Title: Bakies v. Perrysburg

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Bakies v. Perrysburg, 108 Ohio St.3d 361, 2006-Ohio-1190.] 
 
 
 
BAKIES ET AL., APPELLANTS, ET AL. v. CITY OF PERRYSBURG ET AL., 
APPELLEES. 
[Cite as Bakies v. Perrysburg, 108 Ohio St.3d 361, 2006-Ohio-1190.] 
Municipalities — Provision of water and sewer services to extraterritorial 
customers conditioned on petition for annexation. 
(No. 2004-1923 — Submitted October 25, 2005 — Decided March 29, 2006.) 
APPEAL from the Court of Appeals for Wood County,  
Nos. WD-03-055 and WD-03-062, 2004-Ohio-5231. 
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SYLLABUS OF THE COURT 
1.   
A contract between a municipality and an extraterritorial water and sewer 
customer in which the customer agrees to annex property or face 
termination of service is a valid and enforceable contract. 
2.   
In the absence of a contract to do so, a municipality has no duty to supply 
water or sewer services to extraterritorial customers.  (Fairway Manor, 
Inc. v. Summit Cty Bd. of Commrs. (1988), 36 Ohio St.3d 85, 521 N.E.2d 
818, paragraph one of the syllabus, followed.) 
3.   
In the sale and delivery of the surplus product of a municipally owned 
public utility to extraterritorial customers, the council of the municipality 
has the power to determine the terms on which the product will be sold, 
restricted only by pertinent constitutional and statutory limitations.  (State 
ex rel. Indian Hill Acres, Inc. v. Kellogg (1948), 149 Ohio St. 461, 37 
O.O. 137, 79 N.E.2d 319, followed.) 
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O’DONNELL, J. 
{¶ 1} The principal issue presented in this appeal concerns whether a 
municipality may, through either a written agreement or by ordinance, require 
extraterritorial water and sewer customers to annex their property to the 
municipality or face termination of their utility service.  Gregory and Karen 
Bakies and Richard Smith, residents of the Willowbend subdivision in Perrysburg 
Township, Ohio, appeal from a decision of the Wood County Court of Appeals 
that affirmed the judgment of the trial court denying their request for an 
injunction to prevent the city of Perrysburg from terminating their water and 
sewer services because they refused to annex their property to the city of 
Perrysburg. 
{¶ 2} During the 1970s and 1980s, the city of Perrysburg, located in 
Wood County, which operated its own water district, contracted with the Wood 
County Board of Commissioners to provide water and sewer services to 
unincorporated areas within the county. 
{¶ 3} In 1975, the Cavalear Development Company sought to develop 
Willowbend subdivision, a proposed upscale residential development in 
Perrysburg Township, adjacent to the city of Perrysburg.  In order to provide 
water and sewer service to Willowbend, Cavalear contracted with Wood County 
to pay for extension of a water line.  The contract further specified that the water 
would be provided subject to the rules and regulations of the city of Perrysburg. 
{¶ 4} In his brief filed in our court, Smith stated that he purchased 
property and built a home in Willowbend in 1978, Perrysburg extended water and 
sewer services to his property without requiring any written agreement, and he 
has continuously received such services, paying extraterritorial rates since that 
time. 
{¶ 5} Subsequent to that arrangement, Perrysburg began to enact 
ordinances with respect to its water service.  In 1983, it provided by ordinance 
January Term, 2006 
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that following that date, extraterritorial customers had to agree to petition for 
annexation of their property immediately or agree to do so when their property 
became contiguous to any part of the city. 
{¶ 6} Then, in 1988, because of large population growth in areas 
adjacent to the city and in an effort to achieve organized growth, Perrysburg 
declared its intention to annex all adjacent urbanized areas and all adjacent low-
density areas when it became reasonably certain that urbanization of those areas 
would occur.  To carry out this policy, Perrysburg mandated that all current 
extraterritorial customers execute an agreement to annex their property and exert 
all efforts to obtain annexation.  Smith never took any action in response to any of 
this legislation. 
{¶ 7} Ten years later, in 1998, Gregory and Karen Bakies purchased a 
home in the Willowbend subdivision and signed a contract for water service with 
the city of Perrysburg in which they agreed to cooperate with Perrysburg’s 
annexation plans or face termination of their service. 
{¶ 8} Subsequently, the city of Perrysburg and Perrysburg Township 
agreed to designate areas where the township would consent to annexation.  
