REO Enters. v. Village of Dorchester ( 2020 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/14/2020 01:09 AM CDT
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
REO Enterprises, LLC, a Nebraska limited
liability company, appellee, v. Village of
Dorchester, a Nebraska political
subdivision, appellant, and
Ange Lara, appellee.
___ N.W.2d ___
Filed August 7, 2020. No. S-18-970.
1. Ordinances. Interpretation of a municipal ordinance is a question
of law.
2. Constitutional Law: Ordinances. The constitutionality of an ordinance
presents a question of law.
3. Judgments: Appeal and Error. An appellate court independently
reviews questions of law decided by a lower court.
4. Equal Protection. Equal protection requires the government to treat
similarly situated people alike.
5. ____. Equal protection does not forbid classifications; it simply keeps
governmental decisionmakers from treating differently persons who are
in all relevant respects alike.
6. ____. When a classification created by governmental action does not
jeopardize the exercise of a fundamental right or categorize because of
an inherently suspect characteristic, equal protection requires only that
the classification rationally further a legitimate state interest.
7. Constitutional Law: Ordinances: Presumptions. Courts begin with
a presumption of validity when passing upon the constitutionality of
an ordinance.
8. Equal Protection: Proof. Under the rational basis test, whether an equal
protection claim challenges a statute or some other government act or
decision, the burden is upon the challenging party to eliminate any rea-
sonably conceivable state of facts that could provide a rational basis for
the classification.
9. Equal Protection. The rational basis test, which is the most relaxed and
tolerant form of judicial scrutiny of equal protection claims, is satisfied
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Nebraska Supreme Court Advance Sheets
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
as long as (1) there is a plausible policy reason for the classification,
(2) the legislative facts on which the classification is based may ratio-
nally have been considered to be true by the governmental decision-
maker, and (3) the relationship of the classification to its goal is not so
attenuated as to render the distinction arbitrary or irrational.
10. Equal Protection: Records. In equal protection claims, where the
record does not contain information regarding the adoption of an ordi-
nance, statute, or other governmental action, courts analyze the underly-
ing legislative facts the governmental entity alleged to have considered
when such basis is clearly apparent.
11. Equal Protection: Ordinances: Proof. The burden is upon a party chal-
lenging an ordinance under an equal protection claim to eliminate any
reasonably conceivable state of facts that could provide a rational basis
for the classification.
12. Equal Protection: Legislature: Intent. Social and economic measures
violate equal protection only when the varying treatment of different
groups or persons is so unrelated to the achievement of any legitimate
purposes that a court can only conclude that the Legislature’s actions
were irrational.
13. Equal Protection. The rational basis test does not require a govern-
mental entity to choose a specific course of action to address its legiti-
mate interest.
14. Appeal and Error. An appellate court will not consider an issue on
appeal that was not passed upon by the trial court.
15. Constitutional Law: Appeal and Error. A constitutional issue not
presented to or passed upon by the trial court is not appropriate for con-
sideration on appeal.
Appeal from the District Court for Saline County: Vicky
L. Johnson, Judge. Reversed and remanded for further
proceedings.
Kelly R. Hoffschneider, of Hoffschneider Law, P.C., L.L.O.,
for appellant.
Gregory C. Damman, of Blevens & Damman, for appellee
REO Enterprises, LLC.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
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Nebraska Supreme Court Advance Sheets
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
Funke, J.
The Village of Dorchester, Nebraska (Dorchester), appeals
the district court’s order granting summary judgment for REO
Enterprises, LLC (REO). In its order, the district court declared
Dorchester’s ordinance No. 684 unconstitutional because it
treated tenants and owners of property differently when apply-
ing for utility services by requiring tenants to obtain a land-
lord’s written guarantee that the landlord would pay any unpaid
utility charges for the rented property. Dorchester claims that
the district court erred in this declaration and that ordinance
No. 684 does not violate the Equal Protection Clauses of the
U.S. and Nebraska Constitutions. For the reasons set forth
herein, we reverse the judgment and remand the cause to the
district court for further proceedings.
BACKGROUND
REO is a Nebraska limited liability company which owns
residential rental property in Dorchester. Prior to May 1, 2017,
tenants who leased REO’s property applied for utility services
with Dorchester, paid a deposit, and received water, sewer, and
electrical services.
