July 22, 2011
ROBERT J. PACILLI HOMES, LLC. AND RJ'S HERITAGE HOMES, INC., PLAINTIFFS, AND POND & SPITZ HOMES, LLC., PLAINTIFF-APPELLANT,
TOWNSHIP OF HARRISON, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1311-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: December 1, 2010 -
Before Judges Cuff and Sapp-Peterson.
On June 23, 2008, this court issued its opinion in Shore Builders Association v. Jackson Township, 401 N.J. Super. 152 (App. Div. 2008), in which we held that the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, does not permit a municipality to adopt an ordinance that requires a residential builder to make a payment to fund public recreational facilities in lieu of constructing such facilities or setting aside land for that purpose.*fn1 On August 1, 2008, plaintiffs Robert J. Pacilli Homes, LLC; Pond & Spitz Homes, LLC (Pond & Spitz); and RJ's Heritage Homes, Inc. filed a complaint to declare invalid an ordinance adopted by defendant Township of Harrison requiring payment of a recreational facility fee in lieu of dedicating land for public recreational facilities and to recover all recreation fees paid by them pursuant to challenged ordinance. Plaintiff Pond & Spitz*fn2 appeals from the January 22, 2010 order applying the Shore Builders rule prospectively and denying Pond & Spitz's claim for a refund. We affirm.
Defendant Township of Harrison established a set of recreational and open space requirements in 1975. The ordinance requires all developers of multi-unit single family homes to set aside a percentage of the total area of its subdivision for recreational uses. In 2006, the municipal governing body amended the ordinance to allow developers of multi-unit residential subdivisions to pay a fee in lieu of setting aside land for recreational and open space purposes. The planning board was vested with the authority to establish an appropriate fee but the ordinance further established the minimum fee at $3500 per residential unit. If the developer elected to pay a fee, it had to be paid prior to the issuance of a building permit for any unit. The fee was deposited in a trust fund to offset the cost of parks, recreation facilities, and the acquisition of real estate for the development of additional parks and recreation facilities.
Pond & Spitz paid fees in lieu of constructing on-site public recreational facilities. It paid $21,000 in recreational fees for its Tesoro Estates subdivision and $58,000 for its Forest Woods Development. All fees were paid as a condition for issuance of building permits. We discern from the record that Pond & Spitz did not object to the payment of the fee, or pay the fee under protest, or challenge the ordinance until after this court issued its decision in Shore Builders in June 2008.
The Township alleged, and Pond & Spitz did not dispute, that it has collected $1,195,100 in recreational fees between 1999 and 2009, that the fees were placed in a trust fund, and that in 2009 the fund contained $895,036.59, all of which had been allocated to recreational projects. The Township suspended collection of the recreational fees shortly after the Supreme Court issued its Shore Builders opinion.
During oral argument in the Law Division, the parties agreed that the Supreme Court opinion governed the validity of the recreational fee ordinance and the ordinance was not valid. Therefore, the only issue before the court was whether the Shore Builders ruling should be applied prospectively or retroactively. In her oral opinion, Judge McMaster held that the rule announced in Shore Builders is a new rule of law and should be applied prospectively only. In her January 22, 2010 order, Judge McMaster declared the order invalid, held that the Shore Builders rule is to be applied prospectively, and denied plaintiff's request for a refund of all fees paid to the Township pursuant to the challenged ordinance.
This appeal is limited to the single issue of whether the Shore Builders rule should be applied prospectively or retroactively. Plaintiff argues that Shore Builders did not establish a new rule of law but simply applied an established rule to a specific type of fee. The Township responds that Shore Builders represents the first time the Court addressed the specific type of fee at issue in this case. Alternatively, the Township contends that the alteration of long-standing practice counsel against a retroactive application of the rule to allow refunds of fees paid over the course of many years. It cites the many facilities constructed and about to be constructed, and the unanticipated financial burden that would be placed on the Township, if required to reimburse the fees paid by plaintiff.
