(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 4, 1996 -- Decided June 30, 1997
STEIN, J., writing for a majority of the Court.
Pursuant to N.J.S.A. 20:3-30(c) of the Eminent Domain Act of 1971 (section 30(c)), the date on
which an action is taken by the condemnor which substantially affects the use and enjoyment of the property
by the condemnee is one possible date used to value property subject to condemnation. The issue raised in
this appeal is whether a letter written by a municipality to a potential condemnee “substantially affected” the
value of the property, thereby setting the valuation date pursuant to section 30(c).
In 1987, Stuart Nierenberg, Marilyn Nierenberg, Philip Kramer, Sol Kramer, and Ely Kramer
formed the partnership Princeton Manor Associates (PMA) for the purpose of developing a 50-acre tract of
land owned by Yvette Nierenberg, Stuart's and Marilyn's mother. The property is zoned R-2 Residential by
the Township of West Windsor (Township). Prior to July 8, 1987, the date PMA purchased the property
from Yvette Nierenberg for $4,320,700, the property had been designated on the Township's Master Plan as
a potential site for West Windsor's proposed Community Park.
PMA prepared a plan for a forty-eight-lot residential subdivision of the property and submitted a
subdivision application to the Township on May 13, 1988. While PMA was considering whether to propose
an amendment to the municipal sewer plan in order to obtain subdivision approval, Yvette Nierenberg
received a certified letter from the Township Administrator, dated July 29, 1988, formally notifying her,
among other things, that West Windsor Township may acquire her property for the purpose of establishing a
Community Park. PMA's attorney advised PMA that it was unlikely that it would obtain Township approval
for enlargement of the sewer system in view of the Township's apparent intent to condemn the property.
The Township had the property appraised and, on April 19, 1989, PMA was notified that the Green
Acres program had approved the acquisition and had accepted an appraisal valuing the property at
$3,022,000. The parties attempted to negotiate the purchase price of the property. Unfortunately, what
occurred was a lengthy process of failed attempts. Initially, the Township realized that it could not afford to
purchase the property and develop the Park, resulting in negotiations relating to the partial acquisition of the
property by the Township with development of the remainder by PMA. PMA proposed the dedication of
thirty-seven acres to the Township with a townhouse development on the thirteen-acre remainder. West
Windsor rejected that proposal but suggested it might agree to a forty-eight-lot single-family-home
development.
On September 5, 1989, West Windsor's Township Committee adopted a resolution accepting an
offer by PMA to sell thirty-seven acres to the Township for $1,250,000. In return, PMA would complete a
residential development of no more than sixty units on the remaining thirteen acres, subject to a rezoning of
the property and planning board approval. On August 15, 1990, the Township Committee declined to
approve the necessary zoning amendments. Thereafter, the Township Committee agreed in closed session to
purchase the Nierenberg tract for $3.2 million and to introduce a bond ordinance to cover the debt; however,
the bond ordinance was defeated.
On January 22, 1991, PMA filed a complaint in the Law Division, seeking, among other relief, just compensation for the Township's alleged destruction of the value of its property or, alternatively, specific performance of its prior agreement with the Township whereby PMA would receive $1,250,000 and the
property would be rezoned to permit construction of no more than sixty units on the remaining thirteen
acres.
While the lawsuit was pending, continued negotiations produced a new plan whereby PMA would
retain thirty-seven acres on which a thirty-four-lot subdivision would be permitted and the Township would
acquire the remaining thirteen acres. The Township issued a pre-condemnation letter and on May 29, 1992,
West Windsor purchased the thirteen acres for $700,000. On July 17, 1992, the Township Committee
authorized the condemnation of the remaining thirty-seven acres. When PMA rejected the Township's
monetary offers, the Township on May 3, 1993 filed a complaint for condemnation.
The trial court concluded that the date of the Township's letter, which stated that the Township may
acquire the property owner's land to use as a community park, had obtained financing for the acquisition,
and had intended to obtain prompt appraisal of the property's value, constituted the proper date for valuing
the property. The court reasoned that the July 29 letter impeded development, thereby significantly
diminishing the possibility that the land would be put to its highest and best use as a residential development.
The court also concluded that the letter had devalued the property by 25%.
On appeal, the Appellate Division reversed, holding that the letter did not substantially affect PMA's
use and enjoyment of the property within the meaning of section 30(c) and was merely a preliminary step to
a potential future condemnation. The Appellate Division also found that PMA could have perfected its
application for major subdivision approval, thereby forcing the Township to determine its acquisition plans.
The Supreme Court granted certification .
HELD: The July 29, 1988 letter written to Yvette Nierenberg on behalf of the Township of West Windsor
"substantially affected" the value of the property and, therefor set the valuation date pursuant to
N.J.S.A. 20:3-30(c) of the Eminent Domain Act of 1971.
1. When private property is condemned for public use, the condemnor is required to pay “just
compensation” to the property owner. In order to make the condemnee whole, eminent domain proceedings
are required to produce a “fair market value” for the property. (pp. 18-21)
2. New Jersey Sports & Exposition Authority v. Giant Realty Associates is a recent case that is consistent
with precedent in New Jersey and other jurisdictions. The court addressed the legislative policy underlying
section 30(c), noting that its purpose was to protect the condemnee from a diminution in value resulting
from the cloud of condemnation being placed on the property by a potential condemnor and insulate the
condemnor from spiraling inflation. A substantial affect on the use and enjoyment of the property was
defined as the occasion when the condemnor takes action which directly, unequivocally and immediately
stimulates an upward or downward fluctuation in value and which is directly attributable to a future
condemnation. (pp. 21-26)
3. Governmental action merely sufficient to set a date of valuation under section 30(c) need not support a
cause of action for inverse condemnation. The critical issue is not whether PMA could have continued its
attempts to develop the property, but whether PMA's use and enjoyment of its property was substantially
affected by the July 29 letter. The record indicates that any attempt by PMA to continue to seek
development approval from the Township would have been futile and, given the cloud of condemnation over
the property, PMA could not have sold the land at an economically feasible price to another developer. (pp.
