K. HOVNANIAN SHORE ACQUISITIONS, L.L.C. v. MARLBORO TOWNSHIP PLANNING BOARD

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

K. HOVNANIAN SHORE

ACQUISITIONS, L.L.C.,

Plaintiff-Respondent/

Cross-Appellant,

v.

MARLBORO TOWNSHIP PLANNING

BOARD,

Defendant-Appellant/

Cross-Respondent.

_______________________________________________

June 9, 2014

Argued February 25, 2014 Decided

Before Judges Messano, Hayden and Rothstadt.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-4230-11.

Michael W. Herbert argued the cause for appellant/cross-respondent (Herbert, Van Ness, Cayci & Goodell, attorneys; Mr. Herbert, of counsel and on the brief).

Peter H. Klouser argued the cause for respondent/cross-appellant (Heilbrunn Pape, L.L.C., attorneys; Mr. Klouser, on the brief).

PER CURIAM

Alfred Bluh and Joseph Batelli owned approximately 75 acres of land in Marlboro Township (Marlboro). They objected to Marlboro's application seeking substantive certification of its affordable housing plan from the Council on Affordable Housing (COAH), in the process filing two complaints in lieu of prerogative writs against the township and defendant Marlboro Township Planning Board (the Board). On August 7, 2006, following COAH-assisted mediation, the parties settled their disputes.

The settlement agreement (the Agreement) permitted Bluh and Batelli, and their successors or assigns, to develop the property to include a maximum of 200 single-family, age-restricted, non-income restricted units, and fifty multi-family, non-age restricted, low- and moderate-income rental units. Among other things, the Agreement required Marlboro to introduce amendments to its zoning ordinances and regulations. The Agreement required Bluh and Batelli to apply for preliminary and final site plan approval, which the Board agreed to review in an "expeditious, 'fast-track' manner." Paragraph 11 of the Agreement, entitled "Changes in Law," provided:

In the event a change in the law, whether actual or perceived, occurs, such a change shall not affect the terms, rights, and obligations set forth in this Agreement, nor shall it be advanced by any party as a basis for relief from that party's obligations under this Agreement, except that nothing in this Agreement shall be deemed to require any party to take any action that is contrary to law.

In accordance with the Agreement, the Board adopted resolution number 970-06 on January 7, 2009. It permitted OHB Homes, Inc. (OHB) to subdivide the property into 176 lots, 168 of which would be developed as age-restricted residential units, one of which would include two buildings consisting of fifty units of low- and moderate-income housing, and the balance of which would be used for community space, open space or storm water management.

In July 2009, the Legislature enacted the Conversion Act, N.J.S.A. 45:22A-46.3 to -46.16 (the Act). Broadly stated, the Act permitted "any age-restricted development . . . to be changed to a converted development" if it met certain conditions, including that it had received preliminary or final approval for construction prior to the effective date of the Act, July 2, 2009, and the developer "agree[d] that [twenty] percent of the units . . . w[ould] be provided as affordable units . . . ." N.J.S.A. 45:22A-46.5(a)(1) and (2). A "converted development" was defined as "a proposed age-restricted development that will be marketed instead with no age restrictions." N.J.S.A. 45:22A-46.4.

The Act requires a developer to submit to the "approving board" an application that complies with N.J.S.A. 45:22A-46.6. N.J.S.A. 45:22A-46.9 provides that

a. Within [thirty] days after the submission of an amended application . . . , the approving board shall advise the applicant in writing whether the amended application is complete, with completeness to be determined based upon whether the applicant has submitted documentation addressing the issues described in [N.J.S.A. 45:22A-46.6]. If no such writing asserting incompleteness for any such reason is provided to the applicant within the [thirty]-day period, the application shall be deemed complete for purposes of review by the approving board.

b. The approving board shall render a decision on an application for a converted development within [sixty] days of a determination of application completeness, unless the time frame is extended by the applicant. If no such decision is rendered by the approving board within the time period, including extensions, the application shall be deemed approved . . . .

"If the approving board determines that the requirements of [the Act] have been satisfied, and the conversion can be granted without substantial detriment to the public good and will not substantially impair the intent and purpose of the zone plan and zoning ordinance, the application for the conversion shall be approved." N.J.S.A. 45:22A-46.6(c).

