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May 20, 2013

NJ Supreme Court Hears Arguments On Dune Case

Posted by Joseph Grather under Court Decisions, In the news | Tags: , , , , , , , |
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On May 13, 2013, the Supreme Court heard argument in the case of Borough of Harvey Cedars v. Karan.  That case is on appeal from an Appellate Division decision, which affirmed a jury verdict awarding the property owners $375,000 as constitutional just compensation for the partial taking of their private beach-front property.  The municipality appealed the award, arguing that it was legal error for the court to prevent the jury from hearing evidence regarding an alleged “special benefit” the property received by installation of a sand dune.

While this case was tried to the jury and affirmed on appeal long before Super Storm Sandy struck her devastating blow on the mid-Atlantic coastline, the argument did not appear to be limited to the “record below” as is standard operating procedure for Appellate tribunals in New Jersey.

The property owners’ attorney argued that there was no evidence in the appellate record that there was any “special benefit” that could be attributed to the presence or absence of dunes recognized by the market in transactions involving comparable beach-front property.  Buyers and sellers of property, of course, pay a premium for beach-front property and the market data clearly evidences such premiums.  But again, there was no evidence that a dune, per se, had any effect on market value.  At trial, there was, of course, evidence that values would be impacted down-ward when the property owners lost their view of the ocean, and their former private beach would be then become accessible by the general public.

The reason why the trial court ruled that the award of just compensation should not be tainted with speculative evidence of the value of a purported “special benefit” was because the alleged benefit was not special or unique to the owner – the dunes were designed to protect the entire island from storm surges – a quintessential general benefit.

We’ll post up the Supreme Court’s opinion when available, and a link to the argument itself will soon be on line.

 

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May 13, 2013

Town’s Failure to Treat Property Owner Fairly Leads to Reversal by Appellate Division

Posted by Cory K. Kestner under Court Decisions, Settlements and Awards | Tags: , , , |
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A New Jersey appellate court recently reversed a trial court’s dismissal of a tax appeal, and found that the City of North Wildwood failed to act fairly in litigation with the property owner.  The property at issue is improved with a seven-story mixed-use tower, a 160-slip marina and a 3900 square-foot marina services building, and a one-story restaurant.  Plaintiff Beach Creek owns the land underlying the Towers but not the condominium units. The owner of the tower has a ninety-nine-year lease for the land underlying the Towers, and the rent is income to Beach Creek.  Following a revaluation in 2006, the City increased the assessed value of Beach Creek’s property from $1,526,200 for 2005, with an equalized value of $3,225,247, to $14,612,900 for 2006. The City assessed the property at $14,288,900, for 2007 and 2008. Beach Creek filed a timely challenge to its 2007 assessment on March 15, 2007 and a timely challenge to its 2008 assessment on March 24, 2008.  Beach Creek filed tax appeals for 2007 and 2008, and an action in the Chancery Division to challenge the 2006 assessment.

In connection with the pending Tax Court actions, the City obtained an appraisal report from its expert on March 12, 2009 which concluded that the “retrospective market value of [Beach Creek's] property for 2006-2009 tax years” was $4.6 million.  The City provided its appraisal to Beach Creek in discovery and filed it with the Tax Court.  As of March 2009, the City had information that the full and fair value of the property in 2007 and 2008 was nearly $10 million lower than the assessed value for those years, and the City thereafter assessed the property at $4.6 million for 2010.

At trial before the Tax Court, Beach Creek’s expert separately valued the different uses on the property after determining that the most reliable appraisal would be one reached by using the valuation method most appropriate for each of the property’s several components.  Beach Creek’s expert used the income approach in valuing the marina and the land underlying the Towers, the cost approach to value the marina services building, and the sales comparison approach to value the restaurant. The value he assigned to the entire property for 2007 and 2008 is the total of the separate values of the components in each of those years.

At the conclusion of Beach Creek’s case, the Tax Court granted the City’s motion to dismiss concluding that Beach Creek had not produced evidence sufficiently definite, positive and certain in quality and quantity to overcome the presumption of validity that attaches to the assessment under New Jersey law. R. 4:37-2(b); Pantasote Co. v. City of Passaic, 100 N.J. 408, 412-14 (1985).  The court first determined that the hybrid approach used by Beach Creek’s expert of “taking one approach for each of the three or four aspects of the property and then somehow just adding them together and coming up to value,” was unprecedented.  Next, the court found Beach Creek’s expert’s application of the cost and comparable sales approaches flawed, and therefore the court had no basis for assigning a true value to the property based on Beach Creek’s evidence.

