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New Jersey Sports and Exposition Authority v. Borough of East Rutherford

Decided: November 13, 1975.


Petrella, J.c.c., Temporarily Assigned.


[137 NJSuper Page 276] One contested facet of this condemnation action devolves about the question of whether any parties, in addition to defendants

Borough of East Rutherford (borough) and East Rutherford Industrial Center (Industrial Center) have direct compensable claims against plaintiff New Jersey Sports and Exposition Authority (Sports Authority). An affirmative determination permits appearance before condemnation commissioners, with appeal to a trial court, while a negative finding limits participation to allocation proceedings under R. 4:73-9(b).

The borough holds record title to approximately 89 acres of land which various defendants leased, subleased or occupied as of March 6, 1973, the date of taking by the Sports Authority. Industrial Center holds the "master lease" under which other defendants received assignments and/or subleases. All such leases and assignments were in effect and all tenants and subtenants were in possession on said date.

The master lease and certain subleases contain various types of provisions relating to condemnation which govern the claims and positions among party defendants.

The complaint herein was filed February 7, 1973, and declarations of taking and payment orders were filed March 6, 1973 and February 21, 1974. Payments into court of an aggregate of $13,152,000 were made as a result thereof.

On June 21, 1973 then Judge Pashman indicated that all interested parties would be "represented" at the hearings before the condemnation commissioners. However, he cautioned that introduction of proofs as to the value of the land would be limited to plaintiff Sports Authority, the Attorney General (representing the Natural Resource Council and Trustees of the School Fund), the borough record owner, and Industrial Center. The other interested parties*fn1 were reserved the right to consult freely with the defendants presenting proofs. A July 5, 1973 order embodied that determination

and extended the limitation to proofs as to the value of improvements. Subsequently, various defendants unsuccessfully moved for reconsideration of that ruling.

Applications were made later before Assignment Judge Trautwein and a hearing was ordered on the issue. In view of the rehearing determination by the assignment judge the law of the case doctrine presents no impediment here.

The Sports Authority disputes any right of those defendants not already expressly allowed to participate under any prior order to present proofs in condemnation proceedings of the value of improvements as they may affect land value or total compensation. The right to present proofs at an allocation proceeding under R. 4:73-9(b) is not disputed.

Plaintiff argues, among other things, that (1) to allow such proofs would violate the "unit rule" as in effect in New Jersey; (2) tenants in possession lack both standing and a compensable property interest, relying on Nichols, Eminent Domain , § 26.113, and (3) certain defendants (e.g. , Independent News, Vicente Puig & Co., Daido-Steelcraft) are precluded from participation before condemnation commissioners because their leases renounced claims in favor of their respective lessors.

Defendants collectively or individually urge, primarily, that (1) under the 1971 Eminent Domain Act and case law they have a right to participate, and may even be precluded on appeal if they are not allowed to participate; (2) certain conflicts of interest would occur if they were not allowed to participate fully, and (3) violation of due process and equal protection. Royal Worcester Porcelain Co. also alleges that under paragraphs 26(d) and 31 of its lease it should be treated as a tenant with a choate option to extend its sublease for the balance of its landlord's term -- claiming additional leasehold value and fixtures.


A brief review of the relevant case law is appropriate. Basic to the application of any eminent domain statute

is the theory that just compensation must be paid for property taken by public authority. U.S. Const. , Amends. V and XIV; N.J. Const. (1947), Art. 1, par. 20; State v. Gallant , 42 N.J. 583, 587 (1964). The lessor is generally compensated upon a division of the fund for his reversionary interest, and the lessee for damages to his leasehold, out of the award, in allocation proceeding, absent contrary provisions in the lease, or based upon their agreement. See Wayne Co. v. Newo, Inc. , 75 N.J. Super. 100, 104 (App. Div. 1962); N.J. Highway Auth. v. J. & F. Holding Co. , 40 N.J. Super. 309, 316 (App. Div. 1956).

Where the leasehold terminates under a valid condemnation clause and the tenant by contract gives up his claim to any part of the award as to the value of his leasehold, he then lacks standing to participate in the condemnation as to the land value. See 4 Nichols, Eminent Domain , § 12.42(1), and cf. N.J. Highway Auth. v. J. & F. Holding Co., supra , 40 N.J. Super. at 314-315. The parties are bound by the terms of their lease. Wayne Co., Inc. v. Newo, Inc., supra , 75 N.J. Super. at 108; and 4 Nichols, supra § 12.42(3).

The value of condemned personalty would be a separate matter.

In condemnation cases the "unit rule" or undivided fee rule means that one award as a whole of just compensation is made which constitutes "a summation of all of the values of all of the separate interests in the property." N.J. Highway Auth. v. J. & F. Holding Co., supra. A lump sum verdict encompasses all interests in the land.

This rule has been consistently followed*fn2 in New Jersey;

Ross v. Elizabethtown & S.R. Co. , 20 N.J.L. 230, 234-235 (Sup. Ct. 1843). In Schill v. Essex Freeholder Board , 98 N.J. Eq. 469, 470 (Ch. 1926), where the tenant unsuccessfully sought a separate award for damages to his business and the value of his tenancy, it was stated:

The complainant is not entitled to a separate award. Upon an award of a sum, the equivalent of the value of the land and the damage, and its tender or payment into court, possession may be taken . . . and if the complainant has any particular estate or interest in the land for which he is entitled to special compensation, it must be made to him out of the general award. The rule is settled in this State. Bright v. Platt , 32 N.J. Eq. 362 [E. & A. 1880]; Crane v. Elizabeth , 36 N.J. Eq. 339 [E. & A. 1882] Zimmerman v. H & M R.R. Co. , 76 N.J.L. 251 [Sup. Ct. 1908]; Herr v. Board of Education , 82 N.J.L. 610 [E. & A. 1912].

Nichols points out that some jurisdictions have carved exceptions to the undivided fee rule. One recognized exception allows participation by the lessee when the aggregate value of the separate interests exceeds the value of the unencumbered fee. See Nichols, op. cit. , § 12.42 at 479. The tenants in the instant action argue for judicial recognition of such an exception in this State. This court is compelled to decline this request, considering a contrary determination by our Supreme Court.

In State v. New Jersey Zinc Co. , 40 N.J. 560, 574 (1963), Justice Hall, speaking for a unanimous New Jersey Supreme Court, found:

Those having interests in the property less than ownership or claims arising by reason of the condemnation can only be compensated by appropriate division of the fund thereby created, to the extent

entitled. State by State Highway Com'r. v. Cooper, supra , 24 N.J. , at p. 271; New Jersey Highway Authority v. J. & F. Holding Co. , 40 N.J. Super. 309 (App. Div. 1956). Such claimants may not receive separate and additional compensation, c.f. New Jersey Turnpike Authority v. Bowley , 27 N.J. 549 (1958), cert. denied 358 U.S. 927, 79 S. Ct. 312, 3 L. Ed. 2d 301 (1959) as appears to be the case in some other states.

Similar requests were confronted by the Appellate Division in Wayne Co., Inc. v. Newo, Inc. , 75 N.J. Super. 100 (App. Div. 1962), and N.J. Highway Auth. v. J. & F. Holding Co., supra , 40 ...

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