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Elon Associates, L.L.C. v. Borough of Englishtown

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


February 15, 2008

ELON ASSOCIATES, L.L.C., PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
BOROUGH OF ENGLISHTOWN, DEFENDANT-APPELLANT/CROSS-RESPONDENT.
ELON ASSOCIATES, L.L.C., PLAINTIFF-APPELLANT,
v.
BOROUGH OF ENGLISHTOWN, DEFENDANT-RESPONDENT.
TRADITIONAL DEVELOPERS, L.L.C., A LIMITED LIABILITY CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF NEW JERSEY; JOHN F. PLOSKONKA, AND G & F ASSOCIATES, A PARTNERSHIP ORGANIZED UNDER THE LAWS OF THE STATE OF NEW JERSEY, PLAINTIFFS,
v.
THE BOROUGH OF ENGLISHTOWN AND THE PLANNING BOARD OF THE BOROUGH OF ENGLISHTOWN, DEFENDANTS.

On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket Nos. L-3127-99 and L-3015-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 15, 2008

Before Judges Skillman, Winkelstein and Yannotti.

This is an appeal from a post-judgment order in a Mount Laurel action which requires the defendant municipality to enter into a contract with a water company to purchase 100,000 gallons of water per day so it can provide the water service required by plaintiff's proposed housing development.

The Mount Laurel action was settled by an agreement between the plaintiff-developer, Elon Associates, and the defendant-municipality, Englishtown, and its planning board, which was executed in November 2002. The settlement agreement obligated Englishtown to "take all steps necessary to make public water and sanitary sewer service available to [Elon's] property." The agreement also contained detailed provisions concerning the manner in which Englishtown could discharge this obligation. It required Englishtown to "execute an agreement with the Gordon's Corner Water Company to purchase water in an amount sufficient to ensure the provision of adequate water supply to service the entirety of the inclusionary developments approved in the Judgment of Compliance in the most economically feasible manner[.]"

The agreement also authorized Englishtown to seek "additional diversion rights to Farrington Aquifer[.]" The municipality was given eighteen months after entry of a judgment of compliance to explore this alternative source of additional water supply. To enable Englishtown to pursue this alternative, the agreement required Elon to seek in good faith "within three months of the entry of the Judgment of Repose . . . to join the State of New Jersey in the Litigation to require it to allocate additional water to [Englishtown] in an amount sufficient to service the entirety of the inclusionary developments approved in the Judgment of Compliance." The settlement agreement further provided that "[u]ntil such time as the agreement with Gordon's Corner Water Company . . . has been executed[,] [Elon] shall have first priority to any available water resources existing in the Borough system over all other properties[.]"

Around the same time Englishtown settled the Mount Laurel action brought by Elon, it also settled a Mount Laurel action brought by another developer, Traditional Developer. Englishtown and the two developers jointly applied to the court for approval of the settlements. After a hearing, the trial court found that the settlements were fair and reasonable to low and moderate income persons and entered a judgment of compliance on January 27, 2003, which provided Englishtown with "repose from further exclusionary zoning litigation for a period of six years[.]" The judgment of compliance also provided for continuation of the appointment of a professional planner, Elizabeth McKenzie, as special master.

At some point, Traditional received authorization to commence construction of its development using Englishtown's existing water supply. The water required to service Traditional's development exhausted most of the available water supply in the Englishtown system.

Although the Englishtown Planning Board granted Elon preliminary and final major site plan approval for its proposed development, Elon did not undertake to join the Department of Environmental Protection (DEP) in the litigation to obtain the additional allocation of water that Englishtown would require for Elon's proposed development. However, Englishtown and Elon had informal communications with the DEP regarding the diversion of additional water to the Englishtown water system.

These communications were unproductive. The DEP indicated that in order for Englishtown to secure an additional allocation of ground water, it would have to obtain a "major modification" of its existing permit. The DEP also indicated that the Old Bridge and Farrington aquifers from which Englishtown obtains its water are "Critical Water Shortage 1 areas" and therefore excess water capacity must be purchased elsewhere. However, Elon's efforts to obtain a transfer of water diversion rights from a municipality or water utility that had excess capacity were unsuccessful.

