Chrysler Corp. v. New Castle County

• Decision Date: 25 February 1983
• Citation: 464 A.2d 75
• Parties: CHRYSLER CORPORATION, a corporation of the State of Delaware, Plaintiff, v. NEW CASTLE COUNTY, a municipal corporation of the State of Delaware, Defendant and Third-Party Plaintiff, v. The CITY OF NEWARK, a municipal corporation of the State of Delaware, Third-Party Defendant. . Submitted:
• Court: Delaware Superior Court

Page 75

464 A.2d 75

CHRYSLER CORPORATION, a corporation of the State of

Delaware, Plaintiff, v. NEW CASTLE COUNTY, a municipal corporation of the State of

Delaware, Defendant and Third-Party Plaintiff, v. The CITY OF NEWARK, a municipal corporation of the State of

Delaware, Third-Party Defendant.

Superior Court of Delaware New Castle County.

Submitted: Feb. 25, 1983.

Decided: June 8, 1983.

Motions for summary judgment. Granted.

Edward M. McNally (argued), P. Clarkson Collins, Jr., and Scott A. Green, of Morris James, Hitchens & Williams, Wilmington, for plaintiff.

Stephen J. Rothschild (argued), of Skadden, Arps, Slate, Meagher & Flom, Wilmington, for defendant and third-party plaintiff.

Thomas G. Hughes (argued), of O'Donnell & Hughes, P.A., Wilmington, for third-party defendant.

CHRISTIE, Justice: ^*

This case involves an action by Chrysler Corporation against New Castle County in connection with sewer fees. Chrysler entered into an agreement in 1951 under which Chrysler contributed funds to the County toward the construction of a sewer line to the City of Newark, Delaware. The County, in turn, agreed to limit the sewer service charge which it was to collect from Chrysler. The County further agreed that, in the event the sewer line was turned over to Newark, Chrysler would not be liable for a sewer charge greater than that paid by Newark to the County for sewer services rendered in Newark. Chrysler seeks a declaratory judgment that the County must abide by its agreement and a money judgment for what was alleged to be past overcharges.

The County denies any breach of its agreement with Chrysler and has filed a third-party complaint against Newark, seeking to hold Newark liable for any sums which may be adjudged to be due Chrysler from the County. Newark, in turn, has denied any liability to the County on account of sewer charges collected from Chrysler and has raised several affirmative defenses. No complaint has been filed against Newark by Chrysler. Therefore, Newark can be held liable (if at all) in this case only if the County is first held liable to Chrysler. ¹

Chrysler and Newark have both moved for summary judgment.

FACTS

In an attempt to cope with the sewage disposal problem in New Castle County in the late 1940's, the Delaware General Assembly passed legislation granting the County broad authority to take the necessary steps to treat and dispose of sewage. The enabling statutes gave the County power to enter into contracts with industrial establishments for the disposal of sewage, to accept contributions toward the construction of sewers, and to contract with any city or town located within the County for the disposal and treatment of sewage. See 9 Del.C. § 2202(3); 9 Del.C. § 2202(6); 9 Del.C. § 2215. The County proceeded to contract with municipalities and industrial establishments for construction of a County sewage disposal system. See e.g., New Castle County v. Mayor and Council of New Castle, Del.Supr., 372 A.2d 188 (1977).

In 1951, as part of its comprehensive plan, the County began negotiation with Newark and four industrial concerns with plants within the City of Newark. The four industrial establishments were Chrysler, National Vulcanized Fibre Corporation (NVF), E.I. duPont de Nemours & Co., and Curtis Paper Company. The subject of the negotiations was an interceptor trunk line to serve the Newark area. This line was known as the North Christina Interceptor.

As a result of these negotiations, Chrysler entered into an agreement with the County on October 2, 1951. Under the terms of the agreement, Chrysler agreed to contribute $200,000 toward the construction of the sewer line and to:

(3) Pay to [the County] an annual sewer service charge at the usual County rate if as and when such annual service charge may be fixed and put into effect by [the County].

However, the County agreed that:

(3) If, after [the County] shall have deeded any part of the extension of the North Christina Interceptor to the City of Newark, and if Chrysler will be then connected directly to such part of said interceptor, Chrysler will be excused from the payment of any further annual sewer service charges to [the County], but will be liable to pay to the City of Newark its usual sewer service charges. Provided, however, Chrysler shall not be required to pay to the City of Newark an annual sewer service charge on a schedule having charges greater than that paid by the City of Newark to [the County], based on the volume of sewage measured by approved sewage meters installed by Chrysler on their property.

