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South Salem Street Associates, LLC v. The Planning Board of the Township of Montville

A-5401-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

ZONING; CIVIL RIGHTS CLAIMS — Where there is a factual question as to whether a municipality, by the way in which it handles a land use application, has deprived a property owner of the owner’s interest in the property or whether a municipal official, using rezoning as a threat takes personal advantage of a resulting uncertainty, the applicant may have a federal civil rights claim against the municipality and the municipal official.

Two property owners owned a 6.6 acre tract of land and sought to construct a two-story office building on a portion of it. The project was to include a child care facility. The mayor of the municipality, who also sat on the planning board, was opposed to the property owner’s plan, ostensibly due to its impact on nearby neighbors. According to a representative for one of the property owners, the mayor demanded that the size of the planned building, which met all municipal zoning requirements, be significantly reduced and threatened to have the property rezoned to eliminate office buildings as a conditional use. Roughly three weeks later, a resolution was introduced to the municipality’s governing body to eliminate office buildings as a permitted use where the property was located.

The property owners later entered into an agreement with the municipality under which one third of the property was to be sold to the municipality. In return, the municipality agreed not to adopt any ordinances that would prevent the property owner from constructing its office building and the property owners agreed that the building would be reduced in size. Under the agreement, the municipality agreed to install sewer and water lines for connection to the proposed buildings and to obtain any required sewer permits. The agreement stated that the property owners would be allowed to construct two single-story buildings, each roughly one-quarter the size of the original building’s proposed size. The owner’s representative later claimed that he entered into the agreement under duress based on the mayor’s continuing threats to have the property rezoned.

The property owners posted a restoration bond which allowed them to begin preparations on the property before a construction permit was issued. Soon afterwards, the municipality sued one of the property owners in municipal court for clearing the site beyond the area covered by the restoration bond. The municipal court found in favor of municipality and entered a judgment against the representative for the property owner personally, but did not name the property owning entity itself. On an appeal to the lower court, the matter was remanded to the municipal court where the matter was dismissed on the grounds that the ordinance applicable to restoration bonds cited in the complaint was vague.

It was eventually revealed that the municipal court judge had represented the mayor in the mayor’s development of a property across the street from the property owners’ property and that the mayor planned on operating his own building, or part of that building, as a child care center. Also revealed was the fact that the representative for the property owner and the mayor had been opponents in a primary election campaign. One month before the property owners’ site plan approval, a company that planned to operate a child care facility signed a letter of intent with the property owners agreeing to lease a portion of the proposed building for its facility. Roughly six months later, that same company entered into a lease agreement with the mayor to operate its child care facility in the mayor’s building across the street.

After the property owners obtained site plan approval and construction began, the presence of underground rock near the surface caused the property owners to apply to have the site plan approval amended to accommodate a two and one-half foot increase in building height. The proposed increase was within the bounds of the ordinance, but the planning board rejected it. The board’s decision was later reversed by the lower court. Subsequently, after the permits to install the sewer lines expired, the municipality agreed to renew them but demanded that the property owners pay the sewer application fee. In response to the property owners’ complaint seeking reimbursement for the fees which were to be covered by the municipality under the settlement agreement, the municipality asserted that the increase in the proposed building’s height was a breach of contract and threatened to enjoin construction. Both parties later agreed to drop their claims.

The property owners then brought an action which asserted that the municipality had violated federal civil rights statutes and sought specific performance of the contract and a declaration that the increase in the proposed building’s height was not a breach of the agreement between the parties. The complaint was amended to include a claim for reimbursement of the application fee for the sewer permit and a claim of malicious prosecution for the municipal action regarding the restoration bond. The lower court dismissed the civil rights claims on summary judgment and denied motions by the property owners to amend their complaint to include charges of fraud and tortious interference, as well as to add the mayor as a defendant. The property owners’ malicious prosecution and claims regarding the delay in the sewer’s installation were also dismissed.

On appeal, the Appellate Division held that the property owners’ interest in the property deserved federal constitutional protections and, in disagreement with the lower court, found that there was a factual question as to whether the municipality had deprived the property owners of that interest. It added that whether the developer would have profited from its development was irrelevant to its interest in developing it lawfully. The Court also found that if the accusations against the mayor of manipulating the board’s actions; using rezoning as a threat; and entering into a lease with the child care center while opposing the property owners’ site plan amendment were found to be true, a jury could find that such actions were egregious and conscious-shocking enough to sustain the developer’s federal civil rights claims.

The Court also disagreed with the lower court’s dismissal of the civil rights claims and found that there were questions as to whether the municipality and the mayor had intentionally used legal proceedings to delay the property owners’ project over an extended period of time. Additionally, it found that the property owners had no way of anticipating whether the earlier actions of introducing the rezoning ordinance; allegedly pressuring the property owners to sell a portion of their property; and the mayor’s refusal to recuse himself from the board hearings would have led to further delays triggering civil rights protections.

In sum, the Court affirmed the lower court’s finding that the municipality’s action regarding the clearance of the property beyond the limits covered by the restoration bond was not malicious prosecution because there was a genuine question of whether a municipal ordinance was violated or only the terms of the restoration bond had been violated, and because the property owners did not prove how the actions constituted a special grievance. The lower court’s dismissal of the property owners’ civil rights claims and their motion to amend their complaint was reversed and their case was allowed to proceed.

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