(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued November 19, 1996 -- Decided May 20, 1997
HANDLER, J., writing for a unanimous Court.
The issues in this appeal are whether, in determining just compensation in a partial-taking
condemnation case, evidence of damages, or the mitigation thereof, may include the availability and value of
replacement property and whether the severance damages may include the loss of visibility of the remainder
property as a result of reduced highway frontage.
Fred and Geraldine Weiswasser owned property in Burlington County, consisting of over 112 acres
of undeveloped land, which had sections of road frontage on Route 38 and Bullshead Road. Some of the
property located along Route 38 was zoned for commercial use. The bulk of the property, however, was
zoned for residential use. When the Weiswassers purchased the property, they had intended to develop it.
The State took a portion of the property located along Route 38 to construct a jughandle. It also
acquired an easement over a band of the property surrounding that section. As a result of the taking, the
Weiswassers were left with only three sections of frontage on Route 38 of varying widths and one section of
frontage along Bullshead Road.
The State filed a Complaint in Condemnation on October 15, 1986 and offered the Weiswassers
$165,000 as compensation for the property taken, which they rejected. Thereafter, commissioners were
appointed to determine just compensation. Subsequent to the commissioners' hearing, the State proposed to
resolve the suit through the purchase by the State of property contiguous to the Weiswasser property, known
as the Firth property. Acceptance of that property by the Weiswassers as part of the compensation for the
taking would have left them with greater frontage remaining on Route 38. The parties never reached any
settlement over the Firth property.
After continued extensive negotiations, which included the exchange of appraisers reports and
pretrial motions for evidentiary rulings, the matter was scheduled for trial. During an earlier pretrial motion,
the trial court had ruled that the State would be precluded from introducing its purchase of the replacement
(Firth) property as evidence of just compensation. At trial, the primary evidence offered by the Weiswassers
was the testimony of their appraiser. The State also offered testimony of their appraiser, who assessed
damages in the amount of $204,000. He had earlier submitted a higher valuation, which included the
increase in development costs due to the Weiswassers' inability to exhibit model homes within view of Route
38 because the taking had deprived them of their only frontage sufficiently large for that purpose.
The jury award of just compensation in the amount of $204,000 was appealed by the State and cross-appealed by the Weiswassers. The Appellate Division affirmed the jury verdict.
The Supreme Court granted the State's petition for certification.
HELD: Evidence of availability and use of replacement property may be used in mitigation of damages in
determining just compensation in a partial-taking condemnation case; just compensation requires
compensation for the diminution of value of the remainder property that is specifically attributable to
visibility lost as a direct result of the removal of other portions of the property through a partial-taking
condemnation.
1. Where only a portion of a property is condemned, the measure of damages includes both the value of the
portion of land actually taken and the value by which the remaining land had been diminished as a
consequence of the partial taking. (p. 10)
2. Most cases that have considered mitigation of damages in a partial-taking condemnation action have done
so where the cost of cure is based on actions that can be taken by the owner-condemnee relating directly to
the remaining property. (pp. 10-12)
3. The duty of a landowner to mitigate damages, which implicates actions involving both the property taken
and property not owned by the condemnee presents an issue of first impression in New Jersey. (pp. 13-14)
4. The application of the doctrine of mitigation of damages in the form of evidence of replacement property
has been opposed as amounting to specific performance. (pp. 14-16)
5. The availability and use of replacement property can be a material consideration that is relevant to
market value as the basis for just compensation, just as it can be a factor in the negotiations between a
willing buyer and seller. (pp. 16-17)
6. Evidence of available replacement property in mitigation of damages does not equate with compelling the
condemnee to purchase the property. Rather, the key to the relevance of action taken in mitigation of
damages is whether such action is fair and reasonable, a determination which may be made by comparing the
replacement property to the property taken. (pp. 17-21)
7. Because the duty to mitigate damages involving the availability and use of replacement property
represents a departure from existing law, the rule should be applied only prospectively, except in respect of
cases pending in the trial courts, where the rule may be applied on the application of either party for good
cause. (pp.21-22)
8. Loss of visibility as an element of severance damages may be related to a loss of access and the basis for
the compensability for such damages would be whether the loss is attributable to the taking of the property
itself or off-site conditions. (pp.23-31)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, O'HERN, GARIBALDI, STEIN and
COLEMAN join in JUSTICE HANDLER'S opinion.
SUPREME COURT OF NEW JERSEY
A-
54 September Term 1996
STATE OF NEW JERSEY, by the
COMMISSIONER OF TRANSPORTATION,
Plaintiff-Appellant,
v.
FRED WEISWASSER and GERALDINE
WEISWASSER,
Defendants-Respondents,
and
TOWNSHIP OF HAINESPORT, in the
County of Burlington, a Municipal
Corporation of the State of New
Jersey,
Defendant.
Argued November 19, 1996 -- Decided May 20, 1997
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
287 N.J. Super. 287 (1996).
George P. Ljutich, Deputy Attorney General,
argued the cause for appellant (Peter G.
Verniero, Attorney General of New Jersey,
attorney; Mary C. Jacobson, Assistant
Attorney General, of counsel).
S. David Brandt argued the cause for
respondents (Brandt, Haughey, Penberthy,
Lewis & Hyland, attorneys; Donald M. Doherty,
Jr., on the brief).
The opinion of the Court was delivered by
HANDLER, J.
In this case, the State of New Jersey condemned a small
section of a large tract of undeveloped property fronting on a
major highway. As a result of the partial taking, the property
owners lost their widest stretch of contiguous highway frontage.
