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Penpac, Inc. v. Passaic County Utilities Authority

May 23, 2008


On appeal from Superior Court of New Jersey, Law Division, Passaic County, L-2040-05.

Per curiam.


Argued April 29, 2008

Before Judges Fuentes, Grall and Chambers.

Defendant, the Passaic County Utilities Authority (PCUA), appeals from a final order of the Law Division that requires the PCUA to transfer funds in specified bank accounts and assign future payments due on a mortgage to plaintiff PENPAC, Inc. The order implements a writ of mandamus that requires the PCUA to satisfy a judgment obtained by PENPAC. We affirm substantially for the reasons stated by Judge Humphreys in his written opinion of March 2, 2007.

The PCUA was established in 1987, pursuant to the Municipal and County Utilities Authorities Law, N.J.S.A. 40:14B-1 to -78 (MCUA). The PCUA was to administer Passaic County's solid waste management plan, which was adopted pursuant to a comprehensive statutory and regulatory scheme. In re Passaic County Utils. Auth., 164 N.J. 270, 274-75 (2000).*fn1 PENPAC provided solid waste transfer station operations and transportation services to PCUA. At first, PENPAC's compensation was fixed by contract; subsequently, PENPAC was compensated at interim rates fixed by the Commissioner of the Department of Environmental Protection (DEP) and subject to adjustment. See Penpac, Inc. v. Passaic County Utils. Auth., 367 N.J. Super. 487, 493 (App. Div.) (discussing the Commissioner's authority and determinations and the facts relevant to the debt), certif. denied, 180 N.J. 457 (2004).

The debt PCUA owes PENPAC is for services rendered by PENPAC. The amount due PENPAC is not in dispute. It was fixed by the Commissioner of the DEP, and affirmed by this court, which remanded for a determination of interest and consideration of additional payments that might be due. Penpac, supra, 367 N.J. Super. at 511-12. Subsequent to the Commissioner's decision on remand, PENPAC commenced an action in the Law Division and on August 15, 2006, obtained a judgment in the amount of $3,495,105, which included debt in the amount affirmed by this court and interest fixed by the Commissioner.

PCUA did not pay the judgment, and PENPAC sought further relief from the court.*fn2 On October 6, 2006, Judge Humphreys granted PENPAC'S motion for a writ of mandamus compelling the PCUA to satisfy the judgment. He scheduled a plenary hearing on implementation to address PCUA's claim of inability to pay the $3,495,105 judgment. According to the PCUA, it had some sixty-five million dollars in bonded debt, and all of its assets were pledged to repay the bonds and unavailable to pay the debt. Based on the evidence presented at the hearing, Judge Humphreys identified accounts and mortgage payments due to PCUA that were not so pledged and ordered PCUA to transfer funds in those accounts and assign payments due on the mortgage to PENPAC.

Judge Humphreys stayed the transfer and assignment pending this appeal but enjoined the PCUA from using the funds. This court denied PCUA's motion to modify that stay. The parties advise that the Supreme Court had not acted on PCUA's subsequent motion for relief from this court's order when briefs were filed on appeal.

The following facts are based on the evidence adduced during the plenary hearing on implementation. The PCUA presented two witnesses, a commissioner and an auditor for the PCUA.

The PCUA no longer provides any services and has no operating income, employees or offices. The PCUA exists only "to regenerate bond[s] or revenue to pay off past debt." The PCUA's only revenue stream is $323,352 per year it receives as payment on a mortgage. The PCUA uses the mortgage payments to pay fees for auditors, bond counsel, general counsel and a financial advisor. It estimated the cost for 2006 and 2007 at $224,745. The PCUA's bills are paid by the Passaic County finance department, and the PCUA has never reimbursed the County. The auditor has "no reason to believe" the County would pay PCUA's operating expenses that exceed the amount budgeted.

The PCUA did not include the PENPAC judgment in its budget for 2006 or 2007, and the commissioners have never discussed how to pay that judgment. PCUA has never requested assistance with payment of its debt to PENPAC from the County or any State agency or board.

The County has guaranteed PCUA's outstanding bond obligations. The PCUA's debt on bonds issued in 1991 was fully paid by November 2006. According to the commissioner, all of PCUA'S bond debt will be paid by 2033 or 2034, unless new debt is generated. In the opinion of the auditor, but for the County's guarantee, the bonds would be deemed to have the value of junk bonds.

There is no dispute about the identity of assets that PCUA presently holds. In December 2005, the PCUA had $2,829,854 on deposit in various accounts and monthly payments due in the total amount of $323,352 per year on a mortgage that will be satisfied in 2009. The question is whether Judge Humphreys erred by ordering PCUA to transfer funds held in select ...

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