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In re Gatto Desgin & Development Corp.

November 10, 1998

GATTO DESIGN & DEVELOPMENT CORP., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT,
v.
THE TOWNSHIP OF COLTS NECK, DEFENDANT-RESPONDENT.



Before Judges Havey, Skillman and P.g. Levy.

The opinion of the court was delivered by: Havey, P.j.a.d.

[9]    Argued September 23, 1998

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

In this zoning case, plaintiff Gatto Design & Development Corp., appeals from a grant of summary judgment in favor of defendant Township of Colts Neck upholding the validity of § 412 of the Colts Neck Township Development Regulation Ordinance (DRO). Plaintiff contends that § 412 of the DRO violates the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-6 and 53, because it: (1) precludes a developer from submitting a surety bond as an acceptable performance guarantee; and (2) requires the posting of the performance guarantee before the developer's application for final subdivision is deemed complete. We agree with plaintiff's contentions and accordingly reverse.

Plaintiff is the owner of property located in Colts Neck, designated as Block 23, Lot 20, on the official tax map. Plaintiff applied to the Colts Neck Township Planning Board for final major subdivision approval subdividing the subject property into twelve lots. Plaintiff's application was subject to § 412 of the Township's DRO. Section 412 limits the acceptance of performance guarantees to irrevocable letters of credit and/or certified check. It also provides that a developer must submit the required performance guarantee as a prerequisite to the Planning Board certifying a developer's application for final major subdivision approval as complete.

The Township's engineer determined that the aggregate performance guarantees required for the proposed subdivision amounted to $389,300. Plaintiff, through its attorney, advised the Township by letter that the provisions of § 412 of the DRO did not comply with the definitions and requirements of the MLUL, and requested that Colts Neck accept plaintiff's proffered surety bond as its performance guarantee. Plaintiff thereupon submitted ten percent of the engineer's estimate of $389,300, in the form of a certified and/or bank check and ninety percent, $350,370, in the form of an original surety bond issued by Frontier Insurance Company. The Planning Board advised plaintiff that its application for final major subdivision approval was incomplete because a surety bond was not an acceptable form of performance guarantee pursuant to § 412 of Colts Neck's DRO.

Colts Neck's engineer thereafter revised the estimate for the amount required as a performance guarantee to $309,260. Plaintiff, under protest, submitted to Colts Neck a cashier's check in the amount of $270,330 to satisfy the balance of the performance guarantee requirement.

Plaintiff thereafter filed an action in lieu of prerogative writs challenging the validity of § 412 Colts Neck's DRO. It also sought "compensatory damages" as well as costs of suit and attorneys fees. Colts Neck moved for summary judgment, arguing that plaintiff's complaint was barred by the Tort Claims Act, N.J.S.A. 59:1-1 to N.J.S.A. 59:14-4, and that its DRO conformed in every respect to the provisions of the MLUL. The motion Judge agreed, concluding that, with the exception of irrevocable letters of credit issued under N.J.S.A. 40:55D-53.5 and cash, the MLUL gives municipalities the discretion to determine, by ordinance, what type of performance guarantees they will accept. He observed that Colts Neck's purpose in refusing to accept surety bonds, to avoid the possibility of delay or litigation in recovering from the surety, was a reasonable exercise of the Township's legislative discretion. He further held that the requirement that a developer submit an acceptable performance guarantee as a condition precedent to deeming the developer's application complete was not improper because the MLUL allows municipalities to require guarantees "as a condition to final site plan approval." I.

N.J.S.A. 40:55D-53a provides in part:

Before recording of final subdivision plats or as a condition of final site plan approval or as a condition to the issuance of a zoning permit pursuant to subsection d. of section 52 of P.L.1975, c. 291 ([N.J.S.A.] 40:55D-65), the approving authority may require and shall accept in accordance with the standards adopted by ordinance for the purpose of assuring the installation and maintenance of on-tract improvements . . . [t]he furnishing of a performance guarantee . . . ."

[Emphasis added.]

N.J.S.A. 40:55D-6 defines "performance guarantee" as "any security, which may be accepted by a municipality, including but not limited to surety bonds, letters of credit under the circumstances specified in section 16 of P.L.1991, c. 256 ([N.J.S.A.] 40:55D-53.5), and cash." Plaintiff argues that, by defining performance guarantees as "any security . . . including but not limited to surety bonds, letters of credit . . . and cash," the Legislature intended that a municipality be required to accept a surety bond as a form of performance guarantee. Colts Neck counters that the language "including but not limited to surety bonds, letters of credit . . . and cash" was intended to be merely illustrative of the type of securities "which may be accepted by the municipality." The Township reasons that ultimately, under N.J.S.A. 40:55D-53, it has the unqualified discretion to require a single type of security, such as irrevocable letters of credit, in accordance with the "standards adopted by ordinance."

We reject Colts Neck's argument. Prior to 1991, N.J.S.A. 40:55D-6 defined performance guarantee as "any security, which may be accepted by a municipality, including cash; . . . ." By P.L.1991, c. 256, § 2, the Legislature added the language "including but not limited to surety bonds, letters of credit under the circumstances specified in ([N.J.S.A.] 40:55D-53.5), and cash." The Committee Statements attached to Assembly Bill No. 1440, *fn1 ultimately passed into law, state that "[s]section 2 changes the definition of `performance guarantee' in [N.J.S.A. 40:55D-6] to include surety bonds and certain letters of credit." (Emphasis added). To us, the statements express a clear legislative mandate that municipalities accept surety bonds and certain letters of credit as performance guarantees. It is a legislative acknowledgement that such forms of security are acceptable. The amendment strikes a fair balance; it gives the developer, who may not have the immediate financial wherewithal to secure an irrevocable letter of credit, the option to file a surety bond, and provides the municipality with satisfactory security in the form of a bond, acceptable in form to the municipal attorney, issued by a qualified surety institution.

Further, an amendment to a statute ordinarily implies a purposeful alteration in substance. Stauhs v. Board of Review, 93 N.J. Super. 451, 457 (App. Div. 1967). If a statute amends a previous law, we must seek to uncover the intention by examining the old law, the matters deemed to require correction and the remedy enacted. Newark v. Township of Hardyston, 285 N.J. Super. 385, 395 (App. Div. 1995), certif. denied, 143 N.J. 518 (1996). The statute should not be read so as to "render the amendments futile and abortive," ibid., or meaningless or superfluous. In re Sussex County Mun. Util. Auth., 198 N.J. Super. 214, 217 (App. Div.), certif. denied, 101 N.J. 267 (1985). Prior to the 1991 amendment, a municipality had the unqualified power to accept or reject any form of security, including surety bonds and letters of credit. Colts Neck's contention that the 1991 amendatory language was simply to illustrate the type of security a municipality could accept or reject renders the amendatory language meaningless and superfluous; there was no reason to illustrate the type of security a municipality could accept in view of its unqualified ...


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