Watson Rural Water Co., Inc. v. Indiana Cities Water Corp.

• Decision Date: 29 June 1989
• Docket Number: No. 88A01-8810-CV-00326,88A01-8810-CV-00326
• Citation: 540 N.E.2d 131
• Parties: WATSON RURAL WATER COMPANY, INC., Defendant-Appellant, v. INDIANA CITIES WATER CORPORATION, Plaintiff-Appellee, and Farmers Home Administration, Department of Agriculture, United States of America, Third Party Defendant Below.
• Court: Indiana Appellate Court

Page 131

540 N.E.2d 131

WATSON RURAL WATER COMPANY, INC., Defendant-Appellant, v. INDIANA CITIES WATER CORPORATION, Plaintiff-Appellee and Farmers Home Administration, Department of Agriculture United States of America, Third Party Defendant Below.

No. 88A01-8810-CV-00326.

Court of Appeals of Indiana First District.

June 29, 1989.

Rehearing Denied Aug. 10, 1989.

Rebecca G. Looney, New Albany, Virgil E. Bolly, Sellersburg, for defendant-appellant.

Daniel W. McGill, Barnes & Thornburg, Indianapolis, Richard C. O'Connor, Wyatt, Tarrant, Combes & Orbison, New Albany, for plaintiff-appellee.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Watson Rural Water Co. appeals the decision of the trial court entering summary judgment in favor of Indiana Cities Water Corporation, granting Indiana Cities a permanent injunction, and denying Watson Rural Water Company's counterclaims. We affirm.

FACTS

Watson Rural Water Company (Watson) is a not-for-profit Indiana corporation that engages in water distribution in unincorporated areas of Clark County, Indiana. Watson's system was started and built with funds borrowed from the Farmers Home Administration (FmHA). Watson is a public utility serving approximately 1800 customers, and is regulated as to matters of rates and service by the Indiana Utility Regulatory Commission (the "Commission"). Watson does not have a franchise, indeterminate permit or certificate of public convenience and necessity authorizing Watson to provide water service within the City of Jeffersonville.

Indiana Cities Water Corporation (Indiana Cities) is an Indiana Corporation engaged in the water and sewer utility business in various locations in Indiana including the City of Jeffersonville in Clark County, Indiana. Indiana Cities is a public utility serving approximately 59,000 customers statewide. Indiana Cities is also regulated by the Commission and operates within the City of Jeffersonville pursuant to an indeterminate permit issued by the Commission to Indiana Cities' predecessor company on May 31, 1923.

The current controversy concerns which of these public utilities should provide water service to a certain tract of land which is now a part of the City of Jeffersonville. In January 1973, Watson made an unsuccessful attempt to obtain a certificate of public convenience and necessity to serve this area of Jeffersonville, Indiana. Indiana Cities was granted permission to intervene in the action by the Commission. The Commission held a formal evidentiary hearing on Watson's petition on February 1, 1974. After hearing witnesses on both sides and evaluating the evidence presented, the Commission issued an order denying Watson's petition on March 22, 1974. The Commission held that Indiana Cities had the right to service Jeffersonville including the newly annexed areas.

In late 1985, Watson began providing water service to the Jeffersonville Hospital for construction purposes and continued to provide water service to the hospital throughout this litigation. On December 13, 1985, Watson again attempted to obtain a certificate of public convenience and necessity for a certain tract of land including the hospital site located within the City of Jeffersonville. Hearings were held on On February 6, 1987, Indiana Cities filed its complaint seeking damages and a permanent injunction to enjoin Watson from continuing to provide water service to the hospital. Watson filed an answer to this complaint on February 26, 1987, admitting that it continued to provide water to the hospital, but claiming that it was authorized to do so under 7 U.S.C. Sec. 1926(b). Watson also filed a counterclaim against Indiana Cities and sought to make the FmHA a third-party defendant.

Watson's petition on March 18 and 25 and on April 21, 1986. Numerous witnesses testified and other evidence was admitted. On November 26, 1986, the Commission issued an order again denying Watson's petition. The commission found that: (1) Watson had the requisite ability to adequately serve the public in the requested areas; (2) Indiana Cities was ready, willing and able to provide adequate service to the City of Jeffersonville, including annexed areas, at the present time and in the years ahead; (3) Watson's initiation of water service to the hospital without a valid franchise or indeterminant permit and without authority from this commission is contrary to the public interest and reflects unfavorably upon Watson's ability to provide utility service; (4) if permitted, Watson's service to the hospital would result in Watson's other customers improperly subsidizing the costs of providing service to the hospital; (5) 7 U.S.C. Sec. 1926(b) did not apply because the hospital site was not nor had it ever been part of Watson's service area; and (6) public convenience and necessity did not require that Watson provide water utility service to areas within the City of Jeffersonville. Watson did not appeal the Commission's denial of its petition. Despite the Commission's ruling, Watson continued to supply the hospital with water service.

