Township of Middletown v. Simon

Justice RIVERA-SOTO,

concurring in part and dissenting in part.

Although the majority’s view reaffirming our law of dedication is obviously correct, ante at 239-42, 937 A.2d at 956-57, a municipality nevertheless must be restrained by the doctrine of equitable estoppel when it engages in a woefully belated attempt to accept a now seventy-eight year old dedication of one of fifty-seven subdivision lots while, in the interim, publicly representing that lot as one unencumbered by any dedication. Therefore, the judgment of the Appellate Division should be reversed, and the judgment of the Chancery Division dismissing the municipality’s declaratory judgment action seeking title to the property should be reinstated. Because the majority does not reach that result, I respectfully dissent.

I.

In large measure, one cannot quarrel with the even-handed factual presentation made by the majority. There are, however, a few salient facts that warrant focused attention.

The majority correctly points out that, during the pendency of a tax sale certificate foreclosure action brought by defendant (then *247plaintiff) Richard Simon against the record title holders in 2000, counsel for the then-nonparty but now-plaintiff Township of Mid-dletown wrote to Simon’s counsel, raising the question of whether the lot at issue was dedicated for use as a park and inquiring as to a possible settlement. Simon’s response was direct and unequivocal: the trial court already had rejected the claim that the lot was dedicated property and, hence, Simon had no interest in exploring any settlement. The Township’s subsequent and lengthy silence in the face of Simon’s response was deafening and, in the end, condemning.

Despite that representation by Simon, the Township made no effort to intervene in the 2000 tax sale foreclosure action in order to press its claim to the lot. Even more tellingly, as the majority correctly notes, no one appealed the trial court’s final judgment of foreclosure in Simon’s favor in the 2000 tax sale certificate foreclosure action. The Township’s sole response came a year later, when it “request[ed] that Simon consider the sale of the Park lot to the Township.” Ante at 235, 937 A.2d at 953. Again, Simon demurred, this time because Simon already had contracted with a buyer for the lot.

The Township’s historical handling of this lot is entirely inconsistent with the position it now advances. It treated the lot as privately owned; it taxed the lot for any number of years; it sold tax sale certificates to recoup the unpaid taxes on the lot; it accepted the payment of current real estate taxes on the lot from Simon; it informally asserted a claim to the lot and was told that the court in the 2000 tax sale certificate foreclosure action had determined that the Township had no title interest in the lot; it failed to intervene in that action to assert the title claims it now asserts; it failed to appeal that court’s final judgment of foreclosure issuing title to Simon; and it again made an overture to purchase the lot from Simon and was rejected because the lot was already subject to an agreement of sale to a third party. Most importantly, the Township acted in a manner utterly and irretrievably inconsistent with its present claims: it issued a building *248permit for this lot that authorized private construction on it, a use clearly anathema to the Township’s tardy assertion that the lot had been dedicated exclusively for use as a park.1

Finally, although unspoken in the majority’s recitation of the facts, it is important to focus on the inescapable conclusion that the Township’s present declaratory judgment action was not the result of its own volition. After all, it had consistently and unalterably held the view that the lot was privately owned, had been properly taxed, had been properly the subject of Township-issued tax sale certificates, had been properly the subject of a foreclosure action in which the Township had no interest, and that title to the lot properly had passed, by judicial judgment, to Simon. The Township’s present declaratory judgment action is not one of a wronged party; it is the product of public pressure resulting from the hue and cry raised by the neighbors to the lot, two of whom inteiwened as party-plaintiffs.

*249II.

As an overarching proposition, it is fitting and proper to sustain a municipality’s right to accept the dedication of realty for the benefit of its citizens. It has long been the rule that a dedication — “the permanent devotion of private property to a use that concerns the public in its municipal character,” Black v. Central R.R. Co., 85 N.J.L. 197, 202, 89 A. 24 (E. & A.1913) — is not transitory. It also has long been the rule in this State that if “there is a dedication ... to the public ... such dedication continues and cannot be revoked except by consent of the municipality.” Highway Holding Co. v. Yara Engineering Corp., 22 N.J. 119, 125-26, 123 A.2d 511 (1956) (citations omitted). Accord Englander v. W. Orange Twp., 224 N.J.Super. 182, 189, 539 A.2d 1271 (App.Div.1988) (explaining that “the fact that the land has never been formally accepted (by the enactment of an ordinance) ... by the municipality[ ] is inconsequential because such dedication is irrevocable except by proper official municipal action” (citations and footnote omitted)); Velasco v. Goldman Builders, Inc., 93 N.J.Super. 123, 134, 225 A.2d 148 (App.Div.1966) (noting that, although a “dedication may never be accepted ... the power of acceptance continues indefinitely in the public authorities until such time as they reject or vacate the dedicated lands by official municipal legislative action” (citations omitted)).

