The New Jersey Supreme Court answered in the negative the question whether a condemnor must negotiate in good faith with a mortgage holder that has obtained a foreclosure judgment pre-commencement of a condemnation action. Borough of Merchantville v. Malik & Son, LLC (opinion here).  In so doing, the Court affirmed the plain letter of the statute, and established black-letter law:  “We hold that a condemning authority has an obligation to present an offer to acquire property and to engage in bona fide negotiations with no party other than the individual or entity that holds title to the property or the holder of the interest sought to be condemned.”  The Court later in its opinion noted that a condemnor would have to negotiate with a leaseholder if the fee interest were  not in issue.  A simple and straight-forward rule of law.

The court’s holding was based on its reading of a clear and unambiguous statutory provision (N.J.S.A. 20:3-6).  The court also ruled that the condemnor had no duty to negotiate with the mortgagee as the requirement only extended to those parties for which an offer must be extended.

Compare the Merchantville decision with the Supreme Court’s decision regarding a condemnor’s obligation to negotiate with a tenant, discussed in our 2011 blog post “Tenant Has Clout to Negotiate in Condemnation“.  Are these two opinions consistent with each other?

As a follow-up to our July 21st posting on a significant recent case from the Georgia Supreme Court, we’re thrilled to provide this special guest blog from Charles Pursley, Esq., who served as counsel to the property owner in the Dillard case.  More info about Charles and his firm are available on his website.  Thanks for the contribution, for your work in protecting property owners’ rights, and your thoughts, Charles!

charles-297x300The complexities of eminent domain law can baffle inexperienced lawyers.  Appraisal methods, procedural stipulations, and over two centuries of jurisprudence form an intricate network that dictates how and when private property can be taken.  However, regardless of how convoluted the field is, there are concrete principles that remain certain.  In Dillard Land Investments, LLC v. Fulton County, the Georgia Supreme Court spoke clearly and decisively about Fulton County’s attempt to abuse the system.

After a special master awarded $5,187,500.00 as compensation for the taking of Dillard’s land, Fulton County attempted unilaterally to dismiss its case without paying the just and adequate compensation owed the plaintiff.  The trial court vacated and set aside the County’s attempt to dismiss its case and ruled that the County was required to pay the award because it failed to file an appeal for a jury trial to contest the amount.  The Court of Appeals found much differently and reversed the decision.  An ultimate appeal to the Georgia Supreme Court resulted in a ruling that, after entry of the award of the special master, Fulton County was no longer entitled to dismiss the condemnation proceeding.

The Court reasoned that an award of a special master has the same legal effect as an assessor’s award.  When the award was entered, it became the judgment of a tribunal fixing the rights and liabilities of the parties, including Fulton County’s liability to pay the $5,187,500.000.  Attorney Charles Pursley Jr., who represented Dillard Land Investments in the case, said the opinion “reinforces the principal that condemning authorities must operate within the constraints of the law”.  The Court of Appeals’ decision would have deprived property owners of the right to be compensated for a government’s actions in taking private property.  “Legally and ethically, eminent domain must be exercised with utmost good faith”, Pursley went on to explain “the Court of Appeals decision would have given condemning authorities the right to simply walk away and leave the condemnees without just and adequate compensation.”  Condemnation cases “usually take years before they even get to a special masters hearing.   They begin with public information meetings – after which tenants may move out and it’s impossible to sell the land.  You generally can’t recover for pre-condemnation damages.  When you can’t sell, you can’t rent, and your property is losing value; damages accrued by the time the special masters award is decided are much more than attorney’s fees.   Allowing the condemning authority to require the property owner to go through a protracted process, possibly multiple times, and still allow the condemning authority unilaterally to withdraw would be an abuse of property owner’s rights”.

The Supreme Court opinion dissects how the Court of Appeals came to a position contrary to their own ruling by pointing out that the court misread the only case addressing the condemnation statute in question, and misinterpreted the intention behind the statute.  The Court of Appeals decision would inequitable allow condemnors to pick and choose the appraisal value they prefer by rejecting an unfavorable award and using multiple special master’s hearings instead of filing an appeal and facing a jury trial.  As Pursley points out, “if condemning authorities are confident in their appraisals, there should be no objection to following the statutorily prescribed appeals process to defend it in court.” The Supreme Court’s decision ensures that all condemnation procedures will continue to be used consistently and correctly.

Charles Pursley, Jr.,Esq.

