ARNOT 40 REALTY L.L.C. v. BOROUGH OF LODI

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

ARNOT 40 REALTY, L.L.C.,

Plaintiff-Appellant,

v.

BOROUGH OF LODI,

Defendant-Respondent.

______________________________________________

June 23, 2014

Argued May 6, 2014 Decided

Before Judges Messano and Sabatino.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8790-11.

Emil S. Cuccio argued the cause for appellant (Cuccio and Cuccio, P.C., attorneys; Mr. Cuccio, on the brief).

Andrew T. Fede argued the cause for respondent (Archer & Greiner, P.C., attorneys; Thomas J. Herten, of counsel; Mr. Fede, on the brief).

PER CURIAM

Plaintiff owns commercial property in Lodi, comprised of approximately 20,000 square feet, divided into twenty units that plaintiff leases to individual commercial tenants (the property). Each unit contains a lavatory with full plumbing. The property is served by one sewer line and one water line, with water usage measured by a single common meter.

Defendant, Borough of Lodi (Lodi), operates and maintains its own municipal sewerage system pursuant to the Municipal and County Sewerage Act (MCSA), N.J.S.A. 40A:26A-1 to -22. See N.J.S.A. 40A:26A-4 (permitting a "local unit," defined by N.J.S.A. 40A:26A-3 to include a "municipality," to "acquire, construct or operate a sewerage facility . . . ."). In August 2007, Lodi passed Ordinance 808-02 which, among other things, doubled the sewer rates for both residential and non-residential water users from their prior levels of $20 per quarter year to $40 per quarter year for the first 15,000 cubic feet, and from $1 per quarter year to $2 per quarter year per 100 cubic feet used thereafter. Residential users were charged per "each family . . . unit and/or apartment unit."

On May 17, 2010, Lodi again amended its sewer charges by enacting Ordinance 2010-22 (the Ordinance). As to both residential and non-residential users, the Ordinance maintained the same fees, but it reduced the minimum rate per quarter from 15,000 cubic feet to 10,000. Notable for purposes of this appeal, the Ordinance now contained the following definition:

Non-Residential Users are hereby defined as any and all commercial, industrial or institutional owners if owner occupied and tenants or licensees occupying commercial, industrial or institutional premises located in any building or in part of a building whether or not separately metered for water or for sewer and whether or not a certificate of occupancy or certificate of continued occupancy is required.

[(Emphasis added).]

The Ordinance imposed charges per each "non-residential user" and further provided:

The owner or landlord of the property where the meter is located or sewer service is provided shall be responsible for the payment of all sewer user charges for the owner and for his tenants whether or not residential users or non-residential users or a combination thereof. Notwithstanding the foregoing, nothing herein shall prohibit an owner or landlord from seeking reimbursement from his or her tenants provided same is not otherwise contrary to law.

As a result, plaintiff's minimum sewer charges increased twenty-fold, from $40 per quarter to $800 per quarter.

On October 19, 2011, plaintiff filed a complaint in lieu of prerogative writs, alleging Lodi's passage of the Ordinance was "arbitrary, capricious, unreasonable and unconstitutional."1 Lodi filed its responsive pleading, and discovery ensued. On May 14, 2013, plaintiff moved for summary judgment, and Lodi subsequently cross-moved for summary judgment. We briefly recount the evidence in the motion record.

Plaintiff furnished minutes from various municipal council meetings leading up to passage of the Ordinance which, it contended, demonstrated that Lodi failed to perform any analysis or study to support the change in sewerage charges ultimately adopted. It also attached the deposition transcripts of Anthony Luna, the Borough Manager of Lodi, and Frank DiMaria, Lodi's outside municipal auditor.

Luna explained that Lodi operated its sewer system under the powers of the Borough Council, rather than having an autonomous agency perform that function. Lodi sent its sewage to the Passaic Valley Sewerage Commission (PVSC), which in turn billed the municipality. Lodi paid the PVSC and then billed its residents. Luna testified that in 2010, "it was apparent . . . that the amount of revenue from the sewer system was insufficient to cover the cost[s.]"

According to Luna, the Ordinance was adopted to place residential and commercial users "on the same plane." Luna noted that some commercial property owners had meters for each tenant, while some had only one meter for all tenants. Therefore, Lodi adopted an "[a]cross the board" approach that applied to each user. Luna conceded that the rates were "not based upon [the] amount of discharge into the system," but instead upon "a flat rate . . . ."

