Vermont Gas Systems, Inc. v. City of Burlington, 88-169

• Decision Date: 01 December 1989
• Docket Number: No. 88-169,88-169
• Parties: VERMONT GAS SYSTEMS, INC. v. CITY OF BURLINGTON.
• Court: Vermont Supreme Court

Page 45

571 A.2d 45

153 Vt. 210

VERMONT GAS SYSTEMS, INC. v. CITY OF BURLINGTON.

No. 88-169.

Supreme Court of Vermont.

Dec. 1, 1989.

Paul, Frank & Collins, Inc., Burlington, for plaintiff-appellant.

Joseph E. McNeil and William F. Ellis of McNeil, Murray & Sorrell, Inc., Burlington, for defendant-appellee.

Before ALLEN, C.J., DOOLEY and MORSE, JJ., and BARNEY, C.J. (Ret.) and KEYSER, J. (Ret.), Specially Assigned.

DOOLEY, Justice.

Vermont Gas Systems, a public utility, appeals the trial court's decision which denied it recovery of the costs to relocate gas pipes under the City of Burlington after being required to do so by the City. We affirm.

The facts in this case are simple. Plaintiff, Vermont Gas Systems, is a public utility which provides gas service to retail customers in several Vermont municipalities, including the City of Burlington. Plaintiff's gas pipes have been buried beneath Burlington streets for a number of years under a franchise originally granted to its predecessor. During the summer of 1986, defendant, the City of Burlington, began construction on a new segment of a combined storm and sanitary sewer line, known as the Ravine Sewer Project. The trial court found that this segment, a small section of the sewer system as a whole, was part of an overall sewer improvement project intended in part to reduce the flow of pollution into Lake Champlain.

As a result of the defendant's sewer project, plaintiff was required to relocate its gas lines lying within the rights of way of Pearl, South Union and College Streets. Plaintiff relocated the gas lines at considerable expense and then brought this suit to recover its costs, $105,527.16, which were stipulated to by both parties as reasonable.

Plaintiff moved for summary judgment claiming that, as a matter of law, it was entitled to recovery. The trial court denied this motion, stating that the likelihood of success depends on whether the sewer project is governmental or proprietary in nature and that disputed issues of fact underlie the proper characterization. The trial court determined that if the project were held governmental, then plaintiff would not be entitled to reimbursement. If, however, the City's project were proprietary rather than governmental, then plaintiff would be entitled to recover costs. Following a one-day trial, the court held that "the project in question is fairly characterized as governmental. Private gas pipes moved to permit this improvement were moved for a governmental purpose, and no compensation is due for [plaintiff's] forced relocation."

On appeal, plaintiff gas company frames the issue as whether the Ravine Sewer Project represents a governmental or proprietary function. We find that plaintiff states the issue too narrowly. Accordingly, we start with a discussion of the relevancy of this distinction in utility relocation law.

This Court has applied the governmental/proprietary doctrine to utility relocation law on only one occasion. See Vermont Gas Systems, Inc. v. City of Burlington, 130 Vt. 75, 286 A.2d 275 (1971). In that case, Vermont Gas abandoned and relocated its service lines when the City of Burlington razed a number of residential buildings and discontinued sections of several streets. The Court never discussed whether the City's action was governmental or proprietary in nature. Rather, the Court seemed to assume that the action was governmental, stating that the "legislative license to occupy the streets with these installations was at all times subject to the paramount right of the municipality to discontinue or relocate such streets." Id. at 79, 286 A.2d at 277-78. The Court therefore denied the gas company recovery. On reargument, however, the Court concluded that the Urban Renewal Act itself required the municipality to reimburse the utility for real property taken in the carrying out of urban renewal. Thus, the Court found that, by statute, the gas company was entitled to partial recovery.

The governmental/proprietary distinction has a long history in the area of municipal tort liability. For example, in Winn v. Village of Rutland, 52 Vt. 481 (1880), the Court held that when the village negligently constructed a new sewer system, it was liable to a landowner who was injured when the sewer overflowed onto his property. More recently, when a plaintiff claimed that he was injured by falling into a partially uncovered sewer catch-basin, the Court held that "those functions which are governmental are protected by the doctrine of sovereign immunity, while, in contrast, the governmental unit will be liable for injuries caused or sustained in furtherance of its proprietary functions." Dugan v. City of Burlington, 135 Vt. 303, 304, 375 A.2d 991, 992 (1977). The use of the governmental/proprietary distinction, however, has rarely strayed from tort cases in which sovereign immunity was the claimed defense.

Beyond the arena of tort liability, the governmental/proprietary distinction has led a perilous life in other jurisdictions. This distinction has led to unpredictable and diverse results in utility relocation cases. While some courts have held that municipally operated sewer systems, water, lighting and power utilities, and mass transit are governmental activities, other courts have found these same activities to be proprietary. See Northwest Natural Gas Co. v. City of Portland, 300 Or. 291, 299, 711 P.2d 119, 124-25 (1985). When faced with a utility relocation issue similar to the one before this Court, the Supreme Court of Colorado stated: "Cases and commentators have criticized the governmental/proprietary distinction as unhelpful, inherently unsound, and 'probably one of the most unsatisfactory known to the law, for it has caused confusion not only among the various jurisdictions but almost always within each jurisdiction.' " City & County of Denver v. Mountain States Telephone & Telegraph Co., 754 P.2d 1172, 1174 (Colo.1988) (quoting 3 K. Davis, Administrative Law Treatise § 25.07, at 460 (1958)).

Although courts generally fail to analyze the "basis for the distinctions between governmental and proprietary activities," those that do "seem to assert that governmental and proprietary functions are distinguishable based on whether the public bodies are engaged in activity that is (1) essential or necessary for the government to perform, or (2) traditional for the government to perform." Northwest Natural Gas, 300 Or. at 300, 711 P.2d at 125. Both of these tests, however, have proven unworkable. In general, when courts utilize the "essential or necessary" mode of analysis, nearly all municipal activities are deemed governmental rather than proprietary. See, e.g., Wells & Hellerstein, The Governmental-Proprietary Distinction in Constitutional Law, 66 Va.L.Rev. 1073, 1103 (1980); see also Northwest Natural Gas, 300 Or. at 301, 711 P.2d at 125. Likewise, the "traditional function" test is often based on outmoded ideas. For example, while mass...