Town of Clear Lake v. Hoagland Family Ltd. Partnership , 2017 Ind. App. LEXIS 150 ( 2017 )


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  •                                                                                   FILED
    Apr 06 2017, 10:01 am
    CLERK
    Indiana Supreme Court
    Court of Appeals
    and Tax Court
    ATTORNEYS FOR APPELLANT –                                   ATTORNEY FOR APPELLEE
    TOWN OF CLEAR LAKE                                          Jonathan O. Cress
    Jeffrey P. Smith                                            Cress Law Group P.C.
    David K. Hawk                                               Angola, Indiana
    Hawk, Haynie, Kammeyer                                      Diana C. Bauer
    & Smith, LLP                                                Bauer Legal LLC
    Fort Wayne, Indiana                                         Fort Wayne, Indiana
    ATTORNEYS FOR AMICI CURIAE –
    ASSOCIATION OF CITIES AND TOWNS
    AND THE INDIANA MUNICIPAL
    LAWYERS ASSOCIATION
    Nicholas K. Kile
    Mark J. Crandley
    Barnes & Thornburg LLP
    Indianapolis, Indiana
    IN THE
    COURT OF APPEALS OF INDIANA
    Town of Clear Lake,                                         April 6, 2017
    Appellant-Plaintiff,                                        Court of Appeals Case No.
    76A05-1606-PL-1241
    v.                                                  Appeal from the Steuben Circuit
    Court
    Hoagland Family Limited                                     The Honorable Allen N. Wheat,
    Partnership,                                                Judge
    Appellee-Defendant                                          Trial Court Cause No.
    76C01-1006-PL-425
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017                      Page 1 of 16
    Baker, Judge.
    [1]   The Town of Clear Lake (the Town) appeals the judgment of the trial court,
    which granted summary judgment to Hoagland Family Limited Partnership
    (Hoagland) and denied the Town’s motion for partial summary judgment. The
    trial court ruled that until the Town made its sewer system accessible through
    the installation of a grinder pump, it could not enforce penalties against
    Hoagland for failure to connect to the sewer system. Hoagland also argues that
    several alleged procedural errors made by the Town should preclude the Town
    from compelling connection to the sewer system. Finding that the Town does
    have the authority to compel Hoagland’s connection to its sewer system and no
    procedural error, we reverse and remand.
    Facts     1
    [2]   Hoagland owns three parcels of real estate (“the properties”) located in the
    Town. Although the Town operates a sanitary sewer system, Hoagland’s
    properties are not connected to it and contain their own septic systems. Each of
    the properties are within 300 feet of the Town’s sewers. In May 2001, as the
    Town prepared to install its sewer system, it requested an easement for each of
    the properties so that it could connect them to the sewer system, but Hoagland
    declined the request.
    1
    We held oral argument on March 10, 2017, in Indianapolis. We thank both parties and amicus for their
    excellent and informative oral advocacy.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017                     Page 2 of 16
    [3]   In 2003, the Town passed the following ordinance:
    The owners of all houses, buildings or properties used for human
    occupancy, employment, recreation or other purposes situated
    within the town and which [sic] the property line is within 300
    feet of the sanitary sewer is [sic] required at his or her expense to
    install suitable toilet facilities therein and to connect such
    facilities directly with the proper sewer in accordance with the
    provisions of this chapter.
    Clear Lake, Ind., Code of Ordinances § 51.51(A). The Town also adopted an
    ordinance mandating that “[n]o authorized[2] person shall uncover, make any
    connections with or opening into, use, alter, or disturb any public sewer or
    appurtenance thereto without first obtaining a written permit from the Town
    Council.” Id. at § 51.52(A)(1). “[T]he owner or his or her agent shall make
    application on a special form furnished by the town. The permit applications
    shall be supplemented by any plans, specifications, or other information
    considered pertinent in the judgment of the Inspector.” Id. at § 51.52(A)(2).
    [4]   In April 2005, after the Town had installed its system, Hoagland filed an action
    alleging that the Town had inversely condemned its land by running a sewer
    main under Hoagland’s property. This suit ended in October 2010 with a
    settlement between the parties.
    2
    We question whether the drafters of the ordinance intended to refer to “unauthorized” persons.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017                             Page 3 of 16
    [5]   Eight months after Hoagland filed the complaint against the Town, the Town
    passed a Resolution directing the Town’s attorney to take legal action against
    several residents who had not connected to the sewer system; Hoagland’s three
    properties were on the list. Appellant’s App. p. 518.
