IN THE MATTER OF ISLAND BAY, LLC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3163-05T33163-05T3

IN THE MATTER OF ISLAND

BAY, LLC

____________________________

 

Argued May 31, 2006 - Decided June 21, 2006

Before Judges Skillman, Axelrad and Sabatino.

On appeal from New Jersey Department of Environmental Protection.

Richard M. Hluchan argued the cause for appellant Island Bay, LLC (Ballard Spahr Andrews & Ingersoll, attorneys; Mr. Hluchan, of counsel and on the brief; Robert S. Baranowski, Jr. and Emily Daher, on the brief).

Brian Weeks, Deputy Attorney General, argued the cause for respondent New Jersey Department of Environmental Protection (Zulima V. Farber, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Timothy Mulvaney, Deputy Attorney General, on the brief).

PER CURIAM

Appellant Island Bay owns eleven residential lots on Seabreeze Lane, which are located in the Avalon Manor section of Middle Township in Cape May County. These lots are the remaining undeveloped portion of a larger subdivision known as Sterback Harbor.

The DEP has been involved with the subdivision for the last three decades. In 1976, the DEP issued a letter acknowledging that the project "was in the state of 'on site construction including site preparation' on the effective date of the [Coastal Area Facility Review Act (CAFRA)]." Therefore, the DEP concluded that the project was "exempt from the provisions of the Act, and a CAFRA permit will not be required."

On October 22, 1981, the Middle Township Planning Board approved an updated preliminary plat of the Avalon Manor area, and on December 17, 1986, the Planning Board granted final major subdivision approval "for single family homes contingent upon public water and sewer being available." The Planning Board approved the final plat on February 25, 1988, and it was filed on March 14, 1988.

In early 1988, the Cape May County Municipal Utilities Authority (CMCMUA) notified the DEP that it planned to include the Avalon Manor subdivision in its sewer service area. On March 25, 1988, the DEP sent a letter which stated: "[P]lease be advised that the Division [of Coastal Resources] has no objection to the inclusion of the Avalon Manor parcel in the forthcoming Middle Township Sewerage District's CAFRA permit application."

On July 27, 1989, the DEP issued CAFRA permit 88-1016-5, which authorized construction of a sewer line at Avalon Manor, subject to certain conditions. Condition #2 stated that "[s]ewer line hook-ups shall be prohibited within the wetlands and the 50 feet inland wetlands buffer, designated as field delineated and N.J.D.E.P. approved on the Wetland Plottings map of the Middle Township Sewer District . . . prepared by Kona Thomas and Associates." The summary report that accompanied the CAFRA permit stated that "the proposed sewer line will also be within the center of an 'L' shaped undeveloped portion of Avalon Manor[,]" which is Seabreeze Lane. The sewer system was ultimately constructed, and all existing and subsequently constructed homes within Avalon Manor have been tied into the system.

On December 3, 1991, Island Bay purchased the remaining undeveloped lots in the subdivision, which are located on Seabreeze Lane.

In 1988 and again in 1993 and 1998, the DEP granted extensions of the CAFRA exemption for the subdivision that it had recognized in 1976. The letter granting the five-year extension in 1998 stated:

Provided that the unfinished portion of the project is completed in compliance with the exempted plans and there is no lapse in construction for a cumulative period of one year or longer, CAFRA Exemption ER #85 is extended for an additional five (5) year period.

As you are aware, should any of the exempted or non-exempted areas as outlined in the Department's August 4, 1988 letter fall within the jurisdiction of the Wetlands Act, the Waterfront Development statute or the Freshwater Wetlands Protection Act, permits would need to be obtained prior to the start of construction.

The two prior extensions of the CAFRA exemption contained similar language.

The 1998 letter also made the extension contingent upon Island Bay granting the DEP's Land Use Regulation Program "a 10 foot wide perpendicular access way from Seabreeze Lane to Ingrams Thorofare." To satisfy this condition, an easement agreement between Island Bay and the DEP was executed on January 26, 1999 and filed on February 4, 1999.

