Subscribe: New Jersey Eminent Domain Law Blog
Added By: Feedage Forager Feedage Grade B rated
Language: English
compensation  court  domain  eminent domain  eminent  jersey  law  ldquo  new jersey  new  property  rdquo  supreme court  taking 
Rate this Feed
Rate this feedRate this feedRate this feedRate this feedRate this feed
Rate this feed 1 starRate this feed 2 starRate this feed 3 starRate this feed 4 starRate this feed 5 star

Comments (0)

Feed Details and Statistics Feed Statistics
Preview: New Jersey Eminent Domain Law Blog

New Jersey Eminent Domain Law Blog

Published: 2014-06-10T13:37:11-05:00


Eminent Domain and the Underwater Mortgage


A number of cities in New Jersey, including Irvington and Newark, are considering using the power of eminent domain to aid homeowners whose mortgages are underwater. A mortgage is underwater when its unpaid balance is greater than the property’s market value. The underlying mortgages, however, are not necessarily in default. The concept of using eminent domain to assist homeowners in danger of foreclosure was first introduced in San Bernardino, California when the County explored the idea of addressing negative equity by using private equity to help current borrowers in foreclosure blighted neighborhoods. The controversial plan was for municipalities to use the power of eminent domain to circumvent mortgage contracts, acquire loans from bondholders, write them down, and give them back to the bondholders. The proposal was abandoned by the County and two of its cities because of the unquantifiable risk that it introduced to the market and the lack of public support. The level of risk involved, the possible cost of implementing such a plan, pushback from the mortgage industry, and the threat of serious litigation have proven significant impediments to cause a number of cities to reject the idea of using eminent domain as a cure-all to the woes of the housing market. Officials of other cities still find the possibilities of the plan appealing in theory, if not in practice. “It's designed to prevent foreclosures, keep people in their homes, stabilize our neighborhoods and give our local economy a chance to recover,” said Gayle McLaughlin, mayor of Richmond California. Richmond has adopted a plan to use eminent domain to seize underwater mortgages, but has yet to actually use the power. The city’s hesitation may be attributable to a forewarning of future litigation as a law suit that was preemptively filed by Bank of New York Mellon and Wilmington Trust Co. was dismissed by the court in September as premature. See Order Granting Motion to Dismiss, Bank of New York Mellon v. Richmond, California (Nov. 6, 2013). The Federal Housing Finance Agency  has also threatened legal action against cities that use eminent domain in this way. FHFA has called it “a clear threat to the safe and sound operations” of the mortgage industry. The Mortgage Bankers Association, asset managers as well as groups representing banks, real-estate agents, and builders have also objected to the plan, saying it would deter investments in mortgages and damage communities by having a chilling effect on the extension of credit to prospective homeowners. The financial industry views eminent domain as a slippery slope because it penalizes those who save and invest, and violates the rights of investors who may not receive the fair market value of the mortgage. Undeterred, officials and activists in Irvington, Newark, and other cities are championing the use of eminent domain to seize underwater mortgages as “friendly condemnations” and using incentives to persuade homeowners to agree to the use of the power of eminent domain to prevent foreclosures in the struggling cities. Activists insist that New Jersey is in a state of crisis. While foreclosure rates are falling in other parts of the country, New Jersey is on track for another 50,000 filings before the end of 2014. More than 50 percent of Newark and Elizabeth mortgages are underwater, trailing only Hartford, Connecticut among cities with more than 100,000 residents. Paterson is fourth at 49 percent, just ahead of Detroit. Jersey City ranks 32nd in the nation according to the report “Underwater America” completed by a team of urban planners and sociologists from numerous academic institutions. Although the New Jersey American Civil Liberties Union has traditionally been wary of the use of the power of eminent domain, executive director Udi Ofer has voiced support for the proposal and his belief that the use of eminent domain to purchase underwater mortgages would be permitted under New Jersey law. The ACLU joined officials from Newark, Ir[...]

If this isn't inverse condemnation, what is?