29-31)
4. The trial court found that: the letter disclosed the Township's firm intention to acquire the property; the property could not be put to its highest and best use as a residential development because of the letter; and the Township's assertion of its plan to acquire the property and of its ability to finance the acquisition, as set
forth in the letter, caused the property to be devalued by approximately 25%. Those factual findings were
amply supported by substantial credible evidence in the record and should not have been rejected by the
Appellate Division. (pp. 31-32)
5. The legislative objective of section 30(c) was to identify events that affected the value of property so
significantly that it would be unfair, either to the condemnor or the condemnee, to allow the post-event
fluctuation in value to be reflected in the condemnation award. That principle applies whether the
governmental action prompts a decrease or an increase in the value of the property. The Court's
determination should not discourage municipalities from responsibly notifying potential condemnees of an
intention to condemn, nor should its disposition be viewed as penalizing condemnors. (pp. 32-35)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law
Division for further proceedings consistent with this opinion.
JUSTICE O'HERN dissenting, in which CHIEF JUSTICE PORITZ and JUSTICE HANDLER join,
is of the view that what occurred in this case was the result of a lengthy negotiation process in which the
Township attempted, in good faith, to acquire the PMA property. Accordingly, the facts do not demonstrate
the kind of obstructive governmental action that substantially affects the use and enjoyment of property.
JUSTICES POLLOCK, GARIBALDI AND COLEMAN join in JUSTICE STEIN'S opinion.
JUSTICE O'HERN filed a separate dissenting opinion in which CHIEF JUSTICE PORITZ and JUSTICE
HANDLER join.
SUPREME COURT OF NEW JERSEY
A-46/
47 September Term 1996
TOWNSHIP OF WEST WINDSOR IN THE
COUNTY OF MERCER, a Municipal
Corporation of the State of New
Jersey,
Plaintiff-Respondent,
v.
YVETTE NIERENBERG AND PRINCETON
MANOR ASSOCIATES,
Defendants-Appellants.
Argued November 4, 1996 -- Decided June 27, 1997
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
285 N.J. Super. 436 (1995).
Edward D. McKirdy argued the cause for
appellant Yvette Nierenberg (McKirdy and
Riskin, attorneys).
Andrew J. Rothman argued the cause for
appellant Princeton Manor Associates
(Greenbaum, Rowe, Smith, Ravin & Davis,
attorneys).
Richard L. Rudin argued the cause for
respondent (Weiner Lesniak, attorneys).
The opinion of the Court was delivered by
STEIN, J.
This case concerns the appropriate date for valuing
condemned property pursuant to the Eminent Domain Act of 1971
(N.J.S.A. 20:3-1 to -50) (Act). The Act provides for three
possible valuation dates: the date the condemnor takes
possession of the property being condemned either in whole or in
part, N.J.S.A. 20:3-30(a); the date on which the condemnation
action is commenced, N.J.S.A. 20:3-30(b); and "the date on which
action is taken by the condemnor which substantially affects the
use and enjoyment of the property by the condemnee," N.J.S.A.
20:3-30(c).See footnote 1 Just compensation for the condemnee is determined
as of the earliest of those dates. N.J.S.A. 20:3-30.
At issue is whether a letter written by a municipality to a
potential condemnee "substantially affect[ed]" the value of the
property, thereby setting the valuation date pursuant to N.J.S.A.
20:3-30(c). The trial court determined that the date of the
letter, which stated that the municipality may acquire the
property owner's land for use as a community park, had obtained
financing for the acquisition, and intended to obtain a prompt
appraisal of the property's value, constituted the proper date
for valuing the property. The Appellate Division reversed the
trial court's decision, holding that the letter was "merely a
preliminary step to a potential future condemnation."
285 N.J.
Super. 436, 451 (1995). We granted certification,
145 N.J. 371
(1996), and now reverse.
In 1987, Stuart Nierenberg, Marilyn Nierenberg, Philip
Kramer, Sol Kramer, and Ely Kramer formed Princeton Manor
Associates. The purpose of the partnership was to develop a 50-acre tract of land owned by Yvette Nierenberg, Stuart's and
Marilyn's mother. The Nierenbergs contemplated that Yvette would
be given a sum certain for her property, while her adult children
would receive, without financial obligation, proceeds from
development of the property. Philip Kramer, a highly experienced
real estate developer, would handle most of the responsibilities
of development.
The property is zoned R-2 Residential by the Township of
West Windsor (Township). That zoning permits single-family
detached dwellings on three-quarter acre lots. R-2 zoning also
allows open-space cluster developments as a conditional use if
the lot size is at least 20,000 square feet and is served by
either public water or public sewer. The subject property is
serviced by public water and partially by public sewer.
At some time prior to 1987, the property, together with two
contiguous parcels, was designated on the Township's Master Plan
as a potential site for West Windsor's proposed Community Park.
On July 8, 1987, Princeton Manor Associates purchased the
property from Yvette Nierenberg for approximately $4,320,700, and
Yvette simultaneously acquired an interest in the partnership.
In the months following the sale, Princeton Manor Associates
prepared a plan for a forty-eight-lot residential subdivision of
the property. The partnership spent approximately $25,000 in
engineering costs preparing the plan. The final plan conformed
with the municipal zoning ordinance. The partnership's attorney
Peter Buchsbaum would later testify that it was "a relatively
straightforward submission." The partnership's subdivision
application was presented to the Township on May 13, 1988.
By letter dated May 19, 1988, the Township's Director of
Community Development acknowledged receipt of the partnership's
application. The Director notified the partnership that certain
administrative requirements had not been met, such as payment of
a required application fee/security deposit and submission of
additional copies of certain documents. On June 3, 1988, the
Township forwarded a second letter, stating that "on further
examination of the . . . development application," the Township
determined, apparently inaccurately, that the subject property in
its entirety was not within the area served by public sewers.
Therefore, percolation tests and soil log data for the property
would be required before the application would be considered
further.
The partnership was then faced with a choice. It could wait
at least seven months for the seasonal high water period to
conduct percolation tests, at an approximate cost of $40,000.
