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Asbury Shores, Inc. v. City of Asbury Park


November 10, 2009


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-4417-02.

Per curiam.


Argued: October 21, 2009

Before Judges Axelrad, Fisher and Sapp-Peterson.

Intervenor Somerset Development, LLC, the proposed assignee of the redevelopment contract between the City of Asbury Park (City) and Asbury Shores, Inc., appeals from summary judgment dismissal of its claim challenging the City's refusal to consent to the assignment. We reverse and remand.

The issue before the trial court pertained to an interpretation of two contractual documents between the City and Asbury Shores, the redeveloper of the City's urban renewal area. Both the 1990 agreement and the 1998 Contract Rider stated that the City's consent to an assignment of interests and rights under the redevelopment agreement was required, but only the earlier of the documents expressly provided that the City's consent was not to be unreasonably withheld.

By December 2001, Asbury Shores was looking to end its involvement with the project and informed the City it wanted to assign its redevelopment rights to Waterfront Conservation Commission, Inc. Asbury Shores entered into a conditional sales agreement with Waterfront; however, the City did not consent to the assignment. In September 2002, Asbury Shores filed a complaint in lieu of prerogative writs alleging the City's refusal to consent to the transfer violated its redevelopment agreement. The City filed an answer and counterclaim seeking to terminate the redevelopment agreement and return the property to the City. During the pendency of the litigation, Waterfront conditionally assigned the contract to Somerset and Somerset pursued discussions with the City. A redevelopment agreement between the City and Somerset was drafted in January 2005, but was never signed by the parties.

On April 14, 2006, Somerset's motion to intervene in the subject litigation was granted. Thereafter, Somerset filed an answer, counterclaims and cross-claims seeking judgment against the City, Asbury Shores, and Intervenor Waterfront to specifically perform under the agreements. Somerset alleged the City did not have discretion to refuse the proposed assignment and therefore acted arbitrarily and capriciously.

On March 2, 2007, Somerset filed a notice of motion for partial summary judgment seeking an order requiring the City to consent in writing to the sale of the redevelopment property to Somerset. The City contemporaneously filed a notice of motion for summary judgment seeking dismissal of Somerset's claims. Asbury Shores moved for summary judgment against the City for breach of contract and sought transfer of the redevelopment rights to Somerset.

In support of its motion, the City submitted a February 9, 2005 letter sent by Somerset's attorney to the Mayor and Council. The letter provided a history of the discussions with the City regarding the Springwood Avenue Redevelopment Plan and Somerset's understanding that it could move forward with market rate housing on the property it was purchasing from Asbury Shores and the City would negotiate with another developer to construct affordable rental housing on City-owned property within the site. Somerset noted that it was "shocked and surprised" when the redevelopment plan was introduced with an inclusionary affordable housing component for its parcel, in addition to the payment of an affordable housing fee. The letter concluded:

Based on this, Somerset Development is not prepared to proceed with the redevelopment of the Springwood Avenue Area based upon the Redevelopment Plan that is proposed for adoption at Thursday night's meeting. Therefore, we respectfully request that the Mayor and Council table this Ordinance so that the parties can meet to negotiate a mutually acceptable plan.

We . . . feel confident that we can resolve our issues if the Ordinance is tabled. We have worked long and hard on this Redevelopment project and have gone out of our way to attempt to accommodate the City's needs and desires. Given this fact, we feel it is only appropriate that before the City rushes to adopt an Ordinance that is contrary to the prior Agreements made between the City and Somerset, it take time to at least meet with Somerset to make a good faith effort to attempt to resolve any remaining issues.

At argument on the motion, the City's attorney referenced this letter as the explanation as to why it had terminated negotiations with Somerset. The City argued that "by 2005, clearly, there was no deal that could be made, because Somerset did not want to build what the [C]ity is looking at building." The City's attorney elaborated:

Somerset asked us not to act on [our plan] and that, candidly, was the triggering event from the [C]ity to have basically gone in a separate direction, in terms of . . . how to actually proceed with the . . . redevelopment. It was, if you will, a schism from that point forward and the

[C]ity just went out and started an entirely new process to get community involvement.

In response, Somerset submitted, in addition to other items, the reply certification of its president, Raphael Zucker, which stated in pertinent part:

3. After Somerset was presented to the City as a potential assignee of Asbury Shores' rights under the Development Agreement, Somerset and the City engaged in extensive discussions over the design of the Project. However, in early 2005, the City proposed an ordinance that would have imposed an obligation on Somerset to construct affordable housing at the Project. Because such an obligation would have been inconsistent with the parties' prior discussions, Somerset's former coun[sel] sent a letter to the Mayor and Council proposing that the ordinance be tabled. [February 9, 2005 letter attached to City's certification].

