City of Fort Wayne, Indiana v. Town of Huntertown, Indiana ( 2012 )

Pursuant to Ind. Appellate Rule 65(D), this
Memorandum Decision shall not be
FILED
Feb 16 2012, 9:09 am
regarded as precedent or cited before any
court except for the purpose of
CLERK
establishing the defense of res judicata, of the supreme court,
court of appeals and
tax court
collateral estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
ROBERT T. KEEN, JR. JEFFREY P. SMITH
LARRY L. BARNARD DAVID K. HAWK
Carson Boxberger LLP MICHAEL D. HAWK
Fort Wayne, Indiana Hawk Haynie Kammeyer & Chickedantz
Fort Wayne, Indiana
IN THE
COURT OF APPEALS OF INDIANA
CITY OF FORT WAYNE, INDIANA, )
)
Appellant-Defendant, )
)
vs. ) No. 02A05-1107-MI-384
)
TOWN OF HUNTERTOWN, INDIANA, )
)
Appellee-Plaintiff. )
APPEAL FROM THE ALLEN CIRCUIT COURT
The Honorable Thomas J. Felts, Judge
Cause No. 02C01-1006-MI-977
February 16, 2012
MEMORANDUM DECISION – NOT FOR PUBLICATION
BAKER, Judge
Appellant-defendant City of Fort Wayne (Fort Wayne) appeals the grant of
summary judgment in favor of appellee-plaintiff Town of Huntertown (Huntertown).
Specifically, Fort Wayne argues that the trial court erred in determining that a letter sent
from Fort Wayne’s Director of Public Works to the President of Huntertown’s Town
Council did not amount to an expression of Fort Wayne’s desire to discontinue the
parties’ agreement (Agreement) regarding the treatment of sewage collected in
Huntertown. Concluding that the trial court properly determined as a matter of law that
Fort Wayne’s correspondence did not amount to a termination of the Agreement, we
affirm the grant of summary judgment in Huntertown’s favor.
FACTS
Huntertown is an Indiana municipal corporation in Allen County. The City of Fort
Wayne—also in Allen County—operates a waste water treatment facility. On June 14,
1985, the parties entered into the Agreement, whereby Fort Wayne was to treat the
sewage collected in the Huntertown sewage accumulation system at the Fort Wayne
Sewage Treatment Plant (Treatment Plant).
The Agreement provided in part that:
Paragraph 2. Term of Agreement. This Agreement shall continue in full
force and effect for twenty (20) consecutive years from the first date of
connection or rendering of service hereunder.
This Agreement shall continue in full force and effect for an indeterminate
number of (5) year terms after the initial term unless one of the parties
hereto shall notify the other party in writing at least three (3) years prior to
the expiration of the original term, or any additional five (5) year term of its
desire not to continue the agreement. . . .
2
Appellant’s App. p. 20 (emphasis added).
Fort Wayne began rendering services to Huntertown under the Agreement on
April 28, 1988. The Agreement was later amended once on February 18, 1998, and again
on May 18, 2005. Neither amendment altered the terms of the Agreement or the
requirements for termination.
On May 1, 2002, Ted Rhinehart, the Director of Public Works and Utilities for
Fort Wayne, sent a letter to John Hidy, Huntertown Town Council’s President, that
provided:
Since June of 1985 the City of Fort Wayne and the Town of Huntertown
have worked together in a cooperative arrangement under which
Huntertown owns and operates a sewer collection system and Fort Wayne
takes and treats sanitary sewage. From Fort Wayne’s perspective, this
arrangement has allowed us to pursue similar interests—providing for
growth and development while protecting the environment.
The Water Pollution Control Agreement between Huntertown and Fort
Wayne was entered into for an initial term of twenty years with an
automatic renewal for subsequent five-year terms. There is a provision for
either party to notify the other at least three years before the expiration of
the initial term (or any subsequent five-year term) if there was a desire “not
to continue the Agreement.” While the City of Fort Wayne certainly
desires to continue its good working relationship that provides sewage
treatment service for Huntertown, we do at this time as we have discussed
informally, wish to open negotiations on the exact terms of the agreement
that governs our relationship. Specifically, we would like to begin
discussion of long-term capacity issues and service area boundaries for
Huntertown and the City of Fort Wayne.
Please consider this formal notice that the City of Fort Wayne would like to
begin negotiation of a new Water Pollution Control Treatment Agreement
3
to reach a win-win solution to our mutual goal of environmentally-friendly
growth.
Appellant’s App. p. 16, 53 (emphases added).