In 100 Paterson Realty LLC v. Hoboken, the Appellate Division addressed the standard for determining whether an inverse condemnation has taken place: whether the threat of condemnation has had such a substantial effect as to destroy all beneficial use and enjoyment of an individual’s property. Washington Mkt. Enters. v. City of Trenton, 68 N.J. 107,122 (1975). In an inverse condemnation action, a property owner seeks compensation for a de facto taking of his or her property by a government entity with eminent domain powers. A claim of inverse condemnation may result from a direct, physical taking of or interference with property, or arise from a regulatory taking. A claim may also arise from accidental property damage or the abandonment of plans to condemn the property. However, not every impairment of value establishes a taking. To constitute a compensable taking, the property owner must be deprived of all beneficial use of the property. Government “plans” do not ordinarily constitute a taking of property. Danforth v. United States. The mere plotting and planning in anticipation of condemnation without any actual physical appropriations or interference also do not constitute a taking. Kingston East Realty Co. v. State, 133 N.J. Super. 234, 239 (App. Div. 1975). The plaintiff alleged inverse condemnation and tortious interference with prospective economic advantage against the City of Hoboken. The plaintiff argued that the threatened acquisition of property for use as parkland by eminent domain during land use proceedings was a taking warranting payment of just compensation. The trial court held that a taking had not occurred and the Appellate Division affirmed.The property consisted of approximately 6000 square feet of land which contained a 3000 square foot commercial building. Plaintiff acquired the property in 2006 for $2 million with the intention to develop it as a residential project. The residential zoning designation permitted the development. The plaintiff submitted a number of applications to the Hoboken zoning board over a period of two years. However, all of plaintiff’s application were voluntarily withdrawn as a result of (1) “push back” by the board, (2) the adoption of a resolution supporting acquisition of the property for use as “open space” or parkland, and (3) the introduction of an ordinance which would rezone the property for “open space.” This was a flaw in the legal strategy of the plaintiff that ultimately lead the court to find that the threat of condemnation did not deprive the plaintiff of all beneficial use of his property. Hoboken’s actions did not pose a legal impediment to the use or development of the property for a significant period of time such that it constituted a taking. Littman v. Gimello, 115 N.J. 154, 164-65, cert. denied, 493 U.S. 934 (1989). In 2008, the plaintiff filed an action for inverse condemnation. In 2009, the parties entered into an agreement staying the litigation as a result of Hoboken’s indication that “open space” ordinance had been “tabled permanently.” The stay contemplated a negotiated acquisition of the property by Hoboken, but in 2010, the plaintiff was advised that an offer would not be forthcoming due to financial constraints. The plaintiff reinstated his lawsuit and filed an application with the planning board for a project that did not require any variances. The planning board then adopted a report which continued to designate the property as possible parkland and reiterated Hoboken’s intention to purchase it. The report did not change the zoning designation of the property, but the plaintiff withdrew his application. He stated that Hoboken’s commitment to create new parkland and its hostility toward his development applications rendered continued attempts to develop the property “fruitless.” As a practical matter, the plaintiff was unable to pursue a project for which a third party had executed a letter of [...]

NJ beachfront owners hold out for eminent domain


One year after Hurricane Sandy made landfall in New Jersey on October 29, 2012, demands by public officials for the voluntary surrender of property are strident. Local mayors and the governor seek the conveyance of beachfront easements without just compensation. Property owners who are unwilling to surrender their rights are called selfish, mean-spirited, and worse on television, radio, online, and in print. Most “holdouts,” the owners of beachfront properties, residences, and local businesses, want the government to exercise its power of eminent domain. They want the guarantee of justice provided by the Constitution. The United States Constitution, Article 5 states, “No person shall be...deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The New Jersey Constitution, Article 1, Section 20 states, “Private property shall not be taken for public use without just compensation. Individuals or private corporations shall not be authorized to take private property for public use without just compensation first made to the owners.” The process for awarding just compensation is set out in N.J.S.A. 20:3-1, et. seq. The statute requires the government to appraise the property to be taken and offer the owner fair market value plus any damages to the remaining parcel. The statute prescribes that any land taken be utilized for a public purpose. The assurance of just compensation is crucial because private land owners in shore towns will forfeit all rights under perpetual easements. The individuals will retain title to the portion of the property taken subject to the easement. The land owners remain responsible for the land and must meet the typical obligations of landownership, including payment of property taxes, but they will have been deprived of virtually all beneficial use of the taken portion of their land.The guarantee that the land will be used for a public purpose is equally significant. Land owners fear that local leaders will use their land to build boardwalks, public access parking, or public restrooms to attract more beachgoers to the New Jersey Shore where tourism is a $40 billion industry. Provision of the exact terms of the taking pursuant to the statute will prevent any misinterpretation of the rights being acquired. The present beach replenishment project to be overseen by the Army Corps of Engineers is fully funded by the Federal and State Government. The state is picking up the tab for $8 million, while the federal government is paying the rest. U.S. Rep. Frank Pallone (D-Long Branch) announced the awarding of the final contract for the $18.3 million beach replenishment project spanning the shore from Asbury Park to Avon-by-the-Sea in September. The contract is the last of four awarded to cover the stretch between Sea Bright and Manasquan. Contractors will build a continuous 48-foot high wall by driving steel sheets 32-feet into the ground. Approximately 16 feet of steel will rise above the ground. As the steel sheets will be embedded in makeshift dunes about 10 feet high, the municipalities will be responsible for covering the estimated 6 feet of steel that will protrude. Project experts estimate that replenishment projects will have to be undertaken every three years, with a portion of the cost covered by the municipalities. It is unclear how the state or local municipalities will fund concealment of the steel revetment when the dunes erode again. There is no indication of any forward thinking on the part of local leaders in this regard or about the consequences of tidal flooding. Stewart Farrell, director of New Jersey’s Richard Stockton College Coastal Research Center, attributes half of the damage in Long Beach Island caused by Hurricane Sandy to tidal flooding. The bay side of the island is only protected by a bulk head that is four feet high. It was easily overcome by Hurricane Sandy’s 12 foot storm surge.[...]

