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PO RIVER WATER AND SEWER COMPANY v. INDIAN ACRES CLUB OF THORNBURG, INC., ET AL. (59941)


PO RIVER WATER AND SEWER
COMPANY

v.

INDIAN ACRES CLUB OF
THORNBURG, INC., ET AL.


January 9, 1998
Record No. 970050

PO RIVER WATER AND
SEWER COMPANY

v.

INDIAN ACRES CLUB OF
THORNBURG, INC., ET AL.

OPINION BY JUSTICE BARBARA MILANO KEENAN
FROM THE CIRCUIT COURT OF SPOTSYLVANIA COUNTY

J. Peyton Farmer, Judge
PRESENT: All the Justices


In this appeal, we consider whether a property owners’
association must pay a utility for services provided to common
area facilities owned by the association.

Indian Acres Club of Thornburg, Inc. (the Association) is the
property owners’ association for Indian Acres of Thornburg, a
private recreational campground in Spotsylvania County. The
campground consists of 6,245 individual lots located on 802
acres.

The campground includes certain facilities for the benefit of
the individual lot owners, including roads, swimming pools,
tennis courts, lakes, parks, a club house, a recreation center, a
golf course, a car wash, showers, toilets, and lavatories. The
Association owns all the campground’s common area facilities.
Each of the individual lot owners is a member of the Association.

Po River Water and Sewer Company (Po River) is a Virginia
public service corporation certified by the State Corporation
Commission (the Commission) to provide water and sewer services
to the individual lot owners and to the campground’s common area
facilities. From 1971 through October 1987, Po River sent one
bill for water and sewer services to the Association, or to its
predecessor, Indian Acres International. Beginning in November
1987, Po River billed the individual lot owners directly for the
cost of providing water and sewer services to the entire
campground, including the common areas. However, Po River
experienced difficulties in collecting payment for these services
from the individual lot owners.

In conjunction with Po River’s 1992 application for a rate
increase, the State Corporation Commission entered an order in
January 1994, requiring Po River to record the amount of water
consumed by the Association’s common area facilities. The
Commission further ordered Po River to submit in its next rate
case a rate structure that incorporated the Association as a
separate customer class and reflected the Association’s water
usage.

Po River filed its next rate case in 1995. Based on meter
readings, the proposed tariffs and regulations requested a rate
of $85,750 per quarter to be charged to the Association, rather
than to the individual lot owners, for services provided to the
common area facilities. In its required notice to the individual
lot owners and to the Association, Po River stated that the rate
for the individual lot owners would decrease in proportion to the
rate paid by the Association, in order to prevent Po River from
being paid twice for the same service. The State Corporation
Commission approved the rate requested by Po River on an interim
basis, subject to a refund, and permanent rates are currently
under consideration by the Commission.

Although Po River sent several bills to the Association
seeking payment for service to the common areas at the interim
rate, the Association refused to pay any of these bills. Po River
then informed the Association that it would terminate water and
sewer services to the common area facilities unless the
Association paid the quarterly bill of $85,750 and signed a
contract for the continuation of utility service to the
Association’s facilities.

In response, the Association filed a petition for injunctive
relief and declaratory judgment asking the trial court to enjoin
Po River from terminating services to the common areas and to
hold, among other things, that there is no contract for the
provision of services between the Association and Po River, that
the Association is not a customer of Po River, and that the
Association is not responsible for Po River’s customer billing.[1] Po River filed a cross-bill
requesting that the trial court rule, under the theory of quantum
meruit, that Po River is entitled to $85,750 for three
months of water and sewer services provided to the Association’s
common area facilities. Po River also requested the trial court
to issue a declaratory judgment stating that the Association must
pay Po River for its services at the rate of $85,750 per quarter,
subject to refund and modification as may be ordered by the State
Corporation Commission.

