Court Opinion

ID: 4202973
Source: CourtListenerOpinion
Date Created: 2017-09-13 14:17:54.320907+00
Date Added: 2024-06-11T07:47:03.380210
License: Public Domain

[Cite as Hudson v. Akron, 2017-Ohio-7590.]

STATE OF OHIO                   )                     IN THE COURT OF APPEALS
                                )ss:                  NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT                )

CITY OF HUDSON                                        C.A. No.       28011

        Appellant

        v.                                            APPEAL FROM JUDGMENT
                                                      ENTERED IN THE
CITY OF AKRON                                         COURT OF COMMON PLEAS
                                                      COUNTY OF SUMMIT, OHIO
        Appellee                                      CASE No.   CV-2014-12-5497

                                DECISION AND JOURNAL ENTRY

Dated: September 13, 2017

        CARR, Judge.

        {¶1}    Appellant, the City of Hudson, appeals the judgment of the Summit County Court

of Common Pleas. This Court affirms.

                                                 I.

        {¶2}    This matter arises out of a water services dispute between the City of Akron and

the City of Hudson, two municipal corporations in Northeast Ohio. Akron maintains a public

water utility that services its residents as well as extraterritorial purchasers in various locations

throughout the surrounding area. Hudson residents and businesses receive water utility services

from four different providers.1 A portion of Hudson’s residents and businesses receive water

utility services from Akron. In addition to a capital projects charge, Akron charges its Hudson

customers a rate that is roughly 60% higher than the water rate charged to Akron customers. In

        1
          Hudson stated in its complaint that Hudson residents, businesses, and other entities
receive public water services from the City of Hudson, the City of Akron, the City of Stow, and
the City of Cleveland.
                                               2

November 2014, Akron began charging its residential Hudson customers a surcharge of $17.76

per month (“the Surcharge”) and its commercial Hudson customers a 42% increase in water

charges. A small portion of Hudson’s residents and businesses receive water utility services

from the City of Stow. While Stow owns the waterlines that service its customers in Hudson,

Stow buys the water that flows through its waterlines from Akron. When Stow declined to

charge its Hudson customers with a comparable surcharge, Akron began directly billing Stow’s

customers in Hudson in order to collect the Surcharge.

        {¶3}   Before the increase in charges, Akron notified Hudson that it was necessary to

replace a major waterline known as the Twinsburg Line. The Twinsburg Line extends from a

water source in Portage County to cities in the northern part of Summit County such as Hudson

and Twinsburg. The cost of replacing the line will be approximately 15 million dollars and the

vast majority of that cost will be absorbed by Hudson.2 Hudson maintains that Akron imposed

the Surcharge on its customers in Hudson in order to pay for the replacement of the Twinsburg

Line.

        {¶4}   On December 12, 2014, Hudson filed a class action complaint for declaratory

judgment against Akron in the Summit County Court of Common Pleas.             After filing an

amended complaint, Hudson filed a second amended complaint on February 9, 2015. Therein,

Hudson sought a declaration that the Surcharge violates Ohio law because it is unfair and

unreasonable and bears no rational relationship to the service being provided. Hudson further

alleged that the unreasonable rates were implemented in order to compel Hudson to enter into an

unfavorable agreement for water utility services. In addition to the declaration, Hudson sought

        2
         Hudson stated in its amended complaint that replacing the Twinsburg Line would cost
roughly 15 million dollars and that Akron’s Hudson customers would be responsible for 13
million dollars of that cost.
                                                3

permanent injunctive relief preventing Akron from continuing to impose the Surcharge, as well

as damages.

       {¶5}    On February 24, 2015, Akron filed a motion to dismiss pursuant to Civ.R.

12(B)(6). Hudson filed a memorandum in opposition to the motion to dismiss, and Akron

replied thereto. Hudson then filed a surreply brief with leave of court. The trial court issued a

journal entry granting the motion to dismiss on the basis that it did not have authority under Ohio

law to grant the relief requested by Hudson.

       {¶6}    Hudson filed a timely notice of appeal. Now before this Court, Hudson raises one

assignment of error.

                                                II.

                                 ASSIGNMENT OF ERROR

       THE TRIAL COURT ERRED BY CONCLUDING THAT IT WAS
       PRECLUDED FROM STRIKING DOWN A SURCHARGE ASSESSED BY A
       MUNICIPAL WATER PURVEYOR TO WATER CUSTOMERS IN ANOTHER
       MUNICIPALITY THAT HAS NO CONTRACT FOR WATER SERVICE WITH
       THE   PURVEYOR     WHERE   THE  SURCHARGE    IS  UNFAIR,
       UNREASONABLE, AND HAS NO RELATIONSHIP TO THE WATER
       SERVICES PROVIDED.