On appeal, the Appellate Division found Beach Creek’s evidence was adequate to withstand the City’s motion. As to a lack of precedent for the hybrid valuation approach, the Appellate Division cited to Livingston Mall Corp. v. Livingston Twp., 15 N.J. Tax 505, 508-09 (Tax 1996), where the court was faced with valuing a mall that included three anchor department stores and non-anchor mall stores that were leased. The Livingston Mall court concluded that the income approach failed to capture the value of the anchor stores because of a lack of data, and therefore it would be appropriate to use the cost approach for the anchor stores, and the income approach for the non-anchor stores which were leased.

Finally, the Appellate Division found the City’s moving for dismissal based on Beach Creek’s failure to overcome the presumption of validity raised a serious question about the City’s performance of its obligation under F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426 (1985), to “turn square corners” in litigation.  The City, intending to rely on the $4.6 million appraisal at trial, was in possession of evidence that the 2007 and 2008 assessments were grossly erroneous. The Appellate Division found the City’s actions were inconsistent with its obligation to “comport itself with compunction and integrity.”  Thus, the Appellate Division rejected the court’s conclusion that Beach Creek failed to overcome the presumption of the validity afforded to the quantum of these $14.3 million assessments for 2007 and 2008.  The undisputed evidence in the City’s report established that the $14.3 million assessments for 2007 and 2008 were well off the $4.6 million report value, and that sufficient to overcome any presumption that the assessments’ quantum was valid.

As outlined in F.M.C. Stores, the square corners doctrine requires that no government action be taken in litigation with the aim of gaining an unfair advantage over a private citizen.  Thus, the government may not “conduct itself so as to achieve or preserve any kind of bargaining or litigational advantage” over a member of the public.  As the F.M.C. Court observed, this means that “government may have to forego the freedom of action that private citizens may employ in dealing with one another.”Litigation strategies and actions that may be expected in litigation between two private parties will be scrutinized when taken on behalf of a government agency in litigation with a provide citizen.

The property owner in Livingston Mall Corp. v. Livingston Twp., 15 N.J. Tax 505, 508-09 (Tax 1996) was represented by Thomas Olson, Esq. of McKirdy & Riskin, P.A.

A copy of the Tax Court’s opinion in Beach Creek Marina v. North Wildwood City may be found here.

For more blog posts on appraisal report issues, please see the following:

Experts’ Opinions Accepted Over Town’s Objections

Real Estate Tax Appeal Evidence: Admissible in Eminent Domain Case?

Expert’s “Gut Feeling” on Costs Survives Dismissal Claim

Court Disapproves Averaging of Comparable Sales

 

May 6, 2013

High Court Declines Hearing on Partial Taking of Cemetery

Posted by Joseph Grather under Court Decisions, In the news | Tags: , , , , , , , |
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Last week, the New Jersey Supreme Court denied a petition for certification filed by the Diocese of Camden in behalf of St Mary’s Cemetery in Bellmawr.  As reported by the Republic.com, in 2010, the New Jersey Department of Transportation acquired by exercise of eminent domain a six acre parcel owned by the church for its Route 295 Direct Connection Project.  The part taken did not include any grave sites, but the Diocese claimed that several of the interred may need to be relocated because the roadway project “might disturb the tranquility” of some sites.   The church has operated the cemetery site for 50 years.

The State had offered $1.9 million for the acquisition, but the church argued that the land was worth more than ten times that amount when taking into consideration the relocation costs (which apparently were not included in the offer amount). See Courier Post Online story.  Therefore the church challenged the NJDOT’s right to take, which was initially affirmed by the Appellate Division in October of 2012.

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Photo Courtesy –   CHRIS LaCHALL/COURIER-POST.

Absent making application for certiorari to the United States Supreme Court, the case will proceed to a valuation proceeding where the property owner will have an opportunity to present its theories to a panel of Condemnation Commissioners and then to a Camden County Jury.  The second part of the process is designed to protect the property owners constitutional right to just compensation.

We’ll keep you posted.

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April 9, 2013

Experts’ Opinions Accepted Over Town’s Objections

Posted by Cory K. Kestner under Court Decisions, Settlements and Awards | Tags: , , , , |
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Plaintiff Route 21 Associates challenged the assessments imposed by Defendant Township of Belleville on vacant land for tax years 2008, 2009, and 2010. The matter was scheduled for trial where the Tax Court accepted each party’s two witnesses as experts, one in real estate appraisal and one in environmental remediation, and admitted their reports into evidence. Both valuation experts agreed that the subject property’s unimpaired value should first be determined by using the sales comparison approach and that the unimpaired value should be reduced by the costs of remediation. The environmental experts agreed that a 6% discount factor should be applied to the subject property’s 10 year remediation costs and that the unimpaired value should be reduced by the discounted costs, plus the actual or already expended environmental costs, plus 10% for entrepreneurial risk. They differed in the method of offsetting the actual and projected costs for the unimpaired value.

