The opinion of the Court was delivered by PASHMAN, J.
Like the companion cases of Hutton Park Gardens v. West Orange Town Council, 68 N.J. 543 (1975) (Hutton Park) and Troy Hills Village v. Parsippany-Troy Hills Tp. Council, 68 N.J. 604 (1975) (Troy Hills Village), also decided today, this appeal involves constitutional challenges to a municipal rent leveling ordinance. Because this case presents several issues not raised in the companion cases, we have chosen to deal with it in a separate opinion.
New Milford enacted a revised rent control ordinance on November 26, 1973
The ordinance was subsequently amended on September 9, 1974 by Ordinance No. 74:12, which further limits allowable rent increases to 50% of the percentage increase in the CPI during the period from 90 days before commencement of the previous term to 90 days before its termination.
On September 9, 1974 plaintiffs brought this action in lieu of prerogative writ in the Superior Court in Bergen County, challenging the constitutionality of the original ordinance and as amended. Specifically, plaintiffs alleged that the ordinance was confiscatory, constituted an impairment of the obligations of contract, was violative of substantive due process in that it failed to permit rents to rise as rapidly as costs, was arbitrary, vague, unreasonable and unworkable and was ultra vires the police power since the municipality had made no determination of the existence of a housing emergency.
Plaintiffs' complaint sought immediate injunctive and declaratory relief. On October 8, 1974 the trial judge enjoined enforcement of the ordinance as amended permitting landlords to collect rent pursuant to the 1973 ordinance but requiring them to place the excess in escrow.
After hearing arguments on cross-motions for summary judgment, the trial judge rendered an oral opinion holding that all challenges to the original ordinance were barred by R. 4:69-6(a), which requires actions in lieu of prerogative
This Court granted certification on its own motion pursuant to R. 2:12-2. 68 N.J. 174 (1975).
Applicability of Rule 4:69-6
As noted above, the trial court rejected plaintiffs' challenges to the original ordinance as untimely filed under R. 4:69-6.
In Ward v. Keenan, 3 N.J. 298 (1949), this Court recognized that the creation of the in lieu proceeding by the
Some further observations are proper to fully support our rationale. The argument that plaintiffs should be precluded from challenging the original ordinance because they could have joined in the earlier suit is unsound. Res judicata does not bar strangers to a prior action from filing an action of their own, precisely because every plaintiff is entitled to his day in court. Bd. of Directors of Ajax Electrothermic Corp. v. First Nat'l Bank of Princeton, 33 N.J. 456, 463 (1960); Miraglia v. Miraglia, 106 N.J.Super. 266 (App. Div. 1969); In re Estate of Alexandravicus, 83 N.J.Super. 303, 307-308 (App. Div. 1964), certif. den. 43 N.J. 128 (1964). The danger of multiple suits by landlords is not particularly
Thus, subject to the limitation discussed in Part II of this opinion, the trial court should have admitted proofs and rendered a judgment with regard to plaintiffs' challenges to the constitutional validity of the Borough ordinance both as originally enacted and as amended.
Exhaustion of administrative remedies
We next hold that the trial judge was correct in ruling on the facial constitutionality of the amended ordinance and in requiring plaintiffs to exhaust their administrative remedies with respect to their other challenges.
R. 4:69-5 provides that:
Except where it is manifest that the interest of justice requires otherwise, actions under R. 4:69 shall not be maintainable as long as there is available a right of review before an administrative agency which has not been exhausted.