After a bench trial, the court ruled that the Association was
entitled to the "full relief requested." The court held
that the individual lot owners are customers of Po River and
"are obligated to pay for all water and sewerage services
provided by Po River." The trial court enjoined Po River
from terminating service to the common area facilities on the
basis that the Association is a "non-paying customer"
of the utility. Po River appeals from this decision.

Po River first argues that the trial court lacked jurisdiction
to enjoin it from terminating services to the Association, and to
rule that the individual lot owners are obligated to pay for the
water and sewer services provided to the common area facilities.
Po River asserts that the State Corporation Commission has sole
jurisdiction over these matters. Po River also argues that the
trial court erred in denying the relief requested in its
cross-bill.

In response, the Association contends that Po River failed to
raise its jurisdictional argument in the trial court and, thus,
is prevented from raising this objection on appeal. The
Association also argues that the trial court properly exercised
its jurisdiction to determine whether an individual or an entity
is a customer of a public utility for the purposes of bill
collection, because this determination involves private rights
and contracts between a public utility and individuals. Lastly,
the Association denies that Po River is entitled to quantum
meruit relief.

We first address the principles of law that apply to the
jurisdictional issue raised by Po River. A challenge to a court’s
subject matter jurisdiction may be raised at any time, even for
the first time on appeal. Wackwitz v. Roy, 244 Va. 60, 63,
418 S.E.2d 861, 863 (1992); Morrison v. Bestler, 239 Va.
166, 170, 387 S.E.2d 753, 756 (1990).

The Commission has a constitutional and statutory duty to fix
just and reasonable public utility rates. Va. Const. art. XI, ? 2; Code ? 12.1-12; Anheuser-Busch
Co. v. Virginia Natural Gas
, 244 Va. 44, 46, 418 S.E.2d 857,
858 (1992). In setting rates for a public utility, the Commission
must first determine the public utility’s revenue requirement,
and then decide where, how, and from what source or sources the
revenue awarded is to be obtained. Id. at 47, 418 S.E.2d
at 859; Secretary of Defense v. Chesapeake and Potomac Tel.
Co.
, 217 Va. 149, 152, 225 S.E.2d 414, 417 (1976); Apartment
House Council v. PEPCO
, 215 Va. 291, 294, 208 S.E.2d 764, 766
(1974); City of Norfolk v. Chesapeake and Potomac Tel. Co.,
192 Va. 292, 320, 64 S.E.2d 772, 789 (1951). Thus, in order to
allocate a public utility’s revenue requirement, the Commission
is charged with establishing appropriate customer classes based
on usage characteristics of individuals and entities utilizing
the utility’s services. See Anheuser-Busch Co., 244
Va. at 46-47, 418 S.E.2d at 858-59; Secretary of Defense,
217 Va. at 152-53, 225 S.E.2d at 416-17; Commonwealth v.
Shenandoah River Light and Power Corp.
, 135 Va. 47, 60, 115
S.E. 695, 699 (1923). In this manner, the Commission sets a
particular rate for each identified customer class. See Anheuser-Busch
Co.
, 244 Va. at 46-47, 418 S.E.2d at 858-59; Secretary of
Defense
, 217 Va. at 152, 225 S.E.2d at 417; Chesapeake and
Potomac Tel. Co.
, 192 Va. at 320, 64 S.E.2d at 789.

These rate-making duties are encompassed within the
Commission’s general duty to supervise, regulate, and control
public utilities in "all matters relating to the performance
of their public duties and their charges therefor." Code ? 56-36. Since the
Commission has sole jurisdiction to define a utility’s customer
classes for the purposes of setting the rate at which the defined
classes must pay for services received, the trial court did not
have jurisdiction to determine who was a "customer" of
Po River. Thus, the trial court erred in addressing the issue
whether the individual lot owners and the Association are
"customers" of Po River.

