County of Delaware, PA v. Delaware County Regional Water Quality Control Authority

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

County of Delaware, Pennsylvania, :

Appellant :

:

v. : No. 148 C.D. 2021

:

Delaware County Regional Water :

Quality Control Authority, and : Argued: October 18, 2021

DELCORA Rate Stabilization Fund :

Trust Agreement b/t The Delaware :

County Regional Water Quality :

Control Authority as Settlor and :

Univest Bank and Trust Co. as :

Trustee :

:

v. :

:

Darby Creek Joint Authority, Southern :

Delaware County Authority, and Aqua :

Pennsylvania Wastewater, Inc. :

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION BY

JUDGE McCULLOUGH FILED: March 3, 2022

The County of Delaware (County) appeals from the December 28, 2020

final order of the Court of Common Pleas of Delaware County (trial court), which was

entered following a bench trial and disposed of all claims filed by the County and

counterclaims filed by Delaware County Regional Water Quality Control Authority

(DELCORA) and Aqua Pennsylvania Wastewater, Inc. (Aqua).

Recently, in In re Chester Water Authority Trust, 263 A.3d 689 (Pa.

Cmwlth. 2021) (en banc),1 this Court reconfirmed that a municipality, per section

5622(a) of the Municipality Authorities Act (MAA),2 53 Pa.C.S. §5622(a),3 possesses

the unilateral power to dissolve and/or obtain an authority that it had created or the

authority’s assets. The major issue in this appeal is whether a municipality (here, the

County) can exercise that statutory power after an authority (here, DELCORA), acting

pursuant to section 5607(d)(4) and (13) of the MAA, 53 Pa.C.S. §5607(d)(4), (13),4

1

Petition for allowance of appeal pending (Pa., Nos. 519-522 MAL, filed September 17,

2021, and 569-572 MAL 2021, filed October 18, 2021).

2

53 Pa.C.S. §§5601-5623.

3

Titled “[c]onveyance by authorities to municipalities or school districts of established

projects,” section 5622(a) of the MAA presently states as follows:

(a) Project.--If a project established under this chapter by a board

appointed by a municipality is of a character which the municipality

has power to establish, maintain or operate and the municipality desires

to acquire the project, it may by appropriate resolution or ordinance

adopted by the proper authorities signify its desire to do so, and the

authorities shall convey by appropriate instrument the project to the

municipality upon the assumption by the municipality of all the

obligations incurred by the authorities with respect to that project.

53 Pa.C.S. §5622(a).

4

Section 5607(d)(4) and (13) provides as follows:

(d) Powers.--Every authority may exercise all powers necessary or

convenient for the carrying out of the purposes set forth in this section,

including, but without limiting the generality of the foregoing, the

following rights and powers:

....

(4) To acquire, purchase, hold, lease as lessee and use any franchise,

property, real, personal or mixed, tangible or intangible, or any interest

therein necessary or desirable for carrying out the purposes of the

(Footnote continued on next page…)

2

entered a contract to sell its assets to a private third party (here, Aqua). Given the

underlying factual circumstances, this issue arises specifically at a point where the

obligations of the contract have not been fully performed, the contract is subject to a

condition subsequent, the municipality arguably did not assume the obligations of the

contract via an ordinance, and the municipality—disputedly—cannot fulfill the

obligations of the authority in the event the municipality did assume the contract.

Upon review, we conclude that the County retains its statutory authority

under section 5622(a) of the MAA, notwithstanding DELCORA’s exercise of power

under section 5607(d)(4) and (13) of the MAA. Accordingly, we reverse the order of

the trial court and remand for further proceedings.

Background

In its opinion, the trial court set forth the factual history of this case as

follows:

DELCORA is a municipal authority formed by the County

pursuant to the [MAA] of 1945[5] for the purpose of

collecting, conveying, and treating wastewater generated by

residents and businesses located in the County. On October

20, 1971, the County . . . created DELCORA by filing

Articles of Incorporation . . . with the Department of State.

authority, and to sell, lease as lessor, transfer and dispose of any

property or interest therein at any time acquired by it.

....

(13) To make contracts of every name and nature and to execute all

instruments necessary or convenient for the carrying on of its business.

53 Pa.C.S. §5607(d)(4), (13).

5

Act of May 2, 1945, P.L 382, No. 164, as amended, formerly 53 P.S. §§301-322. Later,

section 3 of the Act of June 19, 2001, P.L. 287 (2001 Act), repealed the MAA of 1945 and replaced

it with the current MAA.

3

The County is the only municipal incorporator of

DELCORA. The County is governed under its Home Rule

Charter and consists of five elected council members. The

original Articles provide that DELCORA[]

shall be organized for the purpose only to acquire, hold,

construct, improve, maintain, operate, own and lease,

either in the capacity of lessor or lessee, projects of the

following kind and character: sewers, sewer systems or

parts thereof, sewerage treatment works, including

works for the treating and disposing of industrial waste,

in and for the County, and such other territory as it may

be authorized to serve, and to contract with individuals,

corporations, municipal corporations, authorities, and

other governmental bodies or regulatory agencies both

within and without the County [], and shall exercise all

of the powers granted to an Authority organized for

such purpose by the [MAA] of 1945 under which it is

organized.

