Gaulkin, Foley and Lewis. The opinion of the court was delivered by Lewis, J.A.D.
[84 NJSuper Page 463] This is a proceeding in lieu of prerogative writs to enforce the side yard restrictions of a municipal zoning
ordinance. The Superior Court, Law Division, entered judgment for plaintiffs, the effect of which is to compel the total or substantial demolition of a high-rise apartment building. We granted a stay pending defendants' appeal.
This case was previously before this court. We reversed and remanded the matter for plenary trial. Sautto v. Edenboro Apartments, Inc. , 69 N.J. Super. 420 (App. Div. 1961). We are now presented with a full record, and, to obtain a proper perspective for an equitable approach to the issues involved, it is necessary to review the salient facts at some length.
In 1954 vacant lands known as 82-84 High Street in the City of Orange were acquired by George B. Underwood and his wife for the price of $15,000. Five years later, in order to develop their real estate purchase for resale, the Underwoods engaged an architect, Max Simon, a specialist in the design of multi-family dwellings, to prepare plans for a proposed apartment house to be erected on the site. A plot plan and schematic drawings were submitted by Simon to Joseph Kearns, the municipal building inspector, who advised the architect that there were no side line requirements under the 1922 zoning ordinance then in effect.
On January 14, 1960, following an original and two amended applications, the Federal Housing Administration (herein FHA) issued a letter of feasibility covering a proposal for a 64-unit (218 rooms) apartment building. By written communication from the building inspector, dated January 29, 1960, the owners' agent was advised that "this type of structure is definitely allowed on this site" and that the required building permit would be issued when the building plans were completed. Negotiations were then undertaken by the owners to secure a purchaser for the land and the FHA project.
In February 1960 a contract of sale was entered into with a designated corporation controlled by individuals including one Arnold I. Harris (herein Harris Group). The purchase price was $75,000, and the transaction was conditioned, inter alia , upon the issuance of a building permit, compliance with
local zoning, and the procurement of an FHA mortgage commitment of not less than $685,000. The sales contract also provided for its assignability to a New Jersey corporation to be organized in conformity with the requirements of the National Housing Act.
The City of Orange, on May 9, 1960, issued a permit to build in accordance with the plans submitted, which called for construction for a distance of approximately 45 feet along the side lines of the premises. In July of that year an FHA insurance commitment for a mortgage loan of $824,000 was received, and the following month defendant Edenboro Apartments, Inc., was incorporated under a charter approved by the FHA as the take-over corporation. The closing took place on September 9, 1960. Thereafter, on September 26 and 27 required test borings were made preliminary to the commencement of construction.
Owing to dissension in the Harris Group, efforts were directed toward the resale of the then "committed package." In due course Eugene Brown and Seymour J. Weiner (herein sometimes Brown Group), who were working for a New York construction firm, purchased the Edenboro project at an agreed price of $75,000 plus actual disbursements (not to exceed $21,250), the assumption of unpaid FHA charges, and the balance due on architect's fees (not to exceed $12,200). Their contract of purchase (December 1, 1960) was subject to the aforesaid building permit and financing commitment's being "valid and subsisting" at the time of closing title, which was agreed to be simultaneous with the FHA mortgage loan settlement. When Weiner and Brown were approved by the FHA as substituted project sponsors, they resigned their positions in New York -- presumably to devote their full time and efforts toward completion of the various administrative steps necessary to effectuate the FHA closing, which was ultimately scheduled for April 21, 1961.
In the meantime, on March 7, 1961 the City of Orange adopted an amendment, effective March 9, 1961, to its 1922 zoning ordinance by the pertinent terms of which a ten-foot
minimum side yard was required for all proposed buildings in the apartment district wherein the property in controversy is situate. The amendment contained an exception, however, that where a building permit had been issued and construction work had been started before the effective date of the ordinance, such work might proceed, provided it was completed within one year from that date.
The Brown Group, upon learning of the new zoning enactment, contacted Kearns, the building inspector, who expressed unequivocally the opinion that the outstanding building permit was saved by the new legislation and therefore was still valid. On March 29, 1961 the building inspector wrote a letter to the permittee advising:
"Permit #22167 was issued on May 9, 1960 and is in full force and effect provided that this project is started prior to May 9, 1961 and is completed not later than March 7, 1962, as the present Zoning Ordinance of the City of Orange makes this exception.
A certificate of occupancy will be issued by this Department provided the building is completed prior to the aforementioned date above."
Additionally, one of the prerequisites of the FHA was a survey certificate pursuant to printed instructions on the reverse side of its formal questionnaire. Requirement No. 7 reads:
"All buildings on property must be shown with dimensions and relation to lot and building lines. If conditions in chain of title or zoning ordinances require buildings to be set back specified distances from street or property line, the required setback line must be shown and the survey must show MEASURED DISTANCES from said building to said line."
