Artesian Water Co. v. State, Dept. of Highways and Transp.

Citation330 A.2d 432
PartiesARTESIAN WATER COMPANY, a corporation of the State of Delaware, Plaintiff, v. STATE of Delaware, DEPARTMENT OF HIGHWAYS & TRANSPORTATION, Defendant.
Decision Date22 November 1974
CourtSuperior Court of Delaware

Page 432

330 A.2d 432
ARTESIAN WATER COMPANY, a corporation of the State of
Delaware, Plaintiff,
Superior Court of Delaware, New Castle County.
Nov. 22, 1974.

Page 434

Richard J. Abrams and Stephen E. Herrmann of Richards, Layton & Finger, Wilmington, for plaintiff.

Aubrey B. Lank and Christopher S. Flanagan of Theisen, Lank & Mulford, Wilmington, for defendant.



This is an action by Artesian Water Company (Artesian) against the State of Delaware, Department of Highways and Transportation (State Highway Department), seeking a declaratory judgment that Artesian is entitled to reimbursement in the amount of all water facility relocation expenses that it will necessarily incur by reason of a recently approved state highway reconstruction project involving Delaware Route 141 (Basin Road). Both parties have moved for summary judgment in their respective favor on the issue of Artesian's entitlement to compensation for the full amount of such relocation costs.

The historical and technical facts have been set out in detail by the parties in their briefs. Suffice it to say, therefore, that Artesian, a state-regulated public utility

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corporation engaged in the business of supplying and distributing water for public use, presently operates a portion of its pipeline and related facilities in and along a public road. Artesian had originally acquired a right-of-way in this area from a private trust in 1955 and, in accordance with the terms of franchise agreements entered into between the parties in 1955 and 1956, installed a water distribution system in and along what was then the position of Basin Road and in and through its easement over the privately owned property. All such private property, as well as Artesian's easement, has since been acquired by the State of Delaware. Consequently, all of Artesian's facilities in this area are presently located on state-owned property.

Due to certain reconstruction activities involving Basin Road in 1958--1959, Artesian was required to relocate substantially all of its water lien, originally installed under authority of the franchise agreements, to their present position in the bed of Basin Road. Despite the franchise agreements' cost burden provisions to the contrary, the State Highway Department reimbursed Artesian in the full amount of its relocation costs. The Department's explanation for this is that since the highway reconstruction project qualified for at least 90% Federal aid, 17 Del.C. § 132(b)(5) statutorily shifted the burden of defraying such relocation costs to it.

In 1971, pursuant to a further proposed major reconstruction and relocation of Basin Road, the State Highway Department notified Artesian that it would again be required to relocate certain of its pipeline from the 1958--1959 realigned Basin Road right-of-way and to totally relocate its facilities as originally installed in and through the area of its former easement. Unlike the 1958--1959 highway project in which the Federal Government was a 90% Funding participant, the proposed project was approved on a 50/50 matching basis. Therefore, finding 17 Del.C. § 132(b)(5) inapplicable, the State Highway Department has refused Artesian's request for full relocation cost reimbursement.

Artesian's claim of entitlement to full relocation cost compensation is predicated upon alternative theories. Artesian's primary contention is that the State of Delaware is obligated by federal law to pay public utility relocation costs in all federal-aid highway projects, irrespective of the size of the federal share payable to the State. It relies on the inter-relationship of recent federal and Delaware relocation assistance statutes in proclaiming that a statutory right to compensation has emerged which derogates against the traditional common law rule that heretofore required utilities to relocate at their sole expense. Alternatively, Artesian contends that it has vested property and/or contract rights in the subject location of its water-distributing facilities and is thereby entitled to compensation for relocation expenses under the law of eminent domain.

The State Highway Department, on the other hand, contends that the common law rule is controlling; that neither federal nor Delaware statutes authorize utility relocation cost compensation in the present case; and that Artesian does not have the type of interest in the present location of its facilities for which compensation is required under eminent domain principles.

