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New Horizon Investment Corp. v. Mayor and Municipal Council of the Township of Belleville

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


October 16, 2009

NEW HORIZON INVESTMENT CORP. AND AZAN INTERNATIONAL, INC., PLAINTIFFS-APPELLANTS,
v.
MAYOR AND MUNICIPAL COUNCIL OF THE TOWNSHIP OF BELLEVILLE, PLANNING BOARD OF THE TOWNSHIP OF BELLEVILLE, AND ESSEX COUNTY IMPROVEMENT AUTHORITY, DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3898-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted September 21, 2009

Before Judges Lisa, Baxter and Alvarez.

This is a land use dispute. Plaintiffs, New Horizon Investment Corp. (New Horizon) and Azan International, Inc. (Azan), each own a vacant lot in the Township of Belleville. The lots are contiguous to each other and, along with other parcels to which they are contiguous, comprise a tract that Belleville has designated as in need of redevelopment under the Local Redevelopment and Housing Law (LRHL), N.J.S.A. 40A:12A-1 to -49. Plaintiffs contend that any land use restrictions created by the redevelopment plan did not supersede the underlying residential zoning applicable to their lots, but merely constituted overlay zoning. Belleville takes the contrary view.

In any event, plaintiffs never submitted any development plan, sought any approvals, requested any interpretations of the zoning map or ordinance, or applied for any variances. Instead, they brought this action in lieu of prerogative writs. In their summary judgment motion, they sought a judicial declaration that the redevelopment plan constituted only an overlay zoning district, that the underlying residential zoning was not superseded, and that any development application plaintiffs might submit must be reviewed under the regulations pertaining to the underlying residential zone.

Judge Leath concluded that plaintiffs were not entitled to the relief they sought because they failed to exhaust available administrative remedies. On that basis, she dismissed the complaint.

Plaintiffs argue that (1) the judge erred in declining to exercise jurisdiction because the exhaustion of administrative remedies doctrine is inapplicable to this question of law, (2) because Belleville failed to explicitly amend its zoning map at the time of adoption of its redevelopment plan, any zoning regulations contained in the redevelopment plan merely overlay, but do not supersede, the underlying residential zoning regulations, and (3) Belleville cannot circumvent improper implementation of the redevelopment plan by virtue of an "unlawful settlement agreement" in a separate lawsuit in which plaintiffs were parties, but in which plaintiffs did not join in the settlement agreement. We reject plaintiffs' first argument. We agree with Judge Leath's conclusion that plaintiffs are barred from the relief they sought because they failed to exhaust available administrative remedies. We therefore affirm the order under review. Because of this disposition, we find it unnecessary to decide the second and third issues raised by plaintiffs.

I.

Lal Pathen is the principal of New Horizon. His son, Kaiser Pathen, is the principal of Azan. Plaintiffs' properties are located at the intersection of two major streets in Belleville, Belleville Avenue and Franklin Avenue. Their lots consist of about seven-and-one-half acres of open space commonly known as the "Great Lawn" for the former Essex County Geriatric Center. The Geriatric Center building is a nine-story hospital building, situated on a hill and surrounded by some accessory buildings and open space. It was built in the 1930s, and the building and its surrounding property is a prominent feature in Belleville. In the late 1980s, operations at the Geriatric Center ceased, and the building became vacant.

Although earlier zoning permitted uses such as the Geriatric Center, in 1979 the zoning for this property was changed to R-A-2, which permitted single family homes and home professions, but did not permit hospital facilities. Therefore, after the 1979 zoning change, the Geriatric Center operated as a nonconforming use.

In 1993, the Center for Molecular Medicine and Immunology (CMMI) expressed an interest in establishing a research center in the old Geriatric Center. The Belleville Municipal Council (Council) directed the Belleville Planning Board to consider whether an 18.59 acre portion of the thirty-four acre Geriatric Center property constituted an area in need of redevelopment under the LRHL. The Planning Board conducted proceedings and concluded that the parcel qualified. The Planning Board recommended that the Council declare that portion of the property to be in need of redevelopment and adopt a redevelopment plan.

