The opinion of the court was delivered by: NEALON
International Land Acquisitions, Inc. (International) filed this complaint pursuant to 28 U.S.C. § 1332 on November 16, 1995, alleging that Pennsylvania American Water Company (PAWC) breached its contract with Plaintiff when PAWC, in 1995, would not provide water and sewer service to International's proposed land development unless International paid for substantial improvements. Plaintiff seeks monetary damages contending that it was unable to accomplish the development because of PAWC's refusal to provide the services requested. PAWC filed a Motion for Summary Judgment on November 18, 1996, to which International responded and filed a Cross-Motion for Summary Judgment on November 27, 1996. Both motions have been briefed and are ripe for determination. For the following reasons, Defendant's motion will be granted, as amended, and Plaintiff's motion will be denied, and the case will be referred to the Pennsylvania Public Utility Commission (PUC) with jurisdiction being retained by this Court.
As previously noted, International, a Delaware corporation authorized to conduct business in Pennsylvania, filed this civil action on November 16, 1995, pursuant to 28 U.S.C. § 1332, alleging a beach of contract by PAWC, a Pennsylvania corporation. On October 3, 1996, PAWC sought to serve a third-party complaint upon Country Place Water Company, Inc. and Country Place Waste Treatment Company, Inc.
Discovery in this matter having been completed, PAWC, on November 18, 1996, filed a Motion for Summary Judgment pursuant to FED. R. CIV. P. 56 with a supporting brief and documents. On November 27, 1996, International filed a Cross-Motion for Summary Judgment and a brief in support, together with a brief in opposition to PAWC's Motion for Summary Judgment. PAWC filed a reply brief in support of its motion together with a brief in opposition to International's cross-motion on December 12, 1996. On January 15, 1997, an oral argument was held at which time the parties were directed to file supplemental briefs on certain issues, including whether the PUC had exclusive jurisdiction over this matter. On January 29, 1997, International filed supplemental briefs in support of its Cross-Motion for Summary Judgment and in opposition to PAWC's Motion for Summary Judgment. PAWC filed a reply to International's supplemental motion in support on February 6, 1997. Furthermore, PAWC, on January 30, 1997, filed supplemental briefs in support of its motion and in opposition to International's cross-motion, with International filing a reply to the supplemental brief in support on February 10, 1997.
International is a corporation involved in the business of land development and Donald Kessler is the sole shareholder. Kessler, through International, owns a 19.6 acre piece of property located in Coolbaugh Township, Pennsylvania, which International purchased from Landavel, Inc., a company previously owned by Kessler. Kessler also owned Country Place Water Company and Country Place Waste Treatment Company (hereinafter referred to as "Country Place Utilities"), which he sold to Cost Control Marketing (Cost Control) in 1985. In 1987, Kessler brought an action in this court against Cost Control to recover monetary damages arising from Cost Control's operation of the utility companies. The action was settled by Order of Court dated November 6, 1987, adopting an agreement reached by the parties on September 17, 1987.
The 1987 settlement agreement between International and Cost Control provided, in pertinent part, the following:
Number 5: The parties acknowledge that International Land Acquisitions, Inc., its successors and assigns shall have the right to have any development of the 19.6 acres abutting section B owned by the aforesaid entity, connected or hooked up to the Central Water and Sewer Company owned by the aforementioned utility companies; such hookup or connection, however, shall be accomplished at the sole cost and expense of the person or entity owning the property at the time such connection shall be desired or requested . . . . The parties agree in covenant that the provisions of this paragraph and related subparagraphs shall be a covenant running with the land and in all respects be construed as same.
(1987 Settlement Agreement, Attached as Exhibit 2 to Plaintiff's Response to Defendant's Motion for Summary Judgment and in Support of Plaintiff's Cross-Motion for Summary Judgment). On October 19, 1991, Cost Control filed a Voluntary Petition for Relief pursuant to Chapter 11 of the Bankruptcy Code, and, on September 14, 1994, a hearing regarding the auction and sale of Cost Control's utilities was held before United States Bankruptcy Judge John J. Thomas. At the auction PAWC bid to purchase the assets of Country Place Utilities free and clear of liens, encumbrances and claims. On September 19, 1994, the sale to PAWC was approved by an Order of the Bankruptcy Court that contained certain findings of fact and conclusion regarding PAWC's purchase of the Country Place Utilities, including the following provision:
Pursuant [to] Section 363(f) of the Bankruptcy Code, such sale shall be free and clear of all liens, encumbrances and claims, other than the lien in favor of the Pennsylvania Water Facilities Loan Board to be assumed by the purchaser, with such liens, claims and encumbrances to attach to the proceeds of the sale in the order of priority of such liens, claims and encumbrances in the underlying stock and assets of the Country Place Utilities under applicable law.
Order of September 19, 1994, at 5-6.
In January 1995, PAWC and the Country Place Utilities (Country Place Water Company and Country Place Water Treatment Company) filed applications with the PUC, seeking PUC approval of certain transactions. Included among these transactions were the sale of the waterworks property, the sanitary sewage collection treatment service, and the rights of the Country Place Utilities to PAWC. Although separate applications were filed by Country Place Water Company and Country Place Waste Treatment Company, each contained similar language specifying that all assets transferred to PAWC would be free and clear of any liens or claims, except for a loan in the amount of $ 450,000 to the Pennsylvania Water Facilities Board. The PUC approved the applications on April 28, 1995, and on June 30, 1995, PAWC executed separate bills of sale with both Country Place Water Company and Country Place Waste Treatment Company. Subsequently, PAWC began serving customers with the assets purchased from the Country Place Utilities.
International contacted PAWC in August 1995 to obtain water and sewer service for its proposed "Pocono Executive Suites" development, which was to consist of over two-hundred residential units. Following the request, PAWC informed International that certain improvements to the water system were necessary for PAWC to accommodate the entire development with such service. Specifically, PAWC insisted that the existing six-inch water pipe had to be replaced with a twelve-inch pipe in order to adequately supply water and sewer service to the proposed development and to avoid reducing water pressure to other properties served. Furthermore, PAWC maintained that International was required to pay for the cost of these improvements. International, on the other hand, claimed that PAWC was bound by the 1987 Settlement Agreement which required International to pay only for "hook up" charges. International argued further that the improvements were unnecessary and refused to pay for them and requested that PAWC provide immediate service to five units rather than the entire development.
International subsequently changed its position, requesting again that PAWC provide service to the entire proposed development. PAWC notified International that with the existing system it could provide service to the five units previously requested, but in order to provide service to the entire development, the described improvements would need to be made at International's expense. In October 1995, International filed an action with the PUC requesting an order requiring PAWC to provide service to the proposed "Pocono Executive Suites" development. The case was scheduled for an initial hearing in April 1996, and, ...