Opinion ID: 1201899
Heading Depth: 2
Heading Rank: 2

Heading: legality of contract zoning

Text: This case presents this Court with our first opportunity to discuss in some detail the legality of contract zoning. While a few of our previous opinions relate to contract zoning, none provides clear guidance on the subject. See Westgate Families v. County Clerk, 100 N.M. 146, 148, 667 P.2d 453, 455 (1983) (because the New Mexico Zoning Enabling Act expressly provides for zoning by representative bodies, it denies an exercise of zoning power by referendum); Mechem v. City of Santa Fe, 96 N.M. 668, 672, 634 P.2d 690, 694 (1981) (dictum) (endorsing validity of contract zoning under certain circumstances); Spray v. City of Albuquerque, 94 N.M. 199, 201, 608 P.2d 511, 513 (1980) (contracts attempting to curtail or prohibit a municipality's legislative or administrative authority are uniformly invalid).
At the outset, it is important to explain what is meant by contract zoning. Contract zoning has been variously defined by courts and commentators and has sometimes been used interchangeably with the term conditional zoning. See, e.g., 2 Robert M. Anderson, American Law of Zoning 3d § 9.21 (1986); 1 Norman Williams, Jr. & John M. Taylor, American Planning Law §§ 29.01-.04 (rev. ed. 1988). Contract and conditional zoning are distinct, however, and an appreciation of the distinction is important to understanding our holding today. Contract zoning, properly used, describes an agreement between a municipality and another party in which the municipality's consideration consists of either a promise to zone property in a requested manner or the actual act of zoning the property in that manner. Cf. Nolan M. Kennedy, Jr., Note, Contract and Conditional Zoning: A Tool for Zoning Flexibility, 23 Hastings L.J. 825, 831 (1972) (defining contract zoning in slightly different terms). A contract to zone may be in the form of either a unilateral contract or a bilateral contract. See id. at 837-38. A bilateral contract involves reciprocal promises in which the municipality promises to zone property in a certain manner in return for some promise from the other party to the contract. See id. at 838. A unilateral contract, on the other hand, consists of a promise by only one of the contracting parties; the other party's consideration is action or forbearance rather than a promise. 1 Arthur L. Corbin, Corbin on Contracts § 21 (1963). Thus, in the context of contract zoning, a unilateral contract describes two possible situations: Either a municipality promises to rezone in return for some action or forbearance by the other contracting party, or the other contracting party makes a promise in return for the municipality's act of rezoning. Cf. Kennedy, supra, at 837 (describing unilateral contract zoning only in terms of a promise by the other contracting party in return for the municipality's action of rezoning; not describing the converse situation). In comparison, conditional zoning is not contract zoning at all, because it does not involve a promise by either party. Rather, conditional zoning describes the situation in which a municipality rezones on condition that a landowner perform a certain act prior to, simultaneously with, or after the rezoning. Id. at 831. The absence of an enforceable promise by either party distinguishes conditional zoning from contract zoning. See id. In the present case, we address only the validity of contract zoning; we do not consider the propriety of conditional zoning.
Numerous courts have criticized contract zoning, declaring it invalid per se. See Judith W. Wegner, Moving Toward the Bargaining Table: Contract Zoning, Development Agreements, and the Theoretical Foundations of Government Land Use Deals, 65 N.C.L.Rev. 976, 982-83 (1987). While these courts have advanced several grounds for disapproving contract zoning, the most common rationale is that contract zoning is inherently flawed as a problematic blend of contract and police powers. Id. at 982. Their opinions typically condemn contract zoning as an illegal bargaining away or abrogation of the police power. See, e.g., Hartman v. Buckson, 467 A.2d 694, 699-700 (Del. Ch. 1983); Hartnett v. Austin, 93 So.2d 86, 89 (Fla. 1956) (en banc). As one commonly cited case states, Zoning is an exercise of the police power to serve the common good and general welfare. It is elementary that the legislative function may not be surrendered or curtailed by bargain or its exercise controlled by the considerations which enter into the law of contracts. V.F. Zahodiakin Eng'g Corp. v. Zoning Bd. of Adjustment, 8 N.J. 386, 86 A.2d 127, 131 (1952). We agree that in most situations contract zoning is illegal. However, we do not subscribe to a per se rule against all forms of contract zoning, nor does our rationale rest on the bargaining away or abrogation of the police power. Rather, we believe that contract zoning is illegal whenever it arises from a promise by a municipality to zone property in a certain manner, i.e., when a municipality is either a party to a bilateral contract to zone or when a municipality is a party to a unilateral contract in which the municipality promises to rezone in return for some action or forbearance by the other contracting party. A contract in which a municipality promises to zone property in a specified manner is illegal because, in making such a promise, a municipality preempts the power of the zoning authority to zone the property according to prescribed legislative procedures. Our statutes require notice and a public hearing prior to passage, amendment, supplement, or repeal of any zoning regulation. NMSA 1978, § 3-21-6(B) (Repl.Pamp. 1985). The statutes also grant to citizens and parties in interest the opportunity to be heard at the hearing. Id. By making a promise to zone before a zoning hearing occurs, a municipality denigrates the statutory process because it purports to commit itself to certain action before listening to the public's comments on that action. Enforcement of such a promise allows a municipality to circumvent established statutory requirements to the possible detriment of affected landowners and the community as a whole. See County of Ada v. Walter, 96 Idaho 630, 533 P.2d 1199, 1201 (1975) (oral agreement to allow mobile homes on property was invalid because it did not comply with county zoning ordinance); Midtown Properties, Inc. v. Township of Madison, 68 N.J. Super. 197, 172 A.2d 40, 45-46 (Ct.Law Div. 1961) (contract to zone illegal because it circumvented mandatory zoning procedures), aff'd, 78 N.J. Super. 471, 189 A.2d 226 (Ct.App.Div. 1963) (per curiam).
The foregoing analysis implies that one form of contract zoning is legal: a unilateral contract in which a party makes a promise in return for a municipality's act of rezoning. In this situation, the municipality makes no promise and there is no enforceable contract until the municipality acts to rezone the property. See 1 Corbin, supra, § 21, at 54. Because the municipality does not commit itself to any specified action before the zoning hearing, it does not circumvent statutory procedures or compromise the rights of affected persons. Cf. Kennedy, supra, at 837 (in a unilateral contract to zone, municipality makes no binding promise and there is no abrogation of the police power). Some courts have nonetheless condemned this form of contract zoning on the ground that the contracting party's promise provides improper motivation for the municipality's rezoning action. See, e.g., City of Knoxville v. Ambrister, 196 Tenn. 1, 263 S.W.2d 528, 530 (1953); see also Wegner, supra, at 979 n. 122 (The distinction between bilateral and unilateral agreements seems problematic on policy grounds, however, because even unilateral agreements can serve as an incentive to government action.). We do not find this reasoning persuasive. Private interests are inherent in any zoning matter; therefore, it is disingenuous to condemn a method of zoning because it benefits private interests in some way. Moreover, any potential misconduct that might occur through unilateral contract zoning may be corrected through judicial review if the action of the zoning authority is improper. See Singleterry v. City of Albuquerque, 96 N.M. 468, 472, 632 P.2d 345, 349 (1981) (reviewing court upholds decision of zoning authority if not fraudulent, arbitrary, or capricious); see also Kennedy, supra, at 834.