In the end, however, that conclusion and the reasoning that undergirds it are irrelevant here. No doubt, the acts of the original grantor in 1929 were sufficient to “dedicate” this lot as parkland for public purposes. Moreover, although the Township never formally accepted or rejected that dedication in a timely manner, the cloud of dedication nevertheless hovered over that lot. The question presented, then, is not whether the lot was dedicated to the Township or whether the Township accepted or rejected that dedication. The true question here is whether the Township acted in a manner sufficiently inconsistent with the character of the lot as a public park to invoke the doctrine of equitable estoppel *250and thus bar the Township’s belated attempt to accept the dedication.

III.

The doctrine of equitable estoppel also is of long-standing. We have explained that “[t]he essential principle of the policy of [equitable] estoppel ... is that one may, by voluntary conduct, be precluded from taking a course of action that would work injustice and wrong to one who with good reason and in good faith has relied upon such conduct.” Summer Cottagers’ Ass’n of Cape May v. City of Cape May, 19 N.J. 493, 503-04, 117 A.2d 585 (1955). Stated differently, “to establish equitable estoppel, plaintiffs must show that defendant engaged in conduct, either intentionally or under circumstances that induced reliance, and that plaintiffs acted or changed their position to their detriment.” Knorr v. Smeal, 178 N.J. 169, 178, 836 A.2d 794 (2003) (citation omitted). See also Heuer v. Heuer, 152 N.J. 226, 237, 704 A.2d 913 (1998) (defining equitable estoppel as “the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed ... as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse .... ” (citations and internal quotation marks omitted)).

Ironically, in a case involving this same Township, we held that although “[e]quitable estoppel is rarely invoked against a governmental entity[,] ... equitable estoppel will be applied in the appropriate circumstances unless the application would prejudice essential governmental functions.” Middletown Twp. Policemen’s Benevolent Ass’n Local No. 124 v. Twp. of Middletown, 162 N.J. 361, 367, 744 A.2d 649 (2000) (citations and internal quotation marks omitted). We explained that “before an evaluation of the equitable considerations in applying equitable estoppel [against a governmental entity] may take place, an examination of the nature of the governmental action is required.” Id. at 368, 744 A.2d 649 *251(citation omitted). In doing so, we distinguished between “whether the conduct is ultra vires in the primary sense, or ultra vires in the secondary sense[,]” ibid., that is, we acknowledged

a distinction between an act utterly beyond the jurisdiction of a municipal corporation and the irregular exercise of a basic power under the legislative grant in matters not in themselves jurisdictional. The former are ultra vires in the primary sense and void; the latter, ultra vires only in a secondary sense which does not preclude ratification or the application of the doctrine of estoppel in the interest of equity and essential justice.
[Ibid. (quoting Skulski v. Nolan, 68 N.J. 179, 198, 343 A.2d 721 (1975) (citation and internal quotation marks omitted)).]

It cannot be a matter of serious contest whether the Township’s actions here were anything other than ultra vires in the secondary sense: the Township clearly had the power to accept the dedication of the lot, but it did not. In that basic context — and, again, involving this same Township — we have held that “[ajctions that are ultra vires in the secondary sense will permit the application of estoppel.” Ibid.

A straightforward application of the principles of equitable estoppel inexorably yields the conclusion that the Township must be bound to act in a manner consistent with how it acted until it responded to public pressure. Up to that point, the Township treated this lot as private property: it maintained the lot on the rolls of taxable property; it taxed it; it sold tax sale certificates to recoup the outstanding taxes on the lot; although on notice, it failed to assert its interests in the lot and to intervene in a foreclosure proceeding, the sole purpose of which was to vest clear and marketable title in Simon; it allowed the entry of a judicial judgment of foreclosure concerning the lot in Simon’s favor; it failed to appeal that judgment; and it issued a building permit allowing construction on that lot.2 Thus, the Township’s actions *252abundantly satisfy the doctrine’s first prong: that the Township “engaged in conduct, either intentionally or under circumstances that induced reliance[.]” Knorr, supra, 178 N.J. at 178, 836 A.2d 794.

The same result obtains in respect of the doctrine’s second prong of whether Simon, in reasonable reliance on the Township’s actions, “acted or changed [his] position to [his] detriment.” Ibid. Again, the record is consistent, clear and undisputed: Simon purchased the tax sale certificates sold by the Township; he paid and has continued to pay the intervening real estate taxes; he timely sought judgment of foreclosure; he successfully litigated whether the Township had a continuing or residual interest in the lot; and he sold the lot to a third party in an arm’s length transaction. In these multiple efforts, Simon obviously expended considerable time, effort and money in reasonable reliance on the Township’s actions.

In sum, the Township’s failure to accept the dedication of the lot was ultra vires in the secondary sense. Also, the Township acted in a manner that induced reliance in Simon as to whether the lot was encumbered by any such dedication. Finally, Simon reasonably relied to his detriment on the Township’s multiple and consistent representations concerning Simon’s ability to acquire unencumbered fee title to the lot. That pattern presents a textbook example of when the doctrine of equitable estoppel should be invoked to rein in capricious governmental actions. Because the majority does not do so, I respectfully dissent.3

*253IV.

