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Whelan v. New Jersey Power & Light Co.

Decided: June 28, 1965.


For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. 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 additional 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 judgment the trial court found the contract invalid. We certified the ensuing appeals before the Appellate Division heard them.


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. He 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. 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. 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. 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 (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 Judgments (2 d ed. 1941), pp. 511-512; cf. New Jersey Turnpike Authority v. Parsons, 3 N.J. 235, 240 (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.


The constitutional issue revolves about Art. VIII, ยง III, paras. 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 ...

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