VIRGINIA: IN THE CIRCUIT COURT FOR FREDERICK COUNTY
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1 VIRGINIA: IN THE CIRCUIT COURT FOR FREDERICK COUNTY TOWN OF STEPHENS CITY ) VIRGINIA, ) ) ) Plaintiff, ) ) v. ) Case No. CL ) FREDERICK COUNTY ) SANITATION AUTHORITY, ) SET FOR OCTOBER 5, 2016 HEARING ) ) Defendant. ) FREDERICK COUNTY SANITATION AUTHORITY S BRIEF IN SUPPORT OF DEMURRER AND MOTION TO DISMISS THE AMENDED COMPLAINT COMES NOW the defendant, Frederick County Sanitation Authority (the Authority ), by counsel, pursuant to Rule 4:15(c) of the Rules of the Supreme Court of Virginia and timely submits this Brief in Support of its Demurrer and Motion to Dismiss the Amended Complaint, previously filed on June 24, As demonstrated in that filing, and as further demonstrated below, Plaintiff Town of Stephens City (the Town ) has failed to state a claim upon which relief may be granted with respect to the allegations contained in Counts I, II, IV and V, relating to and premised upon Article VII, Section 9 of the Constitution of Virginia and implementing statutes. Additionally, Counts II, III, and IV fail to state a claim for trespass or breach of contract to the extent that they are premised on the legally mistaken ground that all provisions of the Water Contract, dated June 8, 1992, terminated with the passage of twenty years. Finally, Count II improperly seeks a declaratory judgment even though non-declaratory claims are fully mature. For all of these reasons, as explained in greater detail below, the Authority s Demurrer and Motion to Dismiss should be granted, and the challenged counts dismissed with prejudice.
2 I. INTRODUCTION Plaintiff, a town of 1,829 persons as of the 2010 census, filed a five-count Complaint on August 15, 2015 against the Authority, alleging entitlement to an Injunction (Count I), Declaratory Judgment (Count II), Breach of Contract (Count III), Trespass (Count IV), and Quantum Meruit (Count V). The Authority filed its Demurrer and Motion to Dismiss with respect to all Counts on September 21, The Court sustained the Demurrer to Counts I, II, IV and V on November 25, 2015, with leave to amend. By order of December 31, Plaintiff was given until January 19, 2016 to file its Amended Complaint. Plaintiff did so on January 19, By Order dated March 18, 2016 the period in which the Authority was to respond was extended until June 24, 2016, at which time the Authority filed its demurrer and motion to dismiss as well as a plea in bar. 1 On September 9, 2016, and in accordance with Local Rule 3:1(a), the Authority noticed by praecipe its demurrer and motion to dismiss for a hearing on October 5, 2016, a regularly scheduled motions day, having been unable to obtain available dates from the Town s counsel for some months. 2 In accordance with Rule 4:15(c), the Authority files this brief in support of its demurrer and motion to dismiss. In accordance with the parties contract, the Town bears the obligation to bill and collect monies from its residents for water and sewer services. Although the residents of the Town continue to be billed and to pay for these services, the Town has not paid the Authority since March of 2015, accumulating well over $1 million in accounts receivable. The total due and 1 In light of the need for additional discovery, which is ongoing, the Authority reserves its plea in bar for the taking of evidence on a date to be set by the Court. 2 Counsel for the Town responded to the Authority s of September 8, notifying it of the filing of a counter-praecipe, but not in the form provided by Local Rule 3:1(a), and purporting to set a hearing on scheduling briefing and a hearing, without reference to any pending motion. 2
3 owed is roughly equal to half the budget for the Town, see Ryan Cornell, Stephens City approves budget with tax hike THE NORTHERN VIRGINIA DAILY (June 26, 2014), (reporting that the budget totals $2.1 million, an increase of about $600,000 from the current year s budget ), and roughly equivalent to the amount of monies budgeted from the general fund for the Town budget, see Rachel Mahoney, Stephens City adopts budget THE NORTHERN VIRGINIA DAILY (June 7, 2016), ( The budget will spend $1,093,350 from the general fund, a.3 percent increase from the current fiscal year s general fund budgeted expenditures of $1,089,600. ). The Town has fashioned legal theories which, if valid, would offset the accounts receivable, leading the Town to