On May 1, 2017, Dorchester’s village board passed ordi-
nance No. 684 mandating the use of village utility services and
setting forth terms for billing, collection of bills, and discon-
tinuance of service. As relevant to the instant case, “Section
3-002: Consumer’s Application; Service Deposit” provides:
A. Every person or persons desiring utility services
must make application therefor to the Village clerk, who
shall require the applicant to make a service deposit and
tap fees for water and sewer service in such amounts as
set by resolution by the Village Board and placed on file
at the Village office. . . . Utility services shall not be sup-
plied to any house or private service pipe except upon the
order of the utilities superintendent.
B. Before a tenant’s utility application will be accepted,
the landlord shall be required to sign an owner’s consent
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
form and agree to pay all unpaid utility charges for his
or her property.
In July 2017, Ange Lara entered into a lease agreement with
REO for the rental of REO’s Dorchester property. Pursuant
to this agreement, Lara contacted Dorchester’s village clerk
to apply for utility services and paid a $250 deposit with this
application. At that time, Lara was informed that there was a
prior, unpaid utility bill associated with a prior renter of the
property and that she would not receive the services until this
bill was paid and REO signed a form titled “Owner’s Consent
and Guaranty of Payment for Unpaid Utility Charges for
Rental Property.”
Lara told a representative of REO about her interaction
with the village clerk. An REO representative then contacted
representatives of Dorchester and was informed of ordinance
No. 684 and its requirement that REO sign the “Guaranty”
before Lara could receive utility services for the property. The
village clerk also reiterated the requirement that the prior ten-
ant’s past-due bill be paid. REO responded to these require-
ments by asserting that ordinance No. 684 is invalid and that it
would not sign the “Guaranty.”
Due to this noncompliance, Dorchester refused to provide
Lara utility services at the property in Lara’s name. However,
Dorchester did begin to provide services to the property
through an account set up in an REO representative’s name. At
the time of this action, Dorchester had retained Lara’s deposit
and was continuing to provide utility services for the property,
still occupied and leased by Lara, through the REO representa-
tive’s account.
In October 2017, REO filed a complaint seeking that the
district court declare ordinance No. 684 void and unenforce-
able and order Dorchester to pay REO’s attorney fees and court
costs. REO alleged four claims as follows: (1) Ordinance No.
684 violated the Equal Protection Clauses of article 1, § 3,
of the Nebraska Constitution and the 14th Amendment to the
U.S. Constitution; (2) ordinance No. 684 violated the Equal
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
Credit Opportunity Act 1; (3) ordinance No. 684 violated the
special legislation provision of article 3, § 18, of the Nebraska
Constitution; and (4) ordinance No. 684 violated Nebraska’s
Uniform Residential Landlord and Tenant Act. 2
Dorchester filed an answer which claimed, in part, that
REO’s complaint failed to state a claim upon which relief
could be granted and that REO’s claims were barred in whole
or in part by the doctrine of unclean hands, laches, waiver,
and estoppel.
In May 2016, REO filed a motion for summary judgment
claiming there were no genuine issues of material fact and it
was entitled to judgment as a matter of law. Dorchester, in turn,
also filed a motion for summary judgment, agreeing there were
no genuine issues of material fact and claiming it was entitled
to judgment as a matter of law.
Following a hearing, the district court entered summary
judgment for REO and overruled Dorchester’s motion. In its
order, the court analyzed REO’s claim that ordinance No. 684
violated the Equal Protection Clauses. First, the court found
that residential tenants and owners of Dorchester property were
similarly situated under ordinance No. 684 for equal protection
purposes. The court noted that by requiring a landlord to be a
cosigner to a tenant’s utility obligations, but not requiring a
residential owner to obtain a third-party cosigner, ordinance
No. 684 treated tenants and owners differently. The court then
found there was not a rational relationship between the dif-
ference in treatment and Dorchester’s interest in collecting
unpaid bills from tenants. Specifically, the court reasoned that
Dorchester’s policy was applied to tenants irrespective of their
creditworthiness and ability to pay without taking into account
the tenants’ security deposits and the ability of Dorchester
to impose liens on the rented property or provide other rem-
edies to meet Dorchester’s offered goal. Thus, the court
determined ordinance No. 684 unconstitu­tionally vio­lated the
1
15 U.S.C. § 1691 et seq. (2012).
2
Neb. Rev. Stat. §§ 76-1401 to 76-1449 (Reissue 2018).
