## Facts

- Beechwood Farms was a residential development divided by the boundary between the Borough of Demarest and the Borough of Alpine; 16 homes were in Demarest and 14 in Alpine.
- Fourteen Demarest homeowners petitioned Demarest’s mayor and council under N.J.S.A. 40:43-26 to disconnect their tract from Demarest and have it become part of Alpine.
- Demarest denied consent by resolution, stating the disconnection would be contrary to the borough’s best interests and welfare.
- The Demarest homes in Beechwood Farms had above-average assessed values, generating substantial tax revenue for Demarest.
- Demarest’s operating costs for core services (e.g., police and fire) would not materially decrease if the tract were disconnected.
- The homeowners used Demarest municipal services and participated in its civic and political life; Demarest was also pursuing a sewer project financed by municipal bonds, with costs borne by properties remaining in Demarest.
- The trial court ordered Demarest to consent to disconnection; the Appellate Division affirmed.

## Issues

1. Under N.J.S.A. 40:43-26, as construed in prior precedent, when may a court compel a municipality to consent to disconnection of territory?
2. Whether the proposed disconnection was impermissible because it would materially and adversely affect Demarest’s financial and governmental integrity, particularly through loss of substantial tax ratables without corresponding savings.
3. Whether residents’ preference for municipal alignment with a neighboring community can justify disconnection when municipal-wide impacts weigh against it.

## Decision

- The Supreme Court of New Jersey reversed.
- The Court held the homeowners did not satisfy the statutory standards for disconnection.
- Demarest’s refusal to consent was not arbitrary or unreasonable on the record and could not be judicially compelled.
- The denial of consent therefore remained effective.

## Legal Principles

- N.J.S.A. 40:43-26 is strictly construed because it alters municipal boundaries and governmental structure.
- Disconnection requires consideration of the municipality as a whole, not merely the convenience or preferences of a neighborhood.
- A proposed disconnection is improper if it would materially impair the municipality’s ability to function or to provide essential services.
- A serious loss of tax base, without meaningful reductions in municipal expenditures, may constitute a substantial adverse effect on the remaining municipality and justify denial of consent.
- Courts should not compel municipal consent absent a clear showing that statutory criteria are met and that refusal reflects an abuse of discretion.

## Conclusion

The court sustained Demarest’s denial of deannexation because removing a high-value residential tract would substantially reduce tax ratables without lowering fixed service costs, materially harming the remaining municipality; resident preference for joining a neighboring community was insufficient under N.J.S.A. 40:43-26.


Ryan v. Mayor & Council of the Borough of Demarest, 64 N.J. 593, 319 A.2d 442 (N.J. 1974)