20 N.Y.2d 81 (1967)

A water authority cannot extend its service mains into an area where it would compete with an existing waterworks system without obtaining specific approval from the Water Resources Commission, even if the authority has a general authorization to operate within the broader geographic area.

Summary

This case concerns a dispute between Swan Lake Water Corp. and the Suffolk County Water Authority over who should provide water service to a hospital. Swan Lake had a water main near the hospital but was authorized to serve a different area. Suffolk County Water Authority had a more general authorization to serve the county, but was prohibited from competing with existing systems. The court held that the Water Authority needed specific approval from the Water Resources Commission before extending its mains to serve the hospital, as it would constitute unauthorized competition with Swan Lake.

Facts

Swan Lake Water Corp. served a residential area (Pine Crest) adjacent to a hospital. Their authorized service area ended on the opposite side of the street from the hospital. Suffolk County Water Authority had a water main approximately 2,190 feet away from the hospital. The Water Authority and the hospital entered into a contract for water service without specific approval from the Water Resources Commission. Swan Lake argued this violated a prior order preventing the Water Authority from competing with existing water systems.

Procedural History

Swan Lake sued to prevent Suffolk County Water Authority from providing water service to the hospital. The Special Term ruled in favor of the Water Authority. The Appellate Division reversed, holding that the Water Authority needed approval from the Water Resources Commission. The Court of Appeals affirmed the Appellate Division’s decision.

Issue(s)

Whether the Suffolk County Water Authority could extend its water mains to serve a hospital located near Swan Lake Water Corp.’s service area, without specific approval from the Water Resources Commission, given the Water Authority’s general authorization to serve the county but also a prohibition against competing with existing water systems.

Holding

Yes, because the extension of the Water Authority’s mains to serve the hospital constituted an unauthorized act of competition with Swan Lake, requiring specific approval from the Water Resources Commission under the Conservation Law.

Court’s Reasoning

The court reasoned that the Water Resources Commission has broad authority to regulate water resources and prevent unauthorized competition. The court emphasized that the Water Authority’s general authorization to serve the county did not override the specific prohibition against competing with existing water systems. The court quoted Matter of Suffolk County Water Auth. v. Water Power & Control Comm., 12 A D 2d 198, 202, noting that the allocation of authority to serve a given territory involves “an advised and specialized administrative judgment.” The court stated, “[T]he commission had no power to dispense with these statutory requirements… defendant’s proposed action would be illegal.” The court determined that furnishing water usually involves a monopoly to avoid duplication of facilities, which is an important reason it is subject to public regulation. The dissent argued that the Water Authority should have been allowed to serve the hospital and that Swan Lake lacked standing. The majority rejected these arguments, holding that Swan Lake was an aggrieved party and that the Water Authority’s actions circumvented the necessary regulatory oversight by the Water Resources Commission. The court explicitly stated it was not determining which entity *should* serve the hospital; that determination was for the Water Resources Commission.