    [6]   In May 2009, the Town amended its penalty ordinance. Whereas the penalty
    for violation of a Town ordinance had been set at a minimum of $100 and a
    maximum of $1000, the new penalty for failure to connect to the sewer system
    was $500, per day, per property, with no express limit. CLC § 51.99(B). 3
    [7]   On January 12, 2010, the Town gave Hoagland notice that Hoagland must
    connect the properties to the Town’s sewer system within ninety days:
    you are hereby given notice that the Town of Clear Lake will
    proceed to compel connection of the above described properties
    to the Town of Clear Lake sewer system unless all of said
    properties are connected to the sewer system within ninety (90)
    days. You are further given notice that any use of privies,
    cesspools, septic tanks, or similar structures must be discontinued
    within ninety days (90) from today. Failure to connect to the
    Clear Lake sewer system within ninety (90) days may subject the
    Hoagland Family Limited Partnership to fines, court costs and
    attorney fees as allowed by Indiana Code and the Town of Clear
    Lake Ordinances.
    3
    A previous zoning administrator of the Town, David Gardiner, testified that “it sure looked like” the Town
    had a “get Hoagland policy.” Appellant’s App. p. 557.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017                       Page 4 of 16
    Appellant’s Supp. App. p. 68. This letter also informed Hoagland that since it
    had been “benefit[ting]” from the sewer system to which its properties were not
    yet connected, the Town was also demanding immediate payment of $4,537.38
    in back charges for each property, or a total of $13,612.14. Id.
    [8]   After Hoagland did not take any action, the Town filed a complaint in which it
    asked for an order requiring connection, sewer charges that Hoagland allegedly
    should have been paying plus a further ten percent penalty pursuant to local
    ordinance, $500 per property per day for each day Hoagland remained
    unconnected, an order requiring the discontinuance of any private septic
    systems, and attorney fees and costs. In its answer, Hoagland argued that the
    Town’s claims were barred because they were compulsory counterclaims that
    should have been asserted during the previous litigation involving inverse
    condemnation, that the Town’s notice to connect was defective, and that the
    sewer system was generally illegal.
    [9]   After competing motions for summary judgment and hearings on those
    motions, on May 4, 2016, the trial court granted summary judgment to
    Hoagland and denied it to the Town. The Town stipulated that Hoagland
    cannot complete a connection to the sewer system without the presence of
    grinder pumps, that the Town has not installed any grinder pumps through
    which Hoagland could connect to the sewers, and that the Town had not
    commenced any eminent domain proceedings to put grinder pumps on
    Hoagland’s property. The trial court noted that the Town’s claimed penalties
    had exceeded $2.9 million by the time of the last hearing. It ruled that
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 5 of 16
    Hoagland’s compelled connection with the Town’s sewer system would involve
    a taking of land and that, under Article One, Section 21 of the Indiana
    Constitution, the Town could not proceed until it had assessed and tendered
    just compensation to Hoagland. The Town now appeals.
    Discussion and Decision
    [10]   When reviewing an entry of summary judgment, the Court of Appeals stands in
    the shoes of the trial court, applying the same standards in deciding whether to
    affirm or reverse. AutoXchange.com, Inc. v. Dreyer & Reinbold, Inc., 
    816 N.E.2d 40
    , 47 (Ind. Ct. App. 2004). Thus, on appeal this Court determines whether
    there is a genuine issue of material fact and whether the trial court correctly
    applied the law. 
    Id.
     The entry of summary judgment will be reversed where the
    law has been incorrectly applied to the facts. Markey v. Estate of Markey, 
    38 N.E.3d 1003
    , 1006 (Ind. 2015).
    [11]   Indiana Code section 36-9-23-30(a) permits a municipality operating a sewage
    system to require connection to the system and to order the discontinuance of
    the use of any private sewage system. The only limitations on the exercise of
    this power are that there must be “an available sanitary sewer within three
    hundred (300) feet of the property line of the affected property” and that the
    municipality gives the property owner ninety days’ notice. I.C. § 36-9-23-30(b).
    Municipalities may enforce “reasonable penalties” against a person failing to
    make a connection, and a court “shall” assess court costs and reasonable
    attorney fees against the property owner. Id. at -30(c); -30(d).
