FILED
Apr 06 2017, 10:01 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT – ATTORNEY FOR APPELLEE
TOWN OF CLEAR LAKE Jonathan O. Cress
Jeffrey P. Smith Cress Law Group P.C.
David K. Hawk Angola, Indiana
Hawk, Haynie, Kammeyer Diana C. Bauer
& Smith, LLP Bauer Legal LLC
Fort Wayne, Indiana Fort Wayne, Indiana
ATTORNEYS FOR AMICI CURIAE –
ASSOCIATION OF CITIES AND TOWNS
AND THE INDIANA MUNICIPAL
LAWYERS ASSOCIATION
Nicholas K. Kile
Mark J. Crandley
Barnes & Thornburg LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Town of Clear Lake, April 6, 2017
Appellant-Plaintiff, Court of Appeals Case No.
76A05-1606-PL-1241
v. Appeal from the Steuben Circuit
Court
Hoagland Family Limited The Honorable Allen N. Wheat,
Partnership, Judge
Appellee-Defendant Trial Court Cause No.
76C01-1006-PL-425
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 1 of 16
Baker, Judge.
[1] The Town of Clear Lake (the Town) appeals the judgment of the trial court,
which granted summary judgment to Hoagland Family Limited Partnership
(Hoagland) and denied the Town’s motion for partial summary judgment. The
trial court ruled that until the Town made its sewer system accessible through
the installation of a grinder pump, it could not enforce penalties against
Hoagland for failure to connect to the sewer system. Hoagland also argues that
several alleged procedural errors made by the Town should preclude the Town
from compelling connection to the sewer system. Finding that the Town does
have the authority to compel Hoagland’s connection to its sewer system and no
procedural error, we reverse and remand.
Facts 1
[2] Hoagland owns three parcels of real estate (“the properties”) located in the
Town. Although the Town operates a sanitary sewer system, Hoagland’s
properties are not connected to it and contain their own septic systems. Each of
the properties are within 300 feet of the Town’s sewers. In May 2001, as the
Town prepared to install its sewer system, it requested an easement for each of
the properties so that it could connect them to the sewer system, but Hoagland
declined the request.
1
We held oral argument on March 10, 2017, in Indianapolis. We thank both parties and amicus for their
excellent and informative oral advocacy.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 2 of 16
[3] In 2003, the Town passed the following ordinance:
The owners of all houses, buildings or properties used for human
occupancy, employment, recreation or other purposes situated
within the town and which [sic] the property line is within 300
feet of the sanitary sewer is [sic] required at his or her expense to
install suitable toilet facilities therein and to connect such
facilities directly with the proper sewer in accordance with the
provisions of this chapter.
Clear Lake, Ind., Code of Ordinances § 51.51(A). The Town also adopted an
ordinance mandating that “[n]o authorized[2] person shall uncover, make any
connections with or opening into, use, alter, or disturb any public sewer or
appurtenance thereto without first obtaining a written permit from the Town
Council.” Id. at § 51.52(A)(1). “[T]he owner or his or her agent shall make
application on a special form furnished by the town. The permit applications
shall be supplemented by any plans, specifications, or other information
considered pertinent in the judgment of the Inspector.” Id. at § 51.52(A)(2).
[4] In April 2005, after the Town had installed its system, Hoagland filed an action
alleging that the Town had inversely condemned its land by running a sewer
main under Hoagland’s property. This suit ended in October 2010 with a
settlement between the parties.
2
We question whether the drafters of the ordinance intended to refer to “unauthorized” persons.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 3 of 16
[5] Eight months after Hoagland filed the complaint against the Town, the Town
passed a Resolution directing the Town’s attorney to take legal action against
several residents who had not connected to the sewer system; Hoagland’s three
properties were on the list. Appellant’s App. p. 518.