Between 1998 and 2002, Island Bay constructed twenty-one homes in the subdivision, and as of 2002, it was in the process of constructing several other homes. However, there were eleven remaining lots on which there had been no construction because Middle Township questioned whether such construction would be exempt from CAFRA and whether the homes could be tied into the sewer system.

To resolve these questions, on June 18, 2002, Island Bay's representatives met with Kevin Broderick, the manager of the DEP Bureau of Coastal Regulation. On July 25, 2002, Island Bay's counsel sent a lengthy letter to Broderick which summarized the discussions at the meeting and set forth Island Bay's position that the CAFRA exemption was still valid as applied to the eleven lots and that Island Bay was entitled to connect the houses it planned to construct on the lots to the CMCMUA sewer system. Because this appeal revolves around Broderick's response to the July 25th letter, we consider it appropriate to quote the letter at length:

As you know, this firm is counsel to Island Bay, LLC, the owner of the above-referenced lots in Avalon Manor, Middle Township. Rick Valente, Jordan B. DeFlora, Esq., and I met with you in Trenton on June 18, 2002 in order to review the status of these lots. Specifically, we discussed the continuing viability of the CAFRA exemption for these lots, as well as tying proposed homes on these lots into the existing sewer system. Following is our analysis, as well as the backup documentation you requested. For the reasons which follow, the lots continue to be exempt from CAFRA, and should be permitted to tie into the sewer system. We request your written confirmation in order to facilitate obtaining building permits from Middle Township.

. . . .

In sum, the CAFRA exemption continues to be valid for the Island Bay lots, pursuant to N.J.A.C. 7:7-2.1(c). Site plan approval for this project was issued long before July 19, 1994 (as required by that regulation), construction commenced prior to July 19, 1997, and construction continues to completion without significant lapses.

As such, we request that you confirm in writing that the CAFRA exemption remains valid so that we may pursue permits from Middle Township.

As previously noted, on July 27, 1989, DEP issued a CAFRA permit for the Avalon Manor Sewer Collection System (Exhibit E). It should be noted that the Dixon tract was intended to be served by the Avalon Manor Sewer Collection System. This was confirmed in a September 11, 1987 letter from the Cape May County Municipal Utilities Authority, "Re: Sewerability of Block 117.04, Lots 1.04-1.51, Avalon Manor, Middle Township," which letter confirmed that "the above-referenced area of Avalon Manor is included in the 201 facilities plan for the 7 mile beach/middle region as a sewerable area, as shown on the enclosed copy of the Avalon Manor portion of the 7 mile beach/middle region Appendix C Sewerability Map (June 1981)." (Exhibit J). As a result, "development on the upland portion of this subdivision could be connected to the regional wastewater treatment system . . . conditional upon written approval by the NJDEP Division of Water Resources Technical Services Section, and provided there is available capacity at the treatment plant to service such development at the time of application for an NJDEP sewer extension permit." See Exhibit J. Moreover, on February 8, 1988, Charles Kona, P.E., engineer for the Township, indicated in a letter to NJDEP, Division of Coastal Resources that "the [Sewer] District has no objections to including the 'Dixon parcel' within its service area as long as your department has no objections." (Exhibit K). By letter of March 25, 1988 from Steven E. Epstein, NJDEP, Division of Coastal Resources, Mr. Epstein indicated that "please be advised that the Division has no objection to the inclusion of the Avalon Manor parcel in the forthcoming Middle Township Sewerage District's CAFRA permit application." (Exhibit L).

The Summary Report which is part of the CAFRA permit for the Avalon Manor Collection System (July 1989) (Exhibit E) confirms that the Dixon tract was to be provided with sewer service. At page 2, the Summary Report indicates that "in addition, the proposed sewer line will also be within the center of an 'L' shaped undeveloped portion of Avalon Manor which is southwest of Sterback Harbor." This street is Seabreeze Lane.

