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John C. Evans Project, Inc v. Valley National Bancorp

May 8, 2012


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-4883-07.

Per curiam.


Argued December 6, 2011

Before Judges Reisner, Simonelli and Hayden.

In this prerogative writs matter, defendant Valley National Bank (VNB)*fn1 appeals from three Law Division orders: (1) that part of the April 3, 2009 order, which denied its motion to compel discovery; (2) the April 30, 2010 order, which denied its motion for leave to file an amended counterclaim, compel discovery, and appoint a discovery master; and (3) a second April 30, 2010 order, which granted summary judgment to plaintiff John C. Evans Project, Inc. (Evans) and dismissed the counterclaim with prejudice.

Evans cross-appeals from two orders: (1) the March 26, 2008 order, which dismissed its complaint in lieu of prerogative writs with prejudice; and (2) the June 11, 2010 order, which denied its motion for attorney's fees and sanctions against VNB pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1. We affirm all orders.

In April 2006, VNB, as contract purchaser for property located on North Main Street (the property), submitted an application to defendant Milltown Zoning Board of Adjustment (Board) for preliminary and final major site plan approval with a use variance and bulk variances to build a 3700 foot bank with a three-lane drive-through facility. The property, owned by Dr. Bhudev Sharma (Dr. Sharma), is located in the B-1 commercial zone of the Borough of Milltown (Borough). To the north of the property is a residential apartment building, to the south is a parking lot for a commercial building, to the west is a school, and directly across the street to the east is a bank with a three-lane drive-through facility. The B-1 zone permits banks and fiduciary institutions, but prohibits drive-in or drive-through facilities. Thus, a use variance was required for VNB's proposed drive-through facility.*fn2

In its application, VNB sought to demolish two buildings located on the property: an abandoned residence and a building called the "Forney House and Clinic" (Forney House). The Forney House was in a state of extensive deterioration and disrepair at the time VNB submitted the application. However, it had historical significance because the father of the Borough's first mayor built it circa 1860, and it was used as a medical office and clinic since approximately 1907. In an effort to preserve the Forney House, in June 2006, the vice-chair of the Borough's Environmental Commission, Michael Shakarjian (Shakarjian), applied to the New Jersey Department of Environmental Protection, Historic Preservations Office (HPO) to determine whether the Forney House was eligible for listing on the New Jersey and National Registers of Historic Places. Shakarjian later helped form Evans, and became its president and registered agent.

In August 2006, the Forney House was deemed eligible for listing on the New Jersey and National Registers of Historic Places. Because of that determination, the National Historic Preservation Act, 16 U.S.C.A. § 470f, required that the agency with jurisdiction to approve all licenses for new bank branches, here the Office of the Comptroller of Currency (OCC), must conduct a review before issuing the federal license to open the bank. According to the applicable regulations, the review must consider the effect of the project on the historic property, and how the project seeks to avoid, minimize, and mitigate harm from that effect. 36 C.F.R. §§ 800.1(a), 800.6(a). If the agency and the concerned parties agree on a means of abating the effects, they must execute a memorandum of agreement (MOA). 36 C.F.R. § 800.6(b)(1)(iv), (b)(2). The MOA evidences compliance with all applicable statutes and regulations. 36 C.F.R. § 800.6(c). In September 2006, the HPO notified VNB that the proposed demolition of the Forney House and new construction of the bank would have an adverse effect on the Forney House. The HPO also advised it would consult with the OCC to develop and evaluate alternatives or modifications to avoid, minimize, or mitigate that effect.

The hearings before the Board on VNB's application began on August 2, 2006,*fn3 shortly before the HPO's notice. Because part of Evans's cross-appeal concerns VNB's alleged failure to satisfy the negative criteria for the use variance for the drive-through facility, we focus on the proofs relating to this particular issue.

VNB presented extensive factual and expert evidence at the hearings regarding the use variance for the drive-through facility, which we summarize here. According to VNB's senior vice president in charge of real estate development, Michael Ghabrial, a bank with a drive-through facility has become the standard within the banking industry, and a demographics study showed a need for another bank in the Borough. He explained that the incorporation of technological advances into the banking industry has resulted in a reduction in walk-in bank customers, and from a convenience and safety perspective, customers do not wish to leave their vehicles to conduct their banking.

VNB's expert architect and planner, Salvatore Corvino, established that a drive-through facility is necessary and is now the industry standard. He testified that VNB would place the proposed drive-through facility at the back of the proposed building with a narrow egress that makes it a safer feature than other banks with drive-through facilities. In addition, the drive-through facility would help reduce the parking demand on the property.

Corvino also testified that the proposed building was a much safer design than the Forney House because it would be set back farther from Main Street; the proposed building complies with the zoning ordinance's front setback requirement while the Forney House does not; and the application encouraged commercial development, which the Borough had planned for the Main Street corridor, while removing the Forney House, which was a non-conforming residential/office use that had significant structural and environmental issues, and was unsafe and "ready

to collapse."

Corvino concluded that the site was particularly suitable for the drive-through facility, and the application satisfied both the zoning ordinance requirements for preliminary and final site plan approval, and the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, particularly N.J.S.A. 40:55D-2(a), (c), (g) and (i).

VNB's expert site engineer, Joseph Hanrahan, testified that banks no longer exist without drive-through facilities, and in engineering terms, drive-through facilities are the industry standard. He established that the proposed use satisfies a community need, provides adequate buffering and enhanced aesthetics, promotes safety by removing street parking and locating it on the property,*fn4 and the one-way circulation around the proposed building and location of parking by the exit both increase the safety of the property. He concluded that the application advanced the goals of the MLUL because the proposed use would remove a non-conforming residential structure that was in a state of disrepair and replace it with a new conforming structure. He also concluded that the proposed use advanced the Borough's zoning ordinance and master plan.

