Hamilton Tp. Mun. Utilities Authority v. Apple Tree Corp.

• Decision Date: 27 June 1985
• Parties: HAMILTON TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, Plaintiff-Respondent, v. APPLE TREE CORPORATION, A New York Corporation, t/a Powder Mill Springs, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 440

202 N.J.Super. 440

495 A.2d 434

HAMILTON TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, Plaintiff-Respondent, v. APPLE TREE CORPORATION, A New York Corporation, t/a Powder

Mill Springs, Defendant-Appellant.

Superior Court of New Jersey,

Appellate Division.

Argued June 3, 1985.

Decided June 27, 1985.

Salvatore Perillo, Atlantic City, for defendant-appellant (Salvatore Perillo, Atlantic City, on brief).

David C. Patterson, Berlin, for plaintiff-respondent (David C. Patterson, Berlin, on brief).

Before Judges McELROY and DREIER.

The opinion of the court was delivered by

DREIER, J.A.D.

Defendant has appealed from a judgment entered in favor of plaintiff for $30,638.99 representing "sewer reservation charges" for 36 units which had been set aside for defendant. These units were originally contemplated as a portion of phase two of defendant's residential development. Phase one consisted of 104 units built at a time when plaintiff had no problem in granting permits to connect to its sewerage system. Defendant was initially granted reservations for an additional 224 units, the second phase of its development, but the New Jersey Department of Environmental Protection determined that plaintiff had over-committed for the issuance of development permits to various developers. Defendant's 224 permits were reduced to 100, but, as defendant contended, when it could not proceed as to the full second phase of its development, it lost its financing commitment and was able to build only an additional 64 units, leaving unused 36 connection permits.

The original developer apparently was never advised by plaintiff that there would be any future reservation of capacity fee nor were any bills received for such fees. In 1977 he sold his interest to defendant's principal who testified that when he purchased the project there were no liens against the property for unpaid municipal utility authority fees. It was not until 1979, when the authority rescinded its commitment for the unused 36 units, that he was advised of outstanding "reservation" fees. Parenthetically, in 1981 defendant agreed to pay $95,000 to plaintiff to purchase an additional 160 sewer units to finish phase two of the project.

The issue before us is the validity of the charges until April 11, 1979 plus interest for the stand-by reservation fees. Plaintiff's authority to collect rents, rates, fees or other charges for sewerage is contained in N.J.S.A. 40:14B-22. This statute provides for the assessment of two classes of charges: "sewer service charges" and "connection fees." Specifically, the statute provides:

Every municipal authority is hereby authorized to charge and collect rents, rates, fees or other charges (in this act sometimes referred to as "sewer service charges") for direct or indirect connection with, or the use or services of, the sewerage system ... in addition to any such sewer service charges, a separate charge in the nature of a connection fee or tapping fee ... may be imposed.

N.J.S.A. 40:14B-22 further provides that the amount of the connection charges "shall otherwise be entirely within the discretion of the authority in order that the combination of such connection fee or tapping fee and the aforesaid sewer service charges shall meet the requirements of section 23." Section 23 mandates that the revenues of the municipal authority at all times should be "adequate to pay the expenses of operation and maintenance of the utility system." Thus, the combination of service charges and connection fees combined must be sufficient to run the system. That being the case, a "reservation of capacity" charge which exacts an amount in excess of the authorized service or connection charges is ultra vires.

Plaintiff contends that the fees charged are authorized by N.J.S.A. 40:14B-20(10) [now 40:14B-20(12) pursuant to L. 1980 c. 77 § 4] generally giving a municipal utility authority the power:

To make and enforce by laws or rules and regulations for the management and regulation of its business and affairs and for the use, maintenance and operation of the utility system and any other of its properties, and to amend the same;

For the disputed fees to be imposed under the authority of this general powers section, such fees would be by definition something other than a "sewer service charge" or a "connection fee or tapping fee." Since these two types of fees must, as noted above, be "adequate to pay the expenses of operation and maintenance of the utility system," the general powers section can authorize no additional charge without causing the authority to secure more revenue than is needed to pay its expenses.

At oral argument plaintiff urged that additional authority for the imposition of its charges could be found in N.J.S.A. 40:14B-49 authorizing contracts for the treatment and disposal of sewerage or solid waste. This section, however, deals with contracts between a municipal utility authority and a governmental unit under which the contract charges "shall be in lieu of all or any part of the service charges which would otherwise be charged and collected by the municipal authority with regard to persons or real property within the territorial area of the government unit." This statute has no application in the case before us, although such contracts are recognized in N.J.S.A. 40:14B-23, which permits the total charges to "comply with the terms of any contract of the municipal authority."

Plaintiff urges that defendant's illegality argument not be heard, since the issue was not properly presented to the trial court. Specifically, it contends that since the illegality of the charge had not been raised as an affirmative defense, it should not have been considered by the trial judge. We note, however, that at the conclusion of the testimony defendant moved for "summary judgment" (obviously intended to be a motion for judgment pursuant to R. 4:40-1). The trial judge's rejection of plaintiff's procedural argument is implicit in his statement that he was "dealing with a governmental charge against ... a property owner" and that "the legitimacy of the charge" was at issue before him. Plaintiff was free to refute this argument...