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Island Venture Associates v. New Jersey Department of Environmental Protection

May 05, 2004

ISLAND VENTURE ASSOCIATES, PETITIONER-RESPONDENT,
v.
NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, RESPONDENT-APPELLANT.



On certification to the Superior Court, Appellate Division, reported at 359 N.J. Super. 391 (2003)

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

VERNIERO, J., writing for the Court.

The issue in this appeal is whether a property owner is bound to a use restriction on its land that was imposed by the Department of Environmental Protection (DEP) as part of a coastal permit issued to the owner's predecessor in title.

In 1988, High Bar Harbor Development Company (High Bar) sought a permit from the DEP to construct eighteen single-family dwellings on a tract of land in Long Beach Township (the Township) adjacent to a marina site. The DEP issued a permit pursuant to the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13: 19-1 to -21 that included an administrative condition requiring that the marina site "remain a water dependent use in perpetuity." In 1990, High Bar recorded a deed with the required language. Following approval of a subdivision, High Bar inquired of the DEP whether construction on the newly subdivided parcels, in particular Lots 3.03 and 3.04, required a CAFRA permit. By letter dated March 18, 1991, the DEP advised High Bar that no permit was required so long as there was no construction in wetlands, but the letter did not refer to the 1989 water-dependent restriction.

High Bar never developed Lots 3.03 and 3.04 and instead sold them to Island Venture Associates (Island Venture). However, the deed to the property did not contain any condition concerning water-dependency and the title insurance policy did not identify any restriction affecting Lots 3.03 or 3.04, though it did reveal the waterdependent restriction contained in the recorded Master Deed. In 1999, Island Venture applied to the Township for construction permits to build two family residences, one on Lot 3.03 and another on Lot 3.04. At first the DEP gave the Township and Island Venture the green light, only requiring that Island Venture apply for a modification of the 1989 CAFRA permit to allow for the construction of two additional dwellings. But in a letter dated May 17, 2000, the DEP admitted that it had made a mistake and that it could not approve a modification to permit the proposed development because of the water-dependent use restriction and, for that reason, it would not approve an application for a new permit for a non-water dependent use.

The matter proceeded as a contested case before the ALJ. The ALJ found that Island Venture had been a good faith, innocent purchaser of the two lots, and that it had acquired the property without notice of the restriction. The ALJ determined, however, in the interest of public policy, to enforce the use restriction. The DEP adopted the ALJ's decision, and Island Venture appealed. The Appellate Division reversed in a reported opinion. Island Venture Assocs. v. NJDEP, 359 N.J. Super 391 (2003). The Appellate Division balanced the strong public policy underpinnings to CAFRA with other important statutory provisions, in particular New Jersey's recording statutes (known collectively as the Recording Act), N.J.S.A. 46:15-1.1 to 46:26-1, and concluded: "[t]he integrity and reliability of our recording statutes require that Island Venture receive the benefit of its due diligence."

The Supreme Court granted the State's petition for certification.

HELD: As applied to this case, the policies underlying the Recording Act outweigh those reflected in the Coastal Area Facility Review Act (CAFRA). As a result, Island Venture is not bound to the 1989 water-dependent restriction.

1. The resolution of this dispute turns on the interplay between CAFRA and the Recording Act. CAFRA grants wide authority to the DEP to protect and maintain New Jersey's coastal area. The DEP may subject a CAFRA permit to the applicant's compliance with conditions. N.J.S.A. 13: 19-11. Once a permit is issued, its provisions are intended to apply to landowners and their successors, absent a "change in the nature of the development [.]" N.J.S.A. 13: 19-14. The statute does not contain any provision requiring the recordation of instruments to bind subsequent titleholders to permit restrictions imposed on prior owners. CAFRA's accompanying regulations, however, authorize the DEP to make filing a permit a condition of the permit itself. Case law similarly recognizes that imposing deed restrictions is a proper exercise of the DEP's authority under CAFRA. (Pp. 8-10)

2. Like CAFRA, New Jersey's recording statutes address important public policy concerns. The Recording Act accomplishes its objectives by providing that "[a]ny instrument affecting title to or interest in real estate... in this State shall be recorded on presentation to the recording officer of any county in which all or part of the real estate is located," provided the instrument satisfies certain requirements such as inclusion of a signature. N.J.S.A. 46:15-1.1.