Generally, it is presumed that a ruling in a civil case will be applied retroactively. Twp. of Stafford v. Stafford Twp. Zoning Bd., 154 N.J. 62, 73 (1998). If the decision, however, announces a new rule of law, the retroactivity presumption vanishes, and the court proceeds to determine whether it is appropriate to apply the decision retroactively. Reuter v. Borough Council of Ft. Lee, 167 N.J. 38, 42 (2001). Three factors generally guide this analysis. First, the purpose of the rule and whether retroactive application would further the rule. State v. Knight, 145 N.J. 233, 251 (1996); State v. Nash, 64 N.J. 464, 471 (1974). Second, the degree of reliance placed on the prior rule or practice. Knight, supra, 145 N.J. at 251; Nash, supra, 64 N.J. at 471. Third, the effect retroactive application would have on the public. Knight, supra, 145 N.J. at 251; Nash, supra, 64 N.J. at 471. In the end, the decision whether a rule should be applied retroactively often turns on whether retroactive application of the rule "could produce substantial inequitable results." Montells v. Haynes, 133 N.J. 282, 295 (1993).
A new rule of law, as distinguished from the application of an existing rule to a new or different set of circumstances, has been characterized as "a sudden and generally unanticipated repudiation of a long-standing practice." State v. Cupe, 289 N.J. Super. 1, 12 (App. Div.), certif. denied, 144 N.J. 589 (1996). Accord State v. Afanador, 151 N.J. 41, 58 (1997). A new rule requires departure from existing practice. State v. Burgess, 298 N.J. Super. 254, 268 (App. Div. 1997), aff'd, 154 N.J. 181 (1998).
In Shore Builders, the Court affirmed substantially for the reasons expressed in the opinion rendered by this court. 199 N.J. at 452. We, therefore, examine the reasoning of this court's opinion to determine whether it announced a new rule of law or simply applied settled law to a previously unexamined set of circumstances.
Our opinion in Shore Builders was informed by a series of opinions that explained the limitations imposed on a municipal governing body to exact contributions for off-tract improvement permitted by N.J.S.A. 40:55D-42. 401 N.J. at 168-70. We began by noting generally that N.J.S.A. 40:55D-42 "'provides the boundaries of a public entity's power with respect to off-tract improvements.'" Id. at 168 (quoting Toll Bros., Inc. v. Bd. of Chosen Freeholders of Burlington, 194 N.J. 223, 243 (2008)). By its language, N.J.S.A. 40:55D-42 specifically limits the purposes off-tract contributions to "reasonable and necessary street improvements and water, sewerage and drainage facilities, and easements therefore, located off-tract but necessitated or required by construction or improvements within such subdivision or development."
In our opinion, we were also guided by New Jersey Builders Ass'n v. Mayor & Township Committee, Bernards Township, 108 N.J. 223, 237 (1987), which interpreted N.J.S.A. 40:55D-42 to allow exactions for street improvements and water, sewerage and drainage facilities only if those improvements were necessitated by the particular subdivision or development under review. In Shore Builders, the court reasoned:
[t]hough the focus of [Bernards, supra,] was the failure of the municipality to establish that the developer's pro rata share of the cost of the road improvements was "a direct consequence of the particular subdivision or development under review," the Court specifically articulated, in quoting the statute, that a developer may only pay the pro rata share of the cost of providing "reasonable and necessary street improvements and water, sewerage and drainage facilities and easements therefore." [401 N.J. Super. at 169 (quoting Bernards, supra, 108 N.J. at 237).]
Although Toll Brothers and Bernards explained the scope of N.J.S.A. 40:55D-42, neither addressed directly, the validity of ordinances requiring the "'dedication of land for recreational purposes, or payments in lieu of dedication, where the purpose of the dedication or payment is primarily, but not exclusively, to benefit the residents of the new development.'" Shore Builders, supra, 401 N.J. Super. at 169 (quoting Bernards, supra, 108 N.J. at 229). In Pond Run Watershed Ass'n v. Township of Hamilton Zoning Board of Adjustment, 397 N.J. Super. 335, 359 (App. Div. 2008), this court held that a zoning board's conditioning of variances upon a developer's agreement to subsidize off-site construction of a park amphitheater was invalid. We noted that such an improvement was not specifically listed in N.J.S.A. 40:55D-42. Id. at 358-59.
The threshold question is whether the Shore Builders rule establishes a new rule of law. We conclude it does not. The rule announced in Shore Builders is not novel. It is simply an application of existing precedent to a specific fee. Finding no authority in the MLUL, the fee was declared invalid.