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 6 of 16
    I. Eminent Domain
    [12]   Although the trial court’s ruling depended in part on the law of eminent
    domain, a government order to connect a property to a sewer system does not,
    by itself, involve a “taking.” As the United States Supreme Court has held, “It
    is the commonest exercise of the police power of a state or city to provide for a
    system of sewers, and to compel property owners to connect therewith. And
    this duty may be enforced by criminal penalties.” Hutchinson v. City of Valdosta,
    
    227 U.S. 303
    , 308 (1913); see Alperstein v. Three Lakes Water & Sanitation, 
    710 P.2d 1186
    , 1189 (Colo. Ct. App. 1985) (“Numerous state courts have followed
    [the Supreme Court’s] holding that personal notice and a hearing are not
    required prior to ordering connection to a public sewer system”).
    [13]   On the other hand, the trial court is clearly correct that connection to the
    Town’s sewer system will eventually involve a governmental taking; Robert
    Hull, the Superintendent of the Town, explained, “You cannot hook to our
    system without a grinder pump.” Appellant’s App. 512. The Town’s
    ordinances make clear that the grinder pumps will be owned and operated by
    the Town, not the property owner. CLC § 51.62. It is well settled that the
    Town will need to conduct eminent domain proceedings in order to obtain an
    easement on which to place the grinder pump. E.g., Loretto v. Teleprompter
    Manhattan CATV Corp., 
    458 U.S. 419
    , 426 (1982) (“We conclude that a
    permanent physical occupation authorized by government is a taking without
    regard to the public interests that it may serve”).
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 7 of 16
    [14]   The dispute between the parties centers on whether the Town or Hoagland has
    to act first. Hoagland points to the language in the Indiana Code: the Town is
    only permitted to order connection if there is “an available sanitary sewer.” I.C.
    § 36-9-23-30(a) (emphasis added). Without availability, the Town has no
    authority to compel connection. Town Superintendent Hull agreed in a
    deposition that without a grinder pump on the property, “the Town’s sanitary
    system would be unavailable to that property owner.” Appellant’s App. p. 508.
    Likewise, Town Council member Alan Korte “agree[s] that the town sanitary
    sewer system is unavailable to the Hoagland Family Limited Partnership
    property without the installation of the grinder pump . . . .” Id. at 488.
    Hoagland argues that summary judgment was appropriately granted in its favor
    because the undisputed evidence, including the precise testimony of Town
    officials, shows that until the Town builds a grinder pump, the sewer system is
    not available.
    [15]   The Town counters that its January 2010 letter, which explicitly ordered
    connection to its sewer system, implicitly ordered Hoagland to apply for a
    permit to connect to the sewer system. Such an application will contain
    information useful to the Town in deciding where to put grinder pumps. “Until
    such action is taken by the property owner, the size, location, and necessity of
    easements cannot be determined.” Appellant’s Br. p. 10. The Town further
    asserts that, depending on the plans submitted by Hoagland, the three
    properties might be served by a single grinder pump; therefore, the Town argues
    that it cannot be forced to first obtain the easements for the grinder pumps
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017     Page 8 of 16
    because it cannot know where to place the easements. The Town also suggests
    that Hoagland’s properties might be served by grinder pumps located on other
    properties.4
    [16]   Ordinances are treated as if they stand on the same footing as an act of the
    legislature; therefore, the rules applying to statutory construction apply equally
    to ordinances. Lutz v. City of Indianapolis, 
    820 N.E.2d 766
    , 770 (Ind. Ct. App.
    2005). The primary rule of statutory construction is to ascertain and give effect
    to the intent of the drafters, and the plain language of the statute (or ordinance)
    is the best evidence of the drafters’ intent. 
    Id.
     All words must be given their
    plain and ordinary meaning unless otherwise indicated. City of Indianapolis v.
    Campbell, 
    792 N.E.2d 620
    , 624 (Ind. Ct. App. 2003).
    [17]   We recognize that both parties have defensible interpretations of the relevant
    statutes and ordinances. And we acknowledge that it is every American’s
    birthright to be displeased at governmental orders. Ultimately, however, we
    believe that the Town’s interpretation of the law is correct. The word
    “available” in the statute can only be read to refer to a working sanitary system.
    Because it is undisputed that the Town is operating a working sanitary system,
    there was an “available” sanitary sewer within 300 feet of the properties, and
    4
    Hoagland argues that this final contention was never presented to the trial court, that the Town stipulated
    that it would eventually need to put a grinder pump on Hoagland’s property, and that therefore the Town is
    estopped from pursuing this particular line of reasoning. Because our conclusion would not change based on
    how this argument is decided, we decline to address it.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017                         Page 9 of 16
    therefore the Town has the statutory authority to order Hoagland to connect to
    it.
