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American Tower Asset Sub, LLC v. Borough of Somerdale

July 22, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. C-75-08.

Per curiam.


Argued January 26, 2010

Before Judges Carchman and Ashrafi.

Defendant Borough of Somerdale (Borough) appeals from an order of the Chancery Division granting summary judgment to plaintiff American Tower Asset Sub, LLC. The motion judge declared that plaintiff's lease on certain municipal property was "binding, valid and enforceable for the remainder of its term" and also denied plaintiff's application for contractual indemnity. Plaintiff cross-appeals the denial of that relief. We affirm as to the appeal and reverse and remand as to the cross-appeal.

These are the relevant facts adduced from the record before the judge on the motion. Nextel Communications of the Mid-Atlantic, Inc., (Nextel) applied to the Borough to erect an antenna on a privately-owned water tower. Upon learning of this application, Gerald Sinclair, former Borough solicitor, asked Nextel to instead consider leasing an undeveloped site consisting of 2500 square feet owned by the Borough. The site was vacant, unproductive and located near a public works facility. What followed were a series of negotiations, public meetings and an amendment to the land-use ordinance to permit the tower at the suggested location.

On November 14, 2000, Nextel and the Borough entered into a Communications Site Lease Agreement (the lease), which was signed by Gary Passanante, Borough mayor. A communications tower was erected and has been operated on the municipal premises since 2000. The site also houses equipment, equipment shelters and various subtenants lease space on the tower. In February 2007, the lease was assigned to plaintiff. Since the inception of the lease, plaintiff has paid, and defendant accepted, market rent as well as rent increases consistent with the terms of the lease.

In September 2006, plaintiff sought to have the Borough sign a letter in order to obtain a loan. The Borough administration had changed since the inception of the lease, and for the first time, the Borough questioned the validity of its own lease. Plaintiff later requested that the Borough sign a letter of authorization (LOA) on behalf of one of its wireless customers to install communications equipment on the tower. According to plaintiff, not only did the Borough not return the LOA, but it sought an increase in rental payments as a precondition to signing the LOA. Failing in pursuit of additional rent, it challenged the bona fides of the lease.

According to defendant, the lease is invalid because it was never submitted for public bid, and the lease was never approved by the governing body. Both the Mayor and attorney were unsure whether there was an ordinance or approval by the governing body, and a search of the municipal records failed to reveal any ordinance or resolution authorizing the lease.

As we noted, the lease was, however, the subject of multiple public council and planning board meetings. Furthermore, the lease terms provide that "Lessor has full right to make and perform this Agreement[,]" and in a September 1, 2000 letter from Sinclair to Nextel, Sinclair wrote that "[t]he Borough would cooperate in every way it legally could in support of this alternate site[.]" Again, as we have noted, the Borough collected rents during the term of the lease, issued construction and building permits and approved land-use applications for the site.

In pro-actively responding to defendant's challenge to the bona fides of the lease, plaintiff filed a complaint seeking injunctive relief, specific performance, damages and related relief. The motion judge entered an order restraining defendant from declaring the lease null and void and denied defendant's motion for declaratory judgment declaring the lease void ab initio. The judge, thereafter, granted plaintiff's motion for summary judgment, declared the lease valid and enforceable, dismissed defendant's counterclaims and denied plaintiff's claim for indemnification. The appeal and cross-appeal followed.

On appeal, defendant asserts that the failure of the governing body to advertise for bids and adopt a resolution or ordinance approving the lease renders the lease ultra vires and void. On the cross-appeal, plaintiff argues that the judge erroneously denied its claim for contractual indemnification.

In assessing the rights of the parties on this appeal, we restate certain basic principles that address the responsibilities of a municipality when leasing public lands. As is apparent, many of the municipal obligations are mandated by the Legislature.

Any county or municipality may lease any real property . . . not needed for public use as set forth in the resolution or ordinance authorizing the lease, . . . and except as otherwise provided by law, all such ...

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