Englishtown subsequently applied to the DEP for authorization for a water main extension to serve Elon's proposed development. The DEP denied the application on the ground that Englishtown's existing water capacity was insufficient to provide service to the development. In response, Englishtown claimed that it had an existing contract with Gordon's Corner Water Company (Gordon's Corner) that would enable it to provide the additional water required for Elon's development. The DEP rejected Englishtown's claim on the ground that its contract with Gordon's Corner only provided for an emergency interconnection and that for such a contract to be considered a reliable source of water, it must be a minimum ten-year contract.

In the spring of 2006, Elon's counsel requested the court to schedule a conference regarding the outstanding issues relating to the supply of water to its proposed development. Two such conferences were conducted, the first on April 11, 2006, and the second on May 12, 2006. A representative of the DEP appeared at the second conference. However, neither conference resulted in a resolution of the issues relating to the supply of water for Elon's proposed development.

On July 9, 2006, Elon filed a motion for enforcement of its settlement agreement with Englishtown. This motion sought an order compelling Englishtown to enter into a service agreement with Gordon's Corner for a term acceptable to the DEP which would provide the water required for Elon to construct its proposed residential development project.

The trial court granted the motion, and on August 17, 2006, it entered an order requiring Englishtown to "forthwith enter into a Water Service Agreement with Gordon's Corner Water Company for a term satisfactory to [the DEP] to service the [Elon] Mount Laurel II inclusionary residential development[.]"

On September 19, 2006, Gordon's Corner sent a letter to Englishtown's counsel, which stated in pertinent part:

If the Borough of Englishtown desires to enter into a long term (10 year) water sale agreement with Gordon's Corner Water Company, the Borough will need to commit to purchasing on a take or pay arrangement a minimum of 100,000 gallons per day.

That same day, Englishtown's counsel sent a letter to the trial court, which stated in pertinent part:

Since the time of your Order of August 11, 2006, memorialized in an Order entered August 17, 2006, . . . [Englishtown] has made every attempt to comply with your instructions. . . .

When it appeared that the matter was beginning to stagnate, I wrote to Gordon's Corner Water Company to memorialize our position[.] . . . This resulted in a response from Gordon's Corner Water Company, . . . which is problematic in terms of our attempting to enter into an agreement to supply water to this development as you ordered.

This development, by everyone's estimates, would use a maximum of 30,000 gallons per day ("gpd"). More often than not, it would use less than that. The entire output of [Englishtown] on a given day most of the year is approximately 150,000 gpd. As you can see by the letter from Gordon's Corner Water Company, the company is unwilling to enter into an agreement to supply just this development. It is insisting on a minimum usage of 100,000 gpd. Englishtown has no way to use that amount of water. The 70,000 plus overage each day would probably fill Lake Weamaconk. To absorb all of that water, the Borough would have to nearly shut down its own water operation, or so limit its output as to make it economically unfeasible to operate. This would jeopardize the residents of [Englishtown] in a grossly irresponsible manner, by eliminating a guaranteed source of water locally controlled, and substituting an outside provider over which [Englishtown] would not only have no control, but which, in all likelihood, would have the least influence of all the municipalities being serviced by that provider.

In short, entering into the agreement with Gordon's Corner Water Authority would jeopardize the health, welfare and safety of the residents of Englishtown beyond any acceptable level.

This letter also stated that Englishtown was prepared to file a motion under Rule 4:50 for relief from the judgment of compliance, but suggested that a conference would be a preferable method of addressing the problems presented by Gordon's Corner's demand that Englishtown enter into an agreement to purchase a minimum of 100,000 gallons of water per day.

The trial court scheduled a conference, as requested by Englishtown's counsel. However, when the parties appeared for the conference on October 5, 2006, the court treated the matter as if Elon had made a motion for enforcement and/or modification of the August 17, 2006 order requiring Englishtown to enter into an agreement with Gordon's Corner. Counsel for Elon and Englishtown made numerous conflicting factual assertions regarding the impact upon Englishtown of agreeing to Gordon Corner's demand that it purchase a minimum of 100,000 gallons per day. The special master also commented upon this impact.