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
Equal Protection Clauses and, because it found this claim dis-
positive, did not discuss REO’s remaining claims.
ASSIGNMENT OF ERROR
Dorchester assigns, consolidated and restated, that the
district court erred by finding that ordinance No. 684 vio-
lated the Equal Protection Clauses of the U.S. and Nebraska
Constitutions.
STANDARD OF REVIEW
[1-3] Interpretation of a municipal ordinance is a question of
law. 3 Similarly, the constitutionality of an ordinance presents
a question of law. 4 An appellate court independently reviews
questions of law decided by a lower court. 5
ANALYSIS
Equal Protection
[4-6] The Nebraska Constitution and the U.S. Constitution
have identical requirements for equal protection challenges. 6
Equal protection requires the government to treat similarly sit-
uated people alike. 7 It does not forbid classifications; it simply
keeps governmental decisionmakers from treating differently
persons who are in all relevant respects alike. 8 When a clas-
sification created by governmental action does not jeopardize
the exercise of a fundamental right or categorize because of
an inherently suspect characteristic, equal protection requires
only that the classification rationally further a legitimate
state interest. 9
3
Wilkison v. City of Arapahoe, 302 Neb. 968, 926 N.W.2d 441 (2019).
4
Dowd Grain Co. v. County of Sarpy, 291 Neb. 620, 867 N.W.2d 599
(2015).
5
Wilkison, supra note 3; Dowd Grain Co., supra note 4.
6
Lingenfelter v. Lower Elkhorn NRD, 294 Neb. 46, 881 N.W.2d 892 (2016).
7
Id.
8
Id.
9
Id.
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
Ordinance No. 684 creates two classifications relevant to the
instant action: (1) residential tenants and (2) residential owners.
REO does not claim, and the district court did not find, that
tenants are a suspect class or that ordinance No. 684’s differ-
ence in treatment affected a fundamental right. Additionally, we
have not held that a specific application and collection structure
for payment of utility services by tenants and landowners is a
fundamental right. As such, and because the interests at issue
are economic, we apply the rational basis test. 10
[7-9] This court begins with a presumption of validity
when passing upon the constitutionality of an ordinance. 11
Accordingly, under the rational basis test, whether an equal
protection claim challenges a statute or some other government
act or decision, the burden is upon the challenging party to
eliminate any reasonably conceivable state of facts that could
provide a rational basis for the classification. 12 The rational
basis test, which is the most relaxed and tolerant form of judi-
cial scrutiny of equal protection claims, is satisfied as long
as (1) there is a plausible policy reason for the classification,
(2) the legislative facts on which the classification is based
may rationally have been considered to be true by the govern-
mental decisionmaker, and (3) the relationship of the classifica-
tion to its goal is not so attenuated as to render the distinction
arbitrary or irrational. 13
In this three-part analysis, we first consider the policy reason
for the classification. 14 Under ordinance No. 684, Dorchester
requires residential tenants to provide written guarantees
from their landlords but does not require similar third-party
guar­antees for residential owners. In requiring the written
10
See id.
11
DeCoste v. City of Wahoo, 255 Neb. 266, 583 N.W.2d 595 (1998).
12
State v. Montoya, 304 Neb. 96, 933 N.W.2d 558 (2019); Lingenfelter,
supra note 6.
13
See Lingenfelter, supra note 6.
14
Id.
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
guarantee, Dorchester claims it has a legitimate interest in
maintaining a financially stable municipal utility by collect-
ing from tenants who abscond without paying their bills
when those bills are in excess of the tenant’s security deposit.
Dorchester argues that requiring a landlord’s guarantee
“‘remind[s] each landlord owner of its obligations and liabil-
ity to . . . Dorchester and will further the goal of collection
by reducing the possibility that . . . Dorchester will be faced
with the administrative expenses associated with repeatedly
resorting to cumbersome and expensive foreclosure or collec-
tion proceedings.’” 15
A village has the statutory authority to make and enforce
all necessary rules and regulations in the use of its system of
waterworks or water supply and the use of the water from such
system. 16 Along with charges for the use of a village’s sewer
system, 17 a village has the power to assess and collect from
its inhabitants rates for the use and benefit of water used or
supplied to them which includes the authority to enforce liens
upon the real estate where the water and sewer system are used
or supplied. 18 A village also has the authority to contract to
furnish electricity to any person or corporation. 19
Pursuant to its authority to provide and charge for utility
services, Dorchester has a legitimate interest in ensuring col-
lection of accounts for these services. By requiring a landlord
to guarantee any unpaid utility charges not paid by the tenant,
Dorchester increases the likelihood that it will be able to col-
lect payment for services with minimal additional collection
costs even if the tenants move away and collection efforts
from the tenants are unsuccessful. Such guarantee involves a
third party who is tied to real estate located within Dorchester
15
Brief for appellant at 13.