In the course of extended settlement negotiations, prolonged
pretrial proceedings, a commissioners' hearing with an award of
compensation, and pretrial motions for evidentiary rulings, the
parties raised arguments over the admissibility of evidence that
present issues to be determined on this appeal. Those issues are
whether, in determining just compensation in a partial-taking
condemnation case, (1) evidence of damages, or the mitigation
thereof, may include the availability and value of replacement
property; and (2) severance damages may include the loss of
visibility of the remainder property as a result of reduced
highway frontage.
The property that is the subject of this condemnation action is located in Burlington County and is owned by defendants, Fred and Geraldine Weiswasser. They bought the property as an investment and planned to develop it. The property consisted of 112.38 acres of undeveloped land, which had road frontage on Route 38 and on Bullshead Road. The sections of the property
fronting on Route 38 were approximately 110 feet, 54 feet, 278.5
feet, and 62 feet in width. The property between the 278.5 foot
frontage and the 62 foot frontage sections was a 0.37 acre parcel
owned by third parties, the Firths. The frontage on Bullshead
Road is approximately 135 feet wide and three to four feet below
the road grade. Approximately 19 acres of the Weiswasser
property located within five hundred feet of Route 38 were zoned
for commercial use. The bulk of the Weiswasser property,
approximately 93.38 acres, was zoned for residential use.
Although defendants had never applied for access permits, access
would have been permitted at all points of frontage.
The State took a 0.39 acre crescent-shaped section of the
Weiswasser property in fee simple to construct a jughandle on
Route 38. It also acquired a slope easement over a 0.105 acre
band of property surrounding the section taken in fee simple.
The section taken included 255 feet of frontage from the
property's largest section on Route 38, thereby reducing the
width of that section along the highway from 278.5 feet to
approximately 24 feet. As a result of the taking the owners were
effectively left with only three sections of frontage on Route
38, of widths of 62, 54, and 110 feet, respectively, and the 135
foot stretch of frontage on Bullshead Road.
The State filed a Complaint in Condemnation on October 15,
1986, and offered the Weiswassers $165,000 as compensation. The
Weiswassers rejected that offer. The State then deposited
$165,000, its estimate of just compensation, with the court and
filed a Declaration of Taking on November 13, 1986. On January
8, 1987, the court entered a final judgment on the State's
exercise of its eminent domain power and appointed commissioners
to determine just compensation. The State later revised its
estimate upward and deposited an additional $4,000 with the court
on February 10, 1988. The Weiswassers withdrew those sums from
the court, having filed a consent to entry of judgment in the
event that the money withdrawn exceeded the amount to which they
were ultimately held entitled. See N.J.S.A. 27:7-22.
The commissioners' hearing was held on April 5, 1988. The
State's expert was John Borden, who testified that the value of
the property taken and damages to the remainder combined were
$169,000. Fred Weiswasser testified that just compensation would
be $604,000. The commissioners awarded the Weiswassers $390,000
as just compensation.
Subsequent to the hearing, on October 18, 1988, the State
proposed to the Weiswassers to resolve the suit through the
purchase by the State of the Firth property. Its northern edge
has 150 feet of frontage on Route 38; its eastern edge is
contiguous with the 62-foot wide leg of the Weiswasser property,
and its western edge is contiguous with the 24 feet of frontage
of the Weiswasser property remaining after the taking; the Firth
property thus is surrounded on three sides by the Weiswasser
property, with the fourth side fronting on Route 38. The
addition of the Firth property to the remainder therefore would
provide the Weiswassers with a 236 foot stretch of frontage on
Route 38. The parties apparently negotiated over the Firth
property, but did not reach any settlement.
Thereafter, on March 9, 1989, the Weiswassers submitted an
appraiser's report and a planner's report to the State.
According to the appraisal of Stephen Segal, prior to the taking,
the "highest and best use" of the property was for a mixed-use
development with five acres for commercial uses and 107.38 acres
for single-family residential development; it would have been
possible to construct "a high-quality, median[-]divided, tree-lined development entrance road, thereby creating a proper
'gateway' for the residential community that is beyond the
commercial frontage." Segal valued the five-acre commercial
section at $65,000 per acre, and the residential section at
$8,000 per acre before the taking. He found that as a result of
the taking, "[n]o commercial development could be market[-]
supported without sufficient frontage on Route 38." He therefore
valued the remaining "commercial" land as residential. Segal
also concluded that the residential section had dropped in value
from $8,000 to $7,000 per acre as a result of the taking. He
concluded:
The diminished frontage on Route 38 and
potential loss of access has reduced the
marketability for residential development and
has decreased the value of the residential
land.
Segal assigned damages in four parts: $25,350 to the property taken (0.39 acres @ $65,000 per acre), $267,380 to the commercial remainder reduced to use for residential purposes (4.61 acres @
$58,000 per acre), $107,380 to the reduced worth of the
residential remainder (107.38 acres @ $1,000 per acre), and $200
for the value of the slope easement taken by the State. These
damages resulted in his total of $400,300, of which $374,960
represented severance damages to the 111.99 acre remainder.
On September 21, 1989, the State brought a motion to exclude
the damages contained in the Segal appraisal that compensated for
the reduced potential access to the remainder caused by the
taking; in the alternative, it sought leave to amend its
complaint to permit the acquisition of the Firth property as
compensation to the Weiswassers. On November 30, 1989, the court
determined as a matter of law that there was reasonable access to
the residentially zoned portion of the remainder property (93.3
acres) and that the issue of reasonable access to the
approximately 19 acres zoned "AC Residential/Commercial" was a
question of fact. Accordingly, the court allowed the State to
amend its complaint to show, as evidence of just compensation,
the acquisition of the Firth property to replace the frontage
lost as a result of the taking. The State then made an offer of
$83,000 for the Firth property, pursuant to N.J.S.A. 20:3-6,
under which the offer can be no less than the "approved appraisal
of the fair market value of [the] property." On January 10,
1990, the State purchased the Firth property for $84,000.
