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State v. Cooper Alloy Corp.

Decided: July 16, 1975.


Matthews, Fritz and Botter.

Per Curiam

[136 NJSuper Page 564] Defendant Cooper Alloy Corporation was the owner of a parcel of land containing 14.86 acres in the Township of Hillside, Union County, which was zoned industrial. The premises contain an alloy and stainless steel casting foundry, and had frontage on three streets. The State, by the Commissioner of Transportation (State), sought to condemn two parcels totaling 3.173 acres in fee, and two easements, for the construction of mainline Route I-78. The area taken in fee contained no building improvements and was used for the storage of metals and the dumping of waste products from the foundry. One easement was acquired for the construction of a footing for a retaining wall, and the second was acquired for the reconstruction of a drainage ditch on the remaining property for surface

water drainage. After the taking, the remaining property consisted of 11.687 acres encumbered by these two easements.

Cooper Alloy's claims for damages primarily revolve around the testimony of its consultant Kennelli, that after the taking it would be economically inefficient to expand the production of the foundry to a 6,000,000-pound capacity on the remaining land. The 6,000,000-pound figure represents that expert's "guess" as to the production required for Cooper Alloy to retain its share of the market for its product. During the mid-1960s Kennelli had recommended that Cooper Alloy should relocate its small molding operations (shell molding and green sand) to Alabama. That relocation would, in his judgment, enable Cooper Alloy to maintain its share of the market, which was 4 1/2% in 1965. Kennelli presented production figures which showed that Cooper Alloy had produced a little under 4,000,000 pounds up to 1967 but had fallen off to 3,200,000 pounds thereafter because of changes in production brought about by the imminent condemnation. Kennelli said that the lost production arose because of a loss of 1 1/2 acres of storage materials which now had to be stored on the remainder. He again recommended, after the taking, that Cooper Alloy expand elsewhere and recapture its lost production because, both the expansion and recapture of capacity were not economically feasible on the remainder. Kennelli was of the opinion, however, that the remaining capacity in Hillside should be retained rather than phased out.

The consultant further estimated that it would cost $2,313,000 to attain 6,000,000 pounds on the remaining lands in Hillside, but that the result would be "an economically inherent inefficient operation." The cost of moving to the new site in Alabama was projected as $2,272,000, but the relocation, in his opinion, would enable the company to reach 6,000,000 pounds and permit more extensive growth at some future date. Since it would take 18 to 24 months

to set up a new operation in Alabama, Kennelli believed that it was necessary to duplicate portions of the Hillside operations in Alabama, instead of moving all of the Hillside equipment immediately, in order to prevent the loss of business that would consequently result from the temporary cessation of operations. Kennelli recommended, to expedite the transition, that the small molding operations should be first established in Alabama because they were the easiest to set up.

Kennelli testified that, as of March 31, 1971, Cooper Alloy had expended $410,855 in Alabama for constructing the shell molding operation, of which a total of $156,154 constituted a direct duplication of equipment. Kennelli deducted $48,142 from this sum as the "value installed in place" of certain pieces of equipment moved from Hillside to Alabama, $11,266 as the value of other equipment which remained in Hillside and was being used there, and $10,000 as the salvage value of other pieces of shell molding equipment which remained in Hillside but were rendered useless by the loss of the area to expand; this left a net cost of duplicating the shell molding operation in Alabama at $86,746.

The gross cost for duplicating the green sand equipment in Alabama was $286,746. From this sum Kennelli deducted $31,831 as the value of equipment moved to Alabama, $36,100 for useable equipment which remained in Hillside, and $22,000 as the salvage value of "useless equipment" at the Hillside plant, for a net cost of duplication of the green sand equipment of $196,815.

Kennelli also testified to an alleged damage of $55,000 for engineering and consultation fees attributable to the construction of that portion of the facilities in Alabama that corresponded to the loss of the 800,000 pounds of production at the Hillside plant which Cooper Alloy claims was to be attributed to the taking.

The trial judge held that it was permissible for Cooper Alloy to show the extent of the damage to the remainder in

terms of a "cost to cure" theory, through evidence of what it cost to duplicate the Hillside equipment in Alabama less the residual value of the Hillside equipment. The reasoning seems to have been that Cooper Alloy was entitled to compensation for damage to the remainder, and that such damage included consequential damages, one element of which was the loss of 800,000 pounds in production capacity; further, that the value of that loss could be determined by recourse to the cost of recovery of the 800,000 ...

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