Probability of zone change in NJ eminent domain cases


The Supreme Court of New Jersey, in a 3-2 opinion written by Justice Jaynee LaVecchia, reversed and remanded Borough of Saddle River v. 66 East Allendale, LLC, overturning a jury verdict for just compensation in the amount of $5,250,000. Justice Barry T. Albin, joined by Chief Justice Stuart Rabner, wrote the dissenting opinion. (Download the opinion). When the state or a municipality exercises the power of eminent domain, the determination sought through court action is the amount of just compensation, the value of the property evaluated in light of its highest and best use, which is ordinarily calculated in accordance with current zoning ordinances. However, if there is a reasonable probability that a zoning change will be granted, valuation may include an assessment of a change in the permitted use of the property, or a premium. In State by Highway Commissioner v. Gorga and State by Commissioner of Transportation v. Caoili, the Court held that a determination of reasonable probability of a zoning change must be made by the judge before the evidence is presented to the jury. The Supreme Court reiterated the gatekeeping duty addressed in both Caoili and Gorga: The court must act as a gatekeeper to assess whether there exists sufficient evidence of a reasonable probability of a zoning change to permit an alternate use for a property taken under eminent domain to be considered when valuing property for just compensation. In this case, the Supreme Court found that the trial judge did not perform his gatekeeping function at the proper juncture. He did not consider the record or conduct a preliminary N.J.R.E. 104 hearing before allowing the jury to consider the reasonable probability of a zoning change. Instead he deferred any decision regarding the defendant’s experts’ opinions that a change in zoning was reasonably probable until the trial was in progress. The Supreme Court remanded the case after finding that the expert’s opinions lacked a proper basis, and were speculative and conclusory. It also specifically held that the court’s gatekeeping function is to be exercised prior to the jury’s deliberation on compensation.In further clarification of Caoili, the Supreme Court stated that it is only after the trial court has first determined that the evidence is of a quality to allow for consideration of the reasonable probability of a zoning change that the jury may be permitted to assess a premium based on the change. The Supreme Court refined its analysis by confirming that not every condemnation action involving a possible zoning change requires a N.J.R.E. 104 plenary hearing prior to trial. It clarified that the trial court should first determine whether it can render its determination as to reasonable probability on the papers alone. If the issue cannot be resolved by review of the record, then it should be heard and decided prior to trial. The Supreme Court emphasized the requirement that the trial court render its determination based on the standard that would govern the particular zoning change, and criticized the trial court for failing to engage in the analysis. In a dissenting opinion, Justice Barry T. Albin, joined by Chief Justice Stuart opined that the majority failed to give proper deference to the trial court’s evidentiary rulings and to the factual findings made by the jury. The ramifications of the Supreme Court’s discussion of its gatekeeping functions are clear. It is likely that trial judges will increase their scrutiny of expert testimony prior to trial to ensure that all relevant criteria is met regarding variance approval before allowing the jury to consider evidence of the reasonable probability of a zoning change. Though a N.J.R.E. 104 hearing is not required, trial judges will now hear argument if the issue of probability cannot be resolved on the papers. The Supreme Court also elucidated the details of the analytical process once the issue reaches the jury. Durin[...]

NJ Supreme Court overturns Karan, changes rules on partial takings


The New Jersey Supreme Court reversed and remanded Borough of Harvey Cedars v. Harvey Karan and Phyllis Karan, thereby overturning a jury verdict, trial court and appellate decisions that awarded the Karans $375,000 for the taking of a beach replenishment easement and damages to the remainder. The partial taking amounted to 3,400 square feet, approximately one-fourth of the Karans’ oceanfront lot. The chief issue in the case was whether or not Harvey Cedars should have been permitted to present testimony concerning special benefits which protected the Karans’ property as a result of the construction of a 22 foot high dune between their home and the ocean. Karan argued that the dune partially obstructed his ocean views and diminished the market value of his property by approximately $500,000. Harvey Cedars sought to introduce testimony before the jury that these damages should have been offset by the benefit of having the home protected from future storms. The trial court rejected this testimony based on long standing case law in New Jersey: Projects such as this would be considered a general benefit to the entire island, and not a special benefit to Karans or any other beachfront owner. Today, the Supreme Court rejected the Karan argument and changed the long standing rule on benefits, which has been in effect for more than121 years: We now conclude that when a public project requires the partial taking of property, `just compensation’ to the owner must be based on a consideration of all relevant, reasonably calculable, and non-conjectural factors that either decrease or increase the value of the remaining property. In a partial-takings case, homeowners are entitled to the fair market value of their loss, not to a windfall, not to a pay out that disregards the home’s enhanced value resulting from a public project. To calculate that loss, we must look to the difference between the fair market value of the property before the partial taking and after the taking. In determining damages, the trial court did not permit the jury to consider that the dune would likely spare the Karans’ home from total destruction in certain fierce storms and from other damage in lesser storms. A formula – as used by the trial court and Appellate Division – that does not permit consideration of the quantifiable benefits of a public project that increase the value of the remaining property in a partial-takings case will lead to a compensation award that does not reflect the owner’s true loss. Compensation in a partial takings case must be `just’ to both the landowner and the public. United States v. Commodities Trading Corp., 339 U.S. 121, 123, 70 S. Ct. 547, 549, 93 L. Ed. 707, 712 (1950). A fair market value approach best achieves that goal. Because that approach was not followed in this case, we reverse the judgment of the Appellate Division and remand for a new trial.    In changing the rule on benefits that apply to beach replenishment easements, the Court has also changed the law with respect to all partial takings that may occur for any railroads, highway widenings, and utility easements. The Court in these partial taking cases will now have to conduct a Rule 104 hearing to determine whether there is adequate proof of benefits to present to the jury to offset the damages that occur as a result of partial takings. The Court has said that the standard for determining compensation will be the value before the taking as established by real estate testimony and the value after the taking, taking into consideration all factors which would be considered in the marketplace by the willing buyer and willing seller. At page 44 in the slip opinion issued today, the Court said: Speculative or conjectural benefits conferred on a property owner whose land is partially taken by a public project should not offset a condemnation award because such benefi[...]

