Opinion
No. 245.
Argued November 28, 1973. —
Decided December 21, 1973.
APPEAL from part of a judgment of the circuit court for Racine county: ELMER D. GOODLAND, Reserve Circuit Judge, Presiding. Reversed and remanded.
For the appellant there were briefs by Jack Harvey, city attorney, and Edward A. Krenzke, deputy city attorney, and oral argument by Mr. Krenzke.
For the respondent there was a brief and oral argument by William E. Dye, town attorney.
The city of Racine commenced an action against the town of Mount Pleasant demanding judgment in the sum of $190,771.37 for sewage treatment billings for the last three-quarters of 1969 and the initial quarter of 1970.
The facts in this case are not in dispute. On November 19, 1959, the city of Racine and the town of Mount Pleasant entered into a contract pursuant to sec. 66.30, Stats., whereby the city agreed to accept and treat all sewage from the town's collector system and the town agreed "to pay to the City the charges for said service as are established or calculated as hereinafter provided." Additional terms of the contract material to a determination of the issue involved are set forth below.
"(7) Annexed hereto and incorporated herein by reference is Exhibit A, Schedule A-1, and Schedule A-2. The Town agrees to pay to the City for the services to be provided under this contract a total charge which shall be computed as follows:
"(a) 150% of the pro rated cost of operating the City of Racine Sewage Disposal System as to the items for Operation and Maintenance Expenses and City Administrative Expenses Applicable to Sewage Disposal set forth in Exhibit A and Schedule A-1. The pro rated cost basis shall be in the proportion that the treated gallonage emanating from the Town, as shown by the metered flow thereof, bears to the total gallonage treated by the City in the Calendar year;
"(b) plus, $40.00 per million gallons of treated gallonage emanating from the Town, as shown by the metered flow thereof. This charge shall be considered to cover the items of Depreciation (Exhibit A and Schedule A-2), Interest on Bonded Indebtedness (Exhibit A and Schedule A-2), and Return on Investment (Exhibit A and Schedule A-2);
"(c) plus, 100% of the construction cost of future additions to the City sewage disposal plant (exclusive of replacement of depreciated plant items to the extent that these items being replaced have been depreciated) and future sewer mains and appurtenances thereto located in the City and connecting therewith actually used to carry sewage emanating from the Town, which cost shall include construction cost financing interest which the City is obligated to pay, such cost to be projected over the useful life of such additions and mains and to be pro rated in the proportion that the treated gallonage emanating from the Town, as shown by the metered flow thereof, bears to the total gallonage treated by the City in the Calendar year. This charge shall be considered to cover all other items of the City's cost.
"In computing the charges under paragraph (7) (a) above for the first calendar year, or fraction thereof, in which such services shall be provided, the figures set forth in Exhibit A and Schedule A-1 shall be used; for all calendar years subsequent thereto, the annual computation shall be made upon the actual cost therefor. The only other variable basis for computing the total charge shall be upon the basis provided in paragraph (7) (c) above.
"The Town agrees to make payment quarterly. The quarters upon which billing shall be based shall commence on the first days of the months of January, April, July and October of each year. The quarterly payment next following the completion of the redetermination of the City's cost shall be adjusted either upward or downward to reflect any adjustment made necessary on account of said redetermination. Following said redetermination of the City's cost, the quarterly payments shall thereafter be made by the Town to the City in accordance with such redetermined cost. A copy of the annual calculation of costs shall be forwarded by the City to the Town upon completion of the same. The cost of the annual calculation shall be considered a proper item to be included for Operation and Maintenance Expenses and City Administrative Expenses Applicable to Sewage Disposal under Exhibit A and Schedule A-1 to be paid for as provided in paragraph (7) (a). The Town may, at its expense, procure an independent qualified audit of the City's annual calculation of costs and, if such audit shall disclose error in the City's calculation, such calculation shall be adjusted accordingly. All quarterly charges to the Town by the City shall be paid within 60 days after billing."
The contract for treatment of the town's sewage became operative in 1961 and the first billing under the contract was made on December 26, 1961. The period of service for the initial billing covered all four quarters of 1961 and the cost per million gallons (hereinafter M.G.) of treated sewage for the initial year was specifically determined by contract. After the initial billing the town made quarterly payments to the city for sewage treatment. The amount of quarterly payments was determined by multiplying the number of M.G. of town sewage treated by the city by a predetermined rate. This billing procedure continued up to the present.
"In computing charges . . . for the first calendar year, . . . the figures set forth in Exhibit A and Schedule A-1 shall be used;"
Beginning with the fourth billing on December 19, 1963, the city commenced adjusting its billings in a fashion it claimed was permitted under the contract with the town. This billing consisted in part of a readjustment of the city's charge which it claimed correctly reflected the actual cost for treatment of the town's sewage in the year 1962. The city claimed that this readjustment of the 1962 charges for sewage treatment to reflect the actual cost of said treatment was made pursuant to the terms of the contract. The town paid this readjusted cost for the 1962 calendar year.
On March 17, 1965, the city adjusted its charges for sewage treatment for the 1963 calendar year to conform with its actual cost. This adjustment was again paid by the town. Adjustments were again made by the city to reflect its actual cost for the calendar years 1964 through the first quarter of 1968. These adjustments were also paid by the town.
