Article

Note: Frank Craig (Developer/Applicant) applied to Woolwich Township (Local Government) for a minor subdivision approval to develop a parcel of land into three residential single-family homes. Local Government approved Contractor/Applicant’s submission on the condition that Contractor/Applicant install sidewalks to connect the homes and submit the location of the sidewalks for advanced review and approval.

To assure the completion of the improvements, Developer/Applicant posted a standby letter of credit. The letter of credit was issued by Parke Bank (Lender) as a USD 25,380.00 performance bond. On 28 December 2009, Contractor/Applicant requested to the Local Government that the amount of the bond be reduced. Local Government’s engineers inspected the development and recommended the bond be reduced to USD 6,768.00. Local Government then approved the reduction request. Contractor/Applicant testified in front of Local Government that the required seventy linear feet of sidewalk was completed and the remainder could not be extended because of natural physical obstructions such as a creek and the need to preserve the heavily wooded area.

The Lender later sold the parcel to another owner when Developer/Applicant’s interest in the property was foreclosed. The development was not continued.

When Developer/Applicant subsequently requested Local Government to release the performance bond. Lender then inquired into any outstanding improvements and Local Government conducted a new inspection of the property.

The new report in 2014 stated approximately 1,520 square feet of sidewalk was uncompleted, with an estimated cost of completion of USD 14,592.00. As a result, Local Government denied Developer/Applicant’s request, stating that the required improvements were incomplete.

Developer/Applicant then sued Local Government for the release of the remaining performance guarantee, alleging the required sidewalk was fully installed. The Superior Court of New Jersey, Law Division, found that the project was incomplete. On appeal, the New Jersey Superior Court, Lihotz J. and O’Connor J., reversed the trial court decision. It found that the sidewalk project was completed and the performance bond could be released.

At the trial court, Developer/Applicant had argued that he no longer had legal authority to enter the parcel to make additional installments, that Local Government had not called the bond to undertake improvements itself, that the change in position to insist on an additional length of sidewalk was “arbitrary” and “unnecessary,” and that if Local Government required additional improvements a bond should be sought from the current owner as successor developer.

The trial court judge concluded that the sidewalk was incomplete and cited the Municipal Land Use Law as protecting Local Government’s ability to complete a project when developer fails to do so. On appeal, Developer/Applicant sought reversal on grounds that the trial court judge erroneously made factual findings not supported by the record.

On appeal, Applicant claimed the trial court judge had failed to recognize that the final approved development plan only contained an easement. The easement did not require a sidewalk across the entire frontage of the road and Developer/Applicant claimed the sidewalk was permitted to end at the wooded area to preserve the trees. The easement was reflected in the 2009 report itemizing a required 291 square footage of sidewalk. The appellate court ruled that, although 291 square feet is not quite 73 linear feet, there was no support showing the sidewalk must extend the entire length of the road frontage.

The appellate court found that Local Government’s reliance on the 2014 engineer report was not persuasive because it did not address determinations made by engineers in 2006 and 2009, and making the change in position from the 2006 and 2008 reports was arbitrary without providing an explanation in the 2014 report. The appellate court determined the municipal action in denying the release of the bond was arbitrary and unreasonable.

[AWL/JMC]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.