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Palatine I v. Planning Board of Township of Montville

Decided: August 5, 1993.


On certification to the Superior Court, Appellate Division.

For affirmance -- Chief Justice Wilentz, and Justices Handler, Pollock and Garibaldi. For reversal and remandment -- Justices Clifford, O'Hern and Stein. The opinion of the Court was delivered by Garibaldi, J. Chief Justice Wilentz and Justices Handler and Pollock join in this opinion. Justice Stein has filed a separate Dissenting opinion in which Justices Clifford and O'Hern join. Stein, J., Dissenting. Justices Clifford and O'Hern join in this opinion.


[133 NJ Page 549] This appeal presents the question of whether a municipal planning board's grant of preliminary site-plan approval and a building permit insulates a developer in perpetuity against zoning changes. Specifically, is a municipal planning board equitably estopped from denying final site-plan approval and applying post-preliminary site-plan approval zoning amendments to a developer whose preliminary site-plan approval and construction permit have expired? Like the trial court and Appellate Division below, we conclude that it is not. Accordingly, we affirm the judgment of the Appellate Division.

I. Facts and Procedural History

Plaintiff, Palatine I (Palatine), is a partnership owning 4.9 acres of land in Montville. In 1982, Palatine applied to the Montville Planning Board (the Board) for preliminary site-plan approval for an office building. The application proposed a 65,000-square-foot two-story building, consisting of two 30,000-square-foot wings connected by a central core. On February 11, 1982, the Board, finding that the application fully complied with all then-existing zoning regulations, granted preliminary site-plan approval. That initial grant of preliminary site-plan approval conferred rights on Palatine for a three year period, ending February 11, 1985. In October 1984, Palatine applied for and received an extension of the preliminary site-plan approval to February 11, 1986. In January 1986, Palatine applied for and received a second extension to February 12, 1987. In granting the second extension, the Board warned Palatine that "this is the last extension of preliminary site plan you can request."

During the period covered by the second extension, Palatine applied for a construction permit. The permit was issued by Montville's construction official on April 11, 1986. Palatine paid fees of $4,699.31 for the construction permit. Printed across the bottom of the permit was the following notice:

If construction does not commence within one (1) year of date of issuance, or if construction ceases for a period of six (6) months, this permit is void.

Palatine did commence construction and completed the first wing of the building (Section I) and the central core sometime in 1987 or 1988. Palatine also laid a concrete slab as a foundation for the second wing (Section II), but did not construct the remainder of Section II because of "the sagging real-estate market." At that stage, Palatine had spent approximately $2,000,000 for construction costs, including $200,000 for a storm sewerage permit and $40,000 for soil improvement. No allocation has been made of the construction costs attributable solely to the construction of Section II. Palatine still has no plans to build Section II in the foreseeable future.

In October 1989, Palatine, having secured tenants for Section I, applied for a certificate of occupancy for that Section and for final site-plan approval for the entire complex. In 1986 and 1987, after the granting of the preliminary site-plan approval, Montville had amended its zoning ordinances in ways that made them more restrictive than the zoning ordinances in effect at the time of the original approval. Under the new standards, the largest building that could be built on Palatine's property would be approximately 45,000 square feet. Palatine had already built one 30,000-square-foot wing plus the small core. Roughly speaking, therefore, the net effect of the maximum lot coverage standard, if applied to Palatine, would be that Palatine would have to halve the size of the unbuilt wing or else obtain variances.

In considering Palatine's application for final site-plan approval, the Board bifurcated its consideration of Section I and the core, which existed, and Section II, which did not. The Board's resolution stated:

this application was originally submitted in 1981 and the first building has been completed while only a foundation exists for the second building, and the Board notes that no work has progressed on the second building for a period of years. Applicant now wants to rent the first building but preserve his rights under the original Ordinance for the construction of Phase II, the second building; and

the applicant testified that completion of the original project was held up because of economics; and

the Board, based on legal advice, finds that while the first building was in compliance with the 1981 Land Use Ordinance, that building number 2 when completed, must comply with the Ordinance in affect [sic] at the time a new site plan application is approved; and

the Board finds that the application should be bifurcated and approval given only to the first building * * *.

Accordingly, the Board granted final site-plan approval and a certificate of occupancy for the existing structure consisting of Section I and the core. However, the Board denied final site-plan

approval for Section II because the plans did not comply with current zoning regulations.

Palatine filed a complaint in lieu of prerogative writ in the Law Division on December 19, 1990, naming the Board as the sole defendant. Palatine sought declaratory judgment that it was entitled to final site-plan approval on the entire project and that it could, "at such time as it sees fit," complete construction of Section II as originally approved under 1982 zoning law. Palatine presented two arguments. The first was that the Board was arbitrary, capricious, and unreasonable and acted contrary to law in concluding "that * * * preliminary site plan approval on building number 2 had expired; and/or * * * [t]hat Palatine is subject to zoning amendments rendering the Building nonconforming after the commencement of construction." The second theory was that due to Palatine's reliance on the building permit, the Board was equitably estopped from enforcing against Palatine any zoning amendments adopted after construction began. The Board counterclaimed for declaratory relief, arguing that it had acted within its rights in denying final approval. The parties entered into a stipulation of facts.

