Madison County Utilities District v. City of Richmond

CourtCourt of Appeals of Kentucky
DecidedApril 4, 2025
Docket2023-CA-1401
StatusPublished

This text of Madison County Utilities District v. City of Richmond (Madison County Utilities District v. City of Richmond) is published on Counsel Stack Legal Research, covering Court of Appeals of Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Madison County Utilities District v. City of Richmond, (Ky. Ct. App. 2025).

Opinion

RENDERED: APRIL 4, 2025; 10:00 A.M. TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals NO. 2023-CA-1401-MR

MADISON COUNTY UTILITIES DISTRICT APPELLANT

APPEAL FROM MADISON CIRCUIT COURT v. HONORABLE DAVID M. WARD, JUDGE ACTION NO. 23-CI-00395

CITY OF RICHMOND; A & R CONTRACTORS, LLC; AND RICHMOND UTILITIES APPELLEES

OPINION REVERSING AND REMANDING

** ** ** ** **

BEFORE: CALDWELL, A. JONES, AND TAYLOR, JUDGES.

CALDWELL, JUDGE: Madison County Utilities District appeals from the grant

of a summary judgment in a water service rights dispute. We reverse and remand

for further proceedings. FACTUAL AND PROCEDURAL HISTORY

This case arose from a dispute about water service to a Madison

County property (“the Property”) recently annexed to the City of Richmond. The

Property consists of about 118 acres of previously undeveloped land. The Property

has been located within the boundaries of the Madison County Utilities District

(“MCUD”) or its predecessor since about 1968. A four-inch MCUD water main

was placed adjacent to the Property about 50 years ago. Two MCUD water lines

also run along two sides adjacent to the Property. However, MCUD admits it has

not actually delivered water to any customer or consumer located on the interior of

the Property.

In 2005, the City of Richmond (“the City”) acquired a 1,940-foot

easement along the southern portion of the Property to construct underground

water lines for Richmond Utilities. Sometime thereafter, Richmond Utilities

installed a 12-inch water line extending 1,900 linear feet beneath the Property and

used the connection to provide improved wholesale water service to MCUD. After

the easement was acquired, a MCUD water meter was installed on the Property to

measure how much water was sold to MCUD by Richmond Utilities.

Sometime prior to 2007, disputes arose between the City and MCUD

about providing water service to areas of Madison County. According to MCUD,

the City sought to serve areas within MCUD’s territory and to extend the City’s

-2- water distribution system to real estate developments outside city limits, often

resulting in litigation.

In 2007, Madison County and MCUD entered into a Contract for

Service and Sale of Water with Richmond Utilities (an agency of the City). The

contract contained provisions about the City’s sale of water to MCUD, volume

limits, and territories. The contract included provisions setting forth the terms of

the City’s purchase of the right to serve water to certain specifically identified

properties from MCUD. MCUD also released all claims and rights to serve

territories acquired by the City under certain specified prior agreements.

Furthermore, the parties agreed “to negotiate in good faith with regard to all other

territories.”

Also in 2007, the City adopted Ordinance 07-05. Ordinance 07-05

required that before any land was annexed to the City, the land had to be within the

service territory of Richmond Water, Gas and Sewerage Works for both water and

sewer. The Ordinance further required that the landowner must: “take such steps,

including the payment of any and all fees, charges and expenses as may be

required to release the land from the service territory of any other jurisdiction and

to transfer the land to the service territory of Richmond Water, Gas and Sewerage

Works.”

-3- In February 2023, the City annexed the Property at the request of the

Property’s then-owner, New Idea Construction and Homes, LLC (“New Idea”).

MCUD asserts New Idea was aware the Property was located within MCUD’s

territory since New Idea had inquired about MCUD’s ability to serve the Property.

MCUD states it provided New Idea with a hydraulic study showing its ability to

serve the Property with MCUD’s existing facilities.

MCUD asserts that it had a legal duty to provide the Property with

water service because the Property was within MCUD’s boundaries, and that New

Idea failed to obtain a release of the Property from MCUD’s territory. MCUD also

points to the ordinance allowing the annexation of the Property being silent about

whether New Idea obtained a release from MCUD. It claims there is no evidence

the City took affirmative steps to ascertain that a release was secured from MCUD

before annexing the Property. However, MCUD admits it did not contest

annexation of the Property despite the Madison County Judge Executive’s

receiving notice of the proposed annexation.

After the ordinance to annex the Property was approved, A & R

Contractors, LLC (“A & R”) acquired the Property. In June 2023, MCUD inquired

about negotiations for a transfer of rights to serve the Property, as required by the

2007 contract in its view. A & R signed an agreement to indemnify the City and

Richmond Utilities for any litigation resulting from the water service dispute. A &

-4- R subsequently began installing water infrastructure for the City and Richmond

Utilities with the intention that the Property receive water and sewer service from

Richmond Utilities.

In July 2023, MCUD filed a declaratory judgment action in Madison

Circuit Court (“the trial court”). The City, Richmond Utilities, and A & R were

named as Defendants.1 MCUD requested that the trial court declare the Property to

be within MCUD’s territory. MCUD later amended the complaint to include a

breach of contract claim against the City and Richmond Utilities for failure to

negotiate in good faith about service rights to the Property. MCUD also filed a

motion for a temporary injunction preventing the installation of City water lines in

MCUD’s territory.

A & R filed a motion for summary judgment, which the City and

Richmond Utilities joined. The Defendants argued that Richmond Utilities had the

right to serve the Property because MCUD never installed a water meter or

provided service to the Property, and because Richmond Utilities had a water main

at least as close to the Property as MCUD’s water main.

The trial court entered an Order Denying Motion for Temporary

Injunction and Granting Motion for Summary Judgment (“the Order”). It rejected

1 The City and Richmond Utilities filed a joint answer along with a crossclaim against A & R for indemnification.

-5- MCUD’s argument that it had the dominant right to serve the Property. It also

determined the agreement to negotiate about other territories was unenforceable.

MCUD filed a timely appeal. Further facts will be provided as

necessary in our analysis.

ANALYSIS

MCUD argues the trial court misconstrued KRS2 96.538(2) and KRS

96.150(1). It also contends the trial court erred by disregarding the contractual

provisions to negotiate concerning other territories in good faith and further erred

in granting summary judgment despite the existence of factual questions.

Standard of Review

In reviewing the trial court’s grant of summary judgment, we must

determine “whether the record, when examined in its entirety, shows there is no

genuine issue as to any material fact and the moving party is entitled to a judgment

as a matter of law.” Powers v. Kentucky Farm Bureau Mutual Insurance

Company, 694 S.W.3d 361, 374 (Ky. 2024). In so doing, we keep in mind that the

trial court “must view the evidence in a light most favorable to the nonmoving

party, resolving all doubts in its favor.” Id. Since summary judgment does not

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Bluebook (online)
Madison County Utilities District v. City of Richmond, Counsel Stack Legal Research, https://law.counselstack.com/opinion/madison-county-utilities-district-v-city-of-richmond-kyctapp-2025.