Pursley, Friese & Torgrimson

Atlanta, Georgia

 

The Georgia Supreme Court recently reversed a decision of the Georgia Court of Appeals and reinstated a special master’s award of $5,187,000 in favor of the property owner for the taking of its property by eminent domain. Full text of Dillard Land Investments, LLC v. Fulton County opinion here.

In short, the Supreme Court held “that a condemnor is not entitled to voluntarily dismiss a condemnation action unilaterally once the special master renders his award” and reversed the Court of Appeals decision that permitted the condemnor to withdraw from the condemnation after the special masters award.

For more info, check out the posting of our colleague Charles Ruffin, Esq. of Owners’ Counsel of America, here.

The procedures in New Jersey are somewhat different and specifically controlled by the Eminent Domain Act.  Here, a condemning authority is entitled to abandon a taking at any time after the filing of a complaint and before or within 30 days after the filing of the award of the condemnation commissioners, but only IF a Declaration of Taking has not been filed.  In cases where a Declaration of Taking has been filed, the condemning authority is not entitled to abandon a taking unless it has consent of the owner.  N.J.S.A. 20:3-35. In either event, the owner is entitled to damages, including costs and fees, in the event of an abandonment pursuant to N.J.S.A. 20:3-24 and 26.

Updating our recent entry on the Property Reserve case (here), the California Supreme Court has decided to review the Appellate Court’s finding that the Water Resource Board’s preliminary entry constituted a taking under California’s law of the eminent domain.  The appellate court ruling meant that the State was going to have to pay just compensation to thousands of property owners in order to conduct invasive preliminary testing on the viability of a tunnel to transport fresh water from Northern California to the arid South.  The California Supreme Court limited review to the following questions:

(1) Do the geological testing activities proposed by the Department of Water Resources constitute a taking? (2) Do the environmental testing activities set forth in the February 22, 2011, entry order constitute a taking? (3) If so, do the precondemnation entry statutes (Code Civ. Proc., §§ 1245.010-1245.060) provide a constitutionally valid eminent domain proceeding for the taking?

Full text of the Order is available here.

Looking forward to the briefs and decision.

A California appellate court recently declared its pre-condemnation entry statute unconstitutional. Property Reserve, Inc. v. Dep’t of Water Resources (JCCP No. 4594, March 13, 2014).  While we are not going to recount all the details of the comprehensive opinion here, the State was seeking access to private property pre-condemnation in connection with a proposed tunnel project for delivery of water from the North to the South in order to study the geological and environmental conditions of the properties within the proposed tunnel route.  The State sought court approval of the preliminary entries.

The trial court granted the State preliminary entry for environmental testing on set terms, and denied preliminary entry for geological testing on the grounds that those activities would result in the permanent physical occupation of private property, i.e. a taking of private property which could only be accomplished by commencement of a condemnation action.

With respect to the environmental studies, much like the New Jersey statute which applies to preliminary entry, the California statute allows a potential condemnor to “enter upon property to make photographs, studies, surveys, examinations, tests, soundings, borings, samplings or appraisals or to engage in similar activities reasonably related to acquisition….” Cf. N.J.S.A. 20:3-16.  Unlike the trial court, the California Appellate Court found that the “entry order for environmental activities authorizes a taking of a property interest in the nature of a temporary easement that must be acquired in a condemnation suit” and therefore reversed the Order authorizing preliminary entry.

The appellate court explained its findings by use of a four-part balancing test: 1) The degree to which the invasions are intended; 2) the character of the invasions; 3) the amount of time the invasions will last; and 4) the economic impact of the invasion.  After employing the test, the court concluded, “all the factors weigh in favor of a finding of a temporary taking.  The invasion and its consequences are intended by the State similar to a direct condemnation for a temporary easement.  The invasion is a physical invasion, “a government intrusion of an unusually serious character.” (quoting Loretto v. Teleprompter, 458 U.S. 419 (1982).

In New Jersey, the preliminary entry statute automatically provides the property owner with a right to claim damages if a condemning agency does not commence a condemnation action within two years after the preliminary entry.

It’s extremely likely that the State will seek review from the California Supreme Court.  But in the meantime, think twice next time a condemnor seeks to gain preliminary entry onto your client’s property.

A New Jersey appellate court recently decided the sequel to a failed condemnation action from 2012 regarding property in Newark.  The property in question was commercial property owned in condominium form by New United Corp. and the Essex County Improvement Authority (“ECIA”), containing five buildings and a parking garage.  Due to prior disputes between the parties which resulted in litigation, a receiver was appointed to oversee the condominium association, during which time the Essex County Vocational Schools Board of Education (“Board”) became interested in using the premises as a school.  The Board unsuccessfully utilized its eminent domain powers in the prior 2012 opinion, where the Appellate Division concluded that the Board had failed to comply with its obligations to conduct bona fide negotiations with the property owner prior to instituting condemnation.  The matter was thus remanded and the present appeal stemmed from the trial court’s disposition of the matter on remand.