The Articles were subsequently amended by the County

through the filing of Articles of Amendment on November 9,

1977, to increase the number of board members of

DELCORA from seven to nine. On April 16, 2002, the

Articles were again amended to extend the term of existence

of DELCORA from October 20, 2021, to January 15, 2052.

DELCORA currently owns, operates, and maintains

wastewater collection systems that serve approximately a

half million people in [42] municipalities in both Delaware

and Chester Counties. DELCORA is responsible for

building and operating interceptors, force mains and pump

stations, [] a regional wastewater treatment plant, and

acquiring treatment capacity from the Philadelphia Water

Department. DELCORA also currently owns and operates

sewer collection systems serving eight municipalities: the

City of Chester [(City)], parts of the Township of Chester,

and the Boroughs of Parkside, Upland, Trainer, Marcus

Hook, Rose Valley, and Edgemont. In addition, DELCORA

owns and operates two treatment plants in Pocopson

Township, Chester County. Intervenors Darby Creek Joint

Authority [(DCJA)] and Southern Delaware County

Authority [(SDCA)] both have service contracts with

4

DELCORA and rely upon DELCORA’s wastewater

collection and treatment, as they represent various

communities themselves.

In 2019, when faced with dramatically increasing estimated

capital costs that would substantially increase rates that

would have to be charged to its customers, DELCORA

engaged in discussions with [i]ntervenor [Aqua], a provider

of wastewater utility service in Pennsylvania, for the

purchase of DELCORA’s system. At its regularly scheduled

meeting on September 17, 2019, the DELCORA Board

unanimously approved a $276.5 million sale to [Aqua]. The

Asset Purchase Agreement [(APA)] is dated September 17,

2019, and was subsequently amended on February 24, 2020.

The [APA] is structured in such a way as to protect

DELCORA’s customers by capping all rate increases for

customers at 3% per year. Through a separate DELCORA

Trust Agreement, known as the Rate Stabilization Fund Trust

[(the Trust, Trust Agreement, or Rate Stabilization Fund

Trust)], DELCORA agreed to place the proceeds of the sale

(after paying down DELCORA’s obligations) into an

independently managed irrevocable trust for the benefit of

DELCORA’s customers, with Intervenor Univest Bank and

Trust Co. serving as trustee [(Univest)]. [Aqua] is identified

as a third-party beneficiary under the [] Trust Agreement.

As a municipal authority that is governed by the [MAA],

DELCORA has all the rights, powers, and duties that are set

forth in the [MAA], including the right and power to sell its

system to an investor[-]owned utility such as [Aqua]. The

[APA], dated September 17, 2019, was properly authorized

and properly entered into by DELCORA in full compliance

with the law and the [MAA], at a public meeting and

constitutes a binding, enforceable agreement and contractual

obligation of DELCORA.

The [APA] contains multiple provisions which in effect

mandate that DELCORA proceed to closing on the sale to

[Aqua] prior to any dissolution of DELCORA by the County.

5

There are provisions in the APA that can only be satisfied by

DELCORA prior to closing, and not the County, as

evidenced by [certain,] relevant provisions of the APA.[6,7]

6

Reproduced in a somewhat reworded and summarized form, the trial court commented upon

the pertinent provisions of the “Representations & Warranties” section of the APA as follows: (1)

Article IV, introductory language—DELCORA makes its representations and warranties “as a

material inducement” to Aqua to enter into and consummate the transactions contemplated by the

APA; (2) Section 4.06—DELCORA must confirm that there are no undisclosed liabilities for the

system as of closing; (3) Section 4.09—The APA involves hundreds of distinct interests in real

property and the ongoing searches may reveal many more. DELCORA is required to confirm at

closing that Aqua is getting all of its real property interests, and only DELCORA will have knowledge

regarding whether disclosure of real property interests is accurate and complete; (4) Section 4.13—

DELCORA’s environmental representations and warranties are critical to the APA, and the County,

if it was permitted to dissolve DELCORA prior to closing, will be unable to determine whether the

representations and warranties remain true and correct at closing. Further, Aqua agreed to allow

DELCORA to make several representations and warranties subject to DELCORA’s knowledge of the

conditions covered in those specific representations and warranties, which the County would be

unable to make; (5) Section 4.14—The transaction requires that DELCORA’s permits be transferred;

however, there is no indication that the County is prepared or would be permitted to assume the

Department of Environmental Protection (DEP) permits that are required to operate this system; (6)

Section 4.15—The transaction requires the assignment of approximately 200 service contracts (many

of which require the consent of the parties), all consents secured thus far were based upon the

understanding that the provision of service would be transferred from DELCORA to Aqua, and the

County is in no position to honor some of the obligations that were made; (7) Section 4.17(b)—This

section mandates assurances that the assets Aqua agreed to buy are sufficient to operate the system,

and the County would be unable to make this representation at closing; (8) Section 9.03—This section

requires DELCORA to update representations and warranties within 3 days of becoming aware of

information that implicates a disclosure, which DELCORA alone would know; and (9) Section

12.02—DELCORA must certify at closing that the representations and warranties made as of the date

the parties signed the APA remain true and correct as of the date of closing, but the County, due to

lack of knowledge, is not in a position to make that closing certification, and, as a result, the closing

itself would be jeopardized or Aqua would be forced to decide whether to terminate the APA or accept

an insufficient closing certification. (Trial court op. at 5-6.)