[6] In May 2009, the Town amended its penalty ordinance. Whereas the penalty
for violation of a Town ordinance had been set at a minimum of $100 and a
maximum of $1000, the new penalty for failure to connect to the sewer system
was $500, per day, per property, with no express limit. CLC § 51.99(B). 3
[7] On January 12, 2010, the Town gave Hoagland notice that Hoagland must
connect the properties to the Town’s sewer system within ninety days:
you are hereby given notice that the Town of Clear Lake will
proceed to compel connection of the above described properties
to the Town of Clear Lake sewer system unless all of said
properties are connected to the sewer system within ninety (90)
days. You are further given notice that any use of privies,
cesspools, septic tanks, or similar structures must be discontinued
within ninety days (90) from today. Failure to connect to the
Clear Lake sewer system within ninety (90) days may subject the
Hoagland Family Limited Partnership to fines, court costs and
attorney fees as allowed by Indiana Code and the Town of Clear
Lake Ordinances.
3
A previous zoning administrator of the Town, David Gardiner, testified that “it sure looked like” the Town
had a “get Hoagland policy.” Appellant’s App. p. 557.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 4 of 16
Appellant’s Supp. App. p. 68. This letter also informed Hoagland that since it
had been “benefit[ting]” from the sewer system to which its properties were not
yet connected, the Town was also demanding immediate payment of $4,537.38
in back charges for each property, or a total of $13,612.14. Id.
[8] After Hoagland did not take any action, the Town filed a complaint in which it
asked for an order requiring connection, sewer charges that Hoagland allegedly
should have been paying plus a further ten percent penalty pursuant to local
ordinance, $500 per property per day for each day Hoagland remained
unconnected, an order requiring the discontinuance of any private septic
systems, and attorney fees and costs. In its answer, Hoagland argued that the
Town’s claims were barred because they were compulsory counterclaims that
should have been asserted during the previous litigation involving inverse
condemnation, that the Town’s notice to connect was defective, and that the
sewer system was generally illegal.
[9] After competing motions for summary judgment and hearings on those
motions, on May 4, 2016, the trial court granted summary judgment to
Hoagland and denied it to the Town. The Town stipulated that Hoagland
cannot complete a connection to the sewer system without the presence of
grinder pumps, that the Town has not installed any grinder pumps through
which Hoagland could connect to the sewers, and that the Town had not
commenced any eminent domain proceedings to put grinder pumps on
Hoagland’s property. The trial court noted that the Town’s claimed penalties
had exceeded $2.9 million by the time of the last hearing. It ruled that
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 5 of 16
Hoagland’s compelled connection with the Town’s sewer system would involve
a taking of land and that, under Article One, Section 21 of the Indiana
Constitution, the Town could not proceed until it had assessed and tendered
just compensation to Hoagland. The Town now appeals.
Discussion and Decision
[10] When reviewing an entry of summary judgment, the Court of Appeals stands in
the shoes of the trial court, applying the same standards in deciding whether to
affirm or reverse. AutoXchange.com, Inc. v. Dreyer & Reinbold, Inc., 816 N.E.2d
40, 47 (Ind. Ct. App. 2004). Thus, on appeal this Court determines whether
there is a genuine issue of material fact and whether the trial court correctly
applied the law. Id. The entry of summary judgment will be reversed where the
law has been incorrectly applied to the facts. Markey v. Estate of Markey, 38
N.E.3d 1003, 1006 (Ind. 2015).
[11] Indiana Code section 36-9-23-30(a) permits a municipality operating a sewage
system to require connection to the system and to order the discontinuance of
the use of any private sewage system. The only limitations on the exercise of
this power are that there must be “an available sanitary sewer within three
hundred (300) feet of the property line of the affected property” and that the
municipality gives the property owner ninety days’ notice. I.C. § 36-9-23-30(b).
Municipalities may enforce “reasonable penalties” against a person failing to
make a connection, and a court “shall” assess court costs and reasonable
attorney fees against the property owner. Id. at -30(c); -30(d).
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 6 of 16
I. Eminent Domain
[12] Although the trial court’s ruling depended in part on the law of eminent
domain, a government order to connect a property to a sewer system does not,
by itself, involve a “taking.” As the United States Supreme Court has held, “It
is the commonest exercise of the police power of a state or city to provide for a
system of sewers, and to compel property owners to connect therewith. And
this duty may be enforced by criminal penalties.” Hutchinson v. City of Valdosta,
227 U.S. 303, 308 (1913); see Alperstein v. Three Lakes Water & Sanitation, 710
P.2d 1186, 1189 (Colo. Ct. App. 1985) (“Numerous state courts have followed
[the Supreme Court’s] holding that personal notice and a hearing are not
required prior to ordering connection to a public sewer system”).