On May 11, 1993, the Council passed a resolution which deemed the 18.59 acre portion of the tract "an area in need of redevelopment" under the LRHL. On June 22, 1993, the Council adopted Ordinance No. 2607-A, which approved the redevelopment plan, which, along with a map depicting the zoning change for the area, was attached to the ordinance. The map, entitled "PROPOSED ZONING MAP," reflected the R-DV zoning designation recommended by the Planning Board in the redevelopment plan, which stated:

The designation proposed is R-DV and is shown on the Map RP-1, entitled "Amendment to Zoning Map" included in the Appendix of this Plan. The zoning text would then be amended to reflect the establishment of a new district subject to the regulations and conditions specified in the adopted plan.

The redevelopment plan divided the area into three parcels. The first consisted of the hospital building and the land upon which it stands. The second was the superintendent's residence and its surrounding land. The third was the remaining land within the redevelopment area, which included plaintiffs' lots. The plan provided that parcel one would be redeveloped and sold to CMMI; parcel two would either be converted to medical offices or other uses to support the use of parcel one, or be demolished; parcel three was designated for "[o]pen space, passive recreation (such as sitting, strolling, bike-riding), playgrounds, access to and accessory parking for the uses on Sites 1 and 2." Construction on parcel three would be limited to roadway improvements, such as drainage, paving, lighting and expansion of accessory parking areas, and installation of landscaping and such items as may be appropriate to recreational uses.

The redevelopment plan stated that it was consistent with the goals and objectives of Belleville's 1988 Master Plan, including "preservation of open space [and] rehabilitation of non-residential uses," and that its "only inconsistency" was with the existing zoning designation of the site as R-A-2. The plan contained the following statement: "The legislation therefore provides for the Redevelopment Plan to supersede applicable municipal development regulations."

The plan designated the Essex County Improvement Authority (ECIA) as the redevelopment entity, which would be empowered to lease or convey property in the redevelopment area. By 1995, ECIA leased parcel one, containing the former hospital building, to CMMI, which then occupied the building and has used it as a cancer research facility. It has also conducted renovations and restoration of the building.

In 1998, because of a budgetary shortfall, Essex County decided to subdivide lands surrounding the hospital building and sell them. It created seven individual lots, within the remainder of the 18.59 acre redevelopment area not leased to CMMI, comprised primarily of what was designated in the plan as parcel three. The notice of public sale made clear that the parcels conveyed may be subject to the redevelopment district zoning. Plaintiffs purchased two of the lots at the August 31, 1998 public auction. New Horizon purchased a 6.53 acre parcel for $350,000; Azan purchased a 1.38 acre parcel for $115,000. These two parcels contained substantial frontage on Belleville Avenue and Franklin Avenue and comprised the majority of the Great Lawn. Another group of investors purchased several of the other lots. Separate entities were created to take title to each of those lots. Collectively, they became known as the "Rainmaker."

On December 28, 1998, plaintiffs entered into a thirty-year ground lease agreement with the Rainmaker, by which plaintiffs granted the Rainmaker the development rights to their lots in consideration for being paid twenty percent of the net rentals after development. The Rainmaker assumed responsibility for obtaining necessary zoning changes and litigated any disputes with Essex County. Further, Essex County had attempted to void the public sale and conduct a second auction, that had resulted in litigation. The Rainmaker assumed responsibility for negotiating a settlement with Essex County. The Rainmaker guaranteed a minimum bid upon and later purchased the remaining unsold lots, thus obtaining development rights to nearly the entire area surrounding the hospital building.

The relationship between plaintiffs and the Rainmaker quickly deteriorated. The Pathens commenced a course of conduct designed to avoid their obligations under the Rainmaker's contract. On August 12, 1999, the Rainmaker filed a Law Division action against plaintiffs seeking to prevent the Pathens from transferring title to the two lots that were subject to the lease agreement. On June 21, 2002, after a bench trial, Judge Payne, then sitting in the Law Division, ruled in favor of the Rainmaker and directed the parties to appoint a master to oversee specific performance of the lease agreement.