On August 14, 2009, Kumar Menon, as Director of Fort Wayne City Utilities, sent
a letter to the Huntertown Town Council. Menon wrote that Fort Wayne sent
Huntertown “its formal three year notice of termination in 2002.” Id. at 16. The letter
also stated that the Agreement “expired without a new agreement in place in April of
2008.” Id. at 16, 51, 52, 53, 59.
In disputing the statements that Menon made in the 2009 letter and denying that
the Agreement terminated in April 2008, Huntertown filed a complaint for declaratory
judgment on June 1, 2010. Huntertown sought a determination that the 2002 letter did
not constitute sufficient notice of Fort Wayne’s intent to terminate the Agreement.
Thereafter, Fort Wayne filed its motion for summary judgment, claiming that it
was entitled to judgment as a matter of law because the designated evidence established
that Fort Wayne had given the required written notice to terminate the Agreement. In
response, Huntertown filed a cross motion for summary judgment, claiming that the letter
of May 1, 2002, did not constitute a notice of termination of the Agreement. Huntertown
further asserted that it was entitled to judgment declaring that the Agreement did not
terminate at the end of the initial twenty-year term, but was extended for an additional
five year term.
4
The trial court held a hearing on the summary judgment motions on April 26,
2011. Thereafter, the trial court granted Huntertown’s motion for summary judgment.
The trial court’s order provided in relevant part that
(3) On August 14, 2009, . . . Menon . . . sent a letter to the Huntertown
Town Council, advising that Fort Wayne was to begin charging
Huntertown “retail” rates for its sewage treatment, as Fort Wayne
considered the parties’ agreement expired, terminated by virtue of a letter
sent May 1, 2002, and that Fort Wayne resolution now required charging
retail rates to those wholesale customers whose agreements had expired.
(4) The subject May 1, 2002 letter, from . . . Rhinehart . . . referenced the
parties’ agreement and went on to say in pertinent part: ‘There is a
provision for either party to notify the other at least three years before the
expiration of the initial term (or any subsequent five year term) if there was
a desire ‘not to continue the agreement.’ While the City of Fort Wayne
certainly desires to continue the good working relationship to provide
sewage treatment service for Huntertown, we do at this time as we
discussed informally, wish to open negotiations on the exact terms of the
agreement that governs our relationship. Specifically, we would like to
begin discussion of long-term capacity issues and service boundaries for
Huntertown and . . . Fort Wayne. Please consider this formal notice that the
City of Fort Wayne would like to begin negotiations of a new Water
Pollution Control Agreement to reach a win/win solution on our mutual
goal of environmentally friendly growth.
(5) Beginning in February, 2010, the City of Fort Wayne began invoicing
Huntertown for sewage treatment at “retail” rates.
The Court now CONCLUDES:
(1) By its plain language, the May 1, 2002 letter referenced above was NOT
an expression of the City of Fort Wayne’s desire not to continue the
parties’ Agreement.
(2) The parties’ agreement, renewed by its own operation for a 5-year term
on April 28, 2008, remains in effect until at least April 27, 2013.
5
Fort Wayne now appeals.
DISCUSSION AND DECISION
I. Standard of Review
In accordance with Trial Rule 56(C), summary judgment is appropriate only when
there are no genuine issues of material fact and the moving party is entitled to a judgment
as a matter of law. When reviewing the grant of summary judgment on appeal, we apply
the same standards as the trial court in deciding whether to affirm or reverse summary
judgment. Leo Machine & Tool, Inc. v. Poe Volunteer Fire Dept., Inc., 936 N.E.2d 855,
858 (Ind. Ct. App. 2010). We must determine whether there is a genuine issue of
material fact and whether the trial court has correctly applied the law. Id. When moving
for summary judgment, the defendant must show that the undisputed facts negate at least
one element of the plaintiff's cause of action. Id. at 859. We consider all of the
designated evidence in the light most favorable to the non-moving party. Id. at 858–59.
The party appealing the grant of summary judgment has the burden to persuade us
that the trial court’s ruling was improper. Id. at 859. Generally, the construction of a
written contract is a question of law for which summary judgment is particularly
appropriate. Orthodontic Affiliates, P.C. v. Long, 841 N.E.2d 219, 222 (Ind. Ct. App.
2006).
II. Fort Wayne’s Contentions
As set forth above, Fort Wayne maintains that the trial court should have granted
its motion for summary judgment because the designated evidence established that the
6
letter of May 2002 clearly expressed Fort Wayne’s desire not to continue the parties’
agreement. Thus, Fort Wayne argues that the “Agreement expired according to its
terms.” Appellant’s Br. p. 5.
