Opinion
C.A. No. 99C-10-044-JTV
Submitted: October 19, 2001
Decided: January 31, 2002
Upon Consideration of Defendant's Motion for Summary Judgment Granted in Part, Denied in Part.
William S. Pepper, Sr., Dover, Delaware. Attorney for Plaintiff. William E. Manning and Bonnie L. Metz, Wilmignton, Delaware. Attorneys for Defendant.
OPINION
Since approximately 1914, the defendant, Verizon Delaware, Inc., ("Verizon" or "the telephone company"), and its predecessors in interest have maintained a telephone system in the City of Dover ("the City"). From then until the 1990's, the relationship between the telephone company and the City was uneventful, at least as far as the record in this case is concerned. In 1999, however, the City instituted this action, alleging that Verizon owes it $1,290,738 as Verizon's "share" of the cost which the City has incurred from 1994 to 1998, inclusive, "to procure and maintain rights-of-way, easements, poles and similar items." It contends that the amount claimed is due under Section 6 of a 1914 ordinance in which the City granted The Diamond State Telephone Company, the original telephone company, permission to use the City's streets, alleys and highways to construct and maintain a telephone system in Dover. Section 6 provides, in relevant part, that the telephone company will "protect and save harmless the . . . Town from and against all loss and necessary expenditures arising from the erection, construction and maintenance of its system in . . . Town. . . ." The City contends that Section 6 requires the telephone company to pay its fair share of the City's cost of maintaining the City's easements and rights-of-way, and that the $1,290,738 sought is the telephone company's fair share of that cost for the years in question. Verizon agrees that the 1914 ordinance continues to govern the relationship between the two parties. It contends, however, that Section 6 only requires it to reimburse the City for any actual expense incurred by the City which is directly related to the telephone system's presence in the City's easements and rights-of-way; that Section 6 does not require it to pay a "share" of the City's overall cost of maintaining easements and rights-of-way; and that the City's claim for $1,290,738 is, in reality, an attempt to impose a charge for "rent" of the City's easements and rights-of-way to help the City defray the cost of other utilities, most notably the City's electric, water and sewer, and street departments. It also contends that the City's claim is barred by the applicable statute of limitations, waiver and estoppel. It has filed a motion for summary judgment seeking dismissal of the City's suit.
Complaint, paragraph 8.
Id., paragraph 6.
For the reasons which follow, I agree with Verizon that the City's claim for $1,290,738 cannot be justified as an exercise of its right under Section 6 of the 1914 ordinance to be paid for all "loss and necessary expenditures" which the City incurs "arising from the erection, construction or maintenance" of the telephone company's system. Therefore, summary judgment will be granted to the defendant as to the City's stated claim for $1,290,738. However, since the case also involves statute of limitations issues which will not be ruled upon at this time, the City will be given leave to seek to amend its complaint to restate any damages which it believes arise under Section 6 of the 1914 ordinance as that Section is interpreted by this Court herein, or to set forth any alternative legal basis which it believes it has, if any, for a claim of damages against the defendant.
STANDARD OF REVIEW
Summary judgment is appropriate if, after viewing the record in the light most favorable to the non-moving party, the court finds no genuine issue of material fact. However, if from the evidence produced, there is a reasonable indication that a material fact is in dispute or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of the law, summary judgment will not be granted. When the facts permit a reasonable person to draw but one inference, the question becomes one for decision on summary judgment. If an examination of the record reveals no genuine issue as to material facts, it is incumbent upon the court to grant summary judgment. If the basic facts are not in dispute and point to only one justifiable conclusion, summary judgment is appropriate. In discharging this function, the court must view the evidence in the light most favorable to the non-moving party. In so doing, the court will accept as established all undisputed factual assertions made by either party, and accept the non-movant's version of any disputed facts.
Guy v. Judicial Nominating Comm'n, Del. Super., 659 A.2d 777, 780 (1995); Figgs v. Bellevue Holding Co., Del. Super., 652 A.2d 1084, 1087 (1994).
Ebersole v. Lowengrub, Del. Supr., 180 A.2d 467, 470 (1962), rev'd in part and aff'd in part, 208 A.2d 495 (1965).
Frelick v. Homeopathic Hosp. Ass'n, Del. Super., 150 A.2d 17 (1959); Wotten v. Kiger, Del. Supr., 226 A.2d 238 (1967).
E.K. Geyser Co. v. Blue Rock Shopping Ctr., Inc., Del. Super., 229 A.2d 499 (1967).
489.137 Square Feet of Land v. State ex rel. Price, Del. Supr., 259 A.2d 378 (1969).
Merrill v. Crothall-American, Inc., Del. Supr., 606 A.2d 96, 99-100 (1992).