    [18]   While Hoagland is understandably not happy about the prospect of
    disconnecting a septic system for which it paid and installing a lateral line to
    reach the sewer system it does not want to use, its reading of the law would
    require the Town to be more intrusive and dictatorial. In the name of defending
    its property rights from the overreaching Town, Hoagland is demanding that
    the Town take absolute control over where the grinder pump will be placed and
    where it will need to run its lateral line to meet the grinder pump.
    [19]   The Town does not know where sewage will exit the Hoagland homes; if the
    Town were to place the grinder pump based on its own whim, it would likely
    cost Hoagland (and other residents in a similar position) even more money to
    accommodate the Town’s placement. Under the Town’s reading, Hoagland
    can propose the most cost-effective method of extending the lateral lines and the
    Town will accommodate Hoagland by placing the grinder pump where
    Hoagland deems most convenient. Indeed, we find it highly likely that, if the
    Town or other governmental entities were to attempt to dictate the placement of
    grinder pumps on residents’ properties, such actions would lead to a significant
    amount of litigation in which residents would ask courts to allow them to
    engage in precisely the type of process the Town is currently proposing. Just as
    courts require parties to mitigate their damages in tort and contract disputes, we
    favor an interpretation of the law that minimizes the costs and other burdens
    residents will face.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 10 of 16
    [20]   Hoagland argues that the Town is attempting to find an end run around the
    requirement to pay just compensation for a governmental taking of property.
    We do not find this argument persuasive. To be clear, Hoagland was perfectly
    within its rights to reject the Town’s request to voluntarily donate an easement
    on which to place the grinder pumps. Nor is Hoagland required to accept any
    offer of compensation the Town may put forth for an easement on its property.
    Hoagland has the right to force the Town to initiate eminent domain
    proceedings, through which a court with the aid of assessors will ensure that the
    Town pays just compensation for the physical occupation of the grinder pump
    on the property.
    [21]   In sum, because the Town is operating a functioning sanitary sewer within 300
    feet of the properties, there is an “available” sewer under the meaning of
    Indiana Code section 36-9-23-30(a). Accordingly, the Town has the authority
    to compel Hoagland’s connection to the sewer system. Finally, the Town’s
    proposed process—having Hoagland submit an application with plans and
    schematics of the easiest and most convenient method of extending a lateral
    line to the sewer—is more economical and less burdensome than Hoagland’s
    proposal of forcing the Town to take property and ask questions later. Partial
    summary judgment should have been awarded to the Town on this issue.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 11 of 16
    II. Alleged Procedural Defects
    [22]   Hoagland argues that the Town committed several procedural defects that
    prohibit the Town from compelling Hoagland’s connection to the sewer system,
    now or at any point in the future.
    [23]   First, Hoagland argues that the trial court’s grant of summary judgment can be
    affirmed based on the statute of limitations. It points to a public notice given to
    Hoagland, telling it to connect to the sewer system by December 1, 2004.
    Appellant’s App. p. 668. When municipalities are attempting to judicially
    enforce an ordinance, such an action must be brought within two years of the
    alleged conduct. 
    Ind. Code § 36-1-6-3
    ; 34-28-5-1.
    [24]   We do not find this argument persuasive: Hoagland’s violation of the
    municipal ordinance has occurred every day since he was ordered to connect to
    the sewer system, and is occurring right now. It is well settled that right now is
    within the two-year statute of limitations.
    [25]   Second, Hoagland argues that all of the Town’s claims in the present suit
    should be barred under Indiana Trial Rule 13(A) as unpled compulsory
    counterclaims. It argues that the Town was fully aware of its claim against
    Hoagland for not connecting to the sewers when it filed its answer in the inverse
    condemnation case on August 4, 2005. Hoagland says that both cases arose
    from the same transaction or occurrence, that the present claim was mature
    within the time of pleading, that there were no third parties over whom the trial
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 12 of 16
    court lacked jurisdiction, and that the initial claim has been reduced to
    judgment. Estate of McCullough, 
    492 N.E.2d 1093
    , 1095-96 (Ind. Ct. App. 1986).
    [26]   A counterclaim is only compulsory where it arises from the same aggregate set
    of operative facts as the opposing party’s claim. Hilliard v. Jacobs, 
    927 N.E.2d 393
    , 401 (Ind. Ct. App. 2010). Here, the only commonality between the two
    cases is that they involve sewers. We retain the hope that most of these
    situations can be resolved without resorting to litigation, and we hesitate to
    encourage municipalities to sue their residents so that their claims will not be
    barred later. Hoagland’s argument is unavailing.