Alternatively, the partnership could attempt to have the
municipal sewer plan amended to provide service to the entire
property. The partnership was studying the sewer plan amendment
process when Yvette Nierenberg received a certified letter from
Robert Bruschi, the Township Administrator. That letter, dated
July 29, 1988, read:
Dear Ms. Nierenberg:
TOWNSHIP MASTER PLAN/COMMUNITY PARK
Enclosed is a copy of the facilities portion
of the Township Master Plan. Three (3)
properties to comprise a potential Community
Park have been designated in it.
In conjunction with the Master Plan, the
Township applied to the New Jersey Green
Acres for a low-interest loan for the
properties' purchase. Several months ago,
the Governor notified us of our award of a $3
million loan to supplement the Township's
funding for purchasing this property. On
June 27, 1988, the Township Committee
authorized the Mayor to enter into an
agreement with New Jersey Green Acres to fund
this acquisition.
Therefore, this is formal notification that
West Windosr [sic] Township may acquire this
property for the purpose of establishing a
Community Park.
Shortly, the Township along with independent
appraisers and the Green Acres Office will
determine a fair-market value for the
property.
In the interim, I am available to answer your
questions regarding the above items.
Upon review of the July 29 letter, Buchsbaum advised his clients that they could not secure Township approval for enlargement of
the sewer system when the Township appeared intent on condemning
the property.
On August 23, 1988, an appraiser retained by the Township
wrote to Yvette Nierenberg, stating "[t]his firm has been
retained by the Township of West Windsor to make an appraisal on
the above captioned property which is part of the Community Park
Project." That letter stated that Nierenberg could accompany the
appraiser during his inspection of the subject property. On
September 2, 1988, a second appraiser hired by the Township wrote
to Nierenberg, stating that "[w]e have been retained by the
Township of West Windsor to independently appraise the property
to be acquired from you." Shortly thereafter, the appraisers
inspected the property and requested that Buchsbaum forward
information concerning the terms of the 1987 contract of sale.
On February 16, 1989, Buchsbaum wrote to Bruschi, stating:
Confirming our previous conversation, we
have found it impossible, as a practical
matter, to proceed with the development plans
previously filed on the above-referenced
property because of the Township's statement
that it intends to acquire the property for a
park. However, the matter has now been
pending some six months, but we have not even
received an appraisal or any form of offer.
We can not have our land rendered
unusable while the Township considers the
matter. This is, in fact, what has occurred
over the last six months, even though we have
expressed a willingness to discuss the issue
with the township.
Bruschi responded:
As I have explained to you in our conversation on the telephone approximately two weeks ago, the Township is not in the
position to begin any negotiations with the
property owners until such time as we have
received the fair market value from the Green
Acres Office at the State of New Jersey. As
soon as this is received by the Township, we
will begin our discussions with the property
owners involved, and you will be notified at
that point.
In March 1989, the Township attorney Michael Hartsough was
informed that the Department of Environmental Protection,
Division of Green Acres Land Acquisition (Green Acres) had
approved the acquisition. On April 19, Hartsough sent a letter
to Buchsbaum stating that Green Acres had accepted an appraisal
valuing the property at $3,022,000. Hartsough reminded Buchsbaum
that, pursuant to the Act, he had fourteen days to respond.
However, Hartsough encouraged negotiations between the Township
and the partnership, and granted several extensions to permit
further negotiations.
As negotiations continued, it became apparent that grounds
for compromise existed. After the Township received the
appraisals for the properties to be acquired for the Community
Park, it realized that it could not afford to both purchase the
properties and develop the park. Discussions began to center on
a partial acquisition of the property by the Township with
development of the remainder by the partnership. The partnership
proposed, among other plans, a dedication of thirty-seven acres
to the Township with townhouse development on the thirteen-acre
remainder. West Windsor rejected that proposal, but suggested it
might be amenable to a forty-eight-lot single-family-home
development.
On September 5, 1989, West Windsor's Township Committee
adopted a resolution accepting an offer by the partnership to
sell thirty-seven acres to the Township for $1,250,000. The
partnership would be permitted to complete a residential
development of no more than sixty units on the remaining thirteen
acres, subject to a rezoning of the property and planning board
approval. The Township Park Planning Committee recommended
against the rezoning, arguing that the planned development would
be an excessively intensive use of the remainder. On August 15,
1990, the Township Committee declined to approve the zoning
ordinance amendment necessary to permit development of the
remainder.
On August 29, 1990, Buchsbaum wrote to Hartsough to confirm
that the "upset price" for purchase of the entire property was
$3.3 million dollars. Buchsbaum and Hartsough had negotiated
that "upset price" in the event that the zoning amendment failed.
In his reply letter, Hartsough observed that "the Township
Committee last evening in closed session agreed to the purchase
of the Nierenberg tract for $3.2 million." Hartsough further
noted that the Township Committee intended to introduce a bond
ordinance authorizing the debt necessary to consummate the
transaction. That bond ordinance was eventually defeated.
On December 12, 1990, Hartsough wrote to Buchsbaum
indicating that, although the Township still desired to have the
property included in the plans for the Community Park, the
Township would require a "price . . . more reasonable in terms of
current economic conditions." Upon receipt of that letter,
Buchsbaum advised his clients that the Township was stalling the
condemnation process in order to lower its acquisition costs. He
recommended that the partnership file suit.
On January 22, 1991, the partnership filed a complaint in
the Law Division seeking, among other relief, just compensation
for the Township's alleged destruction of the value of its
property or, alternatively, specific performance of its prior
agreement with the Township whereby the partnership would receive
$1,250,000 and the property would be rezoned to permit
construction of no more than sixty units on thirteen acres.
While the lawsuit was pending, the Township continued to express
its interest in acquiring the property. It arranged for new
appraisals and continued to negotiate with the partnership.
Those negotiations produced a new plan whereby the
partnership would retain thirty-seven acres on which a thirty-four-lot subdivision would be permitted. The Township would
acquire the remaining thirteen acres of the property. That
proposal would require no zoning change or variance. The
Township issued a pre-condemnation letter pursuant to N.J.S.A.
