SQUIRETOWN PROPERTIES, LLC VS. TOWNSHIP OF LIVINGSTON(L-9785-07 AND L-326-15, ESSEX COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0528-15T3
SQUIRETOWN PROPERTIES, LLC,
Plaintiff-Respondent,
v.
TOWNSHIP OF LIVINGSTON and
LIVINGSTSON TOWNSHIP COUNCIL,
Defendants-Appellants.
______________________________
Argued April 26, 2017 – Decided June 16, 2017
Before Judges Alvarez, Accurso and Manahan.
On appeal from Superior Court of New Jersey,
Law Division, Essex County, Docket Nos. L-
9785-07 and L-326-15.
Gary T. Hall argued the cause for appellants
(McCarter & English, LLP, attorneys; Mr.
Hall, of counsel and on the brief).
Craig M. Gianetti argued the cause for
respondent (Day Pitney, LLP, attorneys; Mr.
Gianetti, of counsel and on the brief; Sarah
Sakson Langstedt, on the brief).
PER CURIAM
Defendants Township of Livingston and Livingston Township
Council appeal from an order in aid of litigant's rights in
favor of plaintiff Squiretown Properties, LLC, declaring
Livingston Ordinances 18-2014 and 19-2014 "invalid as applied to
[Squiretown's] project, which is the subject of a builder's
remedy award . . . for being an unnecessary cost-generative
feature." Because the trial court failed to accord the
ordinances the presumption of validity to which they are
entitled and made factual findings on the basis of conflicting
certifications, we vacate the order and remand for discovery and
an evidentiary hearing.
We summarize only so much of the long procedural history of
this matter as necessary to provide context for our decision.
In 2010, following a finding the Township was not in compliance
with its Third Round Mount Laurel1 obligations, the court awarded
plaintiff a builder's remedy directing the re-zoning of its
property to permit the construction of an inclusionary
residential development consisting of 220 apartments with a
twenty percent set-aside for low and moderate income households,
forty-four units. See Joseph Kushner Hebrew Acad., Inc., v.
Twp. of Livingston, No. A-5797-10 (App. Div. Aug. 30, 2013)
(affirming the trial court's order).
1
S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mt. Laurel,
92 N.J. 158, 201 (1983) (Mount Laurel II).
2 A-0528-15T3
In 2011, Squiretown sought scarce resource restraints,
leading eventually to a memorandum of understanding, executed in
January 2014 and approved by the court, providing that the
Township would undertake steps to increase its water capacity
and commission a study of its sewer system. The MOU noted a
proposed agreement between the New Jersey Department of
Environmental Protection and the Township to address
Livingston's water capacity deficit, which would permit the DEP
to process water supply connections for Squiretown's project.
The MOU noted Livingston's agreement with the DEP required the
Township to upgrade certain wells and complete others, requiring
capital expenditures, and permitted the DEP to require
Livingston to purchase additional water under short-term
contracts in order to address its existing water deficit. In
order to ensure a water supply connection to its project,
Squiretown agreed to pay the cost of any such short-term
contract to the extent required for capacity needed for its
project.
The study of the sewer system was designed to identify
inflow and infiltration problems believed to have contributed to
average flows exceeding eighty percent of the permitted flow
capacity of the Township treatment works in spring of 2011
following heavy rains. Pursuant to the MOU, Squiretown agreed
3 A-0528-15T3
to perform, at its own cost, a video inspection of the sanitary
sewer lines downstream of its property to identify any
improvements necessary to accommodate the anticipated wastewater
flows from its development and to assume responsibility for its
pro rata share of such improvements in accordance with the
Municipal Land Use Law. Squiretown also agreed to pay its share
of the estimated costs of the sewer system study, slightly over
$100,000. Squiretown's agreement to fund the study was
"premised upon the actual sewer connection fees for the
affordable units . . . being paid out of Livingston's Affordable
Housing Trust Fund."2
On August 6, 2014, sixteen months after receipt of site
plan approval, Squiretown submitted its application for water
and sewer permits to the Township.3 Twelve days later, the
2
In the re-zoning process to implement its builder's remedy,
Squiretown sought zoning ordinance exemptions from any
development fees for its affordable units, including water and
sewer connection fees. The special master, however, endorsed
Livingston's proposal to exempt the affordable units from
development application and escrow fees, but not from water and
sewer connection fees. The court-approved ordinance re-zoning
Squiretown's property thus provides a twenty percent reduction
in development application and escrow fees but does not exempt
any of the units from water and sewer connection fees.