This Court has recognized that the exhaustion of remedies requirement is a rule of practice designed to allow administrative bodies to perform their statutory functions in an orderly manner without preliminary interference from the courts. Ward v. Keenan, supra, 3 N.J. at 302. Therefore, while it is neither a jurisdictional nor an absolute requirement, there is nonetheless a strong presumption favoring the requirement of exhaustion of remedies. Roadway Express, Inc. v. Kingsley, 37 N.J. 136, 139 (1962); East Brunswick Tp. Bd. of Education v. East Brunswick Tp. Coun., 48 N.J. 94, 102 (1966); Pleasantville Taypayers v. City of Pleasantville, 115 N.J.Super. 85, 88 (App. Div. 1971), certif. den. 59 N.J. 268 (1971); Patrolman's Benev. Assoc. v. Montclair, 128 N.J.Super. 59,
Admittedly, the exhaustion requirement will be waived where "the interest of justice so requires." Ward v. Keenan, supra, 3 N.J. at 308; Waldor v. Untermann, 10 N.J.Super. 188 (App. Div. 1950). This has been held to mean that exhaustion of remedies will not be required where administrative review will be futile,
The mere allegation that a constitutional issue is involved does not relieve plaintiffs of the exhaustion requirement. To avoid this requirement, plaintiffs must demonstrate not only that the constitutional question is colorable, but that the matter contains no factual questions which require administrative determination. Mut. Home Dealers Corp. v. Comm. of Bank and Ins., 104 N.J.Super. 25, 31 (Ch. Div. 1968), aff'd o.b. 55 N.J. 82 (1969) See Roadway Express, Inc. v. Kingsley, supra, 37 N.J. at 140, where this Court held that plaintiff's allegation that the
Because the question of the ordinance's facial constitutionality involves no real issues of fact (see Hutton Park,), the trial judge correctly rendered a judgment on that question. Schwartz v. Essex Co. Bd. of Taxation, 129 N.J.L. 129, 132 (Sup. Ct. 1942), aff'd 130 N.J.L. 177 (E. & A. 1943). Moreover, since the remaining issues raised by plaintiffs do require factual findings, the trial judge was also correct in ordering plaintiffs to exhaust their administrative remedies.
With respect to the facial constitutionality of New Milford's rent control ordinance as amended, we hold for the municipality for the reasons set forth in our opinions in Hutton Park and Troy Hills Village.
A. Substantive Due Process
In those opinions, we examined both the scope of judicial review in addressing constitutional challenges based upon substantive due process and the constitutional permissibility of rent control regulation under those standards. We also explained how the "percentage increase of CPI" rent increase formula, utilized by New Milford, and the "fixed percentage" rent increase formula, used by other communities, both bear a rational relation to the legitimate municipal purpose of stabilizing rental levels. Hutton Park, supra, 68 N.J. at 574. We need not repeat those discussions. Suffice it to say that the New Milford CPI formula does not differ in any respect from the rent increase formulae
In Hutton Park we also set forth the standard for determining whether a rent leveling ordinance is confiscatory per se. As was pointed out in Hutton Park an ordinance can be written which is "so restrictive as to facially preclude any possibility of a just and reasonable return." Hutton Park, supra, 68 N.J. at 571.
New Milford's ordinance is not such a regulation. It fixes 1973 rents at a given base level, but permits annual increases in rental charges. Although these increases are not unlimited, we cannot say a priori that the ordinance precludes recovery of just and reasonable returns. Moreover, New Milford's ordinance is even less facially restrictive than the rent control schemes upheld in Hutton Park and Troy Hills Village in that it permits a landlord to apply for an unlimited rental increase in the event that he "cannot realize a reasonable profit from his investment."
