Land v. City of Grandville

2 Mich. App. 681 (1966) 141 N.W.2d 370

LAND
v.
CITY OF GRANDVILLE.

Docket No. 740.

Michigan Court of Appeals.

Decided April 12, 1966.

Vander Veen, Freihofer & Cook (Walter B. Freihofer, of counsel), for plaintiffs.

Bergstrom, Slykhouse, Shaw, Van Orden, DeYoung & Boyles (Richard M. Van Orden, of counsel), for defendant.

HOLBROOK, J.

Plaintiffs-appellants are the owners of a 150-unit mobile trailer park and a 15-unit motel with a manager's apartment in connection situated in the defendant-appellee city of Grandville, a municipal corporation located in Kent county.

Plaintiffs brought suit in circuit court for declaratory judgment declaring defendant's "sewer ordinances" invalid, claiming the rates applicable to plaintiffs' motel and trailer home park were unreasonable and arbitrary, and also for an accounting. After presenting testimony December 10, 1964, the parties signed an agreed statement of facts February 3, 1965, filed briefs, and submitted the case for decision. The trial judge ruled March 18, 1965, against plaintiffs' contentions and dismissed their complaint. From this judgment of dismissal, plaintiffs appeal.

A single question is presented by plaintiffs in their brief on appeal to-wit:

Does the sewer charge ordinance of the city of Grandville create an arbitrary and discriminatory classification of persons required to pay the quarterly "minimum fee," sewer use fee, contrary to the equal protection clauses of the Michigan Constitution^[1] and 14th Amendment to the Federal Constitution?

The pertinent facts necessary for decision appear in the record to be as follows:

Upon petition of the State of Michigan in April, 1962, the Kent county circuit court enjoined the city of Grandville from disposing of its sewage in Grand River, and the city thus became obligated to build a sewage disposal plant. Construction of the plant was commenced in 1963, and completed in late 1964.

Plaintiffs' trailer park and motel are hooked into and are customers of defendant water and sewer systems. The trailer park and motel each have a single water meter.

On August 28, 1961, defendant city adopted Ordinance No 110 pertaining to charges for sewer services. On December 23, 1963, defendant city adopted Ordinance No 110-B which raised the minimum rates from $3 to $5 per quarter. On May 25, 1964, defendant city adopted "sewer Ordinance No 121." Article 8 of the ordinance imposes the same sewer rates as set forth under Ordinance No 110-B and the pertinent parts of said ordinance are as follows:

"Sec. 803(a). The rates and charges for each quarter shall be determined by each user's quarterly water use, the billing for which includes the month of January, and which said rates shall be as follows:

Sewage Service Rates
Quarterly Billing Period
Quantity of Water Used                       Rate
First 15,000 gallons               $5.00 (minimum charge)
Next  85,000 gallons                 .25 per 1000 gallons
Next  200,000 gallons                .22 per 1000 gallons
Next  200,000 gallons                .20 per 1000 gallons
Over  500,000 gallons                .10 per 1000 gallons

* * *

"(c). In the event two or more lots, parcels of real estate, residences, dwelling units, or buildings discharging sanitary sewage, water, or other liquids into the sanitary sewage system of the city either directly or indirectly, are users of water and the quantity of water is measured by a single water meter, then, in each case for billing purposes, the minimum charge for sewer rates and charges shall be multiplied by the number of lots, parcels of real estate, residences, dwelling units, or buildings served through the single water meter."

It is the application of subparagraph (c) quoted above (which is identical in Ordinance No 110 and Ordinance No 110-B) to the property of the plaintiffs that forms the basis for the controversy in these proceedings. The sewer lateral and interceptor system located within the property lines of the plaintiffs and servicing the trailer park were installed by them at their expense the same as required by the defendant city of all developers of any plat or subdivision.

Plaintiffs could have had separate meters installed for each of the 150 trailer units and each of the 16 motel units upon payment of connection charges as provided in said ordinance.

The power of the defendant city to own and operate a sanitary sewer system and by ordinance to impose charges, rentals or rates for such service is not questioned by plaintiffs.