remove payment of the Authority from its budget. As a consequence, it is unlikely that the Town and the Authority can adjust their dispute until the validity of the Town s legal theories is determined. Because those theories as set out in the Amended Complaint fail to state a claim, the Court should sustain the Authority s demurrer and grant its motion to dismiss. II. GROUNDS FOR SUSTAINING DEMURRER AND FOR GRANTING MOTION TO DISMISS THE AMENDED COMPLAINT A. The Virginia General Assembly and the Attorney General Have Long Construed Article VII, 9 s Limitations Strictly, and Consistently with Their Limited Purpose of Preventing Private Enrichment, and Therefore to be Inapplicable to Transfers of Property Between Public Bodies for Public Use. Counts I, II, IV and V allege that the agreements dated December 9, 1991, June 8, 1992, and October 22, 1992, the deeds dated October 30, 1992, the deed of easement dated May 18, 1994, the deed dated August 18, 1994, and the deed and deed of easement dated July 14,
4 (the Transfers ), see Am. Compl. 3, 5, 7, are subject to a supermajority vote requirement, if deemed a sale, and to an advertising and bid requirement, if deemed a lease. These requirements are allegedly imposed on the Transfers by Article VII, Section 9 of the Constitution of Virginia and by the parallel Virginia Code Section, Am. Compl. 46. See also id. at 9, 12, 13, 14, 32, 47, 48, 52, 60, 62, 63, 67, 81, and 85. Article VII, Section 9 of the Constitution of 1971 provides: No rights of a city or town in and to its waterfront, wharf property, public landings, wharves, docks, streets, avenues, parks, bridges, or other public places, or its gas, water, or electric works shall be sold except by an ordinance or resolution passed by a recorded affirmative vote of three-fourths of all members elected to the governing body. No franchise, lease, or right of any kind to use any such public property or any other public property or easement of any description in a manner not permitted to the general public shall be granted for a longer period than forty years, except for air rights together with easements for columns of support, which may be granted for a period not exceeding sixty years. Before granting any such franchise or privilege for a term in excess of five years, except for a trunk railway, the city or town shall, after due advertisement, publicly receive bids therefore.... As the 1969 Report of the Commission on Constitutional Revision made clear, Article VII, Section 9 was a carry-over of section 125 of the Constitution of THE CONSTITUTION OF VIRGINIA, REPORT OF THE COMMISSION ON CONSTITUTIONAL REVISION TO HIS EXCELLENCY, MILLS E. GODWIN, JR., GOVERNOR OF VIRGINIA, THE GENERAL ASSEMBLY OF VIRGINIA, AND THE PEOPLE OF VIRGINIA (1969); CONSTITUTION OF VIRGINIA OF 1902, art. 8, 125. The Comment section of the Report noted that [p]roposed section 9 continues section 125 with only one important change dealing with air rights. Id. at 238. The Report also noted that proposed section 9 altered section 125 to eliminate excess verbage and to use language that conforms with other sections, although [n]o change of substance [was] effected. The 4
5 provision was not extended to counties because traditionally most counties in Virginia have not had the franchise power and do not presently have such power and [i]f the General Assembly allows counties to exercise the power of franchise, it can provide limitations it deems suitable. Id. at 239. This discussion of counties is consistent with the long-held view that the restrictions now found in Article VII, Section 9 apply to grants of franchises to private actors and not to grants to other subdivisions of government. See II REPORT OF THE PROCEEDINGS AND DEBATES OF THE CONSTITUTIONAL CONVENTION STATE OF VIRGINIA , , (1906) (demonstrating through debate on the Report of the Committee on Cities and Town in the Committee of the Whole that what became Section 125 of the Constitution of 1902 was directed exclusively to the sale of valuable public property to private interests and to leasing of valuable franchise rights to private interests). In conformity with this purpose, trunk railways were excluded because the franchise of these switch tracks is not worth anything. Id. at As explained by the Supreme Court of Virginia in 1922, [s]uch restrictions in the Constitution are strictly construed, and unless they clearly apply, the council in such cases is governed