Oklahoma City Hotel & Motor Hotel Ass'n, Inc. v. Oklahoma City

• Decision Date: 16 July 1974
• Docket Number: No. 45463,45463
• Citation: 531 P.2d 316
• Court: Oklahoma Supreme Court
• Parties: OKLAHOMA CITY HOTEL & MOTOR HOTEL ASSOCIATION, INC., et al., Appellants, v. The OKLAHOMA CITY, a municipal corporation, Appellee.

Page 316

531 P.2d 316

OKLAHOMA CITY HOTEL & MOTOR HOTEL ASSOCIATION, INC., et al Appellants, v. The OKLAHOMA CITY, a municipal corporation, Appellee.

No. 45463.

Supreme Court of Oklahoma.

July 16, 1974.

Rehearing Denied Oct. 8, 1974.

Syllabus by the Court

1. Courts have the duty to determine questions relating to rates charged by municipality for its utility services where challenge is based upon unreasonableness, unjustness, or discrimination of the rates.

2. Separate classifications by a municipality of water, garbage and sewer rates, based upon the ultimate consumer being engaged in a particular type business is reasonable if there are substantial differences to justify the separate classifications.

3. The fact that apartments and mobile home parks are volume commercial users but have characteristics dissimilar to 'commercial' users but similar to single family dwellings for water, garbage, and sewer rate purposes, is sufficient to sustain a finding the rates are not discriminatorily applied.

4. The difference between hotels and motels and other volume commercial users are insufficient to justify a separate classification by a municipality for water, garbage and sewer rates.

Action for declaratory judgment to have judicially determined as invalid ordinances of Defendant City of Oklahoma City fixing garbage, water and sewer rates, and for an injunction prohibiting enforcement of the ordinances. Honorable Lee R. West, Judge, Assigned to the District Court of Oklahoma County, held the ordinances valid and enforceable. Plaintiffs appeal.

Trial court affirmed in part and reversed in part. Remanded with directions to enter an injunction prohibiting the enforcement of the ordinances discriminatorily applied to hotels and motels.

Clyde J. Watts, Jay M. Galt, Oklahoma City, for Oklahoma City Hotel & Motor Hotel Association, Inc.

David M. Harbour of Cantrell, Douglass, Thompson & Wilson, Oklahoma City, for Apartment Council of Home Builders Assn. of Greater Oklahoma City, Inc.

Terry T. Wiens, Cantrell, Douglass, Thompson & Wilson, Oklahoma City, for Oklahoma Mobile Home and Trailer Park Operators Assn.

Walter M. Powell, Municipal Counselor, City of Oklahoma City, Oklahoma, City, for appellee.

SIMMS, Justice:

The question in this case is whether the rates or classifications given by Defendant City to apartment houses, mobile home parks, and hotels and motels constitutes an unlawful discrimination against them.

Plaintiffs bring this suit against the Defendant City to determine the validity of city ordinances numbers 12927, 12928, 12929, passed on July 20, 1971, fixing rates for garbage, water, and sewer services provided by the City. Plaintiffs pray for a declaratory judgment declaring the ordinances void and for an injunction prohibiting the City from enforcing the ordinances.

The ordinances in question are attacked by the Plaintiffs on three grounds: (1) that a classification of apartments, mobile home parks, and hotels and motels separate from other commercial users constitutes an unreasonable discrimination in violation of the equal protection clause of the 14th Amendment; (2) that the ordinances exacting additional per-unit charges from apartments, mobile home parks, and hotels and motels, but not from other commercial users, constitutes a tax to cover general obligations of the city, under the guise of a service charge; (3) the mobile home parks also urge that they should have been given notice and opportunity to be heard when the City held its meeting to change the classifications. The trial court held the ordinances were valid and enforceable.

ORDINANCE NO. 12927 provides for minimum/maximum charges for garbage service. Actual charges for commercial users, including hotels and motels, are based upon the size of the containers and number of weekly pickups. Single family residences are charged from $2.50 to $5.00 per month depending on the type of service. Multiple dwelling units, including apartments, are charged on a per unit basis at the lowest rate for single family residences, regardless of whether the units or lots are rented or vacant. ORDINANCE NO. 12928 provides a uniform charge to all water users at specified rates per 1000 gallons, with decreasing rates for increased volume.

