This dispute arises from the efforts, extending over at least the last decade, that have been put forth by the State of New Jersey, the North Jersey District Water Supply Commission, a large number of municipalities and other interested persons and public bodies to make available an additional water supply to certain areas of the State and particularly the heavily populated and industrialized northeastern section. The plan that was evolved, in very broad outline, contemplated that the State would acquire and make available a new supply of water, to be transmitted and delivered to interested municipalities by means of facilities assembled, constructed and operated by the North Jersey District Water Supply Commission. An important legislative step was taken by the enactment of the New Jersey Water Supply Law, 1958, N.J.S.A. 58:22-1 et seq., which made provision for the acquisition and construction of a reservoir of approximately 55 billion gallons capacity in Round Valley and a smaller reservoir of 10 billion gallons capacity on Spruce Run. Both locations are in Hunterdon County; the contemplated source of the water to fill the reservoirs is the Raritan River. Four years later the Water Transmission Facilities Act, L. 1962, c, 167, and an amendment thereto, L. 1962, c. 184, now N.J.S.A. 58:5-31 et seq., gave to the North Jersey District Water Supply Commission the authority, and placed upon it the responsibility, to assemble, acquire, operate and maintain transmission facilities adequate to carry this new water supply to those municipalities in the northern part of the State that wished to and could take advantage of it.
A contract, dated as of July 13, 1965, was prepared by the Commission and submitted to a number of municipalities. It sets forth the terms upon which the Commission will agree to deliver water, the amount which each "contracting municipality" agrees to receive (designated as its "proprietary allotment"), refers to the manner in which the cost of the water is to be determined, and provides for the handling
and resolution of various foreseeable eventualities. An important article of the contract reads:
"The Agreement shall be in full force and effect and be legally binding upon the Commission and upon all of the Contracting Municipalities which shall then have executed the same upon its execution and delivery by the Commission and by municipalities named as parties in the title thereto having Proprietary Allotments aggregating at least 50 million gallons (herein called the 'Effective Date') and the Commission shall forthwith proceed with the Project."
Not until September 12, 1966, when the City of Bayonne became a contracting party, was this minimum requirement reached. Bayonne was the eleventh municipality to become a contracting party, and by its adherence the proprietary allotments came to total 60.925 million gallons daily. The contracting municipalities are Bayonne, Bloomfield, Cedar Grove, Elizabeth, Glen Ridge, Kearny, Newark, Nutley, South Orange, Verona and West Caldwell. Newark became party to the agreement on October 1, 1965. On April 6, 1966 it executed a document entitled "Cooperation Agreement Between City of Newark -- North Jersey District Water Supply Commission -- Contracting Municipalities," the purpose of which was to make available to certain of the contracting municipalities the utilization of its transmission or distribution system and its pumping facilities and to provide, where appropriate, for the "exchange" of water from its Wanaque supply for water from the Raritan River to be received under the new arrangement. A number of municipalities became parties to this cooperation agreement.
Following the effective date of the contract and pursuant to its terms the Commission entered into agreements with engineering consultants and made preliminary financing arrangements. In February 1967 Newark took action by resolution and ordinance to rescind the cooperation agreement as well as the underlying agreement that presumably had become effective September 12, 1966. The reason for this rather precipitate and apparently unheralded action has not been
made entirely clear to the court, but presumably it was provoked by some belated feeling of dissatisfaction with the terms of the arrangement. Be that as it may, upon learning of what had taken place in Newark, the Commission promptly commenced this action by complaint and order to show cause, joining all contracting municipalities as parties defendant but really seeking relief only against Newark. The relief sought is a declaratory judgment to the effect that the principal contract became binding and effective in respect of all parties thereto, including Newark, on September 12, 1966; that the cooperation agreement likewise took effect in accordance with its terms; that the acts of Newark purporting to rescind these arrangements be deemed null and void, and finally, that the city be restrained from "taking any further action to impair the validity of the aforementioned agreements."
The order to show cause was made returnable March 14, 1967. However, all parties to the suit, as well as the State of New Jersey, apparently being anxious to effect a settlement, the court very willingly acceded to requests for adjournment and the matter was not actually brought on for oral argument until December 15, 1967. At that time all municipalities that were represented supported plaintiff's position. The State of New Jersey appeared, and although making no application for formal intervention, recounted the efforts that had been made to bring about a settlement -- efforts with respect to which it had been a principal participant; emphasized the importance of the project in its relation to the serious water shortage that has existed in recent years, and expressed the hope and desire that the proposal would go forward without delay.
The case is now before the court on complaint, order to show cause, affidavits, counter-affidavits and briefs. Additionally, Newark has filed an answer denying certain allegations set forth in the complaint and including, as separate ...