ARTHUR DANSER,s et al. v. THE TOWNSHIP OF CRANBURY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2127-04T12127-04T1

ARTHUR and BARBARA DANSER,

Plaintiffs-Appellants,

vs.

THE TOWNSHIP OF CRANBURY,

Defendant-Respondent.

__________________________________

 

Argued: March 27, 2006 - Decided August 8, 2006

Before Judges Cuff and Holston, Jr.

On appeal from the Superior Court of New Jersey, Chancery Division-General Equity, Middlesex County, Docket No. C-267-04.

Robert J. Hagerty argued the cause for appellants (Capehart & Scatchard, attorneys; Mr. Hagerty, of counsel and on the brief).

Trishka Waterbury argued the cause for respondent (Mason, Griffin & Pierson, attorneys; Ms. Waterbury, of counsel and on the brief).

PER CURIAM

This appeal involves the public auction of property owned by a municipality. The property was acquired by the municipality to preserve it as farmland. The municipality determined to sell the deed-restricted farmland to a private party and conducted a public auction at which two parties participated. The successful bidder sought injunctive relief to set aside the sale as contrary to law. This appeal is from the order denying injunctive relief and dismissing plaintiffs' complaint. We affirm.

The facts are undisputed, as is the law governing the dispute. On June 28, 2004, the Township Committee of defendant Township of Cranbury (Township) passed Resolution R-06-04-136, which authorized the sale by public auction of Barclay Farm, an approximately 183 acre site with a single residence on the part of the farm known as Barclay Farm South. The Resolution specified that all bidders were to qualify by noon, Friday, October 1, 2004, for the October 7, 2004 auction. In order to qualify, prospective bidders were required to submit a one-page application and a $50,000 deposit. Farm tours, including a tour of the residence located on Barclay Farm, were scheduled for September 10, 2004 and September 24, 2004.

The Township had acquired the farms in order to preserve the sites as farmland. It intended to transfer the development rights to the State Agricultural Development Committee (SADC) Direct Easement Program, which would permanently preserve the sites as farmland. The Resolution also provided that Barclay Farm would be sold subject not only to the farmland deed restriction, but also to an Historic Preservation Easement (HPE). The grantee of the HPE was to be the New Jersey Department of Environmental Protection (DEP). The residence on Barclay Farm was considered a very good specimen of vernacular architecture circa 1860 and largely unmodified over the years. Following adoption of the Resolution and publication of the auction, DEP advised the Township that it had concerns about extensive termite damage to the house and expressed reservations about accepting the easement.

In response, the Township made significant changes to the easement. First, it proposed to change the grantee from DEP to the Township. Second, it altered the language of the provision concerning alteration of the residence. The initial HPE prohibited the grantor from demolishing, removing, or razing "the Facades," while the revised HPE prohibited the grantor from demolishing, removing or razing "the Facades or the Building without the express consent of the Township Committee . . . which consent shall be granted only in exceptional circumstances. . . ." The Township Committee approved the revised easement but did not adopt a resolution. Finally, the Township Administrator extended the time for submission of the application to qualify to bid until October 6, the day before the auction.

The following day, September 28, 2004, a supplemental notice was issued. The notice contained information about the revisions to the HPE and the extension of the bidder qualification application deadline to October 6, 2004 at noon. The notice was posted on the Township website, sent to all individuals who had expressed an interest in the auction, and was published in the Trenton Times and Cranbury Press on October 1, 2004.

As of October 1, 2004, plaintiff Arthur Danser was the only qualified bidder for the Barclay Farm. He was born on Barclay Farm South in 1929, and he and his family rented and resided on the farm for decades. He and his family continue to farm and live on the farm to this day. At some time after October 1, 2004, two other persons submitted bid qualification forms.

The farm auction, including Barclay Farm, proceeded on October 7, 2004. On that day, only plaintiff Arthur Danser and one of the other qualified bidders, Bryce Thompson, IV, attended the auction. Prior to the commencement of the auction, Danser protested the extension of the deadline to qualify as a bidder. He contended that the extension was contrary to law and that only the Township Committee, not the Township Administrator, had the authority to extend the deadline. The Township rejected the oral protest, advised plaintiff that he could submit a formal protest following the bid, and proceeded with the auction.

