A New Jersey school district that tried to void the sale of a surplus school building after learning a charter school was taking it over has been ordered to pay $768,487 in damages.

The Board of Education of the City of Newark agreed in 2016 to sell off several unneeded properties amid a budget crisis but in 2020 it took steps to revoke the sale of the Maple Avenue School when an affiliate of a charter school operator bought the property.

NJ Superior Court Judge Lisa Adubato. Courtesy photo

Essex County Superior Court Judge Lisa M. Adubato entered a summary judgment order in favor of Friends of Team Charter Schools, which claimed it incurred additional financing costs for buying the property after the Board of Education issued a lis pendens notice premised on its purported reversionary rights.

The Friends of Team brought a counterclaim for promissory estoppel based on a corrective deed that the Board of Education issued on the Maple Avenue School, saying it was not encumbered, and Adubato granted the counterclaim.

"It's not common to apply promissory estoppel to deed recording, but it's not common for a seller to so disregard its recording as Newark District did here," said Thomas O. Johnston of the Johnston Law Firm in Montclair, representing the Friends of Team. "Judge Adubato got it exactly right."

According to the suit, Board of Education of the City of Newark v. Housing Authority of the City of Newark, the Board of Education decided amid a fiscal crisis in 2016 to sell 12 vacant school buildings to the Housing Authority, which would market them to third parties for redevelopment. After selling the Maple Avenue School to the Housing Authority, in response to the authority's claim that prospective buyers were concerned about encumbrances on the property by the Board of Education, the board issued a corrective deed in 2017 that said it would not place any restrictions on ownership or future uses of the site, according to court documents.

THOMAS JOHNSTON

The housing authority sold the Maple Avenue School to a developer, 33 Maple LLC, which planned to convert it into apartments. But after spending several million dollars on environmental costs, that company decided not to proceed with the project, and it sold the school building to the Friends of Team Charter Schools for educational purposes in March 2020.

The Board of Education, which had filed a suit against the housing authority over the Maple Avenue School, then amended its complaint to add the Friends of Team as an additional defendant, seeking the return of the school. Friends of Team moved to dismiss the suit, asserting that the Board of Education was going back on a promise it made in the corrective deed. Adubato ordered discharge of the lis pendens on June 6 and granted the motion for damages by the Friends of Team on Tuesday.

"Judge Adubato got it exactly right. A seller cannot freely make a covenant as to a grantor's rights in a deed, induce downstream buyers to rely on that representation, only to then contradict that representation by filing a lis pendens," said Johnston. "Friends of Team was harmed and should rightly be made whole."

The school is now KIPP Seek Academy, serving students in kindergarten through Grade 4. KIPP, which stands for Knowledge Is Power Program, is a nationwide network of charter schools serving children in low-income neighborhoods.

The Board of Education's attorney, Matthew Tharney of Sattiraju & Tharney in East Windsor, did not return a call about the ruling. A Newark Board of Education spokesperson did not respond to a request for comment.