At the conclusion of this proceeding, the trial court summarily directed Englishtown to enter into an agreement with Gordon's Corner to purchase a minimum of 100,000 gallons per day in accordance with the demand set forth in Gordon Corner's September 19, 2006 letter. This directive was memorialized by an order entered on October 6, 2006.

Englishtown filed a notice of appeal from this order. Elon subsequently filed a motion for enforcement of the order, which the trial court denied by an order entered on December 8, 2006. Elon then filed a motion for reconsideration of the denial of its motion for relief in aid of litigants' rights, which the trial court also denied by an order entered on January 31, 2007. Elon filed an appeal from the denial of its motions seeking enforcement of the October 6, 2006 order. We consolidated the Englishtown and Elon appeals.

We now reverse the October 6, 2006 order that required Englishtown to agree to Gordon Corner's demand that it contract to purchase 100,000 gallons of water per day for a period of ten years. The reversal of the October 6, 2006 order moots Elon's appeal from the subsequent orders denying enforcement of that order.

We conclude that the September 19, 2006 letter from Englishtown's counsel was in effect an application to vacate or modify the August 17, 2006 order based on changed circumstances, specifically, Gordon's Corner insistence that Englishtown agree to purchase 100,000 gallons of water per day even though Englishtown only required 30,000 gallons per day to provide the water required for Elon's proposed development. The special master described the potential impact of this changed circumstance upon Englishtown at the proceeding conducted on October 5, 2006:

[M]y understanding is that while perhaps Englishtown could use more water than the 30,000 gallons, the 100,000 gallons is way more than they anticipate right now based upon the fact that they are developed. And even with some commercial redevelopment it probably won't rise to the level of demanding 100,000 gallons of water per day.

Which means that Englishtown is in a position. They have their own water utility. They are in a position of buying water and not using their well water, because they will have to be paying for this water, which means that they'll be sitting on a resource that they are unable to use.

And they will not, the water utility will not do as well. I mean, from a profitability perspective, they make more on what they sell that comes out of the ground than what they will be buying from Gordon's Corner. So, that is the situation I think that Englishtown is facing, that they will be in a situation where they may not pull as much water out of the ground, but they won't make as much. And then the question is, are the additional redevelopment opportunities down the road worth it to them.

. . . That's my understanding of where it stands, sort of based on the big picture. I think each of the attorneys probably have their own positions relative to this. But that is, I think, the dilemma. Is it doable? I think it's probably doable.

Mr. Moskovitz will tell you that it will put the town into bankruptcy. I don't know that that's true. But I think he can certainly make that argument. And Mr. Weiss will tell you that his clients are entitled, under your prior order, to have the water, that Englishtown has to supply it, and that if this is the only way it's going to come, then this is the only way.

Therefore, Englishtown made at least a prima-facie showing of a changed circumstance that could warrant relief from the judgment of compliance and the August 17, 2006 enforcement order. For this reason, the trial court erred in summarily ordering Englishtown to enter into an agreement to purchase 100,000 gallons of water per day from Gordon's Corner. Instead, the court should have conducted a plenary hearing to determine whether Gordon Corner's insistence that Englishtown contract to purchase more water than it currently needs is a changed circumstance that warrants relief form the judgment of compliance and August 17, 2006 enforcement order.

We recognize that Gordon's Corner indicated during the course of its negotiations with Englishtown after entry of the October 6, 2006 order that it would only insist upon Englishtown purchasing 50,000 gallons of water per day as a condition of entering into the form of contract required by the DEP. Such a contract would obviously be less onerous than one requiring Englishtown to purchase 100,000 gallons of water per day. However, it may be unreasonable to require Englishtown to accede even to this modified demand by Gordon's Corner. Moreover, our reversal of the October 6, 2006 order is not based on the substance of the order but rather the trial court's failure, after being advised of Englishtown's claim of changed circumstances, to require the filing of an appropriate motion supported by certifications and, if those certifications were conflicting, to schedule an evidentiary hearing.

Accordingly, the October 6, 2006 enforcement order is reversed, and the case is remanded to the trial court for further proceedings in conformity with this opinion. The reversal of this October 6, 2006 order moots Elon's appeal from the denial of its subsequent motions for enforcement of that order. Therefore, that appeal is dismissed.

20080215

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