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Borough of Ellwood City v. Heraeus Electro-Nite Co., LLC

Commonwealth Court of Pennsylvania

July 25, 2017

Borough of Ellwood City, Lawrence County, Pennsylvania, Appellant
Heraeus Electro-Nite Co., LLC

          Argued: April 6, 2017



          PATRICIA A. McCULLOUGH, Judge

         The Borough of Ellwood City (Borough) appeals from a decision of the Court of Common Pleas of Lawrence County (trial court) granting a motion for judgment on the pleadings filed by Heraeus Electro-Nite Co., LLC (Heraeus). Upon review, we affirm.

         Facts and Procedural History

         Pursuant to its codified ordinance concerning the sale of electric energy and power, the Borough is owner and operator of an independent electrical power system that provides electricity within its municipal town limits. Municipal supplying of electricity and electric service is authorized by sections 24A02 and 24A03 of the Borough Code, 8 Pa.C.S. §§24A02, 24A03. The Borough adopted an ordinance codified and designed to regulate the operation and sale of electricity and electric service within its boundaries. (Reproduced Record (R.R.) at 64-66.)

         Heraeus operated a plant within the Borough's town limits and was an eighteen-year industrial customer of the electric utility. On an unspecified date, lightning struck one of the Borough's metering current transformers, rendering it inoperable. When the Borough sent a crew to repair the metering current transformer, the crew discovered problems with the meters which supposedly caused Heraeus to have been underbilled for electricity and electric service for seventeen years. (Borough's Reply to New Matter, ¶¶33, 38-40; R.R. at 71, 73.)

         At some point in 2014, the Borough approached Heraeus about the alleged underbilling based upon the problems with the meters. In October through December of 2014, the Borough and Heraeus met and discussed the accuracy of the Borough's billing. (Heraeus' New Matter at ¶¶21-35 and Borough's Reply to New Matter, ¶14; R.R. at 23-27, 68-69.)

         On January 20, 2015, the Borough filed a "Municipal Claim for Assessment of Charges for Municipal Services Renderered [sic], " requesting a municipal lien against Heraeus in the sum of $975, 456.52. A judgment in the nature of a municipal lien for this amount was entered that same date. (R.R. at 4-9.) The lien alleged, "The Borough of Ellwood City supplied municipal services, namely electricity, to the within property of the Defendant Owner from October 2010 through September 2014." (R.R. at 6.)

         The Borough claimed that there was "a huge error" in calculating what Heraeus owed the Borough for electricity and electric service, alleging it billed Heraeus for only about twenty percent of what was actually supplied. (Borough's Reply to New Matter, ¶¶19, 33; R.R. at 69, 71.) The Borough admitted that Heraeus had paid the Borough's monthly electric bills from September 1997, through September 2014, and further noted that "Heraeus voluntarily executed a 'Request for

          Electrical Service' in November 1996, which was accepted by the [B]orough." (Borough's Answers to Requests for Admission, Nos. 7 and 3, respectively; R.R. at 148-49.) The Borough also confirmed its own codified ordinance required a "written application accepted by the Borough, or other form of contract" before "electricity may be supplied to a customer." (Borough's Answers to Requests for Admission, Nos. 2-3; R.R. at 148.)

         On February 3, 2015, Heraeus filed a notice to issue writ of scire facias. On February 11, 2015, the Borough issued the writ, and Heraeus filed its affidavit of defense, answer, new matter, and counterclaim on February 27, 2015. Heraeus' counterclaim was a request for declaratory judgment. The Borough filed a reply to new matter and counterclaim on March 19, 2015. Heraeus also conducted limited discovery, including a request for admissions served on the Borough.

         After receiving the response to its request for admissions, Heraeus filed a motion for judgment on the pleadings, alleging that entry of the municipal lien was improper because the Borough's ordinance does not permit it to "back-bill, " that is, to bill for prior undercharges for the electricity and electric service provided to Heraeus. The Borough argued that the municipal lien was appropriate because it had "made a huge error" in calculating the electricity used by Heraeus. The Borough also moved to amend its lien to reflect additional calculations of its lien, raising the total amount of the lien to $1, 327, 179.48. (R.R. at 251-52.)

         On May 18, 2015, the trial court issued an opinion and order granting Heraeus' motion for judgment on the pleadings on two grounds: (1) the Borough's own ordinance precludes it from back-billing, and (2) "the lien here should be struck also because the Borough did not lawfully impose the lien on the property initially since imposition of the lien was based upon an agreement."[1] (Trial court op. at 8-10.) Because the trial court struck Borough's municipal claims, it did not reach Borough's motion to amend its lien.

         On appeal to this Court, [2] Borough makes two arguments: (1) the trial court erred in determining that Borough's ordinances precluded back-billing, and, (2) the trial court erred in determining that a municipal lien may not be imposed because the basis of the lien was statutory and not contractual.[3]


         Borough's Attempt at Back-Billing

         Section 24A02(d) of the Borough Code specifically provides, "No person, partnership or corporation may introduce electric current for light, heat, or power purposes, without the consent of the [borough] council, into the limits of any borough that is furnishing electric current to its inhabitants." 8 Pa.C.S. §24A02(d). In other words, if a municipality provides the electrical utility service within its boundaries, it is either the exclusive provider of electric service or has the only authority to approve such. A ...

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