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OFP, L.L.C. v. State

August 10, 2007

OFP, L.L.C., PLAINTIFF-APPELLANT,
v.
STATE OF NEW JERSEY, DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-160-05.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued February 27, 2007

Before Judges Skillman, Lisa and Holston, Jr.

In August 2004, the Governor signed into law the Highlands Water Protection and Planning Act (the Highlands Act), N.J.S.A. 13:20-1 to -35. This legislation established a state agency, called the Highlands Water Protection and Planning Council (Highlands Council), N.J.S.A. 13:20-4, which was delegated responsibility for land use planning in the Highlands Region, consisting of nearly 800,000 acres in eighty-eight municipalities located in parts of Morris, Sussex, Passaic, Bergen, Warren, Hunterdon and Somerset Counties, N.J.S.A. 13:20-7(a). The Highlands Act creates two areas within the Region: a preservation area, in which further development is strictly regulated, and a planning area, in which development consistent with the Act's goals is encouraged. See N.J.S.A. 13:20-7(b),(c); N.J.S.A. 13:20-10(b),(c). The Highlands Act delegates responsibility to the Department of Environmental Protection (DEP) to establish a Highlands permitting review program for all major development in the preservation area. N.J.S.A. 13:20-31 to -35.

Plaintiff OFP is the owner of a ninety-three acre tract of undeveloped land in Washington Township, Morris County. This tract is located within the preservation area in the Highlands Region.

In December 1999, the Washington Township Planning Board granted OFP's predecessor in title preliminary major subdivision approval to subdivide the property into twenty-six lots for residential development. This approval was made subject to various conditions, which OFP's predecessor challenged by an action in lieu of prerogative writs. OFP substituted as plaintiff after it acquired the property. This action resulted in an order striking some conditions of the preliminary subdivision approval and modifying others.

OFP also brought an action against the Washington Township Department of Public Works to obtain approval for construction of a water main required to provide water service to the proposed development. In October 2003, this action resulted in a settlement under which the parties agreed on the water main's location. In addition, OFP obtained various permits and approvals from the DEP, including a stream encroachment permit and authorization for limited encroachments into wetlands.

In February 2004, OFP applied to the DEP pursuant to the Safe Drinking Water Act, N.J.S.A. 58:12A-1 to -37, for a potable water supply permit to construct a water works. On March 22, 2004, the DEP returned the application as incomplete. As a result, OFP's application for a potable water supply permit was still pending when the bill that became the Highlands Act was introduced in the Legislature on March 29, 2004. OFP subsequently corrected the deficiencies in its application, and the DEP issued the required potable water supply permit on May 14, 2004. After the permit was issued, the Legislature enacted the Highlands Act, and the Governor signed the bill into law on August 10, 2004.

The Highlands Act only exempts from its provisions a major Highlands development project that obtained preliminary subdivision or other required approval under the Municipal Land Use Law, N.J.S.A. 40:55D-1 to -129, and required approvals from the DEP before the Act was introduced in the Legislature on March 29, 2004. N.J.S.A. 13:20-28. Therefore, OFP's proposed subdivision is subject to the Highlands permitting review program provided under N.J.S.A. 13:20-33 because OFP did not obtain a potable water supply permit until after the Act was introduced.

On October 18, 2004, OFP's counsel sent a letter to the Commissioner of the DEP requesting a meeting "to discuss the [Highlands Act's] application to the [OFP] project and the potential for an exemption from the Act." On November 12, 2004, a supervising environmental specialist in the Highlands Unit of the Bureau of Watershed Regulation advised OFP's counsel that the DEP had not yet received an application from OFP for a "Highlands Applicability Determination."

On December 14, 2004, OFP's counsel sent another letter to the DEP which asserted that the supervising environmental specialist had advised him there was no "statutory exemption" available for OFP's residential subdivision, and therefore, the property is subject to the Highlands Act. The letter stated that "OFP clearly had an investment backed expectation of developing this property and is left with no choice but to challenge the legality of the Act on its face and as it applies to this project." The letter concluded that in view of the supervising environmental specialist's expression of opinion that the subdivision was not exempt from the Act, OFP had "exhausted administrative remedies and will proceed with our legal remedies."