On November 20, 1951, the County and Newark entered into an agreement which provided that Newark would assume ownership and control of those portions of the sewer line which were to lie within the territorial limits of Newark and a short distance beyond. Newark agreed to pay $18,000 toward the cost of construction of the North Christina Interceptor. In return, the County agreed to dispose of the sewage carried in the sewer line for a charge based upon the actual flow of sewage. Newark was permitted to charge its users subject to the provision that:

6. Newark may collect sewer service charges for residential, commercial, industrial or other properties discharging into these sewers at a rate to be established by the City Council. Such sewer charges on any real property located outside of the corporate limits of the City of Newark shall not be other than the usual County sewer service charge as fixed and determined from time to time by [the County], nor shall such sewer service charges to Chrysler Corporation, E.I. duPont deNemours & Co., Curtis Paper Company and National Vulcanized Fibre Company be other than the usual County sewer service charge as fixed and determined from time to time by [the County], the aforesaid Corporations having contributed to the construction cost of said sanitary interceptor sewer. [Emphasis added.]

On May 27, 1952, NVF signed an agreement with the County which formalized an October 1951 letter of intent to contribute $20,000 toward construction of the sewer line. NVF agreed to:

3. Pay to [the County] an annual sewer service charge at the usual County rate based on its actual discharge of sewage into said sewer but never at any time in excess of the lowest rates then being charged by [the County] for like service.

However, the parties also agreed that:

2. If [the County] shall have transferred any part of said sanitary interceptor trunk sewer to Newark, and if [NVF] shall then be connected directly to such part of said sewer, [NVF] shall be excused from the payment of any further annual sewer service charge to [the County] and will be liable to pay to Newark its usual sewer service charge provided, however, that [NVF] shall not be required to pay to Newark an annual sewer service charge on a schedule having charges greater than that paid by Newark to [the County].

The interceptor line was then constructed and Newark assumed its responsibilities under its agreement with the County. For nearly twenty years thereafter, the County charged Newark and industries located outside of Newark, industries similar to NVF and Chrysler, the same rate.

In 1972, the United States Congress enacted the Clean Water Act, 33 U.S.C. 1251 et seq., which imposed stricter water pollution control standards than those enforced by the County at that time. As a result, the County was required to construct new sewage treatment facilities. To help offset the great cost of the new construction, the County sought federal and state financial aid. As a prerequisite to receiving federal funds, the federal regulations required the County to develop a user service charge system which took into account, among other things, the services which a wholesale customer, such as Newark, was already providing to the system. ² The County states that without this new rate structure, federal funds would not have been available for construction of the improved sewage treatment facilities. ³

As a result of these federal regulations, the County changed its fee structure. Newark also restructured its rates and began charging industrial customers the "Newark/Industrial Rate". This new rate exceeded the rate the County charged Newark and also exceeded the rate the County charged industrial users outside the City of Newark.

PRIOR LITIGATION

No controversy arose until 1976 when NVF discovered that it was being charged a rate which was not in accord with its agreement with the County. NVF then refused to pay the fees which exceeded the limitation of that agreement. Newark, in turn, filed suit in the Court of Chancery against NVF ⁴ and NVF filed a third-party complaint against the County for alleged overcharges.

Since the contracts and contentions in the case now before the Court correspond in many respects to those before the Vice Chancellor in the NVF litigation, the significance and application of the opinions of the Vice Chancellor in the NVF litigation will be discussed in some detail here.

Since most of the facts before the Court of Chancery were not in dispute, Newark and NVF each filed motions for summary judgment. The dispute involved the possible application of three sewer rates:

1. The rate then being charged by Newark to industrial users located within Newark (the Newark/Industrial Rate) which was 79cents per thousand gallons at the time the suit was filed;

2. The rate charged by the County to industrial users located outside Newark (the Industrial Rate) which was 61cents per thousand gallons;

3. The rate charged by the County to Newark (the Municipal Rate) which was 40.9cents per thousand gallons.

Newark requested that the Vice Chancellor affirm its right to charge the highest rate, the Newark/Industrial Rate. NVF, a third-party beneficiary of the 1951 agreement between Newark and the County, argued that that agreement limited the rate Newark could charge to the lowest rate--the Municipal Rate. The County,...