A court will charge a subsequent purchaser with notice of a recorded instrument if it "can be discovered by a 'reasonable' search of the particular chain of title." Palamarg, Realty Co. v. Rehac, 80 N.J. 446, 456 (1979) (Pp. 10-13)

3. As applied to this case, the policies underlying the Recording Act outweigh those reflected in CAFRA. As a result, Island Venture is not bound to the 1989 water-dependent restriction. First, the equities clearly favor Island Venture, which did all that was required of it legally or reasonably to determine the existence of the now-disputed restriction. Second, any possible infringement on CAFRA that might result from our holding will be limited in view of the fact that the DEP has taken steps to assure that CAFRA deed restrictions properly are recorded in the future. Third, the recordation of such restrictions is a form of wide notice that should enhance, rather than encumber, CAFRA's salutary goals. We stress that our ruling turns on the precise facts before us; i.e., our disposition is a product of the totality of the circumstances. To the extent that our holding will prompt deed restrictions to be recorded properly to give accurate notice to subsequent landowners, that effect can only strengthen CAFRA in that it will remove or reduce questions regarding the enforceability of legitimately-imposed restrictions. While both the DEP and the ALJ relied on Aldrich v. Schwartz, 258 N.J. Super. 300 (App. Div. 1992), that decision does not control the analysis. Moreover, while we intend no criticism of the DEP, we cannot help but observe that, as compared to Island Venture, the DEP was in a superior position to know of the CAFRA restriction and to assure its enforceability. Yet, when it corresponded in 1991 with High Bar, and when it initially believed several years later that Island Venture's property lay outside the marina area, the DEP seemed unaware that the water-dependent restriction applied to Lots 3.03 and 3.04. When there is that much uncertainty or confusion affecting the integrity of land titles, equity requires that an innocent purchaser prevail. In striking the balance in favor of the innocent purchaser in this case, we are confident that our holding ultimately will preserve the significant policy objectives underlying each statute. (Pp. 13-20)

The judgment of the Appellate Division is AFFIRMED.

JUSTICE ALBIN filed a separate, CONCURRING opinion, in which JUSTICE LONG joins, stating that he did not construe the Court's opinion to conclude that Aldrich was decided correctly, but that the case is distinguishable.

CHIEF JUSTICE PORITZ and JUSTICES LaVECCHIA, ZAZZALI, and ALBIN join in JUSTICE VERNIERO's opinion. JUSTICE ALBIN also filed a separate, concurring opinion, in which JUSTICE LONG joins. JUSTICE WALLACE did not participate.

The opinion of the court was delivered by: Justice Verniero

Argued February 2, 2004

We must decide whether the property owner in this case is bound to a restriction on its land that was imposed by the Department of Environmental Protection (DEP) as part of a coastal permit issued to the owner's predecessor in title. Because the restriction could not be found by a diligent search of record title, and for the other reasons expressed below, we hold that the property owner is not bound by the restriction.

I.

We derive our summary of facts largely from the record established before the administrative law judge (ALJ), whose decision the DEP ultimately adopted. In 1988, High Bar Harbor Development Company (High Bar) sought a permit from the DEP to construct eighteen single-family dwellings on a tract of land in Long Beach Township (the Township). Issued pursuant to the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-1 to -21, the permit identifies the location of the "Activity/Facility" as "Block Y-12 Lot 3, 3.01, 4.01, 4.02, 4.08[,] 4.09 & 16." In addition to the eighteen-lot residential subdivision, the proposed development also included an adjacent marina site, which resulted in the DEP imposing an administrative condition to the CAFRA permit.

The condition required that High Bar, "[p]rior to construction, submit to [the DEP's Division of Coastal Resources] for review and approval language for a deed restriction for the adjacent marina site, restricting this property to remain a water dependent use in perpetuity." That language was to be included in a so-called "Dockominium-Condominium Master Deed." In response, High Bar recorded the required form of deed with the Ocean County Clerk's Office in 1990. Section 10(a) of the deed contains this sentence: "The Condominium Property shall remain a water-dependent use in perpetuity." The DEP approved that language in 1989, prior to its inclusion in the recorded instrument.

After High Bar had obtained the CAFRA permit, it submitted a minor subdivision application to the appropriate local zoning agency, seeking approval to subdivide Block "25.12 (formerly Y-12) Lots 3.01 and 3.02." (Apparently, Lot 3.02 was designated as that number after previously being known as Lot 3.) The subdivision was approved, establishing several lots, including Lots 3.03 and 3.04, which are the subject of this dispute.

Sometime in 1991, High Bar inquired of the DEP whether construction on the newly subdivided parcels, Lots 3.03 and 3.04, required a CAFRA permit. Along with that inquiry, High Bar also submitted for the DEP's review the minor subdivision site plan. High Bar received a response by letter dated March 18, 1991, from the DEP's Division of Coastal Resources. The letter states, in part: "No coastal permits required, provided no ...


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