Dr. & Mrs. John Petrozzi v. City of Ocean City, 433 N.J. Super. 290

Background

Ocean City obtained perpetual easements from beachfront property owners in the early 1990s that limited dune height to three feet above the block bulkhead and required the city to construct and maintain dunes.
In 1994 CAFRA was amended to require permits for dune construction and maintenance; DEP later denied Ocean City’s permit to mechanically reduce dunes to the contract height.
Multiple beachfront owners sued Ocean City (and named DEP) for breach of easement agreements and inverse condemnation; most claims against DEP were dismissed as DEP was not party to the easements.
At bench trial the court found Ocean City’s pre-1994 easement performance excused by impossibility/practicability due to the CAFRA amendments and DEP’s denial, dismissed many plaintiffs’ breach claims, and rejected inverse condemnation claims for failure to show a regulatory taking.
The court nonetheless found Ocean City liable to four plaintiffs who executed easements after the 1994 amendments and awarded severance-style damages ($70,000 and $35,000) for loss of ocean view; Ocean City appealed valuation; other plaintiffs appealed the discharge-of-performance ruling.
Appellate court: affirmed impossibility for pre-1994 easements but held plaintiffs entitled to restitutionary relief (equitable compensation) for the benefit conferred; remanded for hearings to determine restitution and to clarify damages for the post-1994-easement plaintiffs. The Mitas were dismissed for failing to prove riparian title.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether municipal performance under pre-1994 easements was excused by impossibility/practicability after CAFRA amendments and DEP permit denial	Ocean City should not be allowed to claim impossibility because it acted as the State's agent or should have foreseen DEP disapproval	Ocean City: CAFRA amendments and DEP denial were governmental acts beyond its control and not reasonably foreseeable, excusing performance	Court: Performance excused—municipality and State are distinct; CAFRA/DEP actions were beyond and not reasonably foreseeable to Ocean City
Whether plaintiffs who relied on excused contractual performance are remediless	Plaintiffs: Even if performance excused, plaintiffs conferred benefits and deserve restitution/equitable relief	Ocean City: No breach, so no damages owed	Court: Restitution is available; equitable hearing remanded to determine fair restitution offset by benefits (e.g., storm protection)
Whether plaintiffs stated a compensable regulatory taking/inverse condemnation	Plaintiffs: CAFRA restrictions/de facto dune growth deprived them of use/view and effected a taking	Ocean City/DEP: No physical appropriation; plaintiffs retain substantial beneficial use; no taking	Court: No taking—diminution (15–35%) insufficient; inverse condemnation claims properly dismissed
Proper measure and sufficiency of damages for post-1994-easement plaintiffs (loss of view)	Plaintiffs: Appraisals showed market diminution attributable to dune growth; severance-type valuation justified	Ocean City: Plaintiffs’ expert methods were unreliable; city’s appraiser limited damages to structure life; no competent proof of diminution	Court: Loss of view compensable; trial judge may reject experts but must make specific findings and quantify how damages were calculated; remanded for further valuation evidence and explanation (apply severance analysis and offset storm-protection benefits)

Key Cases Cited

Connell v. Parlavecchio, 255 N.J. Super. 45 (App. Div.) (impracticability principles)
Facto v. Pantagis, 390 N.J. Super. 227 (App. Div.) (restitution available when performance excused)
M.J. Paquet, Inc. v. N.J. Dep’t of Transp., 171 N.J. 378 (impracticability and related contract doctrines)
Creek Ranch, Inc. v. New Jersey Turnpike Authority, 75 N.J. 421 (party cannot make performance impossible by its own actions)
Borough of Harvey Cedars v. Karan, 214 N.J. 384 (account for storm-protection benefits when valuing dune-related diminution)
City of Ocean City v. Maffucci, 326 N.J. Super. 1 (App. Div.) (severance damages for loss of view/access in eminent domain context)
Penn Central Transp. Co. v. New York City, 438 U.S. 104 (land-use diminution alone does not automatically constitute a taking)
Bernardsville Quarry v. Borough of Bernardsville, 129 N.J. 221 (no taking despite very large diminution in value)