February 13, 2009
ROBERT J. PACILLI HOMES, LLC, PLAINTIFF-RESPONDENT/ CROSS-APPELLANTS,
PILESGROVE TOWNSHIP PLANNING BOARD; JOHN OBER, CHAIRMAN OF THE PILESGROVE TOWNSHIP PLANNING BOARD; AND TOWNSHIP OF PILESGROVE, DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS.
GRACIELA RODRIGUEZ, PLAINTIFF-RESPONDENT,
TOWNSHIP OF PILESGROVE, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY AND THE PLANNING BOARD OF THE TOWNSHIP OF PILESGROVE, A DULY CREATED MUNICIPAL BODY OF THE TOWNSHIP OF PILESGROVE, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Salem County, Docket Nos. L-319-05 and L-90-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 1, 2008
Before Judges Lisa, Sapp-Peterson and Alvarez.
These appeals arise out of two unrelated land use applications for residential subdivisions in Pilesgrove Township (Pilesgrove or Township). Although the preliminary and final subdivision approvals granted by the Pilesgrove Planning Board (Planning Board or Board) occurred at the same time for the two developments, the two parcels are unrelated to each other, as are the developers for each and the attorneys representing them.
The Planning Board approvals contained certain conditions pertaining to stormwater management and maintenance, and placed responsibility for those issues upon the to-be-formed homeowners' associations (HOAs) of the two developments. As required by the Planning Board approvals, the attorney for each developer prepared and submitted to the Planning Board planner, engineer and solicitor, and to the township solicitor, the required documents for this purpose. These included HOA certificates of incorporation and bylaws and a declaration of covenants and restrictions.
The township solicitor refused to accept the submitted documents, and instead drafted a set of his own documents and demanded they be accepted by the developers. Many of the provisions were unacceptable to the developers, and their attorneys' efforts to negotiate compromise provisions were rebuffed. Because of the impasse, township officials would not sign the final plats, which could not be recorded, and construction could not commence.
Independent of each other, and at different times, the developers filed actions in lieu of prerogative writs, seeking a determination that the Township's refusal to sign the final plats was arbitrary and unreasonable. They contended that the documents they submitted complied in all respects with the Planning Board's requirements, that the township solicitor attempted to impose additional requirements that were beyond the authority of the township committee to impose, and that some requirements sought to be imposed were not authorized by law, were illegal, or were arbitrary, capricious or unreasonable.
Robert J. Pacilli Homes, LLC (Pacilli) filed the first action. With the consent of both parties, the trial court appointed a special master to assist the court in evaluating the legality and propriety of some of the disputed provisions. Graciella Rodriguez (Rodriguez) then filed the second action. Because the issues were substantially the same, the cases were assigned to the same judge and were heard together. Rodriguez's attorney consented to participation with the special master.
By order of May 12, 2006, the court granted partial summary judgment in favor of Pacilli and denied Pilesgrove's cross-motion for summary judgment. By order of October 10, 2006, the court granted partial summary judgment in favor of Rodriguez, and denied Pilesgrove's cross-motion for summary judgment. Notwithstanding the direction of the court that all counsel should attempt to resolve the remaining disputed provisions in the documents with the special master, the Township remained steadfast in its insistence upon the use of its documents. Accordingly, recognizing that the Planning Board approval directed the developers' attorneys to draft and submit the documents, the court directed the special master to treat the documents prepared by the developers' attorneys as the working documents, but to give due consideration to the contrary provisions in the documents prepared by the township solicitor.
Rather than critique the developers' documents on a piecemeal basis, the format of the special master's report included a third set of documents prepared by the special master. The attorneys for both developers found the special master's report acceptable and moved for its confirmation. In approving the report by its orders January 24, 2007 in each case, the court accepted the special master's documents and ordered that they would be controlling. The court ordered the Township to approve and sign the final plats.
The Township appealed from portions of the partial summary judgment orders in favor of the developers entered on May 12, 2006 and October 10, 2006, and from portions of the January 24, 2007 orders adopting the special master's report. Pacilli cross-appealed from one provision in the May 12, 2006 order. By prior order of this court, the Township's appeal in the Pacilli case (A-3271-06T2) and Pacilli's cross-appeal (A-4226-06T2) have been consolidated. Rodriguez's appeal (A-3301-06T2) was calendared back-to-back with the Pacilli appeals and we now consolidate all of these matters for disposition in this single opinion.
After the appeals were filed, further activities occurred in the trial court. To the extent that further trial court proceedings were precluded by Rule 2:9-1, a limited remand should have been sought from this court. However, the record with respect to those additional proceedings is complete and the issues have been fully briefed. No party has objected to our consideration of orders emanating from the additional proceedings, and we perceive no prejudice to any party. At the conclusion of the additional proceedings, the Township filed amended notices of appeal with respect to adverse rulings against it. Therefore, in the interest of judicial economy, we will address them on the merits.
Most notable among the additional proceedings were applications by both developers for an allowance of counsel fees and costs against the Township under the frivolous litigation statute, N.J.S.A. 2A:15-59.1. The court granted the motions. It ordered Pilesgrove to pay Rodriguez $20,999.74. It initially ordered Pilesgrove to pay Pacilli $46,263.91, but, upon Pilesgrove's reconsideration motion, reduced the amount to $40,859.56.
We conclude that the trial court erred in awarding counsel fees and costs against the Township, and we reverse the orders making those awards. In all other respects, we affirm.
Pacilli applied to the Planning Board for a major subdivision of its fifty-five-acre tract into twenty-one single family detached home building lots and two open space and basin lots to become the property of a HOA to be established for the "Oldman's Bluff" subdivision. The Board granted preliminary approval by Resolution No. 04-153, adopted on September 15, 2004, and, by Resolution No. 224-05, adopted on July 20, 2005, granted final approval. Rodriguez applied, through her grandnephew, William R. Manolopoulos, for a major subdivision of her 14.63 acre tract into twelve residential lots, to be known as "Athenian Estates." The Board granted preliminary approval by its September 15, 2004 Resolution No. 04-152, and granted final approval by its July 20, 2005 Resolution No. 225-05.
Because the issues forming the basis of this appeal pertain to disputes regarding stormwater management responsibility, we preface our further discussion of the facts with a discussion of the relevant State and local regulations pertaining to that issue. On March 24, 2004, the New Jersey Department of Environmental Protection (DEP), Bureau of Nonpoint Pollution Control, Division of Water Quality issued an "AUTHORIZATION TO DISCHARGE R10-Tier B Municipal Stormwater General Permit" to Pilesgrove, effective April 1, 2004. The permit required that: upon its effective authorization date, Pilesgrove (a Tier B Municipality) should ensure that any residential development that is subject to the Residential Site Improvement standards for stormwater management (N.J.A.C. 5:21-7) comply with those standards; within twelve months from the effective date of permit authorization, Pilesgrove must adopt a municipal stormwater management plan; within twelve months from the adoption of the plan, Pilesgrove must adopt a stormwater control ordinance to implement that plan; and, within twenty-four months from the effective date of permit authorization, Pilesgrove must ensure "adequate long-term operation and maintenance of BMP's [Best Management Practices] on property not owned or operated by . . . [Pilesgrove]."
As part of its Master Plan, the Planning Board adopted a "Stormwater Management Plan Element" on June 23, 2005. It included these pertinent sections:
3.2 Relevant Local Issues
As a rural community, Pilesgrove
Township is very concerned about the long-term maintenance responsibilities for stormwater management facilities. The Township has limited resources and does not intend to accept responsibility for the maintenance of basins and infiltration systems. In this regard, the Township supports the establishment of Homeowners Associations to maintain and repair stormwater management systems for each major development. The township will also require that it have the ability, but not the obligation, to take action if stormwater management facilities are not being properly maintained and to assess the members of the association for any costs incurred by the Township. To prevent any township involvement or intervention, it is imperative that proposed developments have an approved Stormwater Management Maintenance Plan (SMMP) that contains maintenance, inspection, and financial planning components in accordance with this Plan.
7.2 Stormwater Management Coordination
Issue. Stormwater management basins are often not properly maintained by Homeowners Associations. Municipalities are often asked to intervene to cause them to be properly maintained.
Control Measure. The Township Planning Board should require that Homeowners Associations be established to maintain basins in residential developments. The Homeowner Association documents shall permit the municipality to enter and maintain or repair a basin that is not being maintained by the Association. In any such event, all of the costs incurred by the Township shall be subsequently paid by members of the Association via an assessment or lien. . . .
8.0 Stormwater Management Maintenance Plan (SMMP) Requirements
Responsible party. The SMMP shall clearly define the entity and party responsible for implementation of the SMMP. A viable corporate entity such as a Homeowner's Association shall be identified. Developers shall be designated as the responsible entity prior to the establishment of the Association. Subsequently, the President of the Association shall be designated as the responsible party. . . .
