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Somers Associates Inc. v. Gloucester Township

Decided: May 18, 1990.

SOMERS ASSOCIATES, INC., A NEW JERSEY CORPORATION, AS AGENT FOR PINE RUN REALTY ASSOCIATES, PINE RUN ASSOCIATES, PINE RUN LIMITED, PINE RUN VILLAGE ASSOCIATES, COLLECTIVELY TRADING AS VILLAGE OF PINE RUN APARTMENTS, PLAINTIFF-RESPONDENT,
v.
GLOUCESTER TOWNSHIP, COUNTY OF CAMDEN, A BODY POLITIC AND CORPORATE OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT, AND GLOUCESTER TOWNSHIP RENT STABILIZATION BOARD, AND VILLAGE OF PINE RUN TENANTS ASSOCIATION, DEFENDANTS



On appeal from the Superior Court of New Jersey, Law Division, Camden County.

King, Baime and Keefe. The opinion of the court was delivered by King, P.J.A.D.

King

After rebuilding 25 fire-damaged units in its apartment complex, the owner-landlord sought a rent increase for those units. Under Gloucester Township's rent control ordinance, a landlord may set rents for new units without regard to the limits of the ordinance. The landlord-owner claimed that the renovated units qualified as new units. The Rent Stabilization Board agreed with the owner but the Township Council did not and reversed on appeal. The Law Division judge reversed the Council, agreeing with the Rent Control Board's construction that these were new units. The judge also agreed with the landlord-owner that two sections of the ordinance concerning administrative appeals of rent increases were unconstitutional on equal protection and due process grounds. The Gloucester Township Council appeals on both issues. We agree with the Gloucester Township Council that the judge was wrong on both the constitutional and the ordinance-construction issues. We reverse.

I

Plaintiff, Somers Associates, Inc., was the managing agent of an apartment complex in Gloucester Township called the Village of Pine Run Apartments. In two fires, in 1984 and 1985, 25 of its 699 units were damaged. Plaintiff totally reconstructed the 25 damaged units. Plaintiff claimed that its renovations "in many cases reconfigured and upgraded the type and quality of the apartment units."

In April 1987 plaintiff applied to the Gloucester Township Rent Stabilization Board (Board) for a "periodic increase" in rents for the apartment complex. With regard to the 25 reconstructed units, plaintiff argued that they qualified as "new units" and were not subject to the rent-increase limitations of the Township's rent-stabilization ordinance. On May 5, 1987, after conducting hearings on the application, the Board agreed with plaintiff that the rentals for the 25 units could be

based upon the ordinance's guidelines for initial rental of new units.

The Village of Pine Run Tenants Association (Association) appealed the Board's decision to the Gloucester Township Council. By resolution of September 14, 1987, the Council reversed the Board's decision on the ground that "renovated or reconstructed units" could not, as a matter of law, qualify as "initial rentals" under the ordinance.

When plaintiff at first refused to comply with the Council's ruling, the Board filed a municipal court complaint in order to compel plaintiff's compliance. The record does not establish whether the municipal court issued any type of order. In any event, plaintiff eventually obeyed the Council's resolution, but brought the present action by filing a Law Division complaint in lieu of prerogative writ, seeking (1) a declaratory judgment that the restored units qualified as "initial rentals" under the exemption clause of the ordinance, and (2) a declaration that several sections of the ordinance were unconstitutional. Gloucester Township filed an answer denying the key allegations and asserting a series of technical defenses. The Board filed an answer disclaiming any stake as a defendant in plaintiff's suit. Though named as a defendant, the Association apparently took no part in the prerogative-writ action and does not participate on appeal. While the Board actually participated in the Law Division proceedings, it has filed a letter of nonparticipation on appeal.

Plaintiff moved for summary judgment. The Law Division judge found that the Board had correctly ruled that the 25 rehabilitated units constituted "initial rentals" under the ordinance. In addition, the judge agreed with plaintiff that several administrative appeal provisions of the ordinance were unconstitutional because they violated the landlord's due process and equal protection rights. The judge stayed his constitutional ruling pending appeal.

The appeal concerns four discrete issues:

1. Did the judge err in striking down several administrative appeal clauses in the rent-control ordinance on due process grounds?

2. Did the judge err in also striking the same administrative appeal clauses on equal protection grounds?

3. Did the judge err in invalidating the ordinance provision for a stay pending administrative appeals?

4. Did the judge err in rejecting the Township Council's interpretation of the "initial rental" clause of the ordinance?

II

Gloucester Township disputes the trial judge's holding that two provisions of § 68-10.1 of the rent stabilization ordinance are unconstitutional. First, we treat the judge's due process theory of invalidation.

