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Howell Township and Howell Township Municipal Utilities Authority v. Manasquan River Regional Sewerage Authority

Decided: February 9, 1987.

HOWELL TOWNSHIP AND HOWELL TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, PLAINTIFFS-APPELLANTS,
v.
MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, OCEAN COUNTY UTILITIES AUTHORITY, BOROUGH OF FARMINGDALE AND TOWNSHIP OF WALL, DEFENDANTS-RESPONDENTS. BOROUGH OF FREEHOLD, ERIC H. FOSTER, JR., AND EDWARD S. MACK, PLAINTIFFS-APPELLANTS, V. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, OCEAN COUNTY UTILITIES AUTHORITY, BOROUGH OF FARMINGDALE AND TOWNSHIP OF WALL, DEFENDANTS-RESPONDENTS. TOWNSHIP OF FREEHOLD, DAVID P. SEGAL, ROBERTA FRIEDMAN AND EVELYN CROSS, PLAINTIFFS-APPELLANTS, V. MANASQUAN RIVER REGIONAL SEWERAGE AUTHORITY, OCEAN COUNTY UTILITIES AUTHORITY, BOROUGH OF FARMINGDALE AND TOWNSHIP OF WALL, DEFENDANTS-RESPONDENTS



On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County.

King, Deighan and Havey. The opinion of the court was delivered by Havey, J.A.D.

Havey

The principal issue raised by these consolidated appeals is whether the Chancery Division has the inherent power to dissolve a local sewerage authority created under N.J.S.A. 40:14A-1, et seq. We conclude that the Chancery Division has no such power. We hold that a local sewerage authority may be dissolved only under the statutory framework provided by N.J.S.A. 40:14A-1, et seq., and the Local Authorities Fiscal Control Law, N.J.S.A. 40A:5A-1, et seq.

The issue comes to us by way of appeals from a summary judgment of the Chancery Division dismissing plaintiffs' complaints in which they sought an order: (1) dissolving defendant Manasquan River Regional Sewerage Authority (MRRSA) of which plaintiffs were constituent members; (2) invalidating a

service agreement between MRRSA and defendant Ocean County Utilities Authority (OCUA); (3) invalidating plaintiffs' service agreements with MRRSA; (4) compelling OCUA to assume MRRSA's existing indebtedness and to establish a uniform rate for all of its customers, and (5) compelling defendants Township of Wall and the Borough of Farmingdale, members of MRRSA, to join in a plan to dissolve MRRSA. Plaintiffs also sought damages against OCUA based on theories of negligence and intentional misrepresentation. We affirm the summary judgment dismissing plaintiffs' complaints to the extent that they sought an order dissolving MRRSA, compelling OCUA to assume MRRSA's debt and compelling Wall and Farmingdale to participate in the dissolution. However, we reverse the dismissal of plaintiffs' remaining claims. The Chancery Division judge failed to address whether there were genuine issues of material facts as to the remaining relief sought. We therefore remand for further proceedings.

MRRSA was created in 1972 pursuant to N.J.S.A. 40:14A-1 by parallel ordinances adopted by the five participating municipalities: plaintiffs Borough of Freehold, Howell Township, Township of Freehold, and defendants Borough of Farmingdale and Township of Wall. MRRSA originally planned to construct both a waste-water treatment facility and regional collection system to collect and treat the waste-water flow generated in its service area. It contemplated installation of regional interceptor sewer lines paralleling major streams in the region which would convey the waste water to a treatment plant to be constructed by MRRSA in Wall Township.

However, in 1980 federal and state environmental agencies directed MRRSA to explore the possibility of using existing treatment facilities then in place in Ocean County and operated by OCUA. Plaintiffs claim that during negotiations between MRRSA and OCUA in 1980 and 1981, OCUA estimated that its "user" charge of $850 per 1,000,000 gallons would not increase significantly over the next four years. According to plaintiffs, federal and state officials, relying upon OCUA's projection,

determined that no grants would be given to MRRSA to assist in the construction of its own regional waste-water treatment facility. As a result, MRRSA abandoned its plan to construct the plant. Instead, it decided to construct interceptor sewer lines to collect untreated sewage from its member municipalities and convey it to OCUA's plant for treatment and disposal.

On September 16, 1981, MRRSA and OCUA entered into a service contract under which OCUA agreed to collect and treat MRRSA's waste water. Following the execution of the service agreement, MRRSA entered into agreements with its member municipalities obligating MRRSA to construct force mains and an interceptor system to transport the waste water to OCUA's facility in Ocean County. The system is presently in place and operating. MRRSA issued temporary bonds to finance the construction of these improvements, and on July 12, 1984, approved a bond resolution authorizing issuance of $21,000,000 in permanent bonds. We are advised that sale of the permanent bonds has been withheld pending disposition of this action and that temporary financing is continuing.

According to plaintiffs, OCUA increased its rate from $850, charged in April 1981, to $1,800 per 1,000,000 gallons, charged in January 1984. MRRSA collects OCUA's fee from its members and adds an additional fee to cover its own capital reserves, insurance costs and the payment of principal and interest on the interim financing. As of the date of plaintiffs' complaints, February 8, 1985, MRRSA had proposed a bulk rate to be charged its member municipalities of $3,022 per 1,000,000 gallons.

Plaintiffs instituted these consolidated actions, claiming that MRRSA has become a ". . . superfluous administrative agency [which] should be dissolved." They sought dissolution of MRRSA and an order compelling OCUA to assume MRRSA's indebtedness. Plaintiffs alleged that the service agreement between MRRSA and OCUA resulted ...


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