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K. Hovnanian Companies Northeast, Inc. v. County of Essex

August 6, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-36-08.

Per curiam.


Argued April 28, 2009

Before Judges Wefing, Yannotti and LeWinn.

K. Hovnanian Companies Northeast, Inc., (Hovnanian) appeals, pursuant to leave granted, from the October 10, 2008 order of the Law Division granting partial summary judgment to the County of Essex (County) dismissing Hovnanian's claims against the County and discharging its notice of lis pendens on certain property in the County. For the reasons that follow, we reverse.

This matter arises from the sale and redevelopment of certain County properties, located in Verona, Caldwell, North Caldwell and Cedar Grove, known as the Hilltop Parcels. In 1995, the County contracted with the Essex County Improvement Authority (ECIA) to manage the redevelopment of the Hilltop Parcels. Pursuant to a resolution passed by the Essex County Board of Chosen Freeholders (Board), the ECIA was empowered to create a master plan for the area, solicit requests for proposals (RFPs) and convey the parcels to the winning bidders. Hovnanian responded to the ECIA's RFP and won the bid to purchase and redevelop Parcels 1 through 5 of the Hilltop Parcels. On March 20, 2002, Hovnanian and the ECIA entered into an agreement of sale for the five parcels; on December 14, 2004, Hovnanian and the ECIA executed an "[a]mended and [r]estated [a]greement of [s]ale" that also encompassed Parcels 1 through 5. Although Hovnanian was awarded the contract, the agreement required further action by the Board before any particular parcel would be transferred. Thereafter, the Board passed resolutions for the conveyance of Parcels 1 through 5. The County then conveyed Parcels 1 through 4 to the ECIA which, in turn, sold those four parcels to Hovnanian. The County never conveyed Parcel 5 to the ECIA, however, and that parcel was never conveyed to Hovnanian notwithstanding its successful bid for all five parcels and the Board's resolution.

On February 6, 2008, Hovnanian filed a complaint against the County and the ECIA, seeking enforcement of the portions of the agreements of sale relating to the conveyance of Parcel 5; Hovnanian also filed a Notice of Lis Pendens in the office of the County's Register of Deeds, covering Parcel 5 in Cedar Grove.

In its complaint, Hovnanian alleged that the County had conveyed Parcels 1 through 5 to the ECIA and had appointed the ECIA as "redeveloper" of those properties. The complaint further alleged that the County was continuously and directly involved with the ECIA in negotiating and drafting documents establishing the ECIA's authority to market the properties.

Hovnanian's claims included the following:

28. [O]n or about December 15, 2004, the [Board] adopted Resolution No. R-04-1160,... [which] specifically acknowledged that... "County property located in Verona, Cedar Grove, North Caldwell and Caldwell... was to be conveyed to the [ECIA] so that the [ECIA] could effectuate its obligations as set forth in the Service Agreement... to create a Master Plan and a Redevelopment Plan for the Hilltop and Contiguous Property, and market and sell all such property for development.... The County Executive and the County Administrator are authorized and directed to execute such instruments... or other documents that are necessary... to accomplish the sale of the [Hilltop Parcels] to the [ECIA]...."


38. As of September 19, 2005, only one Hilltop Parcel (Parcel 5) had yet to be transferred by the County to the ECIA for conveyance to Hovnanian for redevelopment. Hilltop Parcel 5 is located in the Township of Cedar Grove....

39. Throughout 2006 and into early 2007, the County, as it promised it would be, was cooperative in assisting Hovnanian [to] obtain necessary approvals from Cedar Grove to enable it to close on Hilltop Parcel 5.

40. Indeed, on or about March 16, 2006, County Executive DiVincenzo attended a meeting with [the] Mayor... of Cedar Grove, the Township Council and Hovnanian in an effort to assist with meeting Cedar Grove's needs, with the ultimate goal of securing the requisite approvals.

41. However, in February 2007, the County... claimed that it had a significant budget gap that required closure and urged Hovnanian, as it had done in the past, to close early with regard to the remaining Hilltop Parcel.


48. At all times relevant hereto, the County and the ECIA were aware that Hovnanian was compliant with the Agreement and was actively pursuing all approvals for Hilltop Parcel 5, as required.... Indeed, the County and the ECIA were fully aware of the same since they each had been actively involved in the approval process with Cedar Grove.

49. Hovnanian continued to abide by the terms of the... Agreement and continued to work diligently toward the approval process.

50. Without notice to Hovnanian,... on or about December 27, 2007, the County, by [r]esolution..., refused to authorize the conveyance of Hilltop Parcel 5 to the ECIA. Such refusal was in direct contravention of the ECIA's agreement with the County, in direct contravention of its representations and promises to Hovnanian and in direct contravention of the... Agreement.


51. On or about January 4, 2008, Hovnanian was shocked to receive a letter from the ECIA wherein the ECIA advised that it was terminating the... Agreement due to "the County's refusal to transfer title to Parcel 5 to the ECIA."

Hovnanian asserted the following claims against the County:

(1) promissory estoppel; (2) breach of implied in fact contract; (3) breach of contract - agency; (4) third party beneficiary; (5) tortious interference with contract; (6) tortious interference with prospective economic advantage; (7) breach of the covenant of good faith and fair dealing; and (8) conspiracy to breach the covenant of good faith and fair dealing.

The relief which Hovnanian sought against the County was to "declar[e] the attempted termination of the [agreement between Hovnanian and the ECIA] to convey Hilltop Parcel 5 to Hovnanian null and void"; and to "enjoin[] the County... from taking any actions that would impair or otherwise limit the County's ability to convey Hilltop Parcel 5 to the ECIA for conveyance to Hovnanian."

On April 3, 2008, the County filed an answer, counterclaim and third-party complaint against Hovnanian, claiming that:

[O]n or about August 22, 1995[,] the County... entered into a Service Agreement with the... ECIA concerning the redevelopment of County land located in the Townships of Cedar Grove, North Caldwell and Verona. The Service Agreement provides that the project property shall be designated by the County for conveyance to the ECIA ...

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