Whelan v. New Jersey Power & Light Co.

• Decision Date: 28 June 1965
• Docket Number: No. A--45,A--45
• Citation: 212 A.2d 136,45 N.J. 237
• Parties: Thomas J. WHELAN, Mayor of the City of Jersey City, Substituted Plaintiff-Appellant and Cross-Respondent, and Leo A. McCarthy, Plaintiff-Intervenor-Appellant, v. NEW JERSEY POWER & LIGHT COMPANY and Jersey Central Power & Light Company, etc., Defendants-Appellants and Cross-Respondents, and Water Policy and Supply Council et al., Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 237

45 N.J. 237

212 A.2d 136

Thomas J. WHELAN, Mayor of the City of Jersey City Substituted Plaintiff-Appellant and Cross-Respondent and Leo A. McCarthy, Plaintiff-Intervenor-Appellant, v. NEW JERSEY POWER & LIGHT COMPANY and Jersey Central Power &amp Light Company, etc., Defendants-Appellants and Cross-Respondents and Water Policy and Supply Council et al., Defendants-Respondents.

No. A--45.

Supreme Court of New Jersey.

Argued March 30, 1965.

Decided June 28, 1965.

I. Charles Lifland, Jersey City, for appellant and cross-respondent Whelan (Meyer Pesin, Jersey City, attorney).

Alfred A. Rochester, Morristown, for appellants and cross-respondents New Jersey Power & Light Co. and Jersey Central Power & Light Co.

Philip M. Law, Jr., Chicago, Ill., for intervenor-appellant (Leo A. McCarthy, New York City, attorney pro se, Reed, Hoyt, Washburn & McCarthy, New York City, of counsel).

William Miller, Princeton, as amicus curiae.

Alan B. Handler, First Asst. Atty. Gen., filed a statement in lieu of brief (Arthur J. Sills, Atty. Gen., attorney for Water Policy and Supply Council and pro se).

The opinion of the court was delivered by

WEINTRAUB, C.J.

This case involves the validity of a contract dated December 4, 1958 made by the City of Jersey City with New Jersey Power & Light Company and later assigned by the utility to a related company, Jersey Central Power & Light Company (both herein called the Company), whereby the City would acquire addition water supply and the Company would acquire hydroelectric power. The issues raised are (1) whether the contract is prohibited by the constitutional ban against donation by a municipality of its property and the loan of its credit; (2) whether the Legislature has authorized a contract for the coordinated activities here contemplated and whether certain provisions of the contract violate affirmative statutory restrictions; and (3) whether the contract conflicts with the covenant in outstanding water bonds relating to the fixing of water rates or rentals.

Upon cross-motions for summary judgmemt the trial court found the contract invalid. We certified the ensuing appeals before the Appellate Division heard them.

I

We must first refer to an issue we raised, I.e., whether the proceedings are truly adversary. Both the City and the Company ask that the contract be upheld. In essence the Mayor is troubled by doubts entertained by the City's bond counsel. Further, purchasers of the bonds to be issued for the project will require the approving opinion of bond counsel, and bond counsel are unwilling to risk one. Hence this litigation.

To establish an adverse position, a member of the firm of bond counsel purchased $5,000 of outstanding water bonds and with that 'interest' in hand intervened as a party plaintiff. It seems clear to us that the intervenor has conflicting interests by reason of which his presence in the cause cannot supply a true contest. We and his partners have to lose if he wins and so also will their client, the City. We appreciate that the motivation was good and that the intervenor made full disclosure. We acknowledge too that the intervenor and his law firm presented their opposition forcefully. Still it is unwise for counsel to be so situated.

Nonetheless we are satisfied that relief should be granted under the Uniform Declaratory Judgments Act, N.J.S 2A:16--50 et seq., N.J.S.A. The purpose of the act is 'to settle and afford relief from uncertainty and insecurity with respect to rights, status and other legal relations.' N.J.S. 2A:16--51, N.J.S.A. It specifically authorizes an action by a person interested under a 'written contract' to 'have determined any question of construction or validity arising under' the contract. N.J.S. 2A:16--53, N.J.S.A. The City and the Company are parties to a contract, and the Mayor and the Company seek a declaration of its validity. Although both parties believe the contract is valid and seek a judgment to that effect, the controversy is real and not hypothetical, for the views expressed by bond counsel led a responsible official of the municipality to doubt whether he can lawfully carry out the agreement and whether bonds to be issued to that end can be marketed. See Abbott v. Beth Israel Cemetery Ass'n of Woodbridge, 13 N.J. 528, 541, 100 A.2d 532 (1953).