4. The City would have the Court believe that after this letter was sent to the City, Somerset decided to "walk away from the deal." . . . That most assuredly is not the case. Rather, the letter itself states that Somerset was willing to continue discussions: "it is only appropriate that before the City rushes to adopt an Ordinance that is contrary to the prior Agreements made between the City and Somerset, it take time to at least meet with Somerset to make a good faith effort to attempt to resolve any remaining issues." . . .

5. After Somerset's counsel wrote to the City, the ordinance was tabled and Somerset and the City did, in fact, meet to discuss affordable housing and other open issues. Indeed, at one meeting held on or about March 14, 2005, the City agreed to formulate a proposal concerning any affordable housing requirement that it would later submit to Somerset. Despite agreeing to prepare a proposal, the City never came back to Somerset with any concrete proposals.

6. Subsequently, I repeatedly called the City to follow up, but did not receive any proposal. In fact, I learned that the City was forming a redevelopment planning committee for the purpose of developing such a proposal. Although I pleaded with the City to allow me -- as a property owner with a direct interest -- to volunteer and to participate as a member of that committee, my offer was ignored.

7. Thus, contrary to the City's representations, Somerset has always been and remains ready, willing and able to take an assignment of Asbury Shores' rights under the Development Agreement, as amended. If Somerset were not interested in such an assignment, it would not have intervened in this action and counterclaimed for specific performance of the City's obligation to consent to a transfer of Asbury Shores' rights and obligations. Because Somerset is eminently qualified to succeed to Asbury Shores' rights and obligations, the City should be ordered to consent to the proposed transfer of the Property to Somerset.

In a written opinion of April 26, 2007, memorialized in an order of May 15, 2007, the trial court granted the City's motion for summary judgment dismissing Somerset's claims against it with prejudice.*fn1 The court found that the 1998 agreement between the City and Asbury Shores superseded the earlier agreement which had limited the City's ability to withhold consent to a rule of reasonableness and therefore "the City can withhold transferring the rights for whatever reason it deems worthy." As the court found that Asbury Shores entered into the second agreement with the knowledge that a clause prohibiting the City from unreasonably withholding consent did not exist, "neither Somerset nor Waterfront nor Asbury Shores can lay claim that the City must consent to the transfer." Somerset appealed.

When reviewing a grant of summary judgment, we employ the same standards used by the motion judge. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). First, we determine whether the moving party has demonstrated that there were no genuine disputes as to material facts, and then we decide whether the motion judge's application of the law was correct. Atlantic Mut. Ins. Co. v. Hillside Bottling Co. Inc., 387 N.J. Super. 224, 230-31 (App. Div.), certif. denied, 189 N.J. 104 (2006). In so doing, we view the evidence in the light most favorable to the non-moving party. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We accord no deference to the motion judge's conclusions on issues of law, Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995), which we review de novo. Dep't of Envtl. Prot. v. Kafil, 395 N.J. Super. 597, 601 (App. Div. 2007).

We are satisfied the trial court erred as a matter of law in its construction of the contract documents. Even though the "reasonableness required" was not reiterated in the express language of the contract rider, the law implies a covenant of good faith and fair dealing which would preclude the City from unreasonably withholding consent. See 13 Williston on Contracts § 38:15 (4th ed. 2000). See also F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426 (1985) ("In dealing with the public, government must 'turn square corners.'" (citation omitted)); Palisades Prop., Inc. v. Brunetti, 44 N.J. 117, 131 (1965) ("Municipalities, like individuals, are bound by principles of fair dealing."); Auto-Rite Supply Co. v. Mayor & Twp. Committeemen of Woodbridge, 25 N.J. 188, 196 (1957) (Municipalities are bound to act in good faith in the pursuance of the common good and to ensure the welfare of their citizens).

The motion judge never reached the issue of whether the City acted reasonably in withholding its consent to the assignment from Asbury Shores to Somerset. The City argues that its sole obligation under the redevelopment contract was to Asbury Shores and that it never had any obligation to Somerset. We disagree. The City had an obligation under its redevelopment contract with Asbury Shores not to unreasonably withhold its consent to an assignment of the redeveloper's rights and interests. Somerset, or a similar entity, would be a potential beneficiary of that consent.

In determining whether there exists a genuine issue of material fact that precludes summary judgment under Rule 4:46-2, we consider "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill, supra, 142 N.J. at 540. Summary judgment is appropriate when the evidence "'is so one-sided that one party must prevail as a matter of law[.]'" Ibid. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed. 2d 202, 214 (1986)).

After reviewing the record and hearing oral argument, we are satisfied that the evidence is not so one-sided that the City must prevail as a matter of law and that, when the record is viewed in a light most favorable to Somerset, there are genuine issues of material fact surrounding its negotiations with the City and determination of the bona fides of the parties' relationship. Accordingly, summary judgment is not appropriate on this issue and we remand to the trial court to determine whether the City reasonably withheld consent to the assignment of Asbury Shores' contractual rights and obligations under the Redevelopment Agreement.

Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

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