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Rezem Family Associates, LP v. The Borough of Millstone

423 N.J. Super. 103, 30 A.3d 1061 (App. Div. 2011)

ZONING: CIVIL RIGHTS — To allege a civil rights violation in a land use context, the complainant must submit evidence of governmental action that shocks the conscience because a high standard of proof has been set to prevent zoning appeals from being converted into civil rights claims.

An owner of a sixty-seven tract of land attempted to sell lots to developers. Over the course of several years, several developers entered into contingent contracts to buy lots. All of these contracts were terminated because of zoning problems. For example, one contract was terminated because a buyer, who wished to build a gas station on a lot, was unable to obtain an amendment of the zoning ordinance. Another contract with a residential developer, who wished to build units on 16.8 acres of the land for $8,494,000, was terminated when the developer could not be assured of timely completion of the sewer infrastructure. Another contract under which the entire tract was to be purchased for $17,290,000 was terminated because of a zoning problem.

Ultimately, the owner signed an agreement to sell the entire tract to the county for $6,850,000. The county was guided by an appraisal that placed minimal value on forty-five particular acres of the tract that had been rezoned for open space. The owner claimed that it was compelled to accept a lower offer because of the municipality’s actions that were thwarting development of its land. To that end, the owner sued to recover compensatory damages based on the differences between the value of the prior terminated contracts and the amount it received from the county. It was a civil rights complaint, chiefly arguing that the municipality had violated its substantive due process rights by interfering with its ability to develop and sell its land. There were numerous claims of misconduct by the municipality in relation to the terminated business opportunities, such as knowingly using false historic information about the land tract and vastly overstating the amount of wetlands on the property. The lower court dismissed the complaint for failure to state a cause of action, specifically based upon the owner’s failure to allege that it had exhausted all available administrative and judicial remedies, or had failed to seek a final decision on any application for a zoning change or development of the land before it filed its civil rights lawsuit.

The owner appealed, but the Appellate Division affirmed, holding that to allege civil rights violations in a land use context, (a substantive due process claim), requires evidence of governmental action that shocks the conscience. The reason for this high standard of proof is to prevent zoning appeals from being converted into civil rights claims. The Court noted that the lower court first concluded that if the owner could prove its factual allegations of misconduct at trial, a rational jury could have found that the alleged conduct “shocked the conscience.” However, the Court did not need to address that point as it affirmed the lower court’s basis for dismissal – the failure of the owner to exhaust all other available remedies. It held that an owner’s substantive due process claims in a land use case requires a showing either that the owner had obtained a final decision under available state procedures or that such an attempt would have been futile.

In this case, the owner and its prospective buyers never pursued municipal or court remedies available under law. They did not apply to the municipality’s governing body for a zoning change, or to the planning board or board of adjustment for site plan approval or variances to facilitate development of the property. The alleged substantive due process violations might have been remedied through appropriate applications to challenge any unfavorable local decisions.


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