On appeal from the Superior Court of New Jersey, Law Division, Passaic County.
O'Brien, Havey and Braithwaite. The opinion of the court was delivered by O'Brien, J.A.D.
Defendants, Passaic Valley Water Commission (PVWC) and Rocco Trifari (Trifari) appeal from an order of the Law Division ordering PVWC to enter into a lease with plaintiff Richard Miller (herein plaintiff or Miller) for certain property owned by PVWC and requiring Trifari to vacate those premises. We reverse and remand.
PVWC is a water works formed and operating pursuant to N.J.S.A. 40:62-109 and is the owner of a small triangular parcel of land abutting Route 46 in Totowa, New Jersey, through which an underground water pipe runs. After the solicitation of bids pursuant to N.J.S.A. 40A:12-14, PVWC leased the premises in question (p.q.) to defendant Trifari by lease dated November 1, 1981. The term of the lease was for ten years commencing November 1, 1981 and ending on October 31, 1991. The p.q. were to be occupied solely for the purpose of selling food from mobile facilities with no permanent structures and for the sale of Christmas trees.*fn1 The gross rental for the ten-year term was $18,000, payable in 120 equal monthly installments of $150. Trifari, as tenant, also agreed to pay the real estate taxes. PVWC reserved the right to enter the p.q. to maintain, repair and replace its existing water pipes, and Trifari paid a security deposit of $1,800, together with a performance bond guaranteeing payment of the gross rental.
Seven commissioners (commission) have been appointed to administer and set policy as the PVWC for the three owner cities, Clifton, Passaic and Paterson (increased in 1989 from 4 commissioners). See N.J.S.A. 40:62-110.1. In the summer of
1991, the commission became aware of the upcoming expiration of the Trifari lease on October 31, 1991. The p.q. was minuscule in comparison to the overall operation of PVWC. Further, many of the present commissioners were not members of the commission at the time the lease with Trifari was entered into.
The law department of PVWC was directed to prepare an invitation to bid and specifications to be publicly advertised for the receipt of sealed bids on October 1, 1991, pursuant to N.J.S.A. 40A:12-14(a). The invitation to bid advised that the sealed bids would be publicly opened and read on October 1, 1991, and "[i]mmediately after opening of seals [ sic ] bids, an open public sale and auction will be conducted."*fn2 In a supplement to the invitation to bid, PVWC stated that the length of the lease proposed would be for ten years at an aggregate minimum rental over the life of the lease of $36,000, plus payment of real estate taxes.
In the invitation to bid, PVWC reserved the right to reject any bid wherein it was indicated that the use of the premises
would be contrary to the best interests of the commission and the public and also specifically contained a provision:
Section 1-6.0 The Commission reserves the right to reject any and all bids; to waive any defects or informalities in bids received, and to accept any bid which it deems most favorable to the commission at the time and under the circumstances prevailing.
On October 1, 1991, the sealed bids were opened, revealing that Miller had bid $46,000 and Trifari had bid $36,000 for the ten-year lease term. Following the opening of the sealed bids, a public auction was held at which Miller and Trifari participated, and Miller made the high bid of $71,000 over Trifari's last bid of $70,000, and Miller deposited the requisite 10%.
When the results of the bidding and auction were reported in the press, there were expressions of concern that as a result Trifari, who has been blind since birth, would be dispossessed from the property upon which he had operated his business for many years. Allegedly, this was followed by a public outcry and expressions of sympathy for Trifari. The commission concedes that this publicity and emotional public response served as a catalyst for the commission to focus with greater intensity on the use and value of the property.
The commission conducted a workshop session on October 9, 1991, at which there was a lengthy Discussion of the bid process and the results. Comment was offered by the public, including the Mayor of Paterson, who was also a state assemblyman. While there were expressions of sympathy for Mr. Trifari and comment about his being a good neighbor and a landmark in Passaic County, as well as having proven his financial value, one of the commissioners suggested he would be interested in financial statements not only from the current tenant but from any other bidder. This commissioner observed, after stating that he felt all bids should be rejected,
I'd like to see some financial statements submitted with a new bid after rejecting this first bid. The financial statements not only by the current tenant, if he's interested in bidding again, but also by anybody else who would be interested in making a bid. The second matter that disturbs me, and I need to resolve it within myself, is that we're dealing with a ten-year lease and there's
no cost of living nor other escalation in that time period. So we're basically going to be talking about making a decision where we're paying in 1991 dollars on money that's not due until the year 2000 or the turn of the century. Although I'm here as a commissioner, in my professional life I'm an attorney and I just feel that's wrong. I feel that maybe we should have the bids thrown out and reconsidered having that in mind; some kind of escalation of cost of living or otherwise.
The matter was continued until October 23, 1991. At that session, the president of the commission, Alan Levine, observed that the commission had three choices, (1) accept the bid of the highest bidder; (2) reject all bids; or (3) give it to a bidder who was not the highest bidder. Levine expressed his view that all the bids should be rejected and that the lease should not be for a ten-year period. The attorney for the commission confirmed the right of the commission to reject all bids. One of the commissioners suggested that they look into the potential for sale of the p.q., recognizing that it would require an easement because of the pipe running underneath it. He also recommended that the present lease with Trifari continue until new specifications could be drawn. In response to one of the commissioner's suggestion that they accept the bid of Trifari because he had been a good tenant, counsel for the committee advised they could not do that.
The commission expressed its unanimous desire to reject all bids and to form a committee to review and evaluate the alternatives available and report back. A formal resolution was adopted on October 23, 1991, rejecting all bids for the following reasons:
A. Reconsideration of the length of the lease based on the economics of Passaic Valley Water Commission, as to entering into a long term lease;
B. Exploring the possibility of the potential sale of the property;
C. Material modification of the specifications for the leasing of the property including but not limited to financial disclosures by prospective bidders.
The resolution also provided that Trifari continue to occupy the p.q. as a month-to-month tenant. A committee was appointed to ...