[13] On the other hand, the trial court is clearly correct that connection to the
Town’s sewer system will eventually involve a governmental taking; Robert
Hull, the Superintendent of the Town, explained, “You cannot hook to our
system without a grinder pump.” Appellant’s App. 512. The Town’s
ordinances make clear that the grinder pumps will be owned and operated by
the Town, not the property owner. CLC § 51.62. It is well settled that the
Town will need to conduct eminent domain proceedings in order to obtain an
easement on which to place the grinder pump. E.g., Loretto v. Teleprompter
Manhattan CATV Corp., 458 U.S. 419, 426 (1982) (“We conclude that a
permanent physical occupation authorized by government is a taking without
regard to the public interests that it may serve”).
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 7 of 16
[14] The dispute between the parties centers on whether the Town or Hoagland has
to act first. Hoagland points to the language in the Indiana Code: the Town is
only permitted to order connection if there is “an available sanitary sewer.” I.C.
§ 36-9-23-30(a) (emphasis added). Without availability, the Town has no
authority to compel connection. Town Superintendent Hull agreed in a
deposition that without a grinder pump on the property, “the Town’s sanitary
system would be unavailable to that property owner.” Appellant’s App. p. 508.
Likewise, Town Council member Alan Korte “agree[s] that the town sanitary
sewer system is unavailable to the Hoagland Family Limited Partnership
property without the installation of the grinder pump . . . .” Id. at 488.
Hoagland argues that summary judgment was appropriately granted in its favor
because the undisputed evidence, including the precise testimony of Town
officials, shows that until the Town builds a grinder pump, the sewer system is
not available.
[15] The Town counters that its January 2010 letter, which explicitly ordered
connection to its sewer system, implicitly ordered Hoagland to apply for a
permit to connect to the sewer system. Such an application will contain
information useful to the Town in deciding where to put grinder pumps. “Until
such action is taken by the property owner, the size, location, and necessity of
easements cannot be determined.” Appellant’s Br. p. 10. The Town further
asserts that, depending on the plans submitted by Hoagland, the three
properties might be served by a single grinder pump; therefore, the Town argues
that it cannot be forced to first obtain the easements for the grinder pumps
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 8 of 16
because it cannot know where to place the easements. The Town also suggests
that Hoagland’s properties might be served by grinder pumps located on other
properties.4
[16] Ordinances are treated as if they stand on the same footing as an act of the
legislature; therefore, the rules applying to statutory construction apply equally
to ordinances. Lutz v. City of Indianapolis, 820 N.E.2d 766, 770 (Ind. Ct. App.
2005). The primary rule of statutory construction is to ascertain and give effect
to the intent of the drafters, and the plain language of the statute (or ordinance)
is the best evidence of the drafters’ intent. Id. All words must be given their
plain and ordinary meaning unless otherwise indicated. City of Indianapolis v.
Campbell, 792 N.E.2d 620, 624 (Ind. Ct. App. 2003).
[17] We recognize that both parties have defensible interpretations of the relevant
statutes and ordinances. And we acknowledge that it is every American’s
birthright to be displeased at governmental orders. Ultimately, however, we
believe that the Town’s interpretation of the law is correct. The word
“available” in the statute can only be read to refer to a working sanitary system.
Because it is undisputed that the Town is operating a working sanitary system,
there was an “available” sanitary sewer within 300 feet of the properties, and
4
Hoagland argues that this final contention was never presented to the trial court, that the Town stipulated
that it would eventually need to put a grinder pump on Hoagland’s property, and that therefore the Town is
estopped from pursuing this particular line of reasoning. Because our conclusion would not change based on
how this argument is decided, we decline to address it.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 9 of 16
therefore the Town has the statutory authority to order Hoagland to connect to
it.
[18] While Hoagland is understandably not happy about the prospect of
disconnecting a septic system for which it paid and installing a lateral line to
reach the sewer system it does not want to use, its reading of the law would
require the Town to be more intrusive and dictatorial. In the name of defending
its property rights from the overreaching Town, Hoagland is demanding that
the Town take absolute control over where the grinder pump will be placed and
where it will need to run its lateral line to meet the grinder pump.
