Collingswood Sewerage Co. v. Borough of Collingswood

• Decision Date: 07 February 1918
• Citation: 102 A. 901,91 N.J.Law 20
• Parties: COLLINGSWOOD SEWERAGE CO. v. BOROUGH OF COLLINGSWOOD.
• Court: New Jersey Supreme Court

102 A. 901

91 N.J.Law 20

COLLINGSWOOD SEWERAGE CO.

v. BOROUGH OF COLLINGSWOOD.

Supreme Court of New Jersey.

Feb. 7, 1918.

(Syllabus by the Court.)

Certiorari to Board of Public Utility Commissioners.

Petition by the Collingswood Sewerage Company to the Board of Public Utility Commissioners, for authority to charge higher rates for services in the Borough of Collingswood. From a finding and order of the Board, the petitioner brings certiorari. Order set aside, and case remitted for proper findings.

Argued November term, 1917, before SWAYZE, TRENCHARD, and MINTURN, JJ.

Gilbert Collins, of Jersey City, and J. Fithian Tatem, of Camden, for prosecutor.

John W. Wescott and Francis D. Weaver, both of Camden, for Borough of Collingswood. L. Edward Herrmann, of Jersey City, and Frank H. Sommer, of Newark, for Board of Public Utility Com'rs.

SWAYZE, J. The prosecutor was incorporated in 1900 pursuant to the act of 1898 (P. L. 484; C. S. p. 3584).

In accordance with section 12 there was annexed to the ordinance, granting the consent of the borough required by the act, the maximum prices or rents that might be charged property owners for the use of the sewerage system. There was also stated a minimum price which, though not required, was justified by the statutory authority to state other terms and conditions. Except for the maximum and minimum, no price was fixed. In 1914 the sewerage company petitioned the board of public utility commissioners for its authority to charge higher rates. The board found that the present value of the plant after a proper allowance for depreciation was about $139,000; the gross income $12,433.36; operating expenses, taxes, and insurance $7,226.52; and the net balance $5,200, which it found furnished a revenue of more than 3 per cent. upon the company's property investment. Whether these figures make any allowance for depreciation does not appear. There is no finding as to whether the present rates are just and reasonable, sufficient or insufficient. The board contented itself with finding that it did not appear that the rates were so low as to be confiscatory. It found and stated in the beginning of its "report" that:

"It did not appear that the refusal to allow the increase of rates requested will result in the rendition of unsafe, inadequate, or improper service to those to whom the company is under obligation to serve with its present facilities."

The importance of the limitation on the finding indicated by the italicized words, is shown by a subsequent part of the report, where it is set forth that numerous applications were made to the board for orders requiring the sewerage company to make extensions of its service.

As to these, the report finds that there is no doubt of the desirability of these extensions, but the board is unable to find that it is reasonable and practicable for the company in its present financial condition to make them. It therefore declines to order the extension, but suggests that the matter be given "serious consideration" by the borough. "It may be that relief can be had only by municipal action which will make it possible for the utility to obtain new capital."

That certiorari is a proper method to review such failure of the board to act as the act of 1911 contemplates is now settled. The sewerage company was entitled to a formal determination of the claim advanced by it that existing rates are unjust and unreasonable (City of Passaic v. Board of Pub11c Utility Commissioners, 87 N. J. Law, 705, 95 Atl. 127), if the utility board had jurisdiction at all under the Public Utility Act. This right was not met by an adjudication that the rates were not so low as to be confiscatory. The question of confiscation is important when the claim is made under the Fourteenth Amendment that property has been taken without due process of law. The question under the Public Utility Act is stated by the act itself. Section 16c (P. L. 1911, p. 377). The board is thereby required to fix "just and reasonable individual rates." The question is not whether existing rates are confiscatory, but whether they are just and reasonable.

The first doubt to be resolved is whether the board had jurisdiction to settle this question. Its jurisdiction is challenged because it is said that to alter the rates would impair the obligation of the contract between the borough and the company. We think this question is settled, so far as this court is concerned, in favor of the jurisdiction of the board by what was said in at least three prior decisions. Public Service Railway Co. v. Public Utility Board, 85 N. J. Law, 123, 88 Atl. 818; North Wild wood v. Public Utility Commissioners, 88 N. J. Law, 81, 95 Atl. 749; Atlantic Coast E. R. Co. v. Public Utility Board, 89 N. J. Law, 407, 99 Atl. 395.

We might rest on these cases, but in view of the importance of the question, striking as it does at the root of a statute founding for good or ill a new public policy, we venture to add some additional considerations. In one sense, an ordinance embodying a municipal consent upon certain terms to a franchise, whether the general franchise to be a corporation or the special franchise to use the public streets, may be called a contract, accurately enough for practical purposes since it constitutes an enforceable agreement. It is, however, ordinarily an agreement of a peculiar kind. The municipality as such, although a party, indeed often as in this case the only party on one side, has little or no direct beneficial interest. It contracts, or rather imposes conditions, for the benefit of individuals, as in this case the borough, for the benefit of its citizens who might thereafter contract for connections with the sewerage system, provided for a maximum. But no citizen was bound to connect with the company's sewers, nor was there any express language requiring the company to supply the connection. There could not be any such requirement until the price was determined. The ordinance and consent did not fix a price, but only the maximum and minimum between which the price must fall. So far as the ordinance or consent goes, there might be within those limits a different price for each connection, depending on its distance from a central point or a discharge point, on the size of the building, the number of toilets or water taps, or perhaps other considerations. In case of disagreement between landowner and sewerage company, the price would have to be fixed by some tribunal. It would not naturally be the other party to the agreement; it would properly be some outside tribunal, which might at least be supposed to be impartial. This might be a court, a commission, or since 1911 the Public Utility Commission. We know of no other way in which the individual rate could be fixed and a contract made for sewerage service. The Legislature has in terms given that power to the Public Utility Commission, and while the borough had power to impose fixed individual rates and a detailed schedule as a condition precedent to its consent, it chose not to exercise that power, but to impose more elastic and less certain conditions.

Even if the ordinance had fixed the rate for each connection, there would have been no effective way for enforcing it as a contract by action, since the other contracting party is not injured and could only recover nominal damages. Summit v. Morris Traction Co., 85 N. J. Law, 193, 88 Atl. 1048, L. R. A. 1915E, 385.

Regarding the ordinance solely as a contract, the individual citizens of Collingswood would have no right of action thereon because they are not parties to the agreement. Hall v. Passaic Water Co., 83 N. J. Law, 771. at page 776, 85 Atl. 349, 43 L. R. A. (N. S.) 750; Baum v. Somerville Water Co., 84 N. J. Law, 611, 87 Atl. 140, 46 L. R. A. (N. S.) 966. The truth is an ordinance of this kind is a grant upon condition rather than a contract. It creates public duties which can be enforced by mandamus. Rutherford v. Hudson River Traction Co., 73 N. J. Law. 227. 243, 63 Atl. 84. Whether, upon a mandamus to compel a connection with a house sewer or drain, the court could fix the price somewhere between the maximum and minimum is a question not now before us. The question now raised is whether the state...