MHF Holding Co. v. New Jersey Dept. of Environmental Protection

CourtSuperior Court of New Jersey
Writing for the CourtEDITH K. PAYNE
Citation314 N.J.Super. 87,713 A.2d 1096
Decision Date12 October 1997

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314 N.J.Super. 87
713 A.2d 1096
MHF HOLDING COMPANY, et al., Plaintiffs,
Superior Court of New Jersey,
Law Division,
Essex County.
Decided Oct. 12, 1997.

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Kenneth K. Lehn, Livingston, for plaintiffs (Franzblau & Dratch attorneys).

Howard Geduldig, Trenton, for defendant (Peter Verniero, Attorney General of New Jersey attorney).

[713 A.2d 1097] EDITH K. PAYNE, J.S.C.


In 1967, plaintiffs purchased property adjacent to Eisenhower Parkway in the Township of Livingston, currently known on Livingston's tax map as Block 5900, Lot 42, paying approximately $27,000 for the land. At the time of purchase, the property was zoned R-2, which permitted the construction of single-family, detached residences with a minimum lot size of 25,000 square feet. In 1984, in settlement of Mt. Laurel II litigation, Livingston agreed to rezone the parcel from R-2 to PB-2, thereby permitting construction of a professional office building of no more than 120,000 square feet. Residential and industrial uses, as well as wholesale and retail businesses, were prohibited in the zone, which had a minimum lot size of nine acres. The settlement also provided for a property exchange that resulted in an increase in plaintiffs' highway frontage, a transfer to Livingston of property fronting on Old Road, and a prohibition of vehicle access to the property from Old Road. The resulting property consisted of 9.67 acres.

On July 29, 1986, plaintiffs applied to the U.S. Army Corps of Engineers for a wetlands delineation confirmation and confirmation of a nationwide general permit to fill a stream on the property in order to create two stream crossings. The application was granted by letter dated March 12, 1987.

Approximately four and one-half months later, on July 1, 1987, the New Jersey Freshwater Wetlands Protection Act (FWPA),

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N.J.S.A. 13:9B-1 to 30 was enacted. The FWPA had an effective date of July 1, 1988. 1

Despite the regulatory threat created by the FWPA, by contract dated November 4, 1988, plaintiffs agreed to sell the property to JAMM Realty Corp. for approximately $1.7 million. The sale was conditioned upon obtaining governmental approvals within 36 months for the construction of at least a 60,000-square foot office building.

On February 21, 1989, preliminary and final site plan approval was granted to JAMM by the Livingston Township Planning Board for a three-story 68,750-square foot office building, subject to the approval of the Essex County Planning Board, which was granted on September 17, 1990. Additionally, on April 10, 1989, the NJDEP issued a stream encroachment permit for the property, effective May 6, 1989 to December 31, 1996, that authorized the placement of fill and construction of three storm water outfall structures in connection with any future approval of the office building construction.

For unstated reasons, in September 1993, JAMM exercised its right, under extensions of the 36-month contractual deadline, to terminate its purchase contract. A subsequent purchase option contract with Sts. Constantine and Helen Greek Orthodox Church was terminated on February 17, 1994.

On March 3, 1994, plaintiffs were notified by the NJDEP that it was administering the Federal Clean Water Act, and under that Act, a wetlands permit was required prior to development of the property. On May 10, 1994, the NJDEP issued a Letter Of Interpretation confirming the existence of freshwater wetlands of intermediate resource value and associated transition areas on the property, and on September 22, 1995, the NJDEP issued a Letter of Interpretation confirming the delineation of those wetlands and transition areas by plaintiffs' consultants, Schoor DePalma, Inc.,

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and again finding the wetlands to be of intermediate resource value. The September letter continued:

The wetlands have also been identified as being priority wetlands by the U.S. Environmental Protection Agency. This classification may affect the requirements for a Individual Wetlands Permit (see N.J.A.C. 7:7A-3), the types of Statewide General Permits available for the wetlands portions of this property (see N.J.A.C. 7:7A-9) and the modification available through a transition area waiver (see N.J.A.C. 7:7a-7). Please refer to the Freshwater Wetlands Protection Act (N.J.S.A. 12:9B-1 et seq.) and implementing rules for additional information.