According to the State, the purpose of the purchase of the Firth
property was both to replace the frontage lost by the Weiswassers
due to the taking, and to cure the severance damages testified to
by Fred Weiswasser and Stephen Segal.
The Weiswassers brought a motion for reconsideration of the
November 30, 1989, order permitting the State to introduce
evidence of the purchase of the Firth property as a partial
measure of just compensation. The court granted that motion on
January 15, 1990. The court reasoned that under the Eminent
Domain Act, the State had an obligation to propose to the
Weiswassers the purchase of a third-party tract at the time of
the initial offer and then to negotiate in good faith on that
basis. Because the Firth property was not offered to the
Weiswassers until late 1988, the court ruled that the State would
be barred from introducing evidence of such a purchase.
On January 30, 1992, the State presented the Weiswassers
with a new appraisal and formally revised its offer, revaluing
just compensation at $117,700, or, in the alternative, the Firth
property plus $3,700. The State's new valuation was based on an
appraisal by Joseph Manzi, who concluded that the 0.37 acre Firth
property plus an additional $3,700 would make the Weiswassers
whole as of the date of the taking. The State valued the Firth
property at $114,000 by adding to the purchase price of $84,000
its costs of $30,000 to clean-up the property and to restore it
to an undeveloped state. The State's offer stated that the Firth
property would be "conveyed as vacant land with all improvements
and environmentally hazardous materials removed . . . ." The
additional $3,700 was to compensate for the 0.105 acre slope
easement and for the 0.02 acre land differential between 0.39
acre parcel taken and the 0.37 acre Firth property.
Subsequent to this offer, the parties negotiated the issue
of just compensation. Those negotiations included discussions
regarding the transfer of the Firth property, valued at
$84,000.See footnote 1 The Weiswassers requested a hearing, which the court
treated as a motion on the admissibility of the State's new
valuation evidence. On August 28, 1992, the court ruled that the
State would be precluded at trial from introducing its purchase
of the replacement property as evidence of just compensation.
Again, the parties were unable to reach any settlement.
The trial commenced on April 25, 1994. The primary evidence
presented by the Weiswassers was the testimony of Segal based on
his appraisal. The State relied primarily on Borden as its
expert. His appraisal contained two values for just
compensation, $204,000 and $169,000. (The lower valuation was
based on an instruction from a Deputy Attorney General who
informed Borden that it was improper for him to consider the
effect of lost highway visibility in calculating damages to the
remainder. Borden testified at the Commission hearing only as to
the lower valuation.) Borden stated that before the taking the
property had a value of $1,044,000. He found the highest and
best use of the property before the taking to be development of
the rear land for residential purposes and development of the
highway frontage land for commercial purposes. He determined 1.1
acres to be commercial property, worth $174,000. He valued the
remaining 111.28 acre residential property before the taking at
$7,800 per acre, for a value of approximately $870,000. He
testified that as a result of the taking no property remained
suitable for commercial purposes, and included as residential
0.71 acres that he considered as commercial prior to the taking
(1.1 commercial acres minus the 0.39 acres taken by the State).
He considered the entire 111.99 acre remainder as usable for
residential development, which he valued at $7,500 per acre,
totalling approximately $840,000. The difference between the
before-taking figure, $1,044,000, and the after-taking figure,
$840,000, equals Borden's appraisal of $204,000 in damages. That
figure includes the finding that the original residential
property had incurred a loss of $300 per acre, from $7,800 per
acre to $7,500 per acre, leading to an additional loss of
approximately $33,600. That sum substantially accounts for the
$36,000 difference between the $204,000 and $169,000 figures.
Borden explained that in his higher valuation he had included the
increase in development costs due to the Weiswassers' inability
to exhibit model homes within view of Route 38 because the taking
deprived them of their only frontage sufficiently large for that
purpose.
The jury award of just compensation in the amount of
$204,000 was appealed by the State and cross-appealed by the
Weiswassers. The Appellate Division affirmed the jury verdict.
287 N.J. Super 287 (App. Div. 1996). In denying the State's
appeal, the cross-appeal, by stipulation, became moot and was
dismissed. This Court granted the State's petition for
certification.
145 N.J. 373 (1996).
Property owners are entitled to just compensation for land taken in condemnation. State v. Silver, 92 N.J. 507, 513 (1983); see U.S. Const. amend. V; N.J. Const. art I, ¶ 20; N.J.S.A. 20:3-29. This Court has determined that "where only a portion of a property is condemned, the measure of damages includes both the value of the portion of land actually taken and the value by which the remaining land has been diminished as a consequence of the partial taking." Silver, supra, 92 N.J. at 514. One of two formulas may be used to calculate just compensation in a partial-taking case. The first measures damages as "the market value of the land taken plus the difference before and after the taking in market value of the remainder area." Ibid. (quoting Village of South Orange v. Alden Corp., 71 N.J. 362, 367 (1976)) The second sets damages as "the difference between the value of the entire tract before the taking and the value of the remainder area after the taking." Ibid. (same).
The issue raised by the State's offer is whether, in determining severance damages, there is a duty to mitigate damages, and, if so, whether that duty includes a duty to accept
substitute or replacement property or its monetary equivalent in
measuring the value of the property taken.