Like Luna, Di Maria did not prepare any formal report for consideration by the governing body prior to its adoption of the Ordinance, although he had discussions with Luna, the municipal engineer and others regarding the shortfall between expenses and revenue. After plaintiff commenced the instant action, DiMaria furnished a report, in which he explained:

[Lodi] had become aware that PVWC [sic] had been merely billing non-residential units by the number of meters on location as opposed to the number of units/users. [The Ordinance] further clarified and defined the term 'non-residential user.' It was not fair for a property owner to put multi-unit users on one meter to circumvent the minimum sewer charges for the multi-units. (Multi-unit residential units were already being charged on a per apartment basis by . . . Ordinance 808-02 . . . but [it] did not specifically define non-residential user.) This was discussed at length on numerous occasions with the Borough Manager and also reported to and discussed with the Mayor and Council.

Plaintiff also produced an expert's report from Gregg F. Paster, an attorney. Paster opined that the Ordinance was "void ab intitio," because it failed "to account for actual water use or discharge into the sewer system," and because Lodi failed "to properly notice and conduct a user charge hearing" as required by law. Paster's opinions were based upon his interpretation of the "sewerage authorities law," N.J.S.A. 40:14A-1 to -45 ("the Authorities Law"), and the Municipal and County Utilities Authorities Act, N.J.S.A. 40:14B-1 to -78 ("the MUA"). With respect to the setting of sewerage charges, Paster opined that the provisions of each law were "identical[,] almost word for word."

In a supplemental report also furnished to the motion judge, Paster acknowledged that Lodi maintained and operated its own municipal sewerage system. He nevertheless opined that, even if Lodi was not subject to either the Authorities Law or the MUA, the Ordinance failed to "account for actual water use or discharge" and was "void ab initio."

After considering oral argument, the motion judge denied plaintiff's motion and granted Lodi's motion for summary judgment, dismissing the complaint. In a written statement of reasons attached as a rider to the order, citing provisions of both the Authorities Law and the MUA, the judge concluded:

[The Ordinance] establishing sewer user fees has a rational basis for the charges indicated, and [it] meets the criteria set forth in the statute used to determine the appropriate user fee to charge. [Lodi] considered the factors in the statute, and established rates which are uniform and equitable throughout the Borough. The Court therefore finds no reason why the Ordinance should be invalidated.

He entered a conforming order and this appeal followed.

Before us, plaintiff argues that 1) the Ordinance is contrary to established law because it fails to consider actual water usage; 2) its enactment was "arbitrary, capricious and unreasonable" because Lodi failed to conduct any hearings or hold public meetings before enacting the Ordinance; and 3) summary judgment was not appropriate because Lodi failed to produce any evidence supporting the judge's finding that the charges were necessary and reasonable. We have considered these arguments in light of the record and applicable legal standards. We affirm.

"In an appeal of an order granting summary judgment, appellate courts 'employ the same standard [of review] that governs the trial court.'" Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010) (alteration in original) (quoting Busciglio v. DellaFave, 366 N.J. Super. 135, 139 (App. Div. 2004)). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., Inc., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006).

[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.

[Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).]

We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co., supra, 387 N.J. Super. at 231 (citation omitted). "We review the law de novo and owe no deference to the trial court . . . if [it has] wrongly interpreted a statute." Zabilowicz v. Kelsey, 200 N.J. 507, 512 (2009) (citations omitted).

Initially, we note that neither the Authorities Law nor the MUA has application to this controversy. Because Lodi manages and operates its sewerage system, it must only comply with the provisions of the MCSA. We have previously recognized the distinct statutory schemes of the MCSA and the Authorities Law, without reaching any conclusion about whether the differently-phrased rate setting provisions of the two are effectively the same. See New Providence Apartments Co., L.L.C. v. Mayor and Council of the Borough of New Providence, 423 N.J. Super. 210, 219 n.4 (App. Div. 2011) ("We have no need to determine whether a sewerage authority's delegated authority to establish sewer rates [under the Authorities Law] is more circumscribed than a governing body's authority under N.J.S.A. 40A:26A-10 involved in this appeal.").

However, we review appeals from final orders and judgments, not from the opinions that support them. See e.g., Price v. Hudson Heights Dev., LLC, 417 N.J. Super. 462, 467 (App. Div. 2011) (citations omitted) ("[A]ppeals are taken from judgments, not opinions of the trial court."); Pressler & Verniero, Current N.J. Court Rules, comment 2.2.1 on R. 2:2-3 (2014). In this case, we are convinced that, although the judge may have cited inapplicable statutes which plaintiff urged him to address, his essential reasoning was correct.

