Davis Enterprises v. Karpf

523 A.2d 137, 105 N.J. 476, 1987 N.J. LEXIS 290

• Court: Supreme Court of New Jersey
• Decided: March 31, 1987
• Status: Published

Opinions

The opinion of the Court was delivered by

POLLOCK, Justice.

This appeal presents the question whether a “hardship” variance sought pursuant to N.J.S.A. 40:55D-70(c) must be denied because an adjoining property owner offers to purchase the property at fair market value. Defendant, Planning Board of the Township of Cherry Hill (the Board), determined that the offer did not compel the denial of the variance and that the offer was one factor, among others, to be considered in determining whether to grant a variance to defendants Richard and Jack Karpf, who were purchasers under contract. The Law Division ruled, however, that the variance would be defeated if the adjoining property owner, plaintiff, Davis Enterprises (Davis), offered to purchase the property for a price equal to that offered by the Karpfs. In an unreported opinion, the Appellate Division affirmed. We granted certification, 103 N.J. 479 (1986), and now reverse the judgment of the Appellate Division.

-I-

In 1939, Mrs. Schallenhammer and her late husband purchased the subject property, which included the existing house and garage. At no time did Mrs. Schallenhammer, who conveyed the property to the Karpfs during the pendency of the appeal to this Court, increase or decrease the size of the lot. Initially, the Sehallenhammers operated a tap room in the house until they lost their liquor license during World War II because, according to Mrs. Schallenhammer, her husband was not an American citizen. Thereafter, until 1973, they conducted an upholstery business in the house, following which their son operated a tool and dye shop in the garage until -1975. Throughout the entire time of her ownership, Mrs. Schallenhammer used the house as her residence.

The property in question is rectangular in shape and abuts a traffic circle at the intersection of Coles Avenue and Route 38 in Cherry Hill. It is located in a highway business (B-2) zone, and is bordered on two sides by property owned by Davis. The property is surrounded by an office and business complex, a gas station, a bank, a fire hall, and a diner. Jack Karpf, a lawyer, and his brother Richard, a commercial realtor, proposed to use the house as a small real estate and law office, a use that is permitted in the B-2 zone.

Although the proposed use is permitted, the lot is undersized and the location of the house on it is such that the Karpfs applied to the Board, pursuant to N.J.S.A. 40:55D-60(a), for site plan approval and for certain variances:

SECTION SUBJECT ORDINANCE REQUIREMENT VARIANCE REQUESTED

1803 Lot size 20,000 sq. ft. 6,571 sq. ft.

1803 Frontage 120' 45.87'

1803 Front setback 30' 14'

1803 Side setback 10' 2'

1803 Side aggregate 20' 12.8'

2401.12 Driveway width 25' 10.8'

2403.20 Parking spaces 19 6

1810 Open space 25% 13%.

The Board proceedings are colored by animosity between Davis and Mrs. Schallenhammer, apparently because Davis tried to thwart her efforts to sell the property. A proposed sale in 1982 to Philip Kogan for $50,000, which was conditioned upon obtaining certain variances, collapsed in the face of opposition by Davis. An offer for $60,000 from another purchaser was withdrawn, apparently because of the prospect of litigation with Davis. In 1982, after the Kogan sale fell through, Mrs. Schallenhammer rejected offers from Davis for $15,000 and then $30,000. Davis then increased its offer to $40,000, contingent on the removal of the existing structure and the construction of a new 3,000 square foot office building. Although Mrs. Schallenhammer said through a realtor that she would accept $45,000, before Davis responded, she entered into a contract of sale with Richard Karpf for $45,000, which was contingent upon site plan approval and necessary variances. Subsequently, Davis offered her $45,000 without conditions. Davis proposed to raze not only the existing structure but also, on the expiration of a five-year lease, a gas station on a contiguous property. According to Davis, the consolidated lots “would almost equal” the required minimum lot size, and he proposed to construct a yet undesigned building on that lot.

At the conclusion of the hearing, the Board granted site plan approval and the requested variances, finding that the property would be subject to exceptional or undue hardship if the variance were not granted (the “positive criteria”) and that the variance would not result in a substantial detriment to the public good or the zoning plan (the “negative criteria”). N.J.S.A. 40:55D-70(c). Although the Board considered the Davis offer as a relevant factor, it found that “even while considering this offer the board determines that the applicant has the necessary hardship which allows the granting of the requested variances.”

