Title: Po River Water and Sewer v. Indian Acres Club
Citation: N/A
Docket Number: 970050
State: Virginia
Issuer: Virginia Supreme Court
Date: January 9, 1998

PRESENT: All the Justices 
 
PO RIVER WATER AND 
SEWER COMPANY 
 
v.  Record No. 970050 
OPINION BY JUSTICE BARBARA MILANO KEENAN 
                                       January 9, 1998 
INDIAN ACRES CLUB OF 
THORNBURG, INC., ET AL. 
 
 
FROM THE CIRCUIT COURT OF SPOTSYLVANIA COUNTY 
 
J. Peyton Farmer, Judge 
 
 
In this appeal, we consider whether a property owners' 
association must pay a utility for services provided to common 
area facilities owned by the association. 
 
Indian Acres Club of Thornburg, Inc. (the Association) is 
the property owners' association for Indian Acres of Thornburg, a 
private recreational campground in Spotsylvania County.  The 
campground consists of 6,245 individual lots located on 802 
acres. 
 
The campground includes certain facilities for the benefit 
of the individual lot owners, including roads, swimming pools, 
tennis courts, lakes, parks, a club house, a recreation center, a 
golf course, a car wash, showers, toilets, and lavatories.  The 
Association owns all the campground's common area facilities.  
Each of the individual lot owners is a member of the  
Association. 
 
Po River Water and Sewer Company (Po River) is a Virginia 
public service corporation certified by the State Corporation 
Commission (the Commission) to provide water and sewer services 
to the individual lot owners and to the campground's common area 
facilities.  From 1971 through October 1987, Po River sent one 
bill for water and sewer services to the Association, or to its 
predecessor, Indian Acres International.  Beginning in November 
1987, Po River billed the individual lot owners directly for the 
cost of providing water and sewer services to the entire 
campground, including the common areas.  However, Po River 
experienced difficulties in collecting payment for these services 
from the individual lot owners. 
 
In conjunction with Po River's 1992 application for a rate 
increase, the State Corporation Commission entered an order in 
January 1994, requiring Po River to record the amount of water 
consumed by the Association's common area facilities.  The 
Commission further ordered Po River to submit in its next rate 
case a rate structure that incorporated the Association as a 
separate customer class and reflected the Association's water 
usage. 
 
Po River filed its next rate case in 1995.  Based on meter 
readings, the proposed tariffs and regulations requested a rate 
of $85,750 per quarter to be charged to the Association, rather 
than to the individual lot owners, for services provided to the 
common area facilities.  In its required notice to the individual 
lot owners and to the Association, Po River stated that the rate 
for the individual lot owners would decrease in proportion to the 
rate paid by the Association, in order to prevent Po River from 
being paid twice for the same service.  The State Corporation 
Commission approved the rate requested by Po River on an interim 
basis, subject to a refund, and permanent rates are currently 
under consideration by the Commission. 
 
Although Po River sent several bills to the Association 
seeking payment for service to the common areas at the interim 
rate, the Association refused to pay any of these bills.  Po 
River then informed the Association that it would terminate water 
and sewer services to the common area facilities unless the 
Association paid the quarterly bill of $85,750 and signed a 
contract for the continuation of utility service to the 
Association's facilities.  
 
In response, the Association filed a petition for injunctive 
relief and declaratory judgment asking the trial court to enjoin 
Po River from terminating services to the common areas and to 
hold, among other things, that there is no contract for the 
provision of services between the Association and Po River, that 
the Association is not a customer of Po River, and that the 
Association is not responsible for Po River's customer billing.
1 
 Po River filed a cross-bill requesting that the trial court 
rule, under the theory of quantum meruit, that Po River is 
entitled to $85,750 for three months of water and sewer services 
provided to the Association's common area facilities.  Po River 
also requested the trial court to issue a declaratory judgment 
stating that the Association must pay Po River for its services 
at the rate of $85,750 per quarter, subject to refund and 
modification as may be ordered by the State Corporation 
Commission. 
                     
     
1 Thirty-seven individual lot owners joined the Association 
as 
plaintiffs. 
 
However, 
all 
the 
plaintiffs 
except 
the 
Association and Audrey V. Conti later obtained a nonsuit of their 
claims against Po River. 
 