On April 25, 2006, the Township adopted Ordinance #06-04 "to establish minimum stormwater management requirements and controls for major development." The ordinance recognized that a HOA could be designated as the responsible party for stormwater maintenance.
Resolution No. 224-05, granting final approval to Pacilli, placed responsibility for stormwater maintenance upon the to-be-formed Oldman's Bluff HOA, as agreed by the developer. The resolution designated the HOA as the party responsible for the SMMP, and further provided:
The Stormwater Management Maintenance Plan (SMMP) shall clearly define the responsible entity, responsible party, and service contractors that will implement the maintenance plan.
The Applicant agreed to designate the Homeowners' Association as the party responsible for the SMMP and provide the telephone number of the service technician to be contacted by the Township in the event of problems. The name and telephone number shall be updated if any changes occur and supplied to the Township Clerk.
1.1 Responsible Entity
The SMMP shall clearly state the Homeowners' Association will be responsible for implementation of the plan and for all costs associated with the maintenance, inspection and repair of drainage facilities as defined in the Homeowners' Association By-laws. The By-laws need to be appended to the SMMP.
The SMMP shall further state Pilesgrove Township will not be responsible for the maintenance and/or repair of the Oldmans Bluff stormwater system. The Applicant agreed to attach the By-laws of the Homeowners' Association to the SMMP.
As relevant to the issues before us, the resolution granting final approval to Pacilli was conditioned upon:
2. Submitting to the Board's Planner, Engineer, Solicitor, and Township Solicitor, the following documents of encumbrance/ restrictions/easements, Homeowners' Association documents and Bylaws:
(It is the Board's intention that the Solicitor assure the restrictions and/or easements described hereafter are:
a. Not encumbered by any prior interest;
b. Could not be modified by unanimous vote or action of any organization or property owners subject thereto created to maintain or enforce same without the Township having the right to veto said modification;
c. Drafted in a manner to impose upon the Homeowners' Association and lot owners within the development, jointly, severally, and in the alternative, the obligation to perpetually maintain and repair the drainage facilities, landscaping, buffering, development sign, open space, conservation areas, and all other restrictions and/or easements imposed upon the Property;
d. Drafted to vest the Township with the right to perform the work upon default of other parties and to levy the costs incurred against the property owners, jointly, severally, and in the alternative;
e. The person responsible for the maintenance of the facilities and enforcement of the restrictions shall annually provide proof of insurance against loss or damage.
f. Recorded in a fashion to provide the public adequate notice.)
7. Implementation of [a] Stormwater Management Maintenance Plan (SMMP) as revised in accordance with the comments contained in Paragraph 5, Pages 8-12, above. The following guarantees were required:
4. Applicant shall post a performance guarantee in favor of the Township to insure the completion of all improvements as described in N.J.S.A. 40:55D-53 in an amount approved by the Township Engineer, which shall be 120% of the estimated cost, and in a form acceptable to the Township Solicitor or a Letter of Credit as authorized by the Department of Community Affairs (DCA) pursuant to N.J.A.C. 5:36-4.3. If the approved DCA Letter of Credit is posted, the Township Solicitor shall be satisfied it can be called in the event the improvements are not installed and dedicated during the period of protection for which this approval is being granted specifically two (2) years from July 20, 2005. If a bond is posted it shall be valid for a period of two years, six months, or whenever the improvements are deemed completed by the appropriate Township Official, whichever occurs first. . . .
5. Posting a maintenance guarantee with the Township upon completion of all improvements for a period of two (2) years after the final acceptance thereof in an amount of 15% of the cost of the improvements as calculated by the Township Engineer. The Applicant's performance guarantee shall not be released until the maintenance guarantee is posted and shall secure said posting.
On May 26, 2005, William F. Ziegler, Pacilli's attorney, sent to William L. Horner, the township solicitor, drafts of the Oldman's Bluff HOA bylaws and declarations of covenants and restrictions. On September 6, 2005 and again on November 1, 2005, Ziegler asked Horner to review the documents. On November 8, 2005, Horner sent Ziegler alternative forms of a certificate of incorporation, bylaws and a declaration of covenants that Horner had prepared for the Oldman's Bluff HOA. We need not set forth in detail all of the disputed issues. It is sufficient to our analysis to describe some of them.
In the HOA bylaws, Horner provided for quarterly meetings and for a quorum of at least fifty percent of the members. Horner further provided that no amendment to the bylaws could be made except upon the affirmative vote of 100% of the total membership and advance approval by Township resolution. Horner required in the bylaws that, under "Duties and Responsibilities" of the HOA board of trustees, it was responsible to maintain and renew every two years a cash deposit or surety bond in favor of the Township to cover stormwater maintenance or repairs not accomplished by the HOA.
Ziegler objected to these provisions. He complained that Horner was attempting to interject himself into the internal affairs of the non-profit corporation HOA. Under the laws of this State governing such organizations, quarterly meetings and fifty percent quorums were not required. Ziegler insisted that a twenty-five percent quorum was sufficient, as were annual regular meetings, as set forth in his documents. Ziegler objected to the perpetual bonding obligation because it was a new condition, not imposed by the Planning Board as part of the comprehensive approval process, nor authorized by the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, or any Pilesgrove ordinance. With respect to bylaw amendments, Ziegler said he had no objection to requiring prior Township approval for any amendment to the declaration of covenants, but as to other activities of the HOA, the Township had no interest or basis to interfere.
Ziegler also inserted a provision for vesting, contrary to that proposed by Horner. It provided that the three-member board of trustees would be voted on the following schedule: after seven lots are sold - one member, after fourteen lots are sold - two members, and after all lots are sold - all three members will be HOA members and will not include the developer.
Horner's draft of the declaration of covenants provided for priority of liens and personal liability, joint and several, for HOA members. In particular, it provided:
Each assessment authorized under this Declaration, together with the costs of collection thereof (including but not limited to fees for legal counsel and court costs) and interest on any assessments or other amounts to be collected hereunder, shall be a continuing lien upon the Lots against which they are made having priority over all Mortgages and Other Liens but subject and subordinate to all Township Liens, or other amounts owed to the Township, and shall also be the joint and several personal obligation of the Owner of the Lot at the time when such assessment, fine or other charge fell due.
Ziegler objected to any personal liability requirement, asserting there was no legal authority for anything other than in rem liability. He opined that the procedural and substantive provisions of N.J.S.A. 40:55D-43 should apply, which require notice of deficiency, hearings and pro rata assessment, and imposition of liens against the properties in the development.
On February 15, 2006, the court entered an order which included reference to the special master, Edward F. Duffy, "for review of homeowner's documents, consultation with counsel and report and recommendation to the Court." Pacilli moved for summary judgment on February 22, 2006, and the Township cross-moved for summary judgment. In an oral opinion on April 12, 2006, the court disposed of some of the issues raised and granted Pacilli partial summary judgment. The court upheld the Township's perpetual bonding requirement, concluding that although there was no express authorization for such a requirement in the MLUL or other law or regulation, the power of a municipality to impose such a requirement could be reasonably implied, particularly in light of the principle that legislation affecting the public health and safety should be given broad application and construction. The court, however, rejected other provisions proposed by Horner, finding no basis in law for imposition of personal liability and finding that the quorum, vesting and bylaw amendment provisions improperly intruded on the day-to-day operations of the HOA, "smack[ed] of micro management," and were "unreasonable." The court's May 12, 2006 order, disposing of the motions, contained the following relevant provisions:
1. The Defendant Township's requirement that the Oldman's Bluff Homeowners Association, post, maintain and renew a cash deposit or surety bond to assure maintenance of the stormwater management system is lawful, reasonable, and appropriate.
2. The Defendant Township may not subject the individual homeowners association members to in personam liability for the homeowners association's breach of its duties as proposed in the Defendant Township's form of Declaration of Covenants and Restrictions and Deed of Easement for Oldman's Bluff . . . because the Township has other effective remedies available to it, and also because such subjection would:
(a) constitute an extension of the typical methods by which municipalities deal with recalcitrant property owners; (b) constitute an expansion of liability without the members' real participation or input, thereby implicating due process concerns; and (c) possess a certain level of arbitrariness that renders it inappropriate.
3. The Defendant Township may not impose specific quorum requirements upon the homeowners association.
4. The Defendant Township may not impose specific vesting requirements upon the homeowners association that dictate the schedule by which the developer member(s) cede control of the homeowners association to the homeowner members, provided that the vesting schedule conforms to what would be required by the Planned Real Estate Development Full Disclosure Act.
5. The Defendant Township may not require the homeowners association members to obtain Township approval prior to amendment of the homeowners association bylaws.
7. The Township of Pilesgrove has also consented on the record that any audits to be conducted by or on behalf of the homeowners association to be formed are not required to be "certified".
8. The parties are directed to meet with Edward Duffy, Esquire, Court appointed Special Master for purposes of reviewing the remaining outstanding items as to which the Court has not ruled . . . .
