Wandruszka v. City of Moscow

554 P.3d 603

Brenda VON WANDRUSZKA and Ray Von Wandruszka, Husband and Wife; and Robert R. Davis, Plaintiffs-Respondents,

v.CITY OF MOSCOW, William Lambert, in his Official Capacity as Mayor of the City of Moscow; and Sarah L. Banks, in her Official Capacity as Finance Director for the City of Moscow, Defendants-Appellants.

Brenda Von Wandruszka and Ray Von Wandruszka, Husband and Wife; and Robert R. Davis, Plaintiffs-Appellants,

v.City of Moscow, William Lambert, in his Official Capacity as Mayor of the City of Moscow; and Sarah L. Banks, in her Official Capacity as Finance Director for the City of Moscow, Defendants-Respondents.

Docket Nos. 50471

50472

Supreme Court of Idaho, Moscow, April 2024 Term.

Opinion Filed: August 19, 2024

Consolidated appeals from the District Court of the Second Judicial District of the State of Idaho, Latah County. Jay P. Gaskill, District Judge.

The judgments of the district court are affirmed in part, reversed in part, and remanded.

Clements, Brown & McNichols, P.A., Lewiston, for Appellants City of Moscow, William Lambert and Sarah Banks in Docket No. 50471 and Respondents in Docket No. 50472. Andrew Pluskal argued.

Clark & Feeney, LLP, Lewiston for Respondents Brenda Von Wandruszka, Ray Von Wandruszka and Robert Davis in Docket No. 50471 and Appellants in Docket No. 50472. William Jeremy Carr argued.

Naylor & Hales, Boise, for Amicus City of Idaho City and International Municipal Lawyers Association.

MOELLER, Justice.

In this consolidated appeal, we are tasked with reviewing the City of Moscow’s (the "City") revised utility billing process for water service. Brenda and Ray von Wandruszka, along with their business partner, Robert R. Davis (the "Plaintiffs"), are property owners who owned personal residences as well as rental properties located within the City’s limits. The Plaintiffs filed a lawsuit against the City following the adoption of a city resolution in 2021. In a letter sent to all property owners, the City informed the Plaintiffs that if they did not sign the contract, they would lose water services to their properties. The Plaintiffs signed under protest and then alleged in their petition that they were forced to sign the contracts with the City, by which they essentially agreed to become guarantors for their tenants’ unpaid water bills. The Plaintiffs claim that these were unenforceable adhesion contracts signed under duress, while the City contends it was lawfully requiring property owners to guarantee payment for water services provided to the owners’ property, regardless of whether it is occupied by the owner or a tenant.

After cross-motions for summary judgment were filed, the district court agreed with the Plaintiffs that the City was not authorized to recover a tenant’s unpaid utility charges from a property owner. However, the district court also ruled that the City was authorized to require owner-occupied properties to enter into an agreement to pay for the water they actually consume. Both parties have appealed the split summary judgment awards. For the following reasons, we affirm in part and reverse in part.

I. Factual and Procedural Background

The Plaintiffs own several properties within the city limits of Moscow, Idaho, consisting of their personal residences and rental properties leased to a variety of tenants, both residential and commercial. The commercial tenants include a hydrology firm, an ultrasound technician, physical therapists, and a medical spa. Their residential tenants include professors, college students, entrepreneurs, bankers, and retired individuals. During the times relevant to this proceeding, all of the Plaintiffs’ tenants and properties were current on their utility bills, and there is no evidence of delinquent payments in the record.

The Plaintiffs’ water is provided by the City of Moscow, which operates a public water system. It is the only provider of water services within the city limits. The City administers utility billing processes for supplying water to its customers, which include billing, collection, and the enforcement of its policies and regulations. Until 2021, initiating utility service was an informal process; anyone—either an owner or a tenant—could call the City’s finance department to open a utility account and activate utility services at a specific property. However, the City’s finance director reported that landlord-tenant accounts created considerable challenges. While unpaid utility bills were ultimately the responsibility of the property owner under the then-existing city code, the City reported that it received "push back" from property owners relying on City of Grangeville v. Haskin, 116 Idaho 535, 777 P.2d 1208 (1989), whenever it attempted to collect a tenant’s unpaid balance from the property owner. As a result, the City estimated that it lost $40,000 per year to delinquent accounts. In 2021, past due utilities skyrocketed to $143,054.¹

To address the issue of unpaid balances from rental properties, the Moscow City Council revised its utility contracting process by adopting Resolution 2021-01 (hereinafter, the "Resolution"). The Resolution contained the following recitations:

WHEREAS, the Mayor and [City] Council have an interest in promoting the health, safety and the general welfare of all citizens of the City of Moscow; and

….