[19] The Town does not know where sewage will exit the Hoagland homes; if the
Town were to place the grinder pump based on its own whim, it would likely
cost Hoagland (and other residents in a similar position) even more money to
accommodate the Town’s placement. Under the Town’s reading, Hoagland
can propose the most cost-effective method of extending the lateral lines and the
Town will accommodate Hoagland by placing the grinder pump where
Hoagland deems most convenient. Indeed, we find it highly likely that, if the
Town or other governmental entities were to attempt to dictate the placement of
grinder pumps on residents’ properties, such actions would lead to a significant
amount of litigation in which residents would ask courts to allow them to
engage in precisely the type of process the Town is currently proposing. Just as
courts require parties to mitigate their damages in tort and contract disputes, we
favor an interpretation of the law that minimizes the costs and other burdens
residents will face.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 10 of 16
[20] Hoagland argues that the Town is attempting to find an end run around the
requirement to pay just compensation for a governmental taking of property.
We do not find this argument persuasive. To be clear, Hoagland was perfectly
within its rights to reject the Town’s request to voluntarily donate an easement
on which to place the grinder pumps. Nor is Hoagland required to accept any
offer of compensation the Town may put forth for an easement on its property.
Hoagland has the right to force the Town to initiate eminent domain
proceedings, through which a court with the aid of assessors will ensure that the
Town pays just compensation for the physical occupation of the grinder pump
on the property.
[21] In sum, because the Town is operating a functioning sanitary sewer within 300
feet of the properties, there is an “available” sewer under the meaning of
Indiana Code section 36-9-23-30(a). Accordingly, the Town has the authority
to compel Hoagland’s connection to the sewer system. Finally, the Town’s
proposed process—having Hoagland submit an application with plans and
schematics of the easiest and most convenient method of extending a lateral
line to the sewer—is more economical and less burdensome than Hoagland’s
proposal of forcing the Town to take property and ask questions later. Partial
summary judgment should have been awarded to the Town on this issue.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 11 of 16
II. Alleged Procedural Defects
[22] Hoagland argues that the Town committed several procedural defects that
prohibit the Town from compelling Hoagland’s connection to the sewer system,
now or at any point in the future.
[23] First, Hoagland argues that the trial court’s grant of summary judgment can be
affirmed based on the statute of limitations. It points to a public notice given to
Hoagland, telling it to connect to the sewer system by December 1, 2004.
Appellant’s App. p. 668. When municipalities are attempting to judicially
enforce an ordinance, such an action must be brought within two years of the
alleged conduct. Ind. Code § 36-1-6-3; 34-28-5-1.
[24] We do not find this argument persuasive: Hoagland’s violation of the
municipal ordinance has occurred every day since he was ordered to connect to
the sewer system, and is occurring right now. It is well settled that right now is
within the two-year statute of limitations.
[25] Second, Hoagland argues that all of the Town’s claims in the present suit
should be barred under Indiana Trial Rule 13(A) as unpled compulsory
counterclaims. It argues that the Town was fully aware of its claim against
Hoagland for not connecting to the sewers when it filed its answer in the inverse
condemnation case on August 4, 2005. Hoagland says that both cases arose
from the same transaction or occurrence, that the present claim was mature
within the time of pleading, that there were no third parties over whom the trial
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 12 of 16
court lacked jurisdiction, and that the initial claim has been reduced to
judgment. Estate of McCullough, 492 N.E.2d 1093, 1095-96 (Ind. Ct. App. 1986).
[26] A counterclaim is only compulsory where it arises from the same aggregate set
of operative facts as the opposing party’s claim. Hilliard v. Jacobs, 927 N.E.2d
393, 401 (Ind. Ct. App. 2010). Here, the only commonality between the two
cases is that they involve sewers. We retain the hope that most of these
situations can be resolved without resorting to litigation, and we hesitate to
encourage municipalities to sue their residents so that their claims will not be
barred later. Hoagland’s argument is unavailing.
[27] Third, Hoagland argues that several of the Town’s statements and
representations resulted in the waiver of its claims. It points to an August 2001
letter in which the Town stated, “If your easement is not signed by October 1,
2001, your property will be excluded from the Initial Project.” Appellant’s
App. p. 623. Hoagland also points to several letters in which the Town
described the eminent domain process. Hoagland argues that by not exercising
its powers of eminent domain long ago, the Town “excluded” him from the
project and cannot now compel him to join.
