The Federal Circuit of Appeals issued its opinion in Lost Tree Village Corp. v. United States, a regulatory takings case, on June 1, 2015.  Our Owners’ Counsel colleague Robert Thomas beat us to the punch (of course), and provided an excellent case synopsis in his Inverse Condemnation blog, available here.  In brief, the Court of Claims held that the government’s denial of a permit to fill 4.99 acres of wetlands constituted a per se regulatory taking under Lucas v South Carolina Coastal Commission, 505 U.S. 1003 (1992), and that there was a regulatory taking under Penn Central v. New York City, 438 U.S. 104 (1978).  The Circuit Court affirmed the Lucas Taking, and found that it was unnecessary to reach the trial court’s alternate holding.

The U.S. Army Corps of Engineers denied the permit application in 2004, and the owner sued alleging that the property was worth $4.8 million with a permit and $25,000 without a permit.  The government did not genuinely dispute the owner’s valuation, but argued that the relevant parcel included other lands owned by Lost Tree, which argument was successful before the Circuit Court ruled on the first appeal that the relevant parcel was the 4.99 parcel.  On remand, the trial court found that the permit denial resulted in a loss in value of of 99.4%.  The question presented was thus “whether residual value from non-economic uses precludes application of Lucas and requires application of Penn Central’s balancing test.”  The Circuit Court agreed with the government that “a Lucas taking is rare” but concluded that Lost Tree was an example of the breed, however rare.  The Court also rejected the government’s argument that sale – even for nominal consideration – was an economic use that precluded application of Lucas’ per se taking doctrine.

In affirming, the Circuit Court also relied on (and perhaps resurrected) Loveladies Harbor, Inc. v. United States, 28 F. 3rd 1171 (Fed Cir. 1994) a case which concerned Bayfront property on Long Beach Island.  There, the Federal Court also found a categorical Lucas taking of 12.5 acres of Barnegat Bayfront property caused by the Army Corps (and DEP’s) denial of a fill permit.

We’ll keep an eye out for the petition for certiorari.

Last week, a New Jersey Superior Court judge granted a landowner’s summary judgment motion to dismiss the Township of Lakewood’s (“Township”) condemnation actions.  In Tp. of Lakewood v. Garzo, the Township instituted four condemnation actions after designating areas as being “in need of” redevelopment.  The Township initially believed that it had owned the subject properties for more than forty years by virtue of a foreclosure judgment issued in 1973 (no property taxes were paid on the subject properties for over 40 years).  In July 2014, the Township adopted an ordinance authorizing the Township to move forward with the condemnation proceedings.  By August 2014, the Township hired an expert to appraise the subject properties and the reports were finalized by October 1, 2014.  The Township proceeded to file its condemnation actions with the court on December 5, 2014.

While proceeding with its plan, the Township failed to notice that a recent deed was recorded on October 7, 2014 naming the pro se defendant in the present matter, Kenneth Garzo, as the current owner of the subject properties.  The Township did not provide the appraisal report to Garzo nor engage in any communication or negotiation with him because the Township was blind to this recent development.  As a result, Garzo filed a summary judgment to dismiss the condemnation actions for failing to provide him the opportunity to accompany the appraiser during the inspection of the properties, and for not receiving an offer in writing prior to the December 5, 2014 commencement date of the complaints.  In addition, Garzo argued that the Township failed to comply with the bona fide negotiations requirement of N.J.S.A. 20:3-6 before a condemnation action is instituted.  In response, the Township argued that Garzo’s interpretation of the statute was misguided.  Contrary to Garzo’s understanding of the statute, the Township claimed that N.J.S.A. 20:3-6 permits the court to waive the negotiation requirement if the holder of title is “unknown, resides out-of-state, or for other good cause.”  Given that Garzo resides in California, the Township thus argued that the statute permits the court to dispense with the negotiation requirement.