On August 25, 2009, OHB filed an application with the Board seeking to amend its previously-approved plans by removing any age restriction on the single-family homes in the development. When the Board failed to schedule a public hearing or otherwise take action on the application, OHB filed a complaint in lieu of prerogative writs. However, the action was dismissed as a result of OHB's bankruptcy filing.

Plaintiff, K. Hovnanian Shore Acquisitions, L.L.C., became the contract owner of the property and filed an application pursuant to the Act on July 21, 2011. Plaintiff similarly sought to remove any age restriction on the single-family homes, reduce the amount of developed lots from 168 to 155, thereby creating additional land for recreation and on-site parking, and maintain the number of low- and moderate-income housing units at fifty.

On August 9, 2011, the Board returned plaintiff's application, advising that it lacked jurisdiction to hear the request because of the Agreement. Plaintiff filed a complaint in lieu of prerogative writs alleging that its application complied with the requirements of the Act, and the Board violated the Act by failing to conduct a completeness review within the time prescribed by N.J.S.A. 45:22A-46.9. Plaintiff sought a declaration from the court that its application was complete, and an order scheduling a hearing before the Board.

The Board sought to dismiss plaintiff's complaint, reiterating that it lacked jurisdiction to consider the application because of the Agreement. It further argued that, to the extent the Act permitted plaintiff to modify its contractual agreement with the Board, the Act was an unconstitutional impairment of the Board's contract rights. See U.S. Const. art. I, 10, cl. 1; N.J. Const. art. IV, 7, 3; and see State Farm Mut. Auto. Ins. Co. v. State, 124 N.J. 32, 64 (1991) (discussing what constitutes an "unconstitutional impairment of contracts").

After considering oral argument, Judge Lawrence M. Lawson, A.J.S.C., issued a written opinion. Judge Lawson determined that Paragraph 11 of the Agreement, the changes of law provision, was not a basis for the Board to refuse plaintiff's application and conduct a completeness review. He found more persuasive plaintiff's argument that the section did not apply to subsequently-adopted legislation, since it was unlikely "that a party could knowingly bargain away future unknown rights that may come about by not-yet-conceived legislation." More important for our purposes, Judge Lawson reasoned that the Agreement could "not be used as license to dispense with statutory provisions," and "[t]he Board's responsibility to follow the [Act was] important . . . because it would then put the onus on [plaintiff] to either appeal the Board's denial of conversion or modify its plan."

Judge Lawson declined to reach the Board's constitutional argument, finding that it had failed to notify the Attorney General of the prospective challenge to the Act. See R. 4:28-4 ("If the validity of a . . . statute . . . of this State is questioned in any action to which the State or an agency or officer thereof is not a party, the party raising the question shall give notice of the pendency of the action to the Attorney General.").

Judge Lawson further determined that because the Board refused to consider whether plaintiff's application was complete, it had failed to comply with N.J.S.A. 45:22A-46.9(a), which required the Board to notify plaintiff as to completeness within thirty days of submission. As a result, the judge determined the application was deemed to be complete. However, he declined to accept plaintiff's corollary argument, i.e., that because the Board failed to render a decision within sixty days thereafter, the application was deemed approved. See N.J.S.A. 45:22A-46.9(b). Judge Lawson noted that plaintiff filed its suit after fifteen days of the sixty-day period had elapsed, "effectively interrupt[ing] the tolling of that time." The judge reasoned that the Board could either render a decision within forty-five days, or "let the remaining time lapse, triggering the automatic approval of [N.J.S.A. 45:22A-46.9(b)]." The judge entered a conforming order on June 7, 2012, that remanded the matter to the Board and limited its consideration of plaintiff's application to "the criteria of N.J.S.A. 45:22A-46.6(c)." This appeal followed.

The Board reiterates the arguments it made in the Law Division, claiming that the Agreement divested it of jurisdiction to consider plaintiff's application under the Act, and, if applied here, the Act amounts to an unconstitutional infringement of the Board's contractual rights. Plaintiff argues that the Board's decision to "refuse jurisdiction" was arbitrary, capricious and unreasonable, and the Act is constitutional. Plaintiff also cross-appeals from that portion of the judge's order that effectively denied the administrative approvalof its application based upon the Board's failure to "rendera decision"in a timely fashion. N.J.S.A. 45:22A-46.9(b).