Meanwhile, as a result of the Rainmaker's efforts and negotiations, on August 14, 2001, the Belleville Council passed Ordinance No. 2906 creating a "B-SC" zoning designation to allow for the development of a commercial shopping center on portions of the former Geriatric Center site which did not include plaintiffs' properties. On October 5, 2001, during the pendency of the Rainmaker's litigation, a citizens group, Citizens Organization for Responsible Redevelopment (CORR) filed a Law Division action seeking to invalidate the ordinance creating the B-SC district and enforce the open space requirements of the redevelopment plan. Plaintiffs and the Rainmaker were defendants, in addition to Belleville Township, its Planning Board, and Essex County.

On December 9, 2003, CORR, the Rainmaker, the Township, and the Planning Board entered into a settlement agreement, by which the Township would rescind the ordinance creating the B-SC district and rezone a portion of the Rainmaker's property for use as a gated townhouse/condominium community. Plaintiffs were not a party to the settlement. With respect to plaintiffs' lots, this settlement agreement required that:

The Belleville Council and the Belleville Planning Board shall reaffirm the designation of the Great Lawn as open space, by Master Plan amendment to designate the Great Lawn as a "public area", by Official Map designation as a "public area", and by reaffirmation of the 1993 Redevelopment Plan as "open space".

The portion of the Rainmaker's property that fell within the boundaries of parcel three of the redevelopment plan was a small area, which would hold a detention/retention basin for the residential development, and was included in the Rainmaker's density calculation.

Although plaintiffs objected to the settlement, they did not assert counterclaims against CORR or challenge the settlement agreement's purported "reaffirmation" of the open space restrictions on their property.

On March 23, 2004, the Council adopted two ordinances, Nos. 3025 and 3026, which implemented the provisions of the CORR settlement agreement. Belleville Township adhered to the position that plaintiff's properties could not be developed because they were zoned R-DV for open space and passive recreation pursuant to the 1993 Redevelopment Plan.

On June 30, 2004, plaintiffs initiated this action, challenging the effect of the 1993 Redevelopment Plan's zoning restrictions on their property.*fn1

On March 5, 2007, plaintiffs moved for summary judgment. They sought an order stating that the ordinance adopting the redevelopment plan constituted an overlay zoning district and the R-A-2 residential zoning designation of their property remained in place and was not superseded by the redevelopment plan. Defendant cross-moved for summary judgment, urging dismissal on various grounds. Each side submitted evidence, including expert reports, deposition testimony, and other documents, supporting contrary views as to whether zoning restrictions imposed by the redevelopment plan were merely overlay regulations or whether they superseded the underlying residential zoning. The argument revolved primarily around a provision in LRHL that authorizes either overlay or superseding zoning in a redevelopment plan, but which requires that if superseding zoning is the desired result, "the ordinance adopting the redevelopment plan shall contain an explicit amendment to the zoning district map included in the zoning ordinance." N.J.S.A. 40A:12A-7c.

Judge Leath noted that plaintiffs purchased the properties with knowledge of the 1993 Redevelopment Plan and its restrictions on the use of the land to open space and passive recreation. She noted that plaintiffs never filed any application for development, nor did they seek an interpretation from the Belleville Zoning Board as to the zoning map or ordinance. Of course, not having made any development application, plaintiffs also never sought any variance from any zoning regulations. Accordingly, the judge held that plaintiffs failed to exhaust their available administrative remedies, as a result of which plaintiffs' claim was not viable. In making her findings, the judge commented that the open space designations and the redevelopment plan did not "meet the requirements of overlay zoning."

II.

A motion for summary judgment should be granted if the pleadings, depositions, answers to interrogatories and admissions, together with the affidavits produced by the parties, "show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). A party cannot defeat a summary judgment motion by raising factual disputes of an insubstantial nature. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 529 (1995). The trial court must grant all favorable inferences of fact to the non-moving party. Id. at 536.

