First Peoples Bank of New Jersey v. Township of Medford

• Decision Date: 30 December 1991
• Citation: 599 A.2d 1248,126 N.J. 413
• Parties: , Util. L. Rep. P 26,165 FIRST PEOPLES BANK OF NEW JERSEY, Plaintiff-Appellant, v. TOWNSHIP OF MEDFORD and Stephen D. Samost, Defendants-Respondents, and Joseph Samost, Defendant. LAND AND MARKETING TECHNOLOGY, INC., a New Jersey Corporation, Plaintiff-Appellant, v. TOWNSHIP OF MEDFORD and Main Line Realty, a Partnership, Defendants-Respondents, and Joseph Samost, an Individual; John Does 1-100; Cedarstone Conservation Company; All Land Realty Corp.; Estate of Irwin L. Levy, Marlene Levy; Tangent Development, a Partnership; First Peoples Bank of New Jersey; Sharps Run Associates, a Limited Partnership; Medford Circle Associates, Inc.; and William V. Burk, an Individual, Defendants. HEDGE ASSOCIATES, a New Jersey Joint Venture, Plaintiff, v. TOWNSHIP OF MEDFORD, a Municipal Corporation; and Stephen Samost, Defendants, Medford Walk, Inc., Intervenor.
• Court: New Jersey Supreme Court

Page 413

126 N.J. 413

599 A.2d 1248, Util. L. Rep. P 26,165

FIRST PEOPLES BANK OF NEW JERSEY, Plaintiff-Appellant, v. TOWNSHIP OF MEDFORD and Stephen D. Samost, Defendants-Respondents, and Joseph Samost, Defendant.

LAND AND MARKETING TECHNOLOGY, INC., a New Jersey

Corporation, Plaintiff-Appellant, v. TOWNSHIP OF MEDFORD and Main Line Realty, a Partnership,

Defendants-Respondents,

and

Joseph Samost, an Individual; John Does 1-100; Cedarstone

Conservation Company; All Land Realty Corp.; Estate of

Irwin L. Levy, Marlene Levy; Tangent Development, a

Partnership; First Peoples Bank of New Jersey; Sharps Run

Associates, a Limited Partnership; Medford Circle

Associates, Inc.; and William V. Burk, an Individual, Defendants.

HEDGE ASSOCIATES, a New Jersey Joint Venture, Plaintiff, v. TOWNSHIP OF MEDFORD, a Municipal Corporation; and Stephen

Samost, Defendants,

Medford Walk, Inc., Intervenor.

Supreme Court of New Jersey.

Argued Sept. 23, 1991.

Decided Dec. 30, 1991.

Martin S. Ettin, Cherry Hill and Lewis Katz, for plaintiffs-appellants (Katz, Ettin, Levine & Kurzweil, attorneys).

John A. Almeida, Medford, for defendant-respondent Township of Medford (John A. Almeida, attorney; Richard W. Hunt, on the brief).

Frederick W. Hardt, Moorestown, for defendant-respondent Steven D. Samost.

Jeffrey I. Baron, Voorhees, for defendant-respondent Main Line Realty (Thomas F. Crawford, Berlin, attorney).

The opinion of the Court was delivered by

POLLOCK, J.

First Peoples Bank of New Jersey (the Bank) challenges both facially and as applied the sewer ordinance of Medford Township (Medford or the Township). In unreported opinions, the Law Division and the Appellate Division sustained the ordinance. We granted the Bank's petition for certification, --- N.J. ----, --- A.2d ---- (1991), and now affirm.

-I-

In the mid-1970s Medford experienced rapid land use development that overburdened the municipal sewer system. Consequently, the New Jersey Department of Environmental Protection (DEP) imposed a sewer connection ban. Medford's initial response was to adopt a "Flow Equalization Plan," which involved the use of holding tanks to store effluent during peak periods. By 1983, the sewer plant was again at its limit. DEP imposed a second sewer ban ordering the Township to increase the capacity of its pumping station. Land use development came to a halt. The Township's need to construct additional sewer capacity, combined with the problems of financing the construction, led to the enactment of ordinances 1983-10 and -11.

Not challenged on this appeal is ordinance 1983-10, which appropriates $4.6 million to increase the capacity of the Township's sewage treatment plant from 1.3 to 1.75 million gallons a day. Instead, the Bank challenges ordinance 1983-11, which provides for the administration of the increased sewer capacity.

The intent of the ordinance, according to section 1, is "to establish the rules and regulations for connections to the Sewage Treatment Plant upon expansion, and to establish appropriate fees for the repayment of such notes and bonds as may be issued in order to finance and pay for the expansion to said plant." In that section, the governing body found that

it is in the best interest of the Township to establish a priority list such that proposed users of the system desiring to connect to the system can pay for said connections and receive priority in and to the additional capacity to be generated by virtue of said expansion, subject, however, to the rights and interests of the Township to control the allocation of said capacity in the best interests of the Township and its residents in order that said reservation of capacity is not irrevocably committed to a proposed user who may not construct and/or build a project using part of the expanded capacity.

