On appeal from the Superior Court, Appellate Division, whose opinion is reported at 206 N.J. Super. 213 (1985).
For reversal -- Chief Justice Wilentz, and Justices Clifford, Pollock, Garibaldi and Stein. Affirmed. Not participating. The opinion of the Court was delivered by Garibaldi, J. Handler, J., dissenting.
[103 NJ Page 427] The Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-1 to -21, requires that any person proposing to construct a "facility" in the coastal area must obtain a permit from the
Department of Environmental Protection (DEP). A "facility" is extensively defined in CAFRA and includes the construction of "new housing developments of 25 or more dwelling units or equivalent." Appellants, Driftwood Cabana Club (Driftwood) and Edgewater Cabana Club (Edgewater), commenced construction of certain cabana units without securing permits from the DEP. Specifically at issue is whether the beach club cabanas at Driftwood and Edgewater constitute "facilities" under CAFRA. To resolve this question, we first must determine whether DEP has the explicit or implicit statutory authority under CAFRA to hold that a beach club with its newly constructed cabanas is encompassed within the phrase "housing development of 25 or more dwelling units or equivalent" and hence is a "facility." If we answer the first question affirmatively, then we must determine whether DEP in its rules and regulations has properly exercised its authority. We hold that DEP has implicit statutory authority to regulate beach club cabanas but has failed to do so in its present rules and regulations, and that to do so, it must proceed through rulemaking rather than through ad hoc adjudication.
Driftwood and Edgewater have been operated as beach clubs in Sea Bright since the late 1950's. In 1984, Driftwood decided to renovate and upgrade the existing club from one- and two-story structures housing 483 walk-in change lockers and a one-story structure housing 35 cabanas to a two-story structure housing 134 luxury cabanas. Depending upon the model chosen, each cabana is approximately 350 to 400 square feet, including the entrance deck and beach deck. Each includes a full bath, dressing area, wet bar, cabinet, refrigerator, electrical outlets, and telephone jacks.
In 1983, Edgewater also decided to renovate and upgrade its club from 300 to 350 lockers, bath houses, and cabanas to 100 luxury cabanas whose size would be approximately 10 by 16
feet, and that would include a full bath, 10 foot deck, electrical outlets, telephone jacks, wet bar, cabinet, and refrigerator.
None of the cabanas in either club meets the building code requirements (BOCA) for residential structures, for they do not have kitchen facilities, heat, and air conditioning and are not insulated. Each club is open only during the summer season, from 9:00 A.M. or 10:00 A.M. until midnight. The rules of each club, as well as municipal ordinances, prohibit overnight occupancy. At the close of the season, members must retrieve all personal property and effects from the club. The clubs contend that the renovated cabanas will accommodate fewer people than were accommodated by the former cabanas. Both previously have unsuccessfully sought DEP approval to build condominiums or town houses on the beach club property.
Both clubs' site plans were approved by the Borough of Sea Bright Planning Board. Each received a sewer extension permit from DEP. Although the letters granting the sewer extensions listed twelve items to which the beach clubs were subject, they made no reference to CAFRA. Shortly thereafter, each club received a permit from the Department of Transportation for the construction of access to the roadway, which was not made subject to DEP approval. The building inspector for the Borough of Sea Bright then issued a building permit to each club for the project (these are to be issued only if a project has received all necessary state, county, and municipal permits).
