Court Opinion

ID: 9477305
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:19:48.545085+00
Date Added: 2024-06-11T17:45:48.405840
License: Public Domain

MERRITT, Circuit Judge,
concurring in part and dissenting in part.
I agree with the Court’s resolution of the antitrust and § 1983 issues. I disagree, however, with the Court’s decision on the Ohio contract law issue.
I agree with the majority that the power to approve an extra-territorial expansion of city services vests in the city council ab initio. The facts of this case reveal a legal chain of authority in which power over the water and sewer systems was allocated in a succession of constitutional provisions, state statutes, and city ordinances. Municipalities in Ohio are specifically empowered by article XVIII § 4 of the state constitution to operate public utilities. Article XVIII § 6 of the constitution gives the municipality additional power to provide these utilities beyond the city limits. As an initial matter, therefore, it is clear that the city had authority to enter into the alleged contract with Mr. Sproul. See State ex rel. Indian Hill Acres, Inc. v. Kellogg, 149 Ohio St. 461, 79 N.E.2d 319 (1948). In *1275other words, the contract is not ultra vires” as that term is normally used in local government law. See McQuillen, Municipal Corporations § 29.10 (1949).
Although the Ohio Constitution does not identify which municipal agent or body is vested with the authority to approve an extra-territorial extension of service, the Ohio courts have indicated that this authority is entrusted to the city council. See State ex rel. Indian Hill Acres, 149 Ohio St. 461, 79 N.E.2d 319; City of Stow v. City of Cuyahoga Falls, 7 Ohio App.3d 108, 454 N.E.2d 561 (1982). The Court of Appeals noted in City of Stow that this authority flows from Ohio Rev.Code Ann. § 731.47 (Baldwin 1987) which states that the legislative authority of the city has “management and control” of the city’s property “except as otherwise provided.” See also 1957 Op. Att’y Gen. 590 (1957) (legislative authority has statutory power over extra-territorial expansion of water service under § 731.47).
I do not understand, however, why the majority agrees with Judge Thomas that the city council did not “provide otherwise” by enacting sections 921.63 and 923.10 of the City of Wooster, Ohio, Codified Ordinances. Section 921.03 states that “the water mains and the water works of the City are under the exclusive control of the Director of Administration, as provided for in Ohio R.C. 743.03, and that the Council has the general powers of such water works as provided for in Ohio R.C. 743.01.” Section 923.10 states that “the sanitary sewers and the sanitary sewer system of the City are under the exclusive control of the Director as provided for in Ohio R.C. 729.50, and the Council has the general powers over such sanitary sewer system as provided for in Ohio R.C. 727.01.”
These ordinances clearly delegate authority over extra-territorial expansion of water and sewer lines to the administrative branch of the City of Wooster. The meaning of the term “exclusive control” is unmistakable and unambiguous as it relates to the powers of the Director of Administration. A comparison of the cross-referenced statutes confirms this view. The council has reserved the right under § 743.01 to take possession of land necessary for the water works, and the right under § 727.01 to levy assessments for the sewer system. Conversely, the council has given the Director of Administration Power to “manage, conduct, and control” the water and sewer operations. By delegating this broad authority, the council empowered the administrative department to contract with Sproul to serve his proposed development.1
The majority also notes that even if such a delegation was attempted, it doubts that the council could delegate away its policy-making responsibilities in such a manner. However, the cases cited by the Court are inapposite because the majority misapprehends the nature of “policy-making” in the present case. The administrative department has not made “policy” by contracting to provide city services to a single develop*1276ment: it has simply carried out a pre-exist-ing policy established by the council of allowing such expansion. The council has delegated to the administrative department the authority to establish water and sewer rates both inside and outside the city,2 and empowered the administrative department to negotiate services to those who agreed to pay those rates. Thus, it was the council, and not the administrative department, that formulated the policy to serve all paying customers. That the council would choose to allow the administrative department to handle the time-consuming task of negotiating with individual landowners is neither surprising nor unconstitutional. It is not a reasonable interpretation of the council’s action to say that it delegated to the administration the power to set extraterritorial rates while retaining for itself exclusive power to negotiate contracts to charge those rates.
Beyond the rules of agency law, the equities here clearly favor enforcement of the contract. Unlike the public contract cases cited by the city, enforcement of this contract presents no danger to the public fisc. The city is not required to spend any money to extend utilities to the development, since Mr. Sproul has already paid to construct the necessary pipelines. In fact, the city will actually make money from both tapping fees and monthly charges for water and sewer service. Measured against the $30,000 that Mr. Sproul will lose if the contract is not enforced, the city does not have a compelling hardship argument.
For the reasons stated above, therefore, I would hold that Mayor Demorest and Director of Administration Spitler had legal authority to contract with Mr. Sproul on behalf of the city for an extra-territorial expansion of water and sewer service. However, on the state of this record, we can go no further. We do not have findings of fact or conclusions of law on the scope or validity of the contract that Mr. Sproul alleges resulted from the July 1983 meeting with the city officials. We do not know, for example, whether a bargained-for exchange was contemplated by the city officials or whether the contract was required to be in writing. The District Court should be required to examine the substance of the July 1983 meeting to see if the legal formalities necessary for a binding contract under Ohio law were satisfied. Furthermore, if it found that a contract was entered into by the city and subsequently breached, the District Court should be required to fashion an appropriate remedy.
I would remand this case to the District Court for this purpose. Therefore, I respectfully dissent.

. The majority relies on Ohio cases that place the risk of loss caused by a defect in a municipal agent’s authority upon the party contracting with the municipality. See Schumacher Stone Co. v. Columbus Grove, 73 Ohio App. 557, 57 N.E.2d 251 (1944); McCloud & Geiglo v. City of Columbus, 54 Ohio St. 439, 44 N.E. 95 (1896), and Kimbrell v. Village of Seven Mile, 13 Ohio App.3d 443, 469 N.E.2d 954 (1984). These cases are only applicable, however, if there is a defect in authority which could be discovered by the person contracting with a municipality. They are merely an application of the established agency principle that one with notice of defective authority cannot bind the agent's principal to an unauthorized deal. See Restatement (Second) Agency § 161 (1957). In the instant case, I would hold that there was no defect in authority. However, even if there had been a defect in authority, the city would be bound by apparent authority. Under this doctrine, the principal bears the risk of loss where no notice of a special limitation on the agent's authority is given. Id. Although it is unnecessary here, apparent authority provides an alternative basis for liability where a municipality provides no clear notice that its agent has limited power. Cf. City of Cincinnati v. Cameron, 33 Ohio St. 337 (1878) (municipalities acting in proprietary capacity are governed by same rules of contractual liability as private individuals). Here, the municipality certainly provided no clear notice that its agent had limited power. Sproul could reasonably have read the ordinances in the same way that I do, i.e., to delegate authority. Thus, apparent authority would also bind the city.

. The city council has "pegged” the non-resident sewer rates to the water rates set by the Director of Administration for residents. Section 923.-04(1)(1) of the Wooster Codified Ordinances provides:
The sewer rental rates for resident users of the sanitary sewer system of the City are established as 100 percent of the resident water rates as established by the Director. The sewer rental rates for nonresident users of the sanitary sewer system of the City are established as 150 percent of the resident water rates as established by the Director, except as provided by contract. * * *