V & L ASSOCIATES v. THE TOWNSHIP OF MONTVILLE, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2121-04T52121-04T5

V & L ASSOCIATES,

Plaintiff-Respondent,

v.

THE TOWNSHIP OF MONTVILLE, a

Municipal Corporation, and the

TOWNSHIP COMMITTEE OF THE TOWNSHIP

OF MONTVILLE,

Defendants-Appellants.

_______________________________________________________

 

Argued April 3, 2006 - Decided

Before Judges Fall, C.S. Fisher and Miniman.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. MRS-L-1454-02.

Robert H. Oostdyk, Jr. argued the cause for appellants (Johnson, Murphy, Hubner, McKeon, Wubbenhorst & Appelt, attorneys; Mr. Oostdyk and James T. Bryce, on the brief).

Kenneth Meiser argued the cause for respondent (Hill Wallack, attorneys; Mr. Meiser and Henry Chou, on the brief).

PER CURIAM

In this appeal, we are required to consider whether a municipality, which has obtained substantive certification from the Council on Affordable Housing (COAH) that it met its fair share obligations, has the ability to rezone property, when the property had previously been rezoned in order to permit affordable housing pursuant to a judgment entered in a Mount Laurel action. In reversing, we reject the undue emphasis placed on that Mount Laurel judgment, and conclude that the trial judge should have examined the continued viability of that judgment in light of amendments to the Fair Housing Act, N.J.S.A. 52:27D-311(g), which allow a municipality that has obtained substantive certification, and actually effected the construction of those affordable housing units, to amend its zoning ordinance.

I

In 1978, the Morris County Fair Housing Council, Morris County Branch of the National Association for the Advancement of Colored People, and the Public Advocate commenced a civil action against the Townships of Montville and Boonton (hereafter "the Mount Laurel action"). At that time, plaintiff V&L Associates (plaintiff) owned a thirteen-acre site in Montville, which, when purchased in 1968, was zoned for commercial uses.

Montville's engineer approached plaintiff, seeking its consent to the rezoning of its property as part of a settlement in the Mount Laurel action. He also indicated that Montville would extend water and sewer service to the property. Plaintiff agreed to the anticipated court-approved settlement of the Mount Laurel action, which would rezone plaintiff's property as AH-2, in order to permit a density of eight units per acre, with a twenty-two percent set-aside that would yield twenty-three affordable housing units.

On July 11, 1985, the parties in the Mount Laurel action reached a settlement whereby Montville agreed to amend its land use ordinance to establish affordable housing zones and provide for 565 affordable housing units, which represented Montville's "fair share" through the year 1991. The settlement agreement required Montville to "take all reasonable steps to foster development of the units" by adopting resolutions and agreements as necessary to facilitate a developer's application for public subsidies; by expediting disposition of site plan applications and municipal approvals; by cooperating with developers' efforts to obtain water and sewer connections; by cooperating with developers' needs regarding the administration of resale price controls; and by waiving various municipal fees for the affordable housing developments such as certificate of occupancy fees and building permit fees.

Montville agreed, "[i]n accordance with the law," to amend its land use ordinance to establish affordable housing zones as more fully described in the agreement so as to provide for 565 affordable housing units, which would include 109 units for senior citizen housing and which would also count 35 rehabilitation units in Montville toward its fair share allotment. The agreement also stated that the parties acknowledged that 565 units represented Montville's fair share through the year 1991, and that "[i]n the event that additional publicly subsidized/or privately built housing affordable to low or moderate income households is constructed . . . on or before March 1, 1991, [Montville] shall receive credit for each unit towards satisfaction of its fair share obligation." The agreement also contained the following provisions regarding the future repeal or amendment of the ordinance to be adopted pursuant to the settlement agreement:

Upon the construction and occupancy of sufficient units affordable to low and moderate income households under the ordinance set forth as Appendix A to satisfy the municipality's fair share under paragraphs 2, 3, and 5 of this agreement and upon written notice to plaintiffs, the municipality may repeal or amend the ordinance set forth in Appendix A.

. . . .

Upon enactment into law, the low and moderate income housing amendments as set forth in Exhibit A shall not be repealed, amended or modified without the express consent of the plaintiffs, through their counsel, the Department of the Public Advocate, except as provided in paragraph 10 above. In the event of any breach of any provision of this agreement the plaintiffs may seek relief by way of any remedy provided by law. The owners or assignees of the lands which are rezoned by this amendment are also recognized as third party beneficiaries with authority to enforce the terms of this settlement agreement.

Paragraph fifteen of the agreement required that, within the year, Montville was to furnish plaintiffs in that action and the trial court with "a statement describing what lower income housing developments [have] occurred and the status of each site rezoned under this agreement."

By order dated September 12, 1985, the settlement agreement and implementing ordinance were recognized as being fair, adequate and reasonable, and on November 15, 1985, the trial judge entered final judgment in the Mount Laurel action.

II

On July 2, 1985, two months prior to the entry of judgment, the Legislature enacted the Fair Housing Act in response to the Court's Mount Laurel decisions. N.J.S.A. 52:27D-302(a).

In its findings, the Legislature stated:

b. In the second Mount Laurel ruling, the Supreme Court stated that the determination of the methods for satisfying this constitutional obligation "is better left to the Legislature," that the court has "always preferred legislative to judicial action in their field," and that the judicial role in upholding the Mount Laurel doctrine "could decrease as a result of legislative and executive action."

c. The interest of all citizens, including low and moderate income families in need of affordable housing, would be best served by a comprehensive planning and implementation response to this constitutional obligation.

[N.J.S.A. 52:27D-302.]

