For modification and remandment -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford and Schreiber and Judge Conford. Opposed -- None. The opinion of the Court was delivered by Pashman, J.
Like the companion cases of Hutton Park Gardens v. West Orange Town Council, 68 N.J. 543 (1975) (Hutton Park) and Troy Hills Village v. Parsippany-Troy Hills Tp. Council, 68 N.J. 604 (1975) (Troy Hills Village), also decided today, this appeal involves constitutional challenges to a municipal rent leveling ordinance. Because this case presents several issues not raised in the companion cases, we have chosen to deal with it in a separate opinion.
New Milford enacted a revised rent control ordinance on November 26, 1973*fn1 which establishes base rents as those in [68 NJ Page 583] effect on January 11, 1973 (the date federal controls were lifted) and limits rent increases to the percentage increase in the CPI*fn2 during the period from 90 days prior to commencement of the previous tenancy to 90 days prior to its expiration. No restrictions are placed on initial rents for newly constructed dwellings. Under the ordinance landlords are required to notify the Borough Rent Leveling Board of any proposed rent increase 45 days in advance of its imposition. In addition, the ordinance limits rent increases to one per year. Landlords may seek permission from the Rent Leveling Board to pass on to the tenant property tax increases but these tax surcharges are limited to a percentage of the tax increase equal to the percentage of total rooms in the building occupied by the tenant.*fn3 Tenants may pay tax surcharges in 12 monthly installments. If the landlord wins a tax appeal, he must disburse 50% of the reduction, minus costs of the appeal, among his tenants in proportion to the amounts for which they are responsible under the tax surcharge formula. The ordinance further provides that a landlord may appeal to the Rent Leveling Board (composed of two landlord representatives, two tenants and one resident homeowner) for an additional rent increase "in the event [he] cannot meet his mortgage payments and maintenance [costs]" or cannot realize "a reasonable profit from his investment in his property."*fn4 The ordinance also limits the grounds for eviction.
This ordinance was challenged and upheld in the Superior Court in Bergen County on July 23, 1974 in Costa v. Borough of New Milford, L-13458-73 (Law Div. 1974) by the same trial judge who heard the instant matter below.
The ordinance was subsequently amended on September 9, 1974 by Ordinance No. 74:12, which further limits allowable rent increases to 50% of the percentage increase in the CPI during the period from 90 days before commencement of the previous term to 90 days before its termination.*fn5
On September 9, 1974 plaintiffs brought this action in lieu of prerogative writ in the Superior Court in Bergen County, challenging the constitutionality of the original ordinance and as amended. Specifically, plaintiffs alleged that the ordinance was confiscatory, constituted an impairment of the obligations of contract, was violative of substantive due process in that it failed to permit rents to rise as rapidly as costs, was arbitrary, vague, unreasonable and unworkable and was ultra vires the police power since the municipality had made no determination of the existence of a housing emergency.
Plaintiffs' complaint sought immediate injunctive and declaratory relief. On October 8, 1974 the trial judge enjoined enforcement of the ordinance as amended permitting landlords to collect rent pursuant to the 1973 ordinance but requiring them to place the excess in escrow.
After hearing arguments on cross-motions for summary judgment, the trial judge rendered an oral opinion holding that all challenges to the original ordinance were barred by R. 4:69-6(a), which requires actions in lieu of prerogative
writs to be commenced no later than 45 days after the accrual of the right to the review or relief claimed. As a result, no evidence was submitted with respect to these issues. Addressing only the 1974 amendments, the trial court first upheld the facial constitutionality of the provisions reducing the ceiling of allowable rent increases from 100% to 50% of the CPI, but then barred plaintiffs from attempting to prove that the ordinance was unconstitutional as applied on the grounds that they must first exhaust administrative remedies by applying for a hardship increase. On November 18, 1974 a final order was signed dismissing plaintiffs' complaint. Restraints were continued pending appeal.
This Court granted certification on its own motion pursuant to R. 2:12-2. 68 N.J. 174 (1975).
Applicability of Rule 4:69-6
As noted above, the trial court rejected plaintiffs' challenges to the original ordinance as untimely filed under R. 4:69-6.*fn6 In so holding, the court refused to extend the time limit "in the interest of justice" as permitted by paragraph (c) of the rule because the original ordinance had been upheld previously in Costa v. Borough of New Milford, plaintiffs had known about this prior action and could have intervened therein and, consequently, plaintiffs should not be allowed to relitigate the constitutionality of this ordinance at the taxpayers' expense. We disagree.
