Stone v. Old Bridge Tp.

• Decision Date: 02 March 1987
• Citation: 521 A.2d 1329,215 N.J.Super. 361
• Parties: George E. STONE, Plaintiff-Appellant, v. TOWNSHIP OF OLD BRIDGE, a Municipal Corporation of the State of New Jersey, Old Bridge Municipal Utilities Authority, Old Bridge Municipal Utilities Authority in Dissolution and Edward McLane, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 361

215 N.J.Super. 361

521 A.2d 1329

George E. STONE, Plaintiff-Appellant, v. TOWNSHIP OF OLD BRIDGE, a Municipal Corporation of the State of New Jersey, Old Bridge Municipal Utilities Authority, Old Bridge Municipal Utilities Authority in Dissolution and Edward McLane, Defendants-Respondents.

Superior Court of New Jersey Appellate Division.

Submitted Nov. 26, 1986.

Decided March 2, 1987.

James J. Cleary, Matawan, for plaintiff-appellant (James J. Cleary, Matawan, on the brief).

Jerome J. Convery, Old Bridge, for defendant-respondent Tp. of Old Bridge (Jerome J. Convery, Old Bridge, on the brief).

Heffernan & Wersinger, Marlboro, for defendants-respondents Old Bridge Mun. Utilities Authority and Edward McLane (Peter S. Wersinger, Marlboro, on the brief).

Before Judges FURMAN, DREIER and SHEBELL.

The opinion of the court was delivered by

DREIER, J.A.D.

Plaintiff appeals from a dismissal by the Chancery Division of his suit for a declaratory judgment, restraints and specific performance. Plaintiff served as the Executive Director of a municipal water utility known as the Old Bridge Municipal Utilities Authority (Water Authority) now in dissolution, under a five-year contract dated September 9, 1982. In November 1985, with 22 months remaining on the contract, the Township of Old Bridge enacted Ordinance 40-85 dissolving the Water Authority and a companion Sewerage Authority in order to create a new entity with the same name as the former Water Authority, i.e., the Old Bridge Municipal Utilities Authority (Utilities Authority). The functions of both of the prior municipal authorities were continued under the aegis of the new Utilities Authority. A new executive director was appointed, one Edward McLane. We are not informed by the record whether or not he was the former head of the Sewerage Authority.

On November 11, 1985 plaintiff was notified that his employment was terminated, but that he would be retained temporarily pending a review of his employment contract by special counsel retained by the newly-formed Utilities Authority. In an opinion delivered to the Authority January 15, 1986 special counsel determined that plaintiff's position had been validly terminated notwithstanding his employment agreement. Plaintiff was thereupon terminated January 18, 1986, without severance pay or other benefits. He was offered a position as a door-to-door bill collector at a salary substantially less than the $44,950 he earned at the time of his termination. In addition, he had accrued significant leave time and sick days.

The trial judge determined that the contract was validly terminated and granted defendant's motion to dismiss the complaint for failure to state a claim upon which relief could be granted. Specifically, he found:

Nothing in the legislation, nor in the ordinance dissolving the former Old Bridge Municipal Utilities Authority and creating a new one, indicates an intent to require a newly created authority to assume employment contracts entered into by a prior public authority which has been dissolved; moreover, such an intent should not be readily read into this legislation.

The court further rejected plaintiff's arguments that there was an effective novation, i.e., that by enacting the ordinance the Municipality expressly assumed all of the contractual obligations of the old Water Authority, and that the employment agreement would be specifically enforceable against the new entity. The trial judge also found no merit in plaintiff's Contract Clause objection to the abolition of the Water Authority and further denied plaintiff counsel fees for the prosecution of the action.

The Legislature in N.J.S.A. 40A:5A-20 requires that the Local Finance Board approve the dissolution of any municipal authority, which approval must be given if the ordinance

makes adequate provision in accordance with a security agreement or otherwise for the payment of all creditors or obligees of the authority ¹ and that adequate provision is made for the assumption of those services provided by the authority which are necessary for the health, safety and welfare of the recipients of those services.

Within the context of this statute, the words "all creditors or obligees of the authority" can only be fairly read as encompassing those with monetary claims. Plaintiff's reliance on this section is misplaced. Although his employment contract is not rendered unenforceable by its not being included within the Local Authorities Fiscal Control Law, N.J.S.A. 40A:5A-1 et seq., ² his claim is not such to make him a "creditor or obligee." If the law permits the termination of plaintiff's employment upon the dissolution of the Water Authority, or after assumption by the Utilities Authority, he would no longer be a creditor; if not, his claim would be viable.

