Title: DKM Residential Properties Corp. v. The Township of Montgomery et als

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). DKM Residential Properties Corporation (DKM) developed and constructed the Cherry Valley Country Club (Cherry Valley) residential development in the Township of Montgomery (Township). As certificates of occupancy were obtained from the Township between 1995 and 1998, DKM sold the homes in the development and retained a possessory interest only in a few of the non-residential structures. In May 2000, the Township s construction department began receiving letters from Cherry Valley homeowners about improper installation of the stucco-like exterior finish that was applied to their homes. The homeowners maintained that the installation was not in accordance with the manufacturer s specifications and that as a result, moisture had penetrated the homes, causing decay, rotting, and mold accumulation. On investigation, the Township s construction official determined that the installation had not complied with the manufacturer s specifications and was in violation of the New Jersey UCC. The Township official consulted a representative of the Department of Community Affairs (DCA) and was advised that the Township had the authority to bring an enforcement action against DKM. Thereafter, the Township s construction official prepared five notices of violation (NOVs) identifying sixty-two individual instances of violation, all but one of them pertaining to the residences. The NOVs set forth a timeframe for correction of the alleged defect and further contained a specific provision for the imposition of fines for the failure to make the corrections within the specified timeframe. DKM appealed to the Township s Construction Board of Appeals (Board), challenging the NOV on several grounds, including a challenge to the Township s jurisdiction based on the fact that DKM no longer owned the properties. DKM also filed a complaint in lieu of prerogative writ 2001 against the Township and the Board, seeking to have the NOVs vacated and the Board enjoined from proceeding with a hearing. DKM moved for summary judgment, and the Board moved to dismiss the complaint for failure to exhaust administrative remedies. The Board and the Township later moved for summary judgment. While the motions for summary judgment were pending, the Board conducted three days of hearings in the various NOVs then pending and rendered decisions concluding, among other things, that the Township had authority to issue NOVs and that the faulty installation constituted code violations. The Board ordered DKM to submit a remediation plan, subject to the consent of the involved homeowners. Thereafter, the Law Division stayed all aspects of the Board s decision, with the exception of the requirement that DKM submit a remediation plan. In respect of the complaint, the Law Division granted summary judgment to the Township and the Board and dismissed DKM s complaint. In so doing, the court rejected DKM s argument that the Township lacked the authority under the UCC to issue an NOV to a builder once a certificate of occupancy had issued. The stay granted to DKM was vacated. On appeal, the Appellate Division reversed the judgment below and remanded for entry of an order vacating the summary judgment entered in favor of the Township and the Board, reinstating the amended complaint, and granting summary judgment to DKM. The panel held that neither the UCC nor its regulations authorized the Township to bring an enforcement proceeding against DKM concerning property that DKM no longer owned. Rather, the court determined that the municipal enforcing agency was authorized to bring an enforcement proceeding against a builder/owner/developer only during the construction process. Among other concerns, the panel expressed concern about homeowners using the Code s regulatory enforcement process to pursue private claims, thereby unfairly shifting the cost of such actions to unaffected taxpayers. The Supreme Court granted the Township s and the Board s petition for certification. HELD: A municipal construction official has the authority under the Uniform Construction Code Act to cite a developer for a construction code violation in respect of property that has been conveyed and for which a certificate of occupancy has issued. 1. The UCC Act is remedial in nature, and designed to address directly matters affecting health, safety, and welfare. By its own terms, its provisions must receive liberal construction to advance its purposes. The UCC Act charges the DCA Commissioner with all powers to effectuate its purposes, including the power to enforce the UCC and related subcodes. He is assisted in that responsibility by locally appointed and State-certified municipal construction officials and subcode officials (municipal enforcing agency). (pp. 8-12) 2. Because the penalties under the UCC accomplish goals other than merely to secure immediate compliance with the Act by exerting a continuing and increasing penalty for an unabated condition, the penalty section does not evince a legislative intent to restrict penalty enforcement to actions only against the landowner in possession, and not against a violating developer who had been issued a certificate of occupancy on the property. (pp. 12-14) 3. The UCC Act and its regulations reasonably permit the issuance of an NOV and the imposition of a penalty against a developer after a certificate of occupancy has issued. (p. 14) 4. Absent any express or clearly implied limitation on the municipal enforcing agency s authority, there is no general lack of power on the part of the municipal enforcing agency to issue an NOV with an appropriate penalty to a developer notwithstanding that a certificate of occupancy may have issued. (pp. 16-17) Judgment of the Appellate Division is REVERSED. JUSTICES LONG, ZAZZALI, WALLACE, and RIVERA-SOTO join in JUSTICE LaVECCHIA s opinion. CHIEF JUSTICE PORITZ and JUSTICE ALBIN did not participate. Plaintiff, v. THE TOWNSHIP OF MONTGOMERY and THE CONSTRUCTION BOARD OF APPEALS OF THE TOWNSHIP OF MONTGOMERY, Defendants-Appellants. Argued October 13, 2004 Decided January 24, 2005 On certification to the Superior Court, Appellate Division, whose opinion is reported at 363 N.J. Super. 