The duty to mitigate damages is most traditionally employed
in the areas of tort and contract law. See White v. Township of
N. Bergen,
77 N.J. 538, 546 (1978) (stating that, in tort action,
"'[m]itigation of damages' is defined as 'a reduction of the
amount of damages . . . based on facts which show that the
plaintiff's conceded cause of action does not entitle him to so
large an amount as the showing on his side would otherwise
justify.'" (quoting Black's Law Dictionary (4th ed. 1968)). The
doctrine of mitigation is concerned with the compensatory aspect
of tort and contract law. 25 C.J.S. Damages § 96 (1966).
Mitigation of damages also has been invoked in the field of
property law. It has, for example, been applied in cases
presenting claims based on nuisance. E.g., Dickinson v.
Delaware, L. & W. R.R. Co.,
90 N.J.L. 158 (E. & A. 1917)
(reciting general rule that one suffering a nuisance must take
measures to reduce his or her damages). The duty to mitigate
damages is also recognized in the context of landlord-tenant law.
E.g., Sommer v. Kridel,
74 N.J. 446, 456-57 (1977) (recognizing
that landlord has duty to mitigate damages caused by defaulting
tenant by finding another tenant).
The doctrine of mitigation of damages has been applied to
condemnation actions, and, in that context, is sometimes referred
to as the "cost of cure" or the doctrine of avoidable costs. 4A
Nichols on Eminent Domain § 14A.04 (Sackman & Van Brunt eds., 3d
ed. rev. 1997). Most cases that have considered mitigation of
damages in a partial-taking condemnation action have done so
where the cost of cure is based on actions that can be taken by
the owner-condemnee relating directly to the remaining property.
See, e.g., State v. Birch,
115 N.J. Super. 457, 463 (App. Div.
1971) (holding, in a partial-taking condemnation that left
remaining property landlocked, that trial court should have
instructed the jury that the owner would have to comply with
local ordinances in building an access road on the remaining
property and that "the cost of ameliorating or curing that
condition was an important factor to be considered in arriving at
its fair market value"); State v. Sun Oil Co.,
160 N.J. Super. 513 (Law Div. 1978) (determining that property owner had a duty
to mitigate damages in a partial-taking condemnation by
undertaking work on its remaining property to relocate sewer and
water-pipe laterals, electric lines, and underground gasoline
storage tank where it was reasonable to do so); Broward County v.
Patel,
641 So.2d 40 (Fla. 1994) (holding that state may submit
evidence that severance damages of the condemnee may be cured or
lessened by alterations to condemnee's remaining property); Board
of Educ. v. Commonwealth,
528 S.W.2d 657 (Ky. Ct. App. 1975)
(finding that school had duty to mitigate damages caused by
partial taking of school playground and that duty could be
satisfied in part by soundproofing and airconditioning existing
school building).
In this case, however, it is asserted that the duty of the
landowner to mitigate damages implicates actions involving not
only the property that was subject to partial condemnation, but
also property not owned by the condemnee. This argument presents
an issue of first impression in New Jersey. Other jurisdictions
have considered the doctrine of mitigation damages in those
circumstances, however, and their reasoning is instructive.
Recently, the Georgia Court of Appeals ruled that evidence
of the availability of substitute property could be used
affirmatively by the condemnee in determining consequential
damages in a partial-taking case. Department of Transp. v. 2.953
Acres of Land,
463 S.E.2d 912 (1995). The condemnees claimed
that the partial taking left them with an irregularly-shaped
piece of land that could not be used as a site for a warehouse
large enough to meet their business's growing needs. As a
result, they were forced to purchase an adjacent tract of
property for $200,000, and submitted that price as the cost to
cure the damages suffered to their remainder property. The court
found that the trial court had not erred in admitting evidence
that the property owner was precluded by the taking from
expanding its existing business and had to buy additional land in
order not to lose future growth. Id. at 915; see also State v.
Nisbet Properties, Inc.,
309 So.2d 398, 402 (La. Ct. App. 1975)
(upholding admission of condemnee's evidence of purchase of an
adjoining tract of land as substitute property in determining
severance damages).
In Department of Transp. v. Old Nat'l Inn, Inc.,
345 S.E.2d 853, cert. vacated,
349 S.E.2d 748 (Ga. Ct. of App. 1986), the
court allowed evidence of the cost of substitute property to be
introduced by the condemnor in a partial taking action. There a
hotel lost a 0.8 acre section of vacant land it intended to use
as a parking lot. A plurality of the court agreed that the
availability and value of substitute land could be considered by
the jury, although it was improper to calculate consequential
damages by valuing the actual taking and then subtracting from
that figure the value of the substituted land. The court stated:
Although the set-off theory as testified to
by DOT's experts was improper, the
availability and value of any substitute land
can be considered as an element reasonably
affecting fair market value of the remainder
as well as an element of new circumstances of
the remainder just after the time of taking
in arriving at a new consequential damage
figure . . . . Obviously, the consequential
damage would be greater if that land, which
would adequately serve the purpose intended
for the taken land, was not available . . . .
See also Board of Educ. v. Commonwealth, supra, 528 S.W.2d 657 (sustaining, in partial taking of school playground, admission of evidence that the school could be restored to its former condition of utility in part by acquisition of neighboring private land for a new playground).
An argument advanced against the application of the doctrine of mitigation of damages in the form of evidence of replacement property is that it would amount to specific performance. That argument was the focus of Utah Dep't of Transp. v. Rayco Corp.,
599 P.2d 481 (Utah 1979). There, a shopping center lost a
substantial number of its parking spaces as a result of a taking
by the state to widen a road. Experts for both sides agreed that
the remainder suffered damages as a result of the taking, in part
because the taking reduced the number of parking spaces below the
number required by the applicable zoning ordinance. The parties
disputed whether those severance damages could be mitigated by
the state's acquisition and improvement of replacement property.