The court was not persuaded by the Township’s argument.  The court’s decision to dispense with the negotiations requirement is entirely discretionary as the statute clearly indicates that the court “may dispense with the necessity of such negotiations if the title holder resides out-of-state.”  The court’s decision to decline exercising its discretion to dispense with the negotiation requirements was due, in part, to the Township’s neglect to notice the recorded deed prior to filing its complaint.  The Township’s reliance solely on the tax rolls for verifying and confirming the current owners of the properties was simply inexcusable by the court.  Moreover, Garzo may have resided in California but after recognizing the condemnation action filed against the properties, he expressed willingness to negotiate with the Township making the bona fide negotiation requirement all the more important.

This was certainly not the first time a condemning authority failed to comply with N.J.S.A. 20:3-6.  In Borough of Rockaway v. Donofrio, a 1982 Appellate Division decision, the condemning authority made a monetary offer to the landowner but, among other things, failed to permit the owner to accompany the condemnor’s appraiser and also failed fully disclose the purpose and critical details of the proposed partial taking.  The Appellate Division set precedent by dismissing the condemnation action “for [the Borough’s] failure to honor the statute.”

Given what is at stake, one would expect the condemning authority to be more careful and diligent in their efforts in identifying the owners of the properties.  The Township of Lakewood certainly fell short and now heads back to square one.

A copy of the court’s opinion in Garzo may be found here.

McKirdy & Riskin‘s Ed McKirdy and Jack Buonocore served as counsel to the property owner in the Rockaway v. Donofrio case cited above.

Property owners have won a battle in a long simmering dispute in New York over pending real estate tax appeals.  The case was reported in the BuffaloNews.com.  In short, eight property owners with pending tax appeals against the City refused to let the City’s appraiser in their homes in connection with the preparation of the City’s appraisal reports.  The City countered that they could not make a fair assessment of property value without an interior inspection.  The intermediate appellate court agreed with the property owners reasoning that they were entitled to protection under the Fourth Amendment’s guarantee of privacy.

According to the appellate court,  “the city failed to show that its interest in interior inspections outweighed the homeowners’ Fourth Amendment right to privacy, the appellate court ruled.” (BuffaloNews.com).  The question that immediately comes to my mind, if the cases proceed to a trial, do the property owners get to undermine the City’s appraiser’s testimony based on his failure to conduct an interior inspection?

Apparently all the owners just wanted the cases, which have been pending for six years, to get resolved.  But, the City has vowed an appeal to New York’s highest court, so it does not seem like the end is in sight.

 

Yesterday, a United States District Court judge restrained the U.S. Army Corps and NJDEP from any further action towards their joint Little Egg Inlet to Barnegat Inlet Storm Damage Reduction Project pending further hearings to be held in two weeks time.  The City of Margate, which owns the beach west of the State’s public trust area, does not want to be saddled with the DEP/Army Corps dune project, and filed a complaint in federal court alleging that the governmental entities had violated federal and State law when they attempted to “take” part of the municipalities ocean-front property without complying with the Eminent Domain Act.  The federal judge initially agreed and has issued an order temporarily restraining the federal and state agencies from acting in furtherance of the project.

Another hearing has been set for December 17th in the action.

We’ll keep you posted.

Related news coverage of the case:

Press of Atlantic City

Shore News Today

Ocean County Assignment Judge Vincent Grasso dismissed a declaratory judgment action filed by a redeveloper against the Township of Ocean finding that the redeveloper had to exhaust its administrative remedies before coming to the Court for relief.  Alternatively, it appears that the redeveloper was seeking to partially invalidate or revise an ordinance that had been adopted two and half years earlier. Obviously, out of time. See Del Corp. Enterprises I, LLC v. Township of Ocean (Oct. 9, 2014, opinion here)

The redeveloper, Del Corp., was working with the Township in connection with the designation of tract of land as “in need of redevelopment” under the Local Redevelopment & Housing Law (NJSA 40A:12A-1 et seq).  Once designated, the redevelopment plan would call for a residential housing development called the Tradewinds at Waretown consisting of 115  market rate units and 29 affordable units.  The project received site plan approval from the planning board in 2011, subject to the Township enacting an ordinance adopting a redevelopment plan.  Said ordinance was adopted in February of 2012, and provided “[o]f the 144 dwelling units, 115 units are to be for-sale condominium units and 29 units are to be affordable rental units.”  Del Corp did not object to the Ordinance.