The trailers using the park are typically equipped with a toilet, bathing accommodations, and kitchen sinks. These trailers are not transit, but usually stay six months or longer. Plaintiffs restricted the number of children per trailer to two. The average occupancy per trailer is about 2.1 persons. Each trailer is connected by sewage lateral to a gathering system of interceptors running throughout the trailer park, which interceptor system then connects into the trunk sewer of the city at plaintiffs' property line. The trailer park has a near 100% occupancy.

Each unit of the motel has a toilet, shower, and sink and sleeping accommodations and contributes a daily laundry of toweling and linen. The motel has a 65-70% occupancy rate.

By reason of the ordinance the trailer park has been charged a minimum quarterly sewage rental of $5 per quarter for those trailer spaces actually occupied by trailers during each billing period. The motel has been charged for 16 units each quarter on a minimum charge basis.

The trailer park has not paid more than a minimum rental as the water used per unit for the winter control period has been about 10,000 gallons, however, their maximum use of water per quarter in the summer has approached 50,000 gallons of water per trailer. This is also true for the charges of the motel units, as its winter average has been about 5,000 gallons of water per unit with the summer quarter approaching 40,000 gallons of water used per unit.

The sewage plant of defendant city was designed to accommodate the entire population of the city, but at the time of this lawsuit, only about 1/3 of the area was so serviced. The income from rental or charges for services of the sewer system were not enough to defray the cost of operations and the city has imposed a 3-mill ad valorem tax against all of the property of the city to supplement the sewer systems income.

All of the multiple dwelling unit properties in defendant city are charged the minimum rate for sewer services on a per-unit basis the same as plaintiffs' property. These include two other motels and four separate multiple dwelling complexes of apartment buildings.

Billings by defendant city for sewer service to plaintiffs for the trailer park and motel is by way of one bill for each quarter. The meter is read and then the gallonage divided by the number of units occupied to ascertain the gallonage used by each unit. Always the minimum has been charged per unit. The cost of meter reading and billing is no greater for the trailer park than for a factory or business building. The cost of processing the sewage is no greater from the trailer park than a like amount from a business or commercial plant, however, under certain conditions, sewage from the commercial plants must be processed before being placed in the sewer system.

The basis upon which defendant city justifies the minimum charge to dwelling units is contained in the testimony of Mr. Raymond Bruggink, consulting engineer to the city of Grandville. His testimony is to the effect that the design and construction of the sewage disposal system for the city was the population unit. The capacity of the sewage plant was predicated upon the average amount of contribution by the average individual residing in the community. That the presence in the community of business or commercial operations such as laundromats, schools, and businesses was of little significance and had relatively little bearing on considerations of capacity or maintenance for the disposal system because as stated in his words:

"A. Because we have made our design on the basis of the population equivalent which includes the kitchen waste, sanitary waste from the individual, and also the laundry waste, whether it is done at home or at a laundromat would not affect our load on the sewage materially."

The domestic unit composed of individuals according to Mr. Bruggink was the reason for the classification for rate charges for use of the sewer system contained in the defendant city ordinance authorizing minimum charges for each individual residence or dwelling unit, whether it be a house, a trailer home, an apartment, or motel room or rooms. In the city of Grandville, the average family unit was 3.5 persons.

Plaintiffs maintained that their motel and trailer home park constitute businesses or commercial enterprises and by reason of their using only one water meter for each business, should be treated the same as a laundromat, factory, or other business in the city with one minimum rate plus charges for excess use of water at the reduced rate. If plaintiffs' position is tenable, its sewer rentals would be about 1/3 the fees computed under the said ordinance.

The rule governing a municipality's right to regulate rates for its public utilities is dealt with in the early case of Preston v. Board of Water Commissioners of Detroit (1898), 117 Mich. 589, p 598, wherein it is stated:

"It is true, if he is in the water district, he is entitled to the use of the water by complying with the regulations of the water board; it is also true these regulations must be reasonable; but it is not true they must be uniform or that they must be based upon the value of the property where the water is used."