Housing "emergency" not requisite for enactment of rent control
Plaintiffs contend that the rent leveling ordinance, as originally enacted in 1973 and as amended in 1974, was ultra vires the police power and invalid on its face because of the borough's failure to declare the existence of a "housing
As we discussed at length in Hutton Park, it is well settled that governmental price regulation violates neither state nor federal principles of substantive due process merely because such legislation is not supported by a special showing that an "emergency" exists or that the industry to be regulated is "affected with a public interest." Hutton Park, supra, 68 N.J. at 559, 561-562; Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934); Olsen v. Nebraska ex rel. Western Reference & Bond Ass'n, 313 U.S. 236, 61 S.Ct. 862, 85 L.Ed. 1305 (1941); State Bd. of Milk Control v. Newark Milk Co., 118 N.J. Eq. 504, 516-19 (E. & A. 1935). Consequently, absent specific statutory or constitutional provisions to the contrary, municipalities are under no obligation to hold special public hearings, undertake special studies of the local rental housing market or make specific averments of a housing emergency prior to
In our opinion in Hutton Park, we further observed that proof of "special circumstances" or "emergent conditions" was long ago rejected as an absolute prerequisite for determining whether legislative enactments violate substantive due process. Hutton Park, supra, 68 N.J. at 559-562, 561 n. 8. Instead, the correct test to be applied is whether "the laws passed ... have a reasonable relation to a proper legislative purpose." Nebbia v. New York, supra, 291 U.S. at 537, 54 S.Ct. at 516, 78 L.Ed. at 957. More particularly, in the context of rent regulation "the question is whether the legislative body could rationally have concluded that the unrestrained operation of the competitive market was not in the public interest." Hutton Park, supra, 68 N.J. at 564.
Plaintiffs are certainly free to show that New Milford's ordinance violates principles of due process. However, absence of a severe housing shortage alone will not render the rent leveling ordinance unconstitutional where alternative rationales for the ordinance exist. To sustain their burden of proof, plaintiffs must establish by competent proofs or by matters of which the tribunal can take judicial notice that there are no facts which will support any of the possible rationales for adopting the ordinance. In the context of rent control, these rationales include but are not limited to proof of a housing shortage, widespread imposition of exorbitant rents, monopoly control of the rental housing market or prevalence of substandard housing. Hutton Park, supra, 68 N.J. at 564.
Constitutionality as applied
Plaintiffs allege that certain provisions of the New Milford ordinance are arbitrary, unreasonable and confiscatory as applied. As noted above, Point II supra, plaintiffs must exhaust their administrative remedies with respect to these issues. While our disposition of this appeal does not require examination of these contentions we deem it appropriate to comment briefly on them in order to provide guidance for subsequent determination of these issues.
A. Rent increase formula
Plaintiffs contend that the ordinance's rent increase formula, both as originally enacted and as recently amended, is unconstitutional because it does not permit landlords to obtain a just and reasonable return on their investments.
To withstand a constitutional challenge, not only must a rent control ordinance be facially nonconfiscatory, Point III supra, but it must also be nonconfiscatory as applied. Hutton Park, supra, 68 N.J. at 565. The question whether a given ordinance fails to permit a just and reasonable return is both a factual and legal question. Hutton Park, supra, 68 N.J. at 570. In the companion case of Troy Hills Village, supra, we set forth guidelines for determining whether a given rent regulation complies with the constitutional requirement. In the case at bar, plaintiffs were precluded from offering proofs with respect to this issue. Consequently, on appeal we leave this contention unanswered. We do hold that if plaintiffs should again seek judicial relief, after exhausting their administrative remedies, the ensuing adjudication is to be governed generally by the guidelines set forth in Troy Hills Village, supra, 68 N.J. at 620-630.
B. Capital improvement costs
Plaintiffs next challenge the ordinance on the grounds that it obliges a landlord to maintain minimum standards without allowing him to pass on to his tenants the cost of capital improvements. We agree that unless landlords receive
Constitutional principles do not require that rent control regulations take any one particular form. Hutton Park, supra, 68 N.J. at 569. We cannot say a priori that New Milford's ordinance will necessarily leave a landlord with inadequate revenue for normal maintenance or for necessary capital improvements to maintain the building. He may well be able to recoup the necessary funds from gross rental income or from additional rent increases obtained pursuant to the ordinance's hardship provision. Moreover, we cannot say that the failure to provide additional surcharges for capital expenditures vitiates the reasonableness of the relationship between the regulations and the Borough's goal of stabilizing
As noted above, it is still open to plaintiffs to allege and prove that due to the Borough's failure to provide for a capital improvement surcharge, its ordinance is confiscatory as applied. If plaintiffs attempt to do so, their contentions with respect to capital improvements should be subsumed under the more generalized allegation that the ordinance is confiscatory; they are not to be deemed distinct contentions. As we said in Troy Hills Village, reasonable improvement costs are one factor in the overall calculus for determining whether a landlord is realizing a "just and reasonable" return. Troy Hills Village, supra, 68 N.J. at 628. If capital improvements increase the investment, net income thereon is still required to provide a just and reasonable return. There is no separate constitutional requirement that the landlord realize increased income separately allocable to such capital improvement. Hutton Park, supra, 68 N.J. at 569.