In order to avoid secondary impacts unacceptable to DEP, the CAFRA permit for the Avalon Manor Sewer Collection System was conditioned upon prohibiting sewer hookups within the following special areas:

1. The wetland designated as field delineated and NJDEP approved on the Wetlands Plottings map of Middle Township Sewer District No. 3, dated April 4, 1989 last revised November 25, 1985 and prepared by Kona Thomas & Associates;

2. A 50 foot buffer inland from the above-mapped wetlands;

3. Any new development that is an area that falls under island corridor policy and intends to tie into the sewer line but does not submit plans that are reviewed and approved by this Bureau. (Summary Report, Page 5.)

The Kona Wetlands Plottings map (copy enclosed for your information) depicts the NJDEP mapped coastal wetlands line taken from adopted coastal wetland maps. It also depicts the freshwater wetlands line (i.e. unmapped coastal wetlands and freshwater wetlands) and a 50 foot buffer therefrom. In the area of Seabreeze Lane, it appears that the freshwater wetlands line as well as the 50-foot buffer encompass significant areas of lots 1.05 through 1.27 where homes have been constructed over the past ten years. We searched in the Middle Township Sewer Department and Construction Office for copies of all permits issued in connection with the construction of those homes. . . . Although municipal sewer connection permits had been issued in all cases, there was no evidence that DEP had ever approved tie in of any of these homes to the sewer system. At our meeting on June 18th, we specifically requested that you search DEP's files, and provide us with copies of any DEP permits issued for sewer tie in of these homes. Since we have been provided with no permits from DEP, we assume that none were issued.

It seems apparent that DEP determined not to review the homes constructed on lots 1.04 through 1.27 because no such review was necessary. This is so for two reasons. First, since construction of these homes has consistently been deemed to be exempt from CAFRA, they must also reasonably be exempt from the CAFRA condition applied to the permit for the sewer collection system. Second, DEP is only authorized to regulate freshwater wetlands (including unmapped coastal wetlands, see N.J.A.C. 7:7A-1.4, definition of "freshwater wetlands") and their adjacent transition areas pursuant to the terms of the Freshwater Wetlands Protection Act. See N.J.S.A. 13:9B-30, which states that "It is the intent of the Legislature that the program established by this act for the regulation of freshwater wetlands constitutes the only program for this regulation in the State. . . .") In NJ Chapter of NAIOP v. DEP, 241 N.J. Super. 145 (App. Div. 1990), certif. denied, 122 N.J. 374 (1991), the court made clear that the Freshwater Wetlands Protection Act is the exclusive means under which DEP may regulate freshwater wetlands and transition areas; thus, DEP has no independent authority under CAFRA to regulate such areas. See also Matter of Waterfront Development Permit, 257 N.J. Super. 524 (App. Div. 1992). Under the Freshwater Wetlands Protection Act, because preliminary subdivision approval for the Dixon tract was granted pursuant to the Municipal Land Use law prior to July 1, 1989, those lots are completely exempt from transition area regulation. N.J.S.A. 13:9B-4(d); Appeal of Adoption of N.J.A.C. 7:7A-1.4, 118 N.J. 552 (1990). Accordingly, the homes located in the area from lot 1.05 through 1.27 were properly constructed, even though they appear to be located within the 50 foot buffer as set forth on the Kona map.

Similarly, the Island Bay lots at issue here (lots 1.29 through 1.39) must also be allowed to tie into the sewer collection system. It appears that construction on some of these lots will not occur within the 50 foot buffer as depicted on the Kona plan. In any event, DEP's consistent practice has been to allow build out of this CAFRA exempt project, and to attempt at this late date to prohibit construction on the remaining Island Bay lots, where 22 plus homes have already been constructed over the past ten years, would plainly be unfair, inequitable, discriminatory and in violation of fundamental principles of fairness.

Accordingly, we ask you to confirm that lots 1.29 through 1.39 should be permitted to tie into the sewer collection system.

As pointed out above, Middle Township has already revoked two construction permits previously issued to Island Bay because the Township believed that issues existed as to the CAFRA exemption and sewer tie in. I trust that the above history indicates that no such issues remain. It is important to my client that we obtain expeditious written guidance from DEP to this effect, so that we may proceed to obtain local permits from Middle Township. We need DEP's cooperation in this regard in order to complete this project on a timely basis without substantial lapses.