3
Although difficult to tell from the record, it does not appear
as if Squiretown tendered its payment for the permits when it
submitted its application.
4 A-0528-15T3
Township Council introduced Ordinances 18-2014 and 19-2014,
raising sewer and water connection fees.
Ordinance 18-2014 increased the fee for a sewer connection
permit to $3821 from $2500 and implemented an inspection fee of
$87 per unit. Ordinance 19-2014 implemented a new water
connection fee of $942 per unit and increased the inspection fee
from $75 to $83 per unit. Both ordinances reflected that the
increases in the permit fees had been recommended by a certified
public accounting firm retained by the Township, which had
"performed a study of the capital costs and interest on debt
service together with the number of equivalent users as of
December 31, 2013," and was authorized by N.J.S.A. 40A:26A-11 as
to the sewer connection fee and N.J.S.A. 40A:31-11 as to the
water connection fee. The ordinances also provided that the
fees would be recalculated at the end of each budget year
pursuant to those statutes and could be reset by ordinance after
public hearing on a yearly basis. The parties agree that,
notwithstanding the statutory requirement that the fees be
recomputed annually, Livingston had not recalculated its sewer
connection fee since 2001. The last time it recalculated its
water fee was 1979.
Squiretown appeared at the public hearing on the
ordinances, objecting to the new fees and requesting that its
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development be exempted from the increases. The ordinances were
adopted by a unanimous vote of the Council at its meeting on
December 1, 2014.
In January 2015, Squiretown filed a complaint in lieu of
prerogative writs challenging the ordinances. Squiretown
alleged the public notice was defective; that the ordinances
were "arbitrary, capricious and/or unreasonable in light of the
substantial and burdensome increases" in the connection fees and
"because the increases . . . were not predicated on the
Township's costs in operating the systems"; that the increases
do "not comply with the statutory criteria set forth in the
Municipal Sewerage and Water Supply Acts"; that the increases
"constitute an unnecessary cost-generating feature in violation
of the Mount Laurel doctrine and [Fair Housing Act and]
"unfairly target[s]" Squiretown's project "right when
[Squiretown] is near the finish line of having all necessary
development approvals"; that the Township's failure to disclose
its anticipated increase in the connection fees during the
negotiations over the MOU, and when Squiretown agreed to
contribute to the sewer study and expend its own funds to
complete a video inspection of the downstream sewer lines,
"constitutes a breach of its implied duty of good-faith and fair
dealing" and "represent[s] continuous bad-faith conduct to
6 A-0528-15T3
increase costs for this Project in hopes of its failure"; and
finally that the Township's transfer of "surplus funds of
$850,000 in 2011 and/or 2012 . . . from the sewer and water
utility funds to the general fund for tax appeals" violated the
New Jersey Local Budget Law. The complaint demanded judgment
"reversing the passage of the Ordinances that amended the sewer
and water connection fee provisions of the Township Code, or in
the alternative, grandfathering [Squiretown's] Project from the
Ordinances so as to not be subject to the increased connection
fees."
Before Livingston filed its answer in the ordinance
challenge, Squiretown filed a motion in aid of litigant's rights
in the Mount Laurel litigation, alleging the ordinances as
applied to its project violated the court's 2010 builder's
remedy order and the 2014 order approving the MOU. Squiretown
asked the court to void the ordinances or exempt it from having
to pay the increased permit fees. Squiretown also sought to
consolidate the Mount Laurel case with its recently filed
ordinance challenge. After hearing argument on the return date,
the court consolidated the two cases and granted Squiretown's
motion in aid of litigant's rights.
