JUST RELEASED COURT RULING HIGHLIGHTS IMPORTANCE OF DOING PROPER RESEARCH PRIOR TO PURCHASING PROPERTY

A ruling just released by the New Jersey Appellate Division highlights the importance of doing the proper due diligence before purchasing property.

Around October 30, 2017, 546 OG, LLC, which is manged by Mark Klein, purchased 33 Leary Lane in Edgewater at a sheriff's sale. The property is adjacent to other fully-developed properties.

When preparing a land use board application to develop the property, Mr. Klein learned that his property was landlocked due to a road vacation ordinance that the Borough Council had approved back in 2008 which "relinquished the public right-of-way in and over Leary Lane."

The Council had adopted this road vacation Ordinance at the request of the then-owner of the property who was interested in constructing some type of residential development within the adjoining parcels he owned and he thought that vacating the paper street and taking a portion of it would help in that construction effort.

On November 6, 2019, Mr. Klein filed a lawsuit in New Jersey Superior Court in Bergen County challenging the validity of the ordinance "because when the Borough relinquished the public right-of-way in and over Leary Lane, the Borough
blocked the property from accessing the Borough's public street system." In the first count of the complaint, plaintiff alleged the ordinance failed to comply with N.J.S.A. 40:67-19 because it did not maintain plaintiff's "right to access the
Borough's public traffic system via Leary Lane." Plaintiff sought a judgment declaring the ordinance to be invalid and restraining defendant from "any further enforcement or application of the ordinance . . . as to . . . plaintiff's property." In the second count, plaintiff made an inverse-condemnation claim, alleging it had "invested in the property at a level commensurate with reasonable expectations that the property could be developed for residential development"
and, by adopting the ordinance, the Borough made the property "undevelopable."

 

The plaintiff filed a Motion for Summary Judgment,
arguing that the Borough had failed to demonstrate the adoption of the ordinance benefitted the public.

In its civil case information statement, the Plaintiff labelled this case a "Real Property" action, saying that the first count of the complaint was a declaratory-judgment claim.

While the motion was pending, the Assignment Judge relabeled the case to an Action in Lieu of Prerogative Writs. This had a major impact on the case.

The Declaratory Judgment Act confers the declaratory action right on a person whose legal rights are affected by a municipal ordinance. It's mandate is to afford relief from uncertainty with respect to a party's rights, including property rights.

In contrast, a prerogative-writ action affords judicial review of administrative agency actions. The big difference is that a prerogative-writ action must be filed within 45-days after the government action which it challenges was adopted, unless "interest of justice so requires."

On December 17, 2021, the motion judge dismissed the Complaint, finding that "plaintiff's action whether in challenging the ordinance or alleging inverse condemnation fail because both causes of action are grossly out of time." The judge cited Rule 4:69-6(a), requiring an action in lieu of prerogative writs to commence within forty-five days after the accrual of the right to the review, hearing or relief claimed, and Klumpp v. Borough of Avalon, in which the Court held an inverse-condemnation action must be commenced within a six-year statute of limitations.

Rule 4:69-6(c) does authorize a trial court to "enlarge the period of time of... this rule where it is manifest that the interest of justice so requires." Pursuant to Borough of Princeton v. Bd. of Chosen Freeholders, when considering the timeliness of an action in lieu of prerogative writs, a trial court should consider whether the action involves (1) important and novel constitutional questions; (2) informal or ex parte determinations of legal questions by administrative officials; and (3) important public rather than private interests which require adjudication or clarification. 

The judge declined to enlarge the time for commencement of an action in lieu of prerogative writs under Rule 4:69- 6(c), finding that "no interests of justice at stake to compel the court to enlarge the time after more than ten years. . . . The interest at stake here is the private interest of plaintiff, who apparently failed to do its due diligence prior to the purchase of the property at the sheriff's sale."

The plaintiff appealed, arguing that their action was not time-barred, and that they were entitled
to summary judgment because the Borough did not act in furtherance of the public good when vacating a portion of Leary Lane, and, accordingly, the ordinance should be declared void.

In an unpublished ruling just released, Appellate Division Judges Rose and Gummer were unpersuaded.

Plaintiff may have labelled this case a "Real Property" action in its civil case information statement and may have framed the first count of the complaint as a declaratory-judgment claim, but a review of the complaint makes clear plaintiff is seeking to invalidate on non-constitutional grounds an ordinance enacted years before plaintiff purchased the property. Thus, the trial-court judges properly treated the case as an action in lieu of prerogative writs.

Arguing the forty-five-day time limit for actions in lieu of prerogative writs does not apply, plaintiff likens its case to Ballantyne. But the plaintiffs in Ballantyne alleged that the enactment of an ordinance violated the equal-protection guarantees of the federal and state constitutions. Plaintiff makes no such constitutional argument here. Instead, relying on N.J.S.A. 40:67-19, plaintiff argues simply that the public interest was not "better served by releasing" the portion of the Leary Lane Paper Street at issue in the ordinance.

Plaintiff had no interest in or legal rights to the property when the ordinance was enacted in 2008. Plaintiff is not now seeking relief from uncertainty with respect to its rights. Its rights are clear and were clear when it purchased the property in 2017. Under these circumstances, the presiding civil
judge correctly determined plaintiff's complaint was substantively an action in lieu of prerogative writs, and the motion judge correctly applied the forty-five- day time limit of Rule 4:69-6(a) to that claim.

The motion judge also properly declined to enlarge the time for commencement of an action in lieu of prerogative writs, finding that none of the applicable conditions apply here. With none of those considerations applying here, we are satisfied the motion judge did not abuse her discretion by declining to enlarge the time limit.

Plaintiff's inverse-condemnation claim is also without merit. In an action for inverse condemnation, "a landowner is seeking compensation for a de facto taking of his or her property." Greenway Dev. Co. v. Borough of Paramus.

However, "it is a basic requirement of inverse condemnation that the plaintiff-land owner show that any deprivation of the beneficial use of his
property is the result of the exercise of government authority and that the property has in fact been impaired." Pinkowski v. Township of Montclai. I.e. A party is not entitled to compensation for the taking of property it never owned. City of Long Branch v. Jui Yung Liu. Plaintiff did not own the property when defendant enacted the ordinance. It never owned property that had adjacent to it the pre-ordinance, intact Leary Lane Paper Street. Thus, nothing was taken from plaintiff.

"If plaintiff suffered losses because it "invested in the property" based on "expectations that
the property could be developed for residential development," its losses were not caused by an ordinance enacted and recorded nearly nine years before it purchased the property. This is not the type of damage for which the town would be liable," the judges concluded.

This ruling highlights the importance of doing the proper due diligence - including a proper title search - before purchasing property.

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