WHEREAS, the City’s current practice of utility billing has resulted in challenges in collection of unpaid balances from property owners when a tenant fails to pay their utility bills and the City resources being spent to collect on these unpaid accounts has led to the recommended revised billing process as reflected in the attached exhibits; and

WHEREAS, the proposed changes to the City’s utility billing process is to address the deficiencies in the current process for collection of past due accounts and to better utilize the City’s resources, ensure services being provided by the City are being paid by the property owner, and to provide a legally defensible method for the City to collect fees owed.

NOW, THEREFORE, BE IT RESOLVED … [t]he [utility billing policy, utility billing application, and utility billing directive] are the approved regulations for all utility billing collection and enforcement[.]

Under this revised billing process, a tenant can no longer directly contact the City to start water services; only a property owner may initiate a utility hook up. The Resolution provided that current utility account holders had to complete a new billing application form by a set deadline for the use of utility services, regardless of their current contracts or payment history. The billing application form

provided the City with updated contact information about the property owner, explained that this application was a formal request of the property owner requesting services for city utilities at a specific address, and provided an acknowledgment from the property owner tha[t] they will remain legally responsible and liable for unpaid account balances against the service address, regardless of who uses the service.

The form also specified that the failure to pay delinquent balances may result in utility services being shut off and imposing a property lien against the owner’s real property. It stated:

ANY UNPAID BALANCES ARE THE RESPONSIBILITY OF THE PROPERTY OWNER. SERVICES MAY BE DISCONTINUED FOR NON-PAYMENT AND WILL NOT BE REACTIVATED UNTIL THE UNPAID BALANCE IS PAID IN FULL. LIENS MAY BE PLACED ON THE PROPERTY FOR NON-PAYMENT.

Notice of the revised billing policy was provided to property owners in Moscow over a nine-month period through newsletters and letters. Letters first went out in March of 2021, explaining the new Resolution and that a property owner agreement must be signed and returned to the City. Additionally, the letter stated that failing to comply by December 15, 2021, would result in water being shut off to the owners’ properties the following day.

By December 3, 2021, the Plaintiffs had not submitted new billing applications for any of their properties. According to the Plaintiffs, on that day, Brenda received a phone call from the city attorney advising her "that the City would shut off water to all of the Plaintiffs’ properties, including their personal residence," on December 15 "if they did not sign and return one of the agreements." On December 10, the Plaintiffs filed a complaint for expedited declaratory judgment and preliminary injunctive relief against the City, arguing that the City cannot terminate or modify agreements with tenants and property owners who have no outstanding debts for services. Although the Plaintiffs had not yet submitted a utility services application form as required by the new policy, they did so on December 14. When the Plaintiffs signed the agreements, they noted that they were signing under duress due to the threat that they would lose water services at all of their properties. As a result of signing the agreements, the Plaintiffs’ water was not shut off at any of their personal or rental properties.

After signing the agreements, the Plaintiffs amended their complaint with the district court's permission to include a claim of duress. The parties then filed cross-motions for summary judgment on the issue of whether the City could "induce property owners to enter into a contract which allows the City to terminate and refuse water service not only at the address at which bills accrue, but also all other properties owned by the same landlord."

The district court ultimately granted summary judgment in part, and denied it in part, to each party. The district court first concluded that the Plaintiffs established that they signed the utility billing agreements under economic duress. This determination was based on the facts that the Plaintiffs had no alternative way to provide water to their properties and tenants, and their water was going to be turned off the next day unless they signed the agreements. In connection with this ruling, the...