It was during the pendency of these summary judgment cross-motions in the Pacilli case that Rodriguez filed suit. The Planning Board resolution granting Rodriguez final subdivision approval contained provisions and conditions substantially the same as in the Pacilli resolution.
On September 29, 2005, Ross Levitsky, Rodriguez's counsel, transmitted to Horner and others copies of the documents he drafted, including a "Declaration of Covenants and Deed of Easement for Permanent Storm Water Drainage Facilities and Maintenance of Same," a "Declaration of Covenants and Restrictions for the Athenian Estates Subdivision and By-Laws of the Athenian Estates Homeowners Association, Inc.," and a "Copy of Certificate of Incorporation for the Homeowners Association."
After months of not responding, on March 8, 2006, Horner forwarded to Levitsky his own alternative "forms of certificate of incorporation, bylaws and declaration of covenants [that he] prepared for the Athenian Estates project." Horner added an additional requirement:
I have drafted the declaration to include easement rights over adjoining Lot 8.05 because based on present information an inability to maintain the off-tract pipe could negatively impact proposed Lot 8.11. I just learned that the negatively affected area might be within the drainage easement on that lot, though, which could change my thinking on the subject, but in the meantime I simply cannot approve a declaration that does not provide access to and the ability to maintain the off-site pipe.
Rodriguez moved for summary judgment and the Township cross-moved for summary judgment. Rodriguez's moving papers included Manolopoulos' affidavit stating that Horner insisted that his "documents must be executed, as drafted, in order to have the final plans signed for filing." Levitsky's objections to the Horner documents were similar to those expressed by Ziegler on behalf of Pacilli. Additionally, Levitsky objected to Horner's condition, not imposed by the Planning Board, that Rodriguez must obtain an off-site drainage easement from the owners of an adjoining property.
In an oral opinion on August 18, 2006, the court disposed of some of the issues and granted Rodriguez partial summary judgment. The court's ruling was consistent with rulings made in the Pacilli case. For example, the court upheld the Township's perpetual bonding requirement, but rejected the Township's effort to impose personal liability upon individual homeowners and impose unreasonable requirements on the day-today operation of the HOA, such as quorum, vesting, and bylaw amendment provisions. And, the court found no authority for the township solicitor or the Township to impose a condition to obtain an off-tract easement that was not imposed by the Planning Board. The court's order of October 10, 2006, granting partial summary judgment to Rodriguez and denying the Township's motion for summary judgment, included these relevant provisions:
1) The review by the Township solicitor as required by the defendant, Planning Board, as a condition of final major sub-division approval for the plaintiff's development is, as a general proposition, acceptable and appropriate and does not constitute an improper delegation by the Planning Board or a usurpation by the defendant Township, of Planning Board powers. In this specific case, however, the Township Solicitor[']s insistence that only the documents he generated, without change, will gain his approval and be deemed acceptable under the Planning Board Resolutions is unreasonable and unacceptable for the reasons more fully stated on the record on August 18, 2006.
2) The Homeowners Association and related document forms prepared and submitted by plaintiff shall be considered the working documents for purposes of the review that is required for plaintiff's development project pursuant to the conditions of 6(a) through (f) of Resolution No. 225-05. The Court shall provide copies of the working documents to a Court appointed Special Master (Edward F. Duffy, Esq.) for review. The Special Master shall then submit a report to the Court as to whether the working documents satisfy the requirements of Resolution No. 225-05, conditions 6(a) through (f). If the Court is satisfied based on its own review and the report of the Special Master that the working documents satisfy these requirements, then the Court will direct that the plaintiff's Homeowners Association and related documents for the plaintiff's development project are to be accepted and the Plats are to be signed and filed if all other conditions of the Resolution are met, approval of same by defendant Township or defendant Planning Board are not to be unreasonably withheld, subject to Court review.
3) The Motion for Summary Judgment filed on behalf of defendant, Township of Pilesgrove, is DENIED.
4) The Township's demand that, as a condition of final approval, plaintiff obtain a drainage easement from the owner of Block 2, Lot .05 is hereby nullified.
5) Plaintiff shall have, by agreement, two years from the date of the last execution of the final plats within which to complete improvements as required by the Plans, approvals, and engineers' estimates.
6) The defendant Township's requirement that the Athenian Estates Homeowners Association must post, maintain and renew a cash deposit or surety bond to assure maintenance of the storm water management systems is lawful, reasonable, and appropriate.
7) The defendant Township may not subject the individual Homeowners Association members to in personam liability for the Homeowners Association's breach of its duties as proposed in the defendant Township's form of Declaration of Covenants and Restrictions and Deed of Easement for Athenian Estates . . . because the Township has other effective remedies available to it and also because such subjection would (a) constitute an extension of the typical methods by which municipalities deal with recalcitrant property owners; (b) constitute an expansion of liability without the members real participation or input, thereby implicating due process concerns; and (c) possess a certain level of arbitrariness that renders it inappropriate.
8) The defendant Township may not impose specific quorum requirements upon the Homeowners Association.
9) The defendant Township may not impose specific vesting requirements upon the Homeowners Association that dictate the schedule by which the developer member(s) cede control of the Homeowners Association to the homeowner members provided that the vesting schedule conforms to what would be required by the Planned Real Estate Development Full Disclosure Act.
10) The defendant Township may not require the Homeowners Association members to obtain Township approval prior to amendment of the Homeowners Association bylaws.
11) The Township of Pilesgrove has consented on the record that any audits to be conducted by or on behalf of the Homeowners Association to be formed are not required to be "certified."
12) The Court's summary judgment Order dated May 12, 2006 in the matter Robert J. Pacilli Homes, LLC v. Pilesgrove Township Planning Board, et als, under Docket No. SLM-L-319-05 shall be incorporated herewith and made a part hereof except as otherwise expressly provided herein.
On June 16, 2006, Pacilli had moved for sanctions against Pilesgrove for failure to comply with the court's prior directive that Horner review documents previously prepared by plaintiff's counsel and for Horner's continued insistence that his forms be used. By order dated July 25, 2006, Pacilli's motion was denied without prejudice, and Special Master Duffy was "directed to prepare a report for the Court based upon the documents, briefs and other items provided to the Special Master by the parties or which may be requested by the Special Master from the parties."
In his report of December 18, 2006, the special master stated that instead of analyzing respective paragraphs of competing documents submitted by Pacilli and Pilesgrove, he created a set of his own documents, including, among other things, a "Declaration Of Covenants and Restriction And Deed of Easement (Oldman's Bluff)" and "By-Laws of Oldman's Bluff Homeowners' Association, Inc."
Duffy addressed two issues in the Pacilli case: (1) "whether the Oldman's Bluff Development is 'a Planned Real Estate Development' thus triggering the provisions of N.J.S.A. 40:55D-43 setting forth standards for the establishment of an open space organization," and (2) "whether the Township Solicitor's rejection of opposing counsel's documents, in whole or in part, is reasonable."
With respect to the first issue, Duffy stated:
If the Oldman's Bluff Development is a "planned development", the Township's remedy for the failure of Homeowners' Association's [sic] to maintain the Common Property and the recouping of its costs is through the notice, entry and assessment provisions of N.J.S.A. 40:55D-43.
The Township's counsel asserts that Oldman's Bluff Development cannot be a "planned development" since same is not recognized by the Pilesgrove Township's Land Use Ordinance which requires planned developments be either an Agricultural Retention Cluster on 100-acre tracts in an AR district, an Age Restricted Residential Cluster on 95-acre tracts in the SR district or a Planned Industrial Development on 100-acre tracts in the LM district. The only type of planned development that is permitted in the AR district in which the subject development is located is an Agricultural Retention Cluster which requires that at least 50% of the tract be deed-restricted for agricultural use. Defendant's [sic] did not proposed [sic] to deed-restrict any of the land for agricultural uses nor was the application characterized as such at any time during the approval process.
A plain reading of N.J.S.A. 40:55D-43 requires that there be a concomitant ordinance pursuant to said article providing for planned unit development. As presented for approval, Oldman's Bluff Development did not meet the local ordinance. However, the "scheme" set forth in said provision for the enforcement of a lien by the Township is clearly a reasonable ("tried and true") method even if other means of cost collection are not necessarily precluded herein. Inasmuch as the Court has previously ruled that the Defendant Township may not subject the individual homeowners' Association members to in personam liability for the Homeowners' Association breach of its duties, I am not certain this issue remains of significance.
As to the second issue, Duffy stated that
[t]he Resolution of the Planning Board is replete with language where documents are to be submitted for the review and approval of the Township Solicitor. William Cox [in] the seminal work New Jersey Zoning and Land Use Administration is silent on the issue.
