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 25, 2013

Mantoloking (NJ) Contemplates Use of Eminent Domain for Dune Easements

Posted by Joseph Grather under In the news, Uncategorized | Tags: , , , , , , , |
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This just in – Mantoloking has decided to use eminent domain to acquire private property for the purported public use of dune replenishment. See articles from  CBS News and NJ.com.  McKirdy & Riskin’s Tony DellaPelle was interviewed and quoted in the CBS news video about the constitutional issues raised by attempting to require that oceanfront property owners donate their property in order to provide storm protection benefits to the public at large.

ImagePhoto courtesy Andrew Mills/Star Ledger.

You may remember when we blogged about the proposed easement that the town asked all of its beachfront residents to sign back in February.  Well, apparently not everyone was keen on donating their private property for beach/dune replenishment.

We’ll keep you posted.

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March 25, 2013

More from the Shore – Proposed Legislation Seeks to Limit Just Compensation

Posted by Joseph Grather under In the news, Legislative Developments | Tags: , , , , , , , , , , , , |
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Photo courtesy of Associated Press

Owners of property along the Jersey shore continue to be battered, this time by their own elected officials.  The New Jersey Senate recently introduced S-2618, which provides:

“Just compensation for an easement over a portion of beachfront property condemned for the purpose of dune construction or beach replenishment shall include consideration of the increase in value to the entire property due to the added safety and property protection provided by the dune or replenished beach. Any additional rights of the public to access property held in the public trust arising as a result of the easement, or the dune construction or beach replenishment, shall not be considered to cause a diminution in the value of the entire property.”

The State Assembly has a companion bill mirroring the above - A-3896 - introduced on March 7, 2013.  Similar legislation has also been introduced in the State Senate and Assembly by other legislators, S-2599 and A-3889.  These bills are awaiting legislative committee review.

So we all understand the jumping off point, “just compensation” is a constitutional term and is found in the New Jersey Constitution (N.J. Const. Art. 1, Par. 20) and the U.S. Constitution (5th Amend.)  The text of the New Jersey Constitution reads: “Private Property shall not be taken for public use without just compensation.”

Every court in the history of the United States has interpreted the Fifth Amendment as limiting government’s authority to take private property.  Within the clause there are two limitations expressed.

First, the taking must be for a “public use.”  Second, government must pay “just compensation”.

While most, if not all, may agree that government taking of private property in order to replenish New Jersey beaches damaged by Superstorm Sandy would satisfy the “public use” criteria of the Constitution, legislation like the bills mentioned above that attempt to legislatively satisfy the “just compensation” part of the analysis appears to be constitutionally infirm for several reasons.

First, it would violate the fundamental concept that the just compensation is to be determined by judicial processes, not by legislative mandate.  United States v. Cors, 337 U.S. 325 (1949);   Monongahela Navigation Co. v. United States, 148 U. S. 312  (1893).   In other words, “there is no precise and inflexible rule for the assessment of just compensation.” State v. Gallant, 42 N.J. 583 (1963).

Second, the proposed legislation might allow government to acquire private property “without just compensation” in violation of the Constitution.  If a statute mandates a particular valuation rule which fails to afford “just compensation”, it is contrary to the constitutional mandate.

Third,  the proposed statute seeks to preemptively decide the issues pending before the New Jersey Supreme Court is a case known as Borough of Harvey Cedars v. Karan, 425 N.J. Super. 155 (App. Div. 2012).  The issue in Karan is whether the decision of an Ocean County jury to award a property owner “just compensation” for the taking of their private property should be affirmed.  The government has appealed the award of just compensation arguing that the property owners should not receive more than $1 dollar for the taking of their private beachfront property because the government put a public dune on the part taken that benefits the entire beach-going public, as well as the inland residences and businesses occupying the barrier island.  The trial court and the Appellate Division rejected the government’s argument, and the Supreme Court decided to take the case before Superstorm Sandy struck.

Finally, any legislation which seeks to treat some people or classes of people differently than others may itself violate the Equal Protection Clause contained in the 14th Amendment to the U.S. Constitution.

Now, in the aftermath of a devastating natural disaster, government seeks to remedy the devastation – that it alone could have prevented – by making private property owners the scapegoat.