20:3-6, stating its intent to acquire the thirteen-acre portion
of the property. On May 29, 1992, the parties entered into a
contract pursuant to which the Township thereafter acquired the
thirteen acres for $700,000. The contract contained the
following language:
WHEREAS Buyer's planner and engineer have
conducted a preliminary review of a concept
plan [for development of the remaining
thirty-seven acres] . . . and both have
indicated no objection to the lots and layout
as proposed in the concept plan provided that
all ordinance standards are met at the time
of an actual application for development.
The contract also contained language indicating that execution of
the terms of the contract would result in a stipulation of
dismissal of the pending lawsuit. The final paragraph of the
contract indicated that "[e]xecution of this Contract shall not
bind the Township and the West Windsor Planning Board to any
development application by the Seller in the future." Title to
the thirteen acres passed to the Township on June 25, 1992.
On July 17, 1992, the West Windsor Township Committee met
and adopted a resolution authorizing the Township to take action
to condemn the thirty-seven acres still owned by the partnership.
Two months later, the Township offered the partnership $1.7
million for the property. That offer was rejected. On March 1,
1993, the Township adopted an ordinance authorizing the
institution of condemnation proceedings. The partnership
declined a subsequent offer of $1,210,000. On May 3, 1993, the
Township filed a complaint for condemnation.
The sole issue at trial concerned the date on which the
property was to be valued pursuant to N.J.S.A. 20:3-30. The
partnership presented Steven Segal, an expert real estate
consultant with substantial experience in the valuation of real
estate in Mercer County. Segal testified that the July 29, 1988,
letter had substantially affected the use and enjoyment of the
property, as no developer would continue attempts to develop the
property while threatened with condemnation. Segal explained
that, in 1988, the real estate market had been at its peak, and
prudent developers would have bypassed the Nierenberg property
for other, unencumbered, properties. Segal testified that the
letter had diminished the property's market value by at least
twenty-five percent.
The Township presented the expert testimony of Russell
Sterling, a real estate appraiser and consultant. Sterling had
conducted a marketability study that indicated that the growth in
residential development that had typified the early 1980s had
ended by 1986. Sterling testified that, in 1988 and 1989, an
excess of residential lots had been available in the Township and
surrounding areas. Therefore, Sterling concluded that the letter
had not substantially affected the property. Rather, the value
of the property had decreased after July 1988 because of market
conditions.
After hearing testimony from five witnesses and examining
138 exhibits, the trial court issued a comprehensive opinion
concluding that the appropriate date of valuation was July 29,
1988, the date of the letter. The court first concluded that the
standard set forth by N.J.S.A. 20:3-30(c) "does not require a
showing of governmental action which substantially destroys the
beneficial use of private property, but only action which
substantially affects it." Next, the court observed that the
governmental action taken by the municipality included not only a
"single, discrete act," but also "an action which was a
culmination of a number of earlier actions."
The court then made enumerated findings of fact:
(1) The letter written to defendant Yvette
Nierenberg was on West Windsor stationery,
was signed by Robert W. Bruschi, Township
Administrator, was sent certified mail-return
receipt requested, and was stated to be
"formal notification." Copies were sent to
the Township Attorney, the Assistant Township
Administrator/Clerk, and the funding agency,
New Jersey Green Acres. Either lawyer or
layman reading this letter would view it as
an official action on a matter of great
significance. These aspects of the letter
lead to the conclusion that it is much more
than a simple letter advising defendant,
Nierenberg, of her right to accompany an
appraiser on his inspection.
(2) While the letter uses the word "may" in
describing the purpose of the notification
("that West Windosr (sic) Township may
acquire this property"), the word "may" is so
overwhelmed by the other aspects of the
letter as to justify a conclusion of a
predetermination on the part of plaintiff to
take the action described. This is
especially so since the "formal notification"
is not a required action if no decision has
been made by a governmental body to exercise
its right of eminent domain.
(3) Accompanying the letter and referred to
therein was a copy of the map entitled
"Community Facilities Plan" which included
defendants' property. Also included with the
letter was "a copy of the facilities portion
of the Township Master Plan," pages 77
through 94 inclusive, discussing in detail
the construction of a public park on
defendants' property, among others. The
letter was obviously intended to impress
Nierenberg with the advanced stage of
plaintiff's plan to use defendants' property
for public purposes.
(4) The letter states in some detail that funding for the acquisition of defendants'
property was available, reciting the source
of the money and actions taken to obtain it.
It advises defendant, Nierenberg, that the
money was to come from a $3,000,000 low-interest loan from the Green Acres program
pursuant to notification from the Governor of
New Jersey that the award of the loan had
been approved. The $3,000,000 was described
as a supplement to funding by plaintiff,
indicating that additional money was also
available. The money was said to be "funding
for purchasing this property," referring to
three properties of which defendants'
property was one, shown on the Master Plan.
A reasonable conclusion from a reading of
this portion of the information is that a
governmental body which has sent a letter
advising that it has sought and successfully
obtained a $3,000,000 low-interest loan to
purchase properties for a public park and
which states it has supplemental funding for
that purpose, seriously intends to acquire
the property described. This conclusion is
reinforced by the statement, "On June 27,
1988, the Township Committee authorized the
Mayor to enter into an agreement with New
Jersey Green Acres to fund this acquisition."
The words "fund this acquisition," indicate
an intention to do so.
(5) Finally, the letter states that a
determination of the fair market value of
defendants' property is going to be made, and
that three different groups are going to make
that determination, "the township," "the
Green Acres office," and "independent
appraisers," an indication that more than one
appraiser was to be involved. The only
reason for plaintiff to determine the fair
market value of defendants' property would be
to purchase the property, and a statement of
three groups being involved in that decision
is indicative of a firm intent to acquire the
property.
The court reasoned that the Township's letter impeded development, thereby significantly diminishing the possibility that the land would be put to its highest and best use as a residential development. The court observed that the only
apparent alternative use would be agricultural. The court also
relied on the "conservative" estimate of the partnership's real
estate expert that the letter had devalued the property by
twenty-five percent, noting that "[t]here is no doubt that this
is so."
The court rejected the Township's argument that any effect
that the letter may have had was temporary only, as the parties
eventually settled their subsequent inverse condemnation case.