7

Replicated in a relatively more succinct fashion, the trial court analyzed the remaining

portions of the APA that it deemed to be relevant to this case as follows: (10) Section 7.06—This

provision makes closing contingent upon approval by the Pennsylvania Public Utility Commission

(PUC). Because customers exist outside of the County, the County would need to secure a first PUC

approval to obtain DELCORA’s assets and, then the subsequent sale to Aqua, would require a second

PUC approval, which could nullify the pending PUC application to approve the sale directly from

DELCORA to Aqua and threaten the closing date; (11) Section 9.01—This section requires

(Footnote continued on next page…)

6

The [APA] is subject to [PUC] approval, which is the subject

of an application filed by Aqua that is pending before the

PUC at Docket No. A-2019-3015173 [(PUC Application)].

On or about December 18, 2019, the County amended

DELCORA’s Articles to add the following to the “purpose”

provision:

In anticipation of the dissolution of [DELCORA] and/or

the transfer and sale of all or substantially all of

[DELCORA’s] assets, property, and projects in

exchange for the receipt of a cash payment,

[DELCORA] and its Board, in addition to any other

authority granted by applicable law, shall have the full

authority, without limitation to: (1) establish a trust or

non-profit entity to exist for the benefit of rate payers to

distribute to rate payers some or all of the proceeds

received from any transfer and sale, in accordance with

applicable law and any agreements concerning the

transfer and sale of any assets and/or [DELCORA’s]

dissolution; and (2) execute any necessary agreement to

effectuate this purpose prior, during or after any transfer

and sale and/or dissolution.

According to the Amended Articles, assets of a trust or non-

profit entity will be distributed to the rate payers for the

purpose of “Rate Stabilization.” On December 27, 2019, the

[Rate Stabilization Fund] Trust between DELCORA, as

Settlor, and [Univest], as Trustee, was created. . . . The stated

purposes of the Trust are “to benefit the Beneficiaries[,

DELCORA to operate the system in the ordinary course between signing and closing, and DELCORA

credibly alleges that the County has no ability to do so here; (12) Sections 8.01/8.02—DELCORA’s

representations and warranties survive closing for a full year, and the County would be at risk of an

indemnity claim for that full amount in the event the County assumed the obligations of the

representations and warranties; (13) Section 8.05(c)—With certain exceptions, Aqua agreed to cap

DELCORA’s post-closing indemnity obligation for failed representations and warranties at 5% of the

purchase price and, if Aqua had known that it would have to go to closing with the County, Aqua

never would have agreed to cap its post-closing indemnity right; (14) Section 15.09—The County’s

intended action with DELCORA would qualify as an assignment of DELCORA’s rights and

obligations under the APA and would thus require Aqua’s consent; and (15) Section 15.11—The

parties have a right of specific performance under this APA. (Trial court op. at 6-7.)

7

defined as DELCORA’s customers,] by receiving Sale

Proceeds deposited into the Trust Fund by [DELCORA] and

any additional contributions made to the Trust under

[s]ection 3.3 [, which refers to other contributions in the form

of cash, securities, or other property acceptable to Univest,

including funds released from Escrow Accounts related to

the sale to Aqua].”

On May 19, 2020, the County published and passed

Ordinance No. 2020-4 [(Ordinance)] at a special Zoom

[video conference] meeting on June 3, 2020. On June 3,

2020, the County approved and enacted [the] Ordinance [],

directing and ordering DELCORA to terminate its operation,

wind up its affairs, satisfy outstanding debts, and take all

actions necessary to remove any impediments to its

termination, and refrain from taking any action or expending

any funds inconsistent with DELCORA’s termination of its

affairs[.]

Within [24] hours of the County adopting [the] Ordinance [],

the County Solicitor sent a letter to DELCORA on June 4,

2020, which, in part, states and directs that DELCORA is

to take all actions necessary to effectuate its termination

. . . and take all steps necessary to effectuate the transfer

of all its assets, funds, and other property [to the

County] . . . . The County strongly cautions

[DELCORA] against approving any course of action or

expenditure of funds that is inconsistent with

termination, such as incurring additional debt,

transferring assets to the illegally created Rate

Stabilization Fund Trust, or entering into long-term

contracts, without the express authority of the County.

The County Solicitor’s letter further cautions [DELCORA]

that “any expenditure of funds by [DELCORA] that is

contrary to the directives and objectives of the County in the

Ordinance is a violation of the restrictions on the expenditure

of funds of [DELCORA].” The letter from the County

Solicitor, Mr. William F. Martin, directs that “[DELCORA]

is hereby directed to cease any activities—and the

expenditure of any funds in connection with such activities—

8

that are contrary to the County’s directives as set forth in the

Ordinance.”

(Trial court op. at 3-10) (internal citations and footnotes omitted).

In this factual context, the County filed a complaint on May 14, 2020, and

later an amended complaint, seeking among other forms of relief, a writ of mandamus.