But the property owners are not to blame. Let’s not forget that the Army Corps warned of these very dangers decades ago, and government failed to prepare use for the coming storms.  Let’s not let government attempt to foist its responsibility on the narrow shoulders of a small group of property owners.

For more on these issues, see our prior blog postings:

In the Wake of a Superstorm the Debate Continues – Who Should Pay for the Dunes?

Rebuilding After Sandy: Government Assistance at Odds With Private Property Rights

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March 7, 2013

Eminent Domain Bill Clears Senate Committee, Would Update Redevelopment Procedures

Posted by Anthony F. Della Pelle under In the news, Legislative Developments | Tags: , , , , , , , |
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Legislation that would rework some of the procedures used by local governments to their redevelopment powers cleared a State Senate committee earlier this week.  The bill, S-2447, codifies certain protections to property owners which were decided in court decisions in recent years, and also would provide a negotiation alternative to using eminent domain in local redevelopment projects.

The Senate Community and Urban Affairs Committee voted 5-0 for the bill, which is sponsored by committee chairman Jeff Van Drew, D-Cape May, and Sen. Ronald Rice, D-Essex.  It shares some of the provisions which had been included in earlier legislative efforts by Senator Rice that failed to pass before the full Senate two years ago.

S-2447 codifies Gallenthin Realty Development Inc. v. Paulsboro, 191 N.J. 344 (2007), in which the New Jersey Supreme Court held that a blight determination requires a finding of a “deterioration or stagnation that has a decadent effect on surrounding property,” which could not ordinarily be applied to a large tract of vacant land.  The Gallenthin scrutinized the then-common use of municipalities in New Jersey of a standard in the Local Redevelopment and Housing Law, N.J.SA. 40A:12A-5(e) — a “stagnant or not fully productive condition”  to justify that an area was blighted, or “in need of redevelopment”.

S-2447 also codifies Harrison Redevelopment Agency v. DeRose, 398 N.J. Super. 361 (App. Div. 2008), in which an appeals court held adequate written notice of condemnation for redevelopment needs to be provided during the redevelopment planning process.

The other significant provision in the bill, and its companion bill in the State Assembly (A-3615),   is that local governments will be given an option as to whether they will be empowered to use eminent domain to acquire properties in redevelopment areas.

“The bill says municipalities can go with Option A or Option B,” says Michael Cerra, the senior legislative analyst with the New Jersey State League of Municipalities.

If enacted, this bill could help to spur redevelopment in certain areas without having to threaten the property rights of the existing owners.

The companion bill in the Assembly is scheduled for consideration in the Assembly Economic Development and Commerce Committee today.

PolitickerNJ reported on the bill earlier this week in this article.

Stay tuned for more on this legislative development.

 

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February 25, 2013

Hoboken North End Redevelopment Moving Forward

Posted by Joseph Grather under In the news | Tags: , , , , , |
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The Hoboken Planning Board recently completed its investigation of a proposed redevelopment area dubbed the North End Redevelopment Area.

A full copy of the Study Report is available on the City’s website.

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Photo courtesy Google maps.

As noted in a recent article by Amanda Palasciano of the Hudson Reporter, the next step in the process is for the Planning Board to hold public hearings on the proposed redevelopment designation.  Thereafter, the planning board will make a recommendation to the governing body on whether the entire area (or a portion thereof) is in need of redevelopment.   The governing body then would then adopt a resolution acting on the planning board’s recommendation.

Notably, if the area is blighted (i.e. designated in need of redevelopment) and a redevelopment plan is subsequently adopted, the City would be able to use eminent domain to take private property within the designated area.

The hearing dates should be up on the City website shortly.

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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.

 

January 28, 2013

Underwater Mortgage Plan Rejected by County That First Proposed It

Posted by Cory K. Kestner under In the news | Tags: , , , , , |
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Citing lack of public support, the California County that first considered using eminent domain to seize control of private residential mortgage-backed securities with the intent of cutting the principal balances of negative-equity borrowers has publicly announced its decision against that course of action.  Under the original proposal, Mortgage Resolution Partners would find institutional investors willing to provide the financing for government agencies to condemn millions of distressed mortgages.  The government would have taken title to the loans, but not the actual home, and paid the original mortgage owner the “fair value” with the money provided by institutional investors.  Mortgage Resolution Partners would then have worked to restructure the loans to reduce homeowners’ monthly mortgage payments, while selling the restructured loans to hedge funds, pension funds and other institutional investors with the proceeds paying back the outside financiers.