by general rules, and may dispose of property under otherwise applicable law. Town of Victoria v. Victoria Ice, Light & Power Co., 134 Va. 124, , 114 S.E. 89, 90 (1922). Whether the easements are claimed to be a sale of rights in public property, governed by clause 1 of Article VII, Section 9, or claimed to be an unlimited easement governed by clause 2 of Article VII, Section 9, the construction of section 125 as incorporated into Article VII, Section 9 of the Constitution of 1971 must be guided by the purpose for which it was adopted: to prevent[] the permanent dedication of publicly owned property to private use Va. Att y Gen. Op. 125, 1989 Va. AG LEXIS 119, *3 4, 1989 WL , at *2 (Sept. 13, 1989); accord 2008 Va. Att y Gen. Op. 73, 2008 WL , at *1 & n.8 (Dec. 1, 2008) (same, and collecting four other 5
6 attorney general opinions so stating); 1999 Va. Att y Gen. Op. 63, 64, 2000 WL , at *2 (Nov. 3, 2000) ( The clear intent of the constitutional provision is to safeguard public property and ensure that it not be appropriated by private self-interests for an extended term to the detriment of the public without due consideration by council members. (emphasis added)); see also JOHN DINAN, THE VIRGINIA STATE CONSTITUTION: A REFERENCE GUIDE 161 (2006) ( As for the purpose of this section, the Virginia Supreme Court of Appeals remarked in Victoria v. Victoria LLC, Light & Power Co. (1922) that its prime object was to restrict municipalities in the methods by which their power to grant the use of their streets (otherwise conferred) is exercised. ). It is a general rule that, in construing constitutional provisions, [t]he purpose and object sought to be attained by the framers of the constitution is to be looked for, and the will and intent of the people who ratified it is to be made effective. Dean v. Paolicelli, 194 Va. 219, 226, 72 S.E.2d 506, 511 (1952); accord Kopalchick v. Catholic Diocese of Richmond, 274 Va. 332, 340, 645 S.E.2d 439, 442 (2007); see Commonwealth v. City of Newport News, 158 Va. 521, 545, 164 S.E. 689, 696 (1932) (affirming that the provisions of the Virginia Constitution must also be construed in the light of the purposes for which it was ordained ). In responding to numerous questions that have arisen in regard to these restrictions, Attorneys General have been guided by this understanding, which was affirmed most recently in a 2004 opinion, that the clear intent of Article VII, 9 is to safeguard public property and ensure that it not be appropriated by private self-interests for an extended term to the detriment of the public without due consideration by the governing body (2004 Va. AG LEXIS 28, pp. 8-9). DINAN, A REFERENCE GUIDE at 161; accord 2008 Va. Att y Gen. Op. 73, 2008 WL , at *1. In that Attorney General opinion construing application of the clause and implementing statutes governing sales, the question presented involved the sale of a parcel of 6
7 land by Charlottesville for construction of the Meadow Creek Parkway, a public highway. DINAN, A REFERENCE GUIDE at 161. [T]he Attorney General concluded that there cannot be any suggestion that the city council is disposing of valuable public property at a fraction of its worth for private benefit, or that some private business interests are being favored over the public interests in the specific property of the city s public park property. (p. 17). Id. at See also, 2004 Va. Att y Gen. Op. 4, 2004 Va. AG LEXIS 28, at *17, 2004 WL , at *5 (Apr. 16, 2004) ( Clearly the city simply is changing the use of its park property to city highway property. Both of these uses are for the benefit of, and use by, the general public. ). Accordingly, the Attorney General concluded that the provisions of Article VII, 9 and are [not] implicated in any manner in this specific factual context, and that no supermajority vote was required Va. Att y Gen. Op. 4, 2004 Va. AG LEXIS 28, at *17, 2004 WL , at *5. Similarly, the Attorney General has long construed the clause governing leases, and implementing statutes, to apply to transfers to other public entities only if those transfers were made subject, by statute, to the public bidding requirements. The Attorney General has consistently read the General Assembly s decision not to require public bidding in these circumstances as a constitutional construction by that body that the constitutional provision was not implicated. See 1989 Va. Att y Gen. Op. 125, 1989 Va. AG LEXIS 119, at *5, 1989 WL , at *2 (concluding that this statutory omission indicate[s] that the General Assembly generally has construed the requirements of Article VII, 9 and and as inapplicable when the municipally owned real property is leased to a governmental entity. ). Such legislative constructions are afforded substantial deference by the courts, Montgomery Cty. v. Virginia Dep't of Rail & Pub. Transp., 282 Va. 422, 435, 719 S.E.2d 294, 300 (2011) ( this 7