The Fair Housing Act established COAH, and directed that within four months after confirmation of its last appointed member or by January 1, 1986, whichever was earlier, COAH should propose procedural rules, in accordance with the Administrative Procedure Act, and take on the duties established by the Fair Housing Act. N.J.S.A. 52:27D-307. At the time the Fair Housing Act was passed, COAH's duties included estimating the need for low-income and moderate-income housing at the State and regional levels, and adopting criteria and guidelines for determining municipal "present and prospective fair share of the housing need in a given region." Ibid. The Act also provided:

a. Within four months after the effective date of this act, each municipality which so elects shall, by a duly adopted resolution of participation, notify the council of its intent to submit to the council its fair share housing plan. Within five months after the council's adoption of its criteria and guidelines, the municipality shall prepare and file with the council a housing element, based on the council's criteria and guidelines, and any fair share housing ordinance introduced and given first reading and second reading in a hearing pursuant to R.S. 40:49-2 which implements the housing element.

b. A municipality which does not notify the council of its participation within four months may do so at any time thereafter. In any exclusionary zoning litigation insti-tuted against such a municipality, however, there shall be no exhaustion of admini-strative remedy requirements pursuant to section 16 of this act unless the municipality also files its fair share plan and housing element with the council prior to the institution of the litigation.

[N.J.S.A. 52:27D-309.]

According to a report adopted by Montville's planning board on June 26, 1996, when COAH came into existence it established a precredited housing need for Montville's 1987-1993 first round obligation of 393 low-income and moderate-income units. For the second round obligation, which covered the period from 1993 to 1999, COAH assigned Montville in May 1994 "a precredited need of 280 units for which it granted a reduction of 280 units based on zoning or construction of at least that number," which gave Montville "a calculated need of zero."

In June 1996, in anticipation of certification from COAH that it had met its fair share obligation, Montville revised its master plan to eliminate plaintiff's property from the AH-2 designation. On April 14, 1997, Montville petitioned COAH for substantive certification, seeking to delete plaintiff's property from its housing element and fair share plan. Plaintiff objected, and the parties commenced mediation on August 6, 1997, as required by N.J.A.C. 5:93-5.12, which then provided

(b) Sites zoned for inclusionary development in addressing the 1987-1993 housing obligation shall retain such zoning in the petition addressing a 1987-1999 fair share obligation if:

1. The site was subject to an agreement pursuant to the Council's mediation process or part of a negotiated settlement in court.

During the mediation, plaintiff refused to consider rezoning their land either for single-family homes or commercial/industrial/office zoning. The mediation report that followed concluded that plaintiff's site "must remain in the Montville plan with the AH-2 inclusionary zoning" as set forth in the 1985 judgment.

On May 18, 1998, COAH issued its compliance report for Montville. Montville had adopted zoning regulations for four affordable housing zones that consisted of seven sites. Three of the sites were completed, two were under construction, zoning was in place at one site, i.e., plaintiff's property, and another site was proposed for deletion. The three completed sites were: a for-sale townhouse development called Jade Commons, which contained 22 low-income and moderate-income units; a townhouse development called Hunting Hills, which also contained 22 low-income and moderate-income units; and a townhouse development called Montville Chase with 76 low-income and moderate-income units.

The two sites under construction were Rachel Gardens, a rental development that would yield a total of 168 low-income and moderate-income units, of which 104 were constructed and occupied, and 64 were under construction; and Longview at Montville, a development that would yield 109 low-income and moderate-income age-restricted units, of which only 16 age-restricted units had been constructed with the remaining units under construction.

As for plaintiff's site, when the mediation failed, Montville requested a reduction of 23 units based on the zoning in place that permitted a density of eight units per acre with a 22% set aside that would yield 23 affordable units. With the consent of the owner, Montville sought to delete a site on River Road that had been included in the Mount Laurel judgment, because that site was no longer needed to address Montville's affordable housing obligation.

Based on the documentation Montville had submitted, the report recommended that Montville's fair share plan and housing element be approved for substantive certification and its cumulative obligation of 280 units be reduced to zero with a surplus of 214 units to be credited toward any third round obligation.

On June 3, 1998, COAH issued resolution 104-99, which granted substantive certification. Once Montville received substantive certification, its affordable housing program began to operate under the jurisdiction and regulation of COAH.

In 2000, Montville sought further mediation with COAH in the hopes of finding a commercial or nonresidential use that would be acceptable to plaintiff. Daniel Grant, a member of the township committee and planning board, testified that he eventually concluded that COAH "wasn't serious" about finding a resolution. The planning board's attorney told the board that a legislative act would be necessary to change COAH's rule and allow a municipality to rezone property once it had achieved certification. A bill was drafted, and Grant testified before the Legislature concerning whether "this was just an effort by Montville to avoid responsibility or . . . whether or not, in fact, there was a legitimate problem here."

Effective January 11, 2002, the Legislature amended N.J.S.A. 52:27D-311, adding: "A municipality which has received substantive certification from the council, and which has actually effected the construction of the affordable housing units it is obligated to provide, may amend its affordable housing element or zoning ordinances without the approval of the council." L. 2001, c. 441 (codified as N.J.S.A. 52:27D-311(g)).

On March 26, 2002, Montville adopted Ordinance No. 2002-12, which amended its zoning map to rezone plaintiff's property "from AH-2 Affordable Housing District to OB-2B Office Building District as recommended by the 'Amendment to Land Use Plan Element, Montville Township Master Plan' adopted June 26, 1996 by the Planning Board. . . ." Permitted uses in the OB-2 zone included banks and financial institutions, offices, hotels, funeral homes, schools, fitness centers, photography studios, data processing centers, conference centers, research laboratories, self-storage facilities, municipal buildings, agriculture, residential health care facilities, museums and galleries.

III

On May 1, 2002, plaintiff filed a complaint in lieu of prerogative writs, alleging: in count one, that Ordinance 2002-12 was contrary to the Mount Laurel settlement agreement and judgment, contrary to COAH's approved fair share plan, void against public policy, and a deprivation of plaintiff's property rights; in count two, that the enactment of the ordinance constituted a breach of the implied covenant of good faith and fair dealing; in count three, that defendants were estopped from rezoning the property "[a]s a result of the wrongful pattern and practice of conduct by Defendants"; in count four, plaintiff claimed that the ordinance was arbitrary, capricious and unreasonable; in count five, that the ordinance constituted a taking because Montville had zoned the property into inutility; in count six, that Montville had failed to give the required legal notice prior to the adoption of the ordinance; and in count seven, that the ordinance constituted unlawful reverse spot zoning. The complaint did not challenge the constitutionality of N.J.S.A. 52:27D-311(g).