    [27]   Third, Hoagland argues that several of the Town’s statements and
    representations resulted in the waiver of its claims. It points to an August 2001
    letter in which the Town stated, “If your easement is not signed by October 1,
    2001, your property will be excluded from the Initial Project.” Appellant’s
    App. p. 623. Hoagland also points to several letters in which the Town
    described the eminent domain process. Hoagland argues that by not exercising
    its powers of eminent domain long ago, the Town “excluded” him from the
    project and cannot now compel him to join.
    [28]   Hoagland neglected to quote the very next sentence in the Town’s August 2001
    letter: “In the future you will be required to connect to the wastewater system
    at your own expense . . . .” 
    Id.
     The Town’s representations were fairly
    straightforward; Hoagland could choose to join the sewer system from its
    initiation or be required to join later. We find no waiver.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 13 of 16
    [29]   Finally, Hoagland argues that the amended penalties ordinance, CLC § 51.99,
    was not properly passed and therefore cannot be enforced. The ordinance bears
    a date of April 13, 2009, but was not published in a local newspaper until May
    21, 2009, past the thirty-day limit set by statute. 
    Ind. Code § 36-5-2-10
    ; 
    Ind. Code § 5-3-1-2
    (h). Further, Hoagland argues that the language in CLC §
    51.99(B)(1), “when legally required to do so,” is ambiguous and vague, such
    that it would be an unconstitutional basis for punishment.
    [30]   The Town highlights the testimony of the Clerk-Treasurer, who stated that
    while the ordinance has April 13, 2009, written on it, this was a scrivener’s
    error. Appellant’s App. p. 1425-26. There is a wealth of other evidence
    indicating that, in fact, the ordinance was passed, after several readings, on
    May 11, 2009, which renders the May 21, 2009, publication timely. There are
    notations on the ordinance regarding the readings of the ordinance, town
    council minutes, and a notice of a public hearing in the local paper, all of which
    show a publication date of May 11 rather than April 13. Id. Finally, we find
    that the phrase, “when legally required to do so,” has an obvious meaning
    when combined with the previous sentence regarding “the town . . .
    compel[ling] connection by any property producing sewage or similar waste to
    the sewer system . . . .” CLC § 51.99(B). The Town’s penalty ordinance was
    properly promulgated.
    [31]   In short, none of Hoagland’s arguments regarding the statute of limitations,
    compulsory counterclaims, waiver, or invalidity of the Town’s ordinances are
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 14 of 16
    availing. None render summary judgment in Hoagland’s favor appropriate or
    partial summary judgment in the Town’s favor inappropriate.5
    III. Future Proceedings
    [32]   Because the trial court ruled in Hoagland’s favor, it never reached the issue of
    penalties, which will need to be determined on remand. While the issue is not
    squarely before us, we would be remiss if we did not make a few comments.
    [33]   Although the Town is authorized by statute to establish and enforce penalties
    against those refusing to connect to its sewer system, this authority is not
    unlimited; the Town is only authorized to establish “reasonable penalties for
    failure to make a connection . . . .” I.C. § 36-9-23-30(c) (emphasis added). Any
    penalty set above a reasonable amount is unauthorized, unlawful, and
    unenforceable. Because the issue is not before us, we cannot rule on what
    penalty would qualify as “reasonable,” but we have little difficulty saying that a
    penalty of $2.9 million is nowhere near it. Such a penalty is confiscatory, most
    likely unconstitutional, and will not be countenanced.
    [34]   We would also like to express our sincere hope that the parties can work
    together more amicably to achieve what is clearly the end result: at some point,
    5
    Hoagland requests that we award it damages and attorney fees under Indiana Appellate Rule 66. We are
    always hesitant to grant such a request, lest we chill the exercise of litigants’ right of appeal. We are even
    more hesitant where the claim is made against the winning side—Hoagland’s request is denied.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017                           Page 15 of 16
    after some procedure, Hoagland will connect to the Town’s sanitary sewer
    through a Town-provided grinder pump.
    [35]   This type of litigation tends to clog up the court system. Our courts are not
    flush with resources, and they are prone to getting backed up. When the system
    gets backed up, it produces unnecessary and unhealthy strains, which makes it
    more difficult for parties to obtain relief. And when these cases cannot be
    discharged, it is impossible for our court system to stay regular—and that
    means taxpayer resources down the drain. We can understand that, after such
    a long process, the parties are not overflowing with goodwill. But we hope that,
    before the case stalls and stagnates, they can put this big mess behind them.
    [36]   The judgment of the trial court is reversed and remanded with instructions to
    award partial summary judgment to the Town and for further proceedings
    consistent with this opinion.
    Mathias, J., and Pyle, J., concur.
    Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017   Page 16 of 16