This rule is further explained in the case of Township of Meridian v. City of East Lansing (1955), 342 Mich. 734, wherein Mr. Justice TALBOT SMITH stated on p 749 as follows:

"The word ``reasonable' with respect to rates charged by utilities is a word of the most universal employment. It may be provided by ordinance, statute, or constitution (e.g. Simons v. City Council of Charleston, 181 SC 353 [187 S.E. 545]) that rates shall be ``reasonable' or ``fair and reasonable.' Moreover, should the question of rate arise on a contract implied in law, the judicial requirement is that the rate to be paid shall be ``reasonable.' City of Detroit v. City of Highland Park, 326 Mich. 78, 100. It may also be employed (as in the case at bar) in a contract. The determination of its meaning, in any case, is not subject to mathematical computation with scientific exactitude but depends upon a comprehensive examination of all factors involved, having in mind the objective sought to be attained in its use."

The standards applicable in evaluating the reasonableness of a municipality's system of classification are set forth by our Supreme Court in Cook Coffee Co. v. Village of Flushing (1934), 267 Mich. 131, where the Court citing the earlier Michigan case of Naudzius v. Lahr (1931), 253 Mich. 216 (74 A.L.R. 1189, 30 NCCA 179), stated on p 134 as follows:

"The standards of classification given in Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78 (31 S. Ct. 337, 55 L ed 369, Ann Cas 1912C, 160), were quoted by this court in Naudzius v. Lahr, supra, at pp 222, 223:

"``1. The equal protection clause of the Fourteenth Amendment does not take from the State the power to classify in the adoption of police laws, but admits of the exercise of a wide scope of discretion in that regard, and avoids what is done only when it is without any reasonable basis and therefore is purely arbitrary. 2. A classification having some reasonable basis does not offend against that clause merely because it is not made with mathematical nicety or because in practice it results in some inequality. 3. When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. 4. One who assails the classification in such a law must carry the burden of showing that it does not rest upon any reasonable basis, but is essentially arbitrary.'"

This rule was considered recently in a municipal rate case involving a sewer in Beauty Built Construction Corporation v. City of Warren (1965), 375 Mich. 229, wherein Mr. Chief Justice T.M. KAVANAGH on pp 235, 236, stated as follows:

"This Court has repeatedly held that classification of objects to which a municipal ordinance may be made applicable must be based on natural distinguishing characteristics and must bear a reasonable relation to the object of the ordinance. See Palmer Park Theatre Company v. City of Highland Park, 362 Mich. 326; Mulloy v. Wayne County Board of Supervisors, 246 Mich. 632.

"Where an ordinance fails to include and affect alike all persons of the same class, and extends immunities or privileges to one part and denies them to others of like kind by unreasonable or arbitrary classification, the same is contrary to the equal protection guarantees of the State and Federal Constitutions. See Haynes v. Lapeer Circuit Judge, 201 Mich. 138. * * *

"In Seltzer v. Sterling Township, 371 Mich. 214, this Court held that an ordinance imposing privilege fees on all homes connecting to the water system subsequent to the adoption of the ordinance not to be unconstitutional; no arbitrary classification or exemption was attempted by the ordinance in Seltzer as in the instant case."

There does not appear to be precedent in the decisions of our State under identical or similar fact situations with the case at hand. We do have the benefit of recent decisions from other jurisdictions where our question or a similar one is presented. The case with the fact situation most similar to our case appears to be that of Caldwell v. City of Abilene (Texas Civ App, 1953), 260 S.W.2d 712. The city of Abilene enacted a new sewer ordinance which provided in part (p 713):

"``In all cases where more than one living or business unit is supplied through one meter, a minimum charge will be made for each living unit or business unit supplied through such meter. If two or more living or business units are supplied through one meter, a minimum charge will be made each month for each unit regardless of whether units are occupied.'"

A group of apartment owners who had previously enjoyed a minimum rate as applied to each apartment building regardless of the number of living units therein, objected, contending any differentiation in water rates must be based upon the economical factor of cost and any classification for rate purposes not so based is arbitrary and unreasonable. The court stated beginning at p 714, as follows:

"We cannot agree with this contention. Many factors are properly considered in determining the reasonableness of a classification and there is no one factor which is of itself controlling to the exclusion of all others. Each case must be decided upon its own facts and the burden of proof is on the party claiming an unreasonable discrimination. Ford v. Rio Grande Valley Gas Co., 141 Tex 525 (174 S.W.2d 479).

