POTTERS INDUSTRIES, INC. v. BOROUGH OF CARLSTADT

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3878-06T13878-06T1

POTTERS INDUSTRIES, INC.;

495 INDUSTRIAL ROAD, INC.;

619 INDUSTRIAL ROAD, LLC;

GEORGE & JAMES VENTURINI;

BAR TWENTIETH STREET, LLC;

95 BROAD REALTY, LLC;

CHENG'S ENTERPRISES, INC.;

M & C REALTY, LLC; R & R

REALTY; HOUGHTON CHEMICAL

CORP.; LOUMER ASSOCIATES;

KENBAR REALTY, INC.;

SUMER ASSOCIATES, LLC;

WHITEHOUSE TRADING CO.;

WONG'S DEVELOPMENT CO., INC.;

ABRAHAM SCHLUSSEL; SCHLUSSEL

FAMILY, LLC; 700 GOTHAM, LLC;

AND 40 BROAD STREET ASSOCIATES,

Plaintiffs-Respondents,

v.

BOROUGH OF CARLSTADT,

Defendant-Appellant.

________________________________________________________________

 

Submitted February 6, 2008 - Decided

Before Judges Parker and R. B. Coleman.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2955-06.

Brickfield & Donahue, attorneys for appellant (Joseph R. Donahue, on the brief).

O'Brien Thornton, LLC, attorneys for respondents (Merrill M. O'Brien and Terry E. Thornton, on the brief).

PER CURIAM

Defendant Borough of Carlstadt (Borough) appeals from an order entered on February 7, 2007 granting plaintiffs' motion for summary judgment and declaring special assessments made by the Borough pursuant to enabling Ordinances 97-19 and 98-6 null and void. We affirm.

In August 1997, the Borough adopted Ordinance 97-19 authorizing improvements to roadways in its industrial zone. In April 1998, the Borough adopted Ordinance 98-6 amending the August 1997 ordinance and appropriating $3,100,000 for roadway construction costs. The construction was completed in the Fall of 1998 and the Borough appointed three residents to serve as assessment commissioners to allocate the costs of the roadway project among the industrial property owners whose properties were adjacent to the improved roadways. The commission submitted its report to the mayor and Borough council on December 30, 1999. A notice of a hearing to be conducted by the commissioners was sent to each of the industrial property owners with the amount assessed on each property.

The commissioners' hearing was held on January 20, 2000. Plaintiffs' counsel presented a real estate expert who testified that, based upon the rental/leasing history of comparable properties, the increased value resulting from the road improvement was zero. Sixteen owners of industrial properties appeared at the hearing, questioning various aspects of the project and the assessment. Nevertheless, in its final report dated April 1, 2000, the commission rejected the testimony presented at the hearing and "assessed the properties benefited by road improvements an amount, proportioned by area, and equal to the total cost of improvements" against each property adjacent to the improved roads.

On May 4, 2000, the Borough adopted a resolution confirming the assessments. On May 22, 2000, tax bills were sent to all of the affected property owners, including plaintiffs. On April 19, 2006, plaintiffs filed a complaint seeking a declaration that the enabling ordinances that led to the special assessments are null and void as an unconstitutional denial of their equal protection rights. Plaintiffs' motion for summary judgment was argued on January 5, 2007 and on February 7, 2007, the trial court rendered a written decision granting plaintiff's motion.

The Borough appealed and argues that (1) the time limits for the action have lapsed; and (2) the grant of summary judgment was improper because there are genuine issues of material fact.

The Borough first argues that the complaint is time barred because it was not brought within thirty days of the assessment's confirmation, pursuant to N.J.S.A. 40:56-54 and R. 4:69-6. Although the Borough acknowledges that when a constitutional question is raised, the statute of limitations may be relaxed, it maintains that the doctrines of equitable estoppel and laches should "intervene so that [defendant] is not unduly prejudiced by the institution of a stale action." Plaintiffs respond that "claims based on the violation of constitutional rights have traditionally, and repeatedly, been recognized as an exception to those time limitations" and contend that neither equitable estoppel nor laches should apply.

Pursuant to N.J.S.A. 40:56-54, an owner of property that has been assessed because of a local or municipal improvement has thirty days after confirmation of the assessment to appeal. Rule 4:69-6(b)(2) provides that actions in lieu of prerogative writs "to review an assessment . . . made for any municipal improvement" shall be commenced "after [thirty] days from the date of the confirmation of such assessment." Rule 4:69-6(c) further provides that "[t]he court may enlarge the period of time . . . where it is manifest that the interest of justice so requires."