In a decision read into the record, the judge rejected the
Township's argument that it was entitled to discovery and a
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plenary hearing on the validity of the ordinances. Instead, he
found the case "certainly ripe for the entry of an order in aid
of litigant's rights." Noting that "[t]he builder's remedy
order required the Township to remove any unnecessary cost
generative features," the judge found "nothing punitive about
Squiretown seeking the benefit of its bargain and to have the
ordinances for the sewer and water connections at the price that
they reasonably bargained for." The judge further found that
"there is a strong argument that the sudden and coincidental
increase is an unnecessary cost generative feature in
contravention of the mantra of the affordable housing laws."
Accepting Squiretown's arguments that: 1) its project was
court ordered to address the Township's unmet affordable housing
obligations; 2) "Squiretown had to have spent hundreds of
thousands of dollars to prosecute the affordable housing
litigation"; 3) site plan approval was granted in April 2013,
nearly twenty months prior to the increase in connection fees;
4) Squiretown entered into an MOU with the Township "following
mediation directly related to water and sewer" and approved by
the court; and 5) Squiretown "has been delayed in obtaining the
only outstanding permits, water and sewer, due to the Township's
failure to properly maintain its systems," the judge found "more
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than enough justification to have grandfathered Squiretown from
the dramatic increase in connection fees."
The judge found that "for Squiretown's fair payment toward
Livingston's existing water and sewer system to go from $456,000
to $913,000 in one day strikes this court, not only as unfair,
but the timing would lead this court to believe that this was
targeted to deter Squiretown in their pursuit of their builder's
remedy under the fair housing laws." He added that Livingston's
failure to advise either Squiretown or the special master during
the negotiations over the MOU that the Township intended to
increase the connection fees, "despite the fact that they
already had knowledge that they intended to do so" and refused
to mediate the increases, "is a strong argument that the
Township acted in bad faith and in contravention of the MOU
order." The judge concluded upon review of "the totality of the
circumstances" that it "agree[d] with the arguments set forth by
Squiretown" and thus declared the ordinances increasing the
water and sewer connection fees "invalid as applied to
Squiretown."
On Squiretown's application, the court subsequently
dismissed its ordinance challenge without prejudice, as the
order granting the motion in aid of litigant's right rendered
the relief sought in that action moot. This appeal followed.
9 A-0528-15T3
Livingston argues that: the matter should be remanded "for
appropriate proceedings to develop a meaningful factual record
prior to any judicial determinations as to the validity of the
ordinances"; "the trial court incorrectly determined that the
updated utility service connection fees represented
impermissible cost-generative features as applied to development
providing affordable housing"; and the court erred in exempting
Squiretown from the effect of the ordinances. Squiretown
counters that "[t]he trial court did not abuse its discretion in
deciding the motion in aid of litigant's rights on the record
before it."
It is axiomatic that a municipal ordinance adopted pursuant
to authority delegated by statute bears a presumption of
validity. Dial, Inc. v. City of Passaic, 443 N.J. Super. 492,
502-03 (App. Div. 2016). Although "[t]he presumption is not an
irrebutable one, . . . it places a heavy burden on the party
seeking to overturn the ordinance." N.J. Shore Builders Ass'n
v. Twp. of Jackson, 199 N.J. 38, 55 (2009) (internal quotation
omitted). The ordinances at issue here were adopted pursuant to
N.J.S.A. 40A:26A-11 and N.J.S.A. 40A:31-11, which expressly
permit a municipality to impose a connection or tapping fee on
the owner or occupant of property for connecting the property to
a sewerage or water supply system and require those fees be
10 A-0528-15T3
completed at the end of each budget year. Accordingly, there
can be no doubt that both ordinances are entitled to a
presumption of validity, having been adopted pursuant to
specific authority delegated by the Legislature. See Dial,
supra, 443 N.J. Super. at 502-03; cf. Meglino v. Twp. Comm. of
Eagleswood, 103 N.J. 144, 152 (1986) (noting the limited role
courts have in reviewing municipal rates for utility services).
