City of Plainfield v. Public Service Elec. and Gas Co.

• Decision Date: 05 June 1980
• Citation: 412 A.2d 759,82 N.J. 245
• Parties: CITY OF PLAINFIELD, Plaintiff-Respondent, v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 245

82 N.J. 245

412 A.2d 759

CITY OF PLAINFIELD, Plaintiff-Respondent, v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Oct. 9, 1979.

Decided March 10, 1980.

Rehearing Granted April 21, 1980.

Decided June 5, 1980.

Frank A. Sickinger, Newark, for defendant-appellant (Frank A. Sickinger and Carl L. Sulzberger, Newark, attorneys).

David H. Rothberg, Plainfield, for plaintiff-respondent (Sachar, Bernstein, Rothberg, Sikora & Mongello, Plainfield, attorneys).

The opinion of the court was delivered by

HANDLER, J.

The issue presented by this case is whether the City of Plainfield can compel Public Service Electric & Gas Company (PSE&G) to continue to supply free lighting service to municipal buildings pursuant to a contract entered into in 1898. The utility contends that the contract is not enforceable because it violates the statutory prohibition against discriminatory and unreasonable rates and preferences, L.1911, c. 195, § 18, codified as amended (L.1930, c. 35, § 1) at N.J.S.A. 48:3-1 and 48:3-4. The municipality asserts, however, that its contractual rights cannot be altered or impaired because the contract was entered into prior to the enactment of that statutory prohibition. It relies primarily on a 1916 judicial decision, Public Service Elec. Co. v. Board of Public Utility Comm'rs, 88 N.J.L. 603, 96 A. 1013 (E. & A.), which involved claims between these same parties concerning the same contractual provision wherein it was determined that the City was entitled to prevail under the contract.

In July 1898 the City of Plainfield enacted an ordinance designating certain streets in the city along which the Plainfield Gas & Electric Light Company, the predecessor of PSE&G, could place and maintain poles and conduits for the distribution of electric service. In November 1898 the utility and municipality entered into a written agreement relating to the manner in which such service was to be furnished. This contract provided that so long as the utility uses city streets it shall "light by electricity, free of charge" certain designated municipal buildings as well as all other municipal buildings generally, including any to be owned or used by the City in the future. ¹

Pursuant to this provision of the contract, the utility furnished free electric lighting to several municipal buildings, some of which were acquired after 1898. In December 1913, however, Public Service Electric Company, successor to Plainfield Gas & Light Company, notified the City that it would discontinue lighting the City's buildings free of charge as of February 1, 1914. The utility believed that this action was required by the Public Utility Act of 1911, L.1911, c. 195, § 18, which provided that "(n)o public utility . . . shall (m)ake, impose or exact any unjust or unreasonable, unjustly discriminatory or unduly preferential . . . rate," id. § 18(a), or "(m)ake or give, directly or indirectly, any undue or unreasonable preference or advantage to any person or corporation or to any locality," id. § 18(d).

In response to this notification, Plainfield petitioned the Board of Public Utility Commissioners (the Board), asking that the utility be compelled to comply with the terms of the 1898 contract. The Board issued an order directing the utility to comply with the contract terms. The utility then filed suit to set aside the Board's order. The trial court ruled in favor of the utility, finding that, while the performance required by the contract had been made unlawful by the 1911 legislation, the Board nevertheless lacked statutory authority to order specific performance of contracts. Public Service Elec. Co. v. Board of Public Utility Comm'rs, 87 N.J.L. 128, 130-131, 93 A. 707 (Sup.Ct.1915).

Plainfield appealed to the Court of Errors and Appeals, which affirmed the lower court's judgment vacating the Board's order compelling specific performance of the 1898 contract. The City, nevertheless, prevailed in its legal contention under the decision of the Court of Errors and Appeals. While the Court confirmed the lower court's ruling that the Board's order was invalid because it had gone beyond its statutory powers in ordering specific performance of the 1898 contract, 88 N.J.L. at 608-609, 96 A. 1013, it rejected the lower court's reasoning with respect to the applicability of the 1911 act, finding the legislation to be "entirely prospective and not at all retroactive," id. at 607, 96 A. at 1014.

