OAKS DEVELOPMENT CORPORATION, JOHN J. BRUNETTI, and MIDTOWN WATER COMPANY, Plaintiffs-Appellants/ Cross-Respondents,
THE PLANNING BOARD OF THE TOWNSHIP OF OLD BRIDGE, THE TOWNSHIP OF OLD BRIDGE, and THE OLD BRIDGE MUNICIPAL UTILITIES AUTHORITY, Defendants-Respondents/ Cross-Appellants.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 9, 2013.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-1909-05.
Eric I. Abraham argued the cause for appellants/cross-respondents (Hill Wallack, L.L.P., attorneys; Mr. Abraham, of counsel; Mr. Abraham and Christina L. Saveriano, on the briefs).
Louis E. Granata argued the cause for respondents/cross-appellants (Granata & Zaccardi, attorneys; Mr. Granata, of counsel; Mr. Granata and Leslie G. London, on the brief).
Before Judges Yannotti, Ashrafi and St. John.
Plaintiffs Oaks Development Corporation, John J. Brunetti and Midtown Water Company appeal from orders entered by the Law Division, which together resulted in the dismissal with prejudice of all of their claims against defendant Old Bridge Municipal Utilities Authority. The Authority cross-appeals from the dismissal of its counterclaim against plaintiffs. For the reasons that follow, we affirm in part, reverse in part and remand the matter to the trial court for further proceedings.
We briefly summarize the salient facts, drawn from the record on appeal.
A. Midtown's Franchise and Water Diversion Rights.
Plaintiffs are the owners of approximately 2, 500 acres of land in the Township of Old Bridge. Joseph J. Brunetti, the father of John J. Brunetti, acquired those properties in the 1950's, and the Township thereafter granted Midtown a franchise to operate a private water company in that area. The State also authorized Midtown to exercise water diversion rights, and allowed it to operate as a public utility for the withdrawal, extraction, sale and delivery of potable water.
Midtown subsequently drilled a well, built a treatment plant, installed necessary pumps and collateral equipment, and erected a standpipe in its franchise area. Sometime later, the Authority commenced a condemnation action to acquire some of Midtown's real property, as well as its machinery, equipment and franchise rights. Midtown contested the action.
B. The 1967 Water Agreement.
To resolve the condemnation action, Midtown, Joseph J. Brunetti and the Authority entered into an agreement, dated December 13, 1967, in which Midtown agreed to sell and convey to the Authority its artesian well, pumps, equipment, storage tanks and associated facilities, as well as certain real property, in exchange for the payment of specified amounts. Midtown also agreed to relinquish all water diversion rights in the property.
The Authority agreed that it would, at its own cost and expense, construct and erect all wells, pumps, storage and treatment facilities and other appurtenances necessary to furnish and provide an ample supply of potable water of sufficient pressure and volume so that Joseph J. Brunetti and his grantees could develop and use their lands in the franchise area for any lawful purpose.
The Authority additionally agreed to furnish, and Midtown agreed to take, a supply of water of up to five million gallons per day through metered connections with the Authority's mains. Midtown agreed to provide and install at its own cost and expense, meter vaults, meters and meter equipment. The agreement specified the rates that would be charged for the water used.
In addition, Midtown granted the Authority an exclusive and irrevocable option to purchase its entire distribution system, along with any supply or storage facilities that it may have created. The parties agreed upon the purchase price for the system, which included $600 from single-family residential water users and specified amounts from other water users.
C. The 1986 Water Agreement.
Thereafter, Midtown, the Estate of Joseph J. Brunetti, and the Authority entered into an agreement, dated January 18, 1986. This agreement provided that all of Midtown's existing water users in the franchise area would become the Authority's customers, without payment of any kind by the Authority. The agreement specified the amounts the customers would be charged for the water they used. However, the parties agreed that Midtown's customers would not be required to pay fees for any connections made within the franchise area.
The 1986 agreement additionally stated in pertinent part:
2. In the event that the [Authority] supplies water to any other portion of the franchise area, not currently constructed, then, in that event, all customers who are supplied water by the [Authority] shall become customers of the [Authority] and shall pay the prevailing water rate and any increases as shall be approved in accordance with law to the [Authority]. It shall be the obligation of [Midtown] to construct and bear the full costs of all lines and other facilities within the franchise area in order to connect with the existing [Authority] mains.