C. Tax surcharge provisions of ordinance
Plaintiffs also charge that those provisions of the New Milford ordinance which provide for a tax surcharge to cover increases in municipal property taxes are, in several respects, unfair. Unfairness, however, is not a concept of constitutional dimension. Again, what plaintiffs are arguing is that these provisions render the ordinance violative of the constitutional guarantees of due process and nonconfiscation. Among other complaints, plaintiffs argue that by requiring landlords to apportion tax increases equally among rooms in a dwelling, the ordinance compels them to absorb the cost of tax increases attributable to vacant units. It cannot be said that these provisions bear no rational relation to the purposes of the ordinance. Nor can it be said a priori that these provisions deprive landlords of a just and reasonable return on their investments. Constitutional provisions do not require that rent control ordinances allow landlords
Ordinance is unworkable
Plaintiffs contend that chapter 69-5 of the New Milford ordinance is unworkable and hence invalid.
Statutory provisions which are unworkable and impossible to comply with may be invalidated on the ground that they constitute a denial of substantive due process. Sayre & Fisher Brick Co. v. Dearden, 23 N.J.Super. 453, 460-61 (Law Div. 1952). See also Roberts v. Shafer, 63 N.J.L. 182 (Sup. Ct. 1899); Commercial Credit Corp. v. Congleton, 21 N.J.Super. 88 (Cty. Ct. 1952). Unworkable municipal ordinances may also be invalidated on the grounds that they are arbitrary and unreasonable. Kirsch Holding Co. v. Borough of Manasquan, 59 N.J. 241, 251-252 (1971). Larson v. Mayor & Council of Spring Lake Heights, 99 N.J.Super. 365, 372 (Law Div. 1968); Kozesnik v. Montgomery Twp., 24 N.J. 154 (1957); Schmidt v. Bd. of Adjustment, Newark, 9 N.J. 405 (1952). Of course, a legislative enactment will not be declared void unless its repugnancy to the Constitution is so manifest as to leave no room for reasonable doubt. National City Bank of New York v. Del Sordo, 16 N.J. 530, 542 (1954); Behnke v. New Jersey Highway Authority, 13 N.J. 14, 25 (1953); Reingold v. Harper, 6 N.J. 182, 194 (1951); Inganamort v. Fort Lee, 120 N.J.Super. 286, 301 (Law Div. 1972), aff'd 62 N.J. 521 (1973). Therefore, if plaintiffs' assertions are clearly proven to be correct, then the provisions requiring landlords to file their applications for rent increases within a certain time period must be stricken.
In the case at bar, the trial court made no findings of fact with respect to this issue and the record contains contradictory allegations. While plaintiffs claim that they are unable to obtain the necessary information within the prescribed time period, defendant refutes their contention. In addition, defendant asserts that, in fact, landlords have been
Of course, if plaintiffs find that they are able to comply with the ordinance as written, they need not press this issue further. However, if they do decide to pursue it, we remand the matter to the trial court for a determination whether this provision of the ordinance is unworkable and invalid. If invalid, it is to be severed from the remainder of the ordinance
State preemption of eviction provisions in the ordinance
Plaintiffs allege that the provisions of the New Milford ordinance which limit the grounds for eviction are invalid because the State has preempted the municipality's power to act in this area. Plaintiffs further contend that these provisions transgress constitutional proscriptions because they fail to provide a landlord the opportunity to withdraw a rental unit from the rental housing market and convert it into a cooperative or condominium.