Montville moved for summary judgment on counts one, two and three, arguing that the Mount Laurel judgment no longer controlled because Montville had submitted its fair share plan to COAH, received certification, and now operated under the jurisdiction of COAH, which brought it within the ambit of N.J.S.A. 52:27D-311(g) and allowed rezoning of the property without COAH's approval. Plaintiff argued in response that the parties to the Mount Laurel settlement agreement intended that the 565 affordable housing units established "a floor" that could be modified only as permitted by R. 4:50.

The trial judge agreed with plaintiff, describing the issue as requiring a determination of "the limitations on the authority of the municipality" to rezone property in Montville that had originally been zoned for affordable housing pursuant to litigation that preceded the Fair Housing Act. The judge acknowledged that a primary purpose of the Fair Housing Act and the establishment of COAH's rules was "to get the courts out" of the field of lower income housing, and that Mount Laurel litigation "should conform wherever possible to the decisions, criteria and guidelines of the council." The trial judge viewed this case as a "hybrid," stating that there was "no way to overlook the fact that . . . a judgment of the [c]ourt" was in question.

The judge thus viewed the matter as presenting a conflict between a judgment and the statute, which permitted the rezoning since Montville had met COAH's requirements and voluntarily obtained substantive certification from COAH. Since N.J.S.A. 52:27D-311(g) did not impose a requirement of court approval, the trial judge questioned whether the statute permitted Montville to act without court approval, and concluded that our dictum in Deland v. Twp. of Berkeley Heights, 361 N.J. Super. 1 (App. Div.), certif. denied, 178 N.J. 32 (2003) and 179 N.J. 185 (2003), suggested it could not. In Deland, we discussed the legislative preference to treat municipalities differently depending upon whether they had voluntarily submitted housing plans to COAH or had been subjected involuntarily to court supervision as the result of a successful builder's remedy action. The trial judge reasoned that, under Deland, where a builder's agreement was involved, relief from the judgment could be ordered if it could be shown that it was no longer equitable for the judgment to be given prospective application. The judge observed that

the judgment is still there. It still comes into play. And the Toll Brothers factors come into play in that regard, which are whether the site remains suitable for affordable housing, the impact of COAH's policy on the consent judgment, since its regulations amount to a significant change in the law. And now what I'm saying is [N.J.S.A. 52:27D-311(g)] has made that even more significant in that regard. The length of time between the entry of the 1985 judgment and the developer's attempts to enforce their rights, and the municipality's position in the underlying exclusionary zoning litigation in terms of its own zoning and the like.

The judge determined that further information and testimony was required "to make the final decision here on balancing the equities as to whether or not this judgment should be modified," and ordered the matter set down for trial.

On August 17, 2004, five months later, COAH proposed an amended rule in response to N.J.S.A. 52:27D-311(g), to replace N.J.A.C. 5:93-5.12, which stated:

(a) Sites zoned for inclusionary development in addressing the 1987-1999 housing obligation shall retain such zoning in the 1999-2014 Fair Share Plan if:

1. The Council determines that the site continues to meet the site suitability standards pursuant to N.J.A.C. 5:94-4.5;

2. The Council determines that the site continues to present a realistic opportunity pursuant to N.J.A.C. 5:94-3.3; and

3. The site meets one of the following conditions:

i. The site was subject to an agreement pursuant to the Council's mediation process or part of a negotiated settlement in court; or

ii. The developer of the site has filed a development applica-tion with the municipality prior to the expiration of the 1987-1999 substantive certification period or the municipal petition for substantive certification for the 1999-2014 period, which-ever is later.

(b) Notwithstanding the provisions of (a) above, pursuant to N.J.S.A. 52:27-311(g), a municipality that has received substantive certification for the 1987-1999 period and which has effected the construction of its entire affordable housing obligation of that period may amend its Housing Element or zoning ordinances with respect to sites being used to address its 1987-1999 affordable housing obligation. Prior to amending the Housing Element or zoning ordinances, the municipality shall obtain a determination from the Council as to whether the municipality has effected construction of its entire affordable housing obligation. To make such a determination, the Council shall require the municipality to submit the filed deeds with the appropriate deed restrictions, certificates of occupancy for units constructed and evidence of the transfer of RCA funds, if applicable.

[ 36 N.J.R. 3691(a), 3787 (emphasis added).]

IV

On October 12, 2004, at the commencement of the bench trial, the judge outlined the two issues presented. The first issue was described as involving whether Montville had established that circumstances had changed and that it was entitled to relief from the 1985 settlement agreement; in this regard, the judge observed that he adhered to his view that N.J.S.A. 52:27D-311(g) was "a significant factor in terms of changed circumstances," but that it did not afford "automatic relief under [R.] 4:50." The judge held that the burden of proof was on Montville as to this issue. The second issue concerned plaintiff's challenge to the validity of the ordinance, as to which plaintiff had the burden of proof.

A

From October 12 to 21, 2004, the judge heard four days of testimony regarding the history of the property. Plaintiff presented the testimony of Nicholas Luca, an attorney, his brother Dominic Luca, a carpenter, and a friend of theirs, Mathew VanKirk. Their group was formed to purchase the property in 1968, anticipating that it would be near a future exit ramp to Route 287. They testified that the property had no access to water or sewer. After clearing portions of the land, they put up a for sale sign. They received some early inquiries which did not bear fruit.

It is unclear from the record what, if any, efforts plaintiff made to market or sell the property between 1985 and 1991. It was acknowledged that Montville had brought water lines to the site shortly after the 1985 court-approved settlement, but plaintiff had been unsuccessful in obtaining sewer hook-up during that period.

