On certification to the Superior Court, Appellate Division.
For reversal and remandment -- Chief Justice Wilentz and Justices Clifford, Schreiber, Handler and Pollock. For affirmance -- Justice O'Hern. The opinion of the Court was delivered by Handler, J. O'Hern, J., dissenting.
[92 NJ Page 510] This action arises under the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50. It involves the public acquisition for highway purposes of a portion of each of two commonly owned contiguous parcels of land that had been put to separate uses before the taking. In this case, the issue is whether, in awarding severance damages attributable to the partial taking from each lot, the common ownership of the contiguous lots and the potential of a unified use of the portions remaining after the taking are relevant in determining fair market value and just compensation.
The State instituted this condemnation action to take a part of each of two contiguous parcels owned by defendants along Route 9 in Howell Township. Defendants acquired ownership to one parcel in 1965, on which they had operated a clothing store since 1958. In 1972 they acquired an adjoining gas station property which was improved by gas pumps, a shed and a bungalow. The clothing store parcel had 70 feet of frontage along Route 9. The gas station parcel had 100 feet of frontage on Route 9 and a 20 foot frontage along a side street. The property acquired by the State consisted of a 45 foot-wide strip along the Route 9 frontage of each parcel and a 3 foot-wide strip along the side street. Virtually all of the clothing store parking area was taken, substantially reducing the functional utility of that parcel as a clothing store. The taking also effectively destroyed the use of the second parcel as a gas station by eliminating its gasoline pumps, storage tanks and structures.
The State maintained that the highest and best use of the portions of the properties remaining after the taking was in combination as a single economic unit. Because the properties were under common ownership, the original condemnation complaint designated all of defendants' property as one parcel, labeled 84A. Following objections by defendants that were upheld by the trial court, the State filed an amended declaration of taking with a new map that showed two separate parcels, designated 84A1 and 84A2. A hearing was then held before condemnation commissioners and separate awards were fixed for each parcel. Both parties appealed and an order was entered providing for a separate trial for each parcel. The trial court later ruled that each trial should be conducted before a different jury.
At the successive trials, defendants presented expert testimony valuing the damages to the gas station property caused by the partial taking to be $60,500. For the clothing store property, the defendants' expert maintained that the partial taking resulted in damages of $141,500. Thus, the total damages
presented by defendants were $202,000.*fn1 The State's expert calculated the damages to the gas station parcel to be $17,000 and those to the clothing store parcel to be $50,700. Thus, the State contended that its total liability was $67,700.*fn2 However, the State also made an offer of proof out of the presence of the trier of fact which based the after-taking value of the remaining properties on their combined use. By this calculation, the total damage resulting from the takings was $41,300.*fn3
The first jury trial resulted in an award of $26,200 for parcel 84A1, the gasoline station property. A second jury trial resulted in a verdict of $80,000 for parcel 84A2, the clothing store property. The State appealed these awards, challenging the court's rulings that separate valuations of the parcels were required to be made in separate jury trials and that the value of the combined use of the properties after the taking was irrelevant and immaterial.
The Appellate Division affirmed the condemnation awards, holding that where defendants owned two separate parcels, acquired at different times and put to separate commercial uses,
they were entitled to compensation for the separate losses occasioned by the State's takings irrespective of the value of the combined use of the properties after the taking. The State's petition for certification was granted. 89 N.J. 425 (1982).
We now hold that notwithstanding the separate uses to which the respective properties had been put at the time of condemnation, the fact of common ownership and the possible assembly of the remaining parcels for combined use should have been admitted into evidence in the determination of severance damages attributable to the partial takings of each property. Furthermore, we hold that under these circumstances, the values of the condemned properties should have been determined in one proceeding before only one trier of fact. Accordingly, we reverse and remand.
The principles governing condemnation awards are well-settled. This case presents a novel application of these principles. Specifically, these condemnation actions call for the simultaneous application of principles that apply, on the one hand, to the partial taking involving related properties and, on the other, to the entire taking of separate and unrelated properties. In the first instance, condemnation valuation encompasses severance damages; in the latter, severance damages do not arise. Consequently, a brief recapitulation of condemnation valuation precepts is in order to set the controversy before us in an understandable perspective.
When the State takes private property for a public purpose under the provisions of the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50, the property owner is entitled to just compensation. N.J. Const. (1947), Art. I, par. 20. Where the whole of a property is taken, the measure of damages is the fair market value of the property as of the date of the taking, determined by what a willing buyer and a willing seller would agree to, neither being under any compulsion to act. Village of
South Orange v. Alden Corp., 71 N.J. 362, 368 (1976); see also State v. Gorga, 26 N.J. 113, 115-16 (1958); City of Trenton v. Lenzner, 16 N.J. 465, 476 (1954), cert. den., 348 U.S. 972, 75 S. Ct. 534, 99 L. Ed. 757 (1955).
However, where only a portion of a property is condemned, the measure of damages includes both the value of the portion of land actually taken and the value by which the remaining land has been diminished as a consequence of the partial taking. The diminished value of the remaining property constitutes the severance damages visited upon that property as a result of the taking. New Jersey cases have expressed the computation in either of two ways.
In one group of cases it has been held that the measure of damages is the market value of the land taken plus the difference before and after the taking in market value of the remainder area. This concept of the measure of damages may be graphically illustrated by the following equation:
Value of land taken (value of remainder area before taking - value of remainder area after ...