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Middlesex County Sewerage Authority v. Borough of Middlesex

Decided: May 31, 1962.


Cohen, J.s.c.


[74 NJSuper Page 594] Plaintiff, Middlesex County Sewerage Authority (authority) by a declaratory judgment action, seeks determination of the validity of the rate formula and schedules contained in contracts executed between it and the municipalities, other sewerage authorities and private industrial corporations joined as defendants herein who constitute the entire group of participants in the sewerage

project. All agree that declaratory judgment is the proper remedy; however, five defendants, the Boroughs of Middlesex, South River, South Bound Brook and Bound Brook, and the Piscataway Township Sewerage Authority (contestants), challenge the validity of the rate formula and schedules. The remaining 24 defendants either join the plaintiff in urging the validity of the aforesaid contract terms or content themselves with the adjudication of the court. The matter is before the court on briefs, pleadings, affidavits, exhibits and oral arguments. Plaintiff-authority moves for summary judgment and dismissal of counterclaims urging that no genuine issue exists as to any material fact and, accordingly, is entitled to judgment as a matter of law.


The Raritan River extends through the central area of Middlesex County, from Bound Brook to Sayreville and South Amboy, to Raritan Bay, and then to the Atlantic Ocean. Historically it provided splendid bathing, fishing and other advantages common to an unpolluted body of water. With rapid growth of population and expansion of industry in the Raritan Valley, existing facilities for treatment of sewage and industrial waste became acutely inadequate. Gross pollution of the river resulted. Municipalities and industries were faced with large capital and operating expenditures in efforts to abate this pollution. The community became increasingly aware of these conditions; public-spirited citizens of vision recognized the possibility that the Raritan would become a detriment rather than an asset to the municipalities, industries, and residents of the lower valley. Public sentiment demanded action. In response to the need, the board of chosen freeholders created a Middlesex County Sewerage Authority, which was formally organized on August 1, 1950 pursuant to the Sewerage Authorities Law, N.J.S.A. 40:14A-1 et seq. , enacted in 1946.

This act is designed to relieve the waters in and bordering the State from pollution, and to that end empowers a county or a municipality alone, or in combination with others, to create sewerage authorities to erect and operate plants for the collection and disposal of sewage. N.J.S.A. 40:14A-2 provides:

" Declaration of policy; purpose

It is hereby declared to be in the public interest and to be the policy of the State to foster and promote by all reasonable means the relief of waters in or bordering the State from pollution and thus to reduce and ultimately abate the menace to the public health resulting from such pollution. It is the purpose and object of this act to further implement such policy by

(1) Authorizing counties, or municipalities either separately or in combination with other municipalities, by means and through the agency of a sewerage authority, to acquire, construct, maintain, operate or improve works for the collection, treatment, purification or disposal of sewage or other wastes, and, if necessary, works for the impounding, transportation and release of water for the replenishment in periods of drought or at other necessary times of all or a part of waters in or bordering the State diverted into a sewer, sewage treatment or sewage disposal system operated by the sewerage authority; * * *"

The purpose of the act is repeated in N.J.S.A. 40:14A-6 and N.J.S.A. 40:14A-7.

The Sewerage Authorities Law constitutes a sewerage authority a public body politic and corporate, as a subdivision of the state, with enumerated powers, including the right "to enter into any and all contracts, execute any and all instruments, and do and perform any and all acts or things necessary, convenient or desirable for the purposes of the sewerage authority or to carry out any power expressly given in this act." N.J.S.A. 40:14A-7(11).

Pursuant to its organization the authority and prospective participants commenced negotiations for mutually acceptable contract terms with regard to their respective rights and corresponding obligations. Each term and condition of the service contract (contract) was thoroughly discussed by the parties. The first complete draft was prepared in May 1951,

and circulated among various eligible municipalities and industries. During the following years innumerable suggestions and requests for modification were received from attorneys, engineers and officials of the interested municipalities and industries. As a result at least ten redrafts of the agreement were prepared and distributed. Several of the municipalities and industries which had indicated initial interest found the proposed terms unacceptable and abandoned the project. It is apparent, therefore, that the agreement was not hastily prepared, nor ill-considered, nor was there blind reliance by the participants upon representations made by the plaintiff-authority. The contract was finalized in August 1954.

Commencing in February 1958 plaintiff imposed charges upon defendants in accordance with the initial schedule of rates contained in schedule B of the contract. This schedule sets up a sliding scale whereby participants are charged $187 per million gallons of sewage delivered into the sewerage system for the first five million gallons, $123 per million gallons for the next five million gallons, and so on down the line, the cost per million gallons decreasing as the amount of sewage delivered into the system increases. Article IV of the contract recites the relevant provision that, "Such charges made and imposed by the Authority shall be computed * * * at rates which shall at all times be uniform as to all Participants for the same type, class and amount of use or service * * * and give effect to quantity differentials in substantially the proportions reflected in the rates set forth in the Initial Schedule of Rates * * * marked 'Schedule 'B' * * * and the rates applicable with respect to sewage so delivered and discharged * * * by any Participant shall not be more favorable to such Participant than the rates applicable with respect to sewage so delivered and discharged by any other Participant. * * *" (Emphasis added). Plaintiff continued to impose charges on defendants in conformity with schedule B, which was thereafter, upon notice to all participants and at public hearings,

revised in accordance with the procedure set forth in the contract.

Plaintiff alleges that doubts have arisen with respect to the validity of the rate schedule as a result of continued attack by municipal bodies, citizens' committees and the public press, and nonpayment by one of the municipalities. Accordingly, plaintiff instituted this action for declaratory judgment. The legislation itself is not challenged, but the contestants contend the statute indicates a legislative intent that rate charges for all users of the same type, class and amount shall be substantially on the same basis and such charges shall be uniform for the same type, class and amount of use or service. Simply stated, the challenging defendants attack the sliding scale or escalator clause and urge that regardless of quantity and quality the rates must be the same for all participants.


Rebate claims for overpayment were made by several defendants in the event of an adjudication of contract invalidity, but were withdrawn at oral argument.

Resolution of the following pivotal issues will be dispositive of this motion:

(1) Is a declaratory judgment a proper proceeding to settle the dispute between the parties?

(2) Is the rate formula and initial schedule of rates contained in the contract legally derived from a valid exercise of powers conferred upon the authority by N.J.S.A. 40:14A-1 et seq. ?

(3) Were the contesting defendants induced to enter into the contract as a result of erroneous representations made by plaintiff with respect to schedule D of the contract?

(4) Is the schedule of rates provided in the contract arbitrary, discriminatory and unreasonable thereby presenting a factual issue precluding summary judgment?

These issues will be considered seriatim.


(1) A declaratory judgment is the most expeditious and effective proceeding to obtain a judicial determination of the legality and validity of plaintiff's schedule of rates. The Declaratory Judgment Act, N.J.S. 2A:16-50 et seq. , is a remedial device designed to expedite the definitive establishment of private rights and duties thereby forestalling the emergence of costly and cumbersome proceedings. Moss Estate Inc. v. Metal & Thermit Corp. , 73 N.J. Super. 56 (Ch. Div. 1962). N.J.S. 2A:16-53 provides:

"A person interested under a deed, will, written contract or other writing constituting a contract, or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status or other legal relations thereunder."

It should be noted, however, that the remedy provided by the act is limited to those classes of cases where ...

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