       {¶7}    In its sole assignment of error, Hudson contends that the trial court erred by

granting Akron’s motion to dismiss. This Court disagrees.

       {¶8}    An appellate court reviews a trial court order granting a motion to dismiss

pursuant to Civ.R. 12(B)(6) under a de novo standard of review. Perrysburg Twp. v. Rossford,

103 Ohio St.3d 79, 2004-Ohio-4362, ¶ 5, citing Cincinnati v. Beretta U.S.A. Corp., 95 Ohio

St.3d 416, 2002-Ohio-2480, ¶ 4-5.

       {¶9}    In reviewing whether a motion to dismiss should be granted, an appellate court

must accept as true all factual allegations in the complaint and all reasonable inferences must be
                                                4

drawn in favor of the nonmoving party. Rossford at ¶ 5; Mitchell v. Lawson Milk Co., 40 Ohio

St.3d 190, 192 (1988). “To prevail on a Civ.R. 12(B)(6) motion to dismiss, it must appear on the

face of the complaint that the plaintiff cannot prove any set of facts that would entitle him to

recover.” Apostolos Group, Inc. v. BASF Constr. Chems., L.L.C., 9th Dist. Summit No. 25415,

2011-Ohio-2238, ¶ 9, quoting Raub v. Garwood, 9th Dist. Summit No. 22210, 2005-Ohio-1279,

¶ 4, citing O’Brien v. Univ. Community Tenants Union, 42 Ohio St.2d 242, 245 (1975).

       {¶10} Moreover, as a general rule, “[w]hen a trial court enters a judgment in a

declaratory judgment action, the order must declare all of the parties’ rights and obligations in

order to constitute a final, appealable order.” No-Burn, Inc. v. Murati, 9th Dist. Summit No.

24577, 2009-Ohio-6951, ¶ 11, quoting Bowman v. Middleburg Hts., 8th Dist. Cuyahoga No.

92690, 2009-Ohio-5831, ¶ 6. However, a trial court properly dismisses a declaratory judgment

action pursuant to Civ.R. 12(B)(6) where there is not a justiciable issue before the court. Davis

v. Miraldi, 9th Dist. Lorain No. 15CA010741, 2016-Ohio-868, ¶ 7; Chafin v. Ohio Adult Parole

Auth., 10th Dist. Franklin No. 13AP-646, 2014-Ohio-1192, ¶ 14. Thus, “[i]n an action for

declaratory judgment, the trial court must declare the rights of the parties or dismiss the

complaint because either (1) no real controversy or justiciable issue exists between the parties or

(2) the declaratory judgment will not terminate the uncertainty or controversy.” Velasquez v.

Ghee, 99 Ohio App.3d 52, 53-54 (9th Dist.1994), quoting Miller v. Summit Cty. Bd. of Edn., 9th

Dist. Summit No. 15847, 1993 WL 99998, *1 (Apr. 7, 1993).

                                          DISCUSSION

       {¶11} In its October 30, 2015 journal entry, the trial court conducted a deliberate

analysis regarding whether it was permissible under Ohio law for Akron to impose the Surcharge

on its Hudson customers, in addition to the charges and fees that were already in place. The trial
                                                5

court concluded that if Akron could not be compelled to sell water to Hudson under Ohio law,

then it stands to reason that a court does not have authority to order Akron to provide water to

Hudson at a particular rate. On this basis, the trial court granted Akron’s motion to dismiss

because Hudson failed to state a claim upon which relief could be granted.

       {¶12} On appeal, Hudson contends that every utility customer in Ohio should have a

mechanism for challenging their water rates. Hudson points to the Supreme Court of Ohio’s

decision in State ex. Rel. Mt. Sinai Hosp. of Cleveland v. Hickey, 137 Ohio St. 474 (1940), in

support of the proposition that Akron’s residential and commercial customers situated in Hudson

are entitled to a reasonable rate for water services. Hudson attempts to bolster this assertion by

pointing to cases such as the Eighth District’s decisions in Bedford v. Cleveland, 8th Dist.

Cuyahoga No. 33787, 1975 WL 182695 (Apr. 3, 1975) and Lakewood v. Cleveland, 8th Dist.

Cuyahoga No. 35113, 1976 WL 191079 (July 22, 1976), wherein the court entertained

challenges to water rates where extraterritorial customers argued that the rates were arbitrary and

unreasonable. Hudson similarly points to the Supreme Court’s decision in Niles v. Union Ice

Corp., 133 Ohio St. 169, 181 (1938), in support of its assertion that Akron is actually functioning

as a private water purveyor and its rates should be subject to a reasonableness review. Hudson

further contends that Akron is charging the unreasonable water rates in order to leverage Hudson

into entering into an unfavorable contract for water utility services and to finance the

replacement of the Twinsburg Line, which would allow Akron to expand its water utility

operations to areas north of Hudson.