Eminent domain, special benefits, and beach replenishment


The New Jersey Supreme Court has granted Certification to the Borough of Harvey Cedars in the case of Harvey Cedars v. Karan (A. 120-11). At issue in the case is the longstanding policy in eminent domain cases that does not permit off-setting general benefits against damages that ensue from easement takings for dune replenishment and blocking ocean views from the beachfront homes. See Borough of Ridgewood v. Sreel Investment Co., 28 N.J. 121 (1958). In the Karan case, the Borough acquired an easement over one-third of Karans' property and constructed a 22-foot high dune which blocked the ocean views. The Borough, through its expert Donald Molliver, MAI, offered $300.00 as compensation for the taking and damages. Molliver opined that the damages were offset by the special benefit to the property for the project.At trial the Ocean County Superior Court Judge David Millard ruled in Karans’ favor that the dune offered no special benefit to the property but rather a general benefit that inured to the entire group of property owners on the island. Accordingly, the trial judge instructed the jury that they could not offset a general benefit against the damages to the Karan property. The jury awarded the Karans $375,000 in compensation for the taking and damages. On March 26, 2012, in an unanimous opinion, Borough of Harvey Cedars v. Harvey Karan and Phyllis Karan (A-4555-10T3), the Appellate Division affirmed the lower court ruling. The court called beach replenishment a classic example of a “general benefit.” The central question on this appeal is whether public construction of an enormous oceanfront beach dune, for which plaintiff condemned an easement on defendants' land, conferred a special benefit on defendants' beach front property in Harvey Cedars. The dune is one part of a line of dunes, created by the Army Corps of Engineers (Corps), that will eventually run the length of the ocean side of Long Beach Island (LBI).The formerly-spectacular ocean view from defendants' house is now partially blocked by the twenty-two-foot high dune, which occupies one-third of their land. However, their house is now safer from storm damage because the dune was constructed. Judge E. David Millard concluded that construction of the dune did not confer a special benefit on the property. Instead, he found that the only benefit conferred was the general benefit for which the dune was constructed, i.e., to protect the island and its inhabitants from the destructive impact of hurricanes and nor’easters. We find no legal error in that ruling, which is consistent with established case law.   Peter Wegener of Bathgate Wegener in Lakewood represents the Karans and Lawrence Shapiro of Ansell, Grimm and Aaron represents Harvey Cedars. The ruling on the case will affect many of the beach replenishment cases not yet filed on Long Beach Island. Funding for the project comes primarily from the U.S. Army Corps of Engineers, the federal agency in charge of beach replenishment projects. Smaller portions are paid by the NJDEP and the smallest portion by the Borough of Harvey Cedars. Nevertheless, in true Cassandra fashion, Mayor Oldman of Harvey Cedars and Attorney Shapiro opined that these projects will not happen if the verdict is allowed to stand. Mr. Shapiro would like to change the law regarding the general benefits. As reported in the Asbury Park Press, Mayor Oldman said, “I don’t think the lower courts looked at it correctly....For us and the Army Corps of Engineers, this has a lot to do with the beach replenishment and the future of it.’’ See our previous blog entry Court upholds eminent domain award for beach replenishment project  for related information.[...]

