Kewan v. City of Highland

Rule 23 Order filed
December 4, 1997;
Motion to publish granted
January 14, 1998.              NO. 5-97-0004

                                  IN THE

                        APPELLATE COURT OF ILLINOIS

                              FIFTH DISTRICT
_________________________________________________________________

LEONARD KEEVEN, as Trustee of the)  Appeal from the
Leonard Keeven Trust, et al.,    )  Circuit Court of
                                 )  Madison County.
     Plaintiffs-Appellants,      )
                                 )
v.                               )  No. 94-MR-331
                                 )
THE CITY OF HIGHLAND, a body     )
politic and corporate,           )  Honorable
                                 )  David R. Herndon,
     Defendant-Appellee.         )  Judge, presiding.
_________________________________________________________________

     JUSTICE MAAG delivered the opinion of the court:

     Plaintiff, Leonard Keeven, representing himself and other
nonresidents of the City of Highland, filed a class action lawsuit
against the defendant, the City of Highland (Highland), alleging
that water rate ordinances enacted by Highland on and after April
2, 1990, violated his and other nonresidents' common law right
against unreasonable discrimination in water rates.  Keeven sought
an accounting and a refund of the overcharged amount and an
injunction prohibiting Highland from overcharging the class members
in the future.  After a bench trial, the trial court ruled in favor
of Highland.  Keeven appeals.
     The facts are as follows.  Highland supplies water to its
residents and certain customers outside the city.  In late 1989,
Highland hired an engineering firm, Black & Veatch, to prepare a
financial plan and rate analysis report for its water service, to
be used in a proposal for new water rates.  Based upon this report
and other factors considered by the city manager, Highland enacted
an ordinance that allows it to charge nonresidents 75% more for
water than residents of Highland are charged.  Keeven brought an
action alleging unreasonable discrimination in water rates.  From
the trial court's ruling in favor of Highland, Keeven appeals.
     The issues presented for review are:
     1.   Whether the trial court erred as a matter of law in
          utilizing the wrong factors to determine if the
          discrimination in water rates is reasonable.
     2.   Whether the court's judgment and findings are against the
          manifest weight of the evidence.
     3.   Whether the court erred as to the effect of stipulations
          and admissions made by Highland.
     4.   Whether the court erred as a matter of law in the
          admission and exclusion of evidence.
     A municipality operating a public utility is subject to the
same common law ratemaking principles as private or investor-owned
utility companies regulated by the Illinois Commerce Commission.
Austin View Civic Ass'n v. City of Palos Heights, 85 Ill. App. 3d
89, 94, 405 N.E.2d 1256, 1262 (1980).  A municipality operating a
public utility has a common law duty not to act in an unreasonably
discriminatory manner.  Austin View Civic Ass'n, 85 Ill. App. 3d at
95, 405 N.E.2d  at 1262.  Keeven contends that the trial court
utilized the wrong factors to determine whether the different water
rates were reasonable.  
     Since Highland is held to the same standard as private or
investor-owned companies charged with unreasonable discrimination,
the question of whether such unreasonable discrimination exists is
one of fact to be based solely on the evidence presented.  Austin
View Civic Ass'n, 85 Ill. App. 3d at 99, 405 N.E.2d  at 1265, citing
Produce Terminal Corp. v. Illinois Commerce Comm'n ex rel. Peoples
Gas Light & Coke Co., 414 Ill. 582, 112 N.E.2d 141 (1953); Village
of Niles v. City of Chicago, 82 Ill. App. 3d 60, 401 N.E.2d 1235
(1980).  When a charge of unreasonable discrimination in rates is
made, the test used for deciding the validity of the difference in
rates is "whether the difference is reasonable, and not arbitrary,
based on a consideration of such factors as differences in the
amount of product used, the time when used, or any other relevant
factors reflecting a difference in costs."  Austin View Civic
Ass'n, 85 Ill. App. 3d at 99, 405 N.E.2d  at 1265. 
     Keeven had the burden of proving by a preponderance of the
evidence that Highland's rates were unreasonably discriminatory. 
Keeven contends that the trial court erroneously seized upon the
phrase "any other relevant factors" from Austin View Civic Ass'n in
reaching its judgment.  We disagree.  
     As stated above, the question of whether unreasonable
discrimination exists is one of fact to be based on the evidence
presented.  Therefore, the trial court was allowed to accept the
testimony of Highland's expert and exhibits that suggested that
there are certain other costs associated with the delivery of water
to nonresidents as relevant factors supporting a difference in the
rates.  These costs include lost revenue to Highland through the
loss of State-shared revenue and burdens created by the out-of-city
water lines' capacity, maintenance, and liability issues.
     Keeven's next contention is that the court's judgment was
against the manifest weight of the evidence in that the court erred
in its assessment of expert witness testimony and other evidence
presented.  This claim relates to Keeven's contention that the
court used the wrong factors to determine if the discrimination in
the water rates was reasonable.  As discussed earlier, the trial
court was free to consider all the relevant evidence presented in
deciding whether the water rates were unreasonable.  This includes
the additional costs discussed above.  
     Keeven asserts that the test is whether the difference is
reasonable and not arbitrary.  That is only part of the test.  The
court was correct in considering the other factors.  Because Keeven
based his contentions on only a portion of the test, his
contentions must fail.  See Austin View Civic Ass'n, 85 Ill. App.
3d 89, 405 N.E.2d 1256.
     Keeven asserts that the trial court erred in its treatment of
certain stipulations and admissions made by Highland.  Keeven
focuses on the admission by Highland that discrimination in water
rates exists and the stipulation that the Black & Veatch analysis
supports an outside versus inside water usage rate differential of
approximately 1.35.  Keeven contends that the admissions and
stipulations are judicial admissions and cannot be controverted at
trial.
     Judicial admissions are binding upon the party making them and
may not be controverted.  Giamanco v. Giamanco, 111 Ill. App. 3d
1017, 444 N.E.2d 1090 (1982); M. Graham, Cleary & Graham's Handbook
of Illinois Evidence 802.11, at 692 (6th ed. 1994).  Judicial
admissions include admissions in the pleadings of the case, written
admissions filed in court, stipulations of fact, and admissions
pursuant to requests to admit.  M. Graham, Cleary & Graham's
Handbook of Illinois Evidence 802.11, at 692 (6th ed. 1994).  The
facts Highland stipulated to do not eliminate from dispute the
issue of the reasonableness of the water rates or the issue of what
factors are relevant in determining water rates.  The pertinent
portions of Highland's stipulation are as follows:  "[T]he City
stipulates to Mr. Sankpill's opinion that the Black & Veatch
analysis will only support an outside versus inside water usage
rate differential of approximately 1.35," and, "Therefore, the
following facts are not in dispute:
     1.   That the ordinances which set rates charged by the City
          to outside water customers are discriminatory;
     2.   The analysis and results contained in the Black & Veatch
          reports;"
These stipulations and admissions only recognize that the rates are
discriminatory and that the Black & Veatch reports existed. 
Highland never stipulated that the Black & Veatch reports were
correct, nor did it stipulate that the water rates were
unreasonably discriminatory.  In effect, Highland only admitted
that certain persons expressed certain opinions, never once
stipulating that it agreed with the opinions.  Keeven's expert was
entitled to consider the Black & Veatch reports in forming  his
opinion.  See Wilson v. Clark, 84 Ill. 2d 186, 193, 417 N.E.2d 1322, 1326 (1981).  The trial court had the opinion of both
Keeven's expert and Highland's expert before it and chose to accept
the opinion of Highland's expert.  That is the role of the fact-
finder.  Stambaugh v. International Harvester Co., 106 Ill. App. 3d
1, 19, 435 N.E.2d 729, 743 (1982) ("the evidence created a question
for the [fact-finder] to resolve"), rev'd on other grounds, 102 Ill. 2d 250, 464 N.E.2d 1011 (1984).  Keeven had the burden of
proof to carry by a preponderance of the evidence, which he failed
to do.
     Keeven's next contention is that the court erred as a matter
of law in the admission and exclusion of evidence.  At trial,
Keeven objected to Highland introducing, through expert testimony,
factors used by other communities in establishing water rates. 
Keeven asserts that the factors used by other communities are
irrelevant absent a foundation that the services provided are
comparable, relying on Antioch Milling Co. v. Public Service Co. of
Northern Illinois, 4 Ill. 2d 200, 123 N.E.2d 302 (1954).  Keeven
further asserts that the trial court should not have allowed such
testimony.  We disagree.
     At trial, Highland's expert stated that his experience
consisted of working on water rate studies since 1977.  The
testimony Keeven objected to consisted of the expert listing
several factors that municipalities, which he had advised,
considered when setting water rates.  After Keeven objected,
Highland responded that the testimony was relevant to probe the
scope and depth of the witness's experience to show the basis for
his opinions.  The trial court was correct in its ruling on the
evidence.  See Wilson, 84 Ill. 2d 186, 417 N.E.2d 1322.
     In Antioch Milling Co., a privately owned milling company
filed an action claiming Public Service Company of Northern
Illinois (Public Service), an electrical company, was charging it
a higher rate for its services than commercial milling companies
were being charged.  Antioch Milling Co. v. Public Service Co. of
Northern Illinois, 4 Ill. 2d 200, 123 N.E.2d 302 (1954).  The
milling company asserted that Public Service's rate was
unreasonably discriminatory.  The milling company sought to offer
evidence of lower rates charged to it by other public utilities. 
The milling company wanted to use this to show that Public Service
should also charge the milling company lower rates.  The trial
court refused to admit the evidence because the milling company
made no offer to show that the conditions of service were
comparable.  Our supreme court affirmed.  Antioch Milling Co., 4 Ill. 2d  at 210, 123 N.E.2d  at 308.
     The Antioch Milling Co. case does not address the issue at
hand.  Highland offered the challenged evidence to establish the
experience of its expert, and as the basis of his opinions.  It was
not offered as substantive evidence.  The challenged evidence was
properly admitted for the limited purpose offered.
     For the foregoing reasons, the judgment of the circuit court
is affirmed.

     Affirmed.

     KUEHN and GOLDENHERSH, JJ., concur.