In issue are two clauses of that section of the ordinance governing appeals to the Township Council from decisions of the Board. First, tenants, but not landlords, are given a right to appeal. "Any interested tenant may appeal to the governing body any final decision of the Rent Stabilization Board approving any application for rental increases exceeding the limit (4 1/2% annually) set forth in § 68-4A." § 68-10.1A. There is no right of appeal by either party from any other kind of Board decision, such as a denial of an increase or a grant of an increase of an amount within the percentage limits of § 68-4A. The second clause provides that when a tenant appeals, the Township must pay for the transcript of the hearing before the Board: "Upon the filing of an appeal, the Municipal Clerk shall order preparation of a transcript, the cost of which is to be paid by the Township." § 68-10.1C. The Law Division judge ruled that these provisions were a "clear violation of the due process and equal protection rights of the landlords."

The ordinance under attack is a rent control measure, which our courts have classified as legislation within a local government's police power. Orange Taxpayers Council, Inc. v. Orange, 83 N.J. 246, 254, 416 A.2d 353 (1980); Hutton Pk. Gardens v. West Orange Town Council, 68 N.J. 543, 555-556, 350 A.2d 1 (1975). As such, it is "subject to the same narrow

scope of review under principles of substantive due process as are other enactments under the police power: could the legislative body rationally have concluded that the enactment would serve the public interest without arbitrariness or discrimination?" Hutton Pk., 68 N.J. at 563-564, 350 A.2d 1. Rent control ordinances, like other legislative acts, are presumed to be constitutional. Orange Taxpayers, 83 N.J. at 256, 416 A.2d 353. To overcome this presumption a party challenging such an ordinance must carry the "heavy burden" of showing that the municipality knew of no set of facts "which would rationally support a conclusion that the enactment is in the public interest." Hutton Pk., 68 N.J. at 564-565, 350 A.2d 1. A reviewing court "will not evaluate the weight of the evidence for and against the enactment nor review the wisdom of any determination of policy which the legislative body might have made." Id. at 565, 350 A.2d 1. "Even if a court cannot ascertain the actual purpose of the statute, it should sustain the statute if it has any conceivable rational purpose." Matter of C.V.S. Pharmacy Wayne, 116 N.J. 490, 498, 561 A.2d 1160 (1989). Likewise, a reviewing court should approve the means selected to achieve the legislative purpose "unless those means are so irrelevant as to be irrational." Ibid.

In supporting its ordinance against plaintiff's due process challenge, Gloucester Township first argues that the "tenants only" appeal clause comports with the rational basis test. We have searched without success for cases in which an ordinance or statute gave a right to appeal, at the local level in an administrative process, to only one of the contending parties. There is substantial case law to the effect that due process and equal protection require that, if a State chooses to provide a system of appeals from court decisions in civil cases, it may not give the right of appeal to some litigants while denying that right to others. See, e.g., Lindsey v. Normet, 405 U.S. 56, 77, 92 S. Ct. 862, 876, 31 L. Ed. 2d 36, 52-53 (1972); Lynk v. La Porte Superior Court No. 2, 789 F.2d 554, 565 (7 Cir.1986). The right of appeal is not, however, a necessary ingredient to

due process, In re Logan, 70 N.J. 222, 228, 358 A.2d 787 (1976), nor is it a "fundamental right" for the purposes of equal protection analysis. United States v. Avendano-Camacho, 786 F.2d 1392, 1394 (9 Cir.1986).

Gloucester Township relies on Pennell v. San Jose, 485 U.S. 1, 108 S. Ct. 849, 99 L. Ed. 2d 1 (1988). There, the rent control ordinance allowed a tenant to demand a hearing before a hearing officer if the landlord wanted to increase the rent above the ordinance's stated limit of 8%. Among the factors which the hearing officer was allowed to consider was "hardship to the tenant." An association of landlords attacked this provision as facially violative of the due process and equal protection clauses of the Fourteenth Amendment, reasoning that alleviating individual tenant hardship at a particular landlord's expense was not a permissible governmental goal. See Property Owners Assn. of N. Bergen v. Tp. of N. Bergen, 74 N.J. 327, 338-339, 378 A.2d 25 (1977).

The Court rejected the landlords' due process claim, ruling that the ordinance "represents a rational attempt to accommodate the conflicting interests of protecting tenants from burdensome rent increases while at the same time ensuring that landlords are guaranteed a fair return on their investment." 485 U.S. at 13, 108 S. Ct. at 858.

Gloucester Township argues that the "tenants only" appeal clause also represents a rational attempt to balance these interests. The Township says: "This balance is struck by giving tenants the right to appeal in only a limited situation, i.e. when the Rent Stabilization Board grants a landlord an increase greater than the annual limit. No other appeal to Council, whether by landlord or tenant, is available under the Ordinance." Pennell offers us no direct help in evaluating the "tenants only" appeal provision, since no such appeal restriction was at issue in that case. Pennell is, however, of interest to the extent that it supplies a general test to be applied in assessing any specific clause of a rent control ordinance: Does

it reasonably balance the competing legitimate interests of ...


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