It is also well established that "an otherwise valid fee
imposed for the issuance of a license or permit constitutes an
invalid tax if its primary purpose is to raise revenue." N.J.
Shore Builders Ass'n, supra, 199 N.J. at 60. In its ordinance
challenge, Squiretown alleged the ordinances were arbitrary,
capricious and unreasonable because the increases were not
predicated on the costs of operating the sewerage and water
supply systems and did "not comply with the statutory criteria
set forth in the Municipal Sewerage and Water Supply Acts."
If in fact the ordinances do not comply with the statutory
criteria, the proofs should not be difficult as both statutes
set forth a precise formula under which the fees are to be
calculated to ensure they do not exceed the actual cost of the
physical connection plus an amount representing "a fair payment"
towards the cost of the system. See N.J.S.A. 40A:26A-11;
N.J.S.A. 40A:31-11. Squiretown was not, however, ever put to
11 A-0528-15T3
the task of proving its allegations that the connection fees
were improperly computed and excessive before the trial court
ruled the ordinances invalid as applied to its project.
Although an "as applied" challenge to the ordinances is
certainly possible, Squiretown was not put to those proofs
either. The Court has held that an ordinance that operates
reasonably in some circumstances but unreasonably in others is
not void, but enforceable "except where in the particular
circumstances its operation would be unreasonable and
oppressive." Harvard Enters., Inc. v. Bd. of Adjustment, 56
N.J. 362, 368 (1970). "The determination of such an issue
depends upon an evaluation of the proven facts within the
context of applicable legal principles. The total factual
setting must be evaluated in each case, and if the issue be in
doubt, the ordinance must be upheld." Id. at 369.
We perceive that an "as applied" challenge could be
difficult here because the connection fee statutes at issue
require that the charges "shall be uniform within each class of
users" and are designed to recover the capital costs of building
the systems spread fairly across all users hooking into them.
See N.J.S.A. 40A:26A-11; N.J.S.A. 40A:31-11; cf. 612 Assocs.,
L.L.C. v. N. Bergen Mun. Utils. Auth., 215 N.J. 3, 21 (2013)
(discussing the legislative intent underlying the imposition of
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connection fees under the nearly identical provisions of the
Sewerage Authorities Law, N.J.S.A. 40:14A-8(b), and the
Municipal and County Utilities Authorities Law, N.J.S.A. 40:14B-
22).
Because "connection fees must be calculated to effect a
fair and reasonable contribution toward the costs of the system
by all users," 612 Assocs., L.L.C., supra, 215 N.J. at 21,
exempting some users would not further the legislative intent in
establishing the connection fees.4 If, however, Squiretown were
able to prove that the increases unduly increased the cost of
development so as to affect its ability to profitably market the
units, see Toll Bros., Inc. v. Twp. of W. Windsor, 303 N.J.
Super. 518, 541-42 (Law Div. 1996), aff'd o.b., 334 N.J. Super.
109 (App. Div. 2000), aff'd, 173 N.J. 502 (2002), we assume,
without deciding, that it might be able to assert a viable "as
applied" challenge to the ordinances in the context of its
inclusionary development project.
In any event, it is clear that an "as applied" challenge
would require a detailed factual analysis of all the
circumstances underlying the enactment of the ordinances and
4
We surmise such considerations may have entered into the
special master's opinion as to the reasonableness of charging
water and sewer connection fees for all units, including the low
and moderate income units.
13 A-0528-15T3
their application to Squiretown's inclusionary project. As
there was no attempt by Squiretown to create the necessary
evidentiary record, it is not possible to assess whether
Squiretown could have succeeded on its ordinance claims, which
the court determined were made moot by its ruling on
Squiretown's motion in aid of litigant's rights, as affording
the developer the same relief.
Accordingly, we turn to consider Livingston's claim that
the trial court permitted Squiretown to circumvent the
requirements of an "as applied" challenge to the ordinances by
granting it relief under Rule 1:10-3 in the Mount Laurel suit.