7. In the event [Midtown] makes any additions to the existing water distribution system, [Midtown] shall provide the [Authority] "as built" drawings, properly certified by a licensed New Jersey professional engineer.
8.It is the expressed understanding of all parties that nothing in this Agreement shall ever be construed to require the payment by the [Authority] of any monies whatsoever for any purpose whatsoever.
The agreement also stated that, "In the event that the within agreement is contrary to any previous Agreements, Resolutions, Ordinance as established by the [Authority] or the Municipal Government, then the within Agreement shall be controlling."
D. The 1995 Sewer Agreement.
In January 1995, the Authority and John J. Brunetti entered into an agreement to construct sewer lines on three properties that Brunetti owned. The agreement provided that the Authority would construct a forty-two inch sewer main, and Brunetti would construct various sewer lines, which would connect with the Authority's forty-two inch line. The agreement specified the times in which Brunetti would be required to construct the lines.
E. Plaintiffs' Initial Complaint.
Plaintiffs commenced this action to secure orders requiring the Township and its Planning Board to approve the Oaks at Glenwood, a development that they proposed to construct on 433 acres of land in Midtown's franchise area. The development includes commercial space and 1, 384 housing units. Plaintiffs intend to set aside 138 of the residential units for low and moderate income households. In December 2004, the trial court entered an order requiring the Planning Board to approve the development. The Board thereafter adopted a resolution, dated March 1, 2005, approving the development.
F. Midtown's Application for Water Service.
On May 2, 2006, Midtown submitted an application to the Authority to extend water service to plaintiffs' proposed development. The Authority deemed the application incomplete, finding that it did not comply with its rules and regulations and the 1986 water agreement. The Authority requested that Midtown "complete its application showing the lines and facilities needed to provide water service to the project, including an onsite water storage facility" that is sufficient to meet the development's peak day and fire flow demands.
The Authority thereafter retained CME Associates, a firm of consulting and municipal engineers, to determine the impact the development would have on its water distribution system and the improvements that would be required to provide water to the development. CME issued a report dated February 15, 2007.
CME noted that the Authority's water supply system is divided into five zones: Browntown, Sayrewoods, Old Bridge, Route 516, and Lake Ridge. The Authority supplies water from three sources: the Browntown water treatment plant, the Old Bridge water plant and three interconnections with the Middlesex Water Company. Plaintiffs' proposed development is in the Browntown service area.
CME used a computer model to assess the system's capacity and the effect the development will have on the system. CME stated that anticipated demand from the development would affect the Browntown and Route 516 service areas. According to CME, during peak day conditions, the Authority would have to operate three pumps at the Perrine Road pump station and all five pumps at the Browntown plant.
CME stated that the Browntown plant did not have the redundancy required to meet the anticipated peak day demands. CME also stated that the additional water drawn from the Browntown plant would reduce the flow into and level of the storage tank at Route 516, which will lower pressures in that zone. CME recommended that the Authority construct an elevated water storage tank with a minimum of two million gallons. CME said this would reduce the demand on the Browntown plant and the Route 516 pump station during peak day demand, and provide redundancy in the event of a supply pump failure.
CME also recommended improvements to the Browntown plant in order to isolate the plant's treatment system from the distribution system. CME noted that Browntown had a large pump system but due to certain limitations, it operated at a reduced capacity in order to ensure the integrity of the water. CME suggested improvements so that the plant could operate at full capacity and provide needed redundancy.
It is not entirely clear from the record, but at some point either the Authority or CME concluded that a one million gallon water storage tank would be sufficient. In addition, either CME or the Authority's engineers concluded that improvements to the Higgins Road/Route 516 interconnection were required. The estimated cost of all of the improvements was about sixteen million.
G. The Amended Complaint and the Authority's Counterclaim.
In February 2009, with leave of court, plaintiffs filed an amended complaint, in which they claimed that the Authority had improperly interfered with water and sewer service in the Midtown franchise area. Plaintiffs alleged that the Authority had refused to honor its contractual obligation to provide an adequate supply of water to the development, and instead sought to "coerce" plaintiffs into constructing improvements for the benefit of the entire system.
Plaintiffs alleged that the improvements the Authority demanded were not reasonably required to service the development. Plaintiffs additionally alleged that the Authority and its employees had impeded the construction of sewer improvements that are needed to serve the development. They stated that, under the 1995 sewer agreement, Brunetti ...