By early April 1985, when a DEP inspector investigated the sites, each club already had expended substantial sums of money -- 50% of the construction of the Driftwood project was complete, as was 62% of the Edgewater project. Based on the DEP inspections, along with a review of DEP records showing neither a CAFRA permit nor a determination of the inapplicability of CAFRA to the proposed developments, the Supervisor of the North Shore Region of the Bureau of Coastal Enforcement and Field Services issued a cease and desist letter to each club, requiring it either to apply for a CAFRA permit or to stop
construction and restore the property to its former condition. Each club then received a letter from the Director of the Division of Coastal Resources affirming the cease-and-desist letter. Disputing the authority of the DEP to issue such orders, and claiming reliance upon DEP's failure to assert similar authority over at least three other beach clubs on the Jersey Shore that had constructed or improved 25 or more comparable cabanas since the inception of CAFRA in 1973, both clubs ignored the stop orders and continued construction.*fn1
DEP then filed verified complaints in the Chancery Division, seeking to enjoin both Driftwood and Edgewater from proceeding with construction. The Chancery Division refused to grant injunctive relief in either case, concluding as a matter of law that "under the enabling legislation [DEP] was not entitled to regulate this particular type of construction." The court based this statutory interpretation on the common-sense notion that a beach club is not a "housing development," just as a cabana is not equivalent to a "dwelling unit." Furthermore, the Chancery Division concluded that even if CAFRA authorizes the DEP to adopt regulations liberally interpreting these statutory terms, its current regulations do not embrace these structures. "If such regulations are going to be imposed," the trial court held, "then those who are being regulated are entitled to know as a matter of fundamental due process what it is that is prohibited, what it is they have to do. . . ."
DEP then appealed to the Appellate Division, which reversed the Chancery Division, remanding the matter to the DEP, with Judge Cohen dissenting. State Dep't of Envtl. Protection v. Stavola, 206 N.J. Super. 213 (1985). The majority held that "the rulemaking authority granted to DEP, coupled with the admonition of CAFRA that it is to be liberally construed (N.J.S.A. 13:19-20), when read in the context of Crema v. New
Jersey Dep't of Envtl. Protection, 94 N.J. [286, 299 (1983)], requires the conclusion that 'dwellings or their equivalent' is sufficiently broad to include the type and number of luxury 'cabanas' constructed here." Id., 206 N.J. Super. at 222.
The dissent disagreed, noting that DEP itself omitted cabana clubs when it wrote its own definition of housing developments for CAFRA purposes. N.J.A.C. 7:7-2.1(b)(4). Judge Cohen concluded that "[w]hatever else might be said about the regulation's definition, it is plainly limited to places where people live, even for a brief time. . . ." 206 N.J. Super. at 226. And he argued that under the ordinary meaning of the statute, a beach club with cabanas was simply not a "housing development of 25 or more dwelling units or equivalent." Id. at 226-27.
Pursuant to Rule 2:2-1(a), Driftwood and Edgewater took this appeal as of right. We now reverse the judgment of the Appellate Division.
First, we lay out the purposes and provisions of the statute, together with the effectuating regulations. In 1973, the Legislature enacted the Coastal Area Facilities Review Act, finding
that certain portions of the coastal area are now suffering serious adverse environmental effects resulting from existing facility activity impacts that would preclude or tend to preclude those multiple uses which support diversity and are in the best long-term, social, economic, aesthetic and recreational interests of all people of the State.
Nevertheless, recognizing the legitimate economic interests of the inhabitants of the coastal area, the Legislature declared as its purpose:
to encourage the development of compatible land uses in order to improve the overall economic position of the inhabitants of that area within the framework of a comprehensive environmental design strategy which preserves the most ecologically sensitive and fragile area from inappropriate development and provides adequate environmental safeguards for the construction of any facilities in the coastal area.
N.J.S.A. 13:19-16 directs the Commissioner of DEP to develop such an environmental design strategy, including "a delineation of various areas appropriate for the development of residential and industrial facilities of various types. . . ." Accordingly, under N.J.S.A. 13:19-17, the DEP is authorized "to adopt, amend and repeal rules and regulations to effectuate the purposes of this act." And finally, N.J.S.A. 13:19-20 proclaims that "[t]his act shall be liberally construed to effectuate the purpose and intent thereof."
But the Legislature did not stop here, giving the DEP free rein to define "facilities," whether through rulemaking or adjudication, as including all residential, industrial, commercial, or recreational structures with potential adverse environmental effects. Instead, CAFRA indicates that "'[f]acility' includes any of the facilities designed or utilized for the following purposes," proceeding to enumerate twelve purposes and to list eighty-eight specific types of industrial and residential facilities. N.J.S.A. 13:19-3(c). Most of ...