There is an additional charge of $1.00 per month for each mobile home park lot or apartment unit, and $1.00 per month for each hotel and motel unit with kitchen or 'family function' privileges (housekeeping units). Sleeping units in hotels and motels are charged an additional $.25 per month. The additional charges are levied regardless of whether the units or lots are rented or vacant.

ORDINANCE NO. 12929 provides sewerage charges for residential users at $1.75 per month for single family units; $1.75 per month for each apartment unit; $1.75 per month for each hotel or motel housekeeping unit; $1.00 per month for each hotel or motel sleeping unit. Except for single family residences, the charges are levied regardless of whether the units or lots are rented or vacant. Charges to all other users are based upon the size of the water meter and amount of water being used.

Prior to the passage of the above ordinances, the rates for garbage, water, and sewer were the same for Plaintiffs as for all other commercial users.

The City Manager for the Defendant City testified that he recommended the increase in rates based upon the change in classification for two reasons: (1) The City needed.$1.2 million additional revenue for police, fire, and sanitation personnel, and for an increased contribution to city employees for salaries and fringe benefits; (2) to correct an inequity in garbage, water, and sewer rates caused by a lower rate to apartments, hotels, and motels than to single family residences, resulting in discrimination against residents in single family units. The City Manager stated that he did not consider any factor of additional costs in furnishing services to single family residences as opposed to multiple unit dwellings served by a single meter.

The City contends that the fixing of rates of municipally owned utilities is a legislative function and in the absence of a clear showing that the rates are unjust, unreasonable, or discriminatory, the courts may not interfere. Knotts v. Nollen, 206 Iowa 261, 218 N.W. 563 (1928); Rhyne, Municipal Law, Sec. 23--27 (1957); 12 McQuillin, Municipal Corporations, Sec. 35.37(a). We agree with this general rule. We also believe that the review of the regulations on rates established by privately or publicly owned utilities is ultimately the Court's duty. An individual or group that feels discriminated against cannot look to the competition for redress. He must look to the regulating body, or to the courts. Review will act as the substitute for competition.

Cases in numerous other jurisdictions are cited wherein the courts have held reasonable, rate-making ordinances classifying apartments, hotels and motels, and mobile home parks separate from other commercial users and similar to single family residences. Knotts v. Nollen, Supra; Fort Collins Motor Homes, Inc. v. City of Fort Collins, 30 Colo.App. 445, 496 P.2d 1074 (1972); Lewis v. Mayor and City Council of Cumberland, 189 Md. 58, 54 A.2d 319 (1947); Caldwell v. City of Abilene, Tex.Civ.App., 260 S.W.2d 712 (1953); Kermit v. Rush, Tex.Civ.App., 351 S.W.2d 598 (1961); Oradell Village v. Township of Wayne, 98 N.J.Super. 8, 235 A.2d 905 (1967); Land v. City of Grandville, 2 Mich.App. 681, 141 N.W.2d 370 (1966). These cases are based on the theory that the ultimate use or ultimate consumer of the water is a reasonable basis for classification. Apartments, hotels and motels, and mobile home parks were considered by those courts to be aggregations of dwellings, rather than businesses. The courts generally stated that it would be unfair to single family dwellings if apartments, etc., were classified differently. In some of the cases, the courts agreed that the rate classification resulted in discrimination, but held that the discrimination was not unreasonable or unjust. See, Caldwell v. City of Abilene, Supra; Knotts v. Nollen, Supra.

In Fretz v. City of Edmond, 66 Okl. 262, 168 P. 800 (1916), this Court asserted that a municipality operating a utility is governed by the same restrictions as private utility corporations, in practices of discrimination in rates and service. It was also stated in Fretz:

'. . . the rule is not that there must not be any discrimination of any kind, but that there must be no unjust discrimination.'

There is little question that discrimination exists in the instant case between apartments, hotels and motels, and mobile home parks on one hand, and other commercial volume users on the other. The cost of providing the services for both classes of consumers is the same. Both classes are large volume consumers; both classes get their water through a single meter, obviating the requirement that the City maintain a meter for every unit; both classes are mailed only one bill per month and need look to only one person for payment. The question we must decide then, is whether the discrimination based upon the scheme of classification is unreasonable or unjust.

In determining whether discrimination exists in a classification scheme,...