After oral argument, the trial court affirmed the Board's decision to deny Palatine final site-plan approval for Section II and to subject plaintiff to the zoning regulations enacted after the grant of preliminary approval. The trial court stated, however, that a "plausible case might well be made by the plaintiff for getting a variance" from the Montville Board of Adjustment.

Plaintiff appealed, adding as a third theory that the entire proposed building, including both Section I and the unbuilt Section II, was protected as a pre-existing nonconforming structure under N.J.S.A. 40:55D-68. The Appellate Division rejected all Palatine's arguments and affirmed the trial court's judgment substantially for the reasons expressed in its opinion.

We granted certification, 130 N.J. 601, 617 A.2d 1223 (1992), and now affirm.

II. Protection Under Preliminary Site-Plan Approval

A municipality is empowered by N.J.S.A. 40:55D-37 to enact an ordinance requiring approval of site plans by the municipal planning board as a condition for issuance of a construction permit. Montville has such an ordinance. Accordingly, Palatine submitted its plans for its proposed office building in 1981 and received preliminary site-plan approval on February 11, 1982.

A grant of preliminary site-plan approval carries with it certain rights. N.J.S.A. 40:55D-49 provides that preliminary approval protects the applicant from changes in zoning ordinances for three years, except for zoning changes that "relate to public health and safety." That statute also states that "the applicant may apply for and the planning board may grant extensions on such preliminary approval for additional periods of at least 1 year but not to exceed a total extension of 2 years, provided that if the design standards have been revised by ordinance, such revised standards may govern." The purpose of the statute is to give a developer a reasonable period of protection from changes in the zoning law. Bleznak v. Township of Evesham, 170 N.J. Super. 216, 219, 406 A.2d 201 (Law Div.1979).

Thus, an applicant who receives preliminary site-plan approval for a project is protected under N.J.S.A. 40:55D-49 against the application of adverse zoning amendments unrelated to public health or safety for up to five years from the grant of preliminary site-plan approval. After those five years have elapsed, the preliminary approval does not automatically expire, but the statutory period of protection from adverse changes in zoning regulation does expire.

On the closely related subject of final site-plan approval, William Cox writes:

There is a common misapprehension that a site plan "expires" at the end of the two-year period set forth in N.J.S. 40:55D-52a. The statute does not so provide; the site plan is given protection, or vested rights, against a change in zoning for said period, but if at the expiration of the two years there has been no change in zoning, the site plan continues to be in full force and effect until such time as the developer determines to proceed with the development.

[William M. Cox, New Jersey Zoning and Land Use Administration para. 15:5.2 (1993) (emphasis added).]

If, however, there has been a change in the zoning, then the final site-plan approval will not insulate the site plan from the application of the new zoning laws after the two-year period of protection expires.

The same is true of preliminary approval, except of course that the statutory term of years is different. The approval itself is valid indefinitely, but its effect of insulating the holder from changes in the zoning laws is limited to the specified term of years. If the applicable zoning laws have not changed, the holder of preliminary approval may continue past the five-year period without obtaining further approvals. However, if the zoning laws have changed, then after the five-year period of protection has elapsed, the municipality may enforce those new regulations against the holder of preliminary approval.

Thus, Palatine's preliminary approval protected it from non-safety-related changes in the zoning laws for a five-year period. That protection began on February 11, 1982, and ended on February 11, 1987. By the time Palatine applied for final site-plan approval in October 1989, it was no longer protected by the preliminary site-plan approval from changes in the applicable zoning laws.

III. Building Permit

While it was still under the preliminary site-plan approval's protection, Palatine applied for a building permit. Montville's zoning ordinances allow a developer to obtain a building permit before obtaining final site-plan approval. The relevant ordinance states:

A construction permit in connection with a site plan may be issued following preliminary approval and prior to final approval * * *.

[Montville Code § 150-78(B).]

Although it may be, as the trial court stated, "the better practice" for a municipality to require final site-plan approval before issuing

a site plan, the Municipal Land Use Law (MLUL) does not clearly mandate that practice. Cox states that "[t]here can be no commencement of construction and, in fact, no issuance of a building permit until final approval of a site plan has been obtained," Cox, supra, para. 15-5.2, but he cites no case or statute in support of that unequivocal assertion. The relevant statute states:

The governing body may by ordinance require approval of subdivision plats by resolution of the planning board as a condition for the filing of such plats with the county recording officer and approval of site plans by resolution of the planning board as a condition for the issuance of a permit for any development * * *.