The minimum bid for Barclay Farm was $1,200,000. Bidders were also instructed that additional bids would be accepted in $10,000 increments. Danser opened with the minimum bid. Thompson entered the bidding; his last bid was $1,890,000. Plaintiff responded with a $1,900,000 bid and was declared the successful bidder.

On October 18, 2004, plaintiffs' attorney sent a letter to the Mayor of Cranbury and Township Committee members requesting the Township declare the auction void and conduct a new auction. Counsel contended that the auction did not comply with the Local Lands and Building Law, N.J.S.A. 40A:12-1 to -30. Danser also appeared at the Township Committee meeting to protest the conduct of the auction and to request that the bids be set aside. On October 25, 2004, the Township Committee rejected the protest and voted to award the contract to plaintiffs at their $1,900,000 bid.

On November 4, 2004, plaintiffs filed a verified complaint and sought an order to show cause to temporarily and permanently enjoin the Township from consummating the contract. Plaintiffs sought an order requiring a new auction or declaring them the only qualified bidder and the successful bidder at $1,200,000. Temporary restraints were entered that day. On the return date of the order to show cause, Judge Messina dissolved the restraints and dismissed plaintiffs' complaint.

In his oral opinion, Judge Messina held that as successful bidders, the plaintiffs had no standing to seek to invalidate the auction, except for any objection presented prior to the auction. He said, "[i]f you opt to proceed, then in effect you have no standing to challenge the alleged illegal specifications, except perhaps where the person in question makes known the objection to the Town before the auction starts." Here, the judge found that the only objection voiced at the time of the auction was a protest to the extension of time to qualify to bid. As to that issue, Judge Messina found that the extension to the day before the October 7 auction was reasonable. In doing so, he held that the extension was consistent with the spirit and goal of the Local Lands and Building Law and the rule announced in Lieberman v. Township Committee of Neptune, 50 N.J. Super. 192 (App. Div. 1958).

The judge also held that the Township Administrator did not act beyond the scope of his authority when he extended the time for bidders to qualify. He stated that it is the role of the administrator to effectuate the intention of the Township Committee and the auction attracted additional interest and bidders and a higher return for the Township. Furthermore, he held that a resolution was not required to effectuate the changes to the HPE.

Judge Messina observed that the change in the holder of the HPE was of little significance and that the notice provided was reasonable and consistent with the requirement that all bidders should have the same information about the property and any conditions attached to it in advance of the auction. He also noted that the proof of the reasonableness of the notice was the positive effect in generating more interest and a competitive bid process at the auction. Finally, the judge determined that bidders were not required to submit an Option A/Option B bid, as required by N.J.S.A. 40A:12-13, because the easement retained by the Township was neither a contingent nor reversionary interest in the property.

He concluded his opinion with the following remarks:

In a matter such as this, one must not lose sight of the purpose of the law with regard to auction of public land. The law is setup to prevent favoritism, to assure uniform conditions, so that all of the participants are on equal footing when they are bidding for the property. And the purpose of the law is to obtain the best deal for the citizens and taxpayers of the Town. The idea is to include as many participants, who will participate on a level playing fieLd, to obtain the highest possible price for the property for the benefit of the Town.

In this case, after all is said and done, the bottom line is that there were two competing participants. The auction was spirited. The participants were playing on a level playing field. Each of them knew all of the . . . conditions. And they each knew all of the facts that fairly had to be known in order to proceed with the bid. The plaintiff did have a legal objection, which he . . . verbalized before the auction, but it was only with regard to the one issue. However, he bid anyhow. He knew or should have known that his objection might not be sustained. And he voluntarily went forward in the bidding process at his own risk. It would be unfair and inequitable now to sustain his complaint that his final bid was too high and that the sale should be nullified. That result would be unfair to the citizens and taxpayers of Cranbury.

On appeal, plaintiffs argue that they have standing to challenge the auction and that the trial judge erroneously applied the law. They contend that the change to the HPE was substantial and not properly advertised and that the unilateral and unauthorized extension to qualify to bid rendered the auction invalid. They also insist that the Township was required to follow the Option A/Option B procedure set forth in N.J.S.A. 40A:12-13. They urge that this court declare them the successful bidder at $1,200,000 if we find the only infirmity in the auction process was the unauthorized extension of the bidder qualification deadline. Finally, plaintiffs seek to supplement the record to argue that the Township rejected its bid necessitating return of their $50,000 deposit.