The "interest of justice" exception to the statute of limitations includes "'cases involving (1) important and novel constitutional questions; (2) informal or ex parte determinations of legal questions by administrative officials; and (3) important public rather than private interests which require adjudication or clarification.'" Borough of Princeton v. Mercer Cty., 169 N.J. 135, 152 (2001) (quoting Brunetti v. Borough of New Milford, 68 N.J. 576, 586 (1975)). These interests must be balanced against "the important policy of repose expressed in the [thirty-day] rule. The statute of limitations is designed to encourage parties not to rest on their rights." Reilly v. Brice, 109 N.J. 555, 559 (1988).

Here, in considering the validity of the constitutional question, the trial court relied on Judge Jonathan Harris's decision in Gotham Park Assocs. v. Borough of Carlstadt, aff'd o.b., Docket No. A-2679-01T1, certif. denied, 178 N.J. 33 (2003). In Gotham Park, we agreed with Judge Harris's finding that the special assessments violated plaintiffs' constitutional equal protection rights. Plaintiffs raise the same equal protection arguments in this appeal and we find that they are so substantial that they fall within the exception to the thirty-day statute of limitations.

The Borough further argues that plaintiffs' complaint should be barred under the doctrine of equitable estoppel because plaintiffs did not join the Gotham Park action and did not initiate an action after the Gotham Park action concluded in the trial court in December 2001. The appeals however, were not completed until 2003. The Borough maintains that it detrimentally relied on plaintiffs' continued payment of the special assessments for more than four years before plaintiffs filed their complaint in Spring 2006.

The doctrine of equitable estoppel is "founded in the fundamental duty of fair dealing imposed by law." Knorr v. Smeal, 178 N.J. 169, 178 (2003) (quoting Casamasino v. City of Jersey City, 158 N.J. 333, 354 (1999)). "The doctrine is designed to prevent injustice by not permitting a party to repudiate a course of action on which another party has relied to his detriment." Ibid. The doctrine is invoked in "the interests of justice, morality and common fairness." Ibid. (quoting Palatine I v. Planning Bd., 133 N.J. 546, 560 (1993)). In short, to establish equitable estoppel, the Borough must show that plaintiffs "engaged in conduct, either intentionally or under circumstances that induced reliance, and that [defendant] acted or changed [its] position to [its] detriment." Ibid.

The Borough's reliance on Mutual Life Ins. Co. v. Norris, 31 N.J. Eq. 583 (1879), and Application of Buckeye Pipe Line Co., 13 N.J. 385 (1953) is misplaced. These cases involved very different circumstances and are readily distinguished from the facts here.

The claim in Mutual Life involved a foreclosure action in which Mutual Life sought to tack onto the defendant's debt assessments on the mortgaged premises paid by Mutual Life. 31 N.J. Eq. at 583. The mortgage required the defendant to pay the taxes and assessments on the mortgaged property. Ibid. Pursuant to the terms of the mortgage, if the defendant failed to pay, Mutual Life agreed to pay the assessments and add the amount to the debt secured by the mortgage. Ibid. When the defendant failed to pay the assessments, Mutual Life paid them and initiated a foreclosure action. The charter authorizing the assessment, however, had been declared invalid in a separate action. Id. at 584 (citing Bogert v. City of Elizabeth, 27 N.J. Eq. 568, 569-70 (1876) (nullifying the charter because the amount of the assessments was not calculated in proportion to the benefit received by the properties)). In the foreclosure action, the issue was whether the amount paid by Mutual Life on the assessments could be collected from the defendant as part of the debt. Id. at 584-85. Mutual Life argued that equitable estoppel applied because it had paid the assessment in reliance on the mortgage provision. The court found that Mutual Life had no recourse against the defendant because the defendant has not misrepresented the validity of the assessments nor induced Mutual Life to pay them. Id. at 585. With respect to Mutual Life's equitable estoppel argument, the court stated that "[t]he main purpose of the doctrine is to prevent fraud; there can, therefore, be no estoppel without fraud, either actual or legal." Ibid.

In Buckeye Pipe Line, the plaintiff-landowner challenged the constitutional validity of a statute allowing the condemnation of his property for a right-of-way to build a pipeline. 13 N.J. at 386-87. The landowner sought to recoup his property ten months after the expiration of the statutory period allowing for such a challenge. Id. at 387. During this time, the municipality transferred the right-of-way to a third party, the pipeline contractor, who incurred significant expense to complete the project. Ibid. It was not the payment of the money the court found significant, but rather the transfer of the property and the construction of the pipeline that barred the plaintiff's untimely challenge to the condemnation, particularly one seeking the return of property. Id. at 388.

Here, the Borough does not allege fraud. Rather, defendant contends that plaintiffs "were well aware that the special assessments against the Gotham Plaintiffs had been declared unconstitutional in December of 2001." The Borough argues that plaintiffs' payment of the assessments should create grounds for estoppel because the Borough "planned its yearly financial budgets by relying on [plaintiffs'] payments and reasonably believed that [plaintiffs] would continue to pay the assessments."