Two years later, Del Corp. has contracted to sell the project to a third-party.  However, the third-party will not finalize the transaction with the “for sale” requirement contained in the ordinance.  The third-party wants to be free to sell or rent the market units.  Hence, Del Corp’s declaratory judgment action, which the Court found premature:

“Del Corp’s brief states “[i]f the terms of the ordinance are enforced by the Township and the developer is not permitted to rent out the market rate units, the contract purchaser will terminate the contract.” Because Del Corp has not demonstrated that it has applied to build  apartment units contrary to the Redevelopment Plan and the Township is enforcing the terms of the Ordinance, the court concludes that Del Corp seeks a declaratory judgment here to discern the rights upon facts that are “future, contingent, and uncertain.” (Slip op. at 7).

Even if it were ripe, the Court found that Del Corp had not exhausted its administrative remedies, namely asking the Township to amend the redevelopment plan to exclude the “for sale” requirement.  If aggrieved by the outcome, Del Corp would then be able to seek redress before the Courts.

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 Kentucky court recently stopped a utility company from utilizing eminent domain to build an underground gas pipeline to transport natural gas liquids through the Commonwealth.  The case, Kentuckians United to Restrain Eminent Domain, Inc. v. Bluegrass Pipeline Company, LLC (Civil Action No. 13-CI-1492),  involved the challenge by plaintiff, a non-profit agency formed for the purpose of protecting Kentucky residents from“the threat of and attempts to exercise eminent domain by entities not in public service to Kentuckians,” to the efforts of the Bluegrass Pipeline Company to use eminent domain powers to construct a new 24-inch gas pipeline, which would transport the liquids from shale reserves in Pennsylvania, West Virginia and Ohio to the Gulf Coast.

Plaintiff’s declaratory judgment action sought a ruling on whether Bluegrass in fact had the power of eminent domain under Kentucky law.  Under Chapter 278 of the Kentucky Revised Statutes (“KRS”), a Public Service Commission is dedicated to regulating utilities, and only regulated entities that adhere to the requirements of the statute are “in public service” and authorized to use eminent domain. The statute provides: “Any corporation or partnership organized for the purpose of … operating oil or gas well or pipeline for transporting or delivering oil or gas, including oil and gas products, in public service, may… condemn the lands and material or the use and occupation of the lands.”

The plaintiff argued that Bluegrass was not in public service, was not regulated by the Public Service Commission and did not serve Kentucky customers or producers because it was an interstate operation.  It further contended that the natural gas liquids that would be transported through the pipeline were neither “oil or gas” nor “oil or gas products” as required by KRS 278.502.

Bluegrass opposed the motion, suggesting that there were genuine issues of material facts in play, and that its products were “oil, gas, or oil and gas products” under KRS 278.502.  It also contended that it was acting “in public service” because, as a common carrier, it would “furnish services to the public, potentially including manufacturers and producers in Kentucky.”

The Circuit Court concluded that Bluegrass lacked the power of eminent domain under Kentucky Law. The court noted that Chapter 278 of the Kentucky laws was enacted to protect consumers “against costly and unnecessary capital construction.”  It found that Bluegrass sought to benefit from the rights conferred on regulated utilities without subjecting itself to the responsibilities, duties, and regulatory oversight imposed by the KRS.

While this decision is not surprising, as it merely affirms that the power of eminent domain should only be wielded sparingly and that the statutory authority empowering condemning agencies to use condemnation powers should be scrutinized carefully, it has gotten the attention of many around the country, as utility companies have been undertaking efforts to increase and upgrade service and those efforts have involved the use of eminent domain in increasing frequency.  Bluegrass is said to be likely to appeal, so this one may be one to watch.

A copy of the Circuit Court’s opinion is available here.

See discussion on the case from our Owners Counsel of America colleagues Robert Thomas, in his Inverse Condemnation Blog, and Michael Rikon, in his Bulldozers at Your Doorstep Blog.

Here is a sampling of some of the media reports on the Bluegrass case:

 

 

 

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