In ruling on a summary judgment motion, a trial court must determine whether the competent evidence presented, when viewed in the light most favorable to the non-moving party, is sufficient to permit a rational fact-finder to resolve the alleged disputed issue in favor of the non-moving party, thus entitling that party to judgment. Id. at 540. If the evidence is so one-sided that one party must prevail as a matter of law because there exists a single, unavoidable resolution of the alleged factual dispute, then the trial court should not hesitate to grant summary judgment. Ibid. On appeal, this court reviews the matter de novo and applies the same standard as the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

III.

Except where the interest of justice requires otherwise, actions in lieu of prerogative writs "shall not be maintainable as long as there is available a right of review before an administrative agency which has not been exhausted." R. 4:69-5. The doctrine of exhaustion of administrative remedies serves three primary purposes: (1) ensuring that claims will be heard, as a preliminary matter, by a body possessing expertise in the area, (2) creating a factual record to enable meaningful appellate review, and (3) providing the possibility that the administrative decision may satisfy the parties and thus obviate resort to the courts. City of Atl. City v. Laezza, 80 N.J. 255, 265 (1979).

The "interest of justice" qualification confers a degree of discretion upon the trial court faced with an exhaustion issue. Indep. Realty Co. v. Twp. of N. Bergen, 376 N.J. Super. 295, 303 (App. Div. 2005). Though neither jurisdictional nor absolute, relief from the exhaustion requirement is by no means automatic. Id. at 304. Courts have recognized a number of exceptions to the exhaustion requirement:

While ordinarily administrative remedies must be exhausted before resort is had to the court, exhaustion... may be dispensed with where the interest of justice requires, or if there is a need for prompt decision in the public interest or where there is no question as to administrative discretion or judgment and only a question of law is involved or where further resort to administrative recourse would be futile....... Moreover plaintiff must demonstrate that irreparable harm would be caused by the delay in determination attendant upon exhaustion of the administrative remedy.

[41 Maple Assocs. v. Common Council of the City of Summit, 276 N.J. Super. 613, 619 (App. Div. 1994) (quoting Pressler, Current N.J. Court Rules, comment 6 on R. 4:69-5 (1995)).]

Plaintiffs argue that the issue involved here is purely a legal one which should be decided by the courts. Although interpretation of a zoning ordinance implicates primarily legal concerns, a party cannot safely ignore the right to apply for a determination of the issue by the local zoning board of adjustment under N.J.S.A. 40:55D-72, or for a variance, and instead bring a prerogative writs action. William M. Cox, N.J. Zoning & Land Use Administration Ch. 33-2.2 at 713 (2009). It is generally best to establish a record at the local level when land use policy matters are at issue, including matters of zoning interpretation. 21st Century Amusements, Inc. v. D'Alessandro, 257 N.J. Super. 320, 323 (App. Div. 1992).

We considered such a situation in Independent Realty Co., in which a party obtained site plan approvals in 1988, along with bulk and use variances, to construct a twenty-seven story residential building. Supra, 376 N.J. Super. at 298-99. The project was not built, and, in 1999 the municipality changed the zoning designation for the site. Ibid. Without seeking a ruling from any local board or official as to the continued viability of the approval, the party instituted a declaratory judgment action seeking a determination that the prior approvals remained in effect. Id. at 300. The trial court dismissed, and we affirmed, on the grounds that the party did not present a justiciable controversy ripe for adjudication and failed to exhaust administrative remedies. Id. at 302-05. We reasoned that "since no local action is being challenged, there can be no suggestion that requiring exhaustion of local administrative remedies would be futile." Id. at 304.