Essex County Vo-Tech eminent domain complaint dismissed


New United Corporation v. Essex County Vocational-Technical School Board of Education [A-2014-10T2] By William J. Ward and Winifred E. Campbell Yesterday the Appellate Division unanimously dismissed a condemnation complaint filed by the Essex County Vocational-Technical Schools Board of Education (ECVS) for the acquisition by eminent domain of property owned by New United Corporation, consisting of 7.5 acres adjacent to Interstate 280, which was the former site of the United Hospital facility in Newark. Download New United Corporation v. Essex County Vocational-Technical School Board of Education. The court ruling was based on the condemnor’s failure to engage in bona fide negotiations as required by N.J.S.A. 20:3-6, et al., of the Eminent Domain Act. The ECVS used its power of eminent domain with the intent to construct a county-wide regional school that would consolidate several existing technical and vocations schools in surrounding communities. In overturning the condemnation, the court stated, “[t]he record reveals nothing that remotely resembles bona fide negotiations by the Board of Education.” The Eminent Domain Act requires the condemnor to engage in “bona fide negotiations” with a condemnee before commencing an eminent domain action. N.J.S.A. 20:3-6. This provision “encourage[s] public entities to acquire property without litigation…saving both the public and the condemnee the expense and delay of court action.” Township of W. Orange v. 769 Assocs., LLC, 198 N.J. 529 (2009).  A cornerstone to protecting the Constitutional rights of property owners is the requirement that government entities seeking to exercise their power of eminent domain deal “forthrightly and fairly” with property owners. Jersey City Redevelopment Agency v. Costello, 252 N.J. Super. 247, 257 (App. Dic.), certif.. den. 126 N.J. 332 (1991).In this matter, the ECVS made an offer to New United on August 31, 2010. Pursuant to the Eminent Domain Act, New United had 14 days in which to respond to the Board’s offer before the Board could file a complaint in condemnation. N.J.S.A. 20:3-6. New United responded twice to the Board’s offer, on Sept 2, 2010 and on September 8, 2010. In each response, New United requested additional information from the Board as to the basis for its offer. In addition, New United provided evidence of a recent appraisal for the property and evidence of rental income that had not been considered in the Board’s offer. The Board made no reply to New United’s attempts to negotiate and instead filed a condemnation complaint. The ECVS’s failure to comply with the Eminent Domain Act’s pre-litigation requirements is fatal. The Appellate Division remanded the matter to the trial court for final judgment dismissing the complaint without prejudice. This decision emphasizes the importance of government candor and fairness in protecting the landowner’s Fifth Amendment rights. Pursuant to N.J.S.A. 20:3-26(b) the property owner will be entitled to attorneys’ fees and costs incurred in contesting the eminent domain action in both the law and appellate division. R.2:11-4. See our prior blog post, Property owners get counsel fees on abandonment of condemnation (April 4, 2009). In addition, the property owners may claim damages pursuant to N.J.S.A. 20:3-24. This decision represents a major setback for Essex County. The County had originally purchased a portion of the site as the intended relocation of the Essex County Hospital in Cedar Grove for $6.5 million. The relocation of the hospital never occurred, the County allowed its investment to deteriorate from lack of maintenance, and it changed its agenda. New United Corp. alleged that this change in direction by the County was a direct result of multiple law suits and court orders obligating the County to re[...]

US Supreme Court ruling on due process in wetlands regulation


Challenging a wetlands designation in eminent domain cases is often a key issue for property owners attempting to obtain just compensation for the acquisition of their property. While the decision of the Supreme Court  in Sackett v. EPA is not made in the context of eminent domain, the Court's findings with respect to the EPA could well be germane in cases that involve eminent domain. Sackett v. U.S.Environmental Protection Agency Supreme Court of the United States No. 10–1062. Argued January 9, 2012—Decided March 21, 2012 by Winifred E. Campbell, Esq. Last week the United States Supreme Court handed a decisive win to property owners battling to protect their due process rights against baseless environmental regulation. In Sackett v. EPA, the Sacketts were denied their due process rights when they attempted to challenge the Environmental Protection Agency’s (EPA) determination that the Sackett property was encumbered with wetlands. Download Sackett v. EPA.     The Sacketts purchased a 0.63 acre lot in a residential, platted subdivision in Idaho intending to build a house. All permits were granted by the local municipality and gravel was laid in preparation for building the foundation of the home. Without warning, evidence, or explanation, the EPA issued the Sacketts a “compliance order,” demanding construction stop and the land be returned to its pre-gravel condition. According to their attorneys at the Pacific Legal Foundation, the Sacketts were told by the EPA that it controlled the land because the land is “wetlands.” Failure to comply with the EPA’s order racked up fines of $75,000 a day.The question before the Supreme Court was whether the Sacketts could get judicial review of the EPA’s compliance order as a final agency decision without first applying for a wetlands development permit and being rejected. The Sacketts argued the compliance order was a final agency decision and requiring a property owner to go through the permit process before challenging the wetlands designation denied due process. For example, it was estimated the Sacketts could wait years for a permit, incurring more than $200,000 in expenses all the while incurring EPA fines, all to develop a lot that only cost $23,000. (see Pacific Legal Foundation Talking Points.) It was argued that such an interpretation would require property owners who challenge the EPA to pay huge sums to gain access to the Courts. The EPA argued the Clean Water Act, 33 U.S.C. §1251, et seq., precludes judicial review of a compliance order. It further argued that allowing judicial review would greatly hinder the EPA’s ability to enforce the Clean Water Act. The Supreme Court held the Sacketts may institute a civil action under the Administrative Procedure Act (APA), 5 U.S.C. §706(2)(A). The APA provides for judicial review of “final agency action for which there is no other adequate remedy in a court.” 5 U.S.C. §704. The EPA’s compliance order is a “final agency action.” Moreover, applying for a wetlands permit and then filing suit under the APA when the permit is denied does not provide an adequate remedy for the EPA’s action. Remanded.   Winifred E. Campbell is an associate with Carlin & Ward, P.C.  [...]

Court upholds eminent domain award for beach replenishment project


Borough of Harvey Cedars v. Harvey Karan and Phyllis Karan,
Superior Court of New Jersey Appellate Division - A-4555-10T3
Decided March 26, 2012

by Scott A. Heiart, Esq.

Yesterday the New Jersey Appellate Division affirmed a jury award in the amount of $375,000 for the acquisition of an easement in order to construct a dune in conjunction with a beach replenishment project.  Download the decision.

In 1973, Harvey and Phyllis Karan built their “dream house” on the New Jersey shore in Harvey Cedars. Their home was uniquely situated with sweeping views of the beach, shoreline, and ocean. The Borough of Harvey Cedars, as part of a large-scale beach replenishment project in 2008, used eminent domain to take numerous easements from beach-front property owners to construct an enormous dune.

