Reinhold v. Fee Fee Trunk Sewer, Inc., 46121

• Decision Date: 10 January 1984
• Docket Number: No. 46121,46121
• Citation: 664 S.W.2d 599
• Parties: Ray REINHOLD, et al., Plaintiffs-Appellants, v. FEE FEE TRUNK SEWER, INC., et al., Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 599

664 S.W.2d 599

Ray REINHOLD, et al., Plaintiffs-Appellants, v. FEE FEE TRUNK SEWER, INC., et al., Defendants-Respondents.

No. 46121.

Missouri Court of Appeals,

Eastern District,

Division Five.

Jan. 10, 1984.

Motion for Rehearing and/or Transfer to

Supreme Court Denied

Feb. 17, 1984.

Application to Transfer Denied

March 20, 1984.

Brian A. Bild, St. Louis, for plaintiffs-appellants.

David L. Welsh, St. Louis, for defendant-respondent Fee Fee Trunk Sewer.

Donald J. Stohr, James W. Erwin, St. Louis, for Metropolitan Sewer Dist.

Richard J. Sheehan, St. Louis, for defendants-respondents.

HAROLD L. LOWENSTEIN, Special Judge.

Plaintiffs, who are owners and managers of real property, appeal the dismissal of their petition for a class action seeking to recover certain assets, "contributions in aid of construction," totaling $1 million paid by them to a privately owned utility, Fee Fee Trunk Sewer, Inc., (Fee Fee) when Fee Fee sold its assets to the Metropolitan St. Louis Sewer District (M.S.D.), a municipal corporation. M.S.D. continued to provide existing sewer service. These contributions arise when a housing developer puts in sewers, deeds them to the sewer company without charge, but then recoups the cost from an increased price for the home, or when a sewer company makes a connection charge in return for building a sewer to service the property.

The second amended petition, which was dismissed as to all defendants, contained the following:

Plaintiffs are members of Board of Managers of two condominiums that were served by Fee Fee. They sought class certification.

The defendants are Fee Fee, a Missouri corporation providing sewer service, individuals who comprised the last board and were shareholders of Fee Fee, and M.S.D., a municipal corporation that bought out Fee Fee.

The contributions (in excess of $1 million) in aid of construction were donated by real property owners in St. Louis County for their beneficial interest in the defendant Fee Fee providing them sewer service.

On April 27, 1977 a contract was made for sale of Fee Fee to M.S.D. for $12 million, effective December 31, 1977. $10 million of the purchase price came from M.S.D.'s sale of revenue bonds, and plaintiffs' payment of a surcharge on their bills to pay for the bonds in contravention of Section 393.130 RSMo 1978. ¹

The prayer was for a constructive trust of $11 million as to the contributions in aid of construction, an action in equity for damages of $11 million, and for an equitable lien of $10 million on after-acquired assets.

Other facts seem in order. Fee Fee, though privately owned, was subject to the jurisdiction of the Public Service Commission (PSC) for its sewer service to St. Louis County. Therefore the terms of the sale by Fee Fee had to be approved by the PSC. The PSC approved the sale and the terms of the contract. Further, the voters in the area served by Fee Fee in an election approved the annexation of the area by M.S.D. and the issuance of revenue bonds to be paid by a surcharge from themselves as customers to finance the purchase.

The original petition in this case was filed only against defendant Fee Fee. After certification as a class action under Rule 52.08, amended petitions were filed adding M.S.D. and the individual shareholders and last directors of Fee Fee as defendants. The motions to dismiss as to all the defendants was sustained.

The plaintiffs' five points on appeal and twenty-two sub-points form a collage of diverse and fragmented matters. They primarily claim the trial court lacked the power to dismiss and thus erred in dismissing their petition since it did state a claim. Their other points deal with a statute of limitations issue, whether the petition had been properly amended, and the existence of a fiduciary relationship. All plaintiffs' points are denied and the trial court's dismissal is affirmed as to all defendants.

I.

Plaintiffs, in their first point on appeal, relate several procedural defects which, they argue, nullify the trial court's dismissal of the action. In the first sub-point, the plaintiffs argue that the trial court erred in sustaining defendant Fee Fee's Motion to Dismiss because it was bound by the decision of the court of appeals in Fee Fee Trunk Sewer, Inc. v. Litz, 596 S.W.2d 466 (Mo.App.1980). This prior determination, they assert, held that the appellants had set forth a proper cause of action against Fee Fee.