Public entities, like other parties, are not free to ignore
or violate court orders. In re N.J.A.C. 5:96 & 5:97, 221 N.J.
1, 19 (2015). Although a party seeking to compel compliance
with a court order need not prove its adversary was willful or
contumacious, ibid., the law is clear that the scope of relief
"is limited to remediation of the violation of a court order,"
Abbott v. Burke, 206 N.J. 332, 371 (2011) (Abbott XXI).
The trial court rested its order exempting Squiretown from
the ordinances increasing fees for all new connections to the
sewerage and water supply systems on Livingston's violation of
the 2010 builder's remedy order and the 2014 order approving the
MOU. Turning first to the more recent order, Squiretown nowhere
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identifies any specific provision of that order it claims the
Township has violated.5 Instead, it claims more generally that
the Township's failure to disclose its plan to increase the
connection fees during the negotiation of that order constituted
bad faith.
Assuming that fact to be true for purposes of argument,6
Squiretown cites no authority that would permit a court to grant
relief in aid of litigant's rights in such circumstances, and
our research has not revealed any.7 Although there may be other
5
Before the trial court, Squiretown argued the Township violated
the provision of the MOU which states "that upon meeting certain
conditions contained [in the NJDEP Water Agreement], Livingston
will be permitted to consent to, and NJDEP will process, water
supply connection applications for Plaintiff's projects."
Although Livingston argued its execution of Squiretown's
application would be contrary to the Water Agreement and DEP
regulations, the court did not undertake any inquiry into the
validity of that claim. See State Dep't of Envtl. Prot. v.
Mazza & Sons, Inc., 406 N.J. Super. 13, 29 (App. Div. 2009)
(noting that if there is a contested issue regarding the
defendant's ability to comply with an order, "the trial court
must conduct an evidentiary hearing to resolve the factual
dispute"). The court's order to the Township to endorse the
application is not before us.
6
The only support for that allegation in the record is a
statement by an "unidentified speaker" in an excerpt of an
uncertified transcript of the public hearing on the ordinance.
7
Indeed, the claim made to the trial court, that Squiretown
agreed to contribute $100,000 to the cost of the sewer study "in
part, because the Township agreed to pay" the roughly equivalent
sum by assuming the $2500 connection fee for each of the forty-
four affordable units from its Affordable Housing Trust Fund,
(continued)
15 A-0528-15T3
avenues to address such wrongdoing, Squiretown, for example,
alleged in its ordinance challenge that the conduct breached the
Township's implied obligation of good faith and fair dealing,
see Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr.
Assocs., 182 N.J. 210, 224 (2005), its failure to identify a
specific provision of the MOU order the Township violated is
fatal to its claim for relief under Rule 1:10-3, see Abbott v.
Burke, 170 N.J. 537, 564-65 (2002) (Abbott VIII) (LaVecchia, J.,
concurring in part and dissenting in part) (noting a litigant
must show there is a "specific and unequivocal" order in place
to support relief under Rule 1:10-3).
Accordingly, we turn to consider whether the trial court's
order could be upheld on its alternate ground, that is,
violation of the provision of the builder's remedy order
relating to "unnecessary cost-generative features." Paragraph
eight of the interlocutory order of October 2010, granting
Squiretown a builder's remedy provides:
Squiretown shall prepare and submit to
the Special Master and counsel for
[Livingston] a draft zoning ordinance with
(continued)
does not appear to support its argument. If anything, the
increased connection fee would appear to result in the Township,
not Squiretown, having received less than equivalent value in
that exchange.
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provisions intended to allow the development
of the Squiretown Property in a manner that
is consistent with this Order, the report of
the Special Master as modified by her
testimony at trial and the concept plan as
revised pursuant to the procedures in
Paragraph 6 of this Order. The zoning
ordinance shall include provisions for
removing unnecessary cost generative
features in connection with development of
the Squiretown Property. Squiretown and
[Livingston], with the assistance of the
Special Master as needed, shall endeavor in
good faith to reach agreement on the
provisions of the zoning ordinance; provided
however, that [Livingston's] obligation to
adopt such an ordinance is not conditioned
on the parties reaching such an agreement.