Harvey Cedars offered the Karans $300 for the taking, arguing any loss of views was de minimus and that they would receive a “special benefit” due to the added protection against beach erosion and future storm damage. The Karans argued the loss of view was so significant it reduced the value of their property by $500,000.

The trial court heard arguments on whether the dune project constituted a “general benefit” versus a “special benefit.” General benefits are benefits that all property owners share in common with respect to a project. These benefits may not be deducted from a property owner’s just compensation.

In contrast, a special benefit is one that cannot be shared by the general public and can serve as an offset that lowers the amount of just compensation owed to a property owner. See Village of Ridgewood v. Sreel Inv. Corp., 28 N.J. 121, 131-32 (1958).

The trial court in Karan held that  the project constituted a general benefit and prevented Harvey Cedars from presenting evidence to the contrary. The Appellate Division affirmed, holding that “the protection offered to defendants’ property by the dune construction is a classic example of a ‘general benefit’” and no offset is warranted. The court continued, “while defendants’ property may be benefited in somewhat greater degree than its inland neighbors” such a fact is not a legally cognizable “special benefit” for purposes of valuation in a condemnation case.

Harvey Cedars has 20 days to file notice in order to petition the New Jersey Supreme Court for certification on this critical issue. For now, yesterday’s ruling stands as another victory for property owners in their fight to be adequately compensated for the taking of their property.

See our previous blog post on Harvey Cedars beach replenishment cases.

See Appeals panel awards Ocean County couple $375K in sand dune replenishment dispute published Tuesday, March 27, 2012, in The Star-Ledger.

Scott A. Heiart, Esq. is a partner with Carlin & Ward, P.C. in Florham Park, New Jersey.

House bill ends eminent domain for economic development


by Winifred E. Campbell, Esq. The United States House of Representatives passed with bi-partisan support H.R. 1433, The Private Property Rights Protection Act, on February 29, 2012. The bill aims to bar the federal government from using eminent domain for economic development. The bill would also withhold federal development funding to states that take private property for economic development. The bill is now being considered by the Senate. The proposed Private Property Rights Protection Act is in response to the 2005 U.S. Supreme Court decision in Kelo v. City of New London. In Kelo, the Court upheld the condemnation of private property for transfer to other private owners to support “economic development.” The Kelo decision was met with outrage across the country. Frequently, the use of condemnation for economic development benefits wealthy developers at the expense of the poor and politically weak.Many states have responded to Kelo by passing laws that thwart the profitability of taking private property for economic development. For example, Mississippi passed legislation in 2011 that restricted the transfer of condemned property to another private owner for ten years after condemnation. New Jersey has been slow to respond to Kelo. The state’s strongest reaction may be seen in Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, where the New Jersey Supreme Court reined in the definition of “blighted” property. Too frequently, municipalities were deeming property as “blighted” because it was not being used in an optimal manner. See our previous blog post, Reversal of Blight: Eminent Domain and Redevelopment. It remains to be seen whether the Senate will choose to send a strong message in response to the Kelo decision by passing The Private Property Rights Protection Act.   Winifred E. Campbell, Esq. is an associate at Carlin & Ward licensed to practice in New Jersey and and Pennsylvania. [...]

Inverse Condemnation in West Long Branch, NJ


Ciaglia v. West Long Branch Zoning Board of Adjustment (A-0787-10T1)

In a rare example of a case meeting the stringent standard for inverse condemnation, the Appellate Division, in a ruling issued October 25, 2011, reversed the trial court and found the circumstances of that case constituted a taking in Ciaglia v. West Long Branch Zoning Board of Adjustment. The standard, which is a deprivation or substantially all of the beneficial use of the property, was met in this instance. The case was remanded to the trial court for the institution of an eminent domain case.

The court, in a per curiam unpublished opinion, discussed the detailed factual background of the property, which resulted in a conveyance to the plaintiff of a lot which did not meet current municipal standard. The judges called for a “heightened sensitivity on the part of local land use agents…in order to avoid regulatory takings that would be funded by the municipal treasury. “ (p. 18)

On two occasions, the plaintiff, Joseph Ciaglia, attempted to get approval of variances in order to build a single family home on the lot and was denied. In these circumstances, the court found that there had been a regulatory taking and that Ciaglia was entitled to compensation. The court followed and felt it was bound by the precedent set in the Moroney case. See Maroney v. Mayor and Council of Borough of Old Tappan, 268 NJ Super 458 (App. Div. 1993), cert denied, 136 NJ 295 (1994). In the Maroney case, the plaintiff had not exhausted his administrative rights to seek variance relief regarding the lot in question in that case. Here, Ciaglia had on two occasions sought variance approval and been denied; accordingly, the court remanded the case to the law division for the institution of condemnation proceedings.

The plaintiff in this action was represented by Peter Wegener of the firm of Bathgate and Wegener. Because of his successful resolution of the litigation, he will be entitled to counsel fees and costs pursuant to the Eminent Domain Act of 1971, N.J.S.A. 20:3-26b.