On November 27, 1991, plaintiff signed an option contract to sell the property to Hovnanian Companies of North Jersey for $1,500,000, with the provision that Hovnanian obtain the necessary approvals within three years from the date of the contract. In late November 1994, Hovnanian became aware that Montville intended to rezone plaintiff's property to "some form of single family residential." Hovnanian allowed the contract to expire and plaintiff returned Hovnanian's deposit.

On February 23, 1995, Sterling Gage entered into a contract to purchase the property contingent on receiving the necessary approvals. On July 15, 1996, after Montville had revised its master plan to eliminate the property as affordable housing, Sterling cancelled the contract.

On December 18, 1997, after the COAH mediation between plaintiff and Montville had concluded, plaintiff contracted to sell the property to Braemar Homes, Inc. for $2,025,000. The contract permitted the purchaser to terminate the agreement and receive a refund of its deposit if the development approvals yielded less than 71 market rate units. The contract also contained a 12-month contingency period for the purchaser to secure the approvals. Braemar submitted a preliminary site plan application to build 102 units -- 22 Mount Laurel units and 84 market units. Montville returned the application as incomplete. When Braemar's president told Luca that the letter of incompleteness "was beyond anything that he could accommodate," the contract was terminated.

On November 17, 1999, plaintiff entered into a contract to sell the property to Roseland Properties (Roseland) with a 12-month contingency period and subject to the property's approval as a Mount Laurel project. The contract was based on approval for a minimum of 80 market rate units.

On May 23, 2000, Montville adopted Ordinance 2000-30, which prohibited the building of any permanent structure "within a distance of fifty (50) feet of any stream." It also prohibited "the first floor of any permanent structure" from being closer "than two (2) feet above the bank of any stream." In addition, the ordinance required a basement in any "principal building" on a residential lot, with the lowest point of the basement "not less than one (1) foot above the flood hazard elevation." At the same time, Montville also proposed an ordinance that would rezone only plaintiff's property from AH-2 to an office zone OB-2B; that proposed ordinance was not adopted.

According to Luca, the requirements of Ordinance 2000-30 "would make it impossible to build on this site . . . whether it's for . . . Mount Laurel or any zone 'cause you'd have to put a road in, and that would prohibit a road," because an access road would necessarily have to cross a stream located on the property, and because "the way the . . . property was structured . . . you cannot put a basement [in] every individual townhouse."

On June 20, 2000, Roseland filed a complaint in the Law Division, challenging that portion of Ordinance 2000-30 which prohibited the construction of a paved roadway within 50 feet of any stream on the property, and which required a full basement on each residential lot. The complaint also sought to enjoin Montville from adopting an amendment to its zoning ordinance that would delete affordable housing as a permitted use on the property "at least until such time as the owner and COAH may have consented thereto," and "[d]eclaring . . . that such rezoning without . . . consent . . . is in violation of law." The complaint was dismissed on December 13, 2000, because Ordinance 2000-30 had been repealed, because the rezoning ordinance had not been adopted and because there was no firm indication that the proposed ordinance that troubled Roseland would ever be adopted by Montville.

Roseland continued discussions with Montville regarding the possibility of building multi-family housing at a lower density. However, on August 9, 2001, Roseland terminated the contract because "all of our attempts to obtain the Development Approvals have been ignored or rejected and [Montville] has clearly and unequivocally indicated that it would deny any application for the Development Approvals."

When the property's zoning changed to OB-2B in March 2002, plaintiff put up a sign on the property that listed its possible uses and ran an ad in The Star-Ledger. In May 2002, plaintiff filed its complaint in this matter.

At the hearing, Luca offered numerous unsubstantiated reasons why the property could not be used for any of the purposes permitted under the OB-2B rezoning. For example, he said that Angelo Cali, of Mack-Cali, told him that "it's not the area for offices because there's no other offices around." Luca referred to an office building a quarter-mile away on the corner of Changebridge Road and Route 202, and asserted that the property had been "completely vacant" for two to three years and the owner "can't rent it." A second office building several miles away on Changebridge Road was completed one year earlier and "it's completely vacant with all grass growing up in front of it." In response to the newspaper ad, they had received inquiries from people with "low-end type" motels, but "they couldn't use it" because "[t]hey needed something on Route 46 with traffic." A church inquired but "couldn't spend too much money." According to Luca, all the real estate brokers that he called had asked "what about townhouses or what about age restricted," and were uninterested when told the property was not zoned for those purposes.

Linda White, Montville's land use administrator, zoning officer, and director of affordable housing, testified that one of the office buildings referenced by Luca had received its certificate of occupancy within the past year, and that she had "three tenancy approvals" to process for that building, and the other "took his time to come in to get his final approval for whatever reason." In addition, she said that the basement ordinance had been in effect when she arrived in 1989, but it had "evolved" as subdivisions began to be built along the Passaic Valley in the flood plains; it was not enacted, she said, to thwart plaintiff. She also testified that the intersection at Routes 202 and 287 had been opened and Montville "had been hit with a lot of development applications." Montville sought to delete plaintiff's property because of Montville's compliance with its Mount Laurel obligation and because Montville was concerned about density.

White testified that in her role as affordable housing director, she interacted with the public regarding the availability of units and that finding "qualified" candidates for affordable housing was "difficult" and the rental component "constantly" maintained a ten to fifteen percent vacancy. She also had problems in marketing the senior citizen components because the units were "very small" and on the second floor. She testified that senior citizens from the Montville area had assets that placed them out of the income range for the housing, and, in addition, they were "used to a certain style of living." White "sometimes . . . [had] to go through 100 candidates to get a certified person who either wants a unit, is interested in a unit, or can walk up the stairs to [a] second [floor] unit."