Following that agreement, in June 2002, Perrysburg mailed letters to 
approximately 260 property owners in Perrysburg Township requesting that they 
sign a petition for annexation pursuant to either a previously signed agreement for 
water and sewer service or pursuant to applicable ordinances of the city of 
Perrysburg.  The Bakieses received a letter, but refused to sign the annexation 
petition, and as a result, Perrysburg notified them that their water and sewer 
service would be terminated.  Smith also refused to sign and received a similar 
notice of termination of his service. 
{¶ 9} The Bakieses filed a complaint in common pleas court, seeking 
injunctive relief to prevent Perrysburg from terminating their water and sewer 
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services; subsequently, they filed an amended complaint adding Smith as an 
additional party. 
{¶ 10} The trial court conducted a preliminary hearing in which Gregory 
Bakies testified that he had reluctantly signed an agreement to annex his property 
upon the city’s request at the time he purchased his home.  Smith, however, 
testified that he could not recall signing such an agreement.  Perrysburg offered 
the testimony of its city administrator regarding its annexation policy. 
{¶ 11} Following that preliminary hearing, the court granted a preliminary 
injunction preventing Perrysburg from terminating water or sewer service for 60 
days and scheduled the matter for further proceedings. 
{¶ 12} Perrysburg thereafter answered the amended complaint and 
counterclaimed, seeking a declaration as to the enforceability of the Bakieses’ 
agreement and an order compelling them to immediately sign an annexation 
petition. It also moved for summary judgment and submitted a deposition of 
Perrysburg Mayor Jody Holbrook describing the city’s plans to annex portions of 
Perrysburg Township.  Several factors, including an agreement with Perrysburg 
Township, proximity to the city’s corporation limits, tax revenue, and the city’s 
ability to provide services more cost-effectively, influenced which properties it 
selected for annexation.  The mayor also testified that Perrysburg would benefit 
because the annexations would generate revenue for the city by increasing the 
city’s tax base, which would far exceed the revenue Perrysburg gained from 
selling water.  He further testified that township residents would also benefit from 
the annexations because the city of Perrysburg could provide better and more 
effective services for residents than the township, as evidenced by its parks, 
recreation, and fire and police services, among others. 
{¶ 13} Several months later, the court granted Perrysburg’s motion for 
summary judgment, declared the Bakieses’ contract for delivery of water and 
January Term, 2006 
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sewer services valid and enforceable, and ordered the Bakieses and Smith to sign 
the annexation petition within 60 days. 
{¶ 14} The homeowners appealed to the Sixth District Court of Appeals, 
which affirmed the judgment of the trial court as to the enforceability of the 
Bakieses’ agreement; it also held that by continuing to receive water after 1982, 
Smith implicitly agreed to be governed by the rules of the division of water; and it 
determined that Perrysburg could lawfully terminate water service if the 
homeowners failed to consent to annexation of their property to Perrysburg. 
{¶ 15} The homeowners appealed to this court, and we granted 
discretionary review.  They have advanced three propositions of law for our 
consideration: the Bakieses argue that while a municipality may impose 
conditions on the extension of water service to extraterritorial customers, it may 
not require annexation as a condition of continued service for those already being 
serviced; Smith asserts that he is a party to a 1978 oral agreement with the city of 
Perrysburg and that the terms of that contract may not be unilaterally changed by 
Perrysburg; finally, they contend that a municipality’s conditions for the sale of 
water to extraterritorial customers must not be unreasonable, arbitrary, or 
capricious and must bear a rational relationship to the health, safety, and welfare 
of its citizens. 
The Bakieses’ written contract 
{¶ 16} The Bakieses complain that Perrysburg cannot require consent to 
annexation as a condition of continued service for existing extraterritorial 
customers, urging that the Ohio Supreme Court has permitted municipalities to 
require annexation only for the extension of water service to extraterritorial 
customers.  Perrysburg, however, contends that absent a contractual obligation, a 
municipality has no duty to continue to supply water and sewer services to 
extraterritorial customers. 
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{¶ 17} Thus, the issue presented here relates to whether a municipality 
that has historically provided water and sewer service for extraterritorial 
customers is permitted to require annexation of the extraterritorial property as a 
condition of continued service to those customers. 