The court found that the settlement "constituted . . . an
acquisition of a portion of the property for which funding was
then available." The court noted that the evidence adduced at
trial indicated that the Township's proprietary attitude towards
the property had not abated. The threat of condemnation
continued uninterrupted, as was demonstrated by the Township
Committee's subsequent actions. Continuity of the substantial
effect of the letter on defendant's property was established.
Therefore, the court concluded that the date of that letter -
July 29, 1988 -- was the appropriate valuation date.
On April 29, 1994, five days after the entry of the trial
court's Order setting July 29, 1988, as the date of valuation,
the Township moved before the trial court to bar Yvette
Nierenberg and the partnership under the doctrines of res
judicata and collateral estoppel from relying on the July 29,
1988, valuation date. The Township's core argument was that,
because the inverse condemnation complaint was dismissed with
prejudice by a consent judgment, the consent judgment should be
considered an adjudication on the merits that would preclude
further judicial review. The court denied the motion, holding
that the consent judgment was not the equivalent of an
adjudication but rather should be regarded as akin to a
stipulation of dismissal.
The Appellate Division reversed the decision below.
285 N.J. Super. 436 (1995). That court held that the letter did not
substantially affect the partnership's use and enjoyment of the
property within the meaning of N.J.S.A. 20:3-30(c). Id. at 450.
The court reasoned:
The letter contained no promise by the
Township that it would ultimately condemn the
property. Instead, the Township indicated it
"may" acquire the property for development of
a community park in accordance with the
master plan and that it had obtained a loan
commitment to enable it to take this course.
Prior to the creation of Princeton Manor and
the purchase of the property, Philip Kramer
was aware of the fact that the land was a
potential site for a community park. The
master plan made that potential crystal
clear. So too, Princeton Manor either knew
or should have known that the Township had
obtained a low interest loan in order to
acquire and develop the property as a park
and that Green Acres funding was available.
The Township Committee's resolution was a
matter of public record. Clearly, these
events did not dissuade Princeton Manor from
proceeding with its plan for development.
The court determined that the letter "did not earmark the
property for taking. Instead, it was merely a preliminary step
to a potential future condemnation." Id. at 451.
The Appellate Division contrasted N.J.S.A. 20:3-30(c) with
N.J.S.A. 20:3-38, which provides that "[t]he value of any land or
other property being acquired in connection with development or
redevelopment of a blighted area shall be no less than the value
as of the date of the declaration of blight by the governing body
upon a report by the planning board." In enacting that
provision, the Legislature presumed that a declaration of blight
would adversely affect value. See Newark Hous. Auth. v.
Ricciardi,
176 N.J. Super. 13, 19 (App. Div. 1980). The
Appellate Division observed that the Legislature did not impose
on condemnees the burden of proving that an actual decline in
value between the declaration of blight and the taking date was
related to the declaration. Ibid. However, in contrast, the
court noted that in cases not involving a declaration of blight,
the Legislature required the condemnor to engage in preliminary
activities but did not indicate that any of those activities
necessarily would set the date of valuation. 285 N.J. Super. at
452. The court concluded that if such preliminary activities
were to set the valuation date, the Township would be forced "to
pay an unreasonable price." Ibid.
The Appellate Division further found that the partnership
could have perfected its application for major subdivision
approval, thereby forcing the Township to determine its
acquisition plans. Id. at 452. While the court acknowledged
that the partnership would have incurred significant expenses
either by conducting percolation tests or by seeking an amendment
to the sewer plan, it labeled them "business risks that would
have confronted Princeton Manor in any event." Ibid. Therefore,
the court ruled that any loss occasioned by a diminution in the
value should be borne by the partnership and not the Township
taxpayers. Id. at 453. The court reversed and remanded to the
Law Division for further proceedings consistent with its opinion.
Ibid.
While the state appeals were pending, Yvette, Stuart, and
Marilyn Nierenberg, together with the partnership, filed suit in
United States District Court against the Township, the Mayor, and
the Township Committee. Plaintiffs sought relief pursuant to
42 U.S.C.A.
§1983 and the New Jersey common-law actions for breach
of contract and fraudulent misrepresentation. The complaint was
dismissed on defendants' motion for summary judgment. The court
found that plaintiffs' § 1983 claims were time-barred, and
declined to exercise supplemental jurisdiction over the claims
arising under state law. On February 20, 1997, the Third Circuit
Court of Appeals entered a Judgment affirming the decision of the
District Court.
107 F.3d 863 (1997).
When private property is condemned for public use, the
condemnor is required to pay "just compensation" to the property
owner. U.S. Const. amend. V; N.J. Const. art. I, ¶ 20. The
previous landowner is entitled to that amount of money that will
make him whole. See, e.g., Bowers v. Town of Bloomfield,
81 N.J.
Eq. 163, 165 (E. & A. 1913); Port of New York Auth. v. Howell,
59 N.J. Super. 343, 347 (Law Div. 1960), aff'd,
68 N.J. Super. 559
(App. Div.), certif. denied,
36 N.J. 144 (1961). Eminent domain
proceedings are therefore required to produce a "fair market
value" for the subject parcel. State v. Gorga,
26 N.J. 113, 115
(1958); State v. Cooper,
24 N.J. 261, 268, cert. denied,
355 U.S. 829,
78 S. Ct. 41,
2 L. Ed.2d 42 (1957). "Fair market value" as
applied to condemnation proceedings was explained by this Court
in State v. Nordstrom:
Although a sum of money equal to "fair market
value" cannot always be a perfect measuring
stick for determining the worth of property
to a landowner, the State must try as nearly
as possible, employing objective standards,
to replace the land which has been earmarked
for public use with equivalent public funds.
One of the primary objectives of the Act was to integrate and standardize the more than 300 statutes then existing authorizing the exercise of eminent domain. County of Monmouth v. Wissell, 68 N.J. 35, 39-40 (1975); see also State v. Jones, 27 N.J. 257, 265 (1958) (Burling, J., concurring) (requesting legislative clarification of how date of valuation should be set when taking, by statute, precedes initiation of condemnation
proceedings). The Eminent Domain Revision Commission
(Commission) was created in 1962 to suggest revisions to the
then-existing Eminent Domain Act. County of Monmouth, supra, 68
N.J. at 38. The Commission produced its report in 1965. Id. at
38-39. That report served as the foundation for the current Act.
