entitled a "stipulation" about the admissibility of two affidavits; however, the body of the "stipulation" reveals that NIBCA objected to the admission of the affidavits. Even so, the district court approved the stipulation and vacated the trial, ordering that the parties submit additional briefing and closing arguments based on the stipulations.

On February 24, 2017, the district court entered a memorandum decision on the stipulated facts. The court noted that its "prior decisions [on summary judgment] have determined that the fee imposed by [the City] constituted an impermissible tax...." Thus, the "trial" on the remaining issues was determined with the court's prior ruling as a foundational predicate: the City's 2007 Cap Fee was an impermissible tax, and NIBCA had a right to damages for the City's unlawful taking. The court held NIBCA had a right to just compensation when the 2007 Cap Fee was paid because it was imposed without authority, which was "at its essence, a disguised tax." The district court determined that while the fee was impermissible, NIBCA had received something for its payment, so the district court held that NIBCA should be put in the same position it was in before the 2007 Cap Fee. The City was ordered to refund the difference between the impermissible tax paid and the prior lawful fee of $774.

The district court entered a judgment awarding NIBCA $729,403.58, plus post judgment interest to be calculated at a simple interest rate of 6.5%. The court also awarded NIBCA: (1) $219,707.77 in reasonable attorney fees; (2) $138.00 for costs as a matter of right; and (3) $838.78 in discretionary costs.

A motion for summary judgment shall be rendered forthwith if the pleadings,

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