16
See Neb. Rev. Stat. § 17-537 (Cum. Supp. 2016).
17
See Neb. Rev. Stat. § 17-925.02 (Cum. Supp. 2016).
18
See Neb. Rev. Stat. § 17-538 (Cum. Supp. 2016).
19
See Neb. Rev. Stat. § 17-901 (Reissue 2012).
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
and against whom collection may be more easily pursued.
This consideration does not equally apply when determining
whether to require a third-party guarantee from a residential
landowner where the utility customer owns the land at issue
and cannot as easily avoid his or her obligations without aban-
doning the property to its creditors. We find ensuring payment
for utility services is a plausible policy reason for the classifi-
cations requiring landlords’ guarantees for tenants but not for
residential owners.
[10] We next consider whether the legislative facts on which
the classification is based may rationally have been considered
to be true. 20 Where, as here, the record does not contain infor-
mation regarding the adoption of an ordinance, statute, or other
governmental action, we have analyzed the underlying legisla-
tive facts the governmental entity alleged to have considered
when such basis is clearly apparent. 21
Dorchester claims by requiring a landlord guarantee for ten-
ants and not requiring a third-party guarantee for residential
owners, it was recognizing that tenants are less likely to be
creditworthy than owners and that collection from tenants who
moved away is more difficult than from owners who are tied
to the property within the village. In support of these alleged
facts, Dorchester provided an affidavit from Dorchester’s vil-
lage clerk and treasurer. She explained that “[i]n the past,
[Dorchester] spent substantial resources in trying to locate
former residential tenant utilities customers that . . . left town
with unpaid utility account obligations” and “collections agen-
cies would be used to collect these unpaid utilities accounts
[and] charge 50% of the amount collected.” She also described
that there remains an unpaid utility bill on REO’s property in
the previous tenant’s name and that the location of the previous
tenant is unknown.
REO argues the affidavit should be viewed with skepticism
in that it was conclusory and self-serving and failed to include
20
Lingenfelter, supra note 6.
21
See id.
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REO ENTERS. v. VILLAGE OF DORCHESTER
Cite as 306 Neb. 683
specific information supporting its conclusion. REO contends
that there is no evidence that Dorchester ever conducted a
study or analysis of utility bill payment tendencies in order to
establish that tenants were any more likely than property own-
ers to fail to pay utility bills and, if so, at what level. REO’s
argument is based upon the proposition that Dorchester had a
burden to offer evidence in support of its alleged policy reason
for the classification.
We first note the court granted summary judgment in favor
of REO, and as such, Dorchester is entitled to have the evi-
dence viewed in its most favorable light and have all reason-
able inferences deducible from the evidence. 22
[11] Additionally, as stated above, the burden is upon REO
as a party challenging the ordinance to eliminate any reason-
ably conceivable state of facts that could provide a rational
basis for the classification. 23 The U.S. Supreme Court has
explained, “A State . . . has no obligation to produce evidence
to sustain the rationality of a statutory classification.” 24 The
Court further explained, “‘[A] legislative choice is not sub-
ject to courtroom factfinding and may be based on rational
speculation unsupported by evidence or empirical data.’” 25
Contrary to REO’s argument, Dorchester was not required
to present evidence to support the classification under ordi-
nance No. 684, and instead, REO had the duty to disprove
Dorchester’s alleged factual basis or establish the facts were
not reasonably conceivable.
As the district court correctly noted, individual residen-
tial tenants and owners are not intrinsically with or without
creditworthiness. However, other jurisdictions have recognized
22
See JB & Assocs. v. Nebraska Cancer Coalition, 303 Neb. 855, 932
N.W.2d 71 (2019).
23
See, Montoya, supra note 12; Lingenfelter, supra note 6.