8 Court will declare the legislative judgment null and void only when the statute is plainly repugnant to some provision of the state or federal constitution ), and [l]ong acquiescence in such an announced construction so strengthens it that it should not be changed unless plainly wrong. Dean, 194 Va. at 227, 72 S.E.2d at 511; see also City of Roanoke v. James W. Michael s Bakery Corp., 180 Va. 132, 143, 21 S.E.2d 788, 793 (1942) ( Framers of the Constitution are presumed to have been aware of prior decisions of their own courts and of legislative acts construing words or phrases in the light of such construction. ). The General Assembly has evinced a belief for almost 70 years that these constitutional restrictions do not apply to water and sewer authorities. In 1950, the General Assembly first adopted as part of the organic statute for water and sewer authorities a statutory exemption from the public bidding regime for transfers of property rights to those authorities, thereby evincing the view that such transfers were also exempt from the bidding provisions of Article VII, Section 9. See 1950 Va. Acts c. 577, 5(m), at 1320 (Apr. 11, 1950). Now codified, without substantial change, at Virginia Code Section , the statute provides that Any unit, notwithstanding any contrary provision of law, may transfer jurisdiction over or lease, lend, grant or convey to an authority, upon the request of the authority and upon such terms and conditions to which the governing body and authority may agree, such real or personal property as may be necessary or desirable in connection with the acquisition, construction, improvement, operation or maintenance of a system by the authority, including public roads and other property already devoted to public use. Section 19 of that same 1950 Act, now codified at Virginia Code Section , also provided that localities were authorized and empowered: (a) to convey or lease to any Authority created hereunder, with or without consideration, any water system or any facilities for the collection, treatment or disposal of sewage or any right or interest in such facilities or any 8
9 property appertaining thereto, upon such terms and conditions as the governing body thereof shall determine to be for the best interests of such county, municipality or other public body Va. Acts c. 577, 19(a), at And Section 20 specifically stated that [t]his act shall constitute full and complete authority, without regard to the provisions of any other law, for the doing of the acts and things herein authorized, and shall be liberally construed to effect the purposes hereof. Id. 20, at Although [t]he General Assembly, of course, may not construe away a constitutional provision,... its legislative interpretation of a constitutional provision is considered persuasive. See City of Richmond v. Hospital, 202 Va. 86, 94, 116 S.E.2d 79, 84 (1960), 1989 Va. AG LEXIS 119, at *5, 1989 WL , at *2, particularly when so longstanding as here, and after surviving the constitutional revision of Because the framers of the Constitution are presumed to know that the General Assembly did not construe the words of Section 125 as applying to transfers of public property to water and sewer authorities and made no substantive change to the language when adopting Article VII, Section 9 of the Constitution of 1971, the words of that provision will not bear a construction making them applicable to transfers to such authorities. See City of Roanoke, supra. Moreover, the passage of time, without legislative action, confirms that the Attorney General has properly divined the intent of the Virginia General Assembly, and also confirms the constitutionality of Code Sections and Although a construction adopted by the Virginia Attorney General is not binding on the judiciary, the Virginia Supreme Court has deemed such a construction of persuasive character, Clinchfield Coal Co. v. Robbins, 261 Va. 12, 18, 541 S.E.2d 289, 292 (2001) (quotation marks omitted), and, where sufficiently longstanding to afford the General Assembly the occasion to learn of it and respond, has concluded that the Assembly s failure to make corrective amendments evinces legislative 9
