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Joseph Damato Paperstock Corp. v. City Council of Paterson

A-5944-02T1 (N.J. Super. App. Div. 2004) (Unpublished)

LICENSES; RENEWAL—The renewal of a municipal business license is to be treated as a new license application because the license holder has no proprietary interest in the license once its term expires.

A junkyard appealed a municipality’s denial of its application to renew its business license. The junkyard presented statements from its own witnesses claiming that the business’s operations were conducted in an orderly and sanitary fashion. The municipality’s council considered comments from objectors and concluded that the junkyard operated its facility in a way that grossly violated the municipality’s ordinance. It pointed to instances of garbage piled on sidewalks and of traffic congestion caused by trucks visiting the site.

On appeal, the junkyard argued that the council had no jurisdiction to regulate its recycling activities, that it was denied due process in the licensing proceedings, and that the decision of the council was arbitrary and capricious. Although the junkyard was correct that the council had no jurisdiction to regulate recycling activities, it was not considered a recycling facility because it never received the required approval from the New Jersey Department of Environmental Protection.

In its due process claim, the junkyard contended that it should have been allowed to cross-examine objectors and that a junkyard license is a protected proprietary right. Although an opportunity to cross-examine adverse witnesses is required for due process in certain administrative proceedings, the Appellate Division could find no authority supporting a right to cross-examine either in the initial issuance of a license or for a license renewal. For an initial license issuance, a municipality generally has discretion to grant or deny a license application, subject only to the due process requirement to observe adequate standards. Only where an ordinance provides grounds for revocation of an existing license is there a right to cross examine witnesses to contest the proposed revocation. With that in mind, the Court needed to answer the question of whether due process in municipal license renewal proceedings should resemble initial licensing practices or should resemble license revocation practices.

The Court ruled that where a license expires annually, each new year resembles a new application and the process is like that for a first time applicant. Therefore, the junkyard was not entitled to a trial-type hearing. Also, due process did not require the municipality’s council to grant a trial-type hearing to the junkyard because the junkyard did not have a proprietary interest in the license once its term expired. There was no proprietary right simply because the license had been approved in the past, nor was there an automatic claim or entitlement to operate or continue to operate the junkyard, something which would arise only after the junkyard received its approval.

Finally, the Appellate Division did not find the municipal council’s decision to be arbitrary or capricious, even though the ordinance did not provide the same grounds for a license renewal denial as for a revocation. To sort this out, the Court looked to the intent of the ordinance, finding it was to regulate junkyards so that their operation would not be detrimental to the public’s health and safety. The evidence in this case caused the Court to find that it was reasonable for the municipality’s council to conclude that debris from the junkyard was observed on the street and that traffic blocked the street. The Court, having construed the ordinance as contemplating similar grounds for denial of license issuance as for renewal, suspension, and revocation, ruled that the council’s decision was neither arbitrary nor capricious.

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