The adjustment which is the basis of the instant case took place on September 29, 1969, wherein the city determined that the actual cost for treatment of sewage in 1968 was not the billed rate of $96.24/M.G. but rather a rate of $156.42/M.G. As a result of this redetermination, the city claimed that there existed a liability of $40,407.38 in favor of the city. The town refused to pay this adjustment and also refused to pay the invoices of 11/26/69, 1/28/70 and 5/12/70. The final adjustment made prior to the commencement of this action was made on July 6, 1970, and covered the billings made for the calendar year of 1969 and the first quarter of 1970. The actual cost of the city for treatment of sewage for 1969 was adjusted downward from its original billing of $156.42/M.G. to $148.70/M.G. and thus resulted in a credit to the town of $7,975.78.
Trial was commenced February 14, 1972, pursuant to facts stipulated of record and on June 5, 1972, the circuit court entered its judgment holding the town's liability for said sewage treatment to be $146,090.76 and dismissed that part of the complaint which demanded judgment of an additional $51,749.58 which the city claimed as owing because of its adjustment of the actual costs incurred as a result of said treatment. From that part of the judgment disallowing the city's adjustment the plaintiff appeals.
The sole issue presented on this appeal is whether the trial court erred in determining that, pursuant to the contract, the city's right to adjustment of its billings to conform to its actual cost of treatment applied prospectively only.
The trial court held that the following provision:
"The town agrees to make payment quarterly. The quarters upon which billing shall be based shall commence on the first days of the months of January, April, July and October of each year. The quarterly payment next following the completion of the redetermination of the city's cost shall be adjusted either upward or downward to reflect any adjustment made necessary on account of said redetermination. Following said redetermination of the city's cost, the quarterly payments shall thereafter be made by the town to the city in accordance with such redetermined cost."
is unambiguous and permitted the city to adjust its billing so as to reflect the actual cost prospectively only. We think the trial court was in error and that the city, under the contract, is permitted to adjust its present quarterly billing to reflect the actual cost for treatment of the town's sewage in a previous calendar year.
In determining the rights and obligations of a contract, a court must apply each provision of the contract. Each provision of the contract should be applied in establishing the obligations of the contract and a specific provision of that contract establishing one obligation of that contract should not be applied in determining the other contractual obligations established by other provisions of that contract. The provisions of a contract establishing the terms of payment do not alter other provisions of the contract establishing the obligation of payment or the amount of payment. Van Rooy Printing Co. v. Harvey Pierre Post (1948), 252 Wis. 524, 32 N.W.2d 329.
The contract in this action consisted of three provisions. The first provision establishes the town's obligation of payment.
"[T]he Town agrees to pay to the City the charges for said service as are established or calculated as hereinafter provided."
The second provision established the amount of "charges" to be paid.
"The Town agrees to pay to the City . . . a total charge which shall be computed as follows:
"(a) 150% of the pro rated cost of operating the City of Racine Sewage Disposal System . . . . The pro rated cost basis shall be in the proportion that the treated gallonage emanating from the Town, as shown by the metered flow thereof, bears to the total gallonage treated by the City in the Calendar year;
"(b) . . .
"(c) . . .
". . . the annual computation shall be made upon the actual cost therefor."
The third provision established how the town's payments should be adjusted to reflect the charge of the actual cost and when said payments should be made.
"The Town agrees to make payment quarterly. . . . The quarterly payment next following the completion of the redetermination of the City's cost shall be adjusted . . . to reflect any adjustment made necessary on account of said redetermination . . . of the City's [actual] cost. . . ."
In determining the rights and obligations under said contract, all three provisions must be given effect. In so doing, it is clear the contract requires the town to pay its proportionate share of the actual cost of sewage treatment for each calendar year. The term of the payment of the charge for service require quarterly payments of the estimated actual cost for that quarter with an adjustment in a future quarterly payment in another calendar year for the actual cost of sewage treatments in a previous calendar year.
The trial court erred in determining the rights and obligations under such contract by limiting its attention solely to the provisions of the contract which established the terms of payment and the procedure for adjustment of those payments. The result of such action on the part of the trial court was its failure to give effect to the provision of the contract which established the amount or "charges" to be paid by the town. This was error.
We conclude that the judgment of the trial court must be reversed and the case remanded to the trial court with directions to enter judgment in favor of the city in the amount of $183,871.47 plus interest for sewer services rendered during the last three quarters of 1969 and the first quarter of 1970.
In a final contention the respondent argues that the city, by providing sewage treatment, is subject to the same duties and obligations as a public service system or utility. As such, the respondent contends, rates charged by the public service system or utility are prospective in application only.
This contention is without merit. The city is not acting in the relationship of a public service system or utility with the town. Rather, the city is acting under an agreement with the town made pursuant to sec. 66.30 (2), Stats., which permits certain co-operative intergovernmental activities.
"Any municipality may contract with another municipality for the receipt or furnishing of services or the joint exercise of any power or duty required or authorized by statute."
The relationship of the town and the city under such an arrangement is strictly that of contracting parties. The relationship contended by the respondent is in no way involved. Sec. 196.01 (1), Stats.
By the Court. — Judgment reversed, and cause remanded with directions to enter judgment consistent with this opinion.