24
Heller v. Doe, 509 U.S. 312, 320, 113 S. Ct. 2637, 125 L. Ed. 2d 257
(1993).
25
Id.
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REO ENTERS. v. VILLAGE OF DORCHESTER
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an increased likelihood that an individual who rents a prop-
erty may have less available reachable assets and resources
than an owner who may have applied for and acquired debt to
buy the property or had enough resources to buy the property
outright. 26 When analyzing the underlying facts Dorchester
relied on in enacting ordinance No. 684, the question is not
whether such assertion is correct but whether it may rationally
have been considered to be true. 27 Accordingly, the inherent
increased likelihood of a tenant’s lack of creditworthiness com-
pared to a residential owners’ creditworthiness is an appropri-
ate consideration.
Even more compelling is Dorchester’s allegation that admin-
istrative and collection costs associated with unpaid utility bills
are more likely to increase when seeking payment for services
provided to tenants versus residential owners. Tenants are con-
nected to the property through a lease agreement which means
their connection with that property ceases when they are no
longer acting under the agreement. Dorchester noted in the vil-
lage clerk’s affidavit that, in the past, this lack of continuing
connection with the property can result in Dorchester’s spend-
ing “substantial resources” in trying to locate the tenant to col-
lect on unpaid services.
REO argues that Dorchester does not define “substantial
resources” expended to locate and collect from tenants in con-
trast to residential owners. However, evidence of a study and
a precise comparison is unnecessary to support Dorchester’s
conclusion. 28 Residential owners own the property until they
sell, abandon, or are removed. Dorchester, therefore, has a
static source to contact and pursue collection from residential
owners. It is rational to conclude that the costs associated
26
See, Midkiff v. Adams County Reg. Water District, 409 F.3d 758 (6th Cir.
2005); DiMassimo v. City of Clearwater, 805 F.2d 1536 (11th Cir. 1986);
Chatham v. Jackson, 613 F.2d 73 (5th Cir. 1980).
27
See, Montoya, supra note 12; Lingenfelter, supra note 6.
28
See id. See, also, Heller, supra note 24.
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with locating a residential landowner is likely to be less than
locating a previous tenant.
Finally, we must consider whether the relationship of the
classification to its goal is so attenuated as to render the dis-
tinction arbitrary or irrational. 29
[12] The village clerk’s affidavit claims Dorchester has
expended substantial resources in pursuing collection of unpaid
utility accounts from tenants who have moved away, including
costs associated with locating the tenants and collection agen-
cies. Landlord guarantees help to ensure that Dorchester can
minimize these costs because the landlords are more directly
tied to property within Dorchester and the guarantees provide
another party to account for the amounts due. Such a third-party
guarantee does not equally apply to residential owners who do
not have a landlord third-party relationship and are already tied
to the serviced property. Social and economic meas­ures violate
equal protection only when the varying treatment of different
groups or persons is so unrelated to the achievement of any
legitimate purposes that a court can only conclude that the
Legislature’s actions were irrational. 30 Here, we find ordinance
No. 684’s treatment of tenants and residential owners was suf-
ficiently related to Dorchester’s stated purpose so as not to
render the distinction arbitrary or irrational.
In DeCoste v. City of Wahoo, 31 the city enacted an ordi-
nance which authorized collection of landfill management
fees from city residents by adding the fees to the electri-
cal bills of “‘all appropriate electrical customers.’” Because
some city residents such as those within units of multiple-unit
apartment complexes did not have individual electrical meters
and electrical bills, a number of these residents did not have
to pay the landfill management fees. 32 We determined this
29
See Lingenfelter, supra note 6.
30
Citizens for Eq. Ed. v. Lyons-Decatur Sch. Dist., 274 Neb. 278, 739
N.W.2d 742 (2007).
31
DeCoste, supra note 11, 255 Neb. at 271, 583 N.W.2d at 599.
32
Id.
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difference in treatment violated equal protection because the
classifications did not rationally relate to the city’s objec-
tive of funding its landfill management. 33 We reasoned that
whether or not a residence had an electrical meter did not
relate to landfill management and was wholly irrelevant to the
city’s stated objective. 34
The ordinance at issue in DeCoste is different than the land-
lord guarantee requirement under ordinance No. 684, which
directly relates to Dorchester’s objective. Dorchester provides
utility services to properties and charges for the services.