The parties do not dispute that Squiretown sought zoning
ordinance provisions exempting the affordable units from any
development-related fees, including fees for sewer and water
connections. Livingston apparently opposed that request and
countered with a proposal to discount Squiretown's application
and review fees by twenty percent, thus, in effect, exempting
the affordable units from such fees. The Township, however,
opposed any exemption for water and sewer connection fees.
The special master agreed with Livingston, opining that "it
is appropriate to eliminate development application and review
(escrow) fees for the low and moderate income units, but it is
not unreasonable to require that all units be charged for sewer
and water connection fees." Livingston subsequently adopted
17 A-0528-15T3
ordinances re-zoning Squiretown's property and providing for
revised development regulations and fees, which ordinances were
approved by the court in the final judgment of compliance and
repose entered in June 2011 and affirmed by this court.8
Accordingly, assuming that the builder's remedy order,
which is specific to "the zoning ordinance," encompasses
Ordinances 18-2014 and 19-2014, it is not self-evident as to how
water and sewer connection fees that were not considered
unnecessary cost-generative features in the judgment of repose
became so when the fees were increased, allegedly in accordance
with a legislatively mandated formula. It is clear to us that a
finding in this regard was not possible on this record and would
not be possible without an evidentiary hearing in which the
ordinances are accorded the presumption of validity as required
by established law. See Dial, supra, 443 N.J. Super. at 503;
see also Meglino, supra, 103 N.J. at 152.
Accordingly, we vacate the order in aid of litigant's
rights and remand the matter for discovery and an evidentiary
hearing. In doing so, we express no opinion on the outcome in
8
The Township's agreement to pay the sewer connection fees for
the affordable units out of its Affordable Housing Trust Fund,
in exchange for Squiretown's contribution to the sewer study,
was made two-and-a-half years later as part of the MOU.
18 A-0528-15T3
this case. Squiretown maintains that the increase in the
connection and inspection fees for water and sewer service will
drive its costs for those items from $456,500 to $913,808,
essentially doubling them. The amount and timing of those
increases could support Squiretown's argument that the charges
were an unnecessary cost-generative feature implemented by the
Township in bad faith to deter it from pursuing its builder's
remedy.9 The trial court, however, was not free to adopt
Squiretown's arguments in the absence of any proof of its
allegations.
We expressly reject Squiretown's argument that whether "the
increased [connection] fees impaired the viability of the
development project," whether they were "comparable to [those
in] other jurisdictions in the surrounding area," or whether
they were calculated in accord with statutory requirements, is
"irrelevant to whether the Township's conduct violated the
Builder's Remedy Order and the MOU Order" and that it "did not
need to address any of those issues." Those issues are highly
relevant and precisely the ones Squiretown must address on
remand to establish any entitlement to relief.
9
We do not, however, understand the trial court's finding that
Squiretown "bargained for" the prices of connection fees the
Legislature requires be adjusted each budget year in accordance
with the statutory formula.
19 A-0528-15T3
In our view, unless Squiretown can prove the increased fees
contained in Ordinances 18-2014 and 19-2014 were not calculated
in accordance with statute, this is an "as applied" challenge to
enforcement of those ordinances, in which Squiretown can assert
that the increases are an unnecessary cost-generative feature.
See Urban League v. Mahwah, 207 N.J. Super. 169, 232 (Law Div.
1984). Resolution of Squiretown's claims will require a
detailed factual analysis of all the circumstances underlying
the enactment of the ordinances and their application to
Squiretown's inclusionary project.
We vacate the order in aid of litigant's rights and remand
for discovery and an evidentiary hearing.10 We do not retain
jurisdiction.
Vacated and remanded.
10
On remand, Squiretown is, of course, free to move to reinstate
the claims dismissed without prejudice in its ordinance
challenge.
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