[ N.J.S.A. 40:55D-37(a).]

The authorizing statute does not distinguish between preliminary and final site-plan approval, nor does it distinguish between preliminary and final subdivision approval, thus leaving unclear which form of approval may be required before a building permit may issue. Case law has answered that question with regard to subdivisions, holding that final subdivision approval is required before a building permit may be issued. Levin v. Township of Livingston, 35 N.J. 500, 512-13, 173 A.2d 391 (1961); Cella v. Township of Cedar Grove Bd. of Adjustment, 45 N.J. Super. 585, 589, 133 A.2d 389 (Law Div.1957). However, no case has construed the statute with regard to site-plan approval. Montville's ordinance reflects that distinction, requiring final approval before issuance of a building permit for a subdivision, Montville Code § 150-78(A), but requiring only preliminary approval for a site plan, Montville Code § 150-78(B).

The question of whether N.J.S.A. 40:55D-37 refers to final site-plan approval rather than preliminary site-plan approval as a condition for the issuance of a permit is not before us. Palatine does not challenge the validity of the ordinance. Although the Board did argue below that the ordinance was invalid because it improperly allowed issuance of a building permit before final site-plan approval, it did not seek certification of that question.

Moreover, even if the ordinance were invalid, that circumstance would be irrelevant to the Disposition of this case. When a

permit is issued in good faith and in apparent compliance with the law, and the permit-holder reasonably and in good faith relies on that permit, the issuing municipality is estopped from revoking it even if it was erroneously issued. Jantausch v. Borough of Verona, 41 N.J. Super. 89, 124 A.2d 14 (Law Div.1956); see also Gruber v. Mayor of Raritan Township, 39 N.J. 1, 186 A.2d 489 (1962) (noting distinction between "an act which is utterly beyond the jurisdiction of a municipality and an act which involves an irregular exercise of a basic power possessed by the municipality," stating in latter case municipality may be equitably estopped from revoking irregularly-issued permit after reliance). Essentially, such a permit is treated as validly issued. The permit in this case was issued in good faith and relied upon by Palatine. Therefore, we treat the permit as validly issued regardless of the ordinance's validity. Palatine received its building permit on April 11, 1986, within the five-year period of protection from adverse zoning changes afforded by the preliminary site-plan approval. The permit bore the following words on its face:

Note: If construction does not commence within one (1) year of date of issuance, or if construction ceases for a period of six (6) months, this permit is void. (emphasis added).

Palatine began construction and completed Section I and the core of the building, and also laid a concrete slab as a foundation for Section II. At that point, sometime in 1988, Palatine halted construction, anticipating a shortage of tenants due to a downturn in the real-estate market. Neither the Board nor any town entity influenced Palatine's decision to halt construction; it was a unilateral decision based on economics. Palatine has never attempted to resume construction nor does it have any plans to do so in the foreseeable future. Construction having ceased for more than six months, the permit was void on its face long before the Board denied final site-plan approval or Palatine filed this suit.

Palatine argues, however, that the permit still entitles it to build Section II whenever it chooses without having to comply with any zoning changes enacted after the 1982 preliminary site-plan approval. Palatine's argument in support of its position really

consists of two discrete arguments. Its primary argument is that due to Palatine's reliance on the permit and the preliminary site-plan approval, the Board is equitably estopped from revoking or from refusing to reissue a building permit. That argument is discussed in Part IV of this opinion. Its second, subsidiary argument is that the words on the face of the permit, despite their apparently plain meaning, do not operate to void the permit after a six month halt in construction.

The time limitation on the face of the permit is based on the New Jersey Uniform Construction Code (the Code). The Code, codified at Title 5, Chapter 23 of the New Jersey Administrative Code, was adopted by the Commissioner of the Department of Community Affairs pursuant to the Legislature's command that he "adopt a State Uniform Construction Code." N.J.S.A. 52:27D-123. The Commissioner was given "all powers necessary or convenient to effectuate the purposes of this act, including [the power] * * * [t]o adopt, amend and repeal * * * rules relating to the administration and enforcement of this act" and to "make, establish and amend * * * such rules as may be necessary, desirable or proper to carry out his powers and duties under this act." N.J.S.A. 52:27D-124.

Section 5:23-2.16 of the Code governs construction permits. In relevant part, it states:

(b) Suspension of permit: Any permit issued shall become invalid if the authorized work is not commenced within 12 months after issuance of the permit, or if the authorized work is suspended or abandoned for a period of six months after the time of commencing the work.

[ N.J.A.C. 5:23-2.16.]

Palatine does not argue that N.J.A.C. 5:23-2.16(b) is arbitrary and capricious or beyond the scope of the Commissioner's authority to adopt. It argues that the regulation does not mean what it says. According to Palatine, N.J.A.C. 5:23-2.16(b)'s sole intent was to allow a municipality to require a builder who suspended construction to comply, on resuming ...

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