News of San Bernadino’s about-face comes hours after the concept was featured in discussion by eminent domain practitioners from around the country at the annual ALI-CLE Eminent Domain and Land Valuation Conference in Miami last week.  At that conference, two panel discussions debated the wisdom of utilizing eminent domain to take underwater mortgages.  The panelists included Cornell Law Professor Robert Hockett, Loyola University Law Professor Emeritus Gideon Kanner, Pacific Legal Foundation’s James Burling and McKirdy & Riskin‘s Ed McKirdy and Anthony DellaPelle.   In sum, the panelists substantially agreed that the plan was fraught with possible problems and pitfalls, and warned that its implementation would be more expensive than the plan’s proponents had suggested, and was not likely to result in any meaningful public good or purpose.

The concept has been a lightning rod for public opinion.  As we noted in prior blog post found here, experts, media, and politicians varied widely in their opinions on the proposed plan.   However, this is may not be the last time we have heard of this idea as the company proposing the idea is still in discussions with other municipalities around the country to implement the plan.

For more on this story, please see the following news articles and opinion pieces:

San Bernadino County abandons eminent domain mortgage plan

San Bernardino County rejects ‘eminent domain for underwater mortgages’ proposal

SAN BERNARDINO COUNTY: Eminent domain mortgage solution rejected

A solution for underwater mortgages: Eminent domain

RPT Investors tout controversial ‘condemnation’ for housing fix

Investors With Ties To Buffett, Soros, Obama Plan Mortgage Eminent Domain Grab

Eminent domain is floated for mortgages

SAN BERNARDINO COUNTY: Controversial mortgage fix considered

County Studies Eminent Domain to Address Mortgage Crisis

 

January 7, 2013

Rebuilding After Sandy: Government Assistance At Odds With Private Property Rights

Posted by Joseph Grather under In the news, Legislative Developments | Tags: , , , , , , |
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The following quote is attributed to President Ronald Reagan:

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One example of government assistance post-Hurricane Sandy was the removal of an entire house because it was allegedly in the right of way:

Ortley Beach home removed

Well, photographic and video evidence proved that the house was not in the right-of-way, but the State removed and demolished it anyway.

Another example, a local government unit in LBI decided that sand removed from the right-of-way was best deposited on a private property owner’s front yard.  It cost the small homeowner thousands of dollars to remove the sand from his front yard and then the government refused to reimburse the property owner for his removal costs.

Finally, a clear example of government failure can be found in its dune replenishment policy.  In 1999, thirteen years before Sandy struck, the United States Army Corps of Engineers came up with a plan to protect all private property owners from a tidal surge.  That plan was not fully implemented before October 29, 2012.  Part of the problem is that plan implementation was left up to local government, and various local government agencies had varied levels of interest, participation, and results with the plan.

Now, those local politicians are looking for a scapegoat.  Private citizens who happen to own beachfront property are in the cross-hairs.  The politicians have cried foul because of the property owner’s refusal to give-up their private property for the public good and the news agencies have trumpeted the cries almost on a daily basis:

NJ.com today – Tom’s River Homeowners Slow to Give Up Land Needed to Rebuild Protective Dunes;

NJ.com Dec. 2, 2012 – N.J. Shore Towns Near Showdown With Dune-Building Foes.

In mid-December, the Town of Mantoloking wrote to all beach-front property owner demanding that they donate their property by signing an easement before year’s end  (Merry Christmas!).  This practice has been followed by other municipalities in Monmouth and Ocean Counties, as they rush to build and replenish sand dunes before the next big storm hits.

Two of the most fundamental rights found in the bundle of rights known as “property” are the right to “exclusive possession” and the “right to security” defined as “immunity from expropriation.” (“Expropriation” is a synonym for “eminent domain”). See Denise R Johnson, Reflections on the Bundle of Rights, Vermont Law Review (2007).  Neither of those rights would be honored if the public forced private property owners to donate their property for the public good, i.e. without payment of just compensation.