Based upon our review, we are satisfied that Ciaglia was entitled to substantially the same remedy awarded in Moroney. That is, a judgment requiring the Borough to commence procedures pursuant to the Eminent Domain Act of 1971 (the Act), N.J.S.A. 20:3-1 to -50 leading to its acquisition of Lot 20. We leave it to the Law Division to decide whether to appoint commissioners sua sponte, see Moroney, supra, 268 N.J. Super. at 461, or to oblige the Borough to follow some or all of the procedural minutiae of the Act.12 See, e.g., 769 Assocs., LLC, supra, 198 N.J. at 537.

The appeal was argued on September 21, 2011, before Judges Graves, J.N. Harris, and Koblitz.

Fordham Law Eminent Domain Conference: Contrasting Interpretations of Blight in NJ and NY


By Janice Dooner Lynch, Esq. On February 11, 2011, the Fordham Urban Law Journal presented a continuing legal education conference at the Fordham University School of Law entitled, “Taking New York: The Opportunities, Challenges, and Dangers posed by the Use of Eminent Domain in New York.” Many attorneys and non-attorneys from the eminent domain field spoke about various aspects of the challenges which have arisen in this area of the law in recent years. One of the key issues discussed during the conference was the differing definitions of “blight” in each state, which is a major factor in determining whether a government may appropriate property by way of its eminent domain powers. Professor Lynn Blais of the University of Texas School of Law pointed out that while most states have enacted legislation limiting the use of eminent domain to take property for economic development or to be transferred to a private entity, such legislation has, at the same time, provided for an exception to this limitation in the case of “blight.” In other words, an eminent domain taking of property for non-public purposes can take place if a showing can be made that such a taking is necessary for the eradication of “blight” on the property. The following questions then arise: how is the concept of “blight” to be defined by the state legislature or constitution, and how is much judicial review of that definition can be exercised by the courts? The varying approaches to this issue by different states can be seen in the New York State Court of Appeals in Kaur v. New York State Urban Dev. Corp., 933 N.E.2d 721, 892 N.Y.S.2d 8 (2010), and the New Jersey Supreme Court in Gallenthin v. Paulsboro, 191 N.J. 344, 924 A.2d 447 (2007).Professor Ilya Somin of the George Mason University School of Law, who filed an amicus curiae brief on behalf of the property owners in the Kaur case, explained the reasoning behind the decision by the New York State Court of Appeals in this case. The New York State Constitution endows the legislature with the power to eliminate “insanitary” or “substandard” conditions found in real property by clearing, replanning, reconstructing, and rehabilitating such areas. N.Y. Const., Art. XVIII, Sec. 1. The controversy in the Kaur decision lies less in this clause of the state constitution than in the court’s interpretation of its power to review a determination of blight. In Kaur, the court authorized the use of the state’s eminent domain powers to allow redevelopment and expansion by Columbia University in the West Harlem neighborhood of Manhattan by holding that a finding of blight should be judicially overturned “only where there is no room for reasonable difference of opinion as to whether an area is blighted.” 933 N.E.2d at 730 (emphasis in original). Under this judicial standard, Professor Somin pointed out that since, as a practical matter, the Kaur court’s standard for overturning a blight determination is virtually impossible to meet, the court effectively held that no finding of blight in an eminent domain case can be judicially overruled. Professor Paula Franzese of the Seton Hall University School of Law added that since the Court of Appeals has given such “blind deference” to the legislature, the New York judiciary has effectively abdicated its role in eminent domain cases. The contrasting New Jersey approach to determining blight in eminent domain cases was expounded upon by Vice Dean Ronald K. Chen of the Rutgers University School of Law. Like the New York Constitution, the ”Blighted Areas Clause” of the New Jersey Constitution provides that the clearance and redevelopment of blig[...]