Thereafter, DELCORA, Aqua, and two other intervenors filed answers and

counterclaims. The case then proceeded through a somewhat complex procedural

history, which involved or resulted in multiple orders by the trial court, a bench trial

on the merits on some of the claims, and procedural issues regarding the filing of post-

trial motions. See Trial court op. at 2 n.1, 10-16. After conducting a bench trial, the

trial court, in short, concluded that the APA was valid and enforceable, and the County

lacked the authority under section 5622(a) of the MAA to interfere with DELCORA’s

contractual duties to perform under the APA. The trial court further concluded that the

County did not—and could not—assume the contractual obligations of DELCORA

under the APA. As such, the trial court issued an injunction against the County to this

effect, and, in so doing, effectively nullified the Ordinance and the County’s attempt

to dissolve and/or obtain the assets of DELCORA. Based on these conclusions, the

trial court denied the County’s request for a writ of mandamus.

In its statement of errors complained of on appeal, the County raised five

(yet, in some instances, theoretically overlapping) issues for the trial court’s

consideration. More specifically, the County asserted that the trial court erred in (1)

failing to enter a writ of mandamus compelling DELCORA to comply with the

Ordinance; (2) assuming jurisdiction to decide the validity of the APA because

exclusive jurisdiction resides with the PUC; (3) concluding that DELCORA and Aqua

met the standards for injunctive relief; (4) determining that the Rate Stabilization Fund

9

Trust was valid and enforceable; and (5) prohibiting the County from introducing

evidence as to whether the APA violates public policy.

Relevant here, the trial court disposed of the County’s first issue, and its

related subsidiaries and corollaries, with the following reasoning:

The fundamental issues of this case are the legality,

enforceability, and integrity of a contract, that being the

[APA] between DELCORA and Aqua, the enforcement of

the Ordinance and the County’s actions in opposing and

interfering with DELCORA’s performance of the same

contract, and the legality and funding of the Rate

Stabilization Fund Trust between DELCORA and Aqua.

The enforcement of legally binding contracts is the

foundation of our law. When a county government is a party

to a legally binding contract, the change of governmental

administration, management, or political persuasion may

create the desire to renegotiate or not renew nor extend a

contract; but when there is, as there is here, an alleged

intentional interference, termination, or obstruction of a

legally binding contract, that requires critical judicial

examination.

....

Clearly, by way of enforcing the Ordinance, the County

directs the termination, or as the County refers to it, the

“winding down” of DELCORA. This Court found that the

Ordinance does more than “wind down” DELCORA; rather,

it imploded DELCORA’s ability and obligations to perform

contractual obligations to effectuate the sale. The directives,

terms, and provisions of the County’s June 3, 2020

Ordinance [], as demonstrated by the County Solicitor’s

Letter dated June 4, 2020, and public rhetoric with strong

political overtones, evidences the County’s intent and design

to thwart, reverse, interfere, and extinguish the contractual

agreements and a contract[, i.e., the APA,] which was

previously publicly debated, considered, and legally adopted

by DELCORA, Aqua, and the County.

....

10

[T]his Court found that section 5607 of the [MAA] permits

DELCORA to enter into such a contract, while also finding

that the contract terms were still subject to the approval of

the [PUC].

Aqua had and has a fully binding and enforceable agreement

to acquire DELCORA’s system, which requires the

representations and warranties that can only be made by

DELCORA. [See supra notes 5-6.] Contracts, binding

agreements, and various legally public actions are not to be

extinguished or interfered with merely because of a

reorganization of any County Council or partisan differences.

The integrity and predictability of contracts when legally

adopted should be relied upon by the parties, for this

represents good public policy, and the County shall hereby

provide full faith and credit to the [APA], even as [the]

County administrations may change[.]

(Trial court op. at 19-21.)

Specifically addressing its denial of the County’s request for a writ of

mandamus and decision granting DELCORA injunctive relief, the trial court provided

the following rationale to support its rulings:

The County requested that the Ordinance be declared valid

and enforceable and requested a writ of mandamus to

DELCORA to comply with the Ordinance [] and cooperate

with termination; this Court disagreed with the position and

arguments of the County.

By way of enforcing the Ordinance, the County directed the

termination of DELCORA, which this Court determined

directly and immediately interfered with [] DELCORA’s

ability to perform [the APA’s] contractional obligations to

effectuate the sale and further interferes with Aqua’s

contractual rights. This Court notes that the Ordinance

provides for the assumption of all DELCORA’s liabilities by

the County but does not provide an assumption of the

obligations.

....

11

The requirements contained in the County’s Ordinance of

dissolution and termination and the County Solicitor’s June

4, 2020 letter directs that DELCORA immediately provide a

Certificate of Termination, and places restrictions on

expenses and constraints on the actions and performance

required of the [APA], which is the functional equivalent to

termination and interference of contractual obligations, as

well as essential services, and imposes and creates immediate

and irreparable harm. Various terms and conditions of the

Ordinance are a substantial obstacle to DELCORA and

Aqua’s performance of contract, and the County has not

removed any impediments to the termination of DELCORA.

Under [section 5622(a) of] the MAA, the County was

required to assume “all the obligations incurred” by

DELCORA prior to the termination, and that is not what the

County sought in this case. [The County has] taken no steps

to remove the existing impediments while, at the same time,

has consistently required a Certificate of Termination from

DELCORA.