"It is well established that a municipal corporation operating its water works or other public utility has the right to classify consumers under reasonable classification based upon such factors as the cost of service, the purpose for which the service or product is received, the quantity or amount received, the different character of the service furnished, the time of its use or any other matter which presents a substantial difference as a ground of distinction. 73 CJS, Public Utilities, § 27, p 1049, 43 Am Jur, Public Utilities and Services, § 178, p 689; American Aniline Products, Inc., v. City of Lock Haven, 288 Pa 420 (135 A 726, 50 A.L.R. 121). * * *

"The classification of apartment houses under a residential classification based for rate purposes upon consuming units is not, in our opinion, without reasonable basis and justification. Such users constitute a type of class substantially different and distinct from other users. This is sufficient basis for the classification. * * *

"If appellants should prevail in this case, there would be a discrimination against consumers in single unit dwellings. Not every discrimination, however, is condemned, but only a discrimination that is arbitrary and without a reasonable fact basis or justification. The discrimination in this case is not arbitrary. On the contrary, it is supported and justified by a factual basis for classification and by substantial evidence which justifies the charges made to that class of users. Such discrimination as there is need not be suffered by appellants. They have the right to have additional meters installed so that charges may be made directly to each household unit." (Emphasis supplied.)

Also, see, Lewis v. Mayor & City Council of Cumberland (1947), 189 Md 58 (54 A2d 319); Brooklyn Apartments, Inc., v. Mayor & City Council of Baltimore (1947), 189 Md 201 (55 A2d 500); City of Clovis v. Crain (1960), 68 NM 10 (357 P2d 667, 88 ALR2d 1243); and, Knotts v. Nollen (1928), 206 Iowa 261 (218 N.W. 563).

Classification of consumer units rather than to ownership of properties was upheld by the Court in the case of Brown v. Pennsylvania Public Utility Commission (1943), 152 Pa Super 58 (31 A2d 435), wherein the court stated:

"The fact that the owner of a property is the sole contracting party for water is not controlling in determining whether the consumer is entitled to a rate based on a single unit. Nor may the amount of water used be the correct criterion to determine whether a single unit rate is applicable. The use made of the property is an important factor to be considered in determining the proper applicable rates. Classification by consumer units rather than according to ownership of properties was sustained by this court in Hunter v. Public Service Commission, 110 Pa Super 589, 597 (168 A 541)."

In 12 McQuillin, Municipal Corporations (3d ed), 1965 Cum Supp, § 35.37, p 104, it is stated in part as follows:

"Variances in rates must have a rational basis and not be purely arbitrary, and must be fair and equal to similarly situated properties, that is, there must be uniformity within the class.^[2] Held not discriminatory is an ordinance providing that each separate house, residence, apartment building, structure, trailer house and/or mobile home shall have a separate water meter or pay a separate monthly minimum charge for water, while classifying such businesses as hotels and motels as single unit users subject to assessment of one minimum water rate per month."^[3]

Appellants cite in their brief the case of Kliks v. Dalles City (1959), 216 Or 160 (335 P2d 366), as authority for their position that the defendant city of Grandville's sewer ordinance as applied to them is arbitrary and unreasonable. We quote from said opinion as follows (pp 164, 171, 172, 175, 176, 181):

"The ordinances in question, which establish the water rate structure, are challenged on two principal grounds; (1) that the inclusion of rooming houses, boarding houses, motels, hotels and trailer courts under a classification distinct from, and under a more favorable rate structure than, apartment houses constituted an unreasonable discrimination, and (2) that the minimum service charge applicable to apartment houses was based upon the use of a quantity of water which so far exceeded the actual use of the water by the plaintiffs' tenants that the charge was arbitrary, unreasonable and confiscatory. * * *

"``The capital investment necessary to serve a customer is not limited by his average consumption, but must include water supply and mains sufficient to supply his maximum use.' Lewis v. Mayor and City Council of Cumberland, 189 Md 58, 71 (54 A2d 319, 325). * * *

