Howell Tp. v. Manasquan River Regional Sewerage Authority

• Decision Date: 09 February 1987
• Parties: HOWELL TOWNSHIP and Howell Township Municipal Utilities Authority, Plaintiffs- Appellants, v. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, Ocean County Utilities Authority, Borough of Farmingdale and Township of Wall, Defendants-Respondents. BOROUGH OF FREEHOLD, Eric H. Foster, Jr., and Edward S. Mack, Plaintiffs- Appellants, v. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, Ocean County Utilities Authority, Borough of Farmingdale and Township of Wall, Defendants-Respondents. TOWNSHIP OF FREEHOLD, David P. Segal, Roberta Friedman and Evelyn Cross, Plaintiffs-Appellants, v. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, Ocean County Utilities Authority, Borough of Farmingdale and Township of Wall, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 173

215 N.J.Super. 173

521 A.2d 858

HOWELL TOWNSHIP and Howell Township Municipal Utilities

Authority, Plaintiffs- Appellants, v. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, Ocean County

Utilities Authority, Borough of Farmingdale and

Township of Wall, Defendants-Respondents.

BOROUGH OF FREEHOLD, Eric H. Foster, Jr., and Edward S.

Mack, Plaintiffs- Appellants, v. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, Ocean County

Utilities Authority, Borough of Farmingdale and

Township of Wall, Defendants-Respondents.

TOWNSHIP OF FREEHOLD, David P. Segal, Roberta Friedman and Evelyn Cross, Plaintiffs-Appellants, v. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, Ocean County

Utilities Authority, Borough of Farmingdale and

Township of Wall, Defendants-Respondents.

Superior Court of New Jersey,

Appellate Division.

Argued Dec. 10, 1986.

Decided Feb. 9, 1987.

William J. O'Hagan, Jr., for appellants Howell Tp. and Howell Tp. Municipal Utilities Authority (Stout, O'Hagan & O'Hagan, attorneys, William O'Hagan, of counsel and on the joint brief with Matthew R. Kiffin).

Joseph D. Youssouf, for appellant Borough of Freehold (Joseph Youssouf, of counsel and on the joint brief).

Duane O. Davison, for appellant Tp. of Freehold (Bennett, Davison & Monoz, attorneys; Duane Davison, of counsel and on the joint brief).

Charles E. Starkey, for respondent Manasquan River Regional Sewerage Authority (Starkey, Kelly, Blaney & White, attorneys; Charles Starkey on the brief).

Respondent Ocean County Utilities Authority has filed a letter communication of non-participation.

Respondent Borough of Farmingdale and Township of Wall have not filed briefs.

Before Judges KING, DEIGHAN and HAVEY.

The opinion of the court was delivered by Havey, J.A.D.

The principal issue raised by these consolidated appeals is whether the Chancery Division has the inherent power to dissolve a local sewerage authority created under N.J.S.A. 40:14A-1, et seq. We conclude that the Chancery Division has no such power. We hold that a local sewerage authority may be dissolved only under the statutory framework provided by N.J.S.A. 40:14A-1, et seq., and the Local Authorities Fiscal Control Law, N.J.S.A. 40A:5A-1, et seq.

The issue comes to us by way of appeals from a summary judgment of the Chancery Division dismissing plaintiffs' complaints in which they sought an order: (1) dissolving defendant Manasquan River Regional Sewerage Authority (MRRSA) of which plaintiffs were constituent members; (2) invalidating a service agreement between MRRSA and defendant Ocean County Utilities Authority (OCUA); (3) invalidating plaintiffs' service agreements with MRRSA; (4) compelling OCUA to assume MRRSA's existing indebtedness and to establish a uniform rate for all of its customers, and (5) compelling defendants Township of Wall and the Borough of Farmingdale, members of MRRSA, to join in a plan to dissolve MRRSA. Plaintiffs also sought damages against OCUA based on theories of negligence and intentional misrepresentation. We affirm the summary judgment dismissing plaintiffs' complaints to the extent that they sought an order dissolving MRRSA, compelling OCUA to assume MRRSA's debt and compelling Wall and Farmingdale to participate in the dissolution. However, we reverse the dismissal of plaintiffs' remaining claims. The Chancery Division judge failed to address whether there were genuine issues of material facts as to the remaining relief sought. We therefore remand for further proceedings.

MRRSA was created in 1972 pursuant to N.J.S.A. 40:14A-1 by parallel ordinances adopted by the five participating municipalities: plaintiffs Borough of Freehold, Howell Township, Township of Freehold, and defendants Borough of Farmingdale and Township of Wall. MRRSA originally planned to construct both a waste-water treatment facility and regional collection system to collect and treat the waste-water flow generated in its service area. It contemplated installation of regional interceptor sewer lines paralleling major streams in the region which would convey the waste water to a treatment plant to be constructed by MRRSA in Wall Township.