On February 27, 1987, Watson sought to remove the case to the United States District Court for the Southern District of Indiana on the ground that Watson had a claim or right under federal law. The federal court sent the case back to state court. The case was venued to Washington Circuit Court on the motion of Indiana Cities. The FmHA was dismissed as a third-party defendant on October 23, 1987.

On July 22, 1987, Indiana Cities moved for summary judgment as to liability, and requested a permanent injunction against Watson. After briefing by the parties and a hearing on the motion, the trial court granted summary judgment in favor of Indiana Cities against Watson as to Watson's liability for damages resulting from providing water utility service to the hospital. The trial court also granted a permanent injunction prohibiting Watson from providing service to the hospital, and entered summary judgment against Watson on all counterclaims filed against Indiana Cities. In entering summary judgment in favor of Indiana Cities the trial court gave res judicata effect to the November 23rd, 1986 order of the Indiana Utility Regulatory Commission which denied Watson a certificate of public convenience and necessity. From this decision Watson now appeals.

ISSUES

1. Did the trial court err in granting res judicata effect to the November 23rd, 1986, order of the Indiana Utility Regulatory Commission?

2. Do the provisions of 7 U.S.C. Sec. 1926(b) confer a right on Watson to provide water utility service to the Jeffersonville Hospital and other areas within the City of Jeffersonville?

3. Did the trial court err in entering summary judgment in favor of Indiana Cities on Watson's counterclaim?

DISCUSSION AND DECISION

In reviewing a grant of summary judgment, our standard of review is well settled. We consider the contents of the pleadings, affidavits, answers to interrogatories, responses to requests for admissions, and depositions in a light most favorable to the non-moving party to determine whether any genuine issue of material fact exists, and whether the moving party is entitled to judgment as a matter of law. Ayres v. Indian Heights Volunteer Fire Dept., Inc. (1986), Ind., 493 N.E.2d 1229, 1234; Chambers v. Cent. School Dist. (1987), Ind.App., 514 N.E.2d 1294, 1296; Kahf v. Charleston South Apartments (1984), Ind.App., 461 N.E.2d 723, 729, trans. denied.

Issue One

Watson's sole defense to Indiana Cities' claim for damages was that Watson, as a borrower from the FmHA, was permitted to serve the hospital without Commission authority by virtue of the provisions of 7 U.S.C. Sec. 1926(b). The trial court in granting summary judgment in favor of Indiana Cities held that the Commission's prior determination that 7 U.S.C. Sec. 1926(b) did not give Watson the right to provide water utility service to the hospital should be given res judicata effect and that, therefore, the doctrine of collateral estoppel barred subsequent litigation of the issue. Watson contends that the trial court erred in giving the Commission's order res judicata effect. We disagree.

The doctrine of administrative res judicata was recognized by the Court of Appeals of Indiana in South Bend Federation v. National Educ. Ass'n (1979), 180 Ind.App. 299, 389 N.E.2d 23. The two branches of res judicata are "estoppel by judgment" and "estoppel by verdict." ¹ Estoppel by verdict or "collateral estoppel" is applicable when a particular issue is adjudicated and then is put into issue in a subsequent suit on a different cause of action between the same parties or those in privity with them. Id., 389 N.E.2d at 32. Because the concept of "claims" and "causes of action" are less important in administrative proceedings, most problems of res judicata in administrative law involve collateral estoppel. Id. To determine whether an administrative decision should bar or estop subsequent litigation the following criteria should be considered: (1) whether the issues sought to be estopped were within the statutory jurisdiction of the agency; (2) whether the agency was acting in a judicial capacity; (3) whether both parties had a fair opportunity to litigate the issues; and (4) whether the decision of the administrative tribunal could be appealed to a judicial tribunal. McClanahan v. Remington Freight Lines (1988), Ind., 517 N.E.2d 390, 394. (In McClanahan the Supreme Court refused to give collateral estoppel effect to a prior administrative ruling because the parties did not have a full an fair opportunity to litigate the central issue.); Cox v. Indiana Subcontractors Ass'n Inc. (1982), Ind.App., 441 N.E.2d 222, 225 (In Cox the doctrine of collateral estoppel was found to be inapplicable because the Indiana Employment Security Division did not have the authority to determine complex contract cases.) Therefore, this court must evaluate these factors to determine whether or not the...