For reversal -- Acting Chief Justice Jacobs, Justices Hall, Sullivan, Pashman and Clifford and Judges Conford and Collester. For affirmance -- None. The opinion of the court was delivered by Clifford, J. Pashman, J. (concurring and dissenting in part). Pashman, J., concurs in result.
Beechwood Farms is a development of what are described in the record as thirty "beautiful homes, large estates," bisected by the borderline between the Borough of Demarest and the Borough of Alpine in Bergen County. Sixteen of the homes are consequently in Demarest and fourteen are in Alpine.
The plaintiffs here are fourteen of the sixteen Beechwood Farms homeowners whose properties lie in Demarest. On January 4, 1971 they filed a petition with the Mayor and Council of Demarest, pursuant to N.J.S.A. 40:43-26, requesting consent to deannexation of that part of the development which is located in that Borough so that "said lands * * *
may become part of the Borough of Alpine * * *."*fn1 On May 17, 1971 the Council adopted a resolution refusing to grant its consent, declaring that deannexation "would be contrary to the best interest of the Borough of Demarest and its general public and welfare * * *." Plaintiffs then filed a complaint in lieu of prerogative writ under R. 4:69 in the Superior Court, Law Division, to compel the Council to grant its consent. Judgment was rendered in their favor at the trial level. The Appellate Division affirmed in an unreported opinion. We granted certification, 63 N.J. 563 (1973), to expand upon our interpretation of the aforementioned statute in West Point Island Civic Association v. Township Committee of Dover Township, 54 N.J. 339 (1969). For a full understanding of our conclusion leading to a reversal, it is necessary to recite at the outset and in some detail the factual background.
As indicated Demarest and Alpine are adjacent boroughs. Demarest is about 2 square miles and had a population in 1970 of 6,262;*fn2 Alpine is about 5.3 square miles and had a population of 1,344. At the time of trial Demarest was 90% residential; it had a shopping center but no industry. Alpine was almost entirely residential with no stores, other than an antique shop, and some gasoline stations.
In 1971 Demarest's total tax assessment was about $45.5 million, while Alpine's was about $27.6 million. The tax rate that year was $4.70 per $100 of valuation in Demarest and $2.67 per $100 in Alpine.
Both Demarest and Alpine maintain grammar schools. Demarest high school students attend Northern Valley Regional High School, located in Demarest. Alpine high school students are forwarded to Tenafly High School.
The exclusive development of Beechwood Farms has a Beechwood Farms Association which charges dues to its members and which maintains a swimming pool, fishing lake and picnic grounds for their use. The residents perceive themselves as a community, despite the fact that they straddle the two Boroughs.
The Demarest section of Beechwood Farms lies on the eastern boundary of the Borough. It is separated from the rest of Demarest by Aldecress Country Club and Holy Angels Academy. In order to get to the business section of Demarest or other residential sections of the Borough, one must cross over into Alpine, pass briefly through the Borough of Cresskill and return to Demarest. The development lies about two miles from the center of the Borough.
It is undisputed that the Beechwood Farms homes located in Demarest are much more expensive than the average home elsewhere in the Borough. In 1971 the development accounted for only 16 homes out of approximately 1,547 homes in Demarest or 1.03% of the total. Nevertheless, it provided $959,000 in assessed valuation in the Borough or 2.11% of the total valuation, including commercial property. The Beechwood Farms homes provided $45,100 to Demarest in property taxes. It is also undisputed that the property taxes for the same homes would be significantly lower if they were located in Alpine.
At trial, the technical sufficiency of the petition and compliance with the statute were conceded by the defendant Borough. The only issue was whether the refusal of Demarest to consent to deannexation was arbitrary and unreasonable under West Point Island Civic Association v. Township Committee of Dover Township, supra. Plaintiffs rested their main case without presenting any witnesses, relying on the petition to the Council, the complaint and the pretrial order which narrowed the issues in the case. The denial of Demarest's motion for judgment at this juncture was proper, as will appear in the discussion below.
The defendant municipality called as witnesses the borough accountant, the mayor, and the borough engineer. Their testimony revealed that the elimination of sixteen homes would not produce any reduction in the municipality's operating costs -- that is, Demarest could not hire one fewer policeman, fireman or road man after deannexation. The operating costs would remain fairly constant. Likewise, there would be no substantial economy in the budget of the grammar schools as a result of deannexation, although Demarest would save $9,600 to 12,000 in costs for the high school students (different cost figures were supplied by the accountant and the mayor) and there would be a saving in county taxes. These savings would not offset the loss of revenue. In the final analysis, the tax rate for the remainder of Demarest would be increased as a result of the deannexation of Beechwood Farms.
Mayor Ringelstein stated that in reaching its decision the Council considered both the loss in revenue in the upcoming fiscal year and the total loss over the next ten to twenty years and concluded that deannexation would result in an economic hardship. He asserted further that the development figured prominently in the planning of the Borough. The Aldecress Country Club was zoned for residential housing. If and when that land is developed, ...