Canterbury Properties, Inc. v. Municipal Utilities Authority of Mt. Laurel Tp.

• Decision Date: 11 July 1973
• Citation: 307 A.2d 630,124 N.J.Super. 448
• Parties: CANTERBURY PROPERTIES, INC., a New Jersey Corporation, Plaintiff-Respondent, v. The MUNICIPAL UTILITIES AUTHORITY OF MT. LAUREL TOWNSHIP, Defendant-Appellant, and Mt. Laurel Sewerage Corporation, a New Jersey Corporation (now known as Sewel, Inc.), et al., Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 448

124 N.J.Super. 448

307 A.2d 630

CANTERBURY PROPERTIES, INC., a New Jersey Corporation, Plaintiff-Respondent, v. The MUNICIPAL UTILITIES AUTHORITY OF MT. LAUREL TOWNSHIP,

Defendant-Appellant,

and

Mt. Laurel Sewerage Corporation, a New Jersey Corporation

(now known as Sewel, Inc.), et al., Defendants-Respondents.

Superior Court of New Jersey,

Appellate Division.

Argued June 4, 1973.

Decided July 11, 1973.

John W. Trimble, Turnersville, for defendant-appellant, Municipal Utilities Authority of Mt. Laurel Township (Higgins & Trimble, Turnersville, attorneys).

John A. Jones, Cherry Hill, for plaintiff-respondent, Canterbury Properties, Inc. (Toll, Friedman, Pinsky & Jones, Cherry Hill, attorneys).

Josiah E. DuBois, Jr., Camden, for defendants-respondents, Mt. Laurel Sewerage Corp., Mt. Laurel Water Corp., and Richard C. Goodwin (DuBois, Maiale & DuBois, Camden, attorneys).

Before Judges CARTON, MINTZ and SEIDMAN.

The opinion of the court was delivered by

CARTON, P.J.A.D.

The result in this case turns on the validity of certain covenants made by defendant Municipal Utilities Authority of Mt. Laurel Township in connection with its acquisition of a sewerage and water supply system. An outline of the events leading up to the present litigation will serve to provide a backdrop for a more detailed consideration of the factual and legal issues involved.

Defendant Municipal Utilities Authority agreed to purchase the sewerage and water systems from defendant utility companies and in conjunction with that acquisition it assumed performance of certain covenants undertaken by the sellers in agreements between them and various land developers fixing the amount of fees to be charged for connecting dwelling houses in these developments to the systems. When defendant Authority adopted a rate schedule increasing the connection fees and attempted to make them retroactive, plaintiff, the owner of one of the developments, objected, claiming the Authority was bound by the terms of the collateral agreements which it had assumed. It brought this action seeking a determination to that effect, recovery of fees paid under protest in accordance with the revised schedule, and restraint against collection of further fees except in accordance with the agreements between it and the sewerage and water companies. The court entered judgment in favor of plaintiff and defendant Authority appeals.

Plaintiff Canterbury Properties, Inc. is the assignee of two agreements between Alan and Harris Kessler, co-partners, and the Mt. Laurel Sewerage Corporation and the Mt. Laurel Water Corporation. The Kessler brothers are land developers who control a 77-acre tract in the Township of Mt. Laurel, a formerly rural municipality rapidly becoming part of suburban Philadelphia. The housing development of single-family residences constructed on that tract is known as Canterbury Greene.

The water and sewerage companies referred to above were privately-owned utilities organized and controlled by defendant Richard C. Goodwin, also a land developer in the township. Goodwin, as part of his business operations, constructs water and sewerage facilities for his housing developments and enters into service agreements with nearby developers. In all, there were 18 sewerage and 11 water contracts entered into in Mt. Laurel.

The agreements between the Kesslers and the sewerage company, which was entered into in April 1967, provided that the first 200 homes in the tract would be connected to the system without any connection charge as such. As to any further homes, a charge of $275 would be made for such connection. The agreement also required the Kesslers to pay the cost of constructing a pumping station and force main, which cost would be returned to the Kesslers over a 15-year period except for the sum of $53,000. This sum was stipulated by the parties to represent a prepayment of connection fees.

