Judges reverse judgment in favor of town in water agreement dispute

A trial court erred as a matter of law in its interpretation of a disputed section of a water agreement between a real estate developer and the town of Huntertown; as such, the Indiana Court of Appeals reversed partial summary judgment in favor of the town.

Carroll Creek and Huntertown entered into a water agreement in October 2000 in which Carroll Creek would pay for constructing a water main that connects to Huntertown’s water service facility. Carroll Creek could recoup nearly $465,000 of its costs via a water connection charge from certain owners of real estate who connected to the water main.

Those charges led to this lawsuit and appeal, Carroll Creek Development Company, Inc. v. Town of Huntertown, Indiana, 02A03-1307-PL-282. At issue is Section 4.1 of the agreement. The water main will serve real estate in a defined “excess area.” The section states: “In the event any present or future owners of real estate within the excess areas shall, at any time within fifteen (15) years after the date of this Agreement, desire to connect into the Water Main, whether by direct tap or through the extension or connection of lateral lines to service the real estate situated in the excess area or adjacent to the excess area, to the extent permitted by law, … .”

Carroll Creek and Huntertown couldn’t agree whether this section required people who lived in the Ravenswood subdivision and another subdivision on the Ruth Nobis farm to pay the connection charge. Huntertown argued that those homeowners do not have to pay because they are not included in the “excess area” as defined in the water agreement. Carroll Creek’s interpretation of Section 4.1 was that the owners of real estate in the excess area who connected to the water main would be subject to the area connection charge when they used their water main connection to service real estate that was in either the excess area or area adjacent to the excess area. The company argued Huntertown failed to prove that the property owners in question had never owned property in the excess area.

The trial court granted summary judgment to Huntertown on the issue. The judge concluded that the “whether by” clause in Section 4.1 was intended to clarify that the excess area owners will be subject to area connection charges even if they do not connect to the water main directly. But this interpretation changes the “to service real estate situated in the excess area or adjacent to the excess area” language to “that service the real estate …,” the judges noted. In doing so, the court disregarded the plain language of the water agreement.

“The plain language in Section 4.1 of the Water Agreement provides that owners of real estate in the excess area are subject to the area connection charge if they connect, directly or indirectly, to the water main 'to service the real estate situated in the excess area or adjacent to the excess area[.]' Thus, the language of Section 4.1, agreed upon by the parties, shows that the intent of the parties was that the area connection charge would be assessed against excess area owners in two specified situations,” Judge Rudolph Pyle III wrote.

The appeals court remanded for further proceedings.