The Borough, however, was on notice that the special assessments were unconstitutional since 2001. Consequently, it cannot now argue that it relied on plaintiffs' payment of the assessments declared unconstitutional in Gotham Park. Indeed, after the appeals in Gotham Park were concluded with the Supreme Court's denial of certification in 2003, the Borough could reasonably have been expected to rescind the special assessments, but it did not.

The Borough next argues that the doctrine of laches applies because "it would be fundamentally unfair and contrary to the interests of justice to allow [plaintiffs] to sleep on their [rights] before the commencement of this action."

"'[L]aches is an equitable defense that may be interposed in the absence of the statute of limitations,' and is defined as 'an inexcusable delay in asserting a right.'" Princeton, supra, 169 N.J. at 157 (quoting Northwest Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 140 (2001)). In determining whether laches applies, we must consider: "the length of delay, reasons for delay, and changing conditions of either or both parties during the delay." Id. at 157-58 (quoting Northwest, supra, 167 N.J. at 141). The "'central issue'" in the analysis of whether the laches doctrine bars a lawsuit "'is whether it is inequitable to permit the claim to be enforced.'" Id. at 158 (quoting Lavin v. Board of Educ. of Hackensack, 90 N.J. 145, 152-53 (1982)).

In Holloway v. Pennsauken Twp., 12 N.J. 371 (1953), the Court affirmed the dismissal of the plaintiff's challenge to sewer assessments imposed under N.J.S.A. 40:56-26, on the ground that it was untimely under N.J.S.A. 40:56-54. The plaintiffs did not allege that assessments were unconstitutional. Id. at 375. Although the complaint was dismissed as untimely, the Court recognized that "where fundamental rights of property owners have been violated or the enabling statute or ordinance upon which the assessments were based were unconstitutional," neither the statutory time limitations nor the doctrine of laches will act as a bar to a challenge. Id. at 374.

Here, plaintiffs allege violations of the equal protection clauses of the United States and New Jersey Constitutions. The trial court found that the special assessments "are null, void and of no force and effect" because of the "clear and convincing evidence" of disparate treatment between industrial and non-industrial users which was "unrelated to any legitimate end."

Similarly, defendant's reliance upon State v. Mayor and Common Council of New Jersey, 41 N.J.L. 510 (E. & A. 1879), and State v. City of Elizabeth, 41 N.J.L. 152 (E. & A. 1879), is misplaced. In Mayor, the court considered a challenge to the fairness of the amount, not the constitutionality, of an assessment under the local assessment statutes. 41 N.J.L. at 510-11. In Elizabeth, plaintiff's challenge to the constitutionality of the local charter under which the assessment was made was not time-barred, even though the Court found no constitutional violation. 41 N.J.L. at 152-53.

Here, plaintiffs' constitutional challenge to the enabling ordinances is not barred by the doctrine of laches. Holloway, supra, 12 N.J. at 375.

In its next point, the Borough argues that summary judgment was improvidently granted because there are genuine issues of material fact. The trial court found essentially that the constitutionality of the assessments was decided in Gotham Park and that the Borough was precluded from arguing the constitutionality of the ordinances because the issue was litigated previously in Gotham Park. The Borough maintains that the trial court erred in applying the doctrine of collateral estoppel.

The doctrine of collateral estoppel "bars relitigation of any issue actually determined in a prior action generally between the same parties and their privies involving a different claim or cause of action." N.J. Mfrs. Ins. Co. v. Brower, 161 N.J. Super. 293, 297 (App. Div. 1978).

The Borough attempts to distinguish Gotham Park from this case on the ground that Gotham Park addressed the special assessments whereas in this case, plaintiffs allege that the ordinances are unconstitutional as applied to them. Although plaintiffs' notice of motion seeks a declaration that the ordinances were a nullity, we note that, in their complaint, plaintiffs sought a judgment declaring the assessments null and void. The order granting summary judgment states that the assessments made pursuant to the ordinances are null and void. We find this argument lacking sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E).

The Borough further attempts to distinguish Gotham Park from this case by arguing that plaintiffs' industrial properties are different from those in Gotham Park, which "had a unique set of circumstances associated with it because it was originally built [and entirely owned] by the Wilson family" at the time the road project was addressed. It is inconsequential whether the Gotham Park property was owned by one family. The same constitutional protections apply, irrespective of ownership.

We find insufficient merit in any of the Borough's remaining arguments to warrant further discussion in this opinion. R. 2:11-3(e)(1)(E).

Affirmed.

(continued)

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A-3878-06T1

April 30, 2008