Under prior Utah decisional law, "the value of the property
condemned [was] the cost of substitute land which would place the
condemnee in the same position he had prior to condemnation."
Id. at 489 (citations omitted). A plurality of two justices
rejected that law, reasoning that "[i]t is a violation of the
expressed legislative intent when the remainder is, in fact,
damaged to deny severance damages by compelling the condemnee to
procure substitute property with his own funds, which allegedly
will be reimbursed by means of the compensation paid for the land
condemned." Id. at 490. According to their view, the state, in
effect, was forcing the replacement property on the landowner:
The State's theory of mitigation of severance
damage by replacement land . . . is
tantamount to compelling the condemnee to
take substitute land in lieu of money for the
damages sustained . . . . This court has
held that just compensation for property
taken for public use means compensation in
money; that it would make no difference how
valuable the property that was contemplated
as a substitute is, it could not be
substituted in lieu of money, against the
wishes of the condemnee . . . . There is no
meaningful distinction between the state, in
this case, purchasing the school land and
compelling defendant to accept it as
compensation and confining defendant's
damages to the value of the school land.
The analogy to specific performance, which supported the
reasoning of the Utah court's plurality, is not really apposite
in partial-taking condemnation actions. Resort to the construct
of specific performance in this context shifts the proper focus
of condemnation actions, namely, the determination of just
compensation based on the fair market value of the property that
is subject to condemnation. Silver, supra, 92 N.J. at 514.
Market value is determined by what a willing and reasonable buyer
and seller, both unconstrained, would agree is the fair price of
the property. Id. at 513. What should be critical in that
determination is not whether a property owner may be compelled to
acquire substitute property, but whether, under all of the
surrounding circumstances, reasonable and willing parties would
consider the availability and use of such property as bearing on
the market value of the owner's remaining property.
The availability and use of replacement property can be a
material consideration that is relevant to market value as the
basis for just compensation, just as it can be a factor that
informs the negotiations between a willing buyer and seller. As
the court observed in Nisbet Properties, supra, in allowing
evidence of the purchase of substitute property, "[c]ost to cure
and replacement cost are not of themselves precise mathematical
measures of damages, but they are useful evidence and tools in
arriving at a proper award." 309 So.
2d at 402. Further, the
failure to consider the availability of replacement property when
it would otherwise be reasonable to do so might in fact distort
the actual damages resulting from a partial taking. See Rayco,
supra, 599 P.
2d at 495 (Crockett, C.J., dissenting) ("The rule
[precluding evidence of availability of replacement property]
which the majority opinion appears to espouse impresses me as
unnecessarily rigid and may have the effect in some instances of
awarding excessive damages by requiring the courts to treat as
irreparable, injuries which could be minimized.").
The concern that the use of replacement property in
determining severance damages may be equated with or analogized
to specific performance is greatly overstated. Other courts have
disagreed with the proposition that, in a condemnation case,
analogy to specific performance precludes consideration of
replacement property in mitigation of damages. E.g., Carillion
Realty Corp. v. State,
602 N.Y.S.2d 76, 79-80 (N.Y. Ct. Cl. 1993)
(finding no loss of access to the remainder after a taking, where
landowner refused state's offer to provide a permanent right-of-way through neighboring property that the state had acquired, and
noting, further, "[c]laimant confuses a condemnee's duty to
mitigate damages with a condemnor's right to provide substitute
access. Where access has been destroyed or impaired and the
condemnee can reestablish it, it may do so, or may have been
deemed to have done so . . . ."), aff'd,
623 N.Y.S.2d 146 (N.Y.
App. Div. 1995). Cf. Porrata v. United States,
158 F.2d 788 (1st
Cir. 1947) (finding that a condemnor had a right to introduce
evidence of substitute property as mitigation of damages in a
partial-taking case independent of whether the condemnee had a
duty to mitigate involving the acceptance of substitute
property).
Evidence of available replacement property in mitigation of
damages does not equate with compelling the condemnee to purchase
the property. Cost-of-cure damages, for example, authorize the
introduction of evidence that a condemnee can reduce its damages
by taking corrective measures to improve the remainder property
even though such action need not be taken. In Sun Oil Co.,
supra, the State argued that it had a right to do on-site repair
work necessary to restore the gas station because its cost would
be less than the diminution in market value of the remainder,
absent the repairs. 160 N.J. Super. at 532. Although the court
determined that the State itself did not have the right to carry
out repairs on the remainder without an easement, it concluded
that the owner had a duty to mitigate damages where it is
reasonable to do so, and that the owner's compensation could be
limited by that amount whether or not the owner did the work.
Id. at 533-34.
The key to the relevance of action taken in mitigation of
damages is whether such action is fair and reasonable. As
observed by the dissenting justice in Rayco, supra:
A condemnee should not be awarded damages as
if the taking rendered his remaining land
unfit for its established use if the means of
cure, or of minimizing damages, is available
by exercising reasonable prudence; and this
is true even if it involves making
expenditures for substitute facilities,
whether within his own land or outside its
boundaries.
[Id. at 494 (Crockett, C.J.,
dissenting).]
Similarly, in Board of Educ. v. Commonwealth, supra, the court
upheld the jury verdict, ruling that the cost of restoration of
the land, where feasible, was not precluded:
From the standpoint of simple reasonableness,
surely the law would not be that the board of
education should be awarded one million
dollars for a new school if the existing one
can in fact be restored to equal or better
utility for only $238,000.