Id. at 39.
Article V of the report, entitled "Date as of Which
Compensation Shall be Determined," contains the following
comment:
Property owners are . . . affected by
public announcements by agencies of proposed
projects, highway routes and the like. Years
may elapse between the date of the
announcement and the consummation, and the
final plan may and probably will differ
substantially from the original scheme. The
Commission realizes that a public body must
be afforded a wide range of time within which
to reach its final conclusion, and to this
end, will publicize various thoughts to test
public opinion. But some consideration
should be given to the persons whose property
is thus placed in the test tube, and boiled
in the caldron of public and political
bickerings. It is said that this is the
price which is paid for the benefit of living
in a democracy. But why should these
property owners pay the entire cost? Should
not the benefited public also share?
. . . .
The Commission . . . suggests that any
increase or decrease in the value of property
caused by administrative actions, or public
announcements of proposed public
improvements, (other than that due to
physical depreciation within the reasonable
control of the owner) shall be disregarded in
determining the compensation for the taking,
and that compensation shall be fixed as of
the date the action of the taking body shall
substantially affect the use and emjoyment
[sic] of the property.
Shortly before passage of the 1971 Act, this Court decided Jersey City Redevelopment Agency v. Kugler, 58 N.J. 374 (1971). That case involved a constitutional challenge to certain 1967 amendments to the Blighted Area Act, N.J.S.A. 40:55-21.1 to -.14 (repealed 1992), and the Eminent Domain Act, N.J.S.A. 20:1-1 to 4-22. Id. at 376. Those amendments dealt with the valuation of property acquired in eminent domain proceedings as part of the development or redevelopment of blighted areas. Id. at 376-77. Before the statutory amendments, the statutes provided that value should be frozen as of the date of commencement of the condemnation action. Id. at 378. Both amendments provided that "`the value of any property sought to be acquired shall be fixed and determined to be no less than the value as of the date of the declaration of blight . . . .'" Id. at 377 (quoting L. 1967, c. 218, § 1 (repealed 1971) and L. 1967, c. 217, § 1 (repealed 1992)).
The parcel in question was declared blighted nine years before condemnation proceedings were instituted by plaintiffs Jersey City Redevelopment Agency and its Commissioner. Id. at 376. Plaintiffs, undoubtedly faced with higher acquisition costs under the new statutes, instituted suit contending that the Legislature could not compel the courts to adopt a fictitious taking date rather than the actual taking date. Id. at 377.
The Court defined the issue as "the problem of the effect in
subsequent condemnation cases of the earlier announcement by a
public agency that a public improvement was planned for a
particular location or area." Id. at 379. The generally
prevailing rule at that time dictated that any depreciation or
inflation due to a public announcement should not be reflected in
the value set for the parcel. Ibid. The Court held that the
statutory amendments at issue were consonant with that rule,
because they prescribed that the taken land be valued as of the
date of the declaration of blight, which would probably cause a
decrease in value. Id. at 383. The court found that the
Legislature had merely prescribed a minimum base for compensation
and had neither invaded the authority of the judiciary nor
violated constitutional guarantees of just compensation. Id. at
384-85.
A few months after the effective date of the Act, the Law
Division decided State v. Milkon Realty, Inc.,
119 N.J. Super. 156 (1972) and East Rutherford Industrial Park v. State,
119 N.J.
Super. 352 (1972). In Milkon Realty, the court found that the
"clear" legislative intent of L. 1971, c. 361, § 30 (codified at
N.J.S.A. 20:3-30) was "to fix the valuation date of ultimately
condemned property as of the time any action by the condemnor may
reasonably be deemed to thereafter affect the fair market value
thereof." 119 N.J. Super. at 162. Similarly, in East Rutherford
Industrial Park, the court found that injury incurred by public
announcements and publicity surrounding the proposed site of a
sports complex "may be taken into consideration in awarding
damages." 119 N.J. Super. at 361; see also Housing Auth. v.
Atlantic City Exposition, Inc.,
62 N.J. 322, 328-30 (1973)
(reiterating, in dicta, that a proper eminent domain valuation
disregards any depreciation or inflation due to proposed public
project).
New Jersey Sports & Exposition Authority v. Giant Realty
Associates,
143 N.J. Super. 338 (Law Div. 1976), is the most
recent case addressing N.J.S.A. 20:3-30(c). In New Jersey Sports
& Exposition Authority, the court considered whether certain
actions taken by the Hackensack Meadowlands Development
Commission (HMDC) and the New Jersey Sports and Exposition
Authority (Authority) deprived Giant Realty Associates (Giant
Realty) of the beneficial use and enjoyment of its property. Id.
at 343. In April 1972, Giant Realty applied to the HMDC for a
zoning certificate and building permit in order to use its
property for a gas station. Id. at 344. One month later, Giant
Realty entered into a twenty-year lease with Amerada-Hess
Corporation under which the corporation would operate a gas
station on the property. Id. at 344-35. On June 7, 1972, the
HMDC denied Giant Realty's application. Id. at 345. In April
1973, the Authority instituted eminent domain proceedings to
condemn Giant Realty's property. Ibid. The date of valuation
became a contested issue during those proceedings. Id. at 345-36. In applying subsection (c) to fix the date of valuation, the
court first outlined the legislative policy underlying the
subsection. Id. at 347-48. The court found that the dominant
theme of Article V of the Commission's report concerned the
"freezing" of value once an event occurs that causes a
significant fluctuation in value of the condemned parcel. Id. at
347. The court noted that one of the objectives of subsection
(c) is to protect the condemnee from a diminution in value
resulting from "the cloud of condemnation" being placed on the
property by a potential condemnor; another objective is to
insulate the condemnor from "the ravages of an inflationary
spiral." Id. at 348.
Describing the standard governing application of subsection
(c), the court stated: "A substantial effect upon the use and
enjoyment of property is occasioned when the condemnor takes
action which directly, unequivocally and immediately stimulates
an upward or downward fluctuation in value and which is directly
attributable to a future condemnation." Id. at 353. A "clearly
observable and direct interference which is directly related to
condemnation" must exist if a substantial effect is to be found.