10 acquiescence in the Attorney General s view, Beck v. Shelton, 267 Va. 482, 492, 593 S.E.2d 195, 200 (2004) (quoting Browning-Ferris, Inc. v. Commonwealth, 225 Va. 157, , 300 S.E.2d 603, (1983)). Neither Virginia Code Section , implementing Article VII, Section 9 s provisions, nor Virginia Code Sections and 5148, exempting transfers to water authorities, have been amended in pertinent part since these Attorney General Opinions issued. Accordingly, the Attorney General s constructions of the statutes implementing the supermajority and public bid requirements of Article VII, Section 9 to not include sales to public entities for public purposes or leases to public bodies not subject to parallel statutory bidding requirements should be understood to be the settled view of the Assembly. This Court should defer to that view and conclude that because the Authority is a political subdivision created pursuant to the Virginia Water and Wastewater Authorities Act, Va. Code et seq., Am. Compl. 2, Article VII, Section 9 is simply not implicated by the Transfers. Besides these rules of construction, the Authority also notes that the notice and bid requirement would make no sense where property was transferred from a town to another public body for a public purpose. Courts disfavor constructions that require futile acts and lead to absurd results. See Crown Cent. Petroleum Corp. v. Hill, 254 Va. 88, 91, 488 S.E.2d 345, 346 (1997); see also United States v. Am. Trucking Ass ns, 310 U.S. 534, 543 (1940) ( When that meaning has led to absurd or futile results, however, this Court has looked beyond the words to the purpose of the act. ). There is an additional consideration that weighs heavily in favor of the conclusion that the Town s allegations based upon Article VII, Section 9 fail to state a claim on which relief can be granted. In order to accept its claim, the Town would have to convince this Court that Sections and 5148 are unconstitutional, because they plainly authorize the transfers 10
11 without a super-majority vote, publication or a bid. Plaintiff, however, can never sustain that heavy burden. Unlike the powers of the Congress, which are enumerated and therefore limited, the powers of the General Assembly are plenary subject only to constitutional prohibition. The Legislature represents the sovereign authority of the people, except so far as restrictions are enforced by the Constitution in express terms or by strong implication. We look to the Constitution of the State not for grants of power, but for limitations. When the prohibition is not found in the language of that instrument, or in its framework and general arrangement, there is no solid ground to pronounce the enactment void. The infraction must be clear and paplable. This conclusion follows from the accepted canon of construction applicable to the Constitution of this State, that it is a restraining instrument, and that the General Assembly of the State possesses all legislative power not prohibited by the Constitution. Gallagher v. Commonwealth, 284 Va. 444, 452, 732 S.E.2d 22, (2012) (quoting Whitlock v. Hawkins, 105 Va. 242, 248, 53 S.E. 401, 403 (1906)). In Virginia, it is firmly established that [a]ll actions of the General Assembly are presumed to be constitutional. L.F. v. Breit, 285 Va. 163, 180, 736 S.E.2d 711, 720 (2013) (internal quotation marks omitted). There is, indeed, no stronger presumption known to the law. Accordingly, th[e Virginia Supreme] Court must resolve any reasonable doubt regarding a statute s constitutionality in favor of its validity. Further,... [that] Court will declare the legislative judgment null and void only when the statute is plainly repugnant to some provision of the state or federal constitution. Montgomery County, 282 Va. at 435, 719 S.E.2d at 300 (internal citations and quotation marks omitted); accord Elizabeth River Crossings OpCo, LLC v. Meeks, 286 Va. 286, 301, 749 S.E.2d 176, 183 (2013) ( [O]nly where the statute in issue is plainly repugnant to a constitutional provision will we declare it null and void. (quotation marks omitted)). For all of these reasons, Virginia Attorneys General historically have refrained from opining that a statute is unconstitutional unless the statute clearly is unconstitutional beyond a 11
