UNION MONTCLAIR HOUSING ASSOCIATES v. TOWNSHIP OF MONTCLAIR (2011)

Plaintiff Union Montclair Housing Associates (UMHA) appeals the January 29, 2010, order granting summary judgment to defendant.   UMHA entered into a fifty-year tax abatement agreement (Agreement) with defendant Township of Montclair (Township) in 1978, substituting plaintiff's payment of property taxes with an annual charge for receipt of “municipal services” based on a percentage of plaintiff's gross revenue.  “Municipal services” are not defined in the contract nor are they defined by statute.   When plaintiff and defendant entered into the Agreement, plaintiff paid a separate fee for water usage, but not for sewer usage.   In January 2006, defendant enacted an ordinance establishing a sewerage authority and requiring property owners to pay for sewer use and access, instead of including it in their tax bills.   Defendant sought to enforce this ordinance against plaintiff.   Plaintiff filed a complaint for breach of the Agreement, seeking a refund of all sewage payments made, with interest, as well as an injunction barring future billing of the sewage fee.   Both parties then moved for summary judgment, agreeing that no material facts were in dispute.   The court granted summary judgment in favor of the Township, dismissing plaintiff's complaint.

The trial judge found that “municipal services” consisted of any services currently provided to other tax-paying residents without a usage fee.   The court required plaintiff to pay the new sewer fee because other property owners in Montclair were paying it pursuant to the January 2006 ordinance.   After reviewing the record in light of the contentions advanced on appeal, we reverse.

We review a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46.  Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445–46 (2007).   Generally, we must “consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.”  Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995);  see also R. 4:46–2(c).  Further, a trial court's legal interpretation of the meaning of a contract is subject to de novo appellate review.   Fastenberg v. Prudential Ins. Co. of Am., 309 N.J.Super. 415, 420 (App.Div.1998).

The construction of a contract term is a question of law.  Bosshard v. Hackensack Univ. Med. Ctr., 345 N.J.Super. 78, 92 (App.Div.2001).   When courts are called upon to enforce contractual agreements, their main objective is to carry out the mutual intent of the parties.  Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 269 (2006).   Therefore, in “interpreting a contract, a court must try to ascertain the intention of the parties as revealed by the language used, the situation of the parties, the attendant circumstances, and the objects the parties were striving to attain.”  Celanese Ltd. v. Essex Cnty. Imp. Auth., 404 N.J.Super. 514, 528 (App.Div.2009).   Where there is ambiguity as to the meaning of a contractual term, however, the Supreme Court has stated that “courts will consider the parties' practical construction of the contract as evidence of their intention and as controlling weight in determining a contract's interpretation[.]”  Cnty. of Morris v. Fauver, 153 N.J. 80, 103 (1998).

The trial court relied on Ballantyne House Associates v. City of Newark, 269 N.J.Super.   322 (App.Div.1993), and Jersey City Sewerage Authority v. Housing Authority of Jersey City, 70 N.J.Super.   576 (Law.Div.1961), aff'd, 40 N.J. 145 (1963), to find that “municipal services” were those services included in other property owner's tax bills who did not have a tax abatement agreement with the Township.   In Ballantyne, we found that Newark breached a tax abatement agreement, similar to the one here, which was intended “to encourage and facilitate the construction of lower income housing.”   Ballantyne, supra, 296 N.J.Super. at 333.   After entering into the agreement, Newark passed an ordinance classifying the housing facilities as commercial, thereby justifying termination of garbage collection service to the housing complex and requiring the projects to pay a private vendor.   We found that if the municipality was permitted to terminate garbage collection, it “could eliminate or reduce various municipal services to plaintiffs while continuing to provide those services to similar tax-paying facilities.”  Id. at 333.   Here, the trial court emphasized, that the “municipal services” provided to plaintiff need only be those same services provided to other tax-payers.   The trial court focused on the need to treat everyone in Montclair equally regardless of whether or not they have a tax abatement agreement with the Township.

Although the decision was ultimately clarified by the Supreme Court, the trial court relied on the Law Division's decision in Jersey City, supra, holding that a municipality did not breach a tax abatement agreement with a housing authority, which expressly provided for sewage services, by installing a new sewage system and charging for its use while also providing sewage services for no additional charge by means of the old system in existence when the contract was made.   The trial court relied on the following comments of the Law Division in Jersey City, supra, 70 N.J.Super. at 583:

The court acknowledges the fact that an increase in expenses will tend to cause an increase in rentals but to impose this additional financial burden upon the other citizens of the community was neither the legislative intent nor the intent of the City of Jersey City in executing the contract with the Housing Authority.

[Ibid.]

The trial court then found that if UMHA did not have to pay the sewer fee, other residents would incur additional expenses “in order to subsidize the cost of living for the residents of plaintiff's property.   And that doesn't seem to be fair and equitable.”