Ms. Johnson’s article references Lucas v. South Carolina Coast Commission, 505 U.S. 1003 (1992).   That case examined the effect of the State’s adoption of  the Beachfront Management Act in 1988.  The South Carolina legislation created the Coastal Commission to manage its shoreline due to the regularity of hurricane strikes along its barrier islands and shoreline.  The Commission determined that Mr. Lucas, a beachfront property owner, would not be able to build a residence upon his land.  Lucas sued the Commission, and won at the trial level – a jury awarded $1.2 million for the taking, but he ultimately lost in State Court.  The United States Supreme Court reversed, holding “when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good… he has suffered a taking.”

Perhaps our State should look at South Carolina’s Beachfront Management Act as a guide on how to rebuild after Sandy.  Regardless of whether a State or regional commission is created in New Jersey to manage coastal development, a serious, informed analysis of the issues and possible solutions must be undertaken on a statewide level, rather than continuing a piecemeal, hodgepodge and hurried set of “band-aid” responses.

We questioned the wisdom of the continuing these past practices which have proven problematic at best in our recent Op-Ed in the Asbury Park Press (“Don’t Vilify the Greedy“).  While legislators have recently suggested various “solutions”, unfortunately the pressures of getting the Jersey Shore “ready” for this coming summer is apparently standing in the way of a better, sustainable plan for coastal development which Sandy has given us an opportunity to create.

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December 20, 2012

In the Wake of a Superstorm the Debate Continues – Who Should Pay for the Dunes?

Posted by Joseph Grather under In the news | Tags: , , , , , |
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The debate continues – Can government force private property owners to donate their private property for strengthening a dune system for the benefit the general public when the next superstorm hits?  Not in the U. S. of A.

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Photo courtesy http://www.myfoxphoenix.com

A recent National Public Radio program discussed the topic and interviewed property owners and government officials.  Governor Christie appeared to blame the property owners:  ”We had municipalities who were offered this assistance and residents refused to sign the easement because they didn’t want it to block their view. Well, they don’t have to worry about that now. They got no house.”

But despite this attempt to lay blame, a property owners’ refusal to consent cannot stop a bona fide public use, such as the dune project designed by the Army Corps of Engineers.

Essentially, the government’s position is two-fold.  First, it suggests that dune replenishment projects were delayed because some beachfront owners did not consent to the government’s effort to create or increase dunes on those owners’ properties.  But that position is without merit, since the government has always had the right to take those property interests by eminent domain. New Jersey is a “quick take” State and the government could obtain ownership and possession of the property it needs on an accelerated basis.  So any owner’s refusal has no legal bearing on whether the dunes could have been created before Sandy.

Second, the government contends that it would have been cost prohibitive to strengthen the dune system without beach-front property owners donating their private property for the public good.  (Sounds more communistic than democratic).  However, before the storm, the estimated cost to strengthen the dunes was $118 million.  After the storm, the estimated cost of the damage:

  • Insured Losses: $10 – 20 Billion
  • Total Economic Damage: $30 – 50 Billion

Certainly, $118,000,000 is less than $50,000,000,000.

According to the Army Corps and the State, at least some of the damage would have been avoided had the dunes been strengthened (and not all of the estimated damages arise from damages to beach-front properties).  The question is – how can government not do everything within its power to prevent the disaster from happening again?

In the end requiring owners to donate their property would be contrary to the New Jersey Constitution and the United States Constitution:  ”Private property shall not be taken for public use without just compensation.” (NJ Const. Art. I, Par. 20).

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Picture courtesy http://www.osb.org/gen/monte.html

Cut down, we shall grow back stronger.

Imagine, for a moment, that the government took part of someone’s private property to create a public road.  In that situation, would anyone disagree that the affected property owner would be entitled to just compensation for the taking of a part of his or her property?  In this dune replenishment saga, the same issues exist – the government is building the dunes on private property, taking part of the private property, to benefit all property owners.  Why should the private property owners NOT be entitled to just compensation?   The public benefits as a whole, so the public should be required to bear the cost, not just the affected owners.

This one promises to stick around for a while, so we’ll be monitoring it as it unfolds.

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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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