After the remand, the Board was ordered to discharge and dismiss the prior taking, its Declaration of Taking, and the Notice of Lis Pendens it had filed.  New United subsequently sought damages and expenses resulting from the failed condemnation, as is permitted by New Jersey’s Eminent Domain Act.  the damages included a claim of nearly $40,000,000 representing New United’s claim for rent and restoration of the property, several hundreds of thousands of dollars representing alleged remediation costs for fire code violations, and nearly $75,000,000 representing alleged delay damages for the completion of a development project by New United.  New United also sought damages in the form of mortgage expenses, and nearly $600,000 in attorneys fees and costs.

The Board opposed these claims by New United, and the trial court thereafter permitted discovery and held an evidentiary hearing on the issues in late 2012.  The trial court essentially denied all of New United’s claims, except for the claim for attorneys’ fees and expenses, which was granted in part.  This latest appeal followed.

In the current appeal, the court recognized the mandatory nature of an award of fees and costs incurred by a condemnee where the condemnor abandons a taking.  N.J.S.A 20:3-24 and 26.  The appellate panel affirmed the trial court’s decision denying New United’s claim for monies expended to retrofit the buildings to correct fire code violations.  With respect to New United’s claim for damages to the largest building, which claim exceeded $37 million, New United had offered evidence of damage caused, in part, by a series of burglaries that occurred during the Board of Education’s ownership, and also by the alleged use of the Essex County Sheriff’s office of the building for training exercises which caused physical damage.  Here, the appellate panel noted the obligation of the condemning authority to act prudently while occupying condemned property, and to avoid waste, mismanagement and self-dealing.  Failure to do so, during the condemnor’s temporary ownership, could result in liability for failing to restore the property to the condition it had at the time of the original taking.  Because there was insufficient evidence produced at trial as to these issues, the appellate court remanded the matter for further findings.

As to New United’s claim that it was entitled to approximately $74 million in lost development opportunities due to the abandoned taking, the appellate panel found these items speculative, non-compensable, and “pie-in-the sky”.  Accordingly, the trial court’s denial of these damages was affirmed, as was the claim by New United to stay the indebtedness it had to a lender on a mortgage and to discharge that mortgage.

Finally, with respect to the counsel fees and expense award by the trial court – totaling nearly $200,000 — the appellate court concluded that the trial court had improperly excluded fees for time spent after the initial reversal and remand, and questioned the hourly rate approved by the trial court, so the issue of counsel fees and expenses was remanded so that the trial court could “reevaluate the entire fee and expense award” and would be required to include any fees and expenses “reasonably incurred even after the judgment of condemnation was reversed”. Slip. Op. at 35-36.

As is the case with many appellate opinions involving remands, it remains to be seen whether the ultimate outcome will be the subject of a written or reported opinion, but we’ll keep an eye on this one for any further updates.

 

On May 6, 2014, the Appellate Division published its opinion in New Jersey Transit v. Mori (Docket No. A-0122-12T4).  The case involved acquisition of property impacted by wetlands regulated by the Army Corps of Engineers. Plaintiff’s estimate of compensation for the one acre (out of fourteen) partial taking was $61,000 given the presence of wetlands on the part taken; property owner countered that there was a reasonably probability of obtaining a permit to develop the land even with the wetlands and argued for a value of $666,000. (The owner also argued that the property contained no wetlands, and should be valued at $845,000).  After hearing all the evidence, the jury awarded $425,000.

Reversed.  The Appellate Division concluded that it was “error for the trial court to submit to the jury the question of whether the [Army Corps] would have granted [the permit]” without first conducting a preliminary hearing to determine whether there was sufficient evidence of a reasonable probability that Army Corps would have granted the permit.  The court remanded and directed the trial court to conduct a preliminary hearing. This opinion is consistent with the recent opinion of the New Jersey Supreme Court in the Borough of Saddle River v. 66 East Allendale, which we discussed in our blog post late last year.

The Appellate Court also found error where the court allowed the jury to question whether the taking area was, in fact, impacted by wetlands.  Long before the taking, the property owner had suffered an adverse final determination by the Army Corps that the property was wetlands.  Given that fact, it probably was error to allow the property owner to argue at trial that the property was not impacted by wetlands.

A copy of the appellate court opinion is available here.

We’ll keep you posted.

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