After a bench trial, the court ruled that the Association 
was entitled to the "full relief requested."  The court held that 
the individual lot owners are customers of Po River and "are 
obligated to pay for all water and sewerage services provided by 
Po River."  The trial court enjoined Po River from terminating 
service to the common area facilities on the basis that the 
Association is a "non-paying customer" of the utility.  Po River 
appeals from this decision. 
 
Po River first argues that the trial court lacked 
jurisdiction to enjoin it from terminating services to the 
Association, and to rule that the individual lot owners are 
obligated to pay for the water and sewer services provided to the 
common area facilities.  Po River asserts that the State 
Corporation Commission has sole jurisdiction over these matters. 
 Po River also argues that the trial court erred in denying the 
relief requested in its cross-bill. 
 
In response, the Association contends that Po River failed 
to raise its jurisdictional argument in the trial court and, 
thus, is prevented from raising this objection on appeal.  The 
Association also argues that the trial court properly exercised 
its jurisdiction to determine whether an individual or an entity 
is a customer of a public utility for the purposes of bill 
collection, because this determination involves private rights 
and contracts between a public utility and individuals.  Lastly, 
the Association denies that Po River is entitled to quantum 
meruit relief. 
 
We first address the principles of law that apply to the 
jurisdictional issue raised by Po River.  A challenge to a 
court's subject matter jurisdiction may be raised at any time, 
even for the first time on appeal.  Wackwitz v. Roy, 244 Va. 60, 
63, 418 S.E.2d 861, 863 (1992); Morrison v. Bestler, 239 Va. 166, 
170, 387 S.E.2d 753, 756 (1990). 
 
The Commission has a constitutional and statutory duty to 
fix just and reasonable public utility rates.  Va. Const. art. 
XI, § 2; Code § 12.1-12; Anheuser-Busch Co. v. Virginia Natural 
Gas, 244 Va. 44, 46, 418 S.E.2d 857, 858 (1992).  In setting 
rates for a public utility, the Commission must first determine 
the public utility's revenue requirement, and then decide where, 
how, and from what source or sources the revenue awarded is to be 
obtained.  Id. at 47, 418 S.E.2d at 859; Secretary of Defense v. 
Chesapeake and Potomac Tel. Co., 217 Va. 149, 152, 225 S.E.2d 
414, 417 (1976); Apartment House Council v. PEPCO, 215 Va. 291, 
294, 208 S.E.2d 764, 766 (1974); City of Norfolk v. Chesapeake 
and Potomac Tel. Co., 192 Va. 292, 320, 64 S.E.2d 772, 789 
(1951).  Thus, in order to allocate a public utility's revenue 
requirement, the Commission is charged with establishing 
appropriate customer classes based on usage characteristics of 
individuals and entities utilizing the utility's services.  See 
Anheuser-Busch Co., 244 Va. at 46-47, 418 S.E.2d at 858-59; 
Secretary of Defense, 217 Va. at 152-53, 225 S.E.2d at 416-17; 
Commonwealth v. Shenandoah River Light and Power Corp., 135 Va. 
47, 60, 115 S.E. 695, 699 (1923).  In this manner, the Commission 
sets a particular rate for each identified customer class.  See 
Anheuser-Busch Co., 244 Va. at 46-47, 418 S.E.2d at 858-59; 
Secretary of Defense, 217 Va. at 152, 225 S.E.2d at 417; 
Chesapeake and Potomac Tel. Co., 192 Va. at 320, 64 S.E.2d at 
789. 
 
These rate-making duties are encompassed within the 
Commission's general duty to supervise, regulate, and control 
public utilities in "all matters relating to the performance of 
their public duties and their charges therefor."  Code § 56-36. 
Since the Commission has sole jurisdiction to define a utility's 
customer classes for the purposes of setting the rate at which 
the defined classes must pay for services received, the trial 
court did not have jurisdiction to determine who was a "customer" 
of Po River.  Thus, the trial court erred in addressing the issue 
whether the individual lot owners and the Association are 
"customers" of Po River. 
 
