[70 NJSuper Page 530] This is a suit by a municipality against a land developer and its surety. The plaintiff, City of Summit, seeks to compel the developer, defendant Horton Corporation (hereinafter referred to as "Horton"), to build an adequate storm sewer system in the area developed by it known as "Prospect Park" in Summit. It asserts that defendant Horton and its surety, Continental Casualty Company (hereinafter referred to as "Continental"), agreed with plaintiff to construct an adequate storm sewer system in the development in accordance with the municipal requirements; that defendant Horton failed to construct same; that defendants should be required to specifically perform said agreement, and failing same that they be
required to answer in damages. Additionally, plaintiff seeks to enjoin defendant, Townview Manor A, a subsidiary corporation of Horton, from selling a house in "Prospect Park" known as 10 Glen Avenue. The charge is that the dwelling is constructed below the level of the storm sewer constructed by the defendant Horton, and as such is subject to constant flooding, presents a public hazard, and is a menace to innocent purchasers for value.
Defendant Horton contends that the storm sewer system installed by it complies with all municipal requirements and particularly with the plat and improvement plans submitted in connection with preliminary and final approval, and that it was required under economic duress to make installations not called for under its agreement with the municipality. Horton further contends that if any flooding exists in the dwellings or upon the subject lands, it is due to the installation of an additional drainage pipe from Hand's Pond to Stockton Road which the municipality insisted upon as a prerequisite to the issuance of certificates of occupancy for various dwellings completed by Horton; that it was under no obligation to provide drainage for Hand's Pond, which is adjacent to but does not form a part of the tract developed by Horton. Horton counterclaims for a judgment directing the city to accept the improvements made by it and to cancel the surety bond and further seeks damages from the city upon the allegation of malicious refusal to accept the improvements.
Defendant Townview Manor A (hereinafter referred to as "Townview") contends that the certificate of occupancy for 10 Glen Avenue was issued and subsequently unjustifiably revoked by the building inspector and by reason of such revocation it has suffered damages for which it seeks a recovery.
Defendant Continental in effect asserts the same factual contentions as those made by Horton. Additionally, it urges a release from liability because of a material change in the improvement plans made by the municipality after the posting
of its bond and particularly asserts that the bond did not call for the installation of a storm sewer line from Hand's Pond to Stockton Road and did not guarantee that Horton provide an outlying ditch across lands of Commonwealth Water Company (hereinafter referred to as "Commonwealth"), an adjoining landowner. Continental cross-claims against Horton for indemnification and has filed a third-party complaint against individual indemnitors on the bond.
In 1957 Horton was the owner of 25 acres of undeveloped lands in Summit fronting on Baltusrol Road and which it proposed to subdivide and develop. Adjoining the Horton tract to the northeast is Hand's Pond, a low area which for more than 50 years served as a natural drainage basin for approximately 40 to 50 acres, including about 7 1/2 acres of Horton's lands.
Prior to the filing of an application for tentative approval of a proposed subdivision for this tract, Benjamin Shalit, secretary of Horton and the officer who conducted all negotiations in behalf of said corporation, called upon Mr. J. Henry Negus, city engineer and acting secretary of the planning board, to discuss general procedures and proposed improvements to be installed by the developer in its development. Mr. Negus apprised Mr. Shalit of the drainage problem with respect to Hand's Pond. Mr. Shalit indicated his familiarity with the problem and his willingness to cooperate in solving it. About six weeks later Mr. Shalit again visited Mr. Negus with his engineer, Mr. Fuhrmann of the firm of Grassmann & Kreh, and again the development as a whole was discussed. Thereafter a topographical survey dated December 1956, was submitted by Horton's engineers to Mr. Negus. This survey showed a "proposed storm sewer" extending from Hand's Pond in a westerly direction across Horton's lands to a "proposed ditch" on lands of Commonwealth and thence projected in a southwesterly direction a considerable distance to an existing brook on the Commonwealth lands.
On May 23, 1957 Horton filed application with the city planning board for tentative approval of the plat plan. The application recites that in connection with same the developer submitted copies of preliminary layout, plans and profiles for street grading, sanitary and storm sewers, and topographical maps. In none of these documents was there any provision for the installation of a storm sewer (which was subsequently installed as hereinafter related) from Hand's Pond across the rear of lots numbers 26, 25, 22 and thence along the northerly side line of lot 22, adjoining lot 23, in Block B to Stockton Road. This section of the installation was interchangeably referred to as the storm sewer line running from Hand's Pond to Stockton Road. The improvement plans showed three storm sewer outlets on the westerly boundary line of the development, one leading to lands of the Union County Park Commission and two to lands of Commonwealth.
Horton's application for tentative approval was considered at a public hearing before the planning board on July 25, 1957, at which time Commonwealth objected to the proposed discharge of water from Hand's Pond onto its lands. On August 26, 1957 Mr. Negus, as acting secretary of the planning board, wrote Mr. Shalit that the board deferred action until agreement was reached between the developer and Commonwealth. Thereafter Horton agreed to revise its plans so as to provide for only one outlet onto the lands of Commonwealth which would serve as a drainage for a small portion of Stockton Road and from lots 30 and 31 in Block D on the westerly side of Stockton Road.
On October 24, 1957 Mr. J. F. Heyworth, assistant manager of Commonwealth, wrote to the chairman of the planning board stating that they withdrew all objections to the proposed subdivision in view of Horton's agreement, and further stated that:
"The proposed storm sewer easement as shown on the subdivision map is not to be used at this time and if used in the future, it will be necessary to obtain ...