"In arriving at the estimated average amount of water which would be consumed in all apartments as a class, it would be permissible to take into consideration the use of water for the irrigation of apartment house lawns, common laundry facilities, automobile washing facilities and other types of use which some, but not all, apartment houses will require. If the inclusion of such demands in computing the average increased the minimum set by the city, the plaintiffs could not complain merely because they did not happen to need water for all such purposes. The establishment of a rate structure does not require that the components used in creating it fit all persons within the class exactly alike. * * *

"It is our conclusion, then, that the plaintiffs have not shown that the multiple minimum rate is unreasonable merely because it sets a minimum monthly apartment unit charge for 7,500 gallons of water. * * *

"It is urged that even though the rates applicable to them are regarded as reasonable in terms of their use and demand for water, and that such rates may be reasonable vis-a-vis other apartment owners, there is undue discrimination in classifying differently in the rate structure the use of water for apartment house purposes and the use of water in hotels, motels and other similar uses. It will be noted that under Ordinance 721 the minimum charge for rooming houses, boarding houses, hotels, motels and trailer courts with facilities for the accommodation of more than four persons is $2 per month, which entitles the owner to 7,500 gallons of water during the month. The minimum charge is not made separately for each unit under this classification, the user paying for the water on the basis of metered rates after the minimum of 7,500 gallons is consumed. * * *

"In Knotts v. Nollen (1928), 206 Iowa 261 (218 N.W. 563), the city established a schedule of rates which classified apartment house units as separate residences. This resulted in denying to apartment house owners the benefit of a sliding meter rate which was given to hotels, department stores and other commercial users. The court held that the classification did not constitute an unlawful discrimination against apartment owners. In doing so, the court noted that water consumers in an apartment house are the families and not the proprietor and that to classify an apartment house as a quantity consumer would be to discriminate in favor of such families and against families occupying dwellings under separate roofs. It was also noted that the city had no control over the charges which the apartment house owner could impose upon the tenants for the use of the water.

"This argument is deceptively appealing. Unquestionably, there are similarities between the manner in which apartment tenants and those in separate dwellings use water. But the important consideration is not the similarities between these two types of use of water, but the differences, if any, between apartment houses and hotels, motels, and other commercial users to whom a lower rate is charged. * * *

"The trial court held that the classification of the plaintiffs' apartment house as an aggregation of residential living units rather than as a single commercial unit was valid, but that the unit rates under Ordinances No 706 and No 721 as they applied to plaintiffs' property were unreasonable. It is our conclusion that the rates charged the plaintiffs were not shown to be so excessive as to be unreasonable, but that they are unreasonable because the classification is arbitrary."

The issue upon which plaintiffs in the Kliks Case, supra, prevailed was contained in their claim that the inclusion of rooming houses, boarding houses, motels, hotels and trailer courts under a classification distinct from and under a more favorable rate structure than apartment houses constituted unreasonable discrimination. In our case the city of Grandville's ordinance treats all of these types of dwelling units exactly the same.

Modern trailer parks afford modern living accommodations for many of the families in America today, and should not be classified other than dwellings or residences. The fact that there is only one meter servicing the 150 trailers is a convenience and saving of expense to the trailer owners as well as the city of Grandville. The defendant city of Grandville's basis of operation and rental charges to pay the costs of operation is founded principally on the total of individual residents living in dwelling units in the city. This we find is a reasonable basis for the classification contained in the sewer ordinance in question and is not arbitrary or unreasonable in its application to plaintiffs' properties.

Arguendo, each unit of the motel and each trailer home pays not one penny more than any of its counterparts any place in the city of Grandville for sanitary sewage services to-wit: less than $1.70 per month. This certainly cannot be considered more than the fair share properly to be allocated to these individuals and families using the sewer facilities of defendant city.

We conclude that the sewer ordinance of the city of Grandville is valid and constitutional.

Judgment affirmed, no costs, a public question being involved.

FITZGERALD, P.J., and T.G. KAVANAGH, J., concurred.

NOTES

[1] See Const 1963, art 1, §§ 1, 2. — REPORTER.

[2] Town Board of Town of Poughkeepsie v. Poughkeepsie, 22 App Div 2d 270 (255 NYS2d 549).

[3] Kermit v. Rush (Tex Civ App), 351 S.W.2d 598.