DA 11
- 0483 

### IN THE SUPREME COURT OF THE STATE OF MONTANA 20 12MT 21 JUSTIN and SUSAN CONNER, Plaintiffs and Appellants,
v. CITY OF DILLON, Defendant and Appellee.

APPEAL FROM: District Co urt of the Fifth Judicial District,

In and For the County of Beaverhead, Cause No. DV 10
- 13403 Honorable E. Wayne Phillips, Presiding Judge COUNSEL OF RECORD:

For Appellants: Francis P. (Frank) McGee, Attorney at Law; Butte, Montana For Appellee : W. G. Gilbert, III , Dillon City Attorney ; Dillon , Montana Submitted on Briefs: January 4, 2012 Decided: February 1, 2012 Filed:

__________________________________________ Clerk February 1 20122

C hief Justice Mike McGrath delivered the Opinion of the Court. ¶1 Justin and Susan Conner appeal from the District Court’s July 25, 2011 order granting summary judgment in favor of the City of Dillon and dismissing the action with prejudice. We reverse.

**PROCEDURAL AND FACTUAL BACKGROUND** ¶2 The City of Dillon owns a water main line that divertswater from Rattlesnake Creek, as it has donesince the early 1900s. At the time of this action only ten residences receive water from this line and all are located outside the Dillon city limits. In 1981 the City entered an agree ment with Robert and Patricia McNeill allowing them to connect to the Rattlesnake Creek water ma inw ith “one water service” f or their domestic water supply
. I n 1994the

M cNeillsanticipated subdividing their property and selling a lot. They requested theCity to approve a second water servicef or the new lotbut that request
was not approved , according to al etter from the Mayor , “because of a lack of information
. ” In 1997 theMcNeills completed the subdivisionand sold a parcel of their land
. The McNeills divided the ir water tap f

rom the main lines o that water could be piped to their house and to the subdivided lot. A s part of the subdivision process, aJuly, 1997 letter from the Mayor of the City of Dillon to the Montana Department of Env ironmental Quality states that the “Water Department of the City of Dillon” had granted permission to McNeill to “activate an existing water service to his property.” Th e address given for this newly activated or p ermitted water service is the address of the3

Conner s ’ house. The City installed a water meter on thesecondtap alongsidethe meter for the McNeill lot ,and began billing the owner of the subdivided lotfor the water. ¶3 In2004 the Conner s bought thesubdivided lot with the water tap, the City water meter , and themonthly

City billing for water use all in place. The Conner s submitted a $35 “meter deposit” to the City and obtained a receipt. S ince September, 2004 the Conner sh ave received and paid the City’s monthly bills for water furnishedt o them throughtheMcNeills’ tapfrom the Rattlesnake Creek water main
. ¶4 In the winter of 2008 , Rattlesnake Creek and the water main both froze solid during a period of cold weather. By all accounts this was an unusual event. The City hired an excavator who dug the iceout of ab out a mile of Rattlesnake Creek, restoring the flow of water. The water main pipe remained frozen for a longer time, however, and the Conner s were without water service for a period of weeks. During that time the City tried unsuccessfully to drill a water well to replace the Rattlesnake Creek water and to thaw the frozen water ma in pipe. The City offered a larg e water storage tank to the Conner s, but they declined to use it. The City later supplied a portable toilet and bottled water to them. ¶5 In January, 2010 the Conner s sued the City for damages arising from the interruption of water service , basing their complaintupon claims of breach of contract, negligence , and infliction of emotional distress. The City mo ved for summary judgment and bo th sides filed affidavits and briefs
. The District Court referred the summary judgment to a Special M aster who conducted a hearing and issued a decision in fa vor of the City. The Special Master found that there was no contract between Conner s and the4

City because they did not have a contract for water service approved by the City Commission as required by City Ordinance § 13.04.110 . Therefore, the Special M aster determined that the Conner s’ water use was unlawful and could not be the basis for a contract . In addition , the Special Master determinedthat the negligence claim was barred by City Ordinance§ 13.04.150which provides that the City can “shut the water off in its
ma ins” and i s not liable for claims for the resulting

interruption of water service
. The District Court subsequently entered summary judgment for the City based upon the Special Master’s decision , and the Conner s appeal. **STANDARD OF REVIEW** ¶6 On appeal this Court reviews a district court decision on summary judgment under the same criteriaus ed by the district court under M. R. Civ. P. 56. Grimsrud v. Hagel, 2005 MT 194, ¶ 14, 328 Mont. 142, 119 P.3d 47. This Court reviews a district court’s conclusions of law to determine whether they are correct. Gliko v. Permann , 2006 MT 30, ¶ 13, 331 Mont. 112, 130 P.3d 155. This Court applies the same standard of review to an adopted master’s report that we do to any other district court order. Schmidt v. Colonial Terrace Assoc. , 215 Mont. 62, 66, 694 P.2d 1340, 1343 (1985). **DISCUSSION** ¶7 Issue One: Did the City of Dillon have a legal obligation to provide water to the Conner s under express or implied contract? The S pecial M aster, citing § 28
- 2
- 102, MCA, found that the elements of a contract are identifiable parties capable of contracting; the consent of the parties; a lawful object of the contract; and sufficient consideration.5