80 (2003) Trishka Waterbury argued the cause for appellants (Mason Griffin & Pierson, attorneys; Ms. Waterbury and Kristina P. Hadinger, of counsel). William John Kearns, Jr., argued the cause for amici curiae New Jersey State League of Municipalities and New Jersey Institute of Local Government Attorneys (Kearns, Vassallo & Kearns, attorneys). Christine D. Petruzzell argued the cause for amicus curiae New Jersey Builders Association (Wilentz, Goldman & Spitzer, attorneys). JUSTICE LaVECCHIA delivered the opinion of the Court. We granted certification in this matter to determine whether the Uniform Construction Code Act, N.J.S.A. 52:27D-119 to 141 (UCC Act), permits a municipal construction official to cite a developer for a construction code violation in respect of property that has been conveyed and for which a certificate of occupancy has issued. The Appellate Division concluded that municipal officials lacked authority to act in those circumstances. DKM Residential Props. Corp. v. Tp. of Montgomery, 363 N.J. Super. 80, 83 (2003). Because we discern no such limitation to be express or implied from the UCC Act, and because the Act itself directs that the powers conferred be liberally construed, we reverse and remand. I. DKM Residential Properties Corporation (DKM) developed and constructed the Cherry Valley Country Club (Cherry Valley) residential development in the Township of Montgomery (Township). Between 1995 and 1998 as certificates of occupancy were obtained from the Township, DKM sold the homes in the development and retained a possessory interest only in a few structures (a tennis clubhouse, golf clubhouse, cabana pool building, and maintenance building). In May 2000, the Township s Construction Department began receiving letters from Cherry Valley homeowners about improper installation of the synthetic stucco-like exterior finish (called Exterior Insulating Finish System (EIFS)) that was applied to their new homes. The homeowners enclosed engineering reports concluding, after inspection, that the EIFS was not installed according to manufacturer s specifications. As a result of the improper installation, moisture had penetrated exterior walls and had caused decay, rotting, and mold accumulation in the homes. Upon reviewing the reports submitted, the Township s construction official determined that the installation had not complied with the manufacturer s specifications and was in violation of the New Jersey Uniform Construction Code (Code), N.J.A.C. 5:23-1.1 to -12.12. The municipal construction official consulted a representative of the Department of Community Affairs (DCA) and was advised that the Township had the authority to bring an enforcement action against DKM and, so, the Township s construction official prepared five notices of violation (NOVs) See footnote 1 identifying sixty-two individual instances of violation. Sixty-one of the violations pertained to single-family homes. The remaining violation pertained to the clubhouses and maintenance center owned by DKM. The NOVs stated that DKM s failure to correct the violations within a specified timeframe would result in the imposition of fines in the amount of $500 per week. The first NOV issued on December 12, 2000. It alleged that DKM had installed improperly the EIFS of nine homes and demanded that DKM reinstall the EIFS by January 8, 2001. DKM appealed to the Township s Construction Board of Appeals (Board), initially challenging the NOV on three grounds: the Township lacked jurisdiction because DKM no longer owned the properties; there was no violation of the Code; and the Township s compliance demands were unreasonable. An added fourth challenge claimed that because the Township failed to serve the NOVs on the homeowners when DKM was served, the NOVs were void. DKM also filed a complaint in lieu of prerogative writ in February 2001, naming as defendants the Township and the Board. The action sought to have the NOV vacated and the Board enjoined from proceeding with a hearing. DKM moved for summary judgment, and the Board and the Township moved to dismiss the complaint for failure to exhaust administrative remedies. A motion for summary judgment was filed later by defendants. From February through July 2001, while the motions were pending, the Township issued the four other NOVs concerning various properties. Each required compliance by a specific date. DKM appealed to the Board on each and amended accordingly its complaint pending in the Law Division. See footnote 2 The Board conducted three days of hearings and rendered decisions memorializing the Board s conclusions that: 1) the Township had the authority to issue NOVs; 2) the faulty installation of EIFS constituted a Code violation; 3) the compliance dates demanded in the NOVs were reasonable; and 4) the NOVs were not invalidated merely because the homeowners were not served concurrently with DKM. The Board ordered DKM to submit a remediation plan, subject to the consent of the homeowners whose properties were the focus of the first NOV. On April 3, 2001, the Law Division stayed all aspects of the Board s decision, with the exception of the requirement that DKM submit a