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Petrozzi v. City of Ocean City

Superior Court of New Jersey, Appellate Division

October 28, 2013

DR. & MRS. JOHN PETROZZI; DR. & MRS. PHILIP LOPRESTI; MR. & MRS. JACK DOUGHERTY; MR. NICHOLAS TALOTTA & MR. THOMAS L. PAGANO; MR. & MRS. KURT ASPLUNDH; MR. & MRS. MICHAEL C. COYLE; MR. & MRS. ANDREW BERENATO; MR. & MRS. THOMAS PESCI; MR. & MRS. EDWARD HALES; MR. & MRS. ROBERT KOONTZ; MR. & MRS. HARRY BARBIN; MR. & MRS. R. MARSHALL PHILIPS AND MS. ARLENE DIACO; MS. RUTH E. ADLAM; MR. & MRS. DANIEL F. AMOROSO; MS. MARTHA L. ASPLUNDH; MR. BRETT A. BOAL & MS. LISA MARI SHEPPARD; MR. & MRS. JOSEPH E. BUONOMO; MR. & MRS. JEFFREY P. CARPENTER; MR. & MRS. LARRY CARRON; MR. HENRY COCCO; MR. & MRS. DAVID P. DEGLER; MR. PETER DEPAUL; MR. RONALD J. DIMEDIO; MR. & MRS. DONALD F. DWYER; MR. DENNIS ENGLE, MS. LYNN ENGLE & MR. RICHARD RUTT; MR. & MRS. GROVER FRIEND; MS. CHRISTINE HANNON; MR. & MRS. FRANK IACUBUCCI; MR. & MRS. JOHN JOHNSON; MR. & MRS. DAVID M. MCLAUGHLIN; MR. VICTOR J. MAGGITTI, JR.; MR. & MRS. JOSEPH M. MARTOSELLA; MR. & MRS. EUSTACE MITA; MOONRUN ASSOCIATES, LLC (A/K/A MUMMA FAMILY); MR. & MRS. WILLIAM L. MOPPERT; MS. VERONICA MORTELITE; DR. & MRS. JAMES J. NICHOLSON; MR. & MRS. THOMAS PAGANO; MR. & MRS. DAVID E. PANICHI; 3808 WESLEY AVENUE, LLC (A/K/A POWERS FAMILY); MR. & MRS. RICHARD A. RAND; MR. DAVID A. RAND POA; WILLIAM ROSINI & OCEAN ASSOCIATES; MR. JAMES D. SCULLY, JR. & M.A. SCULLY; MS. MAUREEN D. SMITH; MR. CARL W. STRICKLER; MR. & MRS. RICHARD SYKORA; MR. STEPHEN B. TANNER; MS. MARGARET WALTERS; MR. & MRS. G. WILLIAM FOX, PLAINTIFFS, MR. & MRS. DANIEL T. HUGHES; AND MR. AND MRS. NICHOLAS J. TALOTTA, PLAINTIFFS-RESPONDENTS,
v.
CITY OF OCEAN CITY, A MUNICIPAL CORPORATION; WITHIN CAPE MAY COUNTY, STATE OF NEW JERSEY, DEFENDANT-APPELLANT, AND THE DEPARTMENT OF ENVIRONMENTAL PROTECTION, OR ITS ASSIGNS, A GOVERNMENTAL AGENCY FORMED BY THE STATE OF NEW JERSEY, DEFENDANT. DR. & MRS. JOHN PETROZZI; DR. & MRS. PHILIP LOPRESTI; MR. & MRS. JACK DOUGHERTY; MR. NICHOLAS TALOTTA & MR. THOMAS L. PAGANO; MR. & MRS. DANIEL T. HUGHES; MR. & MRS. KURT ASPLUNDH; MR. & MRS. MICHAEL C. COYLE; MR. & MRS. ANDREW BERENATO; MR. & MRS. THOMAS PESCI; MR. & MRS. EDWARD HALES; MR. & MRS. ROBERT KOONTZ; MR. & MRS. HARRY BARBIN; MR. & MRS. R. MARSHALL PHILIPS AND MS. ARLENE DIACO; MS. RUTH E. ADLAM; MR. & MRS. DANIEL F. AMOROSO; MS. MARTHA L. ASPLUNDH; MR. BRETT A. BOAL & MS. LISA MARI SHEPPARD; MR. & MRS. JOSEPH E. BUONOMO; MR. & MRS. JEFFREY P. CARPENTER; MR. & MRS. LARRY CARRON; MR. HENRY COCCO; MR. & MRS. DAVID P. DEGLER; MR. PETER DEPAUL; MR. RONALD J. DIMEDIO; MR. & MRS. DONALD F. DWYER; MR. DENNIS ENGLE, MS. LYNN ENGLE & MR. RICHARD RUTT; MR. & MRS. GROVER FRIEND; MS. CHRISTINE HANNON; MR. & MRS. FRANK IACUBUCCI; MR. & MRS. JOHN JOHNSON; MR. & MRS. DAVID M. MCLAUGHLIN; MR. VICTOR J. MAGGITTI, JR.; MR. & MRS. JOSEPH M. MARTOSELLA; MOONRUN ASSOCIATES, LLC (A/K/A MUMMA FAMILY); MR. & MRS. WILLIAM L. MOPPERT; MS. VERONICA MORTELITE; DR. & MRS. JAMES J. NICHOLSON; MR. & MRS. THOMAS PAGANO; MR. & MRS. DAVID E. PANICHI; 3808 WESLEY AVENUE, LLC (A/K/A POWERS FAMILY); MR. & MRS. RICHARD A. RAND; MR. DAVID A. RAND POA; WILLIAM ROSINI & OCEAN ASSOCIATES; MR. CARL W. STRICKLER; MR. & MRS. RICHARD SYKORA; MR. AND MRS. NICHOLAS J. TALOTTA; MS. MARGARET WALTERS; AND MR. & MRS. G. WILLIAM FOX, PLAINTIFFS, MR. & MRS. EUSTACE MITA; MR. JAMES D. SCULLY, JR. & M.A. SCULLY; MR. STEPHEN B. TANNER; AND MS. MAUREEN D. SMITH; PLAINTIFFS-APPELLANTS,
v.
CITY OF OCEAN CITY, A MUNICIPAL CORPORATION; WITHIN CAPE MAY COUNTY, STATE OF NEW JERSEY, AND THE DEPARTMENT OF ENVIRONMENTAL PROTECTION, OR ITS ASSIGNS, A GOVERNMENTAL AGENCY FORMED BY THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS

Argued: September 9, 2013.

Approved for Publication October 28, 2013.

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On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket No. L-218-05.

Michael P. Stanton argued the cause for appellant (A-1633-11)/respondent (A-1677-11) Ocean City ( McCrosson & Stanton, P.C., attorneys; Dorothy F. McCrosson, of counsel and on the brief).

Frank L. Corrado argued the cause for appellants (A-1677-11) Mita, Scully, Tanner and Smith ( Barry, Corrado & Grassi, P.C., attorneys; Mr. Corrado, on the briefs).

Kenneth A. Porro argued the cause for respondents (A-1633-11) Hughes and Talotta ( Wells, Jaworski & Liebman, L.L.P., attorneys; Mr. Porro, of counsel and on the brief; Spencer J. Rothwell, on the brief).

Matthew T. Kelly, Deputy Attorney General, argued the cause for respondent (A-1677-11) New Jersey Department of Environmental Protection ( John J. Hoffman, Acting Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Mr. Kelly, on the briefs).

Before Judges PARRILLO, HARRIS and KENNEDY. The opinion of the court was delivered by PARRILLO, P.J.A.D.

OPINION

Page 1002

[433 N.J.Super. 296] PARRILLO, P.J.A.D.

These back-to-back appeals, consolidated for purposes of this opinion, present recurrent issues facing shore communities and [433 N.J.Super. 297] their residents. In A-1677-11, we are asked, primarily, to determine whether a municipality's failure to perform its part of easement agreements with owners of beachfront properties is due to reasonably unforeseen circumstances beyond its control so as to be relieved of its contractual duty, and, if so, whether these homeowners are nevertheless left without a remedy. In A-1633-11, we determine, where municipal liability has been established, the proper measure of damages for the loss occasioned by the municipality's breach. Collateral issues concern the viability of the homeowners' inverse condemnation claims against the municipality and the State, through its Department of Environmental Protection (DEP), and whether certain plaintiffs had established their ownership of affected beachfront property.

By way of background, prior to 1987, Ocean City did not have a significant dune system to provide shore protection and, instead, relied upon dunes that were naturally created. To rectify the problem, in 1989, Ocean City participated in a beach replenishment and dunes restoration program with a cost-sharing ratio involving the State and federal government.

Before pumping sand from the sea to create the dune system, however, the Army Corps of Engineers required that Ocean City either own the beach or have access rights where the sand was to be placed. Thus, since a portion of the area identified for the dune system was privately owned, Ocean City would have to either acquire easements from beachfront property owners, or pursue the more time-consuming process of condemnation. Ocean City chose the former course.