Nearly a year after Island Bay sent this letter, Broderick sent a response, dated July 9, 2003, which stated that Island Bay's construction of single family houses in Avalon Manor continues to be exempt from CAFRA for an additional five years through December 28, 2008 and that houses could be connected to the sewer system. However, the DEP imposed two significant conditions upon its approval of Island Bay's application. First, it stated that Island Bay could construct no more than seven houses on the lots, rather than the eleven houses Island Bay had planned to construct. Second, it required Island Bay to execute a conservation easement in favor of the DEP for all wetlands on the lots.

Because of its central importance to this appeal, we quote the Broderick letter in full:

On behalf of your client, Island Bay LLC, you applied for an extension of CAFRA Exemption ER #85. In addition, you sought approval for sewer tie-ins for eleven (11) new single family homes which is required pursuant to condition 3 of the CAFRA permit issued to Middle Township Municipal Utilities Authority for the Avalon Manor sewer collection system (CAFRA permit No. 88-1016-5, issued July 27, 1989). Based upon our review of the information submitted, please be advised that we have determined both requests as follows:

1. The construction of single family homes on the land comprising Tax Block 117.04, lots 1.29 through 1.39 (the "Property") continues to be exempt from CAFRA. This exemption shall be valid for an additional period of five (5) years expiring on December 28, 2008.

2. No more than seven (7) single family homes may be constructed on Block 117.04, lots 1.29 through 1.39 and/or tied into the sewer system. Subject to the area to be protected by the conservation restriction, the homes may be located in the discretion of your client.

3. There shall be no construction, structures or improvements within the High Tide Line established by the US Army Corps of Engineers as verified by Stephen C. Martinelli, LS, LLC, as set forth on the plan entitled Jurisdictional Determination, dated October 25, 2000.

4. Prior to the start of any site disturbance, pre-construction earth movement or any construction of any of the seven dwellings through any portion of the Property, Island Bay LLC, its successors and/or assigns shall record a Conservation Restriction in favor of the Department for all of the wetlands throughout the Property in a form acceptable to the State. The Conservation Restriction shall include a Plan that depicts the protected area and a metes and bounds description.

5. No further approvals from NJDEP shall be necessary or required for said construction.

Island Bay agreed to the conditions set forth in Broderick's letter.

In November and December 2004, Island Bay obtained the required municipal approvals for construction of the seven houses authorized by Broderick's July 9, 2003 letter, and subsequently, it obtained construction permits for four of the seven houses.

On July 8, 2005, Island Bay submitted a copy of the proposed conservation easement for all wetlands on the eleven remaining lots, which was one of the conditions of DEP's approval of construction of seven houses on these lots, and on December 30, 2005, Island Bay recorded the document reflecting the easement.

On June 6, 2005, the owners of several of the existing houses in the Avalon Manor development brought an action in lieu of prerogative writs in the Law Division against Island Bay, the DEP and various land use agencies and officials of Middle Township, challenging the validity of both the DEP's and the municipality's approval of Island Bay's development project. The Law Division subsequently transferred the action to this court as an appeal from a final decision of a state administrative agency.

On February 21, 2006, we granted Island Bay's motion, in which the DEP joined, to dismiss the neighboring property owners' appeal on the ground that it constituted an untimely appeal of the DEP's July 9, 2003 final decision approving Island Bay's development project. On March 27, 2006, we granted the plaintiff property owners' motion for reconsideration and transferred the part of the case challenging the municipal approvals given to Island Bay back to the Law Division. Our order also reaffirmed the dismissal of the challenge to the July 9, 2003 letter as untimely.

During the pendency of the action in lieu of prerogative writs, the plaintiff property owners submitted various factual materials and legal arguments to the DEP questioning the appropriateness of its July 9, 2003 decision approving the construction of seven houses on the remaining eleven lots. Around the same time, following this court's denial of plaintiffs' motion for an injunction prohibiting construction of the houses, Island Bay began site preparation work.

