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DKM Residential Properties Corporation v. Township of Montgomery

September 15, 2003

DKM RESIDENTIAL PROPERTIES CORPORATION, PLAINTIFF-APPELLANT,
v.
THE TOWNSHIP OF MONTGOMERY AND THE CONSTRUCTION BOARD OF APPEALS OF THE TOWNSHIP OF MONTGOMERY, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Somerset County, L-202-01.

Before Judges Wefing, Wecker and Fuentes.

The opinion of the court was delivered by: Wecker, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 4, 2002

This appeal presents a question of first impression concerning the power of a municipal construction official to issue a notice of violation to a residential builder years after a certificate of occupancy was issued and title transferred to the new homeowner. Both plaintiff, DKM Residential Properties Corporation ("DKM"), and defendants, Township of Montgomery ("Montgomery") and the Montgomery Construction Board of Appeals ("the Board"), agree that the scope of the municipal officer's jurisdiction is solely a legal issue. Both parties agree that the Law Division judge did not decide that issue, except insofar as her decisions on cross-motions for summary judgment constituted a de facto decision in favor of jurisdiction. Both parties now seek a ruling by this court rather than a remand to the Law Division. We accede to that request and now reverse.

Because the issue of jurisdiction is determinative, and because the Board's findings of fact were not challenged on the merits in this appeal, we do not review those findings. Our decision today does not reflect any view of the merits of pending or future claims against DKM by any homeowner or group.

I.

This action arose when the municipal construction official issued a Notice of Violation and Order to Terminate ("NOV") to DKM, invoking his authority pursuant to the State Uniform Construction Code Act, N.J.S.A. 52:27D-119 to -141 ("the Act"), and the regulations promulgated thereunder by the Department of Community Affairs ("the DCA"), N.J.A.C. 5:23-1.1 to -12A.6 ("the regulations"). The regulations adopt the State Uniform Construction Code ("the UCC"), as mandated by N.J.S.A. 52:27D-123(section a). The Act empowers municipal construction officials"to administer and enforce the [UCC]." N.J.S.A. 52:27D-126(section a). Both parties also agree that compliance with the UCC is the main goal of the regulations.

The core of DKM's argument in the Law Division, and now before us, is that the municipal construction official lacks authority to issue an NOV to a builder/developer after its work on the property has been completed and a certificate of occupancy issued, and after the developer has transferred title to the property, because the developer no longer has control over the property and therefore has no power to correct the alleged violation. Rather, DKM contends that there is no legal basis for implying enforcement authority against the developer, and code compliance can be met by enforcement against the current property owner, as expressly authorized by the Act.

DKM further contends that if the Act and the regulations are construed to grant such authority to the construction official, those enactments violate both the United States and the New Jersey constitutions.*fn1 In light of our conclusion that the municipal construction official does not have the authority to issue an NOV to DKM, we need not address the constitutional challenge. We also need not address DKM's additional arguments: that the official is equitably estopped from issuing the NOV to DKM based on having previously issued certificates of occupancy; that the municipality illegally delegated its governmental function to the homeowners or their privately retained engineer; that the Board's action constituted an interference with existing contracts; and that the Board violated a stay order issued by the Law Division.

II.

These are the circumstances in which the issue of the jurisdiction of the construction official arose. Several homeowners in the Cherry Valley Country Club ("Cherry Valley") residential development in Montgomery Township found leaks in their homes and retained professional engineers who inspected the Exterior Insulation and Finish System ("EIFS") on their homes. EIFS is an exterior, synthetic, stucco-like finish, whose allegedly defective installation allowed water and moisture to enter the homes, causing damage. The EIFS had been applied, and the construction completed between 1995 and 1998. The dissatisfied homeowners brought their engineer's reports to the Montgomery construction official, who issued the first NOV to DKM on December 12, 2000. That NOV alleged that plaintiff improperly applied EIFS to nine houses it had constructed and sold in the Cherry Valley development, in violation of the UCC, specifically the provision requiring that all exterior walls provide"a barrier against the weather and insects to enable environmental control of the interior spaces."*fn2 The construction official issued several additional NOVs to DKM citing the same problem for a total of sixty-two buildings in the development.

The record before us includes an NOV dated February 20, 2001, specifying violations at fourteen sites, thirteen of which were one-family homes owned by private parties, and one of which included Cherry Valley's tennis and golf clubhouses, cabana pool building, and a maintenance building, all owned by DKM. An attachment to that NOV described the alleged violation:"The installation of the exterior insulation and finish system [EIFS] was not done as per the manufacturer's specifications as approved by BOCA Evaluation Service Report #92-14, Sto [the manufacturer] Specifications A100, N.J.A.C. 5:23-2.21 and 1995 CABO code section 703.1." The next NOV is dated March 6, 2001, and specifies violations at fourteen private homes. The description of the alleged violations was identical to the preceding NOV. The third NOV, dated April 5, specified nine private homes and alleged the same violation. On July 16, 2001, a fourth NOV was issued, alleging the same violation at sixteen additional private homes. We are therefore aware of sixty-one pending citations respecting homes built in Cherry Valley by DKM and sold to private parties, and one citation to DKM for its own property.

The NOVs were never served upon any of the homeowners; that is, the homeowners were neither cited for the alleged violations nor threatened with revocation of the certificates of occupancy or penalties for failure to bring their properties into compliance with the UCC.

The procedural history leading up to the Law Division decision is complicated and largely irrelevant to the issue we now address. A few procedural facts will suffice to set the stage for our discussion. Promptly after the first NOV issued, DKM filed an appeal with the Board.*fn3 DKM also filed this action in lieu of prerogative writs, challenging the municipal construction official's authority to issue the NOV. As each of the several NOV's issued, DKM appealed those violation notices to the Board and amended its complaint to include them.*fn4 In the interim, the Board held an evidentiary hearing on the first NOV and concluded that the violations had been proven: the EIFS installations failed to meet the UCC. The Board ordered DKM to prepare a remediation plan and to obtain the homeowners' consent to the plan.

DKM submitted a remediation plan under protest. That plan included replacing the EIFS with a different synthetic stucco. Thereafter, the Board held brief additional hearings on two additional NOVs, rejected DKM's plan as submitted, required changes, and set forth penalties for non-compliance.

On cross-motions for summary judgment in the prerogative writs action, the judge denied DKM's motion and granted defendants' motion, effectively affirming the Board's order for DKM to remediate, on threat of penalties. DKM's application for a stay was denied by the Law Division, the Appellate Division, and the Supreme Court. DKM then submitted a modified remediation plan, which was approved. The plan provided for replacement of the EIFS, with the homeowners permitted to select many of the details; repair of damage to the affected homes caused by defective material or installation; a mechanism for resolving disputes about the nature and extent of such damage; and elimination of previously imposed penalties, as DKM completed remediation on each property within the time allowed.*fn5

The judge's written decision is difficult to follow, and in several respects inconsistent. The judge did not expressly decide the jurisdictional issue; however, by dismissing the complaint and leaving DKM's appeals for the Board to determine, a decision was made, albeit without explanation. Clearly the jurisdictional issue [.minus] whether the NOVs issued to DKM were ultra vires [.minus] is determinative. In the ...


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