Property owners in 1965 NJ beach replenishment taking will get compensation


"After finally conceding, in 2005, that a taking occurred forty-three years earlier, the Borough now attempts to hide behind the six-year statute of limitations to claim that plaintiffs have no right to an inverse condemnation action....Although physical invasion and physical taking of real property by a governmental entity ought to be notice sufficient to awaken property owners to act to protect their interest in receiving compensation for the taking, government also should provide some other form of notice to affected property owners before, and surely after, a physical taking." - New Jersey Supreme Court Justice Jaynee LaVeccia The New Jersey Supreme Court issued a unanimous 7-0 opinion written by Justice Jaynee LaVecchia remanding Klumpp v. Borough of Avalon  to the trial court to consider compensation for a beach replenishment taking which occurred first in 1965. Download the eminent domain decision here. The Klumpps had built an ocean front home in 1961, which was destroyed by the famous nor’easter storm of 1962. After the home was destroyed, the Borough of Avalon appropriated the property for beach replenishment. No compensation was offered to the Klumpps. The Klumpps continued to be the record owner on the tax maps of Avalon and paid taxes. In 1995, the Klumpps sought permits to rebuild. By this time, Avalon no longer permitted access to the Klumpps property off the local road 75th Street. In addition, the Borough in 1995-96 denied Klumpp building permits and access permits thereby rendering the property useless. The Appellate Division found there had been both a physical taking in 1965 and a regulatory taking circa 1995 both denying the Klumpps all beneficial use and enjoyment of their property.  See our previous blog post of August 6, 2009,  Inverse condemnation at the beach. At no time did the Borough of Avalon offer any form of compensation to the Klumpps. The Supreme Court agreed with the Appellate Division and found there had been both a regulatory and physical taking of Klumpps property without compensation, contrary to the New Jersey Constitution, Article I ¶20 and the 5th and 14th amendments of the U.S. Constitution. The critical ruling by the court in favor of Klumpp was the Supreme Court’s rejection of the statute of limitations argument set forth by the Borough of Avalon. The Court related the critical taking events to 1995-1996, when the Klumpps were denied building permits by Avalon. In remanding the matter to the trial court for consideration of inverse condemnation and just compensation, several interesting legal issues will come into play. What is the date of valuation? N.J.S.A. 20:3-30(a)-(c) provides for a date of valuation to be the earliest of three events: a) date of entry b) date of interference with use and enjoyment of the property c) date of the filing of the complaintDate of entry here is probably 1962, when the city physically appropriated the property for beach replenishment. Was this a partial or total taking? We don’t know at this point. Date of interference with use and enjoyment could be 1995-96, when permits for a rebuild were denied. The date of the complaint filing has not yet occurred. Because this is an inverse condemnation under N.JS.A. 20:3-26(b) the owners are due counsel fees and costs. See Township of West Orange v. 769 Associates and our blog post on April 9, 2009. In addition, there is a large interest component to compensation. N.J.S.A. 20:3-31 provides for the payment of interest from the date of taking to the date of payment. Depending on the date of value selected by the court, the interest would be calculated from that date to the date of payment. Case law provides for annual comp[...]

New York and New Jersey need eminent domain reform



Fox Five News, Good Day New York segment, Eminent Domain Battle with Rosanna Scotto (May 21, 2010).

"In recent years there has been an increase in legal challenges to the law when 'blight' is used as the primary reason by the state for a takeover...'The eminent domain process is subject to abuse. Where the controversy comes in is in redevelopment projects under the Local Redevelopment Housing Law (in NJ) that says certain areas of a city are blighted,' Ward told co-host Rosanna Scotto."

Eminent domain won't happen on Long Branch Broadway Corridor


The Appellate Division decided a group of eminent domain cases involving the Broadway Corridor in Long Branch: Cottage Emporium, Inc., t/a, Rainbow Liquors, Gopal Panday, Davita Panday, The Lighthouse Institute for Evangelism et al v. Broadway Arts Center, City of Long Branch v. Lighthouse Mission and City of Long Branch v. Gopal Panday, Davita Panday and Cottage Emporium (A-0048-07T2, A-4415-07T2, A-4416-07T2). The cases were argued March 15, 2010, before Judges Lisa, Baxter, and Alvarez, and a per curiam decision was issued on April 16, 2010. The unanimous panel remanded the Broadway Corridor cases back to the trial judge, Monmouth County Assignment Judge Lawrence Lawson. Instead of dismissing the eminent domain complaints, the court is fashioning a remedy which is not supported by the law. Here the court arrived at a conclusion similar to the decision in City of Long Branch v. Anzalone, and City of Long Branch v. Brower, which both involved the MTOTSA neighborhood. The appellate panel, led by one of the judges who heard the Anzalone case and two who did not, invited Long Branch to revisit the blight issue and attempt to meet “the substantial, credible evidence” standard for proof of blight. Here the court wrote in its opinion: However, our courts have cautioned that the "substantial evidence" standard requires "a record that contains more than a bland recitation of applicable statutory criteria and a declaration that those criteria are met." Gallenthin, supra, 191 N.J. at 373. That standard similarly prohibits a municipality from exercising eminent domain on findings that are "supported by only the net opinion of an expert." Ibid. Instead of simply describing the physical and financial status of the properties to be taken, the municipality or its expert must perform "an analysis of the statutory criteria as [they] applied to each of the properties in the designated" redevelopment area, and of how each property's condition reflected or contributed to the area's blight. ERETC, supra, 381 N.J. Super. at 279-80.   The city will not be able to prove blight under this standard. Why not dismiss outright? That’s the law.  If there is no blight, you cannot condemn under the Local Redevelopment Housing Law, 40A:12A-1 et seq., and the New Jersey Constitution Article VIII, § 3, ¶1. Findings of blight are grounded on a record made before the local planning board and the expert testimony presented to the board. The Superior Court Law Division, under the present law, does not establish the “record” for blight. Its role in a prerogative writ suit is to review the legality of the blight conditions presented on the record before the planning board. Contrary to popular opinion, the decision written by Justice Zazzali in Gallenthin v. Paulsboro did not establish new law. It reiterated what has always been the law: Blight must be established by substantial, credible evidence. A mere recitation of the statutory criteria found in N.J.S.A 40A:12A-5 (a-h) is not enough. Blight must be proven. This is not a novel idea. What is apparent in the case law is that municipalities and their selected developers were blighting properties indiscriminately without the requisite proof. The clear message in Gallenthin was that this practice would no longer be tolerated by the state’s highest court, and the lower courts have fallen in line. This does not mean that redevelopment is dead, but it does means that eminent domain abuse, as practiced by some municipalities on behalf of politically connected developers, will not be tolerated. Municipalities will have to be more[...]