A party challenging the dismissal of its suit on grounds of exhaustion must demonstrate that the trial court mistakenly exercised its discretion in requiring it to first exhaust its administrative remedies. Id. at 303. A mistaken exercise of discretion occurs when the trial judge's "decision [was] made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." United States v. Scurry, 193 N.J. 492, 504 (2008) (quoting Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002)). Plaintiffs contend that they did not seek in this litigation an interpretation of a valid zoning ordinance, but rather sought a declaration that the "regulation" itself was invalid. Presumably, the "regulation" pertains to the ordinance adopting the redevelopment plan. However, the relief plaintiffs requested in their summary judgment motion was indeed for an interpretation. They sought a judicial declaration that the redevelopment plan constituted an overlay zoning district, that the underlying R-A-2 zoning regulation remained in place and was not superseded by the redevelopment plan, and that if and when they submitted a development application, it must be considered in accordance with the R-A-2 zoning regulations.

The question remains as to what administrative remedies were available to plaintiffs. Although the LRHL does not expressly confer such authority, a local zoning board of adjustment possesses jurisdiction to grant variance relief from the provisions of a redevelopment plan, whether or not the provisions constitute an overlay upon pre-existing zoning. Weeden v. City Council of Trenton, 391 N.J. Super. 214, 226 (App. Div.), certif. denied, 192 N.J. 73 (2007). In Weeden, we construed the LRHL in pari materia with the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163. Id. at 228-29. Applying that rationale, it is fair to conclude that, in addition to recognizing the authority of a local zoning board to grant variance relief, similar authority also exists for a party to seek interpretation of a zoning ordinance or a zoning map in connection with a redevelopment plan. And, as we stated in Weeden, a zoning board "may consult with the planning board if there is a question as to the design and intendment of the redevelopment plan." Id. at 229.

We find no mistaken exercise of discretion in Judge Leath's conclusion that plaintiffs had the option of applying to the Belleville Zoning Board for an interpretation concerning the overlay issue. If unsuccessful in that regard, plaintiffs could have applied to the Board for a use variance and any other necessary variances.

We are further of the view that none of the exceptions to the exhaustion requirement apply. There was no need here for a prompt decision in the public interest nor any indication that plaintiffs would suffer irreparable harm due to delay caused by exercising their administrative options. The futility exception does not apply because plaintiffs have not challenged any local action and, therefore, there can be no suggestion that administrative review of such action would have been futile. See Indep. Realty Co., supra, 376 N.J. Super. at 304. Along those lines, the record contains indications that at least some local officials shared plaintiffs' view in the interpretation of the local ordinances and redevelopment plan. Indeed, the record is by no means clear that pursuit of administrative remedies would have been futile.

Plaintiffs rely primarily on the exception to the exhaustion requirement that the issues involved are purely legal and do not involve administrative expertise or discretion. As plaintiffs frame the issue, all that is involved here is the application of N.J.S.A. 40A:12A-7c, which provides that if a redevelopment ordinance is to supersede existing zoning regulations, "the ordinance adopting the redevelopment plan shall contain an explicit amendment to the zoning district map included in the zoning ordinance."

Relying on Riggs v. Township of Long Beach, 101 N.J. 515, 525-26 (1986), rev'd on other grounds after remand, 109 N.J. 601 (1988), plaintiffs argue that a local zoning board's disposition of a variance application or interpretation of the redevelopment plan would have no bearing because their challenge is to the validity of the ordinance. In Riggs, the Supreme Court held that exhaustion was not necessary where the plaintiffs presented a purely legal question by raising a constitutional challenge to the zoning ordinance, arguing it was arbitrary and capricious. Ibid. In those circumstances, the board's consideration of a variance application would have no bearing on the underlying constitutional validity of the ordinance. Ibid.

In our view, Riggs is distinguishable, because plaintiffs do not challenge the constitutional validity of the ordinance by which Belleville enacted the redevelopment plan, but rather seek a determination regarding its effect on the zoning status of their property. In essence, plaintiffs are seeking an advisory ruling. The situation is more akin to 21st Century Amusements, which did "not embody an attack upon the validity of the zoning ordinance, but rather concern[ed] its interpretation and application." Supra, 257 N.J. Super. at 323. As we recognized in that case, such questions involve the relationship between a redevelopment plan and the zoning ordinance and implicate matters of local land use policy and its implementation, which are better served by requiring that a record be made at the local level. Ibid. Municipal bodies are composed of local citizens who are far more familiar with the municipality's characteristics and interests and therefore better equipped to resolve local land use controversies. First Montclair Partner,

L.P. v. Herod Redevelopment I, L.L.C., 381 N.J. Super. 298, 302 (App. Div. 2005).