[28] Hoagland neglected to quote the very next sentence in the Town’s August 2001
letter: “In the future you will be required to connect to the wastewater system
at your own expense . . . .” Id. The Town’s representations were fairly
straightforward; Hoagland could choose to join the sewer system from its
initiation or be required to join later. We find no waiver.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 13 of 16
[29] Finally, Hoagland argues that the amended penalties ordinance, CLC § 51.99,
was not properly passed and therefore cannot be enforced. The ordinance bears
a date of April 13, 2009, but was not published in a local newspaper until May
21, 2009, past the thirty-day limit set by statute. Ind. Code § 36-5-2-10; Ind.
Code § 5-3-1-2(h). Further, Hoagland argues that the language in CLC §
51.99(B)(1), “when legally required to do so,” is ambiguous and vague, such
that it would be an unconstitutional basis for punishment.
[30] The Town highlights the testimony of the Clerk-Treasurer, who stated that
while the ordinance has April 13, 2009, written on it, this was a scrivener’s
error. Appellant’s App. p. 1425-26. There is a wealth of other evidence
indicating that, in fact, the ordinance was passed, after several readings, on
May 11, 2009, which renders the May 21, 2009, publication timely. There are
notations on the ordinance regarding the readings of the ordinance, town
council minutes, and a notice of a public hearing in the local paper, all of which
show a publication date of May 11 rather than April 13. Id. Finally, we find
that the phrase, “when legally required to do so,” has an obvious meaning
when combined with the previous sentence regarding “the town . . .
compel[ling] connection by any property producing sewage or similar waste to
the sewer system . . . .” CLC § 51.99(B). The Town’s penalty ordinance was
properly promulgated.
[31] In short, none of Hoagland’s arguments regarding the statute of limitations,
compulsory counterclaims, waiver, or invalidity of the Town’s ordinances are
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 14 of 16
availing. None render summary judgment in Hoagland’s favor appropriate or
partial summary judgment in the Town’s favor inappropriate.5
III. Future Proceedings
[32] Because the trial court ruled in Hoagland’s favor, it never reached the issue of
penalties, which will need to be determined on remand. While the issue is not
squarely before us, we would be remiss if we did not make a few comments.
[33] Although the Town is authorized by statute to establish and enforce penalties
against those refusing to connect to its sewer system, this authority is not
unlimited; the Town is only authorized to establish “reasonable penalties for
failure to make a connection . . . .” I.C. § 36-9-23-30(c) (emphasis added). Any
penalty set above a reasonable amount is unauthorized, unlawful, and
unenforceable. Because the issue is not before us, we cannot rule on what
penalty would qualify as “reasonable,” but we have little difficulty saying that a
penalty of $2.9 million is nowhere near it. Such a penalty is confiscatory, most
likely unconstitutional, and will not be countenanced.
[34] We would also like to express our sincere hope that the parties can work
together more amicably to achieve what is clearly the end result: at some point,
5
Hoagland requests that we award it damages and attorney fees under Indiana Appellate Rule 66. We are
always hesitant to grant such a request, lest we chill the exercise of litigants’ right of appeal. We are even
more hesitant where the claim is made against the winning side—Hoagland’s request is denied.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 15 of 16
after some procedure, Hoagland will connect to the Town’s sanitary sewer
through a Town-provided grinder pump.
[35] This type of litigation tends to clog up the court system. Our courts are not
flush with resources, and they are prone to getting backed up. When the system
gets backed up, it produces unnecessary and unhealthy strains, which makes it
more difficult for parties to obtain relief. And when these cases cannot be
discharged, it is impossible for our court system to stay regular—and that
means taxpayer resources down the drain. We can understand that, after such
a long process, the parties are not overflowing with goodwill. But we hope that,
before the case stalls and stagnates, they can put this big mess behind them.
[36] The judgment of the trial court is reversed and remanded with instructions to
award partial summary judgment to the Town and for further proceedings
consistent with this opinion.
Mathias, J., and Pyle, J., concur.
Court of Appeals of Indiana | Opinion 76A05-1606-PL-1241 | April 6, 2017 Page 16 of 16