Common sense must prevail. In instances where the Township has a legitimate concern as to the wording of provisions relating to or impacting upon the Township, reasonable deference should be given to language preferred by the reviewing solicitor. Accordingly, the wording of various terms, conditions, covenants and restrictions relating to stormwater management, open space and conservation areas, setback limitations, etc. should be . . . to counsel's satisfaction. However, the organization of the documents themselves, the wording of various terms, conditions, covenants and restrictions unrelated to specific conditions of an approval and general provisions governing the administration of the Homeowners' Association should be left to the drafting counsel for the development.
Duffy stated in his report that, in drafting the declaration of covenants and restrictions and deed of easement and by-laws of the HOA, he honored the preference of developer's counsel that easements or restrictions which affect only a portion of the proposed Lots be contained in separate documents which may be more visible at time of closing. If the covenants, restrictions or easements affect all or a majority of the proposed Lots, [he] included same in the "master" Declaration. Reviewing counsel's [presumably Horner's] preference for specific wording of various terms, conditions, covenants and restrictions relating to stormwater management . . . were honored but [Duffy] chose the wording of the drafting counsel for the development [of] various terms, conditions, covenants and restrictions unrelated to specific conditions of the approval and general provisions governing the administration of the Homeowners' Association.
On December 21, 2006, Pacilli moved for confirmation of the report. Although the report pertained only to Pacilli, Rodriguez joined in Pacilli's motion to accept the documents created by the special master. The court granted the motion, stating:
[H]ad a dialogue ensued, perhaps the ultimate agreement, the ultimate documents could've included some different items. And there might have been this super document prepared that the solicitor for the township hoped.
But my conclusion is that the township forfeited its right to negotiate the terms of the document, and to my utter amazement, I think I was hearing today some suggestion --well, I did hear the suggestion about a further review of documents, but I also think I was hearing, you know, maybe we ought to have this, maybe we ought to have that.
Well, that very approach, that negotiation approach that I had wanted to impose, was rejected by the township. And the township forfeited its right to negotiate the terms of the document by its very failure and refusal to negotiate those terms when it had the opportunity to do so, when it was invited to do so, when it was begged to do so, and ultimately, when it was ordered to do so.
My view of this is that the Court really has no alternative but to direct--develop the special master's documents to use. And another comment about that approach, initially seeing that the impasse could not be broken in any other fashion, the Court had directed that the developer's documents be used. We had gotten to the point that there was no movement. I had made the determination that the solicitor's position in that regard of insisting on his documents was unreasonable.
I had ordered that the developer's documents be used. And yet, . . . in an extreme effort . . . to be fair to the defendant, and in particular, to the residents of the defendant township, who frankly, in my view, were being harmed by the defendant's hardline position in this matter.
And in spite of the defendant forfeiting its right to participate and protect its citizens, the Court directed the special master to review the documents that had been submitted by the plaintiff developer. And I'm referring to both parties now--both cases.
And in this way, an attempt was made to protect the defendant's rights and the rights of the residents of defendant township even when the defendant in its stubbornness and its utter unreasonableness, abandoned meaningful participation in the process.
So, I think that every effort has been made to protect the residents of the township, and I think that the Court has been left with no alternative but to direct that the . . . [special master's] documents be accepted.
The court's order of January 24, 2007 provided:
1. The recommendations and findings of the Special Master appointed in this matter, Edward Duffy, Esquire, be and are hereby incorporated and do hereby become the Order of the Court; and
2. The documents prepared by Edward Duffy, Special Master and as finally approved by Edward Duffy, be and are hereby deemed to be the appropriate Homeowners Association documents for the residential development to be known as Oldman[']s Bluff and shall be accepted by the Township of Pilesgrove and upon filing with the County Clerk, the Township of Pilesgrove shall sign and release for recording the subdivision plat for said major subdivision; upon completion of all other conditions, approval not to be unreasonably withheld[;]
3. The period of protection afforded by N.J.S.A. 40:55D-52 as it relates to the Oldman[']s Bluff subdivision be and is hereby extended until a period which shall run two years from the date that the final plats are executed[;]
4. This is a final order[; and]
5. Plaintiff's damages claims are severed.
On the same day, the court entered a substantially similar order in the Rodriguez case with respect to the Athenian Estates subdivision.
On February 23, 2007, Pilesgrove filed a notice of appeal in the Pacilli case from portions of the May 12, 2006 order and portions of the January 24, 2007 order. On March 5, 2007, Pacilli filed a notice of cross-appeal from paragraph 1 of the May 12, 2006 order (upholding the Township's demand for a maintenance bond in perpetuity). On February 26, 2007, Pilesgrove filed a notice of appeal in the Rodriguez case from portions of the October 10, 2006 partial summary judgment order and from portions of the January 24, 2007 order.
On February 28, 2007, Pilesgrove moved in the trial court for a stay of the January 24, 2007 orders adopting the special master's report. The court denied the motion on March 30, 2007.
Also on March 30, 2007, the court granted Pacilli's February 3, 2007 and Rodriguez's March 1, 2007 motions for counsel fees and costs pursuant to N.J.S.A. 2A:15-59.1. Rodriguez was awarded $20,999.74, and Pacilli was awarded $46,263.91 (which was modified by order of April 27, 2007, pursuant to Pilesgrove's motion for reconsideration, to $40,859.56).
On March 30, 2007, the court also granted Pacilli's February 13, 2007 motion in aid of litigant's rights, with an order that provided:
1. The Township of Pilesgrove may not, in this matter, require the plaintiff, developer, to post a maintenance guarantee simultaneous with the posting of a performance guarantee as the maintenance guarantee will be posted as a condition of the release of the performance guarantee; and
2. The preemptive stop work order issued by the Township of Pilesgrove be and is hereby voided and the plaintiff may commence construction upon the posting of the appropriate inspection escrow; and
3. The Township of Pilesgrove Engineer is directed to engage in a preconstruction meeting with plaintiff within fifteen (15) days of the date of this Order and proceed in good faith[.]
Pilesgrove filed a notice of appeal from this order on April 19, 2007. On April 25, 2007, we denied Pilesgrove's motion for a stay of the January 24, 2007 orders adopting the special master's report as to both Pacilli and Rodriguez, and of the March 30, 2007 order granting Pacilli's motion in aid of litigant's rights. The Supreme Court, on April 30, 2007, similarly denied Pilesgrove's stay request.
On April 27, 2007, the trial court entered orders disposing Pilesgrove's April 11, 2007 motions for reconsideration of the counsel fees and costs awards. The court reduced Pacilli's award but denied the motion with respect to Rodriguez. The court entered orders on April 27, 2007 and May 1, 2007, denying Pilesgrove's March 20, 2007 motions to limit the special master's duties in the two cases.
In an amended notice of appeal filed in the Pacilli case on May 10, 2007, Pilesgrove appealed from the March 30, 2007 order awarding counsel fees as modified by the April 27, 2007 order, and from the April 27, 2007 order denying its motion to limit the special master's duties. Similarly, in an amended notice of appeal filed in the Rodriguez case on May 10, 2007, Pilesgrove appealed from the March 30, 2007 order awarding counsel fees, and from the corrected May 1, 2007 order denying its motion to limit the special master's duties.
On June 8, 2007, the trial court entered an order upon Pacilli's May 10, 2007 motion, discharging a lis pendens filed by Pilesgrove. Pilesgrove filed a second amended notice of appeal from that order on June 11, 2007.
In a June 21, 2007 order, we denied Pilesgrove's application to stay the discharge of the lis pendens. The Supreme Court denied Pilesgrove's stay application on June 22, 2007.
On appeal, Pilesgrove argues that the trial court erred (1) by precluding it from imposing requirements upon the HOAs for municipal stormwater management responsibilities, (2) in permitting the special master to prepare a third set of HOA documents that were approved for these projects, (3) by permitting Pacilli to begin land disturbance and construction activities following only the posting of an inspection escrow, (4) by nullifying Pilesgrove's requirement for the simultaneous posting of a performance and maintenance guaranty, (5) by awarding counsel fees and costs to the developers, and (6) in discharging Pilesgrove's lis pendens with respect to Pacilli. In its cross-appeal, Pacilli argues that the court erred in ruling that Pilesgrove could impose a post-approval requirement that Pacilli post a cash escrow in perpetuity. We will address each argument in turn.
The Township argues that the trial court erred by precluding it from imposing lawful requirements upon the HOAs, which will be charged with municipal stormwater management responsibilities. Under the stormwater management regulations, the Township, as the permittee, may rely upon another entity, such as an HOA, to satisfy its permit obligations. N.J.A.C. 7:14A-25.7(a)(1),(2). However, the permittee remains responsible for compliance with the permit obligations if the other entity fails to implement the required measures. N.J.A.C. 7:14A-25.7(a)(3).
The Township raises a number of arguments dealing with the HOA documents. It begins by contending that it acted within its rights in insisting upon the use of the documents prepared by the township solicitor and that the court erred in directing that the documents prepared by the developers' attorneys be deemed the working documents for purposes of document review. This argument is premised on the proposition that Horner's forms should be cloaked with the presumption of judicial deference given to municipal action. That premise is not legally supportable.