       {¶13} “[A] city’s power to acquire, construct, own, and operate a public utility within or

without its corporate limits has been conferred upon it by Sections 4 and 6, Article XVIII, of the

Ohio Construction.” Bakies v. Perrysburg, 6th Wood Nos. WD-03-055, WD-03-062, 2004-
                                                  6

Ohio-5231, ¶ 38. The Supreme Court of Ohio has held that “[m]unicipally owned public utilities

have no duty to sell their products, including water, to extraterritorial purchasers absent a

contractual obligation.” Fairway Manor, Inc. v. Board of Com’rs of Summit Co., 36 Ohio St.3d

85 (1988), paragraph one of the syllabus. “Accordingly, absent a contract obligating a city to

provide its services, a municipality has the authority to impose conditions on the sale of its utility

services to extraterritorial users and, consequently, has the authority to refuse to sell its services

to extraterritorial users who do not agree to the conditions demanded by the municipality.”

Bakies at ¶ 38, citing State ex rel. Indian Hill Acres, Inc. v. Kellogg, 149 Ohio St. 461 (1948),

paragraph three of the syllabus.      Furthermore, “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.” Fairway Manor at 89.

       {¶14} The trial court properly dismissed Hudson’s complaint in this case.               While

Hudson urges this Court to apply a reasonableness standard similar to the standard established by

the Supreme Court in Mt. Sinai, 137 Ohio St. 474, the instant matter has a vastly different factual

posture than the circumstances the high court confronted in that case. In Mt. Sinai, the Supreme

Court held that, where a citizen receives water utility services from his or her own municipality,

“[t]he only general restraints imposed on the distribution of water are that the rates charged be

reasonable and that there be no unjust discrimination among the customers served * * *.” Mt.

Sinai, 137 Ohio St. at 477.       Unlike Mt. Sinai, this matter involves a dispute between a

municipality-owned public utility and extraterritorial customers who are operating outside the

bounds of a contractual agreement. Hudson’s reliance on Niles is also misplaced as this matter

does not involve a municipality functioning as a private corporation. Moreover, though Hudson

points to the Eighth District’s decisions in Lakewood and Bedford, we note that those decisions
                                                 7

were decided prior to the high court’s decision in Fairway Manor. As noted above, the Supreme

Court in Fairway Manor held that “[m]unicipally owned public utilities have no duty to sell their

products, including water, to extraterritorial purchasers absent a contractual obligation.”

Fairway Manor at paragraph one of the syllabus. “The degree of control which the courts will

exert over such public utilities is strictly limited to protecting residents of the municipality from

the imposition of rates which are unreasonable * * *.” (Emphasis sic.) Id. at 86-87. Thus, if

Akron has no obligation to provide water services to customers in Hudson absent a contractual

agreement under Fairway Manor, the most rudimentary extension of that holding is that Hudson

customers have no right to demand reasonable water rates from Akron, unless those rates are

negotiated into a contract. To conclude otherwise would frustrate the high court’s holdings in

both Mt. Sinai and Fairway Manor by allowing Akron’s extraterritorial customers to demand

essentially the same right to reasonable water rates as residents of the municipality, irrespective

of whether the extraterritorial customers entered into a contractual agreement with Akron for

water utility services. It follows that while Hudson suggests that every utility customer in Ohio

should have a mechanism for challenging their water rates, no such right currently exists under

Ohio law. Under these circumstances, the trial court properly concluded that it did not have

authority to grant the relief requested by Hudson and dismissed the complaint for lack of a

justiciable controversy.

       {¶15} For the foregoing reasons, the assignment of error is overruled.

                                                III.

       {¶16} Hudson’s assignment of error is overruled. The judgment of the Summit County

Court of Common Pleas is affirmed.

                                                                                Judgment affirmed.
                                                 8

       There were reasonable grounds for this appeal.

       We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

       Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

       Costs taxed to Appellant.

                                                     DONNA J. CARR
                                                     FOR THE COURT

HENSAL, P. J.
TEODOSIO, J.
CONCUR.

APPEARANCES:

R. TODD HUNT, AIMEE W. LANE, and BENJAMIN G. CHOJNACKI, Attorneys at Law, for
Appellant.

EVE V. BELFANCE, Director of Law, and DAVID FOLK, Assistant Director of Law, for
Appellee.

STEPHEN W. FUNK and JUSTIN MARKEY, Attorneys at Law, for Appellee.