In Ward v. Keenan, 3 N.J. 298 (1949), this Court recognized that the creation of the in lieu proceeding by the [68 NJ Page 586] Constitution of 1947 was not intended to discard "the substantive law of the former prerogative writs as a means of safeguarding individual rights against public officials and governmental bodies," but was meant to avoid the "defects of procedure that led to criticism." Id. at 308. As a result, exceptions based on prior decisional law were soon engrafted upon the rules governing in lieu proceedings. Schack v. Trimble, 28 N.J. 40, 47-48 (1958). In particular, the courts held that certain cases were excepted from the rule governing limitation of actions. See Pressler, Current New Jersey Court Rules, Comment R. 4:69-6 at 750 (1975). These exceptions included cases involving (1) important and novel constitutional questions;*fn7 (2) informal or ex parte determinations of legal questions by administrative officials;*fn8 and (3) important public rather than private interests which require adjudication or clarification.*fn9 Paragraph
(c) of the Rule which provides for enlargement of the limitations period, was added by amendment in 1957*fn10 and was intended to codify thees decisional exceptions "in the form of a generalized standard." Schack v. Trimble, supra, 28 N.J. at 48. Consequently, in determining whether "the interest of justice" requires an enlargement of time under paragraph (c), courts should look to these decisions for guidance. Suffice it to say that the constitutional claims raised by plaintiffs in the instant case are at least as fundamental and important as those raised by appellants in the cases cited above at footnote 7. Cases decided subsequent to the adoption of paragraph (c) confirm that consideration of substantial constitutional questions warrants relaxation of the time limits of R. 4:69-6 "in the interest of justice."*fn11
Some further observations are proper to fully support our rationale. The argument that plaintiffs should be precluded from challenging the original ordinance because they could have joined in the earlier suit is unsound. Res judicata does not bar strangers to a prior action from filing an action of their own, precisely because every plaintiff is entitled to his day in court. Bd. of Directors of Ajax Electrothermic Corp. v. First Nat'l Bank of Princeton, 33 N.J. 456, 463 (1960); Miraglia v. Miraglia, 106 N.J. Super. 266 (App. Div. 1969); In re Estate of Alexandravicus, 83 N.J. Super. 303, 307-308 (App. Div. 1964), certif. den. 43 N.J. 128 (1964). The danger of multiple suits by landlords is not particularly
great because collateral estoppel prevents relitigation of any issue actually determined in the original suit. In the instant case, the trial judge conceded that at least some of the issues raised by plaintiffs were not tried in the earlier suit. Therefore, plaintiffs were entitled to submit their proofs.
Thus, subject to the limitation discussed in Part II of this opinion, the trial court should have admitted proofs and rendered a judgment with regard to plaintiffs' challenges to the constitutional validity of the Borough ordinance both as originally enacted and as amended.
Exhaustion of administrative remedies
We next hold that the trial judge was correct in ruling on the facial constitutionality of the amended ordinance and in requiring plaintiffs to exhaust their administrative remedies with respect to their other challenges.
Except where it is manifest that the interest of justice requires otherwise, actions under R. 4:69 shall not be maintainable as long as there is available a right of review before an administrative agency which has not been exhausted.
This Court has recognized that the exhaustion of remedies requirement is a rule of practice designed to allow administrative bodies to perform their statutory functions in an orderly manner without preliminary interference from the courts. Ward v. Keenan, supra, 3 N.J. at 302. Therefore, while it is neither a jurisdictional nor an absolute requirement, there is nonetheless a strong presumption favoring the requirement of exhaustion of remedies. Roadway Express, Inc. v. Kingsley, 37 N.J. 136, 139 (1962); East Brunswick Tp. Bd. of Education v. East Brunswick Tp. Coun., 48 N.J. 94, 102 (1966); Pleasantville Taypayers v. City of Pleasantville, 115 N.J. Super. 85, 88 (App. Div. 1971), certif. den. 59 N.J. 268 (1971); Patrolman's Benev. Assoc. v. Montclair, 128 N.J. Super. 59, 64