To ease property owners' concerns over their beachfront views, beginning on April 26, 1991, Ocean City proposed easements containing a restriction that the municipality would construct and maintain the dune system with a height limitation of no greater than three feet above the average elevation of the bulkhead ( i.e., twelve feet) in the block in which the property was located. [433 N.J.Super. 298] Although the 1991 regulations promulgated pursuant to the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-1 to -21, did not require a municipality to seek a CAFRA permit from DEP for dune maintenance, nevertheless a series of State Aid Agreements entered into between Ocean City and the State since 1987 required the municipality to obtain the agency's written authorization before commencing a dune maintenance.[1]

From May 1, 1992 to December 8, 1995, Ocean City acquired the necessary easements, including the three-foot height restriction,[2] from individual beachfront property

Page 1003

owners. Not surprisingly, between 1992 and 2000, natural accretion caused areas of the dunes to grow in height and width, and the affected property owners began requesting that Ocean City comply with the dune maintenance provision in their easement agreements. By this time, however, by virtue of CAFRA amendments effective July 19, 1994[3] that included dune construction and maintenance as a [433 N.J.Super. 299] regulated activity, Ocean City was required to apply for a CAFRA permit prior to performing dune maintenance to alter the size or height of any dunes within the municipality.[4]

Consequently, on May 29, 2002, Ocean City filed with DEP a CAFRA permit application to reduce the height of existing sand dunes by mechanical excavation to an elevation of three feet above the twelve-foot height of the existing adjacent bulkhead. The agency deemed the application administratively complete, but on May 17, 2005, denied the permit for non-compliance with governing regulations. We affirmed the agency's action in an unpublished opinion. City of Ocean City v. New Jersey Dep't of Envtl. Protection, A-5199-06 (App.Div. September 26, 2008).

Contemporaneously, on May 2, 2005, individual Ocean City property owners filed a complaint in the Law Division against Ocean City alleging, among other things, that Ocean City breached its easement agreements by not maintaining the height limitation on the beachfront dunes, causing the property owners to lose their view, access and privacy. On October 4, 2005, they filed an amended complaint naming additional plaintiffs and DEP as an additional defendant, alleging that DEP " had full knowledge, participated and agreed to the dunes project in question." A second amended complaint added, among other claims against Ocean City and DEP, a cause of action for inverse condemnation.

Out of the original ninety-five individual plaintiffs representing sixty-three beachfront properties, by time of trial only twenty-five plaintiffs remained, representing seventeen properties, including the six appellants in A-1677-11 and the four respondents in A-1633-11. [433 N.J.Super. 300] Ocean City was the lone defendant, the court having dismissed, on summary judgment motion, plaintiffs' breach of contract claims against DEP, because DEP was not a party to the easement agreements, and plaintiffs' inverse condemnation claim, because plaintiffs had not established a regulatory taking and had not lost substantially all of the beneficial use of the totality of their properties.

A bifurcated bench trial was held on liability and damages. As to the former, the only remaining claims against Ocean City were breach of the easement agreements and inverse condemnation. At the conclusion of the eight-day trial on liability, the Law Division dismissed the inverse condemnation claims of all plaintiffs as well as the breach of contract claims of all[5] but the four plaintiffs who had entered

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into easement agreements with Ocean City after the effective date July 19, 1994of the CAFRA amendments. Those four plaintiffs, each two of whom own a beachfront condominium in the same two-unit, two-story structure in Ocean City and who are respondents in A-1633-11, proceeded to a three-day damages trial, at the conclusion of which the court awarded $70,000 to the first-floor occupants (Mr. and Mrs. Daniel Hughes) and $35,000 to the second-floor occupants (Mr. and Mrs. Nicholas Talotta).

As to liability, in dismissing the claims of the six plaintiffs who are appellants in A-1677-11,[6] the court found that the 1994 CAFRA amendments rendered impossible Ocean City's performance under the easement agreements pre-dating the effective date of those amendments and, therefore, relieved the municipality of its contractual obligations. Finding performance excused and no contractual breach, the court held Ocean City was not liable to [433 N.J.Super. 301] plaintiffs for damages, especially since they received the benefit of added storm protection as a result of the dune creation. The court also dismissed plaintiffs' inverse condemnation claims against Ocean City on the same grounds it had previously rejected identical claims against DEP, namely that neither DEP nor Ocean City physically appropriated plaintiffs' properties and that plaintiffs had not shown substantial loss of use required for a compensable regulatory taking.[7]

These six plaintiffs now appeal the dismissal of their breach of contract and inverse condemnation claims, seeking liability judgments in their favor. They argue, alternatively, that even if Ocean City were discharged of its contractual duties, plaintiffs are nevertheless entitled to restitution as an equitable remedy to compensate them for the benefit they conferred on the municipality. Plaintiffs also contend that the 1994 CAFRA amendments, which prevented Ocean City from reducing the height of the dunes seaward of their property and therefore interfered with their ocean views and reduced the value of their beachfront dwellings, effected a regulatory taking of their property without just compensation.[8]

As to those four plaintiffs (respondents in A-1633-11) who executed easement agreements after the July 19, 1994 effective date of the CAFRA amendments, the court found municipal liability because Ocean City was on notice at that time that it could be barred from dune adjustment, and therefore the impossibility [433 N.J.Super. 302] defense did not apply. As such, following a damages trial at which both sides presented expert appraisal testimony, the court, finding their methodologies flawed, nevertheless awarded $70,000 to the first-floor residents of a beachfront condominium building and $35,000 to the second-floor ...


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