Carton, Mintz and Seidman. The opinion of the court was delivered by Carton, P.J.A.D.
The result in this case turns on the validity of certain covenants made by defendant Municipal Utilities Authority of Mt. Laurel Township in connection with its acquisition of a sewerage and water supply system. An outline of the events leading up to the present litigation will serve to provide a backdrop for a more detailed consideration of the factual and legal issues involved.
Defendant Municipal Utilities Authority agreed to purchase the sewerage and water systems from defendant utility companies and in conjunction with that acquisition it assumed performance of certain covenants undertaken by the sellers in agreements between them and various land developers fixing the amount of fees to be charged for connecting dwelling houses in these developments to the systems. When defendant Authority adopted a rate schedule increasing the connection
fees and attempted to make them retroactive, plaintiff, the owner of one of the developments, objected, claiming the Authority was bound by the terms of the collateral agreements which it had assumed. It brought this action seeking a determination to that effect, recovery of fees paid under protest in accordance with the revised schedule, and restraint against collection of further fees except in accordance with the agreements between it and the sewerage and water companies. The court entered judgment in favor of plaintiff and defendant Authority appeals.
Plaintiff Canterbury Properties, Inc. is the assignee of two agreements between Alan and Harris Kessler, co-partners, and the Mt. Laurel Sewerage Corporation and the Mt. Laurel Water Corporation. The Kessler brothers are land developers who control a 77-acre tract in the Township of Mt. Laurel, a formerly rural municipality rapidly becoming part of suburban Philadelphia. The housing development of single-family residences constructed on that tract is known as Canterbury Greene.
The water and sewerage companies referred to above were privately-owned utilities organized and controlled by defendant Richard C. Goodwin, also a land developer in the township. Goodwin, as part of his business operations, constructs water and sewerage facilities for his housing developments and enters into service agreements with nearby developers. In all, there were 18 sewerage and 11 water contracts entered into in Mt. Laurel.
The agreements between the Kesslers and the sewerage company, which was entered into in April 1967, provided that the first 200 homes in the tract would be connected to the system without any connection charge as such. As to any further homes, a charge of $275 would be made for such connection. The agreement also required the Kesslers to pay the cost of constructing a pumping station and force main, which cost would be returned to the Kesslers over a 15-year period except for the sum of $53,000. This sum was
stipulated by the parties to represent a prepayment of connection fees.
In May 1968 the Kesslers assigned the agreement to plaintiff. They completed construction of the pumping station and force main at about the same time at a total cost of $135,000. Housing construction was then begun. By May 1971, 197 homes were completed and connected to the utility systems.
In the Spring of 1969 the Superior Court appointed commissioners to fix compensation for a public taking of the utilities by defendant Authority, a municipal agency formed under N.J.S.A. 40:14B-1 et seq. In July 1969 the commissioners reported a value of $1,182,953 for the sewerage corporation and in August of that year they reported a value of $763,893 for the water corporation. The condemnation action proved abortive because the Authority was unable to float a bond issue in that amount.
On April 9, 1970, however, the Authority and the utility companies reached an agreement of sale by which the Authority agreed to purchase all the facilities of the utility companies and assume all its existing contracts for $1,500,000 cash plus $300,000 in Authority bonds, if the Authority was able to issue bonds in the total amount. The bonds were apparently so issued and the sale completed on June 29, 1970. At that time the Kesslers were reimbursed ...