The threshold issue is whether plaintiffs, as successful bidders, have standing to challenge the validity of the auction. Standing involves a threshold determination that governs the ability of a party to initiate and maintain an action before the court. In re Adoption of Baby T., 160 N.J. 332, 340 (1999). The "essential purpose" of the standing doctrine is:

to assure that the invocation and exercise of judicial power in a given case are appropriate. Further, the relationship of plaintiffs to the subject matter of the litigation and to other parties must be such to generate confidence in the ability of the judicial process to get to the truth of the matter and in the integrity and soundness of the final adjudication. Also, the standing doctrine serves to fulfill the paramount judicial responsibility of a court to seek just and expeditious determinations on the ultimate merits of deserving controversies.

[N.J. State Chamber of Commerce v. N.J. Election Law Enforcement Comm'n, 82 N.J. 57, 69 (1980).]

Standing is governed by Rule 4:26-1, which provides that "[e]very action may be prosecuted in the name of the real party in interest. . . ." In general terms, standing requires that a litigant have a sufficient stake in the matter and real adversariness, with a substantial potential for real harm flowing from the outcome of the case. In re N.J. Bd. of Pub. Utils., 200 N.J. Super. 544, 556 (App. Div. 1985). Moreover, standing has been broadly construed in New Jersey as "our courts have considered the threshold for standing to be fairly low." Reaves v. Egg Harbor Twp., 277 N.J. Super. 360, 366 (App. Div. 1994).

Generally, an unsuccessful bidder does not have standing to challenge the award of a contract to a rival bidder or to challenge the specifications of a bid following submission and opening of bids. Camden Plaza Parking, Inc. v. City of Camden, 16 N.J. 150, 158-59 (1954); Waszen v. City of Atl. City, 1 N.J. 272, 276 (1949); Lieberman, supra, 50 N.J. Super. at 197. In Waszen, the Court expressed the rationale for this rule as follows: "one cannot endeavor to take advantage of a contract to be awarded under illegal specifications and then, when unsuccessful, seek to have the contract set aside." Waszen, supra, 1 N.J. at 276. An unsuccessful bidder may avoid this rule, if it challenges the alleged improper or illegal specifications prior to bid submission. Sevell's Auto Body Co. v. N.J. Highway Auth., 306 N.J. Super. 357, 369-70 (App. Div. 1997), certif. denied, 153 N.J. 51 (1998).

We have been unable to locate any authority that speaks directly to the issue of the ability of a successful bidder to challenge the specifications or procedure which led to its successful bid. The dearth of authority is probably indicative of the anomaly of a successful bidder seeking to set aside its prize. We discern no reason, however, for a different rule. Having participated in the auction and discovered the depth and breadth of interest in the property, the successful bidder could tailor its bid in a subsequent bid submission or auction procedure that may not ultimately redound to the public interest.

Here, however, Danser entered a verbal protest to the extension of time to file the bid qualification application prior to the auction. Danser was also informed that he could file a protest following the auction. Under these circumstances, we are loathe to bar plaintiffs standing to challenge the auction process.

We start with the general proposition that the intent of the statutes governing the disposition of public property is to eliminate "corruption, favoritism, and extravagance." Disposmatic Corp. v. Mayor and Council of Kearny, 162 N.J. Super. 489, 494 (App. Div. 1978). Bidding statutes, whether the object is to acquire goods and services for the operation of government or dispose of property no longer needed by government, are for the benefit of the taxpayers and are to be interpreted to achieve the public good. Terminal Constr. Corp. v. Atl. City Sewerage Auth., 67 N.J. 403, 409-10 (1975); 426 Bloomfield Ave. Corp. v. Newark, 262 N.J. Super. 384, 387 (App. Div. 1993). In 426 Bloomfield, Judge Baime observed that "[t]he object of public bidding is 'not the protection of the individual interests of the bidders but rather the advancement of the public interest in securing the most economical result by inviting competition in which all bidders are placed on an equal basis. . . . '" 426 Bloomfield, supra, 262 N.J. Super. at 387 (quoting Twp. of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207, 215 (Law Div. 1974)).