The majority does remand the cause for the fixing of an appropriate remedy. The majority concludes that “the acceptance of the Park lot as dedicated property by the Township without a corresponding reimbursement to [Simon] would be an unfair and harsh result that would unjustly enrich the Township.” Ante at 246, 937 A.2d at 960. For that reason, the majority binds the Township to its original prayer for relief and remands the matter “to fix the amount [the Township] should reimburse [Simon].” Id. at 246, 937 A.2d at 960. Again, I cannot agree.

In light of the Township’s actions, the only fair and proper remedy is payment to Simon for that which the Township is taking from Simon: the fair market value of the property as improved. If, in the context of its long-standing treatment of this lot, the Township had proceeded along the legally and equitably correct course — under the Eminent Domain Act of 1971, N.J.S.A 20:3-1 to -47 — the Township would have had to condemn the lot for the creation and maintenance of a park, that is, “to take private property for a public purpose under the power of eminent domain[,]” N.J.S.A. 20:3-2(a), in exchange for “the fair market value of such property.” N.J.S.A. 20:3-6. Those damages are far in excess of the miserly restitution damages allowed by the majority.4 Thus, in respect of the remedy afforded by the majority, again I respectfully dissent.

*254V.

For the foregoing reasons, I must respectfully concur in part and dissent in part.

For affirmance in part/reversal in part/remand/ment — Chief JUSTICE RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE, and HOENS — 6. For concurrence in parti dissent in part — Justice RIVERA-SOTO — 1.

The majority correctly notes that Simon did not own the property when this building permit was issued. However, it misapplies that fact to discount the import of the issuance of the building permit, an overt act by the Township. According to the majority, ”[b]ecause [Simon] did not own the property in 1996 when the permit was issued, we find no basis to use that as a factor in considering [Simon's] equitable estoppel argument.” Ante at 239 n. 1, 937 A.2d at 956 n. 1.

That focus is misplaced. The issues here are linear: first, how did the Township overtly treat the property and, second, did Simon reasonably rely on those representations? Couched correctly, then, whether Simon owned the property when the building permit was issued is, simply put, irrelevant. As a threshold matter, what are relevant in the equitable estoppel context are the Township’s — and not Simon's — acts. Among those acts, the Township indisputably issued a building permit, an act entirely contrary to the Township’s assertion that it retained a seventy-plus year right of dedication to a property for which it authorized construction by a private party. Once those representations are ascertained, the focus shifts to Simon’s reliance on those representations and whether that reliance was reasonable. In this regard the record also is clear: the issuance of this building permit loomed large when Simon conducted a lien search of the property before he acquired title by foreclosure. In short, the Township, in word and deed, consistently and unequivocally represented that the property was unencumbered by a dedication and it is to those representations that the Township should be bound.

The Township argues that, in respect of the tax sale certification process, its failure to treat this lot as encumbered by a dedication was of no moment. Even if one accepts that proposition — and one cannot — the Township cannot rebut the commonsense notion advanced by Simon: that the issuance of "a private building permit with respect to the [lot constitutes] an act completely incompatible with any notion that the [lot] would remain vacant as a 'park.' "

It is plainly impractical to conclude that a businessman such as Simon— whose acumen and expertise in the arena of tax sale certificates is well known to this Court, see, e.g., Simon v. Cronecker, 189 N.J. 304, 915 A.2d 489 (2007); Simon v. Rando, 189 N.J. 339, 915 A.2d 509 (2007) — would exert all of the efforts he did if the Township were to retain the right to simply pull the rug out from under him at any time by accepting the dedication of the lot. Yet, that is the very conclusion advanced by the majority. Ante at 241, 937 A.2d at 957. In light of the majority’s conclusion that Simon was an "innocent partly]” who "acted in good faith[,]” ante at 245, 937 A.2d at 959-60, this presents another reason I cannot join in the majority’s analysis.

As a remedy, restitution is woefully insufficient in these circumstances. As a matter of law, all restitution does is to "restore[] the innocent party to the condition he or she occupied before the contract was executed.” Totaro, Duffy, Cannova and Co., L.L.C. v. Lane, Middleton & Co., L.L.C., 191 N.J. 1, 12, 921 A.2d 1100 (2007). See also Mt. Laurel Twp. v. Mi-Pro Homes, LLC, 188 N.J. 531, 538 n. 2, 910 A.2d 617 (2006) (Rivera-Soto, J., dissenting) (explaining that restitution is limited to "an award of compensatory damages [that] requires the full restoration or 'restitution' ... of all payments made.” (quoting Material Damage Adjustment Corp. v. Open MRI of Fairview, 352 N.J.Super. 216, 232, 799 A.2d 731 (Law Div.2002) (internal quotation marks omitted))). Yet, requiring that the Township only pay restitution damages for the Township's undisputed wrongful acts rewards the Township for its dilatory and inconstant behavior; it is required *254to pay only that which Simon expended, thereby effectively confiscating without just compensation the efforts Simon brought to bear in this enterprise.