THE FACTS
On September 7, 1914 the Town Council of Dover enacted an ordinance granting The Diamond State Telephone Company, the defendant's predecessor in interest, permission to construct and maintain a telephone system in the public streets, alleys and highways of Dover. The terms and conditions established by the ordinance were set forth in fourteen numbered Sections. On October 14, 1914 the telephone company accepted those terms and conditions and agreed to comply therewith. Section 6 reads in full as follows:
That said Company [The Diamond State Telephone Company] shall maintain all poles, posts, cables, wires, conduits, ducts, pipes, manholes, distributing and all other apparatus erected or constructed under the provisions of this ordinance in good and safe order and condition and shall at all times fully protect and save harmless the said Town from and against all actions, claims, suits, damages and charges and against all loss and necessary expenditures arising from the erection, construction and maintenance of its system in said Town, or from its neglect or failure to maintain the said apparatus in good and safe order and condition, and shall be liable for and make just compensation for all property injured or destroyed in the construction and maintenance of its system.
There is no evidence that the ordinance was invoked for any reason by either the City or the telephone company between 1914 and 1998. In fact, the City's copy was lost or misplaced and thereafter the City lost all memory of the ordinance. By the 1990's no one associated with the City was aware of the ordinance's existence until Verizon brought it to the City's attention in 1998. There is no evidence that the City ever requested or received any reimbursement from the telephone company for costs associated with maintaining the telephone system prior to the events leading to this litigation.
In 1994 or 1995, city officials began to discuss and consider the idea of requiring utility companies who used the City's rights-of-way, easements, poles and other such property to reimburse the City for the cost which it incurred in acquiring and maintaining those assets. In September 1977 the City Council passed an ordinance providing in relevant part as follows:
(a) The City Manager and the Treasurer shall have authority to enter into Properties/Utilities agreements for the rental of space, easements, rights-of-way and other properties owned and operated by the City.
(b) The City Manager and the Treasurer shall also have authority to charge equivalent or higher payment for the use of space, easements, rights-of-way and other properties in lieu of franchise fees.
In January 1998 the City Manager, still unaware of the 1914 ordinance, sent Verizon a draft of a proposed right-of-way lease agreement pursuant to which the City would grant Verizon permission to maintain its telephone system in City easements and rights-of-way in exchange for payment of an annual fee, the amount of which was left blank. In response, Verizon brought the 1914 ordinance to the City's attention and took the position that it governed the parties' relationship and contained no provision for any such fee. Discussions between the parties concerning payment of a fee continued, without success. Finally, on May 12, 1999, the City formally demanded that Verizon pay the sum of $1,290,738 for the years 1994 through 1998 as its "share" of the City's cost of "procuring and maintaining rights-of-way, easements, poles and the like" during those years. The City's position was, and continues to be, that the amount claimed is due and payable under Section 6 of the 1914 ordinance.
Letter from counsel for the City to counsel for the defendant dated May 12, 1999. For ease of expression, the phrase "easements and rights-of-way" is used herein to refer to all items encompassed within the City's claim for $1,290,738.
The sum $1,290,738 is a portion or share of what the City itself spent in eight budget categories between 1994 and 1998: the tree trimming department, grounds department, transmission and distribution (labor, material and services), transmission and distribution (capital items), electrical engineering (operations and maintenance), the streets department, general administration and insurance. The eight categories identified by the City are ones which the City determined to contain some cost for easements and rights-of-way. For seven of the categories, the City determined what percentage of each was attributable to easements and rights-of-way. Those percentages are as follows: tree trimming department, 100%; grounds department, 10%; transmission and distribution (labor, material and services), 32.16%; transmission and distribution (capital items), 20%; electrical engineering, 8.7%; general administration, .5%; insurance, 40%. In other words the City determined that 100% of the money spent on the tree trimming department was attributable to easements and rights-of-way, that 10% of the amount spent on the grounds department was for easements and rights-of-way, that 32.16% of the amount spent for transmission and distribution, labor, material and services was for easements and rights-of-way, and so on. The eighth category, streets department, was calculated differently. In the case of streets, the City determined that the useful life of a paved or repaved street is 15 years, except that if the street is subjected to cuts and intrusions for utilities, or other utility work on or around the street, the useful life is reduced to 12 years. In 1996, using that as an example, the City paved 5.3 miles of street at a cost of $1,176,790, or $205,374 per mile. Spread over 15 years, the per mile/per year cost for the repaving done in 1996 was $13,692. Over a 12 year span, however, the per mile/per year cost of that work would be $17,115. The difference, $3,423, is deemed a per mile cost of easements and rights-of-way for 1996 because easement and right-of-way work reduces the useful life of a paved or repaved street by that amount. The City then applied that amount to all city paved streets to create a figure of $297,425, which represents, according to the City, the cost of street paving for that year which is attributable to the presence of utilities in and around the City's streets.
Apparently 86.89 miles.
These calculations yield the following costs incurred by the City for easements and rights-of-way:
Tree trimming department.
Grounds department.
Transmission and Distribution (Labor, Material and Services).
Transmission and Distribution (Capital Items).
Electrical Engineering (Operations and Maintenance).
Streets Department.
General Administration.
Insurance costs.