{¶ 18} Section 6, Article XVIII, of the Ohio Constitution authorizes a 
municipality to sell surplus water or sewer services outside its territorial 
boundaries.  Further, in State ex rel. Indian Hill Acres, Inc. v. Kellogg (1948), 149 
Ohio St. 461, 37 O.O. 137, 79 N.E.2d 319, we considered Cincinnati’s obligation 
to extraterritorial consumers of city water and held that in the absence of a 
contract, “the municipality may sell and dispose of its surplus products in such 
quantities and in such manner as the council thereof determines to be in the best 
interest of the municipality and its inhabitants.”  Id. at paragraph three of the 
syllabus. 
{¶ 19} In addition, in Fairway Manor, Inc. v. Summit Cty. Bd. of Commrs. 
(1988), 36 Ohio St.3d 85, 89, 521 N.E.2d 818, we stated: 
{¶ 20} “Municipally owned public utilities have no duty to sell their 
products, including water, to extraterritorial purchasers absent a contractual 
obligation. State, ex rel. Indian Hill Acres, Inc., v. Kellogg (1948), 149 Ohio St. 
461, 37 O.O. 137, 79 N.E.2d 319, paragraph three of the syllabus. Even where 
there is a contract, but the contract provides no termination date, either party to 
the agreement may terminate it upon reasonable notice. Grandview Heights v. 
Columbus (1963), 174 Ohio St. 473, 23 O.O.2d 117, 190 N.E.2d 453, paragraph 
two of the syllabus. Thus, it can be seen that a municipality does not assume a 
duty to continue supplying water in perpetuity to extraterritorial customers merely 
by virtue of having once agreed to supply it. * * * The municipality has the sole 
authority to decide whether to sell its water to extraterritorial purchasers. Indian 
Hill Acres, supra, paragraph two of the syllabus.” 
January Term, 2006 
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{¶ 21} In Indian Hill, Fairway Manor, and Grandview Hts., we 
recognized that a municipality has no obligation to continue to provide water to 
extraterritorial customers in the absence of contract.  Although the Bakieses 
attempt to distinguish a municipality’s authority to impose conditions at the time 
it extends service from its ability to impose conditions upon continued service, 
our precedent does not make that distinction.  We therefore reaffirm the principle 
that absent a contractual obligation, a municipality has no duty to continue to 
supply water to extraterritorial customers.  Further, the Bakieses signed a written 
contract with Perrysburg agreeing to cooperate with annexation or face 
termination of their service. 
{¶ 22} Accordingly, we conclude that a contract between a municipality 
and an extraterritorial water and sewer customer in which the customer agrees to 
annex property or face termination of service is a valid and enforceable contract. 
Smith’s oral contract 
{¶ 23} Smith claims that Perrysburg has provided him with water and 
sewer service since 1978 pursuant to an oral agreement whereby Perrysburg 
provides service conditioned on timely payment therefor and that Perrysburg 
cannot now unilaterally alter the terms of that agreement.  Perrysburg contends, 
however, that Smith has failed to prove the existence of any such agreement. 
{¶ 24} Thus we are called upon to consider the arrangement under which 
Smith receives services from Perrysburg. 
{¶ 25} Smith urges that the course of conduct existing between himself 
and the city of Perrysburg for more than 27 years arises from an oral contract.  It 
is undisputed that he built his home in Willowbend in 1978 and has received 
water and sewer services since then. 
{¶ 26} After our review, we agree with the court of appeals that the record 
does not evidence the terms of any oral contract involving his water and sewer 
services.  It does, however, reflect that Perrysburg enacted ordinances in 1983 and 
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1998 notifying extraterritorial users of conditions for continued receipt of 
services, and Smith’s continued receipt of services after those enactments 
subjected him to the provisions of those ordinances. 
{¶ 27} In Fairway Manor, 36 Ohio St.3d 85, 521 N.E.2d 818, we held that 
in the absence of a contract, a municipality has no duty to supply water or sewer 
services to extraterritorial customers.  Accordingly, because Smith has not proven 
the existence of a contract, Perrysburg has no duty to supply Smith with water and 
sewer services, and he is obligated to comply with the rules and ordinances of 
Perrysburg. 
Constitutionality of Perrysburg ordinances 
{¶ 28} Finally, the Bakieses and Smith urge that conditions imposed by 
Perrysburg ordinances for the sale of water to extraterritorial users are 
unreasonable, arbitrary, and capricious and lack a rational relationship to the 
health, safety, and welfare of its citizens.  Perrysburg first responds that it has no 
duty to prove that its annexation policy bears a rational relationship to the health, 
safety, and welfare of its citizens, and it further maintains that the record 
demonstrates a reasonable basis for it to require annexation as a condition of 
continued service to extraterritorial customers. 