This point is without merit. It is true that the law as applied to the facts in an appellate opinion constitutes the "law of the case." On remand to the trial court, however, matters which were not decided by the appellate court are not within the operation of this rule. State ex rel. Mercantile National Bank at Dallas v. Rooney, 402 S.W.2d 354, 361 (Mo. banc 1966). Cf. Brooks v. Kunz, 637 S.W.2d 135, 138 (Mo.App.1982) (the appellate decision is the law of the case on all points presented and decided ). In State ex rel. Fee Fee Trunk Sewer, Inc. v. Litz, supra, the issue of whether or not the plaintiffs stated a proper cause of action against Fee Fee was never addressed or decided. This was a writ matter limited to the question of whether or not the plaintiffs would be forced to exhaust administrative remedies before bringing any court action Id. at 468. The doctrine of the "law of the case" did not act to prohibit the trial court from sustaining Fee Fee's present motion.

Continuing their theme of the law of the case, the plaintiffs in their second sub-point argue that since one trial judge had certified the class, a successor judge could not entertain a motion to dismiss. It is true that a successor judge is without power to render a judgment, without stipulation of the parties, on testimony heard by his predecessor. Smith v. Smith, 558 S.W.2d 785, 790 (Mo.App.1977). Their argument fails because the testimony and evidence on certification heard on a Rule 52.08(b)(3) class is only to determine, among other things, common questions of law or fact and whether a class action is superior to other methods of adjudication. The merits of plaintiffs' claims were not heard in the certification hearing. The certification itself is not chipped in stone, and, as any certification order, "may be altered or amended before decision on the merits." Rule 52.08(c)(1).

The other sub points denominated "C", "D", and "E" under Point I in the amended points relied on and argument of the plaintiffs' brief are without merit. Point "C" is but a restatement of the two points just addressed. The citations of authority are not germane and tantamount to being "naked of citations." Bishop v. Bishop, 618 S.W.2d 261, 263 (Mo.App.1981) Rule 84.04(d). Likewise point "D" which states "that one trial judge hear all litigation relating to complex class action[s]" is required under Due Process, is but a reargument of the first two sub-points and misses the mark on the effect of class certification. It does not recognize that certification as a class action does not insulate the petition from later dismissal for failure to state a claim, Kahan v. Rosenstiel, 424 F.2d 161, 169 (3rd Cir.1970) cert. denied sub nom., Fertig v. Blue Cross of Iowa, 68 F.R.D. 53, 57 (D.C.Iowa 1974). Sub-point "E" contains no citation of authority, and no explanation is given as to the point being of first impression. It too is denied. Rule 84.04(d). Bishop v. Bishop, supra.

II.

In reviewing the allegations of a petition dismissed for failure to state a cause of action, the appellate court, after construing all averments favorably to the plaintiff, must determine whether the averments invoke principles of substantive law upon which relief can be granted. Shapiro v. Columbia Union National Bank & Trust Co., 576 S.W.2d 310, 312 (Mo. banc 1978); Concerned Parents v. Caruthersville Sch. D., 548 S.W.2d 554, 558 (Mo. banc 1977). A motion to dismiss for failure to state a cause of action is well taken where the petition fails to plead the essential facts for a recovery. Young v. Lucas Construction Co., 454 S.W.2d 638 (Mo.App.1970). In arguing that their petition does indeed state a cause of action, the plaintiffs rely on two separate principles of substantive law--first, under the equitable concept of "bilateral fairness" and second, under the auspices of Section 393.130(1). The plaintiffs are not entitled to relief under either principle, and the trial court's order dismissing the action is affirmed.

The plaintiffs argue that the equitable principle of "bilateral fairness" prohibits a privately-owned utility and its shareholders from receiving a monetary benefit for those assets contributed by the ratepayers. The concept of bilateral fairness, their argument goes, allows a utility to receive a return only on its own investment, and not on the investment of its customers--thus, the return derived from the sale of the "contributions in aid of construction" should inure to the benefit of the ratepayers.

In support of this position, the plaintiffs cite several cases in which courts have held that "contributions in aid of construction" may not be included in determining the "rate base" for ratemaking purposes. State ex rel. Martigney Creek Sewer Co. v. Public Service Commission, 537 S.W.2d 388 (Mo.banc 1976); State ex rel. Valley Sewage Co. v. Public Service Commission, 515 S.W.2d 845 (Mo.App.1974). These cases do not help the plaintiffs. Both are authority only for the proposition that a utility may not have these contributed assets considered toward justifying a rate increase to customers. The courts hold to do so would result in two inherent inequities: first, to allow the utilities to include these "contributions" in the rate base is to ask the utility customers to pay twice for the same thing. State ex rel. Martigney v. Public Service Commission, supra, at p. 394; second, it allows the utility's shareholders to receive a return on money which they never invested. State ex rel. Valley Sewage Co. v. Public...