Although the Supreme Court permitted the extra charge for sewer services in Jersey City, it based its reasoning in part on the fact that the services the housing authority received pursuant to the tax abatement agreement did not decrease.  Jersey City, supra, 40 N.J. at 157.   The Court noted that the old sewer system still existed in tandem with the new system for which a new fee was collected.   Further, Jersey City, was decided more than ten years before the Supreme Court's Mount Laurel decisions, which were ultimately codified in the Fair Housing Act (FHA), N.J.S.A. 52:27D–301 to –329.   See S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mount Laurel, 67 N.J. 151 (1975) (Mount Laurel I);  S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mount Laurel, 92 N.J. 158 (1983) (Mount Laurel II ).   The Court has interpreted its decision in Mount Laurel I as holding, “that developing municipalities in New Jersey are constitutionally required to provide a realistic opportunity for the development of low and moderate income housing.”   Bi–Cnty.   Dev. of Clinton v. Borough of High Bridge, 175 N.J. 302, 320 (2002).   The Court expanded on this requirement in Mount Laurel II, by “impos[ing] an affirmative obligation on every municipality to remove unnecessary cost-producing requirements and restrictions that are barriers to the construction of their fair share of lower income housing.”  Id. at 320 (citing Mount Laurel II, supra, 92 N.J. at 259.)

Our decision in Ballantyne relies on the Mount Laurel doctrine and should not be read so narrowly as to only prohibit municipalities from terminating services to low-income housing authorities if they continue to provide the same services to other taxpayers.   We disapproved of Newark's conduct in Ballantyne in large part because it would “increas[e] the operating costs of limited dividend housing corporations and associations, which could result in rent increases to lower income tenants and undermine the financial viability of lower income housing projects.”  Ballantyne, supra, 269 N.J. at 333.   Further, we refused to grant the municipality authority to alter the agreement in a way that would disadvantage the housing authority absent express contractual authority.  Ibid.

If the Township chose to raise property taxes to increase available revenue, the Agreement would prevent an increase in plaintiff's obligation.   Section 269–25 of the Ordinances of the Township of Montclair, adopted June 13, 2006, provides:

All charges payable to the Township for connection to or use of the Township sewage system and all charges for connection with and use of the township sewers and drains shall accrue interest from the time they become due at the same rate as taxes upon real estate in the Township and shall be a lien upon the premises connected until paid, and the Township shall have the same remedies for collection thereof, with interest, costs and penalties, as it has by law for the collection of taxes upon real estate.

[Montclair, N.J., Ordinances of the Township of Montclair § 269–25.]

This ordinance specifies that the Township will enforce the collection of sewage fees in the same way as it enforces the collection of property taxes.   Pursuant to the Agreement, plaintiff's property taxes are calculated as a percentage of its gross revenue.   The distinction between a fee and a tax in these factual circumstances is minimal.   Contrary to the Agreement, the sewage fee has the practical effect of increasing plaintiff's property tax.

By choosing to enact an ordinance creating a sewer authority authorized to charge sewer fees, without providing a new sewer system, the town has freed up tax revenue previously used to pay for sewer service.   When the fifty-year tax abatement agreement was signed by the parties in 1978, sewer service was included.   That sewer service has not changed.   Pursuant to the ordinance, now it is being paid by taxpayers in a different modality.

The sewer fees charged were $15,230.50 for 2006, $16,476.21 for 2007 and $21,498.16 for 2008.   UMHA is a 126–unit affordable housing project with 80 of the units occupied by people receiving federal rent subsidies pursuant to Section 8 housing assistance.   See Pasquince v. Brighton Arms Apartments, 378 N.J.Super. 588, 591 n.1 (App.Div.2005) (explaining the Section 8 voucher program).   Plaintiff paid its account balances for 2006, 2007 and 2008 with interest, with a check from its reserve and replacement escrow account ¹ in the amount of $53,204.87.   Plaintiff paid sewer fees as of October 28, 2009, for 2009 in the amount of $17,459.23 with a check from its operating account.   Plaintiff indicates that it has continued to make sewage payments pending the resolution of this litigation.

We find that requiring plaintiff to pay a sewage fee in addition to its negotiated tax responsibility without providing any change or improvement in services violates the Agreement.   The ordinance's practical effect on plaintiff is the unilateral imposition of an increase in costs with no change in services.

Reversed and remanded for the entry of an order granting summary judgment to plaintiff.

FOOTNOTES

FN1. Plaintiff's escrow account is governed by regulations established by the New Jersey Housing and Mortgage Finance Agency (NJHMFA).   Plaintiff indicates it is required to set aside amounts for the replacement of property and other major project expenditures and that it must obtain approval from the NJHMFA before making any expenditure out of the escrow account..  FN1. Plaintiff's escrow account is governed by regulations established by the New Jersey Housing and Mortgage Finance Agency (NJHMFA).   Plaintiff indicates it is required to set aside amounts for the replacement of property and other major project expenditures and that it must obtain approval from the NJHMFA before making any expenditure out of the escrow account.

PER CURIAM