Ordinance No. 684 requires that the property owners of the
residences who are provided the services, including landlords
and residential owners, agree to the responsibility for payment
of these utility charges. Having a landlord guarantee increases
the likelihood that these bills are paid.
REO argues the landlord guarantee requires a landlord to
agree to cover unpaid bills for services the landlord will not
receive. REO also claims allowing Dorchester to require a
landlord guarantee would have far-reaching negative implica-
tions and allow municipalities and power districts to require
similar guarantees for rented farmland, industrial land, and
commercial land which could greatly increase the potential
liability of those landlords.
This argument ignores the fact that a landlord receives a
benefit from the property’s having access to and use of utility
services in that a property which has access to utilities and in
which this access is reliable and consistent has an increased
property value. 35 The statutory scheme also assumes a property
owner is a relevant party to the availability and use of utilities
at a property in permitting the imposition of a lien against the
owner’s property when a tenant fails to pay. 36 Finally, whether
33
See id.
34
Id.
35
See Chatham, supra note 26.
36
See, § 17-925.02; § 17-538.
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ordinance No. 684 may influence other municipalities and
power districts to require landlord guarantees which may have
their own expanded implications is immaterial to the question
of whether Dorchester’s landlord guarantee requirement fur-
thers the legitimate interest of ensuring collection of accounts
for the provision of utility services to Dorchester residents.
REO also argues Dorchester “is already adequately protected
by its ability to require the tenant to make a deposit . . . to cover
the last month’s bill and to place a lien on the property for any
amounts that remain unpaid for water and sewer services after
application of the deposit.” 37 REO contends Dorchester can
further limit its potential risk of nonpayment over the deposit
amount by promptly shutting off utility services when a tenant
fails to pay.
[13] While Dorchester may have had alternate avenues to
address its goal of ensuring payment of utility bills through
higher security deposits and collecting from liens imposed on
properties, the rational basis test does not require a govern-
mental entity to choose a specific course of action to address
its legitimate interest. REO has pointed to no authority under
a rational basis review that would require a municipality to
choose an individual means of pursuing its legitimate interest.
Instead, the question remains whether the classification ratio-
nally furthers a legitimate state interest. 38
We find DiMassimo v. City of Clearwater 39 instructive.
There, the 11th Circuit evaluated a requirement that a landlord
join in a tenant’s application for utilities and found the require-
ment was obviously related to the city’s legitimate purpose of
maintaining a financially stable municipal utility. The court
explained that “a landowner, whose property is readily subject
to liens and foreclosure may be rationally presumed to be more
readily held to account as the ultimate guarantor of the bills
37
Brief for appellee at 18.
38
See Lingenfelter, supra note 6.
39
DiMassimo, supra note 26.
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than a tenant who may freely abandon the lease, leaving behind
only his outstanding debts.” 40 In addressing the plaintiff’s
argument that the city already had adequate protection through
liens and the ability to require greater security deposits, the
court stated:
Requiring a landlord’s joinder in the application for utili-
ties serves to remind each owner of his obligations and
liability to the City and therefore, furthers the goal of
collection by reducing the possibility that the City will
be faced with the administrative expenses of repeatedly
resorting to cumbersome and expensive foreclosure pro-
ceedings. A financial deposit sufficient to provide the City
with the same degree of security would indeed be burden-
some to any potential tenant. 41
REO cites Golden v. City of Columbus 42 and O’Neal v. City
of Seattle 43 for the proposition that classifications and dispar­
ate treatment of tenants and owners is not rationally related
to a municipality’s interest in collecting unpaid utility debts.
However, these cases are distinguishable because they involve
whether a municipality could require a tenant to pay a previ-
ous, unpaid utility bill for the initiation and continuation of
service even though the tenant had not received the previous
service and had no previous relationship with the property. 44
In Golden, the Sixth Circuit analyzed a city policy where,
after a tenant moved into a property which was already receiv-
ing water services, the city would terminate the services if
the landlord owed for a prior tenant’s water usage. 45 The city
would inform the tenant that water services would only recom-
mence once the landlord satisfied that debt. The Golden court
40
Id. at 1541.
41
Id. at 1542.
42
Golden v. City of Columbus, 404 F.3d 950 (6th Cir. 2005).