It is fundamental that municipal discretionary actions are "vested with a presumption of validity" and "will be upheld where any state of facts may reasonably be conceived to justify the action." Vineland Constr. Co., Inc. v. Twp. of Pennsauken, 395 N.J. Super. 230, 255 (App. Div. 2007), appeal dismissed as moot, 195 N.J. 513 (2008). However, documents drafted by a township solicitor cannot be considered municipal action. Indyk v. Klink, 121 N.J. Super. 314, 319 (App. Div. 1972). Professional services rendered by a municipal attorney stand on the same footing as the services of a municipal administrative official. Ibid. Municipal attorneys are not "converted, somehow, to officials who themselves exercise the legislative, judicial or executive functions and duties of the bodies or officials they counsel and advise." Ibid.; see also Sumo Prop. Mgmt., L.L.C. v. City of Newark, 21 N.J. Tax 522, 527 (Tax 2004) (holding that actions by city tax assessor and corporate counsel in denying taxpayer's application do not constitute municipal action).
The Planning Board resolutions granting subdivision approvals in these cases required the developers to submit their proposed documents to several planning board officials and to the township solicitor for review. The trial court held, and we agree, that this was permissible. This referral, however, did not vest the township solicitor with the authority to add new conditions that were not imposed by the Planning Board or to draft documents as he saw fit. We reject the Township's argument that the court usurped the township solicitor's authority by directing that the developers' documents be deemed the working documents. By requiring the developers to submit documents for review, this is exactly what the Planning Board directed.
The resolutions expressed the Planning Board's intention that "the Solicitor assure that the restrictions and/or easements [are] . . . [d]rafted in a manner to impose upon the Homeowners' Association and lot owners within the development, jointly, severally, and in the alternative, the obligation to perpetually maintain and repair the drainage facilities," and "[d]rafted to vest the Township with the right to perform the work upon default of other parties and to levy the costs incurred against the property owners, jointly, severally, and in the alternative."
We next consider the Township's attempt to impose personal liability on homeowners. The trial court viewed this attempt with skepticism, "as an extension of the typical method by which municipalities deal with recalcitrant property owners." We agree with the trial court.
Unpaid property taxes and water and sewer charges are enforced by liens upon affected properties. These delinquencies do not become personal obligations of the property owners. As noted in General Ceramics, Inc. v. Borough of Wanaque, 21 N.J. Tax 133, 136 (Tax 2003):
Property taxes are an obligation of the property and not a personal debt of the property owner. See, e.g., Freehold Office Park, Ltd. v. Freehold Tp., 12 N.J. Tax 433, 440 (1992); Garden State Racing Ass'n. v. Cherry Hill Tp., 1 N.J. Tax 569, 573 (1980).
Water and sewer charges also are liens against the property. See N.J.S.A. 40A:31-12 (as to water charges) and N.J.S.A. 40A:26A-12 (as to sewer charges).
For developments subject to N.J.S.A. 40:55D-43 (Standards for the Establishment of Open Space Organization), if it becomes necessary for a municipality to bear the cost of maintaining open space upon the failure of a HOA to do so:
c. The cost of such maintenance by the municipality shall be assessed pro rata against the properties within the development that have a right of enjoyment of the open space in accordance with assessed value at the time of imposition of the lien, and shall become a lien and tax on said properties and be added to and be a part of the taxes to be levied and assessed thereon, and enforced and collected with interest by the same officers and in the same manner as other taxes.
Following this approach, if Pilesgrove incurs any stormwater maintenance costs upon failure of the HOAs to address stormwater issues, then, as with other unpaid municipal taxes, assessments and charges, such unpaid costs could properly result in a lien upon the properties.
Pilesgrove's reliance upon Highland Lakes Country Club & Community Ass'n v. Franzino, 186 N.J. 99 (2006), is misplaced. In that case, the Court held that a current owner was liable to the association for arrears for common assessments owed by predecessors in title. Id. at 112, 118. The case did not involve any claim by a municipality.
In his report, Duffy concluded that these developments did not constitute planned developments falling within the ambit of N.J.S.A. 40:55D-43, because the developments did not contain the acreage required under the Township's ordinance. However, Duffy deemed the purpose and goal the same, and drafted his documents to follow the model statutorily prescribed under this section. Thus, Section 3.5 of the Declaration prepared by Duffy and approved by the court provided:
The Township is hereby granted the right, at its sole option and discretion, to enter the Open Space/Conservation Lot to inspect same and to perform reasonable and necessary repairs and maintenance of and to the Open Space/Conservation Lot in the event the Homeowners' Association fails to comply with the requirements of this Declaration. The Township may exercise all rights of enforcement, jointly or severally, of the terms, conditions and requirements of this easement as authorized by statute by any proceeding so permitted by law, including the right to full reimbursement by the Homeowner's Association, and also all Lot Owners on a pro rata basis, for all reasonable costs relating to such enforcement pursuant to statute.
In our view, this provision properly implemented the requirements of the Planning Board, adequately protected the interests of the Township, and complied with the law pertaining to remedies by municipalities in circumstances such as these. Likewise, as far as Horner's superpriority for any stormwater management lien, the priority of liens will be governed by statute. While we do not decide the issue of priority in this case, because the issue is not before us, we note, for example, the provisions of N.J.S.A. 40:56-1 (providing for the levying of municipal assessments on lands benefited by the construction of drainage facilities), and N.J.S.A. 40:56-33 (providing for priority of liens). We emphasize that we are not ruling prospectively and hypothetically on the applicability of these or any other statutory provisions.
We next consider Horner's efforts to dictate the day-to-day operations of the HOAs. The trial court found that attempting to impose his stringent requirements on items such as the frequency of meetings, quorum requirements, vesting, and amendment of bylaws, "smack[ed] of micro management" and was "unreasonable." This topic requires little discussion. We consider, for example, the frequency of meetings. The New Jersey Nonprofit Corporation Act, N.J.S.A. 15A:1-1 to 15A:16-2, allows the certificate of incorporation or bylaws to provide for a membership meeting at least once every two years, and if not provided for in the certificate of incorporation or bylaws, then the meeting to elect the trustees shall be held annually. N.J.S.A. 15A:5-2(a). Duffy's provision for annual meetings, and other special meetings that may be called from time to time on a more frequent basis, complies with these requirements and is completely reasonable considering the nature of these HOAs. We find no error in the court's determination that Horner's preference for quarterly meetings and his attempt to impose that preference on these HOAs was unreasonable. Horner's argument that his requirement in this regard was "lawful" rings hollow. So too would be a requirement for monthly or weekly meetings. That does not make it reasonable.
The same analysis can be made regarding the other provisions that deal specifically with the internal operations of the HOAs. Duffy sensibly determined that the Township had no overriding interest in dictating the particulars of these provisions and, as long as the provisions complied with legal requirements, the developers' proposals should be honored. The court did not err in ratifying this approach.
With respect to the Athenian Estates HOA, the Township argues that the court erred in determining that it cannot require the developer to obtain an access and maintenance easement for off-tract drainage facilities. This issue involves a twelve-inch pipe from an adjoining off-site parcel. The Planning Board did not require Rodriguez to obtain an easement on the adjoining property regarding this structure, and the Planning Board's professional planner and engineer did not find it necessary. Nevertheless, Horner provided in his draft of the Athenian Estates Declaration of Covenants for the grant of a drainage easement from the neighboring property owner to the Athenian Estates HOA. The trial court invalidated Horner's off-tract easement requirement. The court was correct in doing so. Determination of the need for such an easement was within the province of the Planning Board, a determination evaluated as part of the hearing process, with consultation between professionals of the developer and Planning Board in the overall development of the tract. Once that determination was made, the Township lacked authority to unilaterally impose this as an additional condition.
We next consider Pilesgrove's argument that the trial court erred in failing to determine that these subdivisions do not constitute planned developments for purposes of lien imposition and enforcement pursuant to N.J.S.A. 40:55D-43. However, by adopting Duffy's report, the court in effect did find that these were not planned developments within the meaning of that term. And, as we have already discussed, Duffy structured the lien imposition and enforcement provisions in a manner consistent with N.J.S.A. 40:55D-43, determining that "the 'scheme' set forth in said provision for the enforcement of a lien by the Township is clearly a reasonable ('tried and true') method even if other means of costs collection are not necessarily precluded herein."
With respect to Pacilli, the Township argues that the court erred by failing to determine that the Planning Board can establish a deadline for completion of guaranteed improvements. It argues that Pacilli suggested that the Planning Board improperly set a deadline for completion of guaranteed improvements and that Pacilli "should initially approach the Board with respect to any request for an extension of the improvement completion deadline."