The concern that evidence of the availability and use of replacement property in respect of severance damages is tantamount to specific performance is strongly influenced by the traditional common law notion that each parcel of real property is unique. See E. Allan Farnsworth, Contracts § 12.6 at 829 (1982). The perception that no two parcels of real property are alike, however, does not call for the reflexive and rigid rule that evidence of replacement property must be equated with the forced acquisition of that property. Rather, the concern over the uniqueness of real property in this context enters into the analysis when considering the threshold issue of the comparability of the replacement property, that is, the extent to which the replacement property is sufficiently similar to the property taken. The similarity of such property bears on whether
it may be considered useful and available in conjunction with the
remainder property. The basic issue is whether it is reasonable
and fair to consider that property as a substitute for the
property taken. Thus, in Rayco, supra, concurring with the
decision to remand for a redetermination of damages, one justice
stressed the need for similarity:
[T]he cost of cure measure of severance
damages is applicable only when the
replacement property would totally cure the
damage caused by the condemnation to that
portion of land not condemned. The evidence
in this case falls woefully short of showing
that the condemnees were as well off with the
replacement land as with the land subject to
the actual taking.
[599 P.
2d at 493 (Stewart, J.
concurring).]
The Appellate Division noted that in the Rayco case the Utah
supreme court "found that the replacement property could not
ameliorate the problems caused by the State's acquisition." 287
N.J. at 298. It found the same limitation present in this case,
because a building on the Firth property would require demolition
and hazardous materials were required to be removed. Ibid. The
State vigorously disputes that finding, claiming that its offer
stated the Firth property would be "conveyed as vacant land with
all improvements and environmentally hazardous materials removed
. . . ." The Appellate Division further found that, in contrast
to Rayco, the proposed replacement property is zoned for the same
usage as the condemned property. 287 N.J. Super. at 298.
The issue of the similarity of replacement property is
primarily factual. The degree of similarity is relevant to the
issue of whether under all of the circumstances it would be
reasonable for the condemnee to accept property that is available
and contiguous to the remainder property as a suitable substitute
or replacement for the property taken when that will reduce or
eliminate the damages to the remainder property. It is an issue
that can be presented readily through testimony and evidence,
including the opinions of experts, and determined by the fact-finder.
Accordingly, we now hold that a condemnee seeking severance
damages in a partial-taking condemnation action has a duty to
mitigate those damages. The court may consider evidence of the
availability and use of similar replacement property, when, under
all of the surrounding circumstances, such property would
reasonably affect the fair market value of the remainder
property. Such evidence may be used in mitigation of damages in
determining just compensation in a partial-taking condemnation
case.
The duty to mitigate damages involving the availability and
use of replacement property should apply prospectively. The rule
we have adopted amounts to a "departure from existing law,"
State v. Burstein,
85 N.J. 394, 403 (1981), and not a "principle
plainly looming on the horizon." Williams v. Bell Tel. Lab.,
Inc.,
132 N.J. 109, 123 (1993).
Here, the parties could not have fully anticipated the
possibility of the need to consider replacement property to
discharge a duty to mitigate damages in calculating severance
damages. In the context of this case, the availability of the
replacement property would have placed an affirmative obligation
on the Weiswassers to determine the suitability of that property
and the feasibility of its inclusion in their remaining property.
Even though the parties negotiated over the availability of the
replacement property, those negotiations were predicated on an
effort to resolve amicably the matters in dispute. Moreover, the
trial court ruled that evidence of replacement property was
inadmissible. The parties thus did not proceed on a sufficient
understanding that the law would require replacement property to
be considered as a part of severance damages in a partial-taking
condemnation.
Furthermore, because the parties relied on the old law,
retroactive application of the new law would not serve the
interests of justice. Williams, supra, 132 N.J. at 122.
Consequently, we hold that the rule should be applied
prospectively but, in respect of cases pending in the trial
courts, the rule may be applied on the application of either
party, that is, the condemnor or condemnee, by the trial court
for good cause.See footnote 2
The Appellate Division held that the trial court had
correctly permitted evidence of a loss of visibility as an
element of the severance damages to the remainder property. 287
N.J. Super. at 294. The court found that the loss of visibility
in this case would have a direct effect on the Weiswassers'
marketing costs in developing the property into single-family
residences. Id. at 304.
The State contends that the basis for allowing damages based
on loss of visibility, namely, the increased costs attributable
to marketing for development of the land, has been disapproved in
New Jersey as too speculative and uncertain. See State v. Cooper
Alloy Corp.,
136 N.J. Super. 560 (App. Div. 1975) ("Just
compensation generally does not include losses or costs that are
incidental to a taking, such as . . . frustration of the
condemnee's plans. These items are generally held not to be
directly attributable to the realty, but rather peculiar to the
owner."). Nevertheless, in this case the experts specifically
acknowledged the loss of visibility as an element affecting the
value of the remaining property. Borden, the State's expert,
testified:
Essentially, by the taking the development of
the residential tract has lost as I
considered the advantage of having property
along the major highway of Route 38 for
exposure purposes. As a practical matter,
the fact that it was located on Route 38, as
I've seen in many instances, developers have
utilized sample homes for display purposes
and I felt that at least two dwellings could
be placed on that site with appropriate
advertising and exposed to the tremendous new
traffic on Route 38 by reason of the
improvement, changing it from a two lane to a
four lane highway with ample side roads, that
the developer would be able to sell off his
residential tract more readily because it
would be more readily exposed to the public
by just driving by, coupled with the fact
that he would not have to do extensive
advertising . . . . And for that reason I
felt it added a measure of value to the
property in the before [condition].