The termination provision of the Agreement requires that notice of a “desire not to
continue the Agreement,” i.e., a notice to terminate, be sent at least three years prior to
the Agreement’s expiration. Appellant’s App. p. 20. Although the May 2002 letter from
Rhinehart referenced this contractual requirement, it did not expressly indicate that Fort
Wayne desired to terminate the Agreement at the end of its term.
To the contrary, that letter indicated Fort Wayne’s desire to continue—not
terminate—its relationship with Huntertown. More specifically, as set forth above, the
letter explicitly stated that it is “formal notice” of Fort Wayne’s request to Huntertown to
open negotiations on the exact terms of the agreement that governs the parties’
continuing relationship. Id. at 16, 53. Most significantly, the 2002 letter did not indicate
a desire to terminate the Agreement in the absence of a new agreement. Moreover, there
is no showing that it made a continuation of the parties’ relationship contingent upon the
negotiation of a new contract.
We cannot say that simply expressing a desire to begin negotiations on a new
contract is synonymous with terminating an existing contract. Had Fort Wayne desired
to actually terminate the Agreement, it should have expressly indicated as such. And by
its plain language, the intent of the 2002 letter is to invite Huntertown to negotiate terms
going forward. Moreover, this intent was evidenced by the fact that Fort Wayne actually
7
continued to operate under the terms of the Agreement well after the alleged termination
in April of 2008. Appellant’s App. p. 61, 89. In fact, it was not until Menon sent his
August 14, 2009, letter that Fort Wayne claimed the Agreement had been terminated 14
months earlier. Id. at 61, 82, 89.
By requesting future negotiations and not expressly stating an intention to
terminate, Fort Wayne could have its cake and eat it too. If the parties’ negotiations
failed to result in a satisfactory new agreement, the former Agreement would remain in
effect and the relationship would continue. Given the statements made in the 2002 letter,
it is obvious that Fort Wayne preferred continuation of the relationship with Huntertown
to no relationship at all. Put another way, we cannot say that the equivocal expressions
communicated in the 2002 Letter satisfied the contractual requirements for termination
under section 2 of the Agreement.
By way of analogy, in Westfield Cos. v. Rovan, Inc., 722 N.E.2d 851 (Ind. Ct.
App. 2000), an endorsement that had provided coverage for the lessor of a vehicle was
deleted from an automobile liability policy. When it was deleted, Westfield, the insurer,
sent the insured an amended declarations page, indicating that the endorsement, which
was identified by its form number, had been deleted. Westfield argued that the amended
declaration provided notice that Westfield had cancelled coverage for the lessor. We
rejected that argument and found that the deletion was not a clear expression of an intent
to cancel the endorsement. As a result, it was determined that Westfield failed to provide
an effective notice of cancellation. Id. at 859.
8
Similarly, in Whiteco Indus. v. Nickolick, 571 N.E.2d 1337 (Ind. Ct. App. 1991),
we considered whether a letter constituted an adequate notice of default under the terms
of the sublease. The sublease permitted the sublessor to terminate on the sublessee’s
default. If the sublessor failed to terminate within ninety days of the default, it would be
deemed to have waived the right to terminate.
The letter at issue stated that the rent was overdue and the sublessee should cause
payment to be made as promptly as possible. The sublessee interpreted the letter to be a
notice of default. On appeal, we determined that although the letter identified an event of
default, it did not constitute a notice of default under the sublease. In particular, it was
observed that
[T]he notice was required to declare a default and express an intention to
terminate the sublease. Because neither of these elements were contained
in the notice, we can say as a matter of law that it did not constitute the
requisite notice contemplated in the [sublease].
Id. at 1340.
In the above cases, the contractual notices were found to be inadequate because
they did not clearly and unequivocally express the parties’ intent. Similarly, the 2002
letter was vague and indefinite and it failed to provide clear, direct, and unequivocal
notice of Fort Wayne’s intent to terminate the Agreement regardless of whether a new
contract could be successfully negotiated. Rather, it left open the possibility that the
parties would continue their relationship under the Agreement in the absence of a new
contract. In short, it is “certainty, not uncertainty, which is sought.” Salem Comm. Sch.
9
Corp. v. Richman, 406 N.E.2d 269, 273 (Ind. Ct. App. 1980). As a result, because it was
not clear and unequivocal, the 2002 letter was not an effective notice of termination.
In sum, because the plain language of the 2002 letter failed to provide express,
clear, direct and unequivocal notice for Fort Wayne’s intent, we conclude that the trial
court correctly determined that the Agreement did not terminate in April 2008. Thus,
Huntertown’s motion for summary judgment on its claim for declaratory relief was
properly granted.
The judgment of the trial court is affirmed.
DARDEN, J., and BAILEY, J., concur.
10