1994 $223,715
1995 250,515
1996 265,103
1997 266,069
1998 285,336 ---------- $1,290,738
For purposes of this motion, viewing the facts in the light most favorable to the non-moving party, I will accept as fact that the sum of $1,290,738 is an accurate calculation of one-sixth of what the City spent on easements and rights-of-way between 1994 and 1998. In support of its argument that Verizon should pay a one- sixth share of the City's cost of maintaining easements and rights-of-way, the City argues that the phone company makes use of its full network of easements and rights-of-way since it provides phone service throughout the City. For purposes of this motion, I will accept as fact the City's position that Verizon makes use of all or substantially all of the City's easements and rights-of-way since it does provide telephone service City-wide.
DISCUSSION
In their written submissions and at oral argument the parties argued a number of issues, including issues arising from the Federal Telecommunications Act of 1996. I find it necessary, however, to address only one issue, that question being whether, as a matter of law, Section 6 of the 1914 ordinance does or does not require Verizon to pay the City a share of the City's overall cost of its easements and rights-of-way.
Section 6 is a save harmless clause. The intent of the Section's language is to make the erection, construction and maintenance of the telephone system cost free to the City. If the City incurs an actual expense due to erection, construction or maintenance of the telephone system in the City's easements and rights-of-way, it is entitled to have that expense paid by the telephone company, or, if the City pays that expense in the first instance, to be reimbursed. Section 6, however, is not there to make the telephone company share in an expense which the City would have incurred regardless of whether the telephone system existed or not. It does not require the telephone company to bear a portion of the cost of maintaining other utilities which may also occupy the easements and rights-of-way, such as the City's electric or water and sewer systems. It does not impose any responsibility on the telephone company for general maintenance of the City's easements and rights-of-way. Nor does it require the telephone company to pay fair compensation or any other form of fee for its use of the City's easements and rights-of-way.
The City's theory of damages does not focus on "loss and necessary expenditures arising from the erection, construction and maintenance" of the telephone system. For example, the largest single cost category in the City's claim is its cost for transmission and distribution (labor, services and material). That category accounts for nearly half of the City's cost for easements and rights-of-way. A City employee determined that 40% of employee time and 20% of the material expense in that category was for right of way maintenance. These figures were used to create a weighted percentage of 32.16%, and a judgment was made by the City that 32.16% of its cost for transmission and distribution (labor, services and material) was on account of the easements and rights-of-way. The individual line items within transmission and distribution (labor, services and material) include large sums for such items as electric materials and supplies, electric meters and meter supplies, and employee expense, all of which appear to arise out of maintaining the City's electric system, not the telephone system. In fact, transmission and distribution (labor, services and material) does not appear to contain any expense which a trier of fact could conclude arose out of erection, construction or maintenance of the telephone system. A review of the other six categories which rely on actual city costs leads to the same conclusion. Similarly, the series of computations regarding street "integrity," aside from their general merit, do not address the extent to which street cuts and intrusions arise from maintenance of the telephone system. On this record the trier of fact cannot determine whether, or to what extent, street cuts or intrusions during the years in question were caused by the erection, construction or maintenance of the telephone system, or by other utilities.
The record includes a memo prepared by the City which indicates that approximately one fourth of the City's electric poles also have a telephone company "contact." The current record contains no evidence that such "contacts," in and of themselves, create a cost to the City requiring reimbursement under Section 6. I note, however, that neither the 1914 ordinance nor any other document brought to the Court's attention appear to give the telephone company a contractual or other right to connect to the City's electric poles. That matter was not fully briefed and argued, and I therefore express no opinion as to that issue.
Based upon the clear and unambiguous language of Section 6, I conclude that it does not require the telephone company to pay a fair share of the costs which the City incurs to maintain its easements and rights-of-way. The City's contention that it does is, therefore, rejected. I also conclude, as a matter of law, that, based upon the current record, a trier of fact cannot separate out and determine what portion, if any, of the $1,290,738 is due and payable under Section 6. Therefore, summary judgment will be granted to the defendant as to the City's claim for $1,290,738.
Counsel for the plaintiff has emphasized a letter written by Joshua W. Martin, III, President and Chief Executive of the defendant, in which Mr. Martin states that Section 6 of the 1914 ordinance requires the defendant to pay its "fair share of costs incurred by Dover to maintain utility rights-of-way or our equipment within the City." This letter was apparently written at a time when the City was considering a repeal of the 1914 ordinance. This Court's view of the clear and unambiguous language of Section 6 leads to the result which I reach here, Mr. Martin's letter notwithstanding.
However, since the case involves statute of limitation issues which I do not believe it necessary to rule upon at this time, the City is granted leave to seek to amend its complaint within sixty days of the date of this order to restate a claim for damages under Section 6 consistent with this opinion. It is also granted leave to seek to amend its complaint during said sixty day period to assert any other grounds for relief which it believes may entitle it to compensation for use of the City's easements and rights-of-way. If the City does not file a motion requesting leave to amend its complaint within sixty days, the defendant may move to dismiss the action.
For example, at oral argument counsel for the City raised a quantum meruit argument. Since a claim on this basis was not addressed in the parties' written submissions, the Court is not inclined to rule upon such a claim at this time.
Therefore, the defendant's motion is granted in part and denied in part.
IT IS SO ORDERED.