This conclusion, however, does not end our inquiry because 
the trial court has jurisdiction to adjudicate and determine 
private rights and contracts between public utilities and the 
individual recipients of their services.  Appalachian Power Co. 
v. Walker, 214 Va. 524, 533-34, 201 S.E.2d 758, 766 (1974); City 
of Lynchburg v. Commonwealth, 164 Va. 57, 63-64, 178 S.E. 769, 
771 (1935); Norfolk & W. Ry. Co. v. Commonwealth, 143 Va. 106, 
113-14, 129 S.E. 324, 326 (1925).  Thus, the trial court has 
jurisdiction to determine which individuals or entities have 
received a public utility's services.  Once the trial court makes 
this determination, the court may then compute the recipient's 
liability for payment at the rate set by the Commission for the 
customer class pertaining to that recipient.  Within this 
context, the trial court may also consider whether someone other 
than the recipient is obligated by contract to pay for the 
utility services provided to the recipient.  See id.
 
Applying these principles, we conclude that the trial court 
erred in holding that the individual lot owners are obligated to 
pay Po River directly for water and sewer services provided to 
the Association's common area facilities.  The evidence is 
uncontroverted that the Association is the owner of the common 
areas and facilities, and that Po River provided water and sewer 
services to these facilities.  Thus, the Association, not the 
individual lot owners, received these services from Po River.  
Further, the record contains no evidence that the individual lot 
owners were required by contract to pay for the utility services 
received by the Association.  The documents on which the 
Association relies are unambiguous and do not establish such a 
duty binding the individual lot owners.
2  
 
Although neither the individual lot owners nor the 
Association were required by contract to pay for the utility 
services received by the Association, we agree with Po River that 
the trial court erred in failing to grant Po River relief in 
accordance with its cross-bill, which requested equitable and 
declaratory relief under the theory of quantum meruit.  To avoid 
unjust enrichment, equity will effect a "contract implied in 
                     
 
     
2 These documents include the restrictive covenants 
applicable to the individual lots, Po River's application to the 
Commission in 1971 requesting certificates of public convenience, 
Po River's 1971 rates, rules and regulations, and the lease 
agreement between Po River and Indian Acres Land Company. 
law," requiring one who accepts and receives the services of 
another to make reasonable compensation for those services.  See 
Marine Dev. Corp. v. Rodak, 225 Va. 137, 142-44, 300 S.E.2d 763, 
765-66 (1983); Ricks v. Sumler, 179 Va. 571, 577, 19 S.E.2d 889, 
891 (1942); Hendrickson v. Meredith, 161 Va. 193, 200, 170 S.E. 
602, 605 (1933).  The liability to pay for the services is based 
on an implication of law that arises from the facts and 
circumstances presented, independent of agreement or presumed 
intention.  Marine Dev. Corp., 225 Va. at 142, 300 S.E.2d at 766; 
Hendrickson, 161 Va. at 200-01, 170 S.E. at 605.  The promise to 
pay is implied from the consideration received.  Id.  
 
Here, the record is clear that the Association, as the owner 
of the common area facilities, accepted and received water and 
sewer services from Po River.  A promise to pay is implied from 
the acceptance and receipt of those services.  Thus, we hold that 
the Association is required to pay Po River for those utility 
services. 
 
As stated above, the interim rate in effect for the 
Association's water and sewer usage is $85,750 per quarter.  The 
quarterly period for which Po River requests monetary relief on a 
quantum meruit basis is December 1, 1995 through February 29, 
1996.  Thus, the Association is required to pay $85,750 to Po 
River for the water and sewer services provided to the 
Association's common area facilities for that period.  We also 
hold that Po River is entitled to a judgment declaring that the 
Association is required to pay Po River for the water and sewer 
services provided to the Association's common area facilities at 
the rate of $85,750 per quarter, subject to any future refunds 
and future modifications that may be ordered by the Commission. 
 
For these reasons, we will reverse the trial court's decree 
and enter final judgment in favor of Po River on the 
Association's petition for injunctive and declaratory relief and 
on Po River's cross-bill. 
 
Reversed and final judgment.