Your Towne Builders, Inc. v. Manheim Twp.

303 A.3d 1126

YOUR TOWNE BUILDERS, INC., Cooper Custom Homes, Inc., Hess Home Builders, Inc., C&F, Inc., Horst & Son, Inc., Costello Builders, Inc., and Keystone Custom Homes, Inc., on behalf of themselves and all others similarly situated v. MANHEIM TOWNSHIP, Manheim Township General Municipal Authority, C. Matthew Brown, P.E., and ARRO Consulting, Inc.

Appeal of: Manheim Township and Manheim Township General Municipal Authority

Your Towne Builders, Inc., Cooper Custom Homes, Inc., Hess Home Builders, Inc., C&F, Inc., Horst & Son, Inc., Costello Builders, Inc., and Keystone Custom Homes, Inc., on behalf of themselves and all others similarly situated v. Manheim Township, Manheim Township General Municipal Authority, C. Matthew Brown, P.E., and ARRO Consulting, Inc.

Appeal of: Your Towne Builders, Inc., Cooper Custom Homes, Inc., Hess Home Builders, Inc., C&F, Inc., Horst & Son, Inc., Costello Builders, Inc., and Keystone Custom Homes, Inc.

Nos. 331

497

563 C.D. 2022

No. 911 C.D. 2022

Commonwealth Court of Pennsylvania.

Argued September 11, 2023

Decided October 6, 2023

Reargument Denied November 27, 2023

Bart D. Cohen, Philadelphia and Edward S. Robson, King of Prussia, for Designated Appellants.

Michael S. Gill, West Chester, for Designated Appellee Manheim Township.

Scot R. Withers, West Chester, for Designated Appellee Manheim Township General Municipal Authority.

Kathryn L. Simpson, Harrisburg, for Designated Appellees C. Matthew Brown, P.E. and ARRO Consulting, Inc.

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE COVEY

Your Towne Builders, Inc., Cooper Custom Homes, Inc., Hess Home Builders, Inc., C&F, Inc., Horst & Son, Inc., Costello Builders, Inc., and Keystone Custom Homes, Inc., on behalf of themselves and all others similarly situated, (collectively, Appellants) appeal from: the Lancaster County Common Pleas Court's (trial court) March 7, 2022 order entering judgment against Manheim Township (Township) and the Township's General Municipal Authority (Authority) (collectively, Appellees), jointly and severally in an amount to be determined (Judgment), and enjoining them from charging their current water tapping fee (tapping fee) (Pa. Cmwlth. No. 331 C.D. 2022); the trial court's May 9, 2022 order entering a supplemental judgment against Appellees (Supplemental Judgment) in the amount of $4,405,539.15 (Pa. Cmwlth. No. 497 C.D. 2022); and the trial court's May 18, 2022 order denying Appellants’ post-trial motions (Pa. Cmwlth. No. 563 C.D. 2022). ¹

Appellees appeal from the trial court's January 10, 2018 order denying Appellees’ motion for partial summary judgment; the trial court's March 7, 2022 Findings of Fact, Conclusions of Law, and Verdict; the trial court's March 7, 2022 order entering judgment on the Verdict; the trial court's May 9, 2022 order entering the Supplemental Judgment; the trial court's May 9, 2022 order staying enforcement of the March 7, 2022 verdict; the trial court's May 18, 2022 order denying Appellees’ motion for post-trial relief; and the trial court's February 10, 2020 order granting C. Matthew Brown, P.E.’s (Brown), and ARRO Consulting, Inc.’s (ARRO) motion for nonsuit (Pa. Cmwlth. No. 911 C.D. 2022). ²

Appellants present one issue for this Court's review: whether Appellants are entitled to a full refund of the tapping fees they paid to Appellees prior to March 28, 2016, given the trial court's determination that the Authority failed to adopt its tapping fees in accordance with the Municipality Authorities Act (MAA), ³ and that the Authority grossly miscalculated its tapping fees. ⁴

The Authority presents six issues for this Court's review: (1) whether the trial court improperly relieved Appellants of their burden to prove damages by sua sponte reopening the record to call its own expert witness; (2) whether the trial court erred by excluding the value of the Authority Constructed Facilities (1984-1998) from the total cost basis of the water distribution system because it was dedicated back to the Authority and the tapping fees recovered the cost; (3) whether the trial court erred by concluding that the Authority was collaterally estopped from litigating the Authority's ownership of portions of the water distribution system; and (4) whether the trial court erred by calculating a tapping fee with a design capacity component that arbitrarily included portions of the water distribution system that the Authority did not own. ⁵

The Township presents four issues for this Court's review: (1) whether the Township was the Authority's agent for purposes of imposing tapping fees, and if so, whether the Township is liable to Appellants for MAA violations; (2) whether the trial court erred by reopening the record to establish damages after Appellants rested their case; and (3) whether Appellants are entitled to a refund of all tapping fees which they paid to the Authority. ⁶ As this matter has been fully briefed, and oral argument held, it is ready for disposition.