At the close of proofs, Belleville moved to dismiss Route 21’s complaints pursuant to R. 4:37-2 on the grounds that Route 21’s experts each provided an impermissible “net” opinion.  Specifically, Belleville argued that Route 21’s valuation expert was unfamiliar with his sales, his adjustments to the sales was too great and rendered the information meaningless, and his reliance on the environmental experts opinion rendered his opinion a net opinion because the environmental report was a net opinion.

The Tax Court denied the motion. First, the court found the opinion was not flawed and inadmissible when some particular facts or conditions were not accounted for there were other substantive bases of support therein.  Similarly, the court noted that excessive adjustments went to the question of the expert’s credibility, and the weight to be given such adjustments depended on the facts and reasons supporting the appraiser’s conclusions.  Finally, the court found that Route 21’s environmental expert supported the conclusions in his report, and adequately explained the facts supporting those conclusions.

After reviewing all of the evidence presented to the court, the subject property’s fair market value as impaired was determined for each of the tax years under appeal, and an assessment was established by applying the Chapter 123 ratio as required.

A copy of the Tax Court’s opinion in Route 21 Associates v. Township of Belleville may be found here.

For more blog posts on environmental issues and appraisal report issues, please see the following:

“Special” Valuation Rules N/A To Environmentally Remediated Property

City of Elizabeth Ordered to Pay Motel Owner from Environmental Escrow

Environmental Impacts in Real Estate Valuation Litigation

Expert’s “Gut Feeling” on Costs Survives Dismissal Claim

Court Disapproves Averaging of Comparable Sales

 

April 1, 2013

Arkansas Fish and Game – Remand Briefs

Posted by Joseph Grather under Court Decisions, In the news | Tags: , , , , , |
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As you know from our December 2012 blog, the United States Supreme Court found that an Army Corps flooding program, which damaged a hardwood forest managed by the Arkansas Game & Fish Commission, may constitute a taking of private property.  Therefore, the Court upheld the property owner’s inverse condemnation claim, reversed the Fifth Court’s decision and remanded the matter to the Federal Court of Claims to adjudicate constitutional “just compensation.”

The parties have now submitted their briefs on remand.  Our Owners’ Counsel colleague, Robert H. Thomas, Esq. has them available on his blog. Click here for the property owner’s brief, and here for the government’s brief.   The government argues that it “did not take a flowage easement” and “at most, there was a modest, unforeseeable, and incremental increase in flooding.” (Db1).  The property owner argues that the Corp’s induced flooding resulted in “catastrophic mortality” of several different tree species. (Pb8).

We’ll keep you posted.

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February 7, 2013

Mortgagee Not Entitled to Bona Fide Negotiations

Posted by Joseph Grather under Court Decisions | Tags: , , , , |
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On February 5, 2012, the Appellate Division published its decision in a condemnation case captioned Borough of Merchantville v. Malik & Son, LLC (full text here).  The property was acquired by the municipality in connection with an earlier “in need of redevelopment” designation.  In short, the Appellate Court affirmed a trial court’s rejection of a “right to take” challenge based on an alleged failure to engage in bona fide negotiations.  The court also held that a condemnor had no duty to engage in bona fide negotiations with the “assignee of a mortgagee.”

Regarding the mortgagee’s assignee, the appellate court published its decision despite its comment that the trial court’s decision was based on “established principles” of case-law and the language of the act.  Section 6 requires a condemnor to negotiate with the person or entity “holding the title of record to the property being condemned.”  The trial court’s decision was therefore consistent with the express terms of the statute as interpreted by existing cases. City of Atlantic City v. Cynwyd Investments, 148 N.J. 55 (1997); and Town of Kearney v. Discount City, 205 N.J. 386 (2011).   Again, even though the case was published, it would appear that the holding is based on a clear reading of the statute and existing case-law.

Regarding the appellate court’s affirmance on the bona fide negotiations claim – it too was based on existing case-law.  The property owner rejected the offer in writing but failed to include any substantive basis or facts that would require the condemnor to reconsider the bona fides of its offer.  For instance, the property owner did not tell the condemnor about the two prior offers to purchase ($1,850,000 and $1,250,000), or the amount of the existing liens on the property.  Simply stated, a mere rejection of the offer without more cannot form the basis of a later bona fide negotiations defense.