Pacilli counters that it argued below based on [R.J.P.] Builders, Inc. v. Township of Woolwich, 361 N.J. Super. 207 (App. Div.)[, certif. denied, 178 N.J. 31 (2003),] that condition 11 of the resolution granting final subdivision approval requiring completion of all required improvements within two years of the date of the adoption of the resolution and providing that said time period may be extended by the Township Committee in accordance with N.J.S.A. 40:55D-53 was an illegal condition.
Resolution No. 224-05 granting Pacilli major subdivision approval contained the following condition: "11. Completion of all required improvements within two (2) years of the date of the adoption of this Resolution. Said time period may be extended by the Township Committee in accordance with N.J.S.A. 40:55D-53." N.J.S.A. 40:55D-53(b) provides that "[t]he time allowed for installation of the improvements for which the performance guarantee has been provided may be extended by the governing body by resolution."
In both Pacilli and Rodriguez, the judge extended the period of protection from zoning changes afforded by N.J.S.A. 40:55D-52 until a period "which shall run two years from the date that the final plats are executed." Although the judge did not rule on the validity of condition eleven, the issue is now probably moot because it required improvements to be installed by July 20, 2007 (two years from July 20, 2005, the date of the resolutions). Nevertheless, the condition is invalid. In R.J.P. Builders, supra, 361 N.J. Super. at 215-17, we declared the invalidity of a planning board resolution that required the developer "to complete construction and installation of its improvements 'within 18 months from the date of adoption of [the] resolution' granting final subdivision approval." We reasoned that
N.J.S.A. 40:55D-54(a) and N.J.S.A. 40:55D-52(a) contemplate that there may be delays of up to two years, and even longer where approvals of other governmental agencies are required, before the start of a project which has received major subdivision approval. Condition one conflicts with these provisions by requiring a developer to complete all improvements within eighteen months after adoption of the resolution granting major subdivision approval, even though construction of the development may not even begin within that time, either because the developer is precluded from proceeding due to the absence of other required governmental approvals or because it chooses for its own business reasons to delay the project. [Id. at 216.]
We added that the foregoing does not mean that a municipality lacks any authority to regulate the time of completion of improvements. In fact, we have previously held that "[a] municipality's authority under N.J.S.A. 40:55D-38(c) to adopt 'standards' for improvements and 'provisions ensuring that such facilities shall be completed' includes authority to regulate the time of installation of improvements." Toll Bros., Inc. v. Township of Greenwich, 244 N.J. Super. 514, 520, 582 A.2d 1276 (App. Div. 1990). However, "this municipal authority is activated only when a developer actively undertakes to develop a subdivision." Id. at 521, 582 A.2d 1276. [Id. at 217.]
Thus, Pilesgrove has authority to regulate the time of installation of improvements beginning when active development begins. Id. at 216-17.
The Township contends that with respect to both cases, the judge "erred in failing to determine that it was lawful for [Pilesgrove] to require that all easements and declarations of covenant (except for the road easements) must be included in a single, comprehensive document, rather than in multiple separate ones." Pilesgrove explained that it requires a single document for purposes of uniformity among developments; ease of recording; ease of reference; continuity of definitions, parties and property references; and to further unify and aid in compliance and enforcement within the homeowners by a single document that contains all responsibilities within the development so that each owner knows not only what is required in reference to his or her own respective lot, but also what is required as to all others.
By approving the documents drafted by Duffy, the judge impliedly found no infirmity in multiple easement and declaration of covenant documents. While Pilesgrove may have advanced legitimate practical reasons for the single-document approach, it should not be heard to complain given its intransigence throughout the proceedings. More importantly, the judge implicitly found that the developers' and Duffy's documents were reasonable for their intended purpose.
Finally, we reject the Township's argument that in both cases the court erred in failing to properly analyze and decide the legality of miscellaneous disputed provisions and requirements of its HOA document forms. On the contrary, by making specific findings or by adopting Duffy's report and his documents, the court ruled on all of the issues referenced by the Township.
Pilesgrove argues that the trial court erred by improperly substituting its judgment for Pilesgrove's in approving HOA forms prepared by the special master. Pilesgrove asks us to reverse the order adopting the special master's forms and to order that Pilesgrove can require the developers to utilize the documents prepared by Horner. Pilesgrove further argues that the court erred in permitting the special master to exceed the directives contained in the various court orders and Rule 4:44-1 by allowing him to prepare a third set of documents, which the court ultimately approved.
In support of its argument, Pilesgrove contends that it originally consented to the appointment of a special master to assist the court in reviewing the legality of the various terms contained in the respective parties' documents. Pilesgrove argues that it never consented to Duffy's preparation of a separate set of documents, nor did it consent to delegation of any post-final order responsibilities to Duffy. We find these arguments unpersuasive.
Early in the proceedings, the court entered an order, with the Township's consent, on February 15, 2006 referring the matter to Duffy "for review of homeowner's documents, consultation with counsel and report and recommendation to the Court." The May 12, 2006 order granting partial summary judgment to Pacilli on some of the disputed items directed the parties to meet with Duffy "for purposes of reviewing the remaining outstanding items as to which the Court has not ruled." At the May 12, 2006 hearing to settle the form of the Pacilli partial summary judgment order, the judge suggested that a third set of documents would have to be drafted based upon Duffy's advice that Zeigler and Horner could not agree upon which forms to use as a starting point.
Pacilli moved for sanctions based upon Horner's insistence that his documents be used. Duffy reported that he was prevented from making headway. On July 26, 2006, the court entered an order directing Duffy "to prepare a report for the Court based upon the documents, briefs and other items provided to . . . him or which may be requested by . . . [him] from the parties."
In the October 10, 2006 order granting Rodriguez partial summary judgment, the court directed that the developers' documents would be deemed the working documents, and the special master would submit a report as to whether the working documents satisfied the requirements of the Planning Board approvals.
In granting the developers' motion to confirm the special master's report, the judge rejected Horner's contention that Duffy's role constituted an impermissible attempt to settle the case and exceeded the authority he had been granted. The judge noted that Duffy was appointed to facilitate a discussion and negotiate the creation of documents that would be acceptable, and having failed that, his role "evolved, and he was asked to review plaintiff's documents as a starting point to determine if those documents satisfied the requirements of the resolutions and were otherwise acceptable." The judge further noted that, rather than writing a report as such, Duffy created a set of documents "that reflected his recommendations for cutting and pasting and moving and adding and changing" the conflicting documents. Thus, the judge concluded that Duffy did not exceed his authority but "took a practical approach and, therefore, presented these documents for [court] review."
Matters such as these may be referred to a special master with the consent of the parties or in extraordinary circumstances. R. 4:41-1. Once appointed, and subject to the provisions in the order of reference, the special master has the power "to do all acts necessary or proper for the efficient performance of the duties directed by the order." R. 4:41-3. The role of the special master may include working with the parties, as a facilitator, to resolve disputes in a manner that will meet with the court's approval. S. Burlington County N.A.A.C.P. v. Mt. Laurel Twp., 92 N.J. 158, 282 (1983). That is what happened here, and we find no error in the process.
The orders of reference instructed Duffy to prepare a report and did not, in any manner, preclude him from preparing a third set of documents in lieu of a report. As a practical matter, his documents served as his report. Moreover, the judge specifically contemplated that a third set of documents would have to be prepared, especially in view of Horner's insistence that his documents be used without modifications. The court held that Duffy's work represented a practical implementation of his assigned responsibility. We have no occasion to interfere with that finding.
Pilesgrove further argues that the judge erred by permitting or authorizing Duffy to continue to serve as postorder preparer and reviewer of documents and to serve as a de facto township solicitor. We reject this argument. Duffy's ongoing role was limited to overseeing the completion of documents, particularly in the Rodriguez case. This was within the scope of Duffy's authorized services.
The Township argues that the judge erred by permitting Pacilli "to begin land disturbance and construction activities following only the posting of an inspection escrow despite an ordinance and resolution to the contrary, and by directing the Township Engineer to engage in a premature construction meeting." The Township relies on Section 145-65.A of its ordinance, which "requires the Township Engineer to confirm that all applicable pre-construction conditions of development approval have been satisfied prior to permitting land disturbance" and condition 10 of the resolution granting Pacilli's subdivision approval that "requires that the plat must be filed prior to commencement of construction."
On January 16, 2007, Ziegler wrote to James H. McKelvie, the township engineer, requesting a preconstruction meeting. McKelvie responded, with a copy of his letter to Horner, that because some resolution conditions had not yet been satisfied, a preconstruction meeting would be premature. Ziegler again wrote to McKelvie on January 18, 2007, with a copy to Horner, stating that all outside agencies had approved the plan, that any dispute over the form of HOA documents was unrelated to construction issues, and that in any event, based upon preliminary approval, the developer is authorized to commence construction.
On January 24, 2007, the court entered the order approving and adopting Duffy's documents for Pacilli's development and directing the Township to accept and sign them.