The problem resides not in a lack of the required uncertainty with respect to contractual rights but rather in the circumstance that when litigants seek the same result, a court cannot approach its task confident of the aid which truly adversary positions will ordinarily generate. Relief has been denied in bond-issue cases where the litigants sought the same result. See Borchard, Declaratory Judgment (2d ed. 1941) pp. 511--512; cf. New Jersey Turnpike Authority v. Parsons, 3 N.J. 235, 240, 69 A.2d 875 (1949). Yet, an issue may not be hypothetical or moot or a judgment merely advisory on that account. In the case at hand, existing contractual claims will be concluded by the judgment, and an important public project will founder or proceed, depending upon the resolution of questions raised. In these circumstances relief should not be denied because the parties hope for the same answer. Rather the Court should take such steps as will assure it that all recesses of the problem will be earnestly explored. To that end we required the services of an Amicus curiae at the expense of the City.

II

The constitutional issue revolves about Art. VIII, § III, 2 and 3 of the State Constitution which read:

'No county, city, borough, town, township or village shall hereafter give any money or property, or loan its money or credit, to or in aid of any individual, association or corporation, or become security for, or be directly or indirectly the owner of, any stock or bonds of any association or corporation.'

'No donation of land or appropriation of money shall be made by the State or any county or municipal corporation to or for the use of any society, association or corporation whatever.'

The City's money is not given, nor is its credit directly loaned to the Company, but it is contended the transaction involves a partnership or joint venture which this provision of the Constitution was intended to bar.

The facts are these. The City owns and operates a water supply system which it decided to augment. It proposed to construct a reservoir upon the Rockaway River. There were a number of objectors, including the Company, which advanced a proposal under which the City would obtain a larger supply of water at a lower unit cost, the Company would generate hydroelectric power, and the impact upon the locality would be minimized. That plan was ultimately approved by the Water Policy and Supply Council, and the contract was made to implement it.

The plan calls for the construction by the City of two reservoirs with connecting waterway facilities. One reservoir will be located on the river; the other will be off-site and at a higher elevation. The Company is to erect, own and operate a pumping and hydroelectric generating plant. Water will be pumped by the Company from the lower reservoir to the upper one for storage. So much as is released from the upper reservoir for hydroelectric power will pass through the hydroelectric plant to the lower reservoir, and thereafter will be returned to the upper reservoir. Reversible pump-turbine facilities will thereby generate additional power during the daily peak-demand period and thereafter return the water to the upper reservoir through the use of surplus power steam-generated during the daily off-peak periods. No water is consumed in the process, and under the plan the water needs of the City will always prevail over the needs of the Company. These summarized findings of the Water Policy and Supply Council are not challenged:

'The operations of the hydroelectric plant will not interfere with water supply operations. The dual project will be beneficial in the public interest and superior to the original project through reduction in costs to Jersey City, creation of added storage capacity, use of lands less desirable for other purposes, addition of substantial tax ratables which will more than off-set those lost to Jefferson Township by dislocation of residents within reservoir areas, elimination of necessity for acquisition of existing recreational area around Longwood Lake, as contemplated in original application, and through additional power to meet peak loads in an area of increasing demand for electricity.'

The City will be the sole owner of the reservoirs and the waterway facilities and the Company will be the sole owner of the hydroelectric plant. The City will issue general obligation bonds to finance its costs. The Company will pay the City stipulated sums annually from which the City will recapture part of its capital costs and obtain a return for the use of the water we have already described. These payments start at about $500,000 and will level off at $145,000 a year in the 48th year.

The City will convey five acres of land for the power plant site immediately above the lower reservoir, and the Company agrees to pay for it 'at the average rate per acre fixed as the current market value for similar adjoining lands proposed to be acquired by the City for the Lower Reservoir.' The City agrees also to grant a right of way for electric transmission and distribution lines and communication facilities extending from the Company's hydroelectric station.

The contract will continue so long as the facilities are used for public potable water supply. The Company is assured certain protective rights or options depending upon whether the discontinuance of this potable water supply should occur less or more than 100 years hence.

No one suggests the arrangement was intended to benefit the Company at public expense. The City and the Company struck an arms length bargain from which each will gather certain benefits sufficient to...