43
O’Neal v. City of Seattle, 66 F.3d 1064 (9th Cir. 1995).
44
Golden, supra note 42; O’Neal, supra note 43.
45
Golden, supra note 42.
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analyzed the equal protection claim solely with regard to the
city policy’s irrationally differential treatment of tenants whose
landlords owed the city for water service and other tenants
whose landlords did not have such debt. The court found the
policy violated equal protection because it treated tenants who
moved into properties and whose owners were encumbered
with preexisting utility debts differently from properties that
were not. 46 The court expressed no opinion regarding the pol­
icy’s differential treatment of landlords and tenants. 47 It is note-
worthy that the court left undisturbed the city’s requirements
that a tenant obtain a landlord’s consent prior to receiving
utility services and that a property owner is liable for unpaid
utility bills of a tenant. 48
Similarly, in O’Neal, the Ninth Circuit analyzed a city pol-
icy of refusing to provide water service to new tenants when
there is a balance due for prior water service to the premises. 49
The O’Neal court also found the policy treated tenants differ-
ently based upon whether the properties were encumbered with
preexisting utility debts. The court determined that this scheme
was divorced from the reality of legal accountability for the
debt because the person directly penalized by the scheme
was not the debtor but an innocent third party with whom the
debtor contracted.
Requiring a tenant to pay previous, unpaid utility bills to
initiate or continue service where the tenant was not a party to
those services nor connected to the property is different from
Dorchester’s requirement that a tenant obtain the landlord’s
guarantee prior to the initiation of service. Unlike the tenants
in Golden and O’Neal, landlords are connected to the property
for which the utilities are being provided and, as discussed,
receive a benefit from the availability and use of utilities at
46
Id. See, also, O’Neal, supra note 43.
47
Golden, supra note 42. See, also, Midkiff, supra note 26.
48
Golden, supra note 42.
49
O’Neal, supra note 43.
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their property. Landlords have agency in minimizing their risk
by choosing a creditworthy tenant, mandating in the lease that
the tenant promptly pay all utility bills, and terminating the
lease should the tenant fail in that duty.
On this third consideration, we find Dorchester’s goal of
ensuring the collection of utility accounts through a cost-
effective means is sufficiently related to, and not too attenuated
from, ordinance No. 684’s requirement that a residential tenant
obtain a landlord’s guarantee of payment while not requiring a
residential owner to obtain a third-party guarantee.
In consideration of all of the above, we find that ensuring
collection of utility bills was a plausible policy reason for
requiring tenants to obtain landlord guarantees but not requir-
ing residential owners to obtain third-party guarantees. We
further find that this classification was based on facts which
Dorchester could rationally have considered to be true and
that the classification was sufficiently related to the goal of
ensuring payment of utility bills so as not to render the treat-
ment arbitrary or irrational. Accordingly, ordinance No. 684’s
requirement that a residential tenant obtain a landlord’s guar-
antee for initiating utility services does not violate the Equal
Protection Clauses of the U.S. and Nebraska Constitutions and
the district court erred.
Additional Claims
Even though the district court declined to address REO’s
remaining claims, REO asks that we address them on appeal,
which claims include whether ordinance No. 684 violated
the Equal Credit Opportunity Act; violated article 3, § 18, of
the Nebraska Constitution; and violated Nebraska’s Uniform
Residential Landlord and Tenant Act.
[14,15] An appellate court will not consider an issue on
appeal that was not passed upon by the trial court. 50 As to
constitutional claims specifically, we have held that a con-
stitutional issue not presented to or passed upon by the trial
50
Siedlik v. Nissen, 303 Neb. 784, 931 N.W.2d 439 (2019).
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court is not appropriate for consideration on appeal. 51 Based
upon these established rules and REO’s failure to cross-appeal,
we decline to address REO’s remaining claims on appeal and
remand this cause to the district court for further consideration
of the remaining claims.
CONCLUSION
Because the requirement under ordinance No. 684 that ten-
ants must obtain a landlord guarantee in order to initiate utility
services did not violate the Equal Protection Clauses of the
U.S. and Nebraska Constitutions, we reverse the judgment of
the district court and remand the cause for further proceedings
to consider the remaining claims.
Reversed and remanded for
further proceedings.
51
Capitol City Telephone v. Nebraska Dept. of Rev., 264 Neb. 515, 650
N.W.2d 467 (2002).