On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized.)
American Dream at Marlboro, L.L.C. v. The Planning Board of the Township of Marlboro
Argued January 18, 2012 -- Decided February 16, 2012
This matter arises in the context of a dispute about a deed restriction that a planning board imposed on a developer. The Court considers the appropriate mechanism and quantum of proofs needed for removal of that restriction.
Plaintiff American Dream at Marlboro, L.L.C., is the successor in interest to Beacon Road Associates, L.L.C., an entity that served as the residential developer of a series of lots. The layout of the proposed development, known as Beacon Woods I, involved a series of building lots for homes on both sides of a roadway, to be named Haven Way, which ended in a cul de sac. As originally designed, there was a lot located near the end of Haven Way that was to be reached by a long driveway, a configuration referred to as a flag lot. In 1994 and 1995, plaintiff's predecessor sought the approval of the Marlboro Township Planning Board for Beacon Woods I. As part of the approval process, and in accordance with a municipal ordinance that generally limited subdivision of flag lots, plaintiff's predecessor agreed to a deed restriction whereby the flag lot would not be subdivided in the future. On June 7, 1995, the Planning Board granted preliminary major subdivision approval specifically conditioned on the inclusion of a restriction in the deed for the flag lot that would preclude its further subdivision.
In 1997, plaintiff's predecessor, having failed to file the deed restriction relating to the flag lot, returned to the Planning Board seeking to make a variety of changes and agreed to continue to be bound by the previously-imposed deed restriction. In June 1997, the Planning Board granted final approval for the amended application and continued the deed restriction. In September 1997, plaintiff entered into an agreement with the Township pursuant to which plaintiff would serve as the developer of the project. That agreement expressly included plaintiff's agreement to be bound by all of the terms and conditions expressed in the 1995 and 1997 Planning Board resolutions. In spite of that agreement, plaintiff never recorded the deed restriction relating to the flag lot. Instead, in 1998, plaintiff entered into a contract to purchase a tract of land behind the flag lot, which it then sought to merge with the flag lot for the purpose of creating a new subdivision to be called Beacon Woods II. The new land included an easement that could be used for access to a nearby major roadway, but plaintiff intended to abandon that easement and instead transform the flag lot's driveway into a new road, to be called Sandra Court, that would lead from Haven Way to a second cul de sac development. Plaintiff then sought concept approval for the new plan, but failed to reveal that the flag lot was required to be deed-restricted against further subdivision.
In March 1999, defendant Patricia Cleary entered into a contract with plaintiff to purchase one of the properties in the originally-approved development. Cleary's lot backed onto the existing flag lot and was next to the driveway that was proposed to serve the flag lot. Cleary contends that plaintiff did not disclose the flag lot restriction prior to closing on her property in January 2001. In October 1999, the Planning Board approved plaintiff's application for the new Beacon Woods II subdivision and memorialized its approval in a resolution adopted December 1, 1999. The resolution, however, made no reference to the deed restriction. Plaintiff closed on the purchase of the additional land and vacated the easement that had provided that parcel with separate access to a nearby road other than Haven Way.
In 2002, when plaintiff entered into an agreement to sell Beacon Woods II to another developer, plaintiff realized that it had failed to reserve the easement that it needed to cross defendant's property and to construct Sandra Court, the proposed public roadway leading from the cul de sac to the new part of the development. When negotiations to secure defendant's consent to the easement failed, plaintiff redesigned the roadway so as to obviate the need for her agreement. In 2003, plaintiff attempted to amend the final subdivision approval, but defendant objected. Eventually, the contract between plaintiff and the new developer was terminated as a result of plaintiff's inability to resolve its dispute with defendant.
In 2006, plaintiff returned to the Planning Board and requested that it act on the 2003 application for an amendment to the final subdivision approval. Early in 2007, the Planning Board advised plaintiff that its prior approvals had expired and it rejected plaintiff's assertion that the 2003 application had been approved by default, see N.J.S.A. 40:55D-50b. In April 2003, plaintiff commenced an action in lieu of prerogative writs seeking a declaration that the 2003 application had been approved by default. Defendant, as intervenor, filed a counterclaim seeking a declaration that the flag lot was prohibited from being subdivided because of the earlier-imposed deed restriction, along with an order directing plaintiff to record that deed restriction. The trial court concluded that the Planning Board could not approve the amended application because it lacked jurisdiction to eliminate the deed restriction. The court therefore entered an order declaring that all of the prior approvals for Beacon Woods II were void and permitting plaintiff to amend its complaint to seek approval of the court to eliminate the deed restriction based on changed circumstances.
Ultimately, the trial court concluded that plaintiff had failed to demonstrate that it was entitled to be relieved from the deed restriction and granted summary judgment in favor of defendant. The Appellate Division, in an unpublished opinion, reversed and remanded for further proceedings. The panel's decision was based primarily on its analysis of the precedents that establish the test governing changed circumstances in the restrictive covenant context. That analysis led the panel to conclude that the trial court had misperceived the applicable rule of law and had improperly weighed the facts in reaching its result. The Appellate Division reversed the judgment of the trial court and remanded the matter for further proceedings.
The Supreme Court granted defendant's petition for certification. 206 N.J. 329 (2011).
HELD: The trial court misapplied the governing standards for considering an application to eliminate a deed restriction based on changed circumstances. The matter is remanded for further proceedings, at which time the trial court must consider alternate reasons for the imposition of the deed restriction and defendant's assertion that plaintiff acted with unclean hands.
1. The Court need only consider the standards that the trial court must apply when considering an application to eliminate a deed restriction based on changed circumstances and the manner in which the proofs should be evaluated. The essential test that applies to such a claim of changed circumstances requires the applicant to demonstrate that it has become "'impossible as a practical matter to accomplish the purpose for which'" a servitude or restrictive covenant was created. Citizens Voices Ass'n v. Collings Lakes Civic Ass'n, 396 N.J. Super. 432, 446 (App. Div. 2007) (quoting Restatement (Third) Property: Servitudes, § 7:10(1) (2000)). The doctrine of changed circumstances is narrowly applied and "the test is stringent: relief is granted only if the purpose of the servitude can no longer be accomplished." Ibid at 446. Although the Court agrees with the appellate panel that the trial court misapplied these governing standards, and that as a result the matter must be remanded for further proceedings, it modifies the panel's judgment because its independent factual analysis unduly constricted the scope of the proceedings that are appropriate on remand. First, the appellate panel believed that the Planning Board only imposed the deed restriction because of a concern about further development of the flag lot. The trial court should not be foreclosed on remand from further explanation of its findings and further exploration of the alternate reasons for the imposition of the deed restriction. Second, the elimination of a deed restriction is an exercise of the inherent equitable powers of the court. That being so, defendant's assertion that plaintiff acted with unclean hands in its applications to the Planning Board and her assertion that the allegedly changed circumstances are of plaintiff's own making should have been considered. (pp. 10-13)
The judgment of the Appellate Division is AFFIRMED as modified and the matter is REMANDED to the trial court for further proceedings.
CHIEF JUSTICE RABNER and JUSTICES LONG, ALBIN, HOENS, and PATTERSON join in this opinion. JUSTICE LaVECCHIA and JUDGE WEFING (temporarily assigned) did not participate.
This matter arises in the context of a dispute about a deed restriction that a planning board imposed on a developer. Although the deed restriction was an express condition of the Planning Board's subdivision approval, the developer did not thereafter record it, ...