Thus, the ordinance contemplated the receipt of connection fees to pay for the additional capacity. It also contemplated that Medford would control the issuance of connection permits "in the best interests of the Township."

The central feature of the ordinance provides property owners with the option to purchase connection permits before obtaining municipal land use approvals. Accordingly, section 4H(1)(g) of the Sewer and Water Ordinance provides in pertinent part:

Subject to the right of the Township to repurchase any sewer connection permit, as set forth in subsection (h) below, the owner of any lot, parcel or tract of land in the Township where construction or extension of public sewer is permitted by the Medford Development Ordinance, 1982-22, may purchase sewer connection permits for said lot, parcel or tract. The maximum number of permits which may be purchased shall not exceed the maximum number of residential dwelling units or non-residential units which could be constructed on the lot, parcel or tract under the applicable density, zoning, use, and performance standards and provisions of the said Development Ordinance.

The purpose of the provision allowing a developer to purchase sewer permits before obtaining final approval is to finance the cost of sewer plant improvements and to retire the debt incurred for those improvements. Consistent with this purpose, the cost of permit fees escalated annually until 1987. In effect, the ordinance granted a "discount" for the early purchase of permits.

The Township retains control over sold, but unused, permits in section 4H(1)(h), which provides:

At such time as the committed capacity of the sewage treatment plant equals seventy-five per cent (75%) of the total permitted treatment or design capacity of the sewage treatment plant, and at any time thereafter, the Township may elect, at Township's sole option, to repurchase said permit. This repurchase shall be accomplished by giving written notice to the record owner of any said permit, stating the Township's intention to repurchase six (6) months from the date of said notice.

So essential to the project was the sale of permits that the Township attorney in December 1983 sent a letter to the owners of property who had received land use approvals or who would "require the use of public sewer when the property is developed." The letter warned that "unless there is financial cooperation from those landowners who will benefit from the additional capacity, the project cannot be completed." It continued:

I am writing to advise you of the availability of the sewer connections and to urge you to purchase the required number of connections to serve your development or potential development. While the connections cannot be sold or transferred to another parcel, they are transferrable with your land if a developer, builder or thirty [sic] party purchases your property.

By purchasing your connections prior to December 31, you will (a) save money (b) reserve capacity in the new expansion for your land and (c) help to insure that the project will be completed.

The Bank received the letter, but did not purchase any permits.

The plant's increased capacity of 450,000 gallons per day enabled Medford to make available 1,800 additional permits for sewer connections. Excluding the challenged sale to Samost Medford sold 901 permits, 730 of which were for projects that had not received land use approval at the time of the sale.

The Samost family and their associated entities (Samost) are the largest property owners in Medford, owning approximately 2,000 acres. On April 22, 1988, Samost purchased 825 permits at $4,000 per permit for a total cost of $3.3 million. Although the subsequent deletion of certain properties changed the terms of the purchase, Samost owned enough other land to support the purchase of all 825 permits. Approximately half of the lots represented by the 825 permits have received either preliminary or final development approval. The other half are the subject of applications for approval.

In total, the Township issued 1,770 of 1,800 permits, reserving 30 permits for emergency purposes. It then temporarily suspended the further issuance of sewer permits. Two days later the Bank unsuccessfully sought several sewer permit applications. Samost likewise sought additional applications. The Township denied both requests and, on May 3, 1988, imposed a sewer moratorium. The Bank thereupon challenged the validity of the ordinance and requested a court order directing Medford to accommodate the development of the Bank's property by expanding the capacity of the sewage plant or by repurchasing unused permits.

-II-

-A-

Generally, a reviewing court should presume the validity and reasonableness of a municipal ordinance. Quick Chek Food Stores v. Township of Springfield, 83 N.J. 438, 447, 416 A.2d 840 (1980). Anyone challenging an ordinance as arbitrary or unreasonable bears a heavy burden. Dome Realty, Inc. v. City of Paterson, 83 N.J. 212, 235, 416 A.2d 334 (1980); Hudson Circle Servicenter v. Town of Kearny, 70 N.J. 289, 298-99, 359 A.2d 862 (1976). Accordingly, a court will sustain an ordinance if it is supported by a rational basis. Hutton Park Gardens v. West Orange Town Council, 68 N.J. 543, 564-65, 350 A.2d 1 (1975). The municipal obligation is to provide a level playing field so that applicants are treated equally. Meglino v. Township Comm. of Eagleswood, 103 N.J. 144, 156, 510 A.2d 1134 (1986). Five years ago, we acknowledged the cogency of the general rule of judicial deference when reviewing sewer ordinances. Id. at 152, 510 A.2d 1134; see Sudler v. Environmental Disposal Corp., 219 N.J.Super. 52, 60-61, 529 A.2d 1022 (App.Div.1987) (deferring to decision of Board of Public Utility Commissioners allocating remaining sewer capacity to single developer). Consequently, a sewer ordinance should withstand a challenge unless it is inequitable, unfair, or lacks adequate standards to insure the fair and reasonable exercise of municipal authority. See 5 McQuillin, The Law of Municipal Corporations § 18.12 at 453 (3d ed. 1989).

Expansion of a sewage treatment...