Events that transpired after the appeal and cross-appeal were filed have, to some degree, overtaken the positions espoused by the parties. First, we adjourned the scheduled argument of the Board's appeal since it never served notice upon the Attorney General. We required that it serve the Attorney General and thereafter permitted that office to consider whether it would intervene. The Attorney General subsequently declined to intervene.

Meanwhile, because no stay of Judge Lawson's order was issued, the Board complied with his order and heard and denied plaintiff's application. We were advised at oral argument that the Board based its decision on the "negative criteria" contained in N.J.S.A. 45:22A-46.6(c). Plaintiff has since filed a complaint in lieu of prerogative writs challenging the Board's actions which was, at the time of argument, pending in the Law Division.

We have considered the various arguments raised in light of the record and applicable legal standards. We affirm on the appeal and the cross-appeal, substantially for the reasons expressed in Judge Lawson's thorough written opinion. We add only the following.

The Board cites no authority for the proposition that it lacked jurisdiction to consider plaintiff's application. By its terms, the Act requires that a developer "shall file an application with the approving board seeking an amendment to the previously granted approvals requesting the authority to develop the land as a converted development." N.J.S.A. 45:22A-46.6(a). As Judge Lawson noted, the Act requires the Board then to take action on the threshold determination of whether the application is complete. N.J.S.A. 45:22A-46.9(a). The Act sets forth that "completeness [shall] be determined based upon whether the applicant has submitted documentation addressing the issues described in [N.J.S.A. 45:22A-46.6]." Ibid. Whether the application is approved or not depends upon the Board's review and determination of whether "the conversion can be granted without substantial detriment to the public good and will not substantially impair the intent and purpose of the zone plan and zoning ordinance . . . ." N.J.S.A. 45:22A-46.6(c).

The Act does not expressly or impliedly exempt previously-approved developments -- even if part of a municipality's COAH-approved fair share plan through a negotiated agreement, court-ordered builders' remedy or otherwise -- from eligibility for conversion. Indeed, the Act specifically recognizes the relationship between a municipality's fair share obligations and a developer's conversion application by conditioning the application upon the developer's commitment to set aside twenty percent of the units for low- and moderate-income households, and by "automatically" crediting the municipality's fair share plan with any such housing units created. N.J.S.A. 45:22A-46.5.

We acknowledge well-established precedent that a "settlement agreement between parties to a lawsuit is a contract." Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) (citing Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div.), certif. denied, 35 N.J. 61 (1983)). The Board might rely upon the existence of the Agreement, including the debated "Changes in Law" provision, in deciding the merits of the application.1 But, the Agreement did not divest the Board of its statutory obligations under the Act.

The Board's reliance upon the unpublished opinion of the Law Division in Kaplan at Helmetta, LLC v. Borough of Helmetta, Docket No. L-2068-10 (Law Div. 2010), is misplaced. As Judge Lawson noted, in that case, the approving board accepted the application for conversion, held hearings and denied the request. Here, the Board simply refused to accept plaintiff's application.

The post-filing events that have occurred further convince us that Judge Lawson properly decided the jurisdiction issue. Plaintiff's application has since apparently been considered and denied by the Board. Whether that denial was proper is a question for the Law Division in the first instance, a process that reflects the course of proceedings envisioned by the Legislature when it passed the Act.

We also refuse to consider the Board's constitutional argument. Courts "strive to avoid reaching constitutional questions unless required to do so." Committee to Recall Robert Menendez v. Wells, 204 N.J. 79, 95 (2010) (citation omitted); see also Randolph Town Ctr., L.P. v. Cnty. of Morris, 186 N.J. 78, 80 (2006) ("Courts should not reach a constitutional question unless its resolution is imperative to the disposition of litigation."). We fail to see why requiring the Board to process plaintiff's application necessarily infringes on its contractual rights, since the substantive objection of the Board, i.e., compelling a modification of the Agreement, has not yet been addressed in the Law Division. We therefore affirm Judge Lawson's order.

Turning to the cross-appeal, plaintiff argues that, in light of "the Board's flagrant disregard for its statutory responsibilities" under the Act, failing to grant automatic approval would "render the plain language of [N.J.S.A. 45:22A-46.9(b)] meaningless" and "embolden . . . other Boards . . . [to] disregard statutory obligations because ultimately courts will only impose a do-over." We disagree and affirm for the reasons expressed by Judge Lawson. To the extent we have not otherwise addressed plaintiff's arguments in this regard, they lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

1 We hasten to add that we express no opinion on the merits of such a position.