....

[T]he Ordinance fails to address the impediments that exist

and must be resolved prior to the termination of DELCORA.

Numerous debts and financial obligations must be met prior

to the termination of DELCORA, debts and obligations

which at this time DELCORA is unable to sufficiently fund,

and of which the County has provided no steps to provide

DELCORA with any direction as to how DELCORA can

remove [these] impediment[s] [and discharge] its debts. As

the APA has been found to be binding and valid, it is hence

an obligation of DELCORA, and the County must assume it

in order to terminate DELCORA and, as such, [the APA] is

an impediment to the termination.

(Trial court op. at 25-30.)

12

Discussion

On appeal, the County reiterates the arguments that it made in its

statement of errors, contending, among other things, that the trial court erred in failing

to enter a writ of mandamus compelling DELCORA to comply with the Ordinance.

Whether the County’s Ordinance Complies with—and is Valid and Enforceable

under—Section 5622(a) of the MAA despite DELCORA’s Exercise of the Power

to Contract pursuant to Section 5607 of the MAA8

The County argues that, pursuant to section 5622(a) of the MAA, it has

the unfettered and unilateral right to terminate/dissolve DELCORA without

DELCORA’s consent and to mandate that DELCORA remove any “impediments” to

its termination/dissolution. The County, citing and quoting provisions of the

Ordinance, also contests the trial court’s determination that the Ordinance was invalid

because it did not include any express provision for the assumption of DELCORA’s

contractual obligations as required by section 5622(a) of the MAA.

With regard to In re Chester Water Authority Trust, the County contends

that our decision “makes abundantly clear that the powers of the incorporating

municipality to acquire an authority and its assets under section 5622(a) of the MAA

are paramount, and superior to, any independent powers that an authority possesses

under the MAA,” including an authority’s power to transfer its assets to another entity

pursuant to section 5607(d)(4) and (13) of the MAA. (County’s Suppl. Br. at 7.) The

County maintains that in In re Chester Water Authority Trust, this Court’s “analysis

acknowledge[d] the structural distinction between the powers of municipalities and the

authorities they have created.” Id. For support, the County cites a passage from the

8

On October 6, 2021, this Court entered a per curiam order granting the County’s application

for leave to file a supplemental brief in light of our recent decision in In re Chester Water Authority

Trust. The County, DELCORA, and Aqua have all filed supplemental briefs to address whether In

re Chester Water Authority Trust has any impact on this issue.

13

opinion, which states that “just because an authority may transfer its assets to other

governmental entities, as part of its daily operational affairs under other sections of [the

MAA], this does not mean that an authority possesses the same and sole power under

section 5622(a) of the MAA.” Id. at 6-7 (quoting In re Chester Water Authority Trust,

263 A.3d at 704) (emphasis in brief). At bottom, the County views our decision in In

re Chester Water Authority Trust as marking a distinguishing line between the statutory

powers associated with an authority’s operational affairs, such as the contracting and

selling of assets per section 5607(d)(4) and (13) of the MAA, and a municipality’s

authority, via section 5622(a), “to dissolve an authority and obtain and later transfer

and/or convey the authority’s assets as it deems fit, without any input on the part of the

authority.” Id. at 8 (quoting In re Chester Water Authority Trust, 263 A.3d at 700)

(emphasis in brief).

In response, DELCORA and Aqua argue that the APA is a legitimate

exercise of DELCORA’s authority under section 5607(d)(4) and (13) of the MAA and

constitutes a binding and enforceable contract. They contend that the County, through

the enactment of the Ordinance, seeks to thwart and essentially violate the terms and

conditions of the APA, thereby intentionally interfering with their contract. Apparently

in the alternative, DELCORA and Aqua assert that the Ordinance failed to expressly

assume DELCORA’s debts and obligations and, thus, failed to satisfy the preconditions

needed for the County to obtain DELCORA’s assets under section 5622(a). In

addition, DELCORA and Aqua maintain that the County, even if it had explicitly

assumed the contractual obligations in connection with the APA, lacks the capabilities

to perform them and this serves as an “impediment” to the County’s usage of power

pursuant to section 5622(a). See supra notes 5-6.

14

DELCORA and Aqua further assert that In re Chester Water Authority

Trust has no bearing on or relevance to the issue presented here. They argue that In re

Chester Water Authority Trust only addressed the interplay between sections 5622(a)

and 5610(a.1) of the MAA, 53 Pa.C.S. §5610(a.1.),9 and ultimately issued a “narrow”

holding, to wit, that section 5610(a.1) “did not abrogate, supersede, or otherwise alter

a municipality’s longstanding power under section 5622(a) and its statutory

predecessors to unilaterally obtain an authority and/or its assets.” (Aqua’s Suppl. Br.

at 3) (quoting In re Chester Water Authority Trust, 263 A.3d at 692.) To buttress its

point, DELCORA notes that the present case does not involve section 5610(a.1) of the

MAA in any manner and quotes the following passage from In re Chester Water

Authority Trust:

[W]e accepted one issue, and only one issue, for review:

whether section 5610(a.1) of the MAA mandates that the

City [of Chester (City)], the County of Chester, and the

County of Delaware, as the “governing body” of the [Chester

Water Authority (Authority)], approve a transfer of the

Authority’s assets to the City, or whether the City, pursuant

to section 5622(a) of the MAA, can obtain the Authority and

its assets without the approval of the Authority or its

“governing body.”