On February 2, 2006, Broderick sent Island Bay's counsel a letter summarily rescinding the DEP's prior approval of the sewer connections for the seven houses that Island Bay had been authorized to construct on the remaining eleven lots. The pertinent part of this letter stated:

[T]he Department (DEP) is presently a party to litigation currently before the Appellate Division of Superior Court. One of the primary issues before the court is whether the DEP has authorized sewer connections from the existing sewer line in Sea Breeze Lane to structures that are located within 50 foot of the adjacent wetlands. The requirement for a 50 foot buffer was established by Condition #2 of CAFRA Permit # 88-1016-5, originally issued by DEP on July 27, 1989. . . .

. . . [T]he Land Use Regulation Program in evaluating the requirements of Condition #2, finds that it erred in authorizing sewer connections to seven lots adjacent to Sea Breeze Lane and Ingrams Thorofare.

Based on the above, any houses constructed on Sea Breeze Lane while they would continue to be exempt from CAFRA, would not be exempt from permit Condition #2 of CAFRA permit #88-1016-5, requiring a 50 foot wetlands buffer be incorporated for developments tying into the sewer line. Accordingly, while construction of the houses may proceed, construction may only occur if no tie ins to the sewer line are contemplated. Options available to handle site generated sewerage include composting toilets and holding tanks.

Please note this letter is intended to supersede all letters previously issued by the Program concerning the availability of sewer tie ins for houses proposed on Sea Breeze Lane and adjacent to Ingrams Thorofare.

On February 6, 2006, Middle Township issued Stop Construction orders to Island Bay based on the DEP's rescission of the approval for the sewer connections.

On February 24, 2006, Island Bay filed a notice of appeal to this court from the DEP's rescission of its July 9, 2003 sewer connection approval, and a motion for acceleration of the appeal, which we granted.

The DEP filed a motion to dismiss Island Bay's appeal on the ground that the February 2, 2006 letter did not constitute final agency action. We reserved decision on this motion pending consideration of the merits of the appeal. We now deny the motion and reverse the DEP's February 2, 2006 decision rescinding its authorization to Island Bay to connect the seven houses Island Bay plans to construct in Avalon Manor to the existing CMCMUA sewer line.

I

Initially, we address the DEP's motion to dismiss the appeal on the ground that Broderick's February 2, 2006 letter was not a final agency action. First, we note that Broderick's July 9, 2003 letter was unquestionably a final agency decision. It extended the period of Island Bay's CAFRA exemption for five more years, and it authorized Island Bay to construct seven additional houses that could connect to the existing CMCMUA sewer lines. Furthermore, the letter ended by stating: "No further approvals from the NJDEP shall be necessary or required for said construction." Broderick's February 2, 2006 letter modified the July 9, 2003 approval by eliminating the authorization to connect the seven houses to the CMCMUA sewer system. Moreover, the letter states that it "supersede[s] all letters previously issued by the Program concerning the availability of sewer tie ins for houses proposed on Sea Breeze Lane and adjacent to Ingram's Thorofare." The letter does not suggest that Broderick's determination is subject to further review at a higher level within the DEP. Therefore, like an order modifying a final judgment in a civil action, Broderick's February 2, 2006, letter constituted a final agency decision modifying the July 9, 2003 final agency decision. Furthermore, even if we viewed the February 2, 2006 letter as interlocutory in nature, we would grant leave to appeal "in the interest of justice." R. 2:2-4.

II

Where a government agency issues a permit or other approval to a property owner to construct a building or other facility, and the property owner substantially relies upon the approval, the property owner may acquire vested rights that the agency may not take away. See Tremarco Corp. v. Garzio, 32 N.J. 448, 456-57 (1960). The determination of whether an approval by a government agency may be reconsidered and rescinded depends on the circumstances of the particular case. See Ruvoldt v. Nolan, 63 N.J. 171, 183-85 (1973). Any reconsideration of such an approval must be undertaken "within a reasonable time[.]" Id. at 183. What a reasonable time is depends on "other attendant factors, such as the particular occasion for administrative reexamination of the matter, the fraud or illegality in the original action and any contribution thereto or participation therein by the beneficiary of the original action, as well as the extent of any reliance or justified change of position by the parties affected by the action." Id. at 183-84.

