Town of New Chicago v. City of Lake Station

• Decision Date: 13 May 2011
• Docket Number: No. 45A03–1001–PL–22.,45A03–1001–PL–22.
• Citation: 939 N.E.2d 638
• Parties: TOWN OF NEW CHICAGO, Appellant–Respondent,v.CITY OF LAKE STATION, by the LAKE STATION SANITARY DISTRICT, Appellee–Petitioner.
• Court: Indiana Appellate Court

939 N.E.2d 638

TOWN OF NEW CHICAGO, Appellant–Respondent,

v.CITY OF LAKE STATION, by the LAKE STATION SANITARY DISTRICT, Appellee–Petitioner.

No. 45A03–1001–PL–22.

Court of Appeals of Indiana.

Dec. 13, 2010.Transfer Denied May 13, 2011.

Robert F. Peters, Lucas, Holcomb & Medrea, Merrillville, IN, Attorney for Appellant.James B. Meyer, Meyer & Wyatt, P.C., Gary, IN, Attorney for Appellee.

OPINION

VAIDIK, Judge.

Case Summary

In 1988 the Town of New Chicago (“New Chicago”) and the City of Lake Station (“Lake Station”) entered into an intermunicipal agreement for the construction of an interceptor sewer system. The parties' combined water was then sent downstream for treatment at the Gary Sanitary District (“GSD”). In their agreement, the parties agreed to comply with federal law, including the Clean Water Act, and that Lake Station would bill New Chicago monthly at the GSD rate. Although GSD tripled its rate in 1989, Lake Station did not inform New Chicago and continued to bill New Chicago at the old rate. GSD then sued Lake Station in 1999. Again, Lake Station did not inform New Chicago of the lawsuit. After Lake Station paid an over-five-million-dollar judgment to GSD in 2005 for the difference between the old rate it had been paying and the increased rate, Lake Station demanded approximately a half million dollars from New Chicago for its proportionate share of the judgment. When New Chicago did not pay, in 2007 Lake Station filed a two-count complaint against New Chicago seeking to recover the approximately half million dollars for the years 1990 to 2004. New Chicago raised several affirmative defenses, including laches and equitable estoppel.

In this discretionary interlocutory appeal, New Chicago appeals the trial court's grant of partial summary judgment in favor of Lake Station on the issue of liability and denial of its motion for summary judgment. We conclude that there is no private right of action under the Clean Water Act. Accordingly, Lake Station's only viable claim against New Chicago is for breach of contract. We conclude that laches is not available to New Chicago as a defense for Lake Station's breach of contract claim because laches acts as a limitation upon equitable relief, and an action for breach of contract is a legal claim. Nevertheless, we conclude that New Chicago has met its burden of proving the defense of equitable estoppel because: (1) New Chicago lacked the knowledge or means of knowledge that Lake Station was not properly billing them because there was no indication that anything was wrong, (2) New Chicago relied on the monthly billings from Lake Station for more than fifteen years without any sort of notice from Lake Station, and (3) Lake Station's conduct caused New Chicago to prejudicially change its position in that New Chicago was prevented from budgeting for the increased rate or joining in the GSD/Lake Station litigation. Because there is no genuine issue of material fact, we reverse the trial court and direct the court to enter summary judgment in favor of New Chicago on New Chicago's equitable estoppel defense.

Facts and Procedural History

GSD owns and operates a centralized sewage treatment plant that receives federal and state grant assistance for expansion and improvement in the quality of treatment. Appellant's App. p. 86. To receive this assistance, GSD was required to permit Lake Station and other cities in northwest Indiana to deposit their waste materials into its plant. Id. To that end, in 1982 GSD and Lake Station entered into a sewage treatment contract. Id. at 86–87. The contract was amended in 1984. Id. at 87.

In 1988 New Chicago and Lake Station did not have adequate means to dispose of their waste water, liquid waste, and sewage. Id. at 60. As a result of this inadequacy, on August 16, 1988, New Chicago and Lake Station entered into an Intermunicipal Agreement (“Agreement”) for the joint construction of a gravity and interceptor sewer system. Id. The Agreement, twenty-one pages in length and approved by each entity's governing board, called for a proportionate division of the costs and expenses of the sewer project. Id. In particular, the Agreement gave New Chicago the right to use Lake Station's facilities for the transportation of its sewage downstream to GSD. Id. at 62. The Agreement provided that it would not be binding until both parties “receive[d] grants from the Environmental Protection Agency and the State of Indiana pursuant to Public law 92–500.” Id.

