| Heritage Springs Sewer Works, Inc. v Boghosian |
| 2009 NY Slip Op 02498 [61 AD3d 1038] |
| April 2, 2009 |
| Appellate Division, Third Department |
| Heritage Springs Sewer Works, Inc., Respondent, v ThomasBoghosian et al., Defendants and Third-Party Plaintiffs-Appellants. Town of Milton, Third-PartyDefendant-Respondent. |
—[*1] Walsh & Walsh, L.L.P., Saratoga Springs (Joseph M. Walsh of counsel), for respondent. Shantz & Belkin, Latham (M. Randolph Belkin of counsel), for third-partydefendant-respondent.
Stein, J. Appeals (1) from an order of the Supreme Court (Williams, J.), entered July 31,2007 in Saratoga County, which granted plaintiff's motion for summary judgment, and (2) froman order of said court, entered March 10, 2008 in Saratoga County, which, among other things,granted third-party defendant's motion to dismiss the third-party complaint.
In 1987, the Town of Milton, Saratoga County consented to the incorporation of plaintiff asa sewage-works corporation in accordance with Transportation Corporations Law § [*2]116. Since that time, plaintiff's initial authority to provide sewagedisposal services in the town to a 40-acre planned development district has been expanded toallow it to service a larger area.
In 1998, plaintiff entered into an agreement with defendants whereby plaintiff—inexchange for the payment of a minimum of $150,000[FN1]—would provide sanitary sewer service to the Old Mill Town Planned DevelopmentDistrict, which was being constructed on a parcel of land owned by defendants within the town.The agreement authorized plaintiff to, among other things, inspect the construction andinstallation of the development's sewer-related components. Three days prior to the date onwhich defendants' final payment was due, there was still an unpaid balance of $97,875,prompting plaintiff to make a written demand for full payment thereof. Neither that demand, nora second demand three months later, resulted in any remuneration from defendants.Consequently, plaintiff commenced this action seeking a declaratory judgment that defendants'failure to pay, as well as their refusal to allow plaintiff to perform authorized inspections,constituted a material breach of the agreement. Plaintiff also sought a declaration that it was "nolonger obligated to provide reserve capacity or new hookups to the sanitary sewer system for[d]efendants, their successors or assigns," as well as an award of reasonable counsel fees.
In their answer, defendants interposed numerous affirmative defenses and counterclaimsincluding, among other things, that plaintiff was not a validly authorized sewage-workscorporation under the Transportation Corporations Law, that defendants were fraudulentlyinduced into entering into the agreement with plaintiff and that plaintiff was liable for trespass.Defendants thereafter commenced a third-party action against the Town seeking indemnificationor contribution for any potential liability resulting from plaintiff's complaint against them, and adeclaratory judgment setting forth the Town's failure to discharge certain statutory obligationsunder the Transportation Corporations Law.
Meanwhile, plaintiff moved for summary judgment—said motion being filed prior to,but decided after, commencement of the third-party action. By order entered July 31, 2007,Supreme Court partially granted said motion to the extent of dismissing all of defendants'counterclaims and affirmative defenses, with the exception of defendants' counterclaim fortrespass, and the Court granted plaintiff's request for a declaratory judgment that the contract wasterminated and that plaintiff was no longer obligated to provide defendants with new hookups toits sanitary sewer system. Defendants thereafter moved for clarification of Supreme Court's orderand for an order compelling both plaintiff and the Town to disclose, among other things, "[a]lldocuments concerning the rates and charges agreed to between [p]laintiff and the Town."Plaintiff cross-moved for summary judgment dismissing defendants' trespass counterclaim and,inasmuch as Supreme Court's prior order did not address the issue, reiterated its request for anaward of counsel fees. The Town also moved for summary judgment dismissing the third-partycomplaint against it. Supreme Court denied defendants' motion for clarification, grantedplaintiff's cross motion for summary judgment dismissing the trespass counterclaim, directedplaintiff to submit an affidavit and proposed order relative to its request for counsel fees, grantedthe Town's motion for summary judgment dismissing the third-party complaint against it, and[*3]declared defendants' motion to compel discovery moot.These consolidated appeals ensued, wherein defendants challenge Supreme Court's initial awardof summary judgment to plaintiff, as well as its subsequent decision resolving the parties'succeeding motions.
In support of its summary judgment motion, plaintiff submitted a copy of the parties'agreement, which clearly enunciated defendants' obligation to pay the entire outstanding balanceby September 9, 2005. Plaintiff's president also averred that, notwithstanding multiple requestsfor payment and plaintiff's own adherence to the terms of the contract, defendants failed to paythe full amount due. Because the written terms and conditions of a contract—where thelanguage employed is clear and unambiguous—define the rights and obligations of theparties (see Dierkes Transp. v Germantown Cent. School Dist., 295 AD2d 683, 684[2002]), plaintiff established its prima facie entitlement to summary judgment (see Cranesville Block Co., Inc. v SpringApts., LLC, 53 AD3d 998, 1001 [2008], lv denied 11 NY3d 711 [2008]),thereby "shifting the burden to [defendants] to raise a question of fact requiring a trial"(Lynch v Liberty Mut. Fire Ins. Co., 58 AD3d 939, 940 [2009]).
Initially, we find no merit to defendants' contention that an issue of fact exists as to whetherplaintiff's president, Gordon Nicholson, fraudulently induced them into entering into theagreement. Defendants' assertion that they considered plaintiff as Old Mill Town's sewer serviceprovider only after being prodded to do so by Nicholson due to alleged representations regardingthe system's limited capacity is belied by documentary evidence in the record. Indeed,defendants' site plan application, submitted to the Town in 1996—before their associationwith Nicholson—indicates their intention to utilize plaintiff's services. Moreover,Nicholson's allegedly contradictory testimony regarding the system's capacity followed plaintiff'selimination of a bottleneck problem some 10 years later at a substantial cost. Thus, defendants'counterclaims for rescission of the contract on the basis of fraud and/or fraudulent inducementwere properly dismissed.