Id. at 353-54. The court concluded that the June 7, 1972, letter
of denial of Giant Realty's development application substantially
affected Giant Realty's use and enjoyment of the property,
observing that the denial of the building application presented a
clear example of an event that precipitates a fluctuation in
value. Id. at 355.
The result reached in New Jersey Sports & Exposition
Authority is consistent not only with New Jersey precedent, see
John M. Payne, A Survey of New Jersey Eminent Domain Law (With Academic Interruptions), 30 Rutgers L. Rev. 1111, 1139 (1977) (explaining that New Jersey Sports & Exposition Authority "[made] manifest a trend in New Jersey law that ha[d] been discernible for some time"); it is also consistent with the longstanding rule applied by courts in other jurisdictions. See, e.g., United States v. Virginia Elec. & Power Co., 365 U.S. 624, 636, 81 S. Ct. 784, 792, 5 L. Ed.2d 838, 849 (1961) (holding that "[t]he court must exclude any depreciation in value caused by the prospective taking once the Government `was committed' to the project"); Murray v. United States, 130 F.2d 442, 444 (D.C. Cir. 1942) (approving jury instruction that "in determining the compensation for the land being condemned they shall not take into consideration any effect, whether by enhancement or diminution, which the purpose or intention of the government to acquire this property for public use may have had upon its value"); Klopping v. City of Whittier, 500 P.2d 1345, 1355-59 (Cal. 1972) (establishing that, when condemnor acts unreasonably in issuing precondemnation statements, constitutional concerns mandate that owner be compensated); Dade County v. Still, 377 So.2d 689, 690 (Fla. 1979) (reiterating that "a condemning authority cannot benefit from a depression in property value caused by a prior announcement that it will be taken for a public project"); State v. Sovich, 252 N.E.2d 582, 588 (Ind. 1969) (holding that neither increase nor decrease in value precipitated by knowledge of government project is to be considered in valuing property);
Lipinski v. Lynn Redev. Auth., 246 N.E.2d 429, 432 (Mass. 1969) (establishing that landowner entitled to value of property unaffected by knowledge of impending taking); Michigan State Highway Comm'n v. L & L Concession Co., 187 N.W.2d 465, 467 (Mich. Ct. App. 1971) (finding that established rule of condemnation law is that valuation is determined without regard to change in value attributable to threat of condemnation); County of Clark v. Alper, 685 P.2d 943, 948-49 (Nev. 1984) (holding improper consideration of testimony concerning value of condemned property after city plan predicting taking of property was published); In re 572 Warren Street, 298 N.Y.S.2d 429, 433 (Sup. Ct. 1968) (holding that "[t]he City may not by virtue of a condemnation and by its own action cause a depreciation in value of property to be condemned and then claim that just compensation is that depreciated value"); Raleigh-Durham Airport Auth. v. King, 330 S.E.2d 622, 625 (N.C. Ct. App. 1985) (holding that evidence of longstanding announcements by condemning authority was relevant to show how proposed condemnation had chilled development, as condemnor could not benefit from any decrease in property value attributable to threat); In re Appropriation of Property of Bunner, 276 N.E.2d 677, 680-87 (Ohio Prob. Ct. 1971) (asserting that change in property value due to general knowledge of imminence of condemnation is to be disregarded in determining value). See generally Model Eminent Domain Code § 1005, 13 U.L.A. 91 (1986) (stating that fair market value of property does not include increase or decrease in value caused by proposal of
improvement or project for which property is taken); Julius L.
Sackman, 4 Nichols' The Law of Eminent Domain § 12B.17[7] (3d ed.
1989) (stating that Model Eminent Domain Code § 1005, supra,
follows general rule demanding that effects of proposed taking
are not to be considered in determining market value of land);
Annotation, Depreciation in Value, From Project for which Land is
Condemned, as a Factor in Fixing Compensation,
5 A.L.R.3d 901,
903-06 (1966) (collecting cases indicating that where value of
property has declined between announcement and actual taking,
landowner is allowed compensation representing original value of
property, or, at least, something more than depreciated value).
In Rova Farms Resort, Inc. v. Investors Insurance Co. of
America, this Court set forth the standard of review for non-jury
civil actions:
Considering first the scope of our appellate
review of judgment entered in a non-jury
case, as here, we note that our courts have
held that the findings on which it is based
should not be disturbed unless "* * * they
are so wholly insupportable as to result in a
denial of justice," and that the appellate
court should exercise its original fact
finding jurisdiction sparingly and in none
but a clear case where there is no doubt
about the matter. That the finding reviewed
is based on factual determinations in which
matters of credibility are involved is not
without significance. Findings by the trial
judge are considered binding on appeal when
supported by adequate, substantial and
credible evidence.
(citations omitted).]
Those principles continue to be consistently applied. See, e.g.,
Cohen v. Radio-Electronics Officers Union,
146 N.J. 140, 157
(1996); Walles v. Walles,
295 N.J. Super. 498, 513 (App. Div.
1996); see also Caldwell v. Haynes,
136 N.J. 422, 432 (1994)
(stating that appellate court should defer to decisions based on
trial judge's "feel of the case");
5 Am. Jur. 2d Appellate Review
§ 662 at 337 (1995) (reiterating that reviewing courts generally
may not set aside findings of fact merely because evidence
permits findings other than those made below, or because
appellate court might reach different result); cf. Manalapan
Realty, L.P. v. Township Comm.,
140 N.J. 366, 378 (1995)
(cautioning that, despite Rova Farms, trial court's legal
interpretations not entitled to special deference).