Plaintiff's agreement with the Water Authority was specifically authorized by N.J.S.A. 40:14B-18 which at the time of the contract authorized a municipal authority to appoint and employ an executive director for periods not to exceed five years, and enter into contracts for such services, all "without regard to the provisions of Title 11 of the Revised Statutes." ³ The Legislature did not give Civil Service protection to these discretionary employees, but relegated them to their contractual rights.

Plaintiff's contract with the Water Authority provided that:

[T]he Authority agrees that during the term of the within contract, it will not eliminate the position of Executive Director nor will it create an equivalent position which would usurp the rights and authority of the Employee herein and/or substantially change the duties, obligations, rights and hours of employment of said position.

The Municipality, in Ordinance 40-85 stated:

Section 4. The Authority, upon the effective date of this ordinance, shall assume all services and obligations of the existing Sewerage Authority and the prior existing Utilities Authority.

Section 5. All contracts and other obligations of the Township under any agreements with the existing authorities are hereby ratified and confirmed and shall run to the Authority as if they had been entered into directly with the Authority.

Section 6. To the extent that such action in any way is deemed to have prejudiced the rights that any person or entity had with the Sewerage Authority or Utilities Authority, the Township agrees to assume responsibility for such obligations and to take any steps necessary to correct such actions, including, if necessary, the issuance of obligations by the Township or the Authority created herein to pay or provide for the payment of any outstanding obligations of the Sewerage Authority or the Utilities Authority.

Defendant Utilities Authority contends that the word "obligations" used throughout the ordinance refers solely to the monetary obligations and that the fourth recital to the contract defines the word "obligations" as the Water Authority's bonded indebtedness. The recital reads:

WHEREAS, the Utilities Authority has obligations outstanding pursuant to their General Bond Resolution, as amended (the 'Utilities General Bond Resolution').

This recital does not define "obligations," but rather is merely a statement that there are obligations outstanding pursuant to a particular resolution. Although the municipality used a term broader than one limited to debt ⁴ it appears that the drafters of the ordinance did not specifically consider the issue of an Executive Director's rights to continued employment.

As we read the ordinance and plaintiff's contract with the Water Authority, and applying traditional principles of municipal contract law, we must disagree with the trial judge's construction and conclude that the Utilities Authority assumed all of the contracts of the Water Authority including both debt obligations and the employment contract of plaintiff ⁵. A common-law rule of assumption of contract liabilities by successor municipal corporations "extends to contracts of employment so as to require their continuance after dissolution...." 2 McQuillin, Municipal Corporations § 8.17 at 596 (3d ed. 1979 & Supp.1985). Gober v. Pemberton Tp., 185 N.J.Super. 323, 335, 488 A.2d 516 (Law Div.1982); Board of Ed. of Voc. School v. Finne, 88 N.J.Super. 91, 105, 210 A.2d 794 (Law Div.1965); and see City of Groves v. Ponder, 303 S.W.2d 485 (Tex.Civ.App.1957); Fisher v. City of Mechanicville, 225 N.Y. 210, 121 N.E. 764 (1919).

But our analysis does not end here, since engrafted upon all public contracts are the propositions that one is not paid for work that is unperformed, Matter of Williams, 198 N.J.Super. 75, 77-80, 486 A.2d 858 (App.Div.1984), and that positions may be abolished for reasons of economy, McCartney v. Franco, 87 N.J.Super. 292, 297, 209 A.2d 329 (App.Div.1965). If, in fact, after the consolidation of the two Authorities there would have been two Executive Directors and only enough work for one to perform, one or the other must suffer a demotion or be terminated. The provision in plaintiff's contract with the Water Authority forbidding the elimination of the position of Executive Director of that Authority presupposed the continuation of the entity. It is only binding on the new Authority if its purpose has not been frustrated. If there were substantially similar duties to be performed with the new Authority, plaintiff should have been retained to perform them. Gober v. Pemberton Tp., supra; Board of Ed. of Voc. School v. Finne, supra; City of Groves v. Ponder, supra; Fischer v. City of Mechanicville, supra. But if such duties do not exist, or if the Authority was faced with a choice between plaintiff and the Executive Director of the Sewerage Authority presenting similar claims to plaintiff's, then one position or the other would have to be eliminated to avoid one or the other of the claimants being retained despite having no substantial duties to perform ⁶.

Even if plaintiff were a tenured civil...