9

In 2012, “the General Assembly passed Act 73 of 2012, which added subsection (a.1) to

section 5610 of the MAA.” In re Chester Water Authority Trust, 263 A.3d at 692. Succinctly, this

statutory provision effectively added members to a board of an authority where “a water or sewer

authority incorporated by one municipality provides water or sewer services to residents in at least

two counties and has water or sewer projects in more than two counties.” 53 Pa.C.S. §5610(a.1). In

such a situation, “the powers of each authority shall be exercised by a board composed of . . . [t]hree

members appointed by the governing body from each county in which the services to residents are

provided” and “[t]hree members appointed by the governing body of the incorporating municipality.”

53 Pa.C.S. §5610(a), (a.1)(1)(i)-(ii). This composition of a water/sewer authority’s board stands in

contrast to the scenario where an “authority is incorporated by one municipality,” in which case “the

board shall consist of a number of members, not less than five, as enumerated in the articles of

incorporation.” 53 Pa.C.S. §5610(a)(1).

15

(DELCORA’s Suppl. Br. at 3) (quoting In re Chester Water Authority Trust, 263 A.3d

at 705). For these reasons, DELCORA and Aqua posit that the trial court did not err

in denying the County a writ of mandamus and issuing an injunction prohibiting the

enforcement of the Ordinance.

After consideration of the parties’ contentions, we find merit in the

County’s arguments.

Titled “[c]onveyance by authorities to municipalities or school districts of

established projects,” section 5622(a) of the MAA states as follows:

(a) Project.--If a project established under this chapter by a

board appointed by a municipality is of a character which the

municipality has power to establish, maintain or operate and

the municipality desires to acquire the project, it may by

appropriate resolution or ordinance adopted by the proper

authorities signify its desire to do so, and the authorities

shall convey by appropriate instrument the project to the

municipality upon the assumption by the municipality of all

the obligations incurred by the authorities with respect to

that project.

53 Pa.C.S. §5622(a) (emphasis added).

Here, in relevant part, the Ordinance provides as follows:

Section 1. The County Council hereby directs and orders

that [DELCORA] be terminated.

Section 2. [DELCORA] is directed and ordered to take all

actions necessary to effectuate its termination, including, but

not limited to, the following:

....

[Section] 2.02. [DELCORA] shall cooperate with the

County in an orderly windup of its activities, and take all

steps necessary to effectuate the transfer of all of its assets,

funds and other property, including, as applicable, any

16

regulatory permits, to the County, and the assumption of all

of its liabilities by the County.

....

Section 8. The County Council [is] authorized to take any

further action necessary to effectuate the termination of

[DELCORA], the removal of any impediments to such

termination, [] and the assumption of any liabilities of

[DELCORA].

Ordinance, §§1-2, 2.02, 8 (emphasis added).

As we explained in In re Chester Water Authority Trust, a municipality

possesses the unilateral power under section 5622(a) to pass an ordinance mandating

an authority that it had created to dissolve and transfer its assets to the municipality. In

that case, the City, alone, created the Authority, and the Authority originally serviced

the City, but later expanded to provide water service to other parts of Chester County

and, also, Delaware County. Consistent with section 5610(a.1) of the MAA, see supra

note 8, the City enlarged the governing body or “board” of the Authority to nine

members, in order to account for, and more fairly represent, the areas outside its borders

that received the services of the Authority. Ultimately, this Court held that, although

section 5610(a.1) of the MAA reconfigured the representation on the board in charge

of the Authority, to include members from outside the City, the City, as the sole

municipal incorporator of the Authority, nonetheless retained the power granted to it

by section 5622(a) of the MAA. In so doing, we reviewed and detailed our line of case

law on the issue, originating in 1971 and reaffirmed throughout the years,10 and

determined “these cases demonstrate[] that, as a matter of law, section 5622(a) confers

10

See Township of Forks v. Forks Township Municipal Sewer Authority, 759 A.2d 47 (Pa.

Cmwlth. 2000); Forward Township Sanitary Sewage Authority v. Township of Forward, 654 A.2d

170 (Pa. Cmwlth. 1995); Clearfield Borough v. Clearfield Borough Park Authority, 285 A.2d 532

(Pa. Cmwlth. 1971), aff’d, 301 A.2d 372 (Pa. 1973) (per curiam).

17

upon a municipality, via a duly enacted ordinance, the power to dissolve an authority

and obtain and later transfer and/or convey the authority’s assets as it deems fit, without

any input on the part of the authority.” In re Chester Water Authority Trust, 263 A.3d

at 700.