Plaintiff's planning expert, Jason Kasler, described the status of properties in the surrounding area at the time of trial. Plaintiff's 13-acre tract was located on the south side of Route 202. Directly to the north were the developments of Hunting Hills and Jade Mountain, both of which contained affordable housing units. A development of single-family homes was located to the east of the property. A railroad and the Morris Canal were directly south of the property, behind which was located a 300-unit multi-family development. A light manufacturing and processing plant was located to the west of the property. In Kasler's opinion, it was inequitable to change the zoning of the property because the municipality had "placed obstacles" before any developer that had sought to build affordable housing in that

the idea that sewers came in '95 and then in '96, there was a recommendation to change it, and then they went to [COAH], and then they tried to put other zoning ordinances in place that would specifically address . . . this property, I -- I really don't believe that there has been equity, especially when we're talking about a property that was a consideration of a settlement agreement.

Adrian Humbert, Montville's planning expert, described Montville's planning process and the viability of the property for the zoned uses. He opined that the OB-2B zone provided a more balanced land plan than additional multi-family housing in the area because it provided a transition from the industrial uses to the west and the residential uses to the east of the property, and was located along an arterial road with other office buildings.

B

Much of the trial judge's November 3, 2004 opinion reaffirmed his previous rulings that N.J.S.A. 52:27D-311(g) did not apply, that the judgment survived, and that, as a result, he was required to balance the equities to determine if the judgment should be modified. On the application of N.J.S.A. 52:27D-311(g), the judge found that the statute did not resolve the case because

311(g) is not talking about a case where you have a judgment of repose. 311(g) is talking about a case where you have [COAH] and . . . no judgment of repose. You have a [COAH] determination, and based upon a [COAH] determination only, if it's satisfied, then under 311(g), the Town doesn't have to come back to [COAH] to delete a site. But that doesn't mean they can do that when there is a judgment of repose, and that's what 5-13(b)(1) recog-nizes, and that's what [Deland] recognizes.

But that's totally different than when there is a judgment of repose as [Deland] recognizes and as the very language of 5-13(b)(1) recognizes[,] . . . [a]nd that Administrative Code provision continues to [remain in effect to] this day. It has not been changed in that regard, and clearly there's a recognition there that a court can only modify its own orders by a 4:50-1E analysis and that a statutory procedure cannot change a court order in that regard. The statutory procedure applies really to situations where there is no court order where a town took advantage, for example, of [COAH] right from the start. There is no judgment of repose in that regard.

Relying on Toll Bros., supra, 334 N.J. Super. at 94-95, the trial judge found that "the fact that the [settlement] agreement itself does not talk about what happens after 1991 does not mean that the judgment expires."

The trial judge also rejected the argument that, under paragraph 10, Montville's satisfaction of its COAH obligation meant that it could repeal or modify the ordinance, concluding "that clearly is not the import of the agreement itself." The agreement provided that it could not be repealed, amended or modified without the express consent of the plaintiffs, although, as the judge acknowledged, plaintiff here was not a plaintiff in the Mount Laurel action.

The trial judge emphasized that "we're implicating rights of developers here, not public interest parties, and what's being sought is to extinguish the right of the developer with respect to the agreement." Because "you're talking about extinguishing a developer's rights under the settlement agreement, you're talking about a [R. 4:50-1(e)] analysis, and that is the standard of review that applies in this regard." The judge relied upon our observation in Toll Bros., supra, 334 N.J. Super. at 104-05, that the purpose of N.J.A.C. 5-13(b)(1) was to protect the owners of sites previously designated for inclusionary development, that the judiciary had a continuing role in exclusionary zoning cases, and that the judiciary should conform its decisions to COAH's guidelines wherever possible. As a result, the judge concluded:

[I]t is clear that the viability of 5-13(b)(1) continues. That has not been changed by virtue of 311(g). And it's further clear that 311(g) can implicate substantive certification where there is not a settlement agreement but not in cases where the [c]ourt has ruled in a particular matter in that regard.

Applying the Toll Bros. analysis, the judge rejected, as being based on a net opinion, Montville's contention that 100 additional units of housing would impact the traffic and infrastructure of the neighborhood, observing that Montville had submitted "no data" and "no evidence to show that before the court." Instead, according to the judge, what Montville "is saying is we have these units in place, we've met our [COAH] obligation, therefore, the judgment should be modified."

The judge also found that "this is not a case where . . . the developer sat on the site." He observed that, in 1991, plaintiff had entered into an agreement to develop the property, but the developer decided not to continue when, in 1994, Montville introduced an ordinance to rezone the property. According to the judge, plaintiff "did not stop with that resolution and sit on the property after '94 to today's date," but continued to enter into agreements to develop the property for affordable housing, with each developer backing out "in light of what the Town was contemplating with respect to the property."

The judge held that he was "not making a determination that [Montville] was proceeding in bad faith because they were looking at their overall . . . obligations in terms of their zone plan." Nevertheless, the absence of bad faith "does not mean that the facts don't show that the equities favor the developer here, V&L, over [Montville]."

The judge further observed that only plaintiff's site was rezoned under the ordinance, to which plaintiff continually objected; that plaintiff was not "simply sitting back and not exercising their rights in that regard," concluding:

This is not a situation where V&L was passive and that the equities would favor the Town because the Town's equities are that, A, they achieved their affordable housing obligation under [COAH]; and B, the surrounding area has changed. . . . [T]hey have presented no proof of the impact of that surrounding change in terms of infrastructure . . . that somehow the development of another 100 units on this parcel, the 23 . . . affordable housing units, would impact the infrastructure of this surrounding area because of the density.

As a result, the trial judge found the ordinance to be null and void under a R. 4:50-1(e) analysis. The judge granted plaintiff relief on count one and found the ordinance was void as against public policy and contrary to the Mount Laurel judgment. Although the judge had found no bad faith on Montville's part, he nevertheless held that plaintiff had established a breach of the implied covenant of good faith and fair dealing, and that Montville should be estopped from "reneging on the settlement agreement." The judge declined to address plaintiff's claim that the rezoning constituted a taking or reverse spot zoning because, in part, those issues were mooted by his decision.

