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Klimar Realty, Inc. v. Township of Fairfield

A-0753-04T5 (N.J. Super. App. Div. 2005) (Unpublished)

DEVELOPERS; BONDS—A developer who waits six years after it sells its land to recover a surety bond deposit is barred from recovery because the statute of limitations period has run.

A developer entered into an agreement with a municipality to build a lake on property owned by the developer. The agreement provided that after the lake was fully constructed, the developer was to convey the property to the municipality. It also required the developer to post a $200,000 surety bond to guarantee performance. Instead of posting the bond, the developer posted $40,000 in cash. The developer began construction on the lake but failed to complete it. The municipality’s engineer held the developer in violation of the agreement and ordered all construction to stop. The Unites States Army Corps of Engineers then issued a formal Cease and Desist Order due to the developer’s unauthorized filling of wetlands. In addition, the Environmental Protection Agency cited the developer for bulldozing an adjoining property without proper approvals as well as for illegally dumping construction debris in the lake. The municipality then filed an action against the developer for breach of contact. The developer counterclaimed seeking damages from the municipality. The matter was settled and the parties entered into a stipulation agreement. The agreement required the developer to complete the project and to deposit an additional $25,000 with the municipality increasing its surety bond deposit to $65,000. In addition, the agreement required the developer to establish a $100,000 fund which was to be used by the municipality for extraordinary recreational items. After the agreement was executed, the mayor and municipality council adopted a resolution declaring the agreement null and void because the attorney that entered into the agreement on behalf of the municipality was not authorized to do so. Shortly thereafter, the developer filed a petition in bankruptcy. The developer did not list the funds posted with the municipality as an asset. The bankruptcy court then entered an order authorizing the trustee to sell the lake property at public auction. More than six years later, the developer filed an action to recover the funds deposited pursuant to the original agreement and the stipulation agreement. The municipality moved for summary judgment arguing that the statute of limitations had run. The lower court granted summary judgment ruling that there was no evidence indicating that the deposit monies were intended to be returned to the developer. It further held that the developer’s cause of action accrued on the date the deed to the property was transferred to the new owner, which was more than six years before the filing of the complaint. As a result, the court ruled that the action was barred by the statute of limitations.

The Appellate Division ruled that summary judgment was properly granted in favor of the municipality and affirmed the lower court’s ruling for the same reasons expressed by the lower court.

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