The S pecial M aster foundthat if there were a contract between the City and the Conner s, it was an implied contract under § 28
-2
- 103, MCA, which requires the same elements. ¶8 The Special Master concluded that the elements of a contract required by § 28
- 2
- 102 , MCA, were present in this case, except for the requirement of “a lawful object.” Neither party contests thedetermination that as between the City and the Conner s there
were parties capable of contracting, there was consent of the parties, and there was sufficient consideration. The Special Master determined that the Conner s ’ water use was barred by the original contract between the City and the McNeills, by the City’s 1 994 denial of theM cNeills’ request for a second tap, and by the City’s municipal code requirement that the City Council approve installation of a second water service. ¶9 On appeal, the Conner s argue that they had an implied contract with the City and thatt hey should be allowed to proceed with their claim that the City breached the contract. A contract may be either express or impli ed. The terms of an express contract
are stated in words while both the existence and terms of an implied contract are manif ested by the conduct of the parties, and a party may be estopped by its conduct from denying the existence of a contract. C B & F Development Corp. v. Culbertson State Bank , 256 Mont. 1, 5, 7, 844 P.2d 85, 87, 89 (1992). A party’s performance of a contra ct for a period of years “strongly indicates” that a contract existed. Somont Oil Co., Inc. v. Nutter , 228 Mont. 467, 473, 743 P.2d 1016, 1019 (1987). A party is not allowed to take the benefit of a contract and then later repudiate its existence. Wi lli ams v. Schwager, 2002 MT 107, ¶ 28, 309 Mont. 455, 47 P.3d 839.6

¶10 It is clear that neither the City’s contract with the McNeills providing for “one water service” from the Rattlesnake Creek main line nor the 1994 denial of permission for a second tap bar the Conner s’ claim for breach of contract. The Conner s were not parties to the City’s contract with the McNeills, and it is clear thatin 1997 the City ’s Water Departmentactually approved the activation of water service to the lot subsequently purchased by the Conner s. ¶11 The conduct of the City of Dillon manifested the existence of a contract to furnish water to the Conner s’ lot by approving the water servicea s part of the subdivision process , installing a water meter, and billing and collecting for the wat er that was furnished. With this background the City is e stopped from asserting there was n o contract for this water service because the service was not “specifically approved by the City Council” as provided in § 13.04.110 of the Dillon Municipal Code. The City itself, through the 1997 letter to the DEQ, acted contrary to the position the City now takes, allowing its Water Department to act with reg ard to approving the second water service from the McNeill tap. An established course of conduct can vary the requirement of a reg ulation. Lew

is v. Huyser , 264 Mont. 141, 145 , 870 P.2d 95, 98 (1994) (requirement of building code varied by course of conduct). To the extent that the City of Dillon required City Council approval of the water tap for the Conner s ’ lot, that requirement was completely underminedby the City’s own clear course of conductin this case . Therefore § 13.04.110 of the Dillon Municipal Code does not render the Conner s’ use of water illegal so as to vitiate the existence of an implied con tract to furnish water.7

¶12 The S pecial Master’s conclu sion, adopted by the District Court, that an illegal object barred finding an implied contract between the Conner s and the City of Dilloni s
rev ersed
. ¶13 Issue Two: I

s the liability of the City of Dillon in contract or tort limited by § 13.04.150 of its Municipal Code? ¶14 Section 13.04.150 of the Dillon Municipal Code provides: The water/sewer department reserves the right, at any time, without notice, to shut the water off in its mains for the purpose of ma king repairs or extensions or for any other purpose. No claim shall be made ag ainst the City of Dillon by reason of the breaking of any service pipe or from any other damage that may result from shutting off the water. ¶15 The S pecial M aster construed this provi sion as an absolute bar to any claim that the Conner s could have ag ainst the City under tort or contract. The Conner s argue on appeal that this provision is not a bar to liability because it conflicts with Article II, Sec. 18 of the Montana Constitution. That section provides that governmental entities, including cities hav

e no immunity from liability except as “specifically provided by law by a 2/3 vote of each house of the legislature.” ¶16 This Court will avoid deciding constitutional issues whenever possible, Wei dow v. Uninsured Employers’ Fund, 2010 MT 292, ¶ 2 2, 359 Mont. 77, 246 P.3d 704, and we do so in this case. Section 13.04.150 of the Dillon Municipal Code clearly applies when the City itself decides to shut off water service. In the present caseit is clear that the City did not decide to shut off the water service, but that it was shut off by the water freezing in8

the creek and the main line. Therefore, by its express terms, this provision does not apply here and cannot bar the Conner s ’ claims in either tort or contract. ¶17 The City also argues that it is not liable to the Conner s because the freezing water resulted from an act of God. Neither the S pecial M aster nor the District Court reached this issue and we do not address it here. ¶18 Nothing inthis opinion should be construed as a determination that the City of Dillon is in fact liable to the Conner s on either contract or tort claims. We only hold that the Special M aster and the District Court erred by dismissing the Conner s’ claims as a matter of law. This matter is therefore reversed and remanded for further proceedings.

/S/ MIKE McGRATH
We concur: /S/ MICHAEL E WHEAT /S/ PATRICIA COTTER /S/ JAMES C. NELSON /S/ BRIAN MORRIS