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In re Formal Complaint

Decided: April 24, 1967.


For reversal and remandment -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Francis, J.


[49 NJ Page 196] The issue to be determined here is: When a municipally owned and operated waterworks and distribution system furnishes water to consumers in adjoining municipalities, are the rates charged such consumers subject to the regulatory power of the Board of Public Utility Commissioners?

The Board held it lacked authority to deal with the matter. We certified the ensuing appeal from that determination on the joint petition of the interested parties, before it was heard in the Appellate Division.

On December 15, 1923 the Town of Morristown purchased the waterworks distribution system of the proprietors of the Morris Aqueduct. At that time the system supplied water to Morristown and portions of Morris Township (which virtually surrounds Morristown), Harding Township, Mendham Township, Hanover Township (now principally Morris Plains), and parts of the Townships of East Hanover and Parsippany-Troy Hills. Since that date the Town has continued to serve its own inhabitants, as well as those of the other communities on the Morris Aqueduct's mains and pipes then being served. The acquisition and the continuance of the extra-territorial service appears to have been authorized by chapter 152 of the Laws of 1917, Article XXXII, sections 1(a), (c), (d) and 16 (Home Rule Act; now as revised, R.S. 40:62-49 d, f and 40:62-85).

From 1908 until June 6, 1931, the Normandy Water Company owned and operated a waterworks which supplied water to residents of the eastern portion of Morris Township. It is clear that after acquisition of Morris Aqueduct and before October 1930, Morristown had been furnishing water to residents of other portions of Morris Township. Thus, Morris Township consumers were being served by two independent water utilities, one publicly and the other privately owned. According to a report of the Water Committee of Morristown, which was made part of the minutes of the October 30, 1930 meeting of the governing body of the Town, the Normandy Water Company was being offered for sale, and a number of chain water companies were interested in acquiring it. The Water Committee set forth its view that Morristown was the logical purchaser. Another report of the Committee expressed the opinion that it was not "in the best interest of the Town of Morristown to have a private water company located in the center of a district supplied by the Town of Morristown."

On June 6, 1931 Morristown purchased the franchise and waterworks of Normandy and has operated in its territory ever since. In the same transaction the Town also acquired the Whippany Water Company and began to serve its consumers, who were residents of the Whippany area of Hanover Township.

On December 12, 1966 the governing body of the Town of Morristown by resolution adopted a 30% rate increase for metered water service to be effective January 1, 1967 and to be applicable throughout the system then served by it. Plaintiffs, the Township Committee of the Township of Morris, and certain person individually and as members of the Township Committee, filed a petition with the Board of Public Utility Commissioners challenging the rates as unreasonable and discriminatory as to residents of Morris Township (and other communities outside Morristown), and requesting that they be denied enforcement. Morristown moved to dismiss the petition, alleging lack of jurisdiction in the board to entertain the proceeding. The motion was granted on the basis of the decision of this Court in In re Glen Rock, 25 N.J. 241 (1957). In our judgment that case is not controlling and for reasons to be outlined the order of dismissal must be reversed.

The Township of Morris claims that Morristown acquired the Normandy Water Company by virtue of chapter 222, Laws of 1929 (now, as revised, R.S. 40:62-49 d and f). In its original form that statute provided:

"Any municipality not owning and operating a water-works system or plant is hereby authorized to acquire by purchase, lease or condemnation, an existing water-works system or plant and its real estate, personal property and works, and all its corporate rights, powers, franchises and privileges or any part thereof, for the public and private uses of such municipality. Where the supply of water is from more than one source, or the distribution plant to be acquired is connected with a distribution system of the owner in an adjoining municipality, both of which are served with water from the same source or sources, it shall be lawful for such municipality to purchase * * * not only the source or sources of supply as aforesaid and the distribution system in said municipality but also the distribution system in the adjoining municipality." [49 NJ Page 199] Morristown contends the purchase was made pursuant to Article XXXII, section 1(c) of the Home Rule Act, chapter 152, Laws of 1917, which confers authority on any municipality to purchase from any person or corporation owning a waterworks "supplying such municipality with water or adapted to furnish such supply." But Normandy was not supplying Morristown with water, nor is there any proof that it was adapted to do so, or was intended to be adapted to do so. It was an independent private utility operating in one portion of adjoining Morris Township, with the waterworks already owned and operated by Morristown serving other portions of the Township. The Normandy franchise empowered it to supply water to the "Township of Morris and the inhabitants thereof." The municipal boundaries apparently were the only limitations on the authorized service area. Thus as Morris Township grew, it was entirely conceivable that both Normandy and Morristown would come into actual competition as each extended its mains to meet the consumers' need for water. The two waterworks were potential competitors when Morristown bought the Normandy franchise, and it seems certain they were on the way to actual competition -- not for the business of Morristown residents, but for that of the Township people. Undoubtedly realization of that problem led the Water Committee in October 1930 to express the view that Morristown "should acquire the properties of the Normandy Water Company if it can be shown that there is a necessity to acquire its water supplies to protect those already owned by the Town and that the Town will receive a fair return on the price." It is probable also that the potential competition led the Committee to say further: "We feel that it is not in the best interest of the Town of Morristown to have a private water company located in the center of a district supplied by the Town of Morristown." The facts made available to us stimulate the view that a primary factor in the acquisition of Normandy was elimination of a probable competitor, not for the service of Morristown's own people but for the service of residents of Morris Township, where Morristown

was operating beyond its own borders and in a proprietary capacity.

Morristown points also to section 16 of Article XXXII of the Home Rule Act of 1917, supra, as further support for its position that the Normandy purchase was made under section 1 (c) of Article XXXII. Section 16 makes it lawful for any municipality owning or controlling waterworks to supply water to dwellers in other municipalities through which their mains may pass "upon the like or as favorable terms and conditions as water shall be furnished to dwellers within such municipality for the supplying of which with water such water works shall have been organized or established." (Emphasis added) But Normandy was not established to serve Morristown residents; its franchise was limited to a Morris Township operation, and it was not supplying Morristown at the time of the sale to the latter.

A reading of Article XXXII in its entirety indicates that its prime purpose was to enable a municipality to purchase a waterworks and distribution system in order to supply its own inhabitants with water. A further intention was that if the basic source of supply was outside the purchaser's borders, and the mains carrying the water into the purchasing municipality passed through another municipality, the purchaser could lawfully supply water to consumers in the other municipality.

Sufficient has been said to indicate that doubt was justifiable as to whether the cited sections of the 1917 Home Rule Act clearly empowered Morristown to purchase the Normandy franchise and waterworks. The record does not show how long prior to October 1930 Normandy was up for sale, nor for how long the chain water companies and other persons had been looking into its purchase. It does appear that in 1929 the then senator from Morris County introduced the bill which on April 29, 1929 became chapter 222 of the Laws of 1929. The bill was submitted as a ...

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