In May 1968 the Kesslers assigned the agreement to plaintiff. They completed construction of the pumping station and force main at about the same time at a total cost of $135,000. Housing construction was then begun. By May 1971, 197 homes were completed and connected to the utility systems.

In the Spring of 1969 the Superior Court appointed commissioners to fix compensation for a public taking of the utilities by defendant Authority, a municipal agency formed under N.J.S.A. 40:14B--1 et seq. In July 1969, the commissioners reported a value of $1,182,953 for the sewerage corporation and in August of that year they reported a value of $763,893 for the water corporation. The condemnation action proved abortive because the Authority was unable to float a bond issue in that amount.

On April 9, 1970, however, the Authority and the utility companies reached an agreement of sale by which the Authority agreed to purchase all the facilities of the utility companies and assume all its existing contracts for $1,500,000 cash plus $300,000 in Authority bonds, if the Authority was able to issue bonds in the total amount. The bonds were apparently so issued and the sale completed on June 29, 1970. At that time the Kesslers were reimbursed by the utility companies for their construction expenditures in connection with the utility systems, minus $53,000.

On June 24, 1970 (five days prior to the sale, but a month after it negotiated the purchase agreement) the Authority adopted a rate schedule which provided for a connection charge of $100 for water service and $300 for sewerage. A new municipal government was elected in November 1970 and four new appointments were made to the Authority. By letter of January 11, 1971 the Authority informed plaintiff that it would enforce the rate schedule, including connection fees, retroactively to June 24, 1970, notwithstanding any prior agreements. It threatened to deny plaintiff's houses connection to the utility system and to inform the township committee that certificates of occupancy should not be granted. The township building inspector subsequently did deny a certificate of occupancy and plaintiff was obliged to pay the fees.

Plaintiff paid the sum of $13,000 directly to defendant Authority, representing fees for 30 homes. Plaintiff then instituted this suit against the Authority, the utility companies, and Richard C. Goodwin, individually. Defendant Authority cross-claimed against Goodwin and the utility companies. On October 20, 1971 the trial judge ordered the establishment of an escrow account fot future connection fees. The sum of $11,600 was paid into this account. As part of the stipulation of facts, plaintiff and the Authority agreed to a settlement of their claims against each other before extending the litigation to Goodwin and the utility companies.

The ultimate questions thus is whether the Authority's revised schedule of connection fees is applicable to plaintiff and the houses constructed in its development. We think not.

Defendant Authority's argument for avoidance of any obligation to comply with the connection fee arrangement between its predecessor and the utility companies (from which it purchased the facilities) is two-fold. It argues first that the original agreements between the private utility companies and the developer were unenforceable because they violated Board of Public Utility Commissioners' regulations. Secondly, it contends that even if such agreements were valid as between the original parties, they were unenforceable against the Authority because their assumption was Ultra vires. In particular, they urge that the agreements violate the mandate of the Municipal Utilities Authority Act, N.J.S.A. 40:14B--1 et seq., that connection fees be uniform within the distrct.

The first argument is devoid of merit. The agreements accompanied requests by the utility companies for the Board to approve resolutions of the governing body granting municipal consents to service the lands covered by them. They provided for the extension of sewerage and water service within areas already within the franchise of the utilities and were presumably filed under N.J.S.A. 48:2--27, entitled 'Extension of facilities.' The Board, in its decisions approving such municipal consents, specifically referred to the agreements which set forth the schedule of fees for making connections. We find nothing in the record which provides a basis for any contention that the Board exceeded its statutory grant of power. It seems apparent that its action in granting such approval was clearly within the scope of the statutory language which authorized such approval 'where, in the judgment of the board, the extension is reasonable and practicable * * *.'

The fact that the procedure followed by the Board may not have followed its own suggested formula for approval of such...