The Agreement required New Chicago and Lake Station to comply with several applicable laws, including the “Federal Water Pollution Control Amendment Act of 1972 (Public Law 92–500) particularly Title II, Section 204(b)” (also known as the Clean Water Act), “the Federal Regulations as contained in the Federal Register Volume 39, No. 29, dated February 11, 1974,” and any amendments thereto in order to permit Lake Station, “on a continuing basis,” “to receive grants from the U.S. Environmental Protection Agency and the State of Indiana which may ... in the future offer grants incidental to the collection and treatment of sewage.” Id. at 62–63. Specifically, New Chicago and Lake Station were required to adopt ordinances enacting a “user charge system,” under which all users in their respective jurisdictions had to pay their proportionate share of the costs of operation and maintenance of the sewage system. Id. at 63; see also id. at 73 (“[Lake Station] and [New Chicago] shall institute, maintain, and enforce a system of user charges in accordance with the guidelines of the U.S. Environmental Protection Agency and other state and federal agencies ....”), 59 (admission by New Chicago that it agreed that each recipient of waste treatment services would pay its proportionate share of the costs of operation and maintenance of the sewage system). The parties also agreed to comply with all applicable state and federal laws “[i]n the construction, maintenance and operation of its sewage system.” Id. at 63; see also id. at 59 (admission by New Chicago that it agreed to comply with all applicable state and federal laws). Finally, New Chicago and Lake Station were required to “enforce their User Charge and Sewer Use Ordinances beginning at the points of discharge from [New Chicago] into [Lake Station's] [sewage] system and downstream to the treatment plant of the [GSD].” Id. at 63.

The Agreement governed billing as follows:

12. Billing of Services.

A. [Lake Station] will bill [New Chicago] monthly for the following charges:

1. Treatment charges at the [GSD] treatment rate, plus $40.00 per month billing and carrying charge.

2. Excessive strength waste surcharges billed at the rate established by [Lake Station] sewage rate ordinances.

3. One-twelfth of [New Chicago's] portion of the current year's interceptor O M & R [operation, maintenance, and replacement] costs.

4. One-twelfth of [New Chicago's] portion of the [GSD] capacity charge. (Yet to be determined.)

5. Billing will be on a monthly basis with a penalty charged on all past due billings. The amount of the penalty and the determination of the date when billings are past due will be consistent with [Lake Station's] Sewage Works billing practice for all other customers of the sewage works.

B. [Lake Station] shall have the responsibility of reading the metering devices at the interceptor interconnection point and billing [New Chicago] appropriately....

Id. at 71–72 (emphasis added). Also according to the Agreement, Lake Station agreed “to hold harmless and indemnify [New Chicago] from any liability damages losses, expenses or costs and from any, negligence, or failure to act on the party [sic] of [Lake Station] in operation of its sewage system.” Id. at 77.¹

New Chicago, in compliance with the Agreement, adopted Ordinance No. 89–8 on August 8, 1989. The ordinance established the schedule of rates, user charges, and surcharges to be collected by New Chicago from the owners of property served by the town's Small Diameter Gravity Sewer System. Id. at 95. The ordinance acknowledged that New Chicago had recently signed an agreement with Lake Station for the joint construction and proportionate sharing of construction and operating costs of a gravity interceptor sewer system which would collect sewage from New Chicago and Lake Station and discharge such sewage to GSD for treatment. Id. The ordinance further provided:

WHEREAS, it is necessary to establish a schedule of rates and charges to produce sufficient revenue to provide funds for [New Chicago's] proportionate share of ... Lake Station's operation and maintenance expenses of the interceptor sewer system and East End Lift Station, [GSD] sewage treatment charges, for the annual debt service resulting from the financing of [New Chicago's] share of the gravity interceptor sewer system, and the operating, maintenance and administrative expenses of [New Chicago] in connection with the construction of [New Chicago's] sewage collection system under the United States Environmental Protection Agency Federal Construction Grant Project No. C–181093....

Id.

Pursuant to the 1982 contract between GSD and Lake Station, GSD billed Lake Station at $0.35 per thousand gallons of flow that Lake Station contributed to the GSD sewage system. Id. at 218. When the contract was amended in 1984, the rate was increased to $0.39. Id. On October 31, 1989, the Interim Director of GSD sent correspondence to the Mayor of Lake Station that on October 17, 1989, the Gary Common Council adopted Ordinance No. 6403, which raised the basic sewage treatment rate to be billed to Lake Station to $1.20 per thousand gallons of flow. Id. at 218–19. The correspondence indicated that the increased rate was not negotiable and became effective on October 18, 1989. Over a year later, on November 20, 1990, the Mayor of Lake Station sent correspondence to GSD indicating that Lake Station was rejecting the GSD billing as of September 25, 1990,...