Judged by these criteria, the DEP's rescission of the approval it gave to Island Bay in 2003 to connect the last seven houses Island Bay proposed to build in the Avalon Manor subdivision to the CMCMUA sewer system was arbitrary and capricious. The delay between the DEP's approval of the sewer connection in July 2003 and its rescission more than two-and-a-half years later in February 2006 was significant. Moreover, Island Bay substantially relied upon that approval during the intervening period. Island Bay did not challenge the conditions that the DEP attached to the approval -- the reduction of the number of houses it could construct from eleven to seven and the required dedication of all wetlands to the DEP -- which undoubtedly reduced the potential profit from this development. Instead, Island Bay expended a substantial amount of money, which it estimated to total $320,000, to design the homes, obtain the municipal approvals needed to proceed with construction and undertake site preparation work.

The DEP does not allege that its 2003 approval of the sewer connections was based on any fraud, illegality or other impropriety on the part of Island Bay. To the contrary, the July 25, 2002 letter from Island Bay's counsel to the DEP made complete disclosure of all relevant facts, including in particular that a substantial number of houses previously constructed in the Avalon Manor development had been allowed to connect to the CMCMUA sewer system even though those connections violated the conditions contained in CAFRA permit 88-1016-5 and had not been approved by the DEP:

In the area of Seabreeze Lane, it appears that the freshwater wetlands line as well as the 50-foot buffer encompass significant areas of lots 1.05 through 1.27 where homes have been constructed over the past ten years. . . . Although municipal sewer connection permits had been issued in all cases, there was no evidence that DEP had ever approved tie in of any of these homes to the sewer system. At our meeting on June 18th, we specifically requested that you search DEP's files, and provide us with copies of any DEP permits issued for sewer tie in of these homes. Since we have been provided with no permits from DEP, we assume that none were issued.

The July 25, 2002 letter hypothesized that the DEP's approval had not been required for the sewer connections to the houses previously constructed in Avalon Manor because such approval would have been beyond the DEP's statutory authority for two reasons:

First, since construction of these homes has consistently been deemed to be exempt from CAFRA, they must also reasonably be exempt from the CAFRA condition applied to the permit for the sewer collection system. Second, DEP is only authorized to regulate freshwater wetlands (including unmapped coastal wetlands, see N.J.A.C. 7:7A-1.4, definition of "freshwater wetlands") and their adjacent transition areas pursuant to the terms of the Freshwater Wetlands Protection Act. . . . Under the Freshwater Wetlands Protection Act, because preliminary subdivision approval for the Dixon tract was granted pursuant to the Municipal Land Use Law prior to July 1, 1989, those lots are completely exempt from transition area regulation.

Based on these two statutory arguments, the letter concluded that the homes had been properly allowed to be constructed and connected to the CMCMUA sewer system even though they were "located within the 50 foot buffer as set forth in the [DEP approved wetlands map]."

In addition to Island Bay's statutory arguments, the July 25, 2002 letter also contended that because the DEP had allowed all the other houses constructed in the Avalon Manor subdivision to be connected to the CMCMUA sewer system, it would be unfair and inequitable to deny that same right to Island Bay with respect to the houses it planned to construct on the remaining eleven lots:

DEP's consistent practice has been to allow build out of this CAFRA exempt project, and to attempt at this late date to prohibit construction on the remaining Island Bay lots, where 22 plus homes have already been constructed over the past ten years, would plainly be unfair, inequitable, discriminatory and in violation of fundamental principles of fairness.

Accordingly, we ask you to confirm that lots 1.29 through 1.39 should be permitted to tie into the sewer collection system.

Broderick's July 9, 2003 letter does not indicate which, if any, of the three arguments set forth in Island Bay's July 25, 2002 letter was found sufficiently compelling to warrant approval of Island Bay's construction of seven additional homes on the remaining eleven lots and connection of those houses to the CMCMUA sewer system. Whatever Broderick's reasons may have been, however, he gave unequivocal approval for such development.

