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Robert J. Pacilli Homes, LLC v. Pilesgrove Township Planning Board

A-3371-06T2 and A-4226-06T2 (N.J. Super. App. Div. 2009) (Unpublished)

ZONING — While municipal actions are presumed to be valid, documents drafted by a municipality’s attorney are not municipal actions and do not assume legislative or judicial functions; therefore, an attempt by such documents to impose quorum and meeting requirements on a homeowners association can be found to be unreasonable.

A municipal planning board and a municipal attorney refused to allow construction to begin on two separate residential developments after the developers for each would not accept certain conditions set by the municipality. The municipality had previously adopted an ordinance establishing stormwater management and maintenance systems for new developments and allowed for such responsibilities to be undertaken by the homeowners’ associations of the new developments. During separate negotiations between each developer and the municipal attorney, the developers objected to provisions insisted on by the municipality that the homeowner associations each post a perpetual surety bond or cash deposit with the municipality to cover the cost of any stormwater maintenance or repairs that were not handled by the homeowners’ associations. The municipal attorney required use of his own construction documents that imposed personal liability on the homeowners’ associations to their stormwater management responsibilities. He would not use the documents submitted by the developers.

The municipality refused to allow the development projects to begin without the developers agreeing to the provisions contained in the municipal attorney’s documents. Separate actions were brought against the municipality by the developers for declarations that the required provisions were arbitrary, capricious, and unreasonable. The lower court, relying partly on the report of an appointed special master, determined that the municipality had the right to require a maintenance bond in perpetuity but that the municipality could not require that personal liability be imposed on members of the homeowners’ associations or impose quorum requirements on the homeowners’ associations. Attempts by the municipality to obtain a stay of the lower court’s order, which order also voided the stop-work order issued by the municipality and blocked the requirement that both a maintenance guarantee and a performance guarantee be posted were rejected. On motion by both developers, the lower court awarded both of them attorneys’ fees to be paid by the municipality.

On appeal, the Appellate Division pointed out that municipal actions were presumed to be valid but that documents drafted by municipality’s attorney could not be considered a municipal action, adding that attorneys working for a municipality do not assume judicial or legislative functions. On that basis, the lower court was found not to have inappropriately precluded the municipality from imposing lawful requirements on the homeowners’ association. On the question of liability imposed on individual members of the homeowners’ association, the Court agreed with the lower court that such liability could not be imposed, adding that unsatisfied obligations such as property taxes, and water and sewer charges, are handled in the form of liens and encumbrances but not in the form of personal obligations. The Court also agreed with the lower court that provisions written by the municipality’s attorney involving quorum requirements and the frequency of meetings were unreasonable and an attempt at micro management of the homeowners’ associations’ affairs.
The municipality’s argument, that the lower court incorrectly found that its attorney could not require that an additional easement be obtained that was not required by the planning board, was rejected. It affirmed the lower court’s finding, that documents submitted by the developers regarding multiple easements and declarations of covenant were appropriate even if not in the single-document format preferred by the municipal attorney. The Court rejected the municipality’s argument that the lower court wrongly adopted documents prepared by the appointed special master in place of the working documents drafted by its attorney. The lower court’s findings that the developers had satisfied all of the necessary conditions to begin construction and that the delays resulted from frustrating behavior on the part of the municipality’s attorney were affirmed as was its decision that the municipality did not have the right to require that maintenance and performance guaranties be simultaneously posted.

The Court agreed with the municipality that the lower court incorrectly awarded attorneys’ fees to the developers. Its decision was on the grounds that neither developer issued any notice of intent to seek attorneys’ fees conditioned on the municipality withdrawing its purportedly frivolous claims regarding the disputed. It also found that the municipality, as a public entity, was immune from the statutory provisions allowing awards of attorneys’ fees under the doctrine of sovereign immunity. The lower court’s finding, that the municipality had the right to require a perpetual security bond was affirmed on the grounds that the municipality bore ultimate responsibility for stormwater management under its permit with the state environmental department. Based on its findings, the Court affirmed the lower court’s decision in favor of the developers allowing construction to proceed and the finding that the municipality had the right to require that a perpetual security bond be posted. However, it reversed the lower court’s finding for an award of attorney’s fees in favor of the developers.

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