Background⁷

For more than 40 years, Appellees have worked in conjunction with the City of Lancaster (City) to provide the Township's residents with access to the public water distribution system. Originally, the City solely constructed, owned, and operated the water distribution system that served the Township. In 1984, the Township desired to expand the water distribution system, but the City was not in a position to undertake construction of the necessary extensions. To accomplish this expansion, the City entered into a Municipal Connector's Agreement with the Township on December 18, 1984 (1984 Agreement). ⁸ The 1984 Agreement's stated purpose was to have a public water supply distribution system available to certain lands in the Township, which the Township would pay for, and the City would supply and sell the water after the lines were connected. Pursuant to the 1984 Agreement, the Township would construct water lines in accordance with the City's plans and specifications, and would pay all costs and expenses incurred in the construction of said water mains. The City would permit the Township to connect these lines to the City's existing water distribution system to allow the City to provide public water service to both present and future property owners located in the Township.

Pursuant to the 1984 Agreement, at its expense, the Township constructed water mains, laterals, hydrants, and pumping stations and, specifically, a large water main located under a section of Fruitville Pike, located in the Township, which connected to the existing water distribution system. To enable the Township to recover the costs incurred with this water distribution system expansion, the 1984 Agreement authorized the Township to impose a tapping fee on those who connected to the system. Upon the Township's and the City's certification that the new water distribution system was in service, the 1984 Agreement authorized the Township to lease the water distribution system to the City.

The terms of the Township's water distribution system lease with the City specified that the lease would terminate at the earlier of 20 years from when it was placed into service, or upon the Township's collection of sufficient tapping fees to recoup the costs associated with the water distribution system. The 1984 Agreement further provided that, upon the lease's termination, the Township would dedicate the water distribution system to the City and it would thereupon become a part of the water distribution system owned by the City. The Township water distribution system was placed into service sometime before April 18, 1988.

On September 17, 1985, the Authority adopted A Resolution Establishing and Providing for the Imposition and Collection of Tapping Fees Upon and From Owners of Properties Connected or to be Connected to Water Lines Acquired or Constructed by the Authority that imposed tapping fees on property owners connecting to the water distribution system. The original 1985 tapping fee was amended by resolution in 1985, 1987, 1990, and 1991. In 1993, the Authority authorized the imposition of a tapping fee in the amount of $4,011.00 per equivalent dwelling unit (EDU) ⁹ by way of A Resolution Amending the Resolution Adopted by the Authority of the Township on September 17, 1985, as Previously Amended by Resolutions of November 9, 1985, August 21, 1987, February 16, 1990, and June 17, 1991 (1993 Resolution).

On June 28, 2004, the Township, the Authority, and the City executed the Extension of Municipal Connector's Agreement (2004 Extension Agreement), ¹⁰ which purported to extend the terms of the 1984 Agreement for 90 days from the 2004 Extension Agreement's execution date to September 26, 2004. The parties did not extend the 1984 Agreement before the 2004 Extension Agreement expired. Between 1993 and 2008, the Authority imposed a tapping fee in the amount of $4,011.00 per EDU on all property owners connecting to the water distribution system. In March 2008, Merchant Square L.P. (Merchant Square) purchased two lots in the Township for the purpose of developing a group of multi-family residences consisting of 92 units. To obtain building permits from the Township to develop this real estate, the Township advised Merchant Square that it would be assessed tapping fees by the Authority.

During discussions with the City and the Township, Merchant Square uncovered conflicting information regarding the water distribution system's ownership and the Township's ability to impose tapping fees on Merchant Square. Thus, on March 18, 2008, Merchant Square's counsel wrote to the Township's solicitor in an effort to resolve the discrepancy informally. The letter identified the 1984 Agreement and suggested that its termination ended the Authority's ability to impose tapping fees. One month later, on April 18, 2008, the Township executed the Extension of Municipal Connector's...