We reject the DEP's argument that Broderick's statement that "[n]o more than seven (7) single family homes may be constructed on Block 117.04, lots 1.29 through 1.39 and/or tied into the sewer system" was ambiguous because of his use of the term "and/or." The houses obviously could not be tied into the sewer system without being constructed, and the July 25, 2002 letter from Island Bay to Broderick made it clear that the houses could not be constructed without being tied into the sewer system.

We also reject the DEP's argument that Island Bay's statement in the July 25, 2002 letter that "[i]t appears that construction on some of [the remaining eleven] lots [in the Avalon Manor subdivision] will not occur within the 50 foot buffer as depicted on the [wetlands map][,]" suggested that Island Bay could construct houses on all the remaining lots without any incursion into the 50 foot wetlands buffer zone, and therefore, Broderick's July 9, 2003 letter should not be read to approve sewer connections of houses constructed within that zone. The July 25, 2002 letter on behalf of Island Bay clearly indicated that significant areas within which houses had been constructed during the preceding ten years had been within wetlands or the 50 foot buffer zone and that this also would be true of some of the remaining houses Island Bay planned to construct. Indeed, if Island Bay did not plan to construct any houses within the 50 foot buffer zone, there would have been no need for the presentation of the three arguments set forth in the July 25, 2002 letter as to why the conditions contained in CAFRA permit 88-1016-5 could not or should not be applied to that construction. Moreover, Broderick's July 9, 2003 letter did not place any restriction on the location of the seven houses he authorized Island Bay to construct on the eleven remaining lots. To the contrary, the letter expressly stated: "Subject to the area to be protected by the conservation restriction, the homes may be located in the discretion of your client."

Therefore, we conclude that the part of Broderick's February 2, 2006 letter that rescinded the authorization that he gave to Island Bay in July 2003 to connect to the CMCMUA sewer system was arbitrary and capricious.

We have no need in deciding this appeal to consider the validity of the statutory arguments set forth in the July 25, 2002 letter. Suffice it to say that those arguments were not frivolous and that, upon receiving Broderick's July 9, 2003 letter, Island Bay could reasonably have concluded that the DEP had accepted those arguments or Island Bay's alternative equitable argument or had decided that the arguments were sufficiently meritorious to warrant administrative action approving Island Bay development plans, conditioned upon a reduction in the number of houses from eleven to seven, rather than litigating the issues that Island Bay's submission raised.

III

Because we conclude that the DEP's February 2, 2006 rescission of its July 9, 2003 final decision was arbitrary and capricious and must be reversed, we have no need to address Island Bay's alternative arguments that the February 2, 2006 letter constituted a revocation of a license within the intent of N.J.S.A. 52:14B-11, and consequently, Island Bay was entitled to a hearing before such action could be taken, and that the DEP lacked jurisdiction over the matter as of February 2, 2006 because of the pendency of the property owners' appeal from the DEP's July 9, 2003 approval of the sewer tie-in.

Accordingly, the February 2, 2006 decision, insofar as it relates to the approval of the sewer connections to the CMCMUA system, is reversed, and the July 9, 2003 approval of those connections is reinstated.

 

In 1993, the Legislature enacted amendments to CAFRA that repealed the exemption for projects commenced prior to the September 18, 1973 effective date of this legislation. L. 1993, c. 190, 5. However, the Legislature provided an exemption for projects that received preliminary subdivision approval prior to the effective date of the CAFRA amendments, which was July 19, 1994. N.J.S.A. 13:19-5.2(a); N.J.A.C. 7:7-2.1(c). Because the Middle Township Planning Board granted preliminary subdivision approval for Avalon Manor in 1981, it remained exempt from CAFRA.

Island Bay has completed construction of six more homes since 2002, and two additional homes are presently being constructed by other property owners.

Dixon was Island Bay's predecessor in title.

The letter also concluded that a CAFRA permit would be required for a retaining wall that Island Bay proposed to construct on the site. Island Bay does not dispute this conclusion. Island Bay has not yet decided whether to include a retaining wall in the development project.

Island Bay also sent a letter to the Commissioner of the DEP asking her to reconsider Broderick's rescission of the approval of the sewer connections. Insofar as the record before us indicates, the Commissioner never responded to this letter.

(continued)

(continued)

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A-3163-05T3

June 21, 2006