Following that decision, the utility resumed, and has since continued to provide, free lighting service to a number of city-owned facilities. In September 1974 Plainfield notified PSE&G that three additional buildings should be included under PSE&G's contractual obligation to furnish free lighting. The utility rejected the request, maintaining that these three buildings did not fall within the 1898 contract. In addition, it questioned whether the contract could still be enforced with respect to any municipal buildings, even those then receiving free service. Since 1975 PSE&G has refused to furnish free service for the three buildings under the 1898 contract and the City has withheld payment of substantial portions of its electric lighting and power bills attributable to these three buildings.

Plainfield filed a complaint in Superior Court for declaratory judgment to determine whether PSE&G is required to provide free lighting service for the three additional buildings a library, a youth center, and a museum and, if so, whether the City is entitled to a credit against future billings for the partial amount paid to PSE&G for lighting each of these buildings since it was acquired by Plainfield. PSE&G by answer denied that the three additional properties fall within the coverage of the 1898 contract, and further asserted that the provisions of the contract regarding free lighting service are illegal; it also filed a counterclaim asking the court to hold the agreement unenforceable. In answer to PSE&G's counterclaim, Plainfield pleaded the 1916 decision of the Court of Errors and Appeals as a bar to any attack on the enforceability of the 1898 contract.

The trial court ruled in favor of Plainfield on its complaint and on PSE& G's counterclaim, concluding that the three new facilities fell within the language and intent of the 1898 contract. It emphasized, however, that PSE& G's contractual obligations to provide free service extended only to electric lighting, not to all electric service. It found that the 1898 contract obligated PSE&G to furnish free lighting service for each of the three additional buildings. Because this obligation had not been met in the past, the court ruled that Plainfield would be allowed to make a claim against future billings for all sums previously paid to PSE&G for lighting each building since the date it had initially been occupied for municipal purposes. PSE&G filed a notice of appeal with the Appellate Division. In an unreported per curiam decision, that court affirmed the trial court's decision on the ground that the 1916 decision of the Court of Errors and Appeals was binding. This Court granted PSE&G's petition for certification. 79 N.J. 487, 401 A.2d 243 (1979).

I

The essential issue in the case is whether particular provisions of the Public Utility Act, viz. N.J.S.A. 48:3-1 and 48:3-4, should be applied to invalidate unjustly discriminatory utility rates or unreasonable preferences set by a contract between a public utility and a municipality entered into prior to the enactment of the Public Utility Act.

The Court of Errors and Appeals in the earlier litigation involving this same contract, as already noted, limited application of the act's prohibition against unjust discrimination and unreasonable preferences to rate arrangements entered into after the statute's date of enactment. 88 N.J.L. at 608, 96 A. 1013. The primary ground for its decision was that the Board of Public Utility Commissioners had no authority to order the specific performance of the contract. The Court nevertheless did consider the application of the statute to antecedent contracts, noting that the language of the 1911 Act stated that no public utility "shall . . . make" any unjustly discriminatory or unduly preferential rates. It viewed this "verb phrase" as being "used to prohibit a contingent future event," and concluded that "(i)t is perfectly clear that the statute is without retroactive effect, and that it cannot operate upon the contract of 1898, which, concededly, was lawful when made." 88 N.J.L. at 608, 96 A. at 1015.

The soundness, as well as the necessity, of this reasoning is at best debatable. One may question whether the Court was actually confronted with a classic claim of retroactivity. The issue as to the application of the 1911 act should have been restricted to whether it would require nondiscriminatory rates for the utility service on a prospective basis, not whether such rates could be imposed and charged retrospectively against the municipality. Moreover, in other cases, the statute was not considered to be so "perfectly clear" as to its "retroactive" application. For example, one case decided by the Supreme Court before the decision in Public Service Electric, supra, applied section 18 of the 1911 act to a preexisting gratuity furnished by a common carrier. Public Service Ry. Co. v. Bd. of Pub. Util. Comm'rs, 85 N.J.L. 123, 125-126, 88 A. 818 (Sup.Ct.1913), aff'd o.b. 86 N.J.L. 696, 92 A. 1087 (E. & A. 1914). And in Lehigh Valley R.R. Co. v. United Lead Co., 102 N.J.L. 545, 549, 133 A. 290 (Sup.Ct.1926), a case decided after the Errors and Appeals decision in Public Service Electric, the court held that the provisions of a contract entered into in 1904 violated the 1911 Public Utility Act's prohibition against unreasonable preferences and discriminatory practices, stating that "a promisor is excused from performance of a contract, lawful when made, when...