The Law Division sustained the Board’s finding as to both criteria, but concluded that the variance should have been granted on the condition that Davis be permitted to purchase the property at his offering price of $45,000, the payment of which would eliminate the hardship to the property. Accordingly, the court imposed a condition upon the grant that the variances were to become null and void if Davis made an unconditional offer to purchase the property for $45,000 within 30 days.

In affirming, the Appellate Division ruled that “[i]f the property owner refuses to sell at a ‘fair and reasonable price,’ he would not be considered to have suffered undue hardship.” Finding that Davis’s unconditional offer of $45,000 was “fair and reasonable,” the court declared the variances to be null and void.

-II-

The crux of this case concerns the relationship between the offer of an adjoining owner to purchase the property in question for fair market value and the finding that “the strict application” of the zoning requirements would result in “peculiar and exceptional difficulties to, or exceptional or undue harm upon, the developer of the property.” N.J.S.A. 40:55D-70(c)(1). In short, does an adjoining owner’s offer to purchase prevent a planning board from finding that the positive criteria have been satisfied?

Underlying the request for a hardship variance is the premise that without such relief the property will be zoned into inutility. See Commons v. Westwood Zoning Bd. of Adjustment, 81 N.J. 597, 607 (1980). In balancing the interests of the property owner, adjacent owners, and the municipality, a board may impose reasonable conditions on the grant of a variance. Nash v. Board of Adjustment of Morris Township, 96 N.J. 97, 105 (1984); 6 P. Rohan, Zoning and Land Use Controls § 43.03(1), at 43-41 (1985). One such condition, described as a conditional variance, “affords the adjoining property owners the opportunity to purchase the property for its fair market value.” Nash v. Board of Adjustment of Morris Township, supra, 96 N.J. at 106; see also Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, 78 N.J. 544, 555 (1979) (“[i]t would be consonant with the interests of all parties to deny a variance conditioned on the purchase of the land by adjoining owners at a fair price”); Gougeon v. Borough of Stone Harbor, 52 N.J. 212, 224 (1968) (Gougeon I) (a party may “in the discretion of the Board be denied the permission to build his house on condition that” an adjoining property owner makes an offer to purchase the land at a fair market price). A conditional variance recognizes that adjacent owners have a heightened interest in the sale and development of adjoining property and that the underlying purpose of zoning is to encourage the development of property in accordance with relevant land use requirements. See Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, supra, 78 N.J. at 555-56. Conditioning the grant of a variance on an adjacent owner’s offer to purchase prevents the strict application of an ordinance from zoning property into inutility, while avoiding the possible intrusion of substandard lots or structures into a neighborhood. See id. at 556.

In its discretion, a board may recognize an offer to purchase the property at fair market value by imposing on the grant of a variance a condition subsequent for the benefit of an adjoining owner. Nash v. Board of Adjustment of Morris Township, supra, 96 N.J. at 102. Alternatively, such an offer, if not accepted, may be viewed as eliminating the hardship, thereby leading to the denial of the variance. Id. at 106; Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, supra, 78 N.J. at 555-56; Gougeon I, supra, 52 N.J. at 224. Which alternative to follow, if either, is a matter that is ultimately committed to the sound discretion of the board. In either event, the offer does not become relevant to the board’s decision until the applicant has established that he or she is otherwise entitled to the variance. See Nash v. Board of Adjustment of Morris Township, supra, 96 N.J. at 109.