The Schoor DePalma map reveals that approximately 91% of the property consists of a [713 A.2d 1098] stream, wetlands and a 50-foot buffer or transition zone. Only 0.8 acres, consisting of three areas of 0.6 acres, 0.15 acres and .05 acres, respectively, are unaffected by the FWPA wetlands and transition zone designations. None, according to plaintiffs, is independently developable.

As a preliminary step to application for the Independent Freshwater Wetlands Permit designed to provide relief from wetlands restrictions, on December 21, 1995, representatives of plaintiffs met with Maria T. Bacino, Project Manager of the Bureau of Inland Regulation of the NJDEP for a pre-application conference. At that conference, Ms. Bacino informed plaintiffs that any proposed filling of wetlands in excess of one acre could be authorized only under a Freshwater Wetlands Permit and of the criteria for issuance of such a permit. Ms. Bacino stated additionally, according to plaintiffs,

that it was highly improbable and inconceivable that an Individual Freshwater Wetlands Permit would ever be issued for the proposed office project for the Premises, that such permits were typically granted for small scale purposes such as making sewer connections, constructing driveways or instances involving the public need (such as construction of a county jail) and certainly not for the extent of fill required to develop this 9.67 acre tract.

Further, plaintiffs allege

Bacino ... underscored that the plaintiffs would not be able to demonstrate the unavailability of other sites in the region suitable for the construction of the proposed office building, as would be required to obtain an Individual Permit to develop the Premises. Bacino emphasized that MHF's proposed project was not the type of project for which an Independent Permit can be granted, as other available sites in the region are available for such projects. Bacino further stated

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that she would be the person who would decide whether or not the permit would be granted.

Following the conference, on December 28, 1995, Ms. Bacino wrote to plaintiffs, stating in relevant part:

Based upon staff review of the information presented and discussed at the preapplication conference held on December 21, 1995, your proposed project has the following status in terms of the Program's administrative rules. Please understand that the following informal guidance and initial assessment is not a binding commitment, and does in no way reflect a decision by this Department or Program to approve or deny any forthcoming permit application for this project or site.

Project Description

The applicant is proposing to construct an office Building in Livingston Township, Essex County. The project proposal involves the filling of intermediate resource value, EPA priority wetlands for the construction of the building and parking areas. From staff discussions, several issues arose and are herein discussed as they relate to the project. Again, these issues are not meant to be definitive.

Regulatory Issues

A Letter of Interpretation was issued for this property.... The proposed filling of the wetland areas, which well exceeds one acre, could only be authorized under a Freshwater Wetlands Individual Permit.

The Individual Permit application process is outlined at N.J.A.C. 7:7a-11.1. The applicant was informed that the Department shall issue a the [sic] Individual Permit only if it finds that there is no practicable alternative to the proposed activity. An alternative shall be practicable if it is available and capable of being carried out after taking into consideration cost, existing technology, and logistics in light of overall project purposes. An alternative shall not be excluded from consideration under this provision merely because it includes or requires an area not owned by the applicant which could reasonably have been or be obtained, utilized, expanded, or managed in order to fulfill the basic purpose of the proposed activity.

* * * * * *

I trust this guidance helps you proceed along the design and development process.

Plaintiffs, thereupon, abandoned their effort to obtain regulatory approval by seeking [713 A.2d 1099] an Individual Freshwater Wetlands Permit for any development of the property, and instead, on January 12, 1996, filed the within action seeking a declaration of inverse condemnation by regulatory taking and damages of $1,673,800, consisting of the difference in market value of the property as a

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commercial office-building ($1,712,500) and its value as open space ($38,700). 2

The State has now moved for summary judgment on plaintiffs' complaint, arguing that plaintiffs' claim of a regulatory taking is not ripe as the result of plaintiffs' failure to exhaust administrative procedures and remedies, since administrative relief may be available in the form of an Individual Permit for limited development of the wetlands and a Transition Area Waiver for development on "the more than 20 percent of the property that is not freshwater wetlands."

Plaintiffs have cross-moved for summary judgment on the first count of their complaint, arguing that such action would be futile under the facts presented.

In seeking summary judgment, the State notes that, in order for a regulatory taking to be found to exist, the facts must demonstrate that the state has "gone too far" in its interference with plaintiffs' reasonable investment-backed expectations and thus has taken private property for public use...

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