Further, on January 25, 2007, Ziegler wrote to McKelvie enclosing a copy of a letter dated October 5, 2005 from the former township engineer, "requesting that the applicant's representatives contact this office to set a time for the preconstruction meeting." McKelvie continued in his refusal to meet and instructed that "no construction, land disturbance or land improvement may commence at this time."
On February 15, 2007, Pacilli moved for relief in aid of litigant's rights seeking to void the preemptive stop work order. Ziegler's certification included a March 24, 2006 letter from McKelvie to the secretary of the Planning Board indicating that his office reviewed a final plan of lots and various easements, and concluded by stating that "[a]ll of our comments pertaining to the Final Plan of Lots and legal descriptions have been addressed."
In a responding certification, McKelvie attached a copy of his letter of March 7, 2007 to Horner stating that eight easements described in the Declaration prepared by Duffy were not depicted on the final map, and listing eighteen additional comments with respect to the Declaration. McKelvie further stated that his March 24, 2006 letter "did not address plan revisions that are or may be necessary in connection with the proposed homeowners association and other documents that are required as conditions of the Planning Board's approvals." Horner also provided a certification dated March 7, 2007, stating that he had not received, reviewed or approved the proposed finalized documents approved by the court. On March 16, 2007, the Township issued a stop work order to Pacilli requiring the removal of a silt fence.
The court voided the stop work order, authorized commencement of construction upon the posting of an inspection escrow, and directed the township engineer to engage in a preconstruction meeting. The judge found that all approval conditions had been met and that the Township's position that the special master's documents "somehow necessitated a reversal of the prior letter of the [former] engineer saying that the conditions had been met and the matter was in a position to move forward with the pre-construction meeting, is rejected." The judge found that "[t]here was no material change brought about by the Special Master's documents that would render that prior determination inapplicable."
In essence, the judge found that Horner, with McKelvie's complicit assistance, was impermissibly and without justification obstructing Pacilli's ability to begin construction on an approved project and violating the court's January 24, 2007 order. Thus, by its order of March 30, 2007, the court granted Pacilli's motion in aid of litigant's rights.
We agree with the trial court that all necessary conditions pertaining to construction had been satisfied. Further, the documents prepared by Duffy had been approved and were obviously available to Horner for his review. The prior engineer had long ago been satisfied that all approvals were granted and all conditions met and was willing to engage in a preconstruction meeting and to allow construction to begin. The trial court's finding that the roadblocks put up by Horner and McKelvie were pretextual is supported by the record. There is no basis for reversal of the court's order in this regard.
The Township argues that the court erred by denying its right to require the simultaneous posting of a performance and maintenance guaranty, or a performance guaranty that secures a future maintenance guaranty, prior to the plat's signature or construction for Pacilli's project. The court found that no Township ordinance imposed such a requirement, nor did the resolution approving Pacilli's subdivision, as a result of which the maintenance guaranty was not required to be posted until the improvements were completed and accepted.
In R.J.P. Builders, supra, 361 N.J. Super. at 209, we considered this issue with respect to the following condition in a resolution granting subdivision approval:
3. That the applicant post with the township a maintenance guarantee securing maintenance of all improvements to be constructed in the subdivision . . . in the amount of $62,561.88. The maintenance guarantee shall run for a term of two years from the date of acceptance of the improvements by the township.
The resolution expressly provided that the subdivision plat would not be signed and filed until various conditions, including the one quoted above, were satisfied. Ibid. And, the Township ordinance contained a provision requiring maintenance bonds to be posted in advance of a plat's signature. Ibid. n.1.
We concluded that the introductory language of N.J.S.A. 40:55D-53(a), which provides that the approving authority may require the posting of a maintenance guaranty, as well as a performance guaranty, before signing and recording the subdivision plat, was controlling. Id. at 210-11. Based upon that statutory language, we held that a municipality may indeed impose such a requirement. Id. at 214.
However, unlike in R.J.P., Pilesgrove's land use ordinance does not require simultaneous posting of these guarantees prior to the recording of final subdivision plats. On the contrary, Section 145-61H(3)(a) provides that as a condition of acceptance of improvements, the developer "shall have filed with the Township Committee a maintenance guaranty in an amount equal to and not more than 15% of the cost of installing the improvement . . . ."
The resolution granting subdivision approval to Pacilli contained this condition:
5. Posting a maintenance guarantee with the Township upon completion of all improvements for a period of two (2) years after the final acceptance thereof in an amount of 15% of the cost of the improvements as calculated by the Township Engineer. The Applicant's performance guarantee shall not be released until the maintenance guarantee is posted and shall secure said posting.
We agree with the trial court's analysis and conclusion in this case that (1) the R.J.P. holding establishes that approving authorities may, but are not required, to compel the posting of a maintenance guaranty before a plat will be signed and recorded, and (2) that neither a Pilesgrove ordinance nor condition 5 in Pacilli's resolution required the prior posting. The plain language of condition 5, which is consistent with Section 145-61H(3)(a), provides for the posting of a maintenance guaranty "upon completion of all improvements," at which time the performance guaranty shall be released.
The Township argues that the trial court erred in awarding Pacilli and Rodriguez counsel fees and costs under the frivolous litigation statute, N.J.S.A. 2A:15-59.1. On two separate bases, we agree.
The statute authorizes an award of counsel fees to a prevailing party if the adverse party asserted a frivolous claim or defense. N.J.S.A. 2A:15-59.1a(1). A claim or defense will be deemed frivolous if it "was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury," or if the non-prevailing party knew or should have known that it "was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law." N.J.S.A. 2A:15-59.1b(1),(2).
In these cases, the developers sought counsel fees only against the Township. They did not seek counsel fees against Horner, which would have been determined by Rule 1:4-8. That rule contains procedural requirements as a prerequisite to a frivolous counsel fee claim, including the so-called "safe harbor" provision, which requires advance notice to the allegedly offending attorney and an opportunity to withdraw the frivolous claim or defense. R. 1:4-8(b)(1). The notice must set forth with specificity the basis for the belief that the attorney's action is frivolous. Ibid. Only if the offending pleading or position is not timely withdrawn, may the other party later seek frivolous litigation fees. Ibid.
The frivolous litigation statute contains no safe harbor provision, but through its rulemaking authority, our Supreme Court has imposed the same procedural requirements when a fee is sought against a party pursuant to the statute. R. 1:4-8(f). That rule provides that "[t]o the extent practicable, the procedures prescribed by this rule shall apply to the assertion of costs and fees against a party other than a pro se party pursuant to N.J.S.A. 2A:15-59.1." The Court has determined that the promulgation of Rule 1:4-8(f) was within its rulemaking authority because it is not inconsistent with the language or policies underlying the statute and, indeed, promotes the purposes of the legislative scheme. Toll Bros., Inc. v. Twp. of W. Windsor, 190 N.J. 61, 65 (2007).*fn1
The purpose of the safe harbor provision is to serve as a warning to the opposing litigant that the party serving the written notice and demand will seek counsel fees "if the offending paper is not withdrawn within 28 days." Id. at 69. The Court "fashioned timeframes for bringing frivolous behavior to the attention of the offending party, counsel, or pro se litigant, so that the behavior could be corrected promptly and litigation costs kept to a minimum, thereby preserving judicial, lawyers', and litigants' resources." Id. at 71. By virtue of the safe harbor provision, "all users of the judicial system are spurred to give prompt warning to those engaged in frivolous litigation activity. Early notice furthers the legislative purposes by providing all opportunity for remediation." Id. at 72. Noncompliance with the notice requirement places the party who claims frivolous conduct by the adversary "at risk of forfeiting recompense for defending against allegedly frivolous litigation conduct for which the offending person was not put on notice." Ibid.
Rule 1:4-8(f) requires an assessment when a claim is made against a party "whether it is practicable under all of the circumstances to require strict adherence" to the notice and demand provisions of Rule 1:4-8. Ibid. "Although the notice requirement may have a limiting impact on the compensation that one may receive for costs and fees, the public policies underlying N.J.S.A. 2A:15-59.1 militate in favor of requiring that claims against parties meet the Rule's procedural requirements to the fullest extent possible." Ibid.
In these cases, neither Pacilli nor Rodriguez complied with the notice and demand requirements of Rule 1:4-8(b)(1). They never sent any notice to Horner or the Township that they believed that pleadings filed and positions taken on behalf of the Township were frivolous, setting forth with specificity the basis for that belief, and demanding withdrawal of the offending pleadings or position, in default of which they would seek counsel fees and costs against the Township.
The trial court heard argument and decided the fee application on March 30, 2007, four days before Toll Bros. was decided. The judge made extensive findings supporting the conclusion that, from the very beginning of the litigation, the Township acted in bad faith for the purpose of delaying construction of these developments. The primary dispute revolved around the stormwater management documents for the HOAs. In each case, the developer's attorney and Horner had reached an impasse, with Horner insisting that only his documents could be used. The purpose of each law suit was to compel the township officials to accept the documents submitted by each developer's attorney and to sign the subdivision plats. Horner never changed his position throughout the litigation.