VNB's expert traffic engineer, Nicholas Verderese, performed traffic studies, a gap study, and a pedestrian study. He testified that the property was particularly suited for the proposed use because it was in a commercial area on Main Street, and VNB's anticipated traffic volumes were similar to other uses on Main Street. According to Verderese, the proposed use was a better zoning alternative because it eliminated parking on Main Street and placed it on-site, where there was sufficient parking; the proposed three-lane drive-through facility would not bring in more traffic to the site than a two-lane facility; the proposed development and the traffic attendant thereto would cause no detriment to the community; and the site could accommodate the proposed drive-through facility. He concluded that the application advanced the zoning ordinance and master plan from an engineering perspective, and met the standards of preliminary and final site plan approval because the ingress and egress were safe, and there was adequate parking and onsite circulation.

In addition to VNB's experts, the Board's experts supported the proposed drive-through facility, and they reviewed the application and agreed it met the zoning ordinance requirements and performance standards. The objectors who appeared at the hearings presented no expert evidence, nor did they cross-examine VNB's experts.

On April 6, 2007, the Board passed a resolution approving the application. The Board found credible and accepted the testimony of VNB's experts, made extensive factual findings, and concluded that the use variance for the drive-through facility satisfied the positive and negative criteria of N.J.S.A. 40:55D-70. Regarding the negative criteria, the Board found that the proposed use will not cause substantial detriment to the surrounding community at large, nor would the grant of a use variance cause substantial detriment to the public good and the surrounding neighborhood. The Board also found as follows:

With regard to the negative criteria and the enhanced level of proof required pursuant to Medici v. BPR, [107 N.J. 1 (1987)], both Mr. Ghabrial and Mr. Corvino testified to the changing nature of banks over the years. Specifically, when Mr. Corvino began designing banks in the late 1980's and early 1990's there were [fewer] drive[-]thrus or no drive[-]thrus at all. ATM's were just coming out so not every bank had that technology. As time progressed, drive[-]thrus became very prevalent in the industry. Because of that change in the banking industry, including but not limited to online banking, call-in banking, ATMs, direct deposit and drive[-]thrus there's less pedestrian traffic into the bank, thus the drive[-]thrus become prominent and necessary. Mr. Vederese testified that he has never testified for a bank development that did not have a drive[-]thru facility and that in this day and age the bank and the drive[-]thru uses go hand in hand. Mr. Corvino testified that the provision of the Milltown Borough Ordinance, prohibiting the drive[-]thru use does not seem to apply well to banks the way they are run today especially in downtown quarters such as Main Street where there are many mitigating circumstances in favor to allow banks to have drive[-]thru lanes as modern banks virtually depend upon their drive[-]thru for better customer satisfaction, convenience and increase their efficiency with the drive[-]thru lanes. The Board determines that this testimony reconciles the Borough's omission of a drive-thru in this zone as a permitted use in this B-1 zone.

The Board concluded that the grant of the use variance was not inconsistent with the intent and purpose of the Borough's master plan and zoning ordinance, and that VNB satisfactorily reconciled the grant with the ordinance's continued omission of the drive-through facility from those permitted in the B-1 zone.

On May 29, 2007, Shakarjian, and others who had appeared at the hearings in opposition to the application, formed Evans as a non-profit corporation to, in part, "support the appreciation and protection of historic structures and character in the Borough of Milltown and environs." Evans filed a complaint in lieu of prerogative writs, challenging the Board's grant of a use variance for the drive-through facility, among other things. In addition to the complaint, Shakarjian and other Evans shareholders and officers remained extensively involved in the proceeding before the OCC and HPO in their continued effort to preserve the Forney House.

On July 5, 2007, VNB filed a counterclaim, alleging that Evans intentionally interfered with VNB's contract to purchase the property, and intentionally and maliciously interfered with VNB's prospective business advantage. VNB asserted that the individuals involved in Evans had a history of repeatedly blocking Dr. Sharma's attempts to sell or develop the property, and had engaged in actions to prevent VNB from developing it as well.

In a March 26, 2008 written decision and order, Judge Jessica Mayer dismissed the complaint. Addressing the negative criteria, the judge found the unchallenged expert evidence supported the Board's conclusions that: (1) the proposed use would not cause substantial detriment to the surrounding community; (2) the use variance for the drive-through facility would not substantially impair the intent and purpose of the zoning ordinance and master plan, and would not cause substantial detriment to the public good; and (3) the application satisfied various goals of the zoning ordinance. The judge also found there was ample proof that drive-through facilities were not necessarily contemplated at the time the Borough enacted the zoning ordinance, thus dispelling any concern that the exclusion of a drive-through facility was deliberate. The judge concluded that "[t]he Board thoroughly considered the demand for such uses consistent with the needs and character of the entire community in support of the granting [o VNB's] use variance."

Addressing the enhanced level of proof under the negative criteria, Judge Mayer found the expert evidence supported the Board's conclusion that the bank drive-through facilities generate no additional traffic, noise or odors, they promote efficiency in traffic patterns, and they accommodate the ever-changing lifestyle of modern banking customers; and "the drafters of the Borough's Master Plan did not, and could not, conceive of such a change regarding the manner of banking transactions at the time of the most recent master plan reexamination."*fn5 The judge concluded that the Board properly exercised its discretion in weighing the use variance's benefits against potential harms associated with its granting, and the record contained adequate proofs for the Board to conclude ...

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