 

December 4, 2012

US Supreme Court: Temporary Flooding May Constitute a “Taking”

Posted by Joseph Grather under Court Decisions | Tags: , , , , , , |
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Photo courtesy:  www.agfc.com

Today, the United States Supreme Court issued its unanimous decision in the case of Arkansas Game and Fish Commission v. United States (No.11-597).  The Court concluded in a ruling favorable to the property owner “that recurrent floodings, even if of finite duration, are not categorically exempt from Takings Clause liability.” (Slip op. at 2).

Plaintiff, Arkansas Game and Fish Commission owns 23,000 acres of land in northeast Arkansas along the banks of the Black River.  The property is “forested with multiple hardwood timber species that support a variety of wildlife habitats.”  Defendant, United States, owns the Clearwater Dam located about 115 miles upstream of the property.  The dam is operated by the Army Corps of Engineers.  The Corps’ water release policy is set forth in a Water Control Manual adopted contemporaneous with the construction of the dam in 1948.

In 1993, the Corps approved a deviation from the water release policy.  The property owner objected because the “revised water-release plan adversely impacted the property by inducing annual flooding.”  Nonetheless, the Corps implemented the deviation over the ensuing six years.  In 2005, the property owner sued, claiming that the resultant flooding of its downstream property resulted in a taking of private property without payment of constitutional just compensation as mandated by the Fifth Amendment.

The case was tried in the Federal Court of Claims.  The Court of Claims found that the flooding was foreseeable, and that the property was severely impacted.  The property owner “had been deprived of the customary use of the [property] as a forest and wildlife preserve, as the bottomland hardwood forest turned, over time, into a headwater swamp.”  The Fifth Circuit reversed ruling that the taking had to be permanent in nature to be compensable.

The Supreme Court reversed and remanded.  The Court’s holding was straight-forward and plain:  ”We rule today, simply and only, that government induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.”  Part of the Court’s decision was based on the long-standing rationale that the “Takings Clause is designed to bar Government from forcing some people to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”

The Court summarized its own review of takings clause jurisprudence by noting that “we have rejected the argument that government action must be permanent to qualify as a taking.”   Therefore, “because government-induced flooding can constitute a taking of property, and because a taking need not be permanent to be compensable, our precedent indicates that government-induced flooding of limited duration may be compensable.” (Slip op. at 9).

The impact of this decision is yet unknown but has already been the subject of much media coverage in a matter of hours.  More on this decision is available  from our Owners’ Counsel colleague, Robert Thomas, in his Inverse Condemnation blog post today.

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October 17, 2012

No “Temporary Taking” of Private Property in Long Branch

Posted by Joseph Grather under Court Decisions | Tags: , , , , , , |
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On October 11, 2012, the Appellate Division issued an opinion affirming dismissal of a property owner’s temporary taking claim. Hoagland v. City of Long Branch (A-0358-11T2; A-1583-11T2).  Absent successful petition for certification, so ends another chapter in Long Branch’s long history of redevelopment.

Before getting to the opinion, it must be noted that the only private property along New Jersey’s beautiful Atlantic coast-line that did not appreciate over the past six decades were those areas clouded by government redevelopment efforts.   Those efforts by the way, allowed private redevelopers to grab at least half of Asbury Park’s shoreline during the real estate boom of the early to mid 2000′s, the City’s redevelopers ran out of money when the market dried-up.  So, what happened to the owners whose property was blighted and clouded by condemnation more than a decade?  They got their property “back.”  No harm no foul?  I guess in New Jersey its, ‘no blood, no foul.’

The redevelopers were allowed to abandon these takings in 2008, and the property owners could either walk away with their expenses paid, or file new temporary takings claims.  The Hoagland case explains why the latter alternative was the road that should not have been taken.

The property owners argued that the filing of a complaint lis pendens effected a taking of their property.  The trial court disagreed, as did the appellate court. (Slip op. at 7).  In most simple terms, since the City never filed a “Declaration of Taking” and paid the property owners’ expenses after it abandoned the takings, the property owners were not entitled to relief.

In order to prove a taking of private property, one must show that some action by an entity with the power of eminent domain substantially destroyed the beneficial use of the property.  The property owners contended that “their properties lost value and they were unable to sell or develop their properties until the condemnation actions were abandoned.   As the trial court found however, there is no factual support for these claims in the record.” (Slip op. at 13).

