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Legion Manor Inc. v. Municipal Council of Township of Wayne

Decided: July 5, 1967.

LEGION MANOR, INC., A CORPORATION OF THE STATE OF NEW JERSEY, AND WEBSTER HOMES, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFFS-APPELLANTS,
v.
MUNICIPAL COUNCIL OF THE TOWNSHIP OF WAYNE, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT - RESPONDENT



For affirmance -- Chief Justice Weintraub and Justices Francis, Proctor, Hall, Schettino and Haneman. For reversal -- None. The opinion of the court was delivered by Weintraub, C.J.

Weintraub

The municipal ordinance provides that in connection with the final approval of a subdivision the municipality may accept a performance bond for the installation thereafter of improvements required for the development. The ordinance further provides for the release of a performance bond upon acceptance of the work and the filing of a "maintenance" bond. After plaintiffs filed such bonds, the local ordinance was amended to require a subdivider to give written notice to all property owners in the development of the time when they could be heard before the municipal council with respect to whether the condition of a performance bond or of a maintenance bond had been met. Plaintiffs contend (1) these amendments calling for notice to the property owners are invalid and (2) in any event there is no statutory authorization for the exaction of a maintenance bond. The trial court found for the municipality and we certified plaintiffs' appeal before argument in the Appellate Division.

The Municipal Planning Act (1953) provides in N.J.S.A. 40:55-1.21:

"Before final approval of plats the governing body may require, in accordance with the standards adopted by ordinance, the installation, or the furnishing of a performance guarantee in lieu thereof, of any or

all of the following improvements it may deem to be necessary or appropriate: street grading, pavement, gutters, curbs, sidewalks, street lighting, shade trees, surveyor's monuments, water mains, culverts, storm sewers, sanitary sewers or other means of sewage disposal, drainage structures, and such other subdivision improvements as the municipal governing body may find necessary in the public interest."

N.J.S.A. 40:55-1.22 authorizes the governing body to accept "adequate performance guarantees for the purpose of assuring improvements" referred to in the section just quoted, and N.J.S.A. 40:55-1.2 defines "performance guarantee" to mean "any security * * * including performance bonds, escrow agreements, and other similar collateral or surety agreements."

I

Turning first to the question whether a maintenance bond may be required, we note that the statute empowers the governing body to require "adequate" performance guarantees. Performance contemplates not only that the work be completed but also that it be done correctly. The municipality properly protected itself upon both scores. It could have required a single performance bond calling for completion and for continued liability, surviving acceptance, with respect to defective work and materials, or it could provide for two bonds, one to deal with the completion of the work and the other to continue liability with respect to defects in work or material. The municipality took the latter course. The so-called "maintenance" bond, which in amount is 10% of the performance bond, is limited to "all defects of material or workmanship in the said work" which may develop during the ensuing three years. The use of a second bond benefits the developer by reducing the amount of the secured liability in harmony with the spirit of N.J.S.A. 40:55-1.22. It also avoids an issue of construction which sometimes arises under a single performance bond as to whether acceptance of the work was intended to end liability for defects which later appear. See, 17 Am. Jur. 2 d, Contractors' Bonds, § 96, p. 274; cf. Annotation, 72 A.L.R. 644 (1931).

The covenant being for repairs with respect to defective work or material, the maintenance bond did not impose upon the developer (and, through him, on the property owners) a liability for the "maintenance" of roads in the ordinary sense of the term, i.e., with respect to repairs due to wear and tear, and thus did not depart from the thesis of the statute that the developer (and through him his vendees) shall absorb the cost of the improvement itself as distinguished from its future maintenance. See, West Park Ave., Inc. v. Ocean Tp., 48 N.J. 122, 126 (1966), and Levin v. Livingston Tp., 35 N.J. 500, 514-515 (1961). The "maintenance" bond here involved is but a guarantee of performance. See, 13 McQuillin, Municipal Corporations (3 d ed. 1950), § 37.113, pp. 371-372; Wilson v. Inhabitants of City of Trenton, 61 N.J.L. 599 (E. & A. 1898); Mueller v. Boulevard Comm'rs of Hudson County, 87 N.J.L. 702 (E. & A. 1915).

II

The other question is whether the municipality may provide for a hearing on notice to the owners of property within the development with respect to compliance by ...


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