Hence, a fair market value offer to purchase the property by an adjoining owner is a relevant, but not dispositive, consideration in determining whether hardship exists. See Gougeon v. Board of Adjustment of Stone Harbor, 54 N.J. (1969) (Gougeon II) (an adjoining property owner’s fair market value offer by itself does not warrant a denial of grant of variance); cf. Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, supra, 78 N.J. at 555 (saleability of land is only another yardstick by which undue hardship is to be measured); 3 R. Anderson, American Law of Zoning § 18.54, at 292 (2d ed. 1977) (“[a] land owner has the right to develop his land; he is not required to sell” his non-conforming property just because he received an offer to purchase). Courts in other jurisdictions have also approved hardship variances notwithstanding that the properly owner received an offer to purchase from a neighbor. See, e.g., Marchi v. Town of Scarborough, 511 A.2d 1071, 1073 (Me.1986) (“[t]he fact that the property has a potential for sale to an abutting owner” does not preclude granting of hardship variance); Macchia v. Board of Appeals, 7 Msc.2d 763, 764, 164 N.Y.S.2d 463, 465 (Sup.Ct.1957) (refusal of reasonable offer from adjoining property owner was improper ground for denying application for building permit and variance because an administrative board cannot constitutionally compel a property owner to sell his property); cf. Kent County Land Co. v. Zoning Bd. of Review, 10 R.I. 418, — , 216 A.2d 511, 513 (1966) (an offer to purchase by an objector does not preclude granting of hardship variance).

In determining whether to grant a hardship variance in the face of such an offer, we have stated that we never “intended that existence of such an offer, of itself, would warrant denial of relief. [Gougeon I, supra,) 52 N.J. at 224. It was intended that such an offer would constitute a circumstance to be considered in the application of the Board’s statutory discretion to the whole case.” Gougeon II, supra, 54 N.J. at 148-49. The import of our decisions is that an offer to purchase by an adjacent owner authorizes, but does not require, the denial of a hardship variance. See, e.g., Commons v. Westwood Zoning Bd. of Adjustment, supra, 81 N.J. at 606-08 (“[e]ndeavors to sell the property to the adjoining landowners, the negotiations between and among the parties, and the reasonableness of the prices demanded and offered are also relevant considerations”); Harrington Glen, Inc. v. Leonia Bd. of Adjustment, 52 N.J. 22, 30-31 (1968) (willingness of neighbor or interested person to buy at fair price may be considered in determining hardship); see also Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, supra, 78 N.J. at 561 (in its discretion, board may consider propriety of variance conditioned on selling property to adjoining property owner). Notwithstanding the offer, a board may still grant the requested relief. Gougeon II, supra, 54 N.J. at 148-49.

A conditional variance is strong medicine. It subordinates an owner’s ability to use his or her property to another’s desire to purchase it. See Nash v. Board of Adjustment of Morris Township, supra, 96 N.J. at 109. Accordingly, we have limited our recognition of conditional variances to vacant residential land that requires a variance before the property is useable. See, e.g., id. at 103-05 (an isolated, undersized, vacant lot in a single-family detached residential zone); Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, supra, 78 N.J. at 548-50 (a vacant lot in a residential zone); Gougeon I, supra, 52 N.J. at 216-18 (an undeveloped lot in a residential zone). In those cases, the only alternative to granting an unconditional variance would have been zoning the property into inutility, a result that would be tantamount to taking the property. See Commons v. Westwood Zoning Bd. of Adjustment, supra, 81 N.J. at 607; Harrington Glen, Inc. v. Leonia Bd. of Adjustment, supra, 52 N.J. at 33. The conditional variances in those cases would not have deprived the owners of the right to continue to use previously developed properties. To date, we have not recognized a conditional variance when the property is a developed commercial lot. Furthermore, we have never required the owner of a developed lot to sell that property to an adjoining owner when the owner seeks only to construct an addition to an existing dwelling. Requiring a homeowner to sell to an adjoining owner as a condition of the grant of a hardship variance would generally seem to be unwarranted. Assuming, moreover, that the existing house were to remain in place, forcing the owner to sell to a neighbor who intended to retain the house would not serve any apparent land use purpose.

Arguably, it could be better land use regulation to eliminate developed pre-existing sub-standard lots, such as the property in question, that do not conform to current zoning requirements. The proper scope of judicial review, however, is not to suggest a decision that may be better than the one made by the board of adjustment or planning board, but to determine whether the board could reasonably have reached its decision. Kramer v. Board of Adjustment, Sea Girt, 45 N.J. 268, 285 (1965); Kessler v. Bowker, 174 N.J.Super. 478, 485 (App.Div. 1979), certif. denied, 85 N.J. 99 (1980). Such a decision is presumed valid and should not be set aside unless it is arbitrary, capricious, or unreasonable. Kessler v. Bowker, supra, 174 N.J.Super. at 486; accord Kramer v. Board of Adjustment, Sea Girt, supra, 45 N.J. at 285.