remediation plan. See footnote 3 In respect of the complaint, the court granted summary judgment to the Township and the Board, and dismissed DKM s complaint. In so doing, the court rejected DKM s purely legal argument that the Township lacked authority under the UCC Act to issue an NOV to a builder once a certificate of occupancy had issued. The stay granted to DKM was vacated. DKM appealed and, thereafter, its motion for a stay pending appeal was denied by the Law Division, by the Appellate Division, and by this Court. On the merits of DKM s appeal, however, the Appellate Division reversed the judgment below and remanded for entry of an order vacating the summary judgment entered in favor of the Township and the Board, reinstating the amended complaint, and granting summary judgment to DKM. DKM Residential Props., supra, 363 N.J. Super. at 95-96. The panel held that neither the UCC Act nor its regulations authorized the Township to bring an enforcement proceeding against DKM concerning property that DKM no longer owned. Id. at 91-92. The court determined that the municipal enforcing agency was authorized to bring an enforcement proceeding against a builder/owner/developer only during the construction process. Id. at 92. A contrary result, the court stated, would undermine the UCC Act s purposes of encouraging innovation, eliminating regulatory measures that unnecessarily increase new development costs, and increasing the feasibility of modern construction. Id. at 91. The Appellate Division panel also expressed concern about homeowners using the Code s regulatory enforcement process to pursue private claims, thereby unfairly shifting the cost of such actions to unaffected taxpayers. Id. at 95. In a concurring opinion, Judge Wefing noted the absence of any allegation in the NOVs of improperly issued certificates of occupancy or the abandonment of homes due to substandard construction, suggesting that such allegations might have made the Township s argument more sympathetic. Id. at 96. We granted the petition for certification filed by the Township and Board. 179 N.J. 311 (2004). DKM has not participated in the proceedings before us. We take from DKM s non-participation that the particular violations are no longer in controversy and we are confronted here only with the legal challenge to the municipal enforcing entity s authority to act against a developer after a certificate of occupancy has issued. We are benefited here by the vigorous involvement of both the New Jersey Builders Association (NJBA) and the New Jersey League of Municipalities (League), which were granted amicus curiae status. II. The Legislature enacted the UCC Act in 1975 to address the escalating costs of construction. L. 1975, c. 217, 1. The enactment states clearly its purpose: to reduce construction expense by eliminating the divergent and burdensome municipal construction codes in existence at the time. N.J.S.A. 52:27D-120. Accordingly, the UCC Act provides for promulgation by the DCA Commissioner of a uniform construction code to establish unitary up-to-date construction standards, and further provides for standardization of enforcement practices to preempt conflicting municipal policies. N.J.S.A. 52:27D-122(b), -122.1(a), and -123.1. The UCC Act is remedial in nature, and designed to address directly matters affecting health, safety and welfare. See Cyktor v. Aspen Manor Condo., 359 N.J. Super. 459, 467 (App. Div. 2003) (quoting Commissioner of DCA s discussion of UCC Act s purpose). By its own terms, its provisions must receive liberal construction to advance its purposes. N.J.S.A. 52:27D-141. The UCC Act charges the DCA Commissioner with all powers necessary or convenient to effectuate its purposes, including the power to enforce the uniform construction code and related subcodes (collectively, the Code) promulgated pursuant to the UCC Act s authorization, and to prosecute, or cause to prosecute, violators of the UCC Act or its Code. N.J.S.A. 52:27D-124; see also Cyktor, supra, 359 N.J. Super. at 466-67. The Commissioner is assisted in that responsibility by locally appointed and State-certified municipal construction officials, and subcode officials (collectively known as the municipal enforcing agency). N.J.S.A. 52:27D-126; see also N.J.S.A. 52:27D-127 (establishing construction boards of appeals to hear and decide appeals from decisions by enforcing agencies). The specific power in question here is the municipal enforcing agency s authority to issue a notice of a violation to a builder concerning construction for which a certificate of occupancy has issued. To address the issue, we turn first to the penalty provision, N.J.S.A. 52:27D-138, which authorizes the imposition of sanctions in the form of monetary penalties on violators of the UCC Act or the Code. Subsection a. addresses the issuance of penalties to any person or corporation, who (1) Violates any of the provisions of [the] act or rules promulgated hereunder; (2) Constructs a structure or building in violation of a condition of a building permit; * * * (4) Makes a false or misleading written statement, or omits any required information or statement in any application or request for approval to an enforcing agency or the department. . . . 2. Unless an immediate hazard to health and safety is posed, the construction official shall permit such time period for correction as is reasonable within the context of the situation. DKM RESIDENTIAL PROPERTIES CORP., Plaintiff, v. THE TOWNSHIP OF MONTGOMERY and THE CONSTRUCTION BOARD OF APPEALS OF THE TOWNSHIP OF MONTGOMERY, Defendants-Appellants. DECIDED January 24, 2005 Justice Long PRESIDING OPINION BY Justice LaVecchia CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY