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Woodside Homes Inc. v. Town of Morristown

Decided: April 28, 1958.


On appeal from Superior Court, Law Division.

For affirmance -- Justices Heher, Wachenfeld, Burling, Jacobs, Francis and Proctor. For reversal -- None. The opinion of the court was delivered by Burling, J. Heher, J., concurring in result.


This is a suit to recover the cost of extensions of water mains. The Superior Court, Law Division, heard the case without a jury and entered judgment dismissing the complaint. The cause was appealed to the Superior Court, Appellate Division and, prior to hearing there, this court certified it on its own motion.

Respondent, the Town of Morristown, owns and operates a water system which supplies water to the inhabitants of six municipalities, in addition to Morristown. One of the municipalities serviced is Morris Township. Prior to 1931 Morris Township was served by the Normandy Water Company which had the exclusive franchise to supply water for the township. In July of 1931 Morristown acquired by purchase the plant, net work and franchise of the Normandy Water Company and has since furnished water to the inhabitants of Morris Township.

The appellant is a real estate development company. In 1954 appellant planned to construct a development of one-family homes in Morris Township. The plan was for the construction of two sections. In August of 1954 the appellant applied to the superintendent of the Water Department of Morristown for water service for section 1 of its development. Water was necessary in order to construct homes, as well as to make them saleable after construction. In order to furnish the development with water, it was necessary to extend an existent main and to construct new mains in the interior streets of the project.

In response to appellant's request to extend the mains at the cost of Morristown, the superintendent informed the appellant that the municipality would undertake to furnish water under two plans, both of which required the cost of

extensions to be absorbed by the appellant. Appellant was advised that Morristown would perform the necessary work at the appellant's expense, or that appellant might perform the work under Morristown's supervision. Appellant promptly entered into an agreement with Morristown, dated August 9, 1954. The agreement was Morristown's standard form whereby the town was to perform the necessary work in extending the mains, appellant agreeing to bear the entire cost of the work estimated to be $7,311.49. In addition the appellant agreed to provide all necessary excavating, backfilling and pavement repair and to pay the cost of all road opening permits. Appellant agreed to pay any difference should the actual cost of construction exceed the estimate and provision was made for a rebate in the event that the cost was less than the estimate. In fact, the cost of extension was over-estimated, and the town tendered and the appellant accepted a rebate of $334.02. The agreement further provided that after installation the mains were to be the property of Morristown. No formal protest concerning the validity of the agreement was ever entered by the appellant. During the construction of the homes the president of appellant, since deceased, told the superintendent "I'll take you into court some day."

Upon completion of the first section of the development the appellant again entered into a standard form of agreement with Morristown for the extension of water mains into the second section. Under this agreement, dated March 14, 1955, appellant performed the necessary work under the town's supervision. Morristown's uniform policy respecting rebates to developers was changed on January 1, 1955, and pursuant thereto the following provision for refunds was included in the agreement:

"As permanent taps are made in the main so laid, the cost of which are not a part of, nor included under this agreement, there shall be returned to the party of the second part the amount of Forty five Dollars ($45.00) for each service after the first full year's meter reading on each service, provided, that no return shall be paid on account of any tap made on the water mains included in this contract

after the expiration of five years from the date of the installation of the main, it being understood that only one refund will be made on each service installation."

There were 28 service connections or taps to the main made in section 2. In December 1956 (the present suit was instituted in March 1956), after a year had expired from the date of the last of the 28 taps, Morristown tendered a check for $1,260 representing the agreed rebate of $45 for each tap made. Appellant rejected the tender.

There are a total of 58 consumers of water who have connected with the extensions of the mains in both sections of the development. The cost of the extensions of the water mains was passed on by the appellant to the purchasers of homes via the sales price, and at oral argument the appellant stated that it had no intention in the event of its success to refund to the purchasers.

The record indicates that Morristown has since 1931 pursued three different policies with respect to the imposition of costs upon applicants for the extension of water mains. From 1931 until March 31, 1952 it was the general practice to impose the full cost of extensions upon developers with refunds calculated on the following alternative bases, i.e., (1) 3 1/2 times the charge for the first year's consumption made from all individual taps into the mains during a ten-year period, or (2) 75% of all charges made for consumption from each tap made during a 15-year period (later changed to a ten-year period).

Apparently the refund based upon 3 1/2 times the first year's consumption for each tap made within a period of ten years was derived from general regulations recommending a course of practice for charges made by utilities for extension of services promulgated by the Board of Public Utility Commissioners in 1923 by virtue of their authority under R.S. 48:2-25(a) and R.S. 48:2-27. It is noteworthy that the practice suggested by the Board of Public Utility Commissioners was to impose the entire cost of extension of mains upon the developer in the first instance, with provision for rebates as connections were made into the mains.

The two agreements entered into in the present case reflect Morristown's practice from 1952 to date. From April 1, 1952 through 1954 (the period covered by the first agreement), Morristown charged the entire cost of mains to developers without any provision for refund. From January 2, and apparently to date, Morristown's practice was to refund $45 for each tap made to the main, after the first full year's meter reading, within five years from the date of installation of any such tap. Agreements in accordance with the foregoing practices were required from virtually all developers, whether the particular development was within Morristown's borders, or outside of its borders in the areas serviced by the town. There were isolated instances in which Morristown, under special circumstances, would bear part of the initial cost, but these are not sufficient to detract from the generally uniform course pursued. The record indicates that no such special arrangements were made after 1952.

With respect to individual homeowners, a more flexible course was pursued, Morristown sometimes bearing the entire cost for extensions.

The present suit was instituted in March 1956. Appellant's complaint sets forth two theories. First, a cause of action sounding in tort for violation of an alleged public duty on the part of Morristown to extend mains into appellant's development at the town's expense, and secondly, an action in quasi -contract based upon the unjust enrichment of Morristown in that it acquired valuable property rights at appellant's expense. The amount of damages was stipulated and is based on alternative methods of valuation. First, appellant seeks a return of the monies expended in the extension of the mains. On this basis the amount of damages would be $8,426.09 for the extensions in section 1 and $5,771 for section 2. In the alternative ...

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