Nor do we find merit to defendants' argument that the agreement with respect to connectionfees was not enforceable because plaintiff was not an authorized sewage-works corporationunder the Transportation Corporations Law. It is undisputed that plaintiff's initial formation andauthorization was proper and the record reflects the Town's multiple consents to plaintiff'srequests to both extend its operating agreement with the Town and to expand its service territory.While plaintiff and/or the Town may have subsequently failed to comply with the TransportationCorporations Law in other respects, we find no basis to conclude that plaintiff's operation isdeemed unauthorized by reason of such failures. Thus, defendants' counterclaim requesting adeclaration that plaintiff is not a valid sewage-works corporation was properlydismissed.[FN2]
However, Transportation Corporations Law § 121 requires a sewage-workscorporation to provide sewer services at "fair, reasonable and adequate rates agreed to betweenthe corporation and the local governing body." Defendants contend that the connection feecharged [*4]by plaintiff is a rate and that the Town's approval ofsuch fee was therefore required, but was not obtained. While the Transportation CorporationsLaw does not define what constitutes a rate, we note that the purpose of regulating the rates of aprivate sewer company—to ensure reasonable public access to a service customarilyprovided by a municipality—applies equally to connection fees as to usage rates.Therefore, we agree with, and give deference to, an opinion of the Attorney General that, absentapproval of such connection fees by the municipality, the amount charged by the sewer companymust be reasonable (see 1977 Atty Gen [Inf Ops] 117; Matter of Nelson v New YorkState Civ. Serv. Commn., 96 AD2d 132, 134 [1983], affd 63 NY2d 802 [1984]).
Here, since there is no record evidence that the Town approved the connectionfee,[FN3]a determination of whether the provision of the agreement requiring the payment of such fees isenforceable—and, accordingly, whether defendants are in material breachthereof—depends on whether the fees were reasonable. This, in turn, requires financialinformation—regarding, among other things, plaintiff's costs—which is in plaintiff'sexclusive control. Defendants have therefore demonstrated the existence of a triable issue of factprecluding summary judgment to plaintiff and they should have been permitted to conductappropriate discovery. In light of this conclusion, defendants' motion to clarify is renderedacademic and Supreme Court's determination that plaintiff is entitled to an award of counsel feeswas premature.
We are unpersuaded that a triable issue of fact exists with regard to the trespasscounterclaim. Notably, as plaintiff demonstrated that defendants were on notice of plaintiff'sconstruction of the sewer infrastructure as of 1996, the statute of limitations ran at the latest by2006 (see generally Stefanis v Town ofMiddletown, 56 AD3d 980, 980 [2008]). Plaintiff also demonstrated with documentaryevidence that it had a prescriptive easement to maintain the subject sewer infrastructure ondefendants' property by March 2002 (see generally Lew Beach Co. v Carlson, 57 AD3d 1153, 1154[2008]). Further, inasmuch as the agreement contemplated easements for plaintiff within OldMill Town as well as for "adjoining lands," any use by plaintiff was permissive. Thus, SupremeCourt properly dismissed defendants' counterclaim for trespass.
We perceive no error in Supreme Court's dismissal of defendants' third-party action againstthe Town.[FN4]The Transportation Corporations Law does not provide a private right of action and nocontractual, statutory or common-law right of indemnification exists premised on the Town'salleged failure to ensure plaintiff's compliance with that law. Nor, under the circumstances here,is a declaratory judgment action appropriate (see CPLR 3001; see generallySiegel, NY Prac §§ 436-437, at 738-741 [4th ed]).[FN5][*5]
Mercure, J.P., Peters, Kane and Malone Jr., JJ., concur.Ordered that the order entered July 31, 2007 is modified, on the law, without costs, by reversingso much thereof as granted plaintiff's motion for summary judgment declaring that the contractwas terminated and that plaintiff was no longer obligated to provide defendants with newhookups to its sanitary sewer system; plaintiff's motion denied to said extent; and, as somodified, affirmed.
Ordered that the order entered March 10, 2008 is modified, on the law, without costs, byreversing so much thereof as denied defendants' motion to compel discovery and as awardedcounsel fees; defendants' motion to compel discovery granted; and, as so modified, affirmed.
Footnote 1: Such payment constituted anaggregate connection fee for 100 units (as defined by the agreement) and consisted of a $37,500down payment, plus payments on the $112,500 balance according to a specifically definedschedule, with the entire balance being due no later than September 9, 2005.
Footnote 2: We note that Supreme Court'sJuly 2007 decision and order granted plaintiff's summary judgment motion on the sole basis thatdefendants' failure to pay the balance due on the contract constituted a material breach, and it didnot explicitly address defendants' arguments based upon fraud or violations of the TransportationCorporations Law.
Footnote 3: In fact, the Town Supervisorand Commissioner for the Saratoga County Sewer District No. 1 during the relevant timeindicates in his affidavit that the Town was aware of the charges, but did not believe that itsapproval was required.
Footnote 4: While the basis for SupremeCourt's decision is not clear, our independent examination of that action leads us to conclude thatdismissal was appropriate.
Footnote 5: We decline to exercise ourauthority to convert the action to a CPLR article 78 proceeding (see CPLR 103 [c]) inview of the Town's uncontroverted contention that defendants have failed to exhaust theiradministrative remedies.