{¶ 29} Thus we are asked to consider whether the Perrysburg ordinances 
imposing conditions on continued service to extraterritorial customers are 
unreasonable, arbitrary, or capricious and whether its ordinances bear a rational 
relationship to the health, safety, and welfare of its citizens. 
{¶ 30} Section 4, Article XVIII of the Ohio Constitution empowers any 
municipality to acquire, construct, own, lease, and operate any public utility 
within or without its corporate limits to serve the municipality and its inhabitants.  
Section 6, Article XVIII further authorizes a municipality owning or operating a 
public utility to sell and deliver surplus utility product to others. 
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{¶ 31} Appellate courts of this state have examined this issue in similar 
cases.  In Shipman v. Lorain Cty. Bd. of Health (1979), 64 Ohio App.2d 228, 18 
O.O.3d 172, 414 N.E.2d 430, in which the city of Oberlin required annexation as 
a condition of receiving sewer service, the court concluded that the city’s reasons 
for its policy—regulating growth and increasing its tax base—constituted 
legitimate aims of the ordinance and that the city used reasonable means to 
accomplish its objectives. 
{¶ 32} Also, in Andres v. Perrysburg (1988), 47 Ohio App.3d 51, 546 
N.E.2d 1377, the court upheld an ordinance requiring property owners to sign 
annexation agreements in order to have sewer service extended to their properties, 
stating that the city could provide extraterritorial services “subject to whatever 
conditions it deems necessary in the exercise of its police powers so long as each 
condition is not unreasonable, arbitrary, or capricious and bears a legitimate and 
rational relationship to the health, safety, and welfare of its citizens.”  Id. at 53, 
546 N.E.2d 1377. 
{¶ 33} In accord with the reasoning of the other courts that have 
considered these similar issues, we conclude that ordinances requiring 
extraterritorial customers to agree to annexation in exchange for continuation of 
services are a valid exercise of the police power of a municipality, that such a 
requirement is not unreasonable, arbitrary, or capricious, and that it bears a 
rational relationship to the health, safety, and welfare of the municipality’s 
citizens.  The homeowners here have failed to advance any basis upon which we 
could conclude otherwise. 
{¶ 34} Perrysburg, on the other hand, has demonstrated a legitimate basis 
for selecting the homes owned by the Bakieses and Smith for annexation— 
including tax revenue, proximity to Perrysburg’s corporate limit, and its prior 
agreement with Perrysburg Township.  Perrysburg further demonstrated that 
annexation would create a larger tax base, which would increase its general 
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revenue and reduce the strain on city services caused by adjacent urbanized areas 
of Perrysburg Township.  And it would benefit township residents by providing 
better and more cost-effective services such as parks, recreation, and police and 
fire services to residents. 
{¶ 35} In Indian Hill, 149 Ohio St. 461, 37 O.O. 137, 79 N.E.2d 319, we 
held that in the sale and delivery of the surplus product of a municipally owned 
public utility to extraterritorial customers, the council of the municipality has the 
power to determine the terms on which the product will be sold, restricted only by 
pertinent constitutional and statutory limitations.  Today, we reaffirm that 
holding.  Accordingly, the positions advanced by the Bakieses and Smith are not 
well taken, and the judgment of the court of appeals is affirmed. 
Judgment affirmed. 
 
MOYER, C.J., RESNICK, PFEIFER, LUNDBERG STRATTON, O’CONNOR and 
SADLER, JJ., concur. 
 
LISA SADLER, J., of the Tenth Appellate District, sitting for LANZINGER, J. 
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Rohrbachers, Light, Cron & Trimble Co., L.P.A., David J. Rohrbacher, 
and Todd M. Zimmerman, for appellants. 
Spengler Nathanson, P.L.L., Theodore M. Rowen, and Lisa E. Pizza; and 
Peter D. Gwyn for appellee city of Perrysburg. 
Byron & Byron Co., L.P.A., Barry M. Byron, and Stephen L. Byron; and 
John Gotherman, urging affirmance for amicus curiae, Ohio Municipal League. 
Richard C. Pfeiffer Jr., City Attorney, and Daniel W. Drake, Chief 
Counsel, urging affirmance for amicus curiae city of Columbus. 
Andrew J. Burkholder, Deputy Law Director, urging affirmance for 
amicus curiae city of Springfield. 
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