Shore Builders cannot be considered a sudden and unanticipated change in long-standing practice. Impact fees, e.g. financial contributions for roads and other public utilities, imposed as a condition of a land use approval have been approved only when the fees have been adopted by ordinance, which in turn was authorized by the MLUL and which bear a logical nexus to the needs created by the proposed development, and are based on a methodology or formula that accounts for impact of the development and the impact. Holmdel Builders Ass'n v. Twp. of Holmdel, 121 N.J. 550, 585 (1990). When, however, the ordinance has not been based on authority derived from the MLUL or imperfectly implements the authority bestowed by the MLUL, such contributions are not valid. Toll Bros., supra, 194 N.J. at 256; Britwood Urban Renewal, LLC v. City of Asbury Park, 376 N.J. Super. 552, 570 (App. Div. 2005). Moreover, when fees have been calculated on an ad hoc basis as a condition of an approval, the fees have been declared invalid. Twp. of Marlboro v. Planning Bd. of Holmdel, 279 N.J. Super. 638, 643 (App. Div.), certif. denied, 141 N.J. 98 (1995); Nunziato v. Planning Board of Edgewater, 225 N.J. Super. 124, 129-135 (App. Div. 1988).
Although we disagree that Shore Builders announced a new rule of law and believe Shore Builders simply applied existing precedent to a previously unchallenged fee, the judge properly dismissed Pond & Spitz's complaint. Regardless of the means by which the contribution is imposed, i.e., as a condition of an approval, ordinance, or developers agreement, a developer must timely protest any such fee. See Woodside Homes, Inc. v. Town of Morristown, 26 N.J. 529, 534, 545 (1958); Yardville Estates, Inc. v. City of Trenton, 66 N.J. Super. 51, 62-63 (App. Div. 1961).
In Woodside Homes, the builder sought to recover the cost of extending water mains. 26 N.J. at 533. The builder entered an agreement with the town and paid the town to install the necessary water main extensions. Id. at 534. The work was performed by the city, and the builder actually received a check for the difference between the estimated cost and the actual cost. Ibid. The builder never protested the demand that it pay for the installation of the water mains. Ibid. The case was primarily concerned with whether the Board of Public Utility Commissioners had jurisdiction of the municipally owned and operated water company and whether the municipality abused its discretion by requiring the builder to pay for the provision of water service. Id. at 539-40. The Court declined to remand to the agency to determine the reasonableness of the exercise of discretion by the municipal utility because the builder had never protested the exaction. Id. at 543-45. In holding that the builder was estopped from challenging the municipal action, Justice Burling stated:
We are satisfied . . . that the [builder] voluntarily entered into the contracts without duress or compulsion. [The builder] is estopped at this late date from contending that Morristown abused its discretion in requiring the extension of the water mains at [the builder's] own cost. [Id. at 545.]
Similarly, in Yardville Estates, supra, we barred a developer from seeking recovery of the cost incurred to install water mains when the developer voluntarily installed the improvement without protest. 66 N.J. Super. at 62. By contrast, we permitted a developer to recover a payment for any off-site improvement when the developer protested the payment when initially imposed and when paid. Baltica Constr. Co. v. Planning Bd. of Franklin, 222 N.J. Super. 428, 440 (App. Div. 1988).
A requirement to protest and the concomitant response to bar a later
action to recover fees acknowledges the reliance placed by the
municipality on the availability of the fees to fund construction of
public facilities. Here, the record is bereft of any suggestion that
Pond & Spitz protested the payment at any time until it filed its
complaint soon after this court's
Shore Builders opinion. By contrast, in the period between payment and
the commencement of this action, recreational facilities had been
constructed and the Township had committed the remaining funds to
other projects. The amount of funds sought by Pond & Spitz is not
large, but the impact on the Township is significant, particularly if
other developers who paid the fees without protest may also recover
their payments. To apply Shore Builders retroactively in this
situation could produce substantial inequitable results.*fn3
Having failed to protest the payments and having allowed the
recreational facilities to be constructed, Pond & Spitz cannot now
seek to recover these admittedly invalidity assessed fees. Therefore,
although we held that Shore Builders did not establish a new rule of
law, other factors counsel against retroactive application of the
rule. We, therefore, affirm the January 22, 2010 order dismissing