This conclusion, however, does not end our inquiry because the
trial court has jurisdiction to adjudicate and determine private
rights and contracts between public utilities and the individual
recipients of their services. Appalachian Power Co. v. Walker,
214 Va. 524, 533-34, 201 S.E.2d 758, 766 (1974); City of
Lynchburg v. Commonwealth,
164 Va. 57, 63-64, 178 S.E. 769,
771 (1935); Norfolk & W. Ry. Co. v. Commonwealth, 143
Va. 106, 113-14, 129 S.E. 324, 326 (1925). Thus, the trial court
has jurisdiction to determine which individuals or entities have
received a public utility’s services. Once the trial court makes
this determination, the court may then compute the recipient’s
liability for payment at the rate set by the Commission for the
customer class pertaining to that recipient. Within this context,
the trial court may also consider whether someone other than the
recipient is obligated by contract to pay for the utility
services provided to the recipient. See id.

Applying these principles, we conclude that the trial court
erred in holding that the individual lot owners are obligated to
pay Po River directly for water and sewer services provided to
the Association’s common area facilities. The evidence is
uncontroverted that the Association is the owner of the common
areas and facilities, and that Po River provided water and sewer
services to these facilities. Thus, the Association, not the
individual lot owners, received these services from Po River.
Further, the record contains no evidence that the individual lot
owners were required by contract to pay for the utility services
received by the Association. The documents on which the
Association relies are unambiguous and do not establish such a
duty binding the individual lot owners.[2]

Although neither the individual lot owners nor the Association
were required by contract to pay for the utility services
received by the Association, we agree with Po River that the
trial court erred in failing to grant Po River relief in
accordance with its cross-bill, which requested equitable and
declaratory relief under the theory of quantum meruit.
To avoid unjust enrichment, equity will effect a "contract
implied in law," requiring one who accepts and receives the
services of another to make reasonable compensation for those
services. See Marine Dev. Corp. v. Rodak, 225 Va.
137, 142-44, 300 S.E.2d 763, 765-66 (1983); Ricks v. Sumler,
179 Va. 571, 577, 19 S.E.2d 889, 891 (1942); Hendrickson v.
Meredith
, 161 Va. 193, 200, 170 S.E. 602, 605 (1933). The
liability to pay for the services is based on an implication of
law that arises from the facts and circumstances presented,
independent of agreement or presumed intention. Marine Dev.
Corp.
, 225 Va. at 142, 300 S.E.2d at 766; Hendrickson,
161 Va. at 200-01, 170 S.E. at 605. The promise to pay is implied
from the consideration received. Id.

Here, the record is clear that the Association, as the owner
of the common area facilities, accepted and received water and
sewer services from Po River. A promise to pay is implied from
the acceptance and receipt of those services. Thus, we hold that
the Association is required to pay Po River for those utility
services.

As stated above, the interim rate in effect for the
Association’s water and sewer usage is $85,750 per quarter. The
quarterly period for which Po River requests monetary relief on a
quantum meruit basis is December 1, 1995 through
February 29, 1996. Thus, the Association is required to pay
$85,750 to Po River for the water and sewer services provided to
the Association’s common area facilities for that period. We also
hold that Po River is entitled to a judgment declaring that the
Association is required to pay Po River for the water and sewer
services provided to the Association’s common area facilities at
the rate of $85,750 per quarter, subject to any future refunds
and future modifications that may be ordered by the Commission.

For these reasons, we will reverse the trial court’s decree
and enter final judgment in favor of Po River on the
Association’s petition for injunctive and declaratory relief and
on Po River’s cross-bill.

Reversed and final judgment.

 

 

 

FOOTNOTES:

[1] Thirty-seven individual lot
owners joined the Association as plaintiffs. However, all the
plaintiffs except the Association and Audrey V. Conti later
obtained a nonsuit of their claims against Po River.

[2]
These documents include the restrictive covenants applicable to
the individual lots, Po River’s application to the Commission in
1971 requesting certificates of public convenience, Po River’s
1971 rates, rules and regulations, and the lease agreement
between Po River and Indian Acres Land Company.

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