The rationale underlying that limited scope of appellate
review is that a trial judge's findings are substantially
influenced by his or her opportunity to hear and see the
witnesses and to get a "feel" for the case that the reviewing
court can not enjoy. State v. Whitaker,
79 N.J. 503, 515-16
(1979). This Court has recognized that "[b]ecause a trial court
`hears the case, sees and observes the witnesses, [and] hears
them testify,' it has a better perspective than a reviewing court
in evaluating the veracity of witnesses." Pascale v. Pascale,
113 N.J. 20, 33 (1988) (quoting Gallo v. Gallo,
66 N.J. Super. 1,
5 (App. Div. 1961)). In practice, when the Rova Farms standard
is applied and the reviewing court is satisfied that the trial
court's findings could reasonably have been reached on sufficient
credible evidence in the record, the decision below should not be
disturbed. Pioneer Nat'l Title Ins. Co. v. Lucas,
155 N.J.
Super. 332, 338 (App. Div.), aff'd,
78 N.J. 320 (1978).
State v. Johnson,
42 N.J. 146 (1964), sets forth guidelines
for our review of Appellate Division actions when that court
determines that a trial court's findings of fact were wrong.
Under Johnson, the Court first determines whether the Appellate
Division "initially approached the review correctly." Id. at
163. If the Appellate Division did not conduct its review
correctly, this Court's review will turn on whether agreement or
disagreement with the trial court's findings resulted. Ibid. If
agreement between the two tribunals exists, this Court then
determines whether both courts were clearly in error. Ibid. If
there was disagreement, the Court determines whether the
Appellate Division was "manifestly mistaken" in ruling that the
trial court "had gone too wide of the mark." Ibid.; see also
Sadofski v. Williams,
60 N.J. 385, 396 (1972) (holding that "[a]s
a second appellate tribunal, our function is the more limited one
of determining whether the Appellate Division was right or wrong"
in evaluating trial court's findings).
In its opinion, the Appellate Division began its analysis by
stating that "[t]his case does not involve a claim of inverse
condemnation." 285 N.J. Super. at 446. The court observed that
mere governmental plotting and planning does not constitute a
taking; that governmental action often compromises a parcel's
marketability; that even a substantial reduction in marketability
does not trigger Fifth Amendment protections; and that proposed
takings do not justify compensation merely because potential
purchasers may therefore reject the property. Id. at 447-48.
Although we disagree with none of those observations, we
note, as did the Appellate Division, that those principles are
not dispositive of this appeal. The inquiry whether specific
governmental action constitutes a taking does not determine
whether a landowner's use and enjoyment of his or her property
has been substantially affected by a future condemnor for the
purpose of fixing the valuation date that governs the eventual
condemnation proceeding. In an inverse condemnation case, the
property owner is "required to show that there has been
substantial destruction of the value of [his or her] property and
that defendant's activities have been a substantial factor in
bringing this about." Washington Market Enters. v. City of
Trenton,
68 N.J. 107, 123 (1975); see also Littman v. Gimello,
115 N.J. 154, 164 (reiterating that inverse condemnation requires
substantial or total destruction of beneficial use of property),
cert. denied,
493 U.S. 934,
110 S. Ct. 324,
107 L. Ed.2d 314
(1989). The legislative standard under N.J.S.A. 20:3-30(c),
however, requires only a showing that the governmental action has
"substantially affect[ed]" the landowner's use and enjoyment of
the subject property in order to fix the valuation date that
governs the condemnation proceedings. That standard differs from
the standard for determining when a government action constitutes
a taking. See New Jersey Sports & Exposition Auth., supra, 143
N.J. Super. at 349 ("It does not follow, however, that simply
because the denial of Giant's development applications did not
amount to a constitutional taking, such action cannot be said to
have `substantially affected' the use and enjoyment of the
property insofar as a determination of a date of valuation is
concerned."). Governmental action merely sufficient to set a
date of valuation under subsection (c) need not support a cause
of action for inverse condemnation.
The Appellate Division also noted that the partnership
"could have pursued its development plan by perfecting its
application for major subdivision approval, thus compelling the
Township to determine whether to seek condemnation." Id. at 452.
However, the critical issue in this appeal is not whether the
partnership could have continued its attempts to develop the
property, but whether the partnership's use and enjoyment of its
property was substantially affected by the July 29 letter.
Furthermore, while the partnership could have continued to seek
development approval from the Township, the record indicates that
any such attempt would have been futile. Partnership attorney
Buchsbaum recognized as much when he informed the Township
Administrator by letter that "we have found it impossible, as a
practical matter, to proceed with the development plans
previously filed on the above-referenced property because of the
Township's statement that it intends to acquire the property for
a park." Nor, given the cloud of condemnation over the property,
could the partnership have sold the land at an economically
feasible price to another developer. We decline to fault the
partnership for not pursuing its development application in the
face of overwhelming odds against approval. That course of
action would have succeeded only in consuming substantial
partnership assets with no commensurate benefit.
The question whether and when a landowner's use and
enjoyment of his or her property has been "substantially
affected" under N.J.S.A. 20:3-30(c) is a mixed question of law
and fact. See 5 C.J.S. Appeal & Error § 703d (1993) ("Mixed
questions of law and fact concern the application of a legal rule
to the facts and the determination of whether the rule is
satisfied."). The standard of review of the court's findings of
fact is dictated by Rova Farms, supra, in which we emphasized
that "[f]indings by the trial judge are considered binding on
appeal when supported by adequate, substantial and credible
evidence." 65 N.J. at 484.
Among the trial court's factual findings were that the
letter disclosed the Township's firm intention to acquire the
property and that, because of the letter, the property could not
be put to its highest and best use as a residential development.
The court also found that the Township's assertion of its plan to
acquire the property and of its ability to finance the
acquisition, as set forth in the letter, caused the property to
be devalued by approximately twenty-five percent. Those factual
findings by the trial court, amply supported as they were by
substantial credible evidence in the record, should not have been
rejected by the Appellate Division. See generally Pioneer Nat'l
Title Ins. Co., supra, 155 N.J. Super. at 338 (holding that, if
reviewing court is satisfied that trial judge's findings could
reasonably have been reached on sufficient credible evidence in
record, decision below should stand).
Applying the subsection (c) standard to those findings, the
trial court concluded that the letter of July 29, 1988, had
substantially affected the partnership's use and enjoyment of the
property. Therefore, the court held that the fair market value
of the property would be determined as of that date pursuant to
N.J.S.A. 20:3-30(c).
Whether the partnership's inability to develop the property,
which resulted in the twenty-five percent diminution in the
property's value, constituted a "substantial" e