12 reasonable doubt Va. Att y Gen. Opi. 30, & n.8, 2007 Va. AG LEXIS 10, at *4 & n.8, 2007 WL , at *1 & n.8 (Mar. 5, 2007) (Opi. No ) (collecting authorities); accord 2011 Va. Att y Gen. Opi. 31, 2011 Va. AG LEXIS 31, at *13 14 & n.17, 2011 WL , at *5 n.17 (May 27, 2011) (Opi. No ). Obviously, Virginia Code Sections and cannot be unconstitutional beyond a reasonable doubt because of the limited historical purpose of Article VII, Section 9 and the consistent views of the General Assembly and the Attorney General over a long period that Article VII, Section 9 is not implicated by transfers to a public body. See Howell v. McAuliffe, Va.,, 788 S.E.2d 706, 717, 718 (2016) (recognizing that in construing the Virginia Constitution a page of history is worth a volume of logic and that Lewis counsels that we accord interpretive respect to the unbroken historical record... ). B. As This Court Previously Found, the Town Fails to State a Claim to the Extent That It Depends upon Construing the Easement Rights Conveyed by the Water Contract to Terminate after Twenty Years, Contrary to that Agreement s Plain Language. In Counts II, III and IV of the Amended Complaint, the Town alleges that all continuing use of the easements following the supposed expiration of the Water Contract s twenty-year term in 2012, Am. Compl. 49, 60, 66, 73, 74, 77 80, is a trespass and a breach of contract, and seeks a declaration of the same. As the terms of the Water Contract plainly show, and as this Court held in its November 25, 2015 Order, Plaintiff s allegations ignore[] the fact that the agreement conveyed... easement rights to withdraw water that... are [not] fixed by that term of years, but are perpetual subject only to the possibility of reverter.... Nov. 25, 2015 Order at 6. This was the proper role of the Court because [i]t is the court s duty to declare what the instrument itself says it says. [W]hat the parties claim they might have said, or should have said, cannot alter what they actually said. Babcock & Wilcox Co. v. Areva NP, Inc., 292 Va. 12
13 165,, 788 S.E.2d 237, (2016) (internal citation, footnote, and quotation marks omitted). Because the documents attached to the Amended Complaint confirm that the easements granted did not terminate with the end of the term provided in the Water Contract s for the Town s purchase of water, see Water Contract 2, this Court should dismiss the Town s Amended Complaint insofar as it is premised upon the contrary view, see Dodge v. Trs. of Randolph-Macon Woman s Coll., 276 Va. 1, 5 6, 661 S.E.2d 801, (2008); Ward s Equip., Inc. v. New Holland N. Am., Inc., 254 Va. 379, , 493 S.E.2d 516, (1997). C. Because the Town s Claims Are Fully Mature, Declaratory Relief Is Not Available, and the Town s Request for the Same Should Be Dismissed. Finally, in Count II of the Amended Complaint, the Town seeks declaratory relief as to past or continuing acts of the Authority for which it also seeks coercive relief. However, where claims and rights asserted have fully matured, and the alleged wrongs have already been suffered, a declaratory judgment proceeding, which is intended to permit the declaration of rights before they mature, is not an available remedy. Charlottesville Area Fitness Club Operators Ass n v. Albemarle Cty. Bd. of Supvrs., 285 Va. 87, 99, 737 S.E.2d 1, 7 (2013) (quoting Bd. of Supvrs. v. Hylton Enters., 216 Va. 582, 585, 221 S.E.2d 534, 537 (1976)); accord Cherrie v. Va. Health Servs., Inc., Va., & n.2, 787 S.E.2d 855, 859 & n.2 (2016); see also Small v. Fed. Nat l Mortgage Ass n, 286 Va. 119, 134 n.3, 747 S.E.2d 817, 825 n.3 (2013) (McClanahan, J., concurring in part and dissenting in part) (noting that in a suit seeking damages for breach of contract, plaintiffs are neither required nor permitted to file a separate claim for a declaratory judgment that the defendant breached the terms of the contract. Instead, plaintiffs simply prove the breach as part of the legal claim for damages, and existence of a normal contract remedy makes declaratory relief unavailable ; collecting cases). As before, see Nov 25, 2015 Order at 6-7, the Amended Complaint seeks declaratory relief as to claims that have long ago accrued. As 13
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15 800 East Canal Street Richmond, Virginia (804) (Telephone) (804) (Facsimile) Counsel for the Frederick County Sanitation Authority 15
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