On appeal from the Superior Court, Law Division, Ocean County.
Allcorn, Francis and Morton I. Greenberg. The opinion of the court was delivered by Morton I. Greenberg, J.A.D.
This appeal arises as a result of application of certain procedures provided under the Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq. While there are sharply disputed issues of fact between the parties, the basic structure of their dispute is quite clear.
Defendant DCA of New Jersey, Inc. (hereinafter "DCA") tendered two bonds to plaintiff to guarantee that DCA would construct, install and complete certain improvements in connection
with subdivisions located within the plaintiff township.*fn1 One of the bonds was written in 1972 and the other was written in 1973.*fn2 The surety on one bond was defendant International Fidelity Insurance Company (hereinafter "International"). Defendant Safeco Insurance Company of America (hereinafter "Safeco") was the surety on the remaining bond. The improvements to be installed were quite substantial and included clearing, grading, paving, curbs, sidewalks, monuments, signs, manholes, headwalls, pipes, culverts, trees, planting, seeding, sewerage and water pipes. The International bond was for $594,950. The Safeco bond was for $968,133. On February 6, 1980 Eric Levin, vice-president of DCA, sent two letters to the clerk of plaintiff with copies sent to the municipal engineer. See N.J.S.A. 40:55D-53. The letters each referred to one of the bonds and recited that "all of the improvements covered by the above reference bond having been installed, release of the bond is hereby requested." Each letter recited that the request was made pursuant to the "Municipal Land Use Law, N.J.S. 40:55D et seq."
Plaintiff did not respond to DCA after receipt of the letters. From plaintiff's viewpoint this failure was unfortunate since it
was clearly the intention of DCA to trigger the provisions of N.J.S.A. 40:55D-53 d and e which provide:
d. Upon substantial completion of all required appurtenant utility improvements, and the connection of same to the public system, the obligor may notify the governing body in writing, by certified mail addressed in care of the municipal clerk of the completion or substantial completion of improvements and shall send a copy thereof to the municipal engineer. Thereupon the municipal engineer shall inspect all improvements of which such notice has been given and shall file a detailed report, in writing, with the governing body, indicating either approval, partial approval or rejection of such improvements with a statement of reasons for any rejection. The cost of the improvements as approved or rejected shall be set forth.
e. The governing body shall either approve, partially approve or reject the improvements, on the basis of the report of the municipal engineer and shall notify the obligor in writing, by certified mail, of the contents of said report and the action of said approving authority with relation thereto, not later than 65 days after receipt of the notice from the obligor of the completion of the improvements. Where partial approval is granted, the obligor shall be released from all liability pursuant to its performance guarantee, except for that portion adequately sufficient to secure provision of the improvements not yet approved; provided that 30% of the amount of the performance guarantee posted may be retained to ensure completion of all improvements. Failure of the governing body to send or provide such notification to the obligor within 65 days shall be deemed to constitute approval of the improvements and the obligor and surety, if any, shall be released from all liability pursuant to such performance guarantee for such improvements.
It will be noted, of course, that the aforesaid sections at least in some circumstances contemplate that the municipality respond within 65 days to the notice that the improvements have been completed or substantially completed. A failure to respond "shall be deemed to constitute approval of the improvements and the obligor and surety, if any, shall be released from all liability, pursuant to such performance guarantee for such improvements." Ibid. Not surprisingly, therefore, on April 22, 1980 DCA notified plaintiff, International and Safeco that the sureties were released from the bonds. The letters of April 22, 1980 caused plaintiff to take action. On or about April 29, 1980 plaintiff's attorney notified defendants that the bonds were not ...