This Court has recognized the principle that a property
owner does not have an absolute right to a particular form of
access to a public highway, but only to reasonable access:
It seems to be agreed in New Jersey, as
elsewhere, that in the absence or denial of
all highway access, the general rule is that
the property owner is not entitled to access
to his land at every point between it and the
highway, but only to free and convenient
access to his property and the improvements
on it.
[High Horizons Dev. Co. v.
Department of Transp.,
120 N.J. 40,
48 (1990).]
See also Lima & Sons, Inc. v. Borough of Ramsey,
269 N.J. Super. 469, 477 (App. Div. 1994) ("We . . . conclude that a property
owner clearly is entitled only to reasonable access to the system
of public roadways"); N.J.S.A. 27:7-90e ("Every owner of property
which abuts a public road has a right of reasonable access to the
general system of streets and highways in the State, but not to a
particular means of access.").
The Appellate Division in State v. Van Nortwick,
260 N.J.
Super. 555 (App. Div. 1992) (Van Nortwick I), was presented with
the question of whether diminution of access to a highway was a
compensable element of a partial-taking condemnation. The
Appellate Division held that it was reversible error for the
court to have failed to exclude diminution of access as an
element of damages. The court, however, distinguished between
diminution of access that was not in itself compensable, and
other conditions of the property caused by such diminution that
were compensable:
Although a diminution of access may cause
other conditions on the property itself which
may be compensable, as for example, as noted
by defendant's expert . . . , such things as
a limitation of design options or on-site
maneuverability, as long as the remaining
access is reasonable, the diminution per se
is not compensable.
On remand, the trial court allowed the landowner's expert to testify to the loss in value to the remainder property through limitations on building design and reduced vehicle maneuverability as a result of the diminution of access. The State appealed that decision and the Appellate Division held "any such on-site impact was compensable as part of severance damages." State v. Van Nortwick, 287 N.J. Super. 59, 63-64, (App. Div.) (Van Nortwick II), certif. denied, 143 N.J. 320 (1995). The appellate court further found that the jury was properly instructed to consider the on-site damages resulting from the diminished access only if they were "actual and specific to this property." Van Nortwick II, 287 N.J. Super. at 73; see also State v. Inhabitants of the Town of Phillipsburg, 240 N.J. Super. 529, 547-48 (App. Div. 1990) (finding, where the taking and highway construction had left one remainder cut off from
another, that the increased cost of developing the remainder
section of the property was compensable).
It is also established that a change in traffic patterns
resulting in damages to a property owner is not considered a
compensable taking. E.g., State v. Charles Inv. Corp.,
143 N.J.
Super. 541, 545 (Law Div. 1976) (holding that property owner was
not entitled to compensation for the economic harm suffered as a
result of the decreased traffic flow directly in front of his
station), aff'd,
151 N.J. Super. 14 (App. Div. 1977), aff'd,
76 N.J. 86 (1978); State v. Monmouth Hills, Inc.,
110 N.J. Super. 449 (App. Div.) (rejecting the owner's claim for additional
compensation for the damages in an amount equal to the cost of
installing ramps to improve access to the remainder property when
the damages were attributable to the closing off of an opening in
the highway median strip), certif. denied,
57 N.J. 133 (1970).
Loss of visibility as an element of severance damages may be
related to a loss of access and the basis for the compensability
for such damages would be whether the loss is attributable to the
taking of the property itself or off-site conditions. In State
v. Stulman,
136 N.J. Super. 148 (App. Div. 1975), the court
specifically considered a damages claim based on the loss of
visibility. The court rejected the owner's argument that he was
entitled to compensation for the loss of visibility of his
property because the loss resulted, not from the partial taking
in the case, but from the construction of a new highway on
property belonging to others. Id. at 162.
Other courts are split on whether loss of visibility is
compensable in a partial-taking action. See generally Tracy A.
Bateman, Annotation, Eminent Domain: Compensability of Loss of
Visibility of Owner's Property,
7 A.L.R.5th 113 (1992). Most
courts have not recognized a property interest in maintaining the
visibility of one's property:
Generally, this right is denied, principally
upon the theory that one has no control over
his neighbor's property and therefore could
not prevent his neighbor, under most
principles of real property law, from
erecting barriers to prevent his right to be
seen. Therefore a taking by a public
authority takes nothing from him.
[4A Nichols on Eminent Domain
§ 14A.03[4] (Sackman & Van Brunt
eds., 3d ed. rev. 1997).]
E.g., State v. Schmidt, 805 S.W.2d 25 (Tx. Ct. App. 1991), rev'd 867 S.W.2d 769, 774 (Tex. 1993) (holding that the owners were not entitled to compensation for diminution of value of the remainder due to lessened visibility, increased circuity of travel, or diversion of traffic, and stating that "[j]ust as a landowner has no vested interest in the volume or route of passersby, he has no right to insist that his premises be visible to them."), cert. denied, Schmidt v. Texas, 512 U.S. 1236, 114 S. Ct. 2741, 129 L. Ed.2d 861 (1994); Acme Theatres, Inc. v. State, 258 N.E.2d 912, 914-15 (N.Y. 1970) ("Our courts have consistently refused to award consequential damages because the owner's property is no longer visible to passing motorists . . . ."); Forest City Enterprises v. State, 458 N.Y.S.2d 397, 398 (N.Y. App. Div. 1982) ("Aside from decreasing the size of claimant's tract, the only
other effect of the appropriation was a lessening of visibility
from the Millersport Highway to the remainder parcel. Loss of
visibility is not compensable."), aff'd,
452 N.E.2d 1262 (N.Y.
1983).
