Goldmann, Halpern and Lora.
This is a highway condemnation case wherein the State condemned a triangular-shaped piece of vacant land containing .161 of an acre belonging to defendants. Defendants' entire property consists of .994 of an acre. It has a frontage on State Highway 70 of 299 feet, a frontage on Forge Pond Road to the east of 150 feet, it is about 262 feet on the rear, and about 185 feet on the west side. Located on the property is a one-story commercial building having 12,000 square feet of space, and operated by defendants as a furniture store.
The triangular parcel condemned commences at the southwest corner of the tract and runs (1) along the westerly boundary line for about 185 feet, (2) along the rear about 80 feet, and (3) about 185 feet to the beginning. The distance between the northwest corner of the existing building and the nearest point of the parcel being condemned is about 50 feet, and the distance between the southwest corner of the building and the nearest point of the parcel being condemned is about 110 feet. The vacant lands in front of the building facing State Highway 70 and Forge Pond Road are unaffected by the taking. Of the original .994 of an acre there remanded to defendants after the taking .833 of an acre.
A brief history of what transpired is necessary for a better understanding of the issues. During 1967 defendants decided to put an attached addition onto their existing building. By November 1967 defendants had hired an engineer to prepare plans for the proposed addition, obtained a building permit and commenced excavation. A portion of the ground excavated is included in the parcel taken by the State. On December 20, 1967 defendants were notified by the State of its contemplated condemnation. As a result defendants discontinued any further building operations, having spent to that point $750 for a building permit, $2,150 for engineering expenses and $625 for the excavation. The condemnation complaint was filed on May 27, 1970. The condemnation commissioners were appointed by
the court on October 1, 1970 and after a hearing awarded defendants $16,000. Defendants appealed and the State cross-appealed from the judgment. After a jury trial a judgment was entered awarding defendants $25,659 plus interest thereon from the date of taking, May 27, 1970. The State appeals from the judgment, and defendants cross-appeal from so much of the judgment as allowed interest from May 27, 1970, contending interest should have been allowed from December 20, 1967, the date they were notified by the State of the contemplated taking.
The principal issue on appeal is whether the trial court erred in permitting defendants' real estate expert, Byron Kotzas, to express an opinion as to the market value of the taking based upon his hypothetical projections.
We start with the premise that defendants are entitled to just compensation. N.J. Constitution , Art. I, § 20, and N.J.S.A. 20:1-1 et seq. The measure of compensation is the fair market value as of the date of taking. State by State Highway Com'r v. Gorga , 26 N.J. 113, 115 (1958). Such value is defined as being a fairly negotiated price agreed upon voluntarily between an owner willing to sell and a buyer willing to purchase, neither being under compulsion. Trenton v. Lenzner , 16 N.J. 465, 476 (1954), cert. den. 348 U.S. 972, 75 S. Ct. 534, 99 L. Ed. 757 (1955). Since this is a partial taking of vacant land, the price for such taking is the difference between the market value of defendants' entire parcel as a whole, immediately before and unaffected by the taking, and the market value of the remainder not taken, immediately after and as affected by the taking. Putting it another way, it is the value of the parcel taken based upon its best and highest use, plus compensation for any diminution in value resulting to the remainder from the taking. Sterner v. Nixon , 116 N.J.L. 418, 420 (E. & A. 1936). See also State By State Highway Com'r v. Speare , 86 N.J. Super. 565, 572-573 (App. Div. 1965), certif. den. 45 N.J. 589 (1965).
The difficulty arises in determining the appraisal approach to be used in arriving at fair market value. We are satisfied that each partial taking case must be decided on its own merits. We recognize that most often real estate experts use the comparable sales approach. State, by Commissioner of Conservation v. Vacation Land, Inc. , 92 N.J. Super. 471, 478-479 (App. Div. 1966). So, too, where the facts warrant it, other approaches are utilized by real estate experts. State By Com'r of Transp. v. Probasco , 114 N.J. Super. 546, 551-552 (App. Div. 1970), aff'd 58 N.J. 372 (1971); State By State Highway Com'r v. Burnett , 24 N.J. 280, 289 (1957). The State has asked us to decide what appraisal method should be used in this case. It is not our function to designate what method of appraisal should be used -- our function is limited to decide in each case whether the method used is reasonable under the existing circumstances. As the court stated in Jersey City Redevelopment Agency v. Kugler , 58 N.J. 374 (1971)
There is no precise and inflexible rule for the assessment of just compensation. The Constitution does not contain any fixed standard of fairness by which it must be measured. Courts have been careful not to reduce the concept to a formula. The effort has been to find working rules and practical standards that will accomplish substantial justice such as, but not limited to, market value. [at 384-385]
In the instant case comparable sales and other approaches were admittedly available but were not used by Kotzas in arriving at fair market value. Instead, he used an income approach by projecting a hypothetical building part of which was to be on the parcel being condemned, which (including the area of the existing building) would contain 31,000 square feet. He estimated the annual rental for the combined structures to be $3.75 a square foot, or a gross annual income of $116,625. He estimated the expenses on such hypothetical building to be $2.23 ...