We accordingly conclude that Judge Leath did not err in holding that plaintiffs were required to exhaust their administrative remedies before seeking judicial relief. Plaintiffs have presented no concrete development plan, and they have not challenged any local action. They have not presented a justiciable controversy that is ripe for adjudication. See Indep. Realty Co., supra, 376 N.J. Super. at 301-03.

IV.

We comment briefly on the overlay issue. After rejecting plaintiffs' claim based on failure to exhaust administrative remedies, Judge Leath commented that she was further of the view that the open space designations in the Redevelopment Plan of 1993 did not "meet the requirements of overlay zoning." In their appellate briefs, both parties characterize the comment as dicta. As we stated at the outset of this opinion, because we affirm on the exhaustion issue, we do not find it necessary to resolve the overlay question. Whether the various documents and municipal enactments included in the record are sufficient to satisfy the "explicit amendment to the zoning district map included in the zoning ordinance" requirement of N.J.S.A. 40A:12A-7c, is open to question.

Further, it appears that a more definitive ordinance was adopted in 2001 to amend the zoning map. No party has made any arguments regarding the time-of-decision rule, and we will not, on our own initiative, reach into that area. As we have stated, such issues should be first resolved at the local level, in the context of a development application or interpretation proceeding, with an appropriate record made.

There is an additional reason why we decline to address the overlay issue in the procedural context in which the case is before us. In effect, the redevelopment plan becomes either all or part of the zoning for the redevelopment area. Weeden, supra, 391 N.J. Super. at 224-25 (redevelopment plan operated as overlay zoning); Jersey Urban Renewal, LLC v. City of Asbury Park, 377 N.J. Super. 232, 235-36 (App. Div.), certif. denied, 185 N.J. 392 (2005) (redevelopment plan superseded the prior zoning scheme and therefore became the zoning ordinance for the redevelopment area).

Even if Ordinance No. 2607-A, which adopted the 1993 Redevelopment Plan, constituted an overlay zoning district, the question remains as to what effect overlay zoning would have on plaintiffs' development rights. Although not defined by the LRHL, "[t]he term 'overlay zoning' refers to a situation in which a municipality leaves in place the existing zoning regulations applicable to an area, but superimposes an additional set of requirements." Weeden, supra, 391 N.J. Super. at 225.

For example, overlay zoning may provide additional opportunities for development which will not apply unless the land is developed in accordance with the purposes for which the overlay zoning was adopted. See Milford Mill 128, LLC v. Borough of Milford, 400 N.J. Super. 96, 103 (App. Div. 2008) (redevelopment plan provided residential overlay zoning but left in place the underlying industrial zoning if the property was not redeveloped). Overlay zoning may also create additional restrictions upon the use of land being developed under the prior zoning scheme. See Campbell v. Borough of N. Plainfield, 404 N.J. Super. 337, 340-45 (App. Div. 2008) (ordinance creating overlay for age-restricted community in residential zone); Terner v. Spyco, Inc., 226 N.J. Super. 532, 544 (App. Div. 1988) (flood plain ordinance creating an overlay district adding a new layer of controls for land located within a 100 year flood plain).

Terner and Weeden provide examples of disputes over whether and how variance relief should be granted from the restrictions imposed by an overlay zoning district. In both cases, all parties agreed that the additional restrictions operated as overlay zoning. Yet, the overlay regulations were not deemed meaningless due to that fact.

In the case before us, the parties dispute the threshold question of whether or not the redevelopment plan constituted overlay or superseding zoning with respect to plaintiffs' property. Once that issue is resolved at the local level, the consequences of the determination will be ripe for consideration as well.

Affirmed.


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