The Alaska supreme court reached a different conclusion in
8,960 Square Feet v. Alaska,
806 P.2d 843 (1991). In that case,
the state sought to condemn a portion of a parcel of property in
conjunction with altering and improving the abutting road. Two
aspects of the project diminished the visibility of the remaining
property: (1) the project entailed the construction of a railroad
overpass, which would require the creation of a gradually rising
earthen berm constructed totally on property owned by the
railroad, and (2) the abutting road would be lowered between five
and seven feet from its original level and part of the newly
expanded and lowered road would be constructed on the land taken
from the owner.
The court rejected the claim for lost visibility
attributable to the construction of the earthen berm. Id. at
845-46. The court ruled that because the owners had no easement
over the property owned by the railroad, and because the earthen
berm was to be constructed solely on the railroad's property,
loss of visibility attributable to the berm was not compensable.
The court held, however, that the landowner could recover for
loss of visibility as a result of the widening and lowering of
the abutting road because those changes, unlike the construction
of the earthen berm, involved property of the owner that was
taken. It stated:
Ownership of land gives the owner the right
and ability to limit any obstructions from
being placed on that land. In particular,
ownership of land abutting on a road gives
the owner the right to control the visibility
of all adjoining land further off the road.
This obviously can be an important commercial
asset. Thus when the state takes a parcel
which abuts the road, it also takes the
potentially valuable right to control the
visibility of the remaining parcel. For this
reason, we believe that the best rule in
light of reason and policy is that loss of
visibility to a remaining parcel is
compensable where that loss is due to changes
made on the parcel taken by the state.
The Alaska supreme court made a distinction between
visibility lost as a result of changes occurring off the taken
land and visibility lost as a result of changes occurring on the
taken land. It reasoned that if the landowner has a right not to
build on his land in order to maintain visibility, that right is
taken with respect to that portion of the land taken and thus
should be compensable.
The decisional law in other jurisdictions supports the
Alaska approach. In Louisiana v. Manning,
322 So.2d 362 (La.
Ct. App. 1975), the state condemned a portion of defendant's
property for the construction of an entrance ramp to an
interstate highway. Defendant lost frontage and visibility from
the highways and lost the use of a billboard previously
maintained for advertising purposes. Although not permitting a
separate award for the loss of the use of the advertising
billboard, the court permitted recovery for the loss of
visibility: "Such an item of damage must necessarily be absorbed
into the reduction of the market value of the remainder after the
taking by the expropriating authority." Id. at 366. The court
did not discuss whether damages for loss of visibility occasioned
by construction undertaken without a taking of defendant's land
would give rise to a claim for compensation.
The court in Schmidt, supra, was "reluctant to hold that
such damages can never be recovered," and based its holding in
part on the findings that the lost visibility damages resulted
from modifications of the existing highway and not from the use
of the small strip actually taken from the condemnee, and that
the impaired visibility did not affect the condemnee's land in a
"special, unique way, different from the effect on the
surrounding area." 867 S.W.
2d at 781. When visibility is
impaired by virtue of construction that occurs off the landowners
property, no right has been taken and therefore compensation is
not due. Ibid.; cf. People v. Ricciardi,
144 P.2d 799 (Cal.
1943) (noting that under California law, property owners abutting
a public roadway "possess . . . an easement of reasonable view of
their property from such highway" and, although an abutting
landowner has no right to compensation by reason of diversion of
traffic away from its property, a landowner could introduce
evidence that the loss of visibility caused by the taking
affected the market value of the remaining property).
The critical factor, therefore, in determining if loss of
visibility is a compensable element of damages in a partial-taking condemnation, is whether the loss arises from changes
occurring on the property taken.
The Appellate Division here found that "the facts of this
case fall within a narrow exception to any rule which would
prohibit an award of compensation for a diminution in
visibility." 287 N.J. Super. at 302. It concluded that the
trial court appropriately distinguished "between an award of
damages for loss of visibility, which are not permitted, and
damages to the remainder by way of increased development costs,
attributable to a loss of visibility, which are permitted . . .
." Id. at 305. The distinction is that the loss of visibility
to the remainder is directly attributable to the reduced frontage
as a result of the property taken, and thus is compensable.
We hold that just compensation requires compensation for the
diminution of value of the remainder property that is
specifically attributable to visibility lost as a direct result
of the removal of other portions of the property through a
partial-taking condemnation.
The judgment of the Appellate Division is affirmed.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, O'HERN,
GARIBALDI, STEIN and COLEMAN join in JUSTICE HANDLER'S opinion.
NO. A-54 SEPTEMBER TERM 1996
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
STATE OF NEW JERSEY, by the COMMISSIONER OF
TRANSPORTATION,
Plaintiff-Appellant,
v.
FRED WEISWASSER and GERALDINE WEISWASSER,
Defendants-Respondents,
and
TOWNSHIP OF HAINESPORT, in the County of Burlington, a Municipal
Corporation of the State of New Jersey,
Defendant.
DECIDED May 20, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice Handler
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1 The State's offer would have required the Weiswassers to return $84,000 of the $169,000 previously withdrawn from the court; in return, the Weiswassers would receive the Firth property and would be permitted to keep $85,000 of the $169,000 estimate of just compensation. Footnote: 2 In light of our decision to apply the duty to mitigate damages prospectively, we need not address the Appellate Division's application of laches to bar the State's use of the Firth property as evidence of just compensation. 287 N.J. Super. at 300. We note, however, that the record in this case does not readily support the finding of laches. The reasons for the various and lengthy delays remain more or less unexplained, and it appears that both parties pursued a dual approach of negotiation and litigation.