The Court preliminarily directs itself to the question of the applicability of the 1955--1956 franchise agreements to the present controversy. These agreements, if applicable, would clearly place the burden on Artesian to absorb all expenses for the relocation of its facilities from the areas over which the franchises were granted. However, due to the major realignment of Basin Road and the substantial relocation of Artesian's water-distributing facilities in 1958--1959, these agreements presently cover only 85 feet or approximately 5% Of the present location of Artesian's facilities. Therefore, the terms of the 1955--1956 franchise agreements govern the disposition of the compensation

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issue only with respect to that portion (approximately 5%) still covered by the agreements unless, of course, Artesian prevails in its argument that certain recent federal and Delaware statutes supercede these agreements entirely on the question of full relocation cost reimbursement.

In the absence of a statute or agreement to the contrary our state courts, as well as the courts of most jurisdictions, adhere to the common law rule that a utility is required to relocate at its own expense its facilities located on public highways when such relocation is necessary to facilitate highway improvements. State Highway Department v. Roberts, Del.Ch., 215 A.2d 250, 254 (1965). See also New Orleans Gas Light Company v. Drainage Commission, 197 U.S. 453, 25 S.Ct. 471, 49 L.Ed. 831 (1905); Port N.Y. Auth. v. Hackensack Water Co., 41 N.J. 90, 195 A.2d 1 (1963); Opinion of the Justices, 101 N.H.Supr. 527, 132 A.2d 613 (1957). See generally, 12 McQuillen, Municipal Corporations (3rd Ed.), § 34.74a; 36 Am.Jr.2d, Franchises, § 42. The rationale underlying the rule is that since the utility acquires its right to make special or exceptional use of the public highway only by the permissive grant of the state, 12 McQuillen, supra, § 34.10, the utility's use is necessarily subordinate to the general public's principal and primary use of the highway. Sammons v. City of Beaufort, 225 S.C. 490, 83 S.E.2d 153, 157 (1954); 25 Am.Jur.2d, Highways, § 182. Hence, under the theory that what special privileges the sovereign giveth, it can, in the light of a paramount public need, taketh away, a utility always runs the risk that the public welfare may require changes in the public highways which will require relocation of its facilities and for which 'a utility must always be prepared to assume and pay for.' State Highway Department v. Roberts, supra, 215 A.2d at 254. See also New York Tunnel Authority v. Consolidated Edison Co., 295 N.Y. 467, 68 N.E.2d 445 (1946); Bell Telephone Co. v. Pennsylvania Public U. Com'n, 139 Pa.Super. 529, 12 A.2d 479 (1940).

It is this well-settled common law rule that Artesian argues has been displaced by a statutory right to full relocation cost compensation. Specifically, Artesian argues that the Federal-Aid Highway Act of 1956 as amended, 23 U.S.C. § 101 et seq., and its state counterpart, 17 Del.C. § 132(b) (5), create a qualified right to utility relocation cost reimbursement which has ripened into an absolute right to full reimbursement in all federal-aid highway projects by operation of two recent statutes, the Uniform Relocation Assistance and Real Property Acquisition Act of 1970, 42 U.S.C. § 4601 et seq., and the Delaware Uniform Relocation Assistance Act of 1972, 29 Del.C. § 9101 et seq.

No person would dispute the fact that the Federal-Aid Highway Act and 17 Del.C. § 132(b)(5) operate to give a utility only a qualified right to relocation cost reimbursement. The primary purpose of the Federal-Aid Highway Act is to stimulate and accelerate the construction of federal-aid highways by offering federal aid to state and local bodies which undertake construction within their boundaries. 23 U.S.C. § 101(b); D.C. Federation of Civic Ass'ns, Inc. v. Airis, 129 U.S.App.D.C. 125, 391 F.2d 478 (1968). The federal share payable ranges from 50% To 100%, depending upon the type of project engaged in by the state. 23 U.S.C. § 120. Section 123 of the Act provides that 'when a state Shall pay the cost of relocation of utility facilities' necessitated by the construction of a federal-aid project, '(f)ederal funds May be used to reimburse the State for such costs in the same proportion as federal funds are expended on the project.' 23 U.S.C. 123. Reimbursement, however, is not appropriate under this section where the state's 'payment to the utility violates the law of the State or violates a legal contract...

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