It is well established that when a state statute has preempted a field by supplying a complete system of law on a subject, an ordinance dealing with the same subject is void. Ringlieb v. Parsippany-Troy Hills Tp., 59 N.J. 348 (1971) (State regulation of solid waste disposal); Summer v. Teaneck, 53 N.J. 548 (1969) (ordinance designed to prevent blockbusting); Mogolefsky v. Schoem, 50 N.J. 588 (1967) (licensing of real estate brokers); Sutherland, Statutory Construction (4 ed. 1973), § 30.05 at 349. In Summer v. Teaneck, supra, Chief Justice Weintraub outlined the contours of the doctrine of preemption:
A municipality may not contradict a policy the Legislature establishes. Auto-Rite Supply Co. v. Mayor and Township Committeemen of Woodbridge, 25 N.J. 188 (1957). Hence an ordinance will fall if it permits what a statute expressly forbids or forbids what a statute expressly authorizes. Even absent such evident conflict, a municipality may be unable to exercise a power it would otherwise have if the Legislature has preempted the field. This follows from
In the case at bar, defendant argues that the provision relating to grounds for eviction does not contradict or undermine State policy but rather, essentially duplicates the State statute on the subject. As noted above, however, courts may still find that there has been preemption by the state even where there is no apparent conflict between state and local enactments. Summer v. Teaneck, supra, 53 N.J. at 554. State v. Ulesky, 54 N.J. 26 (1969) (municipal registration of criminals); Chester Tp. v. Panicucci, 116 N.J.Super. 229, 234-35 (App. Div. 1971), aff'd 62 N.J. 94 (1973) (municipal regulation of firearms); Coast Cigarettes Sales v. Mayor, Coun., Long Branch, 121 N.J.Super. 439, 446 (Law Div. 1972) (licensing of cigarette vending machines); Dimor, Inc. v. Passaic, 122 N.J.Super. 296 (Law Div. 1973) (State obscenity laws); Wein v. Irvington, 126 N.J.Super. 410 (App. Div. 1975), certif. den. 65 N.J. 287 (1974) (State obscenity laws). The test applied where no apparent conflict exists is one of determining the Legislature's intent. Dimor, Inc. v. Passaic, supra, 122 N.J. Super. at 302.
Two lower courts have found provisions in municipal rent control ordinances which enumerate grounds for eviction to be invalid because by the District Court Act (N.J.S.A. 2A:18-53 et seq.) and the Landlord and Tenant Act (N.J.S.A. 2A:42-1 et seq.) the subject was preempted by the State. Barry Gardens v. Passaic, 130 N.J.Super. 369,
For the foregoing reasons, we hold that the trial court erred in its reliance upon R. 4:69-6(a) in dismissing plaintiffs' constitutional challenges to the 1973 ordinance. We hold that as originally enacted and as amended the ordinance is facially constitutional. As to plaintiffs' challenge that the ordinance is confiscatory as applied, we hold that plaintiffs must exhaust their administrative remedies by applying for rent reviews pursuant to the hardship provisions of
Modified and remanded for further proceedings in conformity herewith.
For modification and remandment — Chief Justice HUGHES, Justices MOUNTAIN, SULLIVAN, PASHMAN, CLIFFORD and SCHREIBER and Judge CONFORD — 7.
Opposed — None.
Unlike similar provisions in the ordinances involved in Hutton Park and Troy Hills Village, this provision places no ceiling on rent increases available in hardship cases and therefore is capable of affording the landlord complete relief. Plaintiffs argue that this holding would permit a municipality to dispense with all automatic increases and require hearings prior to any rental increase. They are correct; so long as the procedure is not so arbitrary and unavailable as to preclude relief, there is no constitutional obstacle to this approach.
The provision for allowing a landlord an increased rental to realize a "reasonable profit from his investment" is construable as the equivalent of a requirement that the landlord must be permitted a fair return on investment, as held in, and subject to, the qualifications stated in our opinions in Hutton Park and Troy Hills Village.