Clearly, the Ordinance dictated the termination/dissolution of

DELCORA. See Ordinance, §§1-2, 2.02. While the parties dispute whether the

Ordinance contained language wherein the County affirmatively and explicitly

“assumed” the “obligations incurred” by DELCORA, at the very least, the Ordinance

unambiguously required DELCORA, and authorized the County, to take the steps

necessary for such an assumption. See Ordinance, §§2.02, 8. By its terms, the

Ordinance thus acknowledges the absolute necessity for, and imperative nature of, an

assumption of obligations, which is an event that would occur during (or in a sense,

subsequent to) the time when DELCORA institutes its process of

termination/dissolution, or, in other words, its “winding down” and the identification,

itemization, or taking of inventory of its assets and obligations. Importantly, the

process and procedure utilized by the County, as expressed in the Ordinance, is entirely

consonant with section 5622(a) of the MAA. A municipality can initially order an

authority to dissolve and transfer all its assets to the municipality, but, naturally, a

municipality cannot direct the transfer of any specific assets until it can legally and

officially verify the assets of an authority. Similarly, before the County can embark

upon an “assumption . . . of all the obligations incurred by” DELCORA, the County

must first acquire information regarding those obligations. 53 Pa.C.S. §5622(a).

Here, once the County ascertains and later obtains the transfer of

DELCORA’s assets and obligations, and technically assumes their ownership as a

matter of law, the County can then demand, with an amendment to or creation of a new

18

ordinance, that DELCORA execute a legal instrument that officially conveys those

assets and obligations as a matter of fact. See Forward Township Sanitary Sewage

Authority, 654 A.2d at 175 (stating that “a municipality may, by ordinance, impose

upon an authority the duty of executing the necessary documents for a transfer of all of

the authority’s property to its creating municipality”). Indeed, according to its

structure, section 5622(a) of the MAA envisions—but does not necessarily require—a

three-step process: first, a municipality enacts a resolution or ordinance to “signify”

its “desire to acquire [a] project;” second, the municipality engages in measures to

complete an “assumption . . . of all the obligations incurred . . . with respect to that

project”; and, third, the authority “conveys[s] by appropriate instrument the project to

the municipality.” 53 Pa.C.S. §5622(a). The Ordinance is designed in such a way that

mimics or otherwise complies with this process. Therefore, we conclude that the

Ordinance is valid and enforceable to the extent it directs the termination/dissolution

of DELCORA and dictates that, after termination/dissolution is underway, DELCORA

must engage in conduct necessary to effectuate the transfer of its assets and the

assumption of its liabilities/obligations by the County.

Citing its authority to enter into the APA with Aqua under section

5607(d)(4) and (13) of the MAA and claiming that the APA is a valid and enforceable

contract, DELCORA questions whether the County could perform the obligations

imposed by the APA. Likewise, Aqua, referring to the trial court’s findings and

determinations on the issue, asserts that the County, in the event it would assume the

obligation of the APA, would breach the terms and conditions of the APA. Both

DELCORA and Aqua contend that the County’s inability to satisfactorily fulfill the

obligation of the APA serves as an “impediment”—or a bar—to the County’s exercise

of power under section 5622(a) of the MAA.

19

In addressing these arguments, we find guidance in In re Chester Water

Authority Trust. Notably, in concluding that “the City [of Chester] possesses the sole

power under section 5622(a) of the MAA to demand and compel the conveyance of the

Authority and its assets by enacting the appropriate resolution and/or ordinance,” 263

A.3d at 706 , this Court commented upon former section 4B(d) of the 1945 MAA, now

section 5607(d)(4) of the current MAA, which provided—and presently provides—an

authority with the power “to sell, lease as lessor, transfer and dispose of any property

or interest therein at any time acquired by it.” Formerly 53 P.S. §306B(d); 53 Pa.C.S.

§5607(d)(4). While expressly acknowledging that our General Assembly

unmistakably granted an authority “the power to convey its property to another

governmental entity,” we stated, in relevant part:

Nonetheless, just because an authority may transfer its assets

to other governmental entities, as part of its daily operational

affairs under [section 5607(d)(4)], this does not mean that an

authority possesses the same and sole power under section

5622(a) of the MAA. Indeed, as a juxtaposition, the Supreme

Court in County of Allegheny[ v. Moon Township Municipal

Authority, 671 A.2d 662 (Pa. 1996)], clarified that, in

contrast to [section 5607(d)(4)], section 5622(a) of the MAA

was “applicable only to instances in which an authority’s

project is being transferred to the municipality or

municipalities that actually created the authority.” County of

Allegheny, 671 A.2d at 665 (emphasis added). The Supreme

Court further added that [section 5622(a)] was “presumably

enacted to preclude a municipality . . . from assuming

responsibility over projects absent a resolution or ordinance

indicating the municipality’s clear willingness to do so.” Id.

(emphasis added). Therefore, while County of Allegheny

confirmed that an authority may transfer or convey its assets

to another governmental entity in the daily course of its

business, it also reaffirmed that, assuming an authority does

not want to transfer its assets to another authority or

governmental entity, the creating and/or incorporating

municipality, proceeding under [] section 5622(a) of the

20

MAA, can obtain the authority and its assets by passing an

ordinance stating the municipality’s desire to do so.

In re Chester Water Authority Trust, 263 A.3d at 704-05 (emphasis added).