Before the DEP responded to the December 14th letter, OFP filed this action challenging the constitutionality of the Highlands Act as applied to its property. The complaint asserted that the Act "operates as a bar to development as otherwise permitted by law and results in a taking of OFP's property without compensation," in violation of the Fifth Amendment to the United States Constitution and Article I, paragraph 20, of the New Jersey Constitution. Based on the alleged retroactive application of the Act to OFP's subdivision approval, the complaint also asserted that the Act violates the equal protection and due process guarantees of the United States and New Jersey Constitutions and results in a "manifest injustice."

The DEP filed a motion pursuant to Rule 4:6-2(e) to dismiss the complaint for failure to state a claim upon which relief may be granted. The trial court converted the motion to a motion for summary judgment.

In a comprehensive written opinion, the trial court rejected OFP's challenges to the constitutionality of the Highlands Act and dismissed its complaint. The court noted that the Act "provides protection to property owners through an administrative process to lessen the effect of [the] land restrictions" it imposes. This administrative process includes provisions for hardship waivers. In light of the availability of this administrative process, the court dismissed OFP's "constitutional challenge to the Act as applied to [its] property . . . on the procedural grounds of failure to exhaust administrative remedies[.]" The court also concluded that the limited retroactive application of the Act to development projects that received administrative approvals during the intervening period between the Act's introduction in the Legislature and final enactment did not violate OFP's due process and equal protection rights or result in a manifest injustice. OFP subsequently filed a motion for reconsideration, which the court denied.

On appeal, OFP presents the following arguments:

I. THE TRIAL COURT ERRED IN DISMISSING APPELLANT'S CHALLENGES TO THE HIGHLANDS ACT AS UNRIPE BECAUSE THERE ARE NO ADMINISTRATIVE REMEDIES AVAILABLE.

II. THE TRIAL COURT ERRED IN DISMISSING APPELLANT'S MANIFEST INJUSTICE CLAIM.

III. THE TRIAL COURT ERRED IN DISMISSING APPELLANT'S CHALLENGES TO THE HIGHLANDS ACT BECAUSE THERE ARE MATERIAL FACTS IN DISPUTE AS TO THE DESIGNATION OF APPELLANT'S PROPERTY WITHIN THE PRESERVATION AREA.*fn1

We reject these challenges to the validity of the Highlands Act as applied to OFP's property and affirm the summary judgment dismissing its complaint.

I.

OFP's primary challenge to the constitutionality of the Highlands Act is that enactment of this legislation resulted in a taking of its property.

It is now firmly established that governmental actions that do not involve governmental occupancy or encroachment upon private land may "still affect and limit its use to such an extent that a taking occurs." Palazzolo v. Rhode Island, 533 U.S. 606, 617, 121 S.Ct. 2448, 2457, 150 L.Ed. 2d 592, 607 (2001). "In Justice Holmes' well known . . . formulation, 'while property may be regulated to a certain extent, if a regulation goes too far, it will be recognized as a taking.'" Ibid. (quoting Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 160, 67 L.Ed. 322, 326 (1922)).

It is thus clear that "a regulation which 'denies all economically beneficial or productive use of land' will require compensation under the Taking Clause [of the Fifth Amendment]." Ibid. (quoting Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015, 112 S.Ct. 2886, 2893, 120 L.Ed. 2d 798, 813 (1992)); accord Gardner v. New Jersey Pinelands Comm'n, 125 N.J. 193, 205 (1991). It is less clear whether a taking occurs "[w]here a regulation places limitations on land that fall short of eliminating all economically beneficial use[.]" Palazzolo, supra, 533 U.S. at 617, 121 S.Ct. at 2457, 150 L.Ed. 2d at 607. In that situation, the determination whether there has been a taking "depend[s] on a complex of factors including the regulation's economic effect on the landowner, the extent to which the regulation interferes with reasonable ...


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