On November 22, 2004, less than three weeks after the court's decision, COAH adopted the proposed N.J.A.C. 5:94-4.17. 36 N.J.R. 5748(a).

V

Montville argues that the trial judge erred in imposing the standard, contained in R. 4:50-1(e), for amending a judgment because the Fair Housing Act provided the statutory authority to amend the zoning under the provisions of N.J.S.A. 52:27D-311(g), which states: "A municipality which has received substantive certification from the council, and which has actually effected the construction of the affordable housing units it is obligated to provide, may amend its affordable housing element or zoning ordinances without the approval of the council." In reaching his decision that Montville could not avail itself of the statute's rezoning provision, we conclude that the trial judge mistakenly applied the holdings of two cases to create what he characterized as a "hybrid" type of Mount Laurel case that precluded the application of N.J.S.A. 52:27D-311(g).

Contrary to the trial judge's holding, our decision in Deland does not support the conclusion that N.J.S.A. 52:27D-311(g) can never apply once a municipality has been subject to a judgment of repose. In Deland, property owners in Berkeley Heights brought a Mount Laurel action, which was settled in 1989, when the court entered a judgment of repose. 361 N.J. Super. at 4-5. The judgment incorporated a settlement agreement and also the agreements that the municipality had entered into with the owners of property that had been rezoned for affordable housing. Id. at 5. In 1995, the trial court had entered another order, which granted the municipality credits for the affordable housing units constructed since the judgment, fixed the municipality's second-round obligation, and extended its period of repose until 2001. Ibid. In September 1999, the trial court's special master reported that the municipality had satisfied its obligations under the 1989 judgment and under the 1995 order of repose, which established the second-round obligation. Id. at 6. The municipality then unsuccessfully petitioned the court to delete one of the sites from its Mount Laurel compliance plan and rezone the property as "Open Land." Ibid. The municipality then filed a second action that sought to acquire the property by eminent domain, and to transfer jurisdiction from the court to COAH. Id. at 6-7. The successor in interest to one of the original property owners filed a new motion to enjoin the municipality from interference with its development of the site. Id. at 7. The trial judge denied the municipality's motions and granted the property owner's motions. Id. at 8-9.

On appeal, the municipality relied on N.J.S.A. 52:27D-311(g) in arguing that it was entitled to delete the site from its compliance plan. 361 N.J. Super. at 13. But, we held:

It is clear on its face that N.J.S.A. 52:27D-311(g) does not apply to a Mount Laurel compliance plan which has been approved by a court rather than by COAH because a municipality may avail itself of the right to amend its affordable housing element or zoning ordinances without COAH's approval only if it "has received substan-tive certification from [COAH]."

[Id. at 14 (quoting Hills Dev. Co. v. Twp. of Bernards, 103 N.J. 1, 63 (1986)).]

We, thus, rejected the municipality's effort "to extend the plain language" of the statute and construe it to apply also to municipalities that had obtained a judgment of repose, observing:

If the Legislature had intended to allow not only municipalities which have obtained substantive certification from COAH but also municipalities which have obtained a judgment of compliance from a court to change their housing element and zoning ordinance without approval, it easily could have said so. Consequently, the omission from N.J.S.A. 52:27D-311(g) of any mention of the Superior Court cannot be viewed as simply a matter of legislative inadvertence.

[Ibid.]

In addition, we held that the property owner's right to retain the zoning also derived from the developer's agreements, rather than solely from the judgment of repose. Id. at 15. The municipality, we said, could obtain relief from the settlement agreements "if it can show that 'it is no longer equitable that the judgment . . . should have prospective application.'" Ibid. (quoting Toll Bros., supra, 334 N.J. Super. at 98).

Both the 1989 judgment and the 1995 order in Deland provided for the retention of jurisdiction in the courts. 361 N.J. Super. at 18. Moreover, the municipality did not attempt to transfer jurisdiction to COAH from the time the Mount Laurel action was filed in 1987 until 1999 -- a period of 12 years. Id. at 18.

The circumstances of Deland are readily distinguishable from this case and do not support the trial judge's conclusion that Deland precluded the application of N.J.S.A. 52:27D-311(g) in these circumstances. In Deland, the municipality chose not to take advantage of the procedures set forth in N.J.S.A. 52:27D-309, which would have allowed it to obtain repose by submitting a fair share housing plan in accordance with COAH's guidelines. 361 N.J. Super. at 4. Here, the litigation was initiated and resolved prior to the effective date of the Fair Housing Act. Nor did the municipality in Deland ever seek substantive certification and obtain repose from COAH as it was entitled to do under N.J.S.A. 52:27D-309(b). Instead, it was the court that set the municipality's second-round obligation and which conferred upon the municipality the repose that protected it from further Mount Laurel litigation. N.J.S.A. 52:27D-311(g) was inapplicable to the circumstances in Deland because, by its plain language, that statute applied only when the municipality has "received substantive certification" from COAH, i.e., when oversight of its affordable housing plan had been transferred to COAH. In Deland, the municipality had never received certification and the court had no basis to apply the provisions of N.J.S.A. 52:27D-311(g).

In this case, the trial judge also found N.J.S.A. 52:27D-311(g) did not apply because he believed the judgment survived, as suggested by the Toll Bros. holding. However, we conclude that that decision also is distinguishable. There, the owners of two tracts of land had entered into consent judgments in 1985 as part of the settlement of a Mount Laurel action that had been instituted by an affordable housing corporation. 334 N.J. Super. at 85-86. Neither landowner wanted its property rezoned for affordable housing, but both eventually acceded to rezoning. Id. at 86. The consent judgments specifically delineated their rights and obligations. Ibid. Under the settlement, the municipality obtained repose until July 22, 1991. Ibid.

In 1993, Toll Brothers instituted an action that alleged the municipality's fair share plan was defective and sought a site-specific builder's remedy. Id. at 86. In 1997, during the pendency of that action, the municipality notified the two landowners whose property had been rezoned as part of the 1985 Mount Laurel litigation that it intended to delete their sites as affordable housing. Id. at 87. The landowners objected and attempted to intervene. Ibid.