We find our reasoning in In re Chester Water Authority Trust equally

applicable to the situation where an authority has expressed its desire to sell its assets,

and has executed a contract to that effect, at least where, as here, the contract has not

been fully performed. Reading section 5622(a) in tandem with section 5607(d)(4) and

(13), it is apparent that section 5622(a) of the MAA presupposes that an authority has

the power to enter contractual obligations, even with respect to a transfer of its assets,

and expressly accounts for the scenario where the authority has already entered a valid

and binding contract. That is, based on the plain language of section 5622(a) of the

MAA, a municipality can “assume” all of the “obligations incurred” by an authority,

including those in a contract to sell its assets, by obtaining an authority’s project and

legal title to the assets of the project. Otherwise, if an authority could override the

power granted to a municipality in section 5622(a) by simply incurring contractual

obligations, then the last clause of section 5622(a) would be rendered nugatory. See

53 Pa.C.S. §5622(a) (stating that “the authorities shall convey by appropriate

instrument the project to the municipality upon the assumption by the municipality of

all the obligations incurred by the authorities with respect to that project”). When

analyzing statutory language, the courts “must give effect to every provision of the

statute,” Pocono Mountain School District v. Department of Education, 151 A.3d 129,

138 (Pa. 2016), and “[w]e are not permitted to ignore the language of a statute, nor may

we deem any language to be superfluous.” Commonwealth v. McCoy, 962 A.2d 1160,

1168 (Pa. 2009). Therefore, in order to give meaning to both section 5622(a) and

section 5607(d)(4) and (13) of the MAA, and construe them in a harmonious fashion,

we conclude that an authority may utilize its power to contract and sell its assets to

21

another entity; however, a municipality may invoke its power under section 5622(a) to

demand that the authority terminate and/or convey its assets to the municipality at any

time prior to the complete performance of that contract.

Moreover, a municipality’s ability to perform the contractual obligations

that it acquires from an authority is not an “impediment” recognized by the law where,

as here, the authority has not obtained (and a municipality will thus not assume) any

continuing “debt” or obligation that an authority has to repay, in what is basically

financial installments, outstanding loans, or other forms of an immediate or continuing

repayment obligation. See Forward Township Sanitary Sewage Authority, 654 A.2d at

175 (explaining that, absent a financial “impediment” imposed by another section of

the MAA that pertains to debt securitization prior to dissolution, a county can dissolve

an authority and demand conveyance of all its assets). That said, it is important to note

that the County, in its demand that DELCORA terminate its operations and transfer its

assets to the County, effectively places the County in a situation where it would receive

a “contractual assignment” from DELCORA as a matter of statutory law.

Consequently, the County would, without question or condition, be bound by the terms

and conditions of the APA, just as if it were DELCORA itself in the sense that it would

essentially become a “party” to a contract. See Employers Insurance of Wausau v.

Department of Transportation, 865 A.2d 825, 830-31 (Pa. 2005). As such, all of the

concerns that the trial court enunciated regarding the County’s inability to fulfill the

APA’s contractual obligations is completely irrelevant and has no place in the statutory

analysis of section 5622(a) vis-à-vis section 5607(d)(4) and (13) and the issue of

whether the County retains its authority pursuant to section 5622(a) despite the APA

and its specific obligations. This is because the County, irrespective of whether it can

live up to the contractual promises made in the APA, will have no choice but to abide

22

by and fully perform its obligations or else be potentially subjected to a breach of

contract suit by Aqua. See Employers Insurance of Wausau, 865 A.2d at 830-31.11

In sum, section 5622(a) provides the County with the authority to enact

the Ordinance, and the Ordinance complies with the requisites necessary for the County

to demand the termination of DELCORA and the conveyance of DELCORA’s assets

and obligations to the County.

Conclusion

For the above-stated reasons, we conclude that the trial court erred in

denying the County’s request for a writ of mandamus and granting injunctive relief in

favor of DELCORA and Aqua. Accordingly, we reverse the trial court’s order and

remand to the trial court for the entry of an order consistent with this opinion. Due to

the basis of and grounds for our disposition, we need not address the County’s

remaining arguments.

________________________________

PATRICIA A. McCULLOUGH, Judge

President Judge Cohn Jubelirer and Judges Covey, Fizzano Cannon and Wallace did

not participate in this decision.

11

We express no opinion with respect to the viability of any potential remedies at law that

Aqua and/or DELCORA may have in the event the County assumes the obligations of the APA.

23

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

County of Delaware, Pennsylvania, :

Appellant :

:

v. : No. 148 C.D. 2021

:

Delaware County Regional Water :

Quality Control Authority, and :

DELCORA Rate Stabilization Fund :

Trust Agreement b/t The Delaware :

County Regional Water Quality :

Control Authority as Settlor and :

Univest Bank and Trust Co. as :

Trustee :

:

v. :

:

Darby Creek Joint Authority, Southern :

Delaware County Authority, and Aqua :

Pennsylvania Wastewater, Inc. :

ORDER

AND NOW, this 3rd day of March, 2022, the December 28, 2020 order

of the Court of Common Pleas of Delaware County (trial court) is hereby

REVERSED and the case is REMANDED to the trial court for entry of an order

consistent with the accompanying opinion.

Jurisdiction relinquished.

________________________________

PATRICIA A. McCULLOUGH, Judge