Plaintiff's first two points on appeal rely upon the same faulty premise presented to the Law Division, i.e., that the process of enacting the Ordinance, and the criteria Lodi used to adjust sewerage charges, must be consistent with the rate-setting provisions of the Authorities Law and the MUA. In this regard, we acknowledge that under those statutes, a sewerage authority or municipal utilities authority must set its rates using certain criteria or combination thereof, one of which is the consumption of water "on or in connection with the real property." N.J.S.A. 40:14A-8(b); N.J.S.A. 40:14B-22. Further, under both of those statutes, the authority may adjust the charges only after holding a public hearing at which it "provide[s] evidence . . . showing that the proposed adjustment of the service charges is necessary and reasonable[.]" N.J.S.A. 40:14A-8(c); N.J.S.A. 40:14B-23.

In contrast, the MCSA does not require specific notice and a public evidentiary hearing whenever a municipality intends to amend sewerage service charges. Moreover, the MCSA does not contain the laundry list of specific criteria the Authorities Law and the MUA contain that provide the basis for calculating sewerage charges under those statutory schemes. Specifically, the MCSA only provides in more general terms that a municipality

may prescribe and, from time to time, alter rates or rentals to be charged to users of sewerage services. Rates or rentals being in the nature of use or service charges or annual rental charges, shall be uniform and equitable for the same types and classes of use and service of the facilities . . . . Rates or rentals and types and classes of use and service may be based on any factors which the governing body . . . shall deem proper and equitable within the region served.

[N.J.S.A. 40A:26A-10 (emphasis added).]

In doing so, a municipality "shall establish a rate structure that allows" it to recover various costs, as well as "an amount equal to any operating budget deficit occurring in the immediately preceding fiscal year[.]" N.J.S.A. 40A:26A-10(a). The municipality may also fix rates that permit it to establish a surplus. N.J.S.A. 40A:26A-10(b).

We have recognized that "[o]ur courts . . . have only a 'limited role' in reviewing the charges imposed for sewer service." New Providence Apartments, supra, 423 N.J. Super. at 216 (quoting Meglino v. Twp. Comm. of Eagleswood, 103 N.J.144, 152 (1986)). "An ordinance establishing [such] rates will be upset only if patently unreasonable." Ibid.(alteration in original) (citation omitted).

The Court has specifically concluded that "a municipally owned sewer utility" may set the same per dwelling unit charge "for all single-family occupancy units, whether in large apartment houses, smaller multiple rental buildings or single-family residences," without "making rates dependent on specific or average sewerage flows in different categories of housing, particularly when . . . the municipality is not operating through a sewerage authority pursuant to the particularized regulations of [the Authorities Law]." Piscataway Apartment Ass'n v. Twp. of Piscataway, 66 N.J.106, 109 (1974). In New Providence Apartments, supra, we specifically held that the MCSA

does not limit the governing body's exercise of discretion in establishing sewer rates solely to consideration of usage. . . . [T]he Legislature has delegated authority to a municipal governing body to consider not simply usage but any other factor the governing body 'deem[s] proper and equitable' in establishing both 'types and classes of use and service' and 'rates or rentals.'

[423 N.J. Super. at 218-19 (emphasis added) (quoting N.J.S.A. 40A-26A-10).]

In this case, the Ordinance was enacted not only to address the persistent financial shortfall of the system's operation, which was permissible under the MCSA, but also to place residential and non-residential users "on the same plane." Prior to its enactment, residential users were being charged per eachdwelling unit. The Ordinance imposed the same rate structure upon non-residential users. Contrary to plaintiff's assertions, under N.J.S.A. 40A:26A-10, Lodi need not have considered the actual usage of each "non-residential user" in exercising its broad discretion under the statute. In short, the Ordinance is "free from patent unreasonableness." Piscataway Apartment Ass'n, supra, 66 N.J. at 109. And, as already noted, the MCSA did not require Lodi to hold public evidentiary hearings to justify the amendment of its sewerage charges.

In light of our discussion, plaintiff's third argument, that Lodi failed to demonstrate the increased charges were necessary and reasonable, lacks sufficient merit to warrant discussion in a written opinion. R.2:11-3(e)(1)(E).

Affirmed.

1 The complaint's second count challenged another ordinance Lodi enacted regarding the issuance of certificates of occupancy. The parties subsequently executed a stipulation of dismissal without prejudice regarding this count.