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Oldfield v. Stoeco Homes Inc.

Decided: March 3, 1958.


On appeal from Superior Court, Law Division.

For affirmance -- Chief Justice Weintraub, and Justices Wachenfeld, Burling, Jacobs, Francis and Proctor. For reversal -- None. The opinion of the court was delivered by Burling, J.


This is a proceeding in lieu of prerogative writ. Suit was instituted by plaintiffs, residents and taxpayers of the City of Ocean City, with the object of having several resolutions of the City of Ocean City extending the time for performance of certain conditions in a deed declared invalid, and for the further relief of having lands owned by the defendants forfeited and returned to the city. The parties defendants are Stoeco Homes, Inc., the purchaser from Ocean City, Workshop, Inc., a subsequent grantee of a portion of the land from Stoeco, and Seaboard Fidelity Company, Workshop's mortgagee, and the City of Ocean City.

From an adverse determination in the Superior Court, Law Division, plaintiffs prosecuted an appeal. Prior to hearing in the Appellate Division, we certified the cause on our own motion.

The facts are not in dispute and have been stipulated by the parties. This stipulation, together with the exhibits and the additional testimony of three witnesses, the mayor of Ocean City, a city commissioner and a corporate officer (secretary) and stockholder of Stoeco comprise the evidence in the case.

In 1951 Ocean City held title to a large number of lots of undeveloped land in a low lying area of the city. The locale of the lots is roughly divisible into two large segments, with Bay Avenue forming a dividing line between east and west. The western segment, in which the city owned several hundred lots, extends from Bay Avenue on the east to the bay thorofare on the west and from 18th Street on the north to 24th Street on the south. The eastern segment, in which the city owned some 653 lots, is bounded by Bay Avenue on the west, Haven Avenue on the east, 20th Street on the north and 34th Street on the south. It is the lots in the eastern segment which are the subject matter of this litigation.

The topography of the entire area is an essential factor in this case. What little there is in the record concerning the western segment indicates that, although it was below grade and required fill, it was generally higher and necessitated less fill in order to raise the grade to the existent levels in the remainder of the city than the eastern segment. It was also situated nearer the bay and conceded to be commercially more valuable.

The eastern tract consisted largely of mosquito breeding swamp and meadow lands with salt ponds interspersed and required extensive filling and grading before the land could be utilized for residential or other productive uses.

Stoeco was desirous of acquiring the lots owned by the city in the western segment, and as part of a general plan of redevelopment it conceived of the idea of acquiring the lots owned by the city in the eastern segment also. Ocean City, recognizing that an extensive redevelopment of these swampy areas would benefit the community, indicated its willingness to sell the lots, with the exception of 226 lots in the eastern tract which it desired to retain.

After receiving minimum bids for the two groups of lots, Ocean City advertised both tracts of land for public sale on February 14, 1951, setting forth in the advertisement various terms and conditions with which the vendee was to comply. At the sale Stoeco was the only and therefore the

highest bidder for both the eastern and western groups of lots, bidding $10,525 for the former and $100,000 for the latter. The sales were duly confirmed by two resolutions of the municipality dated February 16, 1951, and final settlement was made on both sales on June 29, 1951. Throughout the sales were treated as separate transactions and no question is raised in this case concerning Stoeco's performance of the conditions imposed by the deeds to the lots on the western side.

While the deed from Ocean City to Stoeco contained various conditions and restrictions, the core provisions around which this dispute centers are:

"(a) Within one (1) year from the date of this Deed, the party of the second part shall fill all of the following listed lots of land now owned by the party of the first part and which are not being conveyed.

(Here follows a list of lots by lot number and block number.)

(b) Within one (1) year following the date of this Deed, the party of the second part shall fill all of the lots of land sold to said party of the second part as a result of this sale."

"(d) All such lands shall be filled to at least the now established and existing grades of the City of Ocean City, New Jersey for the areas and lots to be filled."

"The City of Ocean City reserves the right to change or modify any restriction, condition or other requirements hereby imposed in a manner agreeable to or as permitted by law.

A failure to comply with the covenants and conditions of paragraphs (a), (b) and (d) hereof will automatically cause title to all lands to revert to the City of Ocean City; and a failure of any other restrictions and covenants may cause title to revert to the City as to any particular land, lot or lots involved in any violation."

Thus, Stoeco was required to fill and grade not only the lots sold to them by the city, but also the lots retained by the city.

Some of the blocks did not contain all the lots making up the block, so that in order to complete its holdings Stoeco purchased between February and November of 1951, 137 lots from various individuals for a total price of $20,020. Shortly after settlement Stoeco entered into a contract with

the Hill Dredging Company to hydraulically fill the two areas purchased by Stoeco. With materials dredged from two new lagoons on the west side, the Dredging Company between September and December of 1951 filled hydraulically a large portion of the west side and a small portion of the east side. At this stage serious difficulties were encountered by Stoeco in the performance of its undertakings. Stoeco's original scheme contemplated that five lagoons located on the west side should be dredged and the materials removed would be employed to fill the eastern side of Bay Avenue. It quickly became apparent however that the material dredged from the lagoons was not of sufficient quality to be used as fill; it contained too high a quantity of mud and silt. In fact, Stoeco was compelled to acquire an island from a private source to use as a spill area in order to dispose of the substandard substances dredged from the lagoons. These unfavorable dredging conditions, not originally contemplated, created serious engineering and financial problems for Stoeco.

By June 29, 1952, one year after obtaining the deed, Stoeco had still not completed the substantial portion of filling and grading, nor had it done so by February of 1953. Ocean City, more interested in redevelopment than declaring a default, passed a resolution on February 20, 1953 to change and modify the terms and conditions of the sale of land. The city relied upon N.J.S.A. 40:60-51.2 and N.J.S.A. 40:60-51.5 as the wellspring of its authority, following the procedure as to publication of notice, public ...

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