-III-

In the present case, the Board discussed the effect of Davis’s offer to purchase the property and, in the course of the hearing, consulted its attorney, who advised that the offer was a factor that should guide, but not predetermine, the exercise of the Board’s discretion. After considering the offer, the Board found that the existing house together with the size and shape of the lot created the hardship necessary to justify the requested variances. In concluding that the grant of the hardship variance would become null and void if Davis met the condition of making a matching offer, the lower courts erred. They should have accorded the presumption of validity that attaches to the decision of a planning board or board of adjustment and, in the absence of a showing that the decision was arbitrary, capricious, or unreasonable, upheld the Board’s decision.

Before concluding, we recognize a question exists whether all the requested variances were required. Karpf sought lot size and frontage variances as well as front and side setback, side aggregate, and open space requirements, which result from the location of the existing structure on the lot. No variance was sought to convert the nonconforming residential use to a commercial use. See Foster-Hyatt Group v. West Caldwell Planning Bd., 174 N.J.Super. 10, 12 (App.Div.1980) (distinguishing a nonconforming use from a nonconforming lot or structure). The size and configuration of the property as well as the location of the house have not changed since 1989, the date of purchase by Mr. and Mrs. Schallenhammer. Unfortunately, the record does not disclose whether the lot and house antedate relevant zoning regulations. The pre-existence of the house could be important because N.J.S.A. 40:55D-68 provides in relevant part: “Any nonconforming use or structure existing at the time of the passage of an ordinance may be continued upon the lot or in the structure so occupied and any such structure may be restored or repaired in the event of partial destruction thereof.” Although the statute does not protect pre-existing nonconforming lots, as distinguished from structures, see N.J. S.A. 40.-55D-5, the zoning ordinance permits such a lot to be used “for any purpose permitted in the zone other than multiple dwellings, provided that all other regulations prescribed for the zone by this Ordinance are complied with.” Township of Cherry Hill, N.J., Zoning Ordinance § 510 (1976). Arguably, the statutory protection accorded to a nonconforming structure rendered unnecessary the variances resulting from the location of the dwelling. Similarly, the ordinance might have rendered unnecessary variances from the area and frontage requirements. Although the Karpfs’ attorney mentioned at oral argument before us that no variances were required, the necessary record was not developed before the Board or the lower courts. Nor was the issue briefed on appeal. Consequently, we decline to decide the matter on the basis that no variances were required.

Foster-Hyatt, supra, 174 N.J.Super. 10, does not conflict with that conclusion. There, the Appellate Division affirmed a planning board’s denial of bulk variances requested in connection with the proposed conversion of a single-family dwelling located in a commercial zone from a nonconforming residential to a conforming commercial use. As in the present case, some of the bulk variances were requested because of the size and shape of the lot, and others because of the location of the house. The lot adjoined on either side two other sub-standard residential lots. In opposing the application, the municipality emphasized its desire to encourage commercial development that conformed to the requirements of the zoning ordinance. The planning board concluded that the owner had failed to demonstrate that it was unable to purchase other property and that the variances would not impair the zone plan. Stating “[w]e do not sit in judgment on whether the envisioned commercial upgrading of this area is wise or unwise,” id. at 14, the Appellate Division sustained the board’s decision. As indicated, the case proceeded on the assumed need for the variances pertaining to both the lot and the dwelling, and the decision may be viewed as judicial approval of a board decision that was neither arbitrary nor unreasonable.

We need not reach the issue posed by the concurring opinion, whether the Board erred in considering the adjoining owner’s offer to sell, evidence of which was admitted without objection. The Board found, notwithstanding the offer, that the property was subject to the hardship necessary to support the grant of the variance. We are satisfied that the Board did not act arbitrarily, capriciously, or unreasonably, and that the findings of the Board are supported by substantial credible evidence.

The judgment of the Appellate Division is reversed, and the matter is remanded to the Law Division for the entry of an order affirming the decision of the Board granting the requested variances and the site plan approval.