A sampling of the redevelopment history is seen from our prior blogs:

Greetings from Asbury Park

Asbury Park Heads to Arbitration

Asbury Park Settlement Rejected

Asbury Park Asks Judge to Cancel Redevelopment K

Asbury Park Redeveloper’s Claim Against City Revived (2009)

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October 15, 2012

NJ Appellate Court Affirms Right to Condemn

Posted by Joseph Grather under Court Decisions | Tags: , , , , |
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Yesterday, the appellate division affirmed a trial court decision that rejected a property owner’s request to dismiss a condemnation action on the grounds that the State failed to engage in bona fide negotiations. State, DOT v. St. Mary’s Church (Docket A-5448-10T1).  The property owner argued that dismissal was warranted because the State failed to follow the correct pre-complaint procedures required for an entity to exercise eminent domain; i.e. produce a copy of an “addendum memo” authored by its appraiser when it made its offer, and for DOT’s failure to produce an internal “review appraisal.  The “addendum memo” was ultimately disclosed to the property owner, but the State refused to disclose the internal “review appraisal.”  After positing the issue as:  ”Does the failure to provide the addendum memo in the first instance require this court to dismiss the complaint… ?” The trial court found that it did not, and denied the property owner’s challenge.

The Appellate Division affirmed, and its reasoning is set forth in the following paragraph:

“In this case, Judge Millenky concluded that Black’s review appraisal was part of a deliberative process employed by the State to confirm the validity of the original appraiser’s report. The review appraisal added no new information that the State in turn used to “calculate[e] the amount if would offer” to St. Mary’s. Ibid.  Indeed, the original appraiser’s report fully set forth the method utilized in making the pre-litigation offer and incorporated comments and suggestions made by Black before it was served upon St. Mary’s. Additionally, St. Mary’s had another report which, utilizing a different method of calculation, set the fair value of the taking at a far greater amount. Together, these two appraisals were sufficient to “permit a reasonable, average property owner to conduct informed and intelligent negotiations.” Carroll, supra, 123 N.J. at 321. Judge Millenky held that the review appraisal was not subject to pre-litigation disclosure, and the failure by the State to serve it before filing the complaint was not a failure to engage in pre-litigation “bona fide negotiations.” N.J.S.A. 20:3-6. [Slip op. at 14].

These types of cases are highly fact sensitive, and the merits of each such case should be weighed closely before investing the substantial time and expense needed to mount a challenge to a condemnor’s right to take.

 

October 9, 2012

California Appellate Court Reverses Property Owner Victory in Condemnation Action

Posted by Joseph Grather under Court Decisions | Tags: , , , , , , , |
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The Sixth District of the California Appellate Court recently reversed a trial court opinion dismissing a condemnation action and awarding legal fees.  San Benito County v. Hollister, Inn (Docket CU-06-00051& CU-06-00054 September 19, 2012).

Following a trial on the County’s authority to use eminent domain (“right to take”), the court found that the County had “committed a gross abuse of discretion by failing ‘to consider the possibility of taking the property of an adjoining landowner to provide [respondent Hollister Inn] access to Highway 25′ pursuant to section 1240.350.”   In addition, “safe alternate access was removed from the plans and [the County] was warned by the trusted and competent project manager that the condemnation of the proposed alternate access from [respondent's] property to Highway 25 would violate the law prohibiting the taking of private property from one private party for the benefit of another private party.”

The trial court also recognized that Hollister Inn’s property was not “landlocked since it had access to San Felipe Road but determined that section 1240.350 did not apply to only landlocked properties.  The court concluded that, “as a matter of law,” “a plain reading of CCP § 1240.350″ permitted condemnation to provide an alternative access to the highway since access to that highway had been cut off.”  (Slip op. at 11-12).

In sum, the property owner objected to the taking because the County took its direct highway access and failed to take property from a neighboring owner to provide substitute highway access as permitted by California statute.  The County argued that it was only permitted to take private property from a neighboring owner to benefit an adjacent private property owner where the latter’s parcel became landlocked due to the loss of access.

The trial court agreed with the property owner and dismissed the action and awarded reasonable legal fees and expenses to the property owner in the amount of $223,700.

The appellate court reversed the dismissal and the award of attorneys’ fees.  The appellate court interpreted the California statute to mean that it only applied where the property became landlocked after the taking.  In other words, a condemnor is only permitted to condemn private property to provide access to landlocked properties.  Since the Hollister Inn had alternative access, the County was not required or permitted to provide substitute direct highway access by condemning an adjacent parcel.

New Jersey does not have a similar statutory provision, but case-law permits the acquisition of nearby private property and conveyance to another private property owner to mitigate damages caused by a partial taking.  There are also several New Jersey cases dealing with loss of highway access and damages caused thereby.

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