The trial court directed the landowners to file a separate action to enforce their rights under the 1985 consent judgment, which the court then consolidated with the Toll Brothers' action "for limited purposes." Ibid. In 1998, after a trial, the court entered a final judgment and an order of repose in the Toll Brothers' action, which authorized the municipality to delete the landowners' sites and treated all orders entered in the 1985 litigation as "having expired." Ibid.

On appeal, we rejected the characterization of the 1985 judgment as having expired after six years. Id. at 93-95. The judgment protected the municipality from litigation for that period only, but the judgment itself did not expire. Id. at 94. We observed that if Mount Laurel judgments simply "expired after six years, municipal defendants would have every incentive to delay approval of inclusionary developments or other unpopular affordable housing plans." Id. at 95. Because the judgment was still in effect, we held that the question of whether it should be modified to delete the sites was governed by R. 4:50-1(e), which allowed relief where a "judgment or order has been satisfied, released or discharged, or a prior judgment or order upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment or order should have prospective application." Id. at 98. In Toll Bros., the judgment survived and was subject to the rules pertaining to modification because no part of the judgment provided for its expiration and, unlike the circumstances here, the municipality had taken no steps to transfer jurisdiction to COAH.

In the matter at hand, the trial judge's description of the circumstances as a "hybrid" Mount Laurel action mistakenly relied on the two cases discussed above, where jurisdiction had never been transferred to COAH because neither municipality had sought or received certification from COAH. Because our decisions in Deland and Toll Bros. flowed from that circumstance, we find those decisions inapplicable to the present matter. In short, we conclude that the judge's emphasis on the presence of a Mount Laurel consent judgment unduly diminished the great weight and significance of N.J.S.A. 52:27D-311(g), particularly in a circumstance where COAH has exercised jurisdiction over Montville's affordable housing obligation and where plaintiff here was not a party to the action in which the judgment was entered.

We also observe that the trial judge mistakenly interpreted N.J.S.A. 52:27D-311(g). The starting point in interpreting a statute is always the plain language of the statute. DKM Residential Prop. Corp. v. Twp. of Montgomery, 182 N.J. 296, 305 (2005); Franklin Tower One L.L.C. v. N.M., 157 N.J. 602, 613 (1999). If the plain language of the statute allows for different meanings, then a court must seek to give effect to the legislative intent in light of the statute's language and the objectives the Legislature sought to achieve in its passage. Merin v. Maglaki, 126 N.J. 430, 434-35 (1992); Matter of Adoption of N.J.A.C. 71I, 291 N.J. Super. 183, 191 (App. Div. 1996), aff'd, 149 N.J. 119 (1997). To ascertain that intent, a court may turn to "the statute's structure, history, and purpose." Matter of Adoption of N.J.A.C. 71I, supra, 291 N.J. Super. at 191.

In this regard, it is important to emphasize that it is not the function of the courts "to rewrite a plainly-written enactment of the Legislature or presume that the Legislature intended something other than that expressed by way of the plain language." O'Connell v. State, 171 N.J. 484, 488 (2002). A court should not "'write in an additional qualification which the Legislature pointedly omitted in drafting its own enactment,' Craster v. Bd. of Comm'rs of Newark, 9 N.J. 225, 230 (1952), or 'engage in conjecture or surmise which will circumvent the plain meaning of the act,' In re Closing of Jamesburg High School, 83 N.J. 540, 548 (1980)." DiProspero v. Penn, 183 N.J. 477, 492 (2005).

N.J.S.A. 52:27D-311(g) plainly states that "[a] munici-pality which has received substantive certification from the council, and which has actually effected the construction of the affordable housing units it is obligated to provide, may amend its affordable housing element or zoning ordinances without the approval of the council." The argument that the concept of obligation under the statute includes yet to be constructed units such as those attributed to plaintiff's property would undermine the entire purpose of the statute. In this context, a municipality has no reason or logical basis to rezone property already built with affordable and market rate housing. The only benefit conferred by the statute is to allow a municipality to rezone property that had been designated for affordable housing but later determined to be surplus to its obligations.

As to the statute's history and the legislative intent, the clear inference from the testimony of Grant, a member of the planning board, was that Montville's situation with plaintiff's property was the actual impetus for the statute, and that Montville was involved in its drafting, and provided legislative testimony regarding the circumstances and need for the statute. In evaluating the applicability of the statute to this case, the trial judge mistakenly overlooked this evidence which demonstrated that the statute was passed precisely to remedy the type of situation in which defendants found themselves because of COAH's rule in N.J.A.C. 5:93-5.12(b).

Furthermore, the trial judge's reliance on the fact that COAH had not amended N.J.A.C. 5:93-5.12(b) misapprehended the fact that COAH was engaged in the final stages of the amendment process when the trial took place. In addition, the judge's reasoning mistakenly elevated the agency's rule above the legislative authority that was intended to supersede the rule, and departed from the "basic principle that the agency's power exists solely as granted by the Legislature." DiVigenze v. Chrysler Corp., 345 N.J. Super. 314, 327 (App. Div. 2001), certif. denied, 171 N.J. 442 (2002). In short, an agency's authority is no more and no less than that afforded by the Legislature. T.H. v. Div. of Developmental Disabilities, 381 N.J. Super. 366, 373 (App. Div. 2005). The judge's reliance on N.J.A.C. 5:93-5.13(b)(1) mistakenly failed to recognize that that regulation had been in existence prior to the passage of N.J.S.A. 52:27D-311(g), and that the Legislature's purpose in passing the new statute was to override that regulation. The fact that COAH's rules had not yet been revised to conform to the directive of the statute cannot possibly mean that the regulation was not superseded by the statute.