However, in 1980 federal and state environmental agencies directed MRRSA to explore the possibility of using existing treatment facilities then in place in Ocean County and operated by OCUA. Plaintiffs claim that during negotiations between MRRSA and OCUA in 1980 and 1981, OCUA estimated that its "user" charge of $850 per 1,000,000 gallons would not increase significantly over the next four years. According to plaintiffs, federal and state officials, relying upon OCUA's projection determined that no grants would be given to MRRSA to assist in the construction of its own regional waste-water treatment facility. As a result, MRRSA abandoned its plan to construct the plant. Instead, it decided to construct interceptor sewer lines to collect untreated sewage from its member municipalities and convey it to OCUA's plant for treatment and disposal.

On September 16, 1981, MRRSA and OCUA entered into a service contract under which OCUA agreed to collect and treat MRRSA's waste water. Following the execution of the service agreement, MRRSA entered into agreements with its member municipalities obligating MRRSA to construct force mains and an interceptor system to transport the waste water to OCUA's facility in Ocean County. The system is presently in place and operating. MRRSA issued temporary bonds to finance the construction of these improvements, and on July 12, 1984, approved a bond resolution authorizing issuance of $21,000,000 in permanent bonds. We are advised that sale of the permanent bonds has been withheld pending disposition of this action and that temporary financing is continuing.

According to plaintiffs, OCUA increased its rate from $850, charged in April 1981, to $1,800 per 1,000,000 gallons, charged in January 1984. MRRSA collects OCUA's fee from its members and adds an additional fee to cover its own capital reserves, insurance costs and the payment of principal and interest on the interim financing. As of the date of plaintiffs' complaints, February 8, 1985, MRRSA had proposed a bulk rate to be charged its member municipalities of $3,022 per 1,000,000 gallons.

Plaintiffs instituted these consolidated actions, claiming that MRRSA has become a "... superfluous administrative agency [which] should be dissolved." They sought dissolution of MRRSA and an order compelling OCUA to assume MRRSA's indebtedness. Plaintiffs alleged that the service agreement between MRRSA and OCUA resulted in disparate treatment between MRRSA and OCUA members in that plaintiffs were being charged substantially higher fees than OCUA members for essentially the same service. Plaintiffs demanded implementation of "... uniform, nondiscriminatory and equitable sewer service rate for all classes of uses connected to ... OCUA['s sewerage] system." Finally, plaintiffs demanded damages against OCUA for OCUA's negligent or intentional misstatements to MRRSA and federal and state officials which resulted in MRRSA's decision to abandon its own plans to construct its own waste-water treatment facility.

MRRSA moved for partial summary judgment, seeking dismissal of the complaints to the extent that they sought dissolution of the authority. The Chancery Division judge granted the motion, concluding that it had no power to dissolve the authority, reasoning that the method of dissolving a local authority was a legislative, rather than a judicial concern. The judge then noted that an action had been instituted by MRRSA against OCUA challenging the rate OCUA charged MRRSA for waste-water treatment. In that action, MRRSA sought damages and a rate alteration, contending that OCUA had misrepresented that the $850 rate would remain in effect through 1984 and that a substantial part of rate presently charged by OCUA reflected unnecessary expenses incurred by OCUA prior to its service contract with MRRSA. The judge was of the view that the remaining relief sought by plaintiffs in the present actions would be mooted if MRRSA succeeded in its action against OCUA. He therefore dismissed "without prejudice" plaintiffs' remaining claims.

Plaintiffs first contend that the Chancery Division erred in concluding that it was not empowered to dissolve MRRSA. They argue that under the Superior Court's original general jurisdiction, it has inherent equitable power to dissolve the authority. We disagree.

MRRSA is a regional authority created under N.J.S.A. 40:14A-1, et seq. It is empowered to construct, maintain and operate works for the collection, treatment or disposal of sewage or other waste, charge fees to the recipient of the services provided, and to issue bonds for the financing of such works. N.J.S.A. 40:14A-2. The governing bodies of any two or more municipalities, by the adoption of parallel ordinances, may create an authority to serve the municipalities as an autonomous body. N.J.S.A. 40:14A-4(c).

N.J.S.A. 40:14A-4(h) permits member municipalities to dissolve the authority by parallel resolutions on condition that: (1) either the members of such authority have not been appointed or the authority has consented to such dissolution, and (2) the authority has no debts or obligations outstanding.

There is no provision in N.J.S.A. 40:14A-1, et seq. permitting dissolution of the local authority once it has incurred indebtedness by temporary or permanent financing, as is the case here. Such a procedure was provided by the passage of the Local Authority's Fiscal Control Law, L.1983, c. 313, codified as N.J.S.A. 40A:5A-1, et seq. This legislation vested in the Local Finance Board (Board), a state agency, the power to oversee the creation, financing and dissolution of local authorities. N.J.S.A. 40A:5A-4 to :5A-21. Its legislative purpose was to "... promote the financial integrity and stability of local authorities ... by providing for State review of project financing of local...