Therefore, both developers were well aware, even before they filed suit, of Horner's inflexible position. While it is true that throughout the course of the litigation, Horner refused to negotiate through the auspices of the special master as directed by the court, and he later brought up other issues, including the requirement to simultaneously post a maintenance bond before the plats could be signed, and filed a lis pendens, the thrust of his position on behalf of the Township was that his documents and only his documents could be used to satisfy the Planning Board requirements.
For purposes of our analysis, we accept the trial court's factual finding that, from beginning to end, Horner's conduct on behalf of the Township was in bad faith and for the purpose of delay. In conducting the required practicability analysis, however, the court said on March 30, 2007:
So is it practicable to apply those requirements; the letter [from each developer that was not sent would be] saying please withdraw your position and the time frame?
It strikes me that the law does not require a useless act and it's very clear that a demand to cease and desist the unreasonable position of the defense would have fallen on deaf ears and would have gone without the hoped for response.
If the defense doesn't abide Court Orders and engage in negotiation of document terms, pursuant to an Order of the Court, I think that a reasonable inference is that a letter from the lawyer saying please withdraw your frivolous defense would not fare well.
Accordingly, the court awarded counsel fees and costs to both developers.
The Township moved for reconsideration, at least in part because of the Toll Bros. decision that had just been issued. In denying the motion (except for an adjustment of the amount awarded to Pacilli), the court again addressed the practicability issue in light of the Toll Bros. discussion. The court stated:
So, if what -- practicability means whether it can be accomplished. And, what we're trying to accomplish is getting the offending party, in this case, the Township, to correct its behavior. I -- I have to say that -- and I have to say it with some considerable confidence that I'm satisfied that any number of letters, that any number of notices at any point in this process would not have brought about a correction in the Township's behavior.
There's no question but that the Township was on notice of its offending behavior. So, if what this letter, this demand, this notice is to accomplish is to let them know of the offending behavior, clearly, it was made known. It was made known early enough in -- in the run-up to the actual litigation, and it was made known repeatedly throughout the litigation.
So, to say that there has to be a technical adherence to this requirement of a written notice and demand is unreasonable under . . . all of the circumstances of this case. The . . . purpose of the notice and demand, to minimize the costs in terms of judicial resources, lawyers['] time and fees, and the litigants' blood, sweat, tears, and expenses would not have been accomplished. It -- it truly would have been a futile act.
The -- reasons for the use of this . . . safe harbor provision would not have been realized in this case. The behavior wouldn't have been corrected, the costs wouldn't have been minimized, and there wouldn't have been any remediation of the position.
So, to the extent that the purpose of the -- of the notice and demand could not be accomplished, it is my finding that, as I had indicated at the time of the prior ruling, that compliance, strict compliance with the requirement was not practicable, and there is no point in this that I can see that it would have accomplished anything to send -- to send the letter.
In our view, the judge misconstrued the practicability requirement of Rule 1:4-8(f). The rule requires a determination of when it was reasonably practicable for an aggrieved party to serve the other party with the notice and demand required by Rule 1:4-8(b)(1). Instead, the judge reasoned that notice was not required because, even if it was given, there probably would have been no change in the Township's position. This analysis, akin to harmless error analysis, is not what Rule 1:4-8(f) prescribes. We will not indulge in speculation as to whether the Township might well have authorized Horner to be more flexible in the Township's position if the Township was on notice that it might later be held accountable for the developers' counsel fees and costs.
Accepting as we do the findings of the trial court, which managed both cases from beginning to end and had the feel of the case, those findings lead to an opposite conclusion of that reached by the trial court. In their responding briefs, the developers do not dispute the judge's factual findings, and do not suggest any reason why it was not practicable for them to serve a notice and demand on the Township at the commencement of the litigation, or at any other time during the litigation. Indeed, in situations such as this, where the positions are well known prior to institution of suit, notice can be given even before the litigation begins. For example, in Savona v. Di Giorgio Corp., 360 N.J. Super. 55, 58 (App. Div. 2003), we noted that in a pre-litigation letter, counsel for DiGiorgio, after setting forth the factual and legal basis with specificity, warned Savona's counsel "that Di Giorgio would 'seek fees and costs associated with defending against any baseless claim.'" Thus, "Savona was on notice before the action was filed that Di Giorgio asserted her claim was baseless." Id. at 61.
Stated simply, based upon the trial court's findings, which are accepted by both developers, the developers knew all they needed to know before this litigation was instituted to furnish the required notice and demand. Certainly they could have furnished it at any other time during the course of the litigation. Nothing precluded them from doing so. The record establishes that it was practicable for the developers to comply with Rule 1:4-8(f) at the commencement of the litigation, and their failure to do so precludes their entitlement to counsel fees under N.J.S.A. 2A:15-59.1.
We have a second independent basis for disagreement with the trial court on the counsel fee issue. The trial court held that the Township, a public entity, was not immune from a counsel fee award under N.J.S.A. 2A:15-59.1. We disagree, and for the reasons stated in Division of Youth & Family Services v. P.M., 301 N.J. Super. 80 (Ch. Div. 1997), conclude that, absent a clear legislative enactment to the contrary, public entities are not subject to counsel fee awards under N.J.S.A. 2A:15-59.1 by the terms of the statute and under the doctrine of sovereign immunity.
We therefore reverse those portions of the orders awarding counsel fees and costs to Pacilli and Rodriguez.
After the final orders were entered, and the Township's requests for a stay were denied by this court and the Supreme Court, the Township filed a lis pendens covering the Pacilli property, giving notice of its appeal to this court. Pacilli moved to discharge the lis pendens, and the trial court granted the motion. This court and the Supreme Court denied Pilesgrove's application to stay the discharge of the lis pendens.
The lis pendens was properly ordered discharged because Pilesgrove's appeal arguments do not have as their object to "enforce a lien upon real estate or to affect the title to real estate or a lien or encumbrance thereon" within the meaning of N.J.S.A. 2A:15-6.
Finally, we address Pacilli's cross-appeal. Pacilli argues that the court erred in ruling that the Township could impose a post-approval requirement that Pacilli post a cash escrow in perpetuity. Pacilli argues that this requirement has no basis in the MLUL or in New Jersey's Stormwater Management regulations. However, Pilesgrove's Ordinance #06-04, adopted on April 25, 2006 "to establish minimum stormwater management requirements and controls for major development," requires such a guaranty if an entity such as an HOA is responsible for stormwater management in a development.
The ordinance constitutes municipal action and is presumed valid. Municipalities are authorized to enact ordinances for the protection of persons and property and for the preservation of the public health, safety and welfare. N.J.S.A. 40:48-2. This delegation of authority is further buttressed by the constitutional provision that any law concerning municipal corporations shall be liberally construed in their favor. Quick Chek Food Stores v. Twp. of Springfield, 83 N.J. 438, 447 (1980).
Ordinances related to stormwater management and responsibility necessarily implicate public, health, safety or welfare. Among the purposes of the MLUL are "[t]o encourage municipal action to guide the appropriate use or development of all lands in this State, in a manner which will promote the public health, safety, morals and general welfare" and "[t]o secure safety from fire, flood, panic and other natural and man-made disasters." N.J.S.A. 40:55D-2(a),(b). Included in the MLUL are provisions mandating the preparation and implementation of a stormwater management plan by municipalities. N.J.S.A. 40:55D-93 to -99. N.J.S.A. 40:55D-95 provides that a stormwater management plan and ordinance(s) shall be designed:
a. to reduce flood damage, including damage to life and property;
b. to minimize storm water runoff from any new land development where such runoff will increase flood damage;
c. to reduce soil erosion from any development or construction project;
d. to assure the adequacy of existing and proposed culverts and bridges;
e. to induce water recharge into the ground where practical;
f. to prevent, to the greatest extent feasible, an increase in nonpoint pollution;
g. to maintain the integrity of stream channels for their biological functions, as well as for drainage; and
h. to minimize public safety hazards at any storm water detention facilities constructed as part of a subdivision or pursuant to a site plan.
Because Pilesgrove is ultimately responsible under its DEP permit for possible defalcations of the HOAs with respect to their stormwater responsibilities, Pilesgrove's attempt to protect itself by ordinance is reasonable. The ordinance also comports with authority granted by the stormwater provisions of the MLUL. The trial court did not err in upholding this requirement, which was self-executing by virtue of the ordinance, and was not dependent on Horner's insertion of the requirement in his documents.
For the reasons stated, we reverse the trial court orders awarding counsel fees and costs in favor of Pacilli and Rodriguez against the Township. In all other respects, we affirm on the Township's appeal in both cases and on Pacilli's cross-appeal.
Affirmed in part; reversed in part.