We conclude that the judge's analysis of N.J.S.A. 52:27D-311(g) mistakenly exalted the agency rule over the authority of the statute, and departed from the statute's plain language. Indeed, the decision mistakenly failed to recognize that, by the time of trial, COAH itself had recognized that the new statute required the amendment of N.J.A.C. 5:93-5.13(b)(1) and sought to amend COAH's rules accordingly by a proposed new rule that was adopted within days after the court's decision.

In the alternative, we also agree with Montville that it was entitled to relief pursuant to R. 4:50-1(e), which provides for relief if "the judgment or order has been satisfied, released or discharged . . . or it is no longer equitable that the judgment or order should have prospective application." In determining that Montville was not entitled to such relief, the trial judge applied the factors set forth in Toll Bros., supra, 334 N.J. Super. at 102-06, which were later summarized in Mount Olive Complex v. Twp. of Mount Olive, 340 N.J. Super. 511 (App. Div. 2001), remanded for reconsideration, 174 N.J. 359 (2002), decision reaffirmed, 356 N.J. Super. 500 (App. Div.), certif. denied, 176 N.J. 73 (2003), in the following way:

(1) whether the . . . sites . . . removed from the judgment of compliance remain suitable for affordable housing; (2) COAH's policy impact on the 1985 consent judgment, since COAH regulations amounted to a significant change of the law; (3) the length of time between entry of the 1985 judgment and the developers' attempts to enforce their rights thereunder; (4) the general decline of the housing market in the late 1980s and early 1990s; and (5) the municipality's position in the underlying exclusionary zoning litigation, where it argued the developers' sites remained appropriate for inclusionary zoning.

[Id. at 529.]

Montville argues that the trial judge erred in holding that continued site suitability was the "central core" of the analysis, and that the trial judge saddled it with an "impossible" burden by requiring proof that the site was now unsuitable for affordable housing.

In Toll Bros., we described the present suitability of the site as the "central core" of the R. 4:50-1(e) analysis pertaining to modification of a Mount Laurel consent judgment. 334 N.J. Super. at 102. When a municipality seeks to delete a site that had been included in a consent judgment, it "must demonstrate significant change in facts or applicable law warranting revision of the consent judgment and orders, and that removal of the sites from the plan is 'suitably tailored to the changed circumstance.'" Ibid. (quoting Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 393, 112 S. Ct. 748, 765, 116 L. Ed. 2d 867, 892 (1992)). The suitability analysis must consider any factual changes that would make continued inclusion of the sites in the compliance plan "more onerous, or unworkable because of unforeseen circumstances, or any present conditions or other facts which, if the 1985 consent judgment and orders were enforced without modification, would cause detriment to the public interest." Ibid. (quoting Rufo, supra, 502 U.S. at 384, 112 S. Ct. at 760, 116 L. Ed. 2d at 886-87).

In this case, the judge's analysis of continued suitability reasonably rejected the net opinion offered by Montville's planning expert. However, that analysis failed to consider the public impact of the addition of 23 units to an affordable housing market that already had a surplus of over 200 units, and failed to acknowledge the negative impact on Montville's master plan to create a transition space between the industrial and high-density housing area to the east and the town center to the west. As previously mentioned, White testified that she already had vacancies in the existing affordable housing units. The court also focused on the structural impact of the 23 affordable housing units rather than the 100 units that actually would be built on the property because of the necessary inclusion of the market rate units.

But, more importantly, the trial judge's analysis of the other Toll Bros. factors misapprehended critical factual circumstances relevant to the analysis. We have recognized in this regard that changes in COAH regulations amount to a significant change in law. Mount Olive Complex, supra, 340 N.J. Super. at 529; Toll Bros., supra, 334 N.J. Super. at 102. As we have already discussed, the trial judge mistakenly gave insufficient weight to these statutory changes and the fact that COAH was in the process of amending the precise regulation on which the court had relied.

In addition, the judge also mistakenly characterized the third factor in this analysis in his conclusion that plaintiff had not slept on its rights because it had repeatedly entered into contracts to develop the property for affordable housing. This third factor examines the length of time between the judgment and the plaintiff's attempts to enforce the judgment. Mount Olive Complex, supra, 340 N.J. Super. at 529; Toll Bros., supra, 334 N.J. Super. at 105-06. Here, plaintiff clearly was aware for many years of Montville's attempts to rezone the property from affordable housing. But, instead of acting to enforce its rights under the judgment, plaintiff continued to enter into contracts with third parties that required plaintiff to remove the property from the market for little or no compensation on the premise that it could be developed for affordable housing. Plaintiff's continued efforts to develop the property in the face of Montville's opposition is not equivalent to enforcing its rights under the judgment.

Most significantly, plaintiff made no attempt to block the transfer of jurisdiction to COAH. Certainly, at the time of the transfer, COAH's regulation favored plaintiff's position. But plaintiff had no guarantees that the regulation would remain unchanged. If plaintiff had intended to rely on the Mount Laurel judgment to assert rights against Montville, then it could have taken legal action to attempt to ensure that jurisdiction over Montville's affordable housing compliance remained with the courts. Instead, it took advantage of the favorable legislative and regulatory environment that existed under COAH's jurisdiction at the time of the transfer, and then sought to reverse that position when the environment changed.

Thus, for all these reasons, we conclude that the trial judge mistakenly determined that the Mount Laurel judgment should continue to bind these parties, when COAH exercised control over Montville's affordable housing obligation, and when N.J.S.A. 52:27D-311(g) permitted rezoning once the obligation was met.

Reversed.

 

S. Burlington County N.A.A.C.P. v. Twp. of Mount Laurel, 67 N.J. 151, cert. denied, 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed. 2d 28 (1975); S. Burlington County N.A.A.C.P. v. Twp. of Mount Laurel, 92 N.J. 158 (1983).

Toll Bros. v. Twp. of W. Windsor, 334 N.J. Super. 77 (App. Div. 2000), certif. denied, 168 N.J. 295 (2001).

(continued)

(continued)

44

A-2121-04T5

June 2, 2006