James F. DeCarlo, a civil engineer by profession, who held the position of assistant municipal engineer for the City of Orange, in his signed certification answered "Yes" to the question, "If any zoning or other municipal regulations affect the use of surveyed premises, do the improvements on the premises and the use made of them comply with such?" According to the certification, his last inspection of the property
was on April 4, 1961, and it appears from his testimony that he knew from the filed building plans that the proposed structure would extend to the side lines of the premises.
The position of the municipality, as stated in the pretrial order, is significant:
"The City of Orange contends that the action of the building inspector in allowing the construction of this building to proceed after the 1961 Zoning Ordinance was passed, is proper; (b) that the 1961 Zoning Ordinance protects the rights of the defendant owners and builders under the permit issued under the 1922 Zoning Ordinance as amended; (c) that the reliance of the defendant owners and builders on this permit is such that the City of Orange could not at this time pursue, or at the present time prevent the construction of this building."
On April 21, 1961 the transfer to the Brown Group and the mortgage settlement with The Trust Company of New Jersey were completed, at which time the payments required by the FHA for closing (approximately $58,624) were advanced by the mortgagor. At the same time, such documents as the construction contract, building loan agreement and performance bond were executed and delivered. The settlement officer and closing attorney, who had investigated the municipal requirements, testified that he submitted a written opinion stating affirmatively that there was compliance with local zoning. The initial advancement by the mortgagee trust company was made on April 24, 1961 in the amount of $42,852. Thereafter Calvin A. Liguori, the subcontractor for site clearing, commenced activity. His statement was that he first had men working on the property during the week ending April 27, 1961. The FHA records reveal that for payroll purposes construction started April 28, 1961.
The pending litigation then ensued against the owner, Edenboro Apartments, Inc., the construction contractor and the building inspector. Although suit was commenced April 28, 1961, notice thereof was not served upon defendants until May 4, 1961. Plaintiffs Salvatore Sautto and James A. Christiano and their wives, who owned and resided in dwellings
on either side of the property, sought by their complaint to set aside the building permit issued May 1960 for the construction of the proposed building without side yards. They claimed that the permit when issued was in conflict with the 1922 zoning ordinance and, if not, it nevertheless had been invalidated by the 1961 amendment which irrefutably requires ten-foot minimum side yards.
Defendants-appellants answered and counterclaimed, contending: their permit conformed with the 1922 ordinance requirements; it was saved under the terms of the 1961 amendment and, alternatively, the amendatory ordinance was invalid and of no legal effect; in any event, they were protected by vested rights, having substantially relied upon the permit; plaintiffs were in laches and their action was barred under R.R. 4:88-15(a). With leave of court, the City of Orange intervened to urge and support the constitutionality and validity of the 1961 ordinance.
On July 13, 1961 the trial court, on cross-motions for summary judgment, entered a judgment in favor of the defendants, predicating its opinion primarily on the issuance of the building permit under the 1922 ordinance and the fact that the defendants "had spent in excess of $160,000" on the project at the time of the institution of plaintiffs' suit. Plaintiffs obtained leave to appeal to the Appellate Division, which appeal was argued on October 9, 1961 and decided October 17, 1961. The case was remanded for trial, conformably with the opinion of Judge Conford as reported in Sautto v. Edenboro Apartments, Inc., supra , with directions that the remand "should obviously be proceeded with forthwith, in view of the continuing construction of this building." 69 N.J. Super. , at p. 435. The Supreme Court refused to review the judgment on November 27, 1961.
The plenary hearing before the Law Division on remand did not commence until May 9, 1962. The trial and supplemental proceedings were concluded with the entry of a final judgment on February 21, 1963, by which time the apartment building was 98% completed and steps had been taken to
obtain a certificate of occupancy from the city. The judgment, in substance, declared appellants' apartment building to be in violation of the 1961 zoning enactment; directed the building inspector to enforce the ordinance as amended and, in particular, the side yard provisions thereof; ordered the project defendants to relocate the building to provide the requisite side yards; and enjoined and restrained defendant Edenboro from permitting any portion of its apartment building to remain on the areas required as side yards, and "to remove or cause to be removed all parts or portions of said building located upon any part of said side yard areas within 60 days of the effective date of this judgment."
Defendants' contention on appeal that plaintiffs should be barred from injunctive relief by reason of laches and the dilatory prosecution of their case is without merit and calls for no further comment. The crucial questions here to be resolved are (1) was there such a substantial reliance upon the building permit issued May 9, 1960 as to immunize its validity from the subsequent amendatory zoning ordinance, and ...