A municipality may sell any real property not needed for public use. N.J.S.A. 40A:12-13. The resolution or ordinance authorizing the sale shall set forth the method of sale, such as public sale at auction or private sale. N.J.S.A. 40A:12-13(a), (b) and (c). If the governing body decides to sell by pubic sale at auction, the governing body may by resolution establish the terms and conditions of the sale, including minimum bids, a reservation of the right to reject all bids where the highest bid is not accepted, and restrictions on the use of the property. N.J.S.A. 40A:12-13(a). Any conditions or restrictions must also be included in the advertisement. Ibid. Here, the Township authorized the sale of Barclay Farm and two other farm properties by a resolution that contained the relevant terms and conditions of the sale. The Township also placed the requisite advertisements in the appropriate papers as required by statute. N.J.S.A. 40A:12-13.

In addition, the sale must be in conformity with the terms of the resolution and the advertisement. Thus, when wholesale additions and alterations of the terms of the proposed sale of municipal property were submitted immediately prior to the sale, the modified offer was considered fatally defective. Skakel, supra, 37 N.J. at 380. The Court explained that the need for prior full disclosure was designed to encourage maximum competition at a sale. Id. at 379. Justice Proctor wrote:

The above principles which require prior full disclosure of the provisions of the offer to encourage maximum competition at a sale apply with equal force when the same disclosure is designed also to give notice to townsmen that a particular sale at a minimum price for a specific use is contemplated. As the public welfare demands that the greatest number be stimulated to compete, considerations for the local citizenry require that they also be informed of the details so that they may make their views known to the governing body.

[Ibid. ]

Thus, notice of any departure or modification of the terms initially announced in the resolution and advertised to the general public must also be made known sufficiently in advance to foster notice and participation by an informed public. Ibid. The Court explained the reason for the prior notice as follows:

Initial disclosure of a modification as far-reaching as the one in the present case at such a late time makes it almost impossible for competitive bidders and citizens present to digest the meaning of the modification and to effectively participate in the proceedings. But most important of all, the legislative purpose would be destroyed if the municipality through its advertisement could present one scenario of future municipal action, thus lulling citizens and potential bidders into silence, and then materially change the script in their absence.

[Ibid.]

In other instances, departure from this rule has led to the issuance of an injunction to bar construction of a building at variance with the terms of a sale. Vaccaro v. Asbury Park Enters., 42 N.J. Super. 288, 296-97 (App. Div. 1956). Similarly, a deed was declared null and void when the deed conveyed property in excess of the dimensions described in the advertisement. Markey v. City of Bayonne, 24 N.J. Super. 105, 112 (App. Div. 1952).

Here, the HPE was modified in two important respects. First, the grantee was changed from the DEP to the Township. Second, the prohibitory language in the initial adopted and advertised HPE applied only to the "Facades" of the farmhouse, while the amended HPE extended to the entire structure. These modifications may have been considered significant by the prospective bidders and required announcement prior to the auction, which was done. The Township announced the modification on September 28, 2004, posted the modification on the Township website, notified every person who had inquired about the sale, and published the modification in the authorized publications on October 1, not earlier than seven days before the October 7 auction, as required by N.J.S.A. 40A:12-13. The result was salutary; two additional persons submitted qualification to bid applications and, ultimately, one additional bidder participated in the auction.

Accordingly, we hold that the efforts undertaken by the Township to publicize the modification of the HPE were reasonable under the circumstances. Certainly, as measured by the response to the notices, the public interest was served. We are also unconvinced by plaintiffs' contention that the modification required a new resolution. The Township had adopted the resolution required by N.J.S.A. 40:12-13 authorizing the sale and announcing the terms and conditions of the sale. We do not interpret the statute as requiring a new resolution to memorialize two modifications to the HPE that did not alter the ultimate goal of preserving the historic homestead. Similarly, the action by the Township Administrator was within the authority granted to this official who must effectuate the actions of the Township Committee.

We also hold that the Township Administrator did not err in extending the period to qualify to bid from October 1 to October 6. Indeed, the requirement to submit a qualification application and a deposit by October 1, six days before the October 7 auction, was illegal. In Lieberman, supra, 50 N.J. Super. at 199, we held that the requirement of a deposit three days before a sale was illegal. We said:

Such a condition is only calculated to reduce the number of possible bidders at a sale and favor those who might see the advertisement of sale or become advised as to the sale by municipal officials. This is not conducive to the statutory aim of realizing the highest possible price for the property to be sold. Applying the three-day condition to the instant matter, it denied a person, otherwise entitled to bid, the right to bid if he saw the notice or heard of the sale less than three days prior to the advertised date of sale. The required public notice is to make reasonably certain that all those who might be interested in bidding for the property are informed of the sale.

[Ibid.]

The extension of time to qualify and to submit a deposit in this case allowed additional persons to participate and assured a competitive auction, all of which was consistent with the purpose of the statute and advanced the public interest. In addition, plaintiffs' attempt to rigidly interpret the relevant statues inevitably favors only them and frustrates the public interest.

Plaintiffs also contend that the auction process was legally infirm because the alteration of the HPE required the submission of two bids, one without consideration of the easement and the other with consideration of the easement. We disagree.

N.J.S.A. 40A:12-13 requires that the invitation to bid on real property, in which the public entity intends to retain an interest in the form of a contingent or reversionary easement, must require the submission of two bids: one taking account of the easement and the other free of all restrictions. The statute provides as follows:

In any case in which a county or municipality intends to retain an estate or interest in any real property, capital improvement or personal property, in the nature of an easement, contingent or reversionary, the invitation to bid and the advertisement required herein shall require each bidder to submit one bid under each Option A and Option B below.

(1) Option A shall be for the real property, capital improvement or personal property subject to the conditions or restrictions imposed, or interest or estate retained, which the county or municipality proposes to retain or impose.

(2) Option B shall be for the real property, capital improvement or personal property to be sold free of all such restrictions, conditions, interests or estates on the part of the county or municipality.

[N.J.S.A. 40A:12-13(a).]

The obvious purpose of this alternative bid procedure is to allow the public entity to determine whether the property or improvement will produce a better return with or without the proposed restriction.

Based on our review of the language of the HPE, the Option A/Option B procedure was not required in this case. Paragraph 7 of the revised HPE provides as follows:

If any term of this Easement is violated or there is a threat of violation, [Township] may bring proceedings in any court of competent jurisdiction to enjoin such violation by ex parte, temporary, preliminary, and/or permanent injunction, including prohibitory and/or mandatory injunctive relief, and to require the restoration of the Facades to the condition and appearance required under this Easement.

This language does not create a contingent interest because the effectiveness of the easement does not depend on an event that may or may not occur. See Post v. Herbert's Ex'rs, 27 N.J. Eq. 540, 543 (E. & A. 1876) (defining contingent interests). Moreover, if the terms of the easement are violated, the property does not revert to the Township. See McKelway v. Seymour, 29 N.J.L. 321, 332 (Sup. Ct. 1862) (describing a reversionary interest). The HPE simply restricts the owner from altering the appearance of the building, particularly the facade of the building, and allows the Township to enforce the restriction. The section 13 alternative bid procedure was not implicated by the easement retained by the Township.

 
As to the final issue, we decline to supplement the record to reach the issue of whether plaintiffs' bid has been rejected by the Township and whether plaintiffs are entitled to return of their deposit. We ordinarily refrain from addressing issues not presented to the trial court. Brock v. Pub. Serv. Elec. & Gas Co., 149 N.J. 378, 391-92 (1997). We discern no reason to depart from that rule in this case. Whether the Township has rejected plaintiffs' bid and whether the deposit is refundable or should be forfeited are issues that require consideration in the first instance in the trial court.

Affirmed.

At the same time, the Township Committee authorized the sale of two other farms. All were scheduled to be sold on the same day.

We are reluctant to recognize their standing in their status as citizens of the Township. Although citizens and taxpayers commonly have standing to challenge contract awards, see, e.g., Skakel v. Township of North Bergen, 37 N.J. 369, 377 (1962) (citizen and taxpayer had standing to challenge a sale of public lands), the inherent conflict of interest between plaintiffs, who are attempting to acquire the property for no more than the minimum bid, and the residents of Cranbury, who seek to maximize their return on the sale of the property, militates against allowing plaintiffs' standing as taxpayers and citizens in this instance.

(continued)

(continued)

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A-2127-04T1

 

August 8, 2006