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State v. Inhabitants of Town of Phillipsburg

Decided: April 26, 1990.


On appeal from Superior Court, Law Division, Warren County.

Deighan, R. S. Cohen and Brochin. The opinion of the court was delivered by Deighan, J.A.D.


Plaintiff State of New Jersey by the Commissioner of Transportation (State) appeals from a judgment entered on June 21, 1988, in the amount of $186,450.88, in a condemnation action involving lands of defendant, the Inhabitants of the Town of Phillipsburg (defendant or Phillipsburg). The condemnation proceeding was commenced under the provisions of the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 et seq. (Act).

On October 18, 1984, a declaration of taking was filed by the State and a deposit was made with the Clerk of the Superior Court for the taking. The matter was initially heard by three appointed commissioners who determined the value of the taking to be $36,873. Phillipsburg appealed to the Law Division and applied for a jury trial. The State presented three motions in limine: (1) to strike the 1987 appraisal of defendant's expert and to exclude his 1986-1987 comparable sales; (2) to preclude testimony of defendant's appraiser evaluating the Phillipsburg portion of the taking as subdivided approved lots, and (3) to suppress testimony by defendant concerning noise damages to its remaining vacant land as a result of the proximity of Route 78. The latter motion was granted but the first two motions were denied.

After a jury verdict for $186,415.88, the State moved for a new trial on the grounds that the verdict was against the weight of the evidence and that there was clearly a miscarriage of justice under the law. The trial judge denied the State's motions.

The following essential facts were developed at trial. At the commencement of this action, the State acquired in fee 8.048 acres of vacant land owned by Phillipsburg together with a bridge abutment easement of .073 acres. The land was to be used for the construction of Interstate Route 78 in Warren County. This final section of Route 78 in New Jersey commenced at the existing western end of the route in Greenwich Township, Warren County, and continued in a southwesterly direction through parts of Pohatcong Township, Alpha Borough and the Town of Phillipsburg to a new bridge across the Delaware River.

Of the 8.048 acres taken in fee, 1.957 acres are located in Phillipsburg and 6.091 acres are located in Pohatcong. The bridge easement encumbers land in Phillipsburg. The vacant land contains no public water, sewer lines, streets or other improvements. Prior to the State's taking, defendant owned a 41.918 acre parcel of land. Of this total, 38.7 acres were located in Pohatcong and 3.218 acres in Phillipsburg. As a result of the taking, the remaining property was separated into three parcels: (1) a northern remainder in Phillipsburg of 1.255 acres which was encumbered by the bridge easement; (2) a southwestern remainder of 19.830 acres which was sold by defendant in 1987 to the Penn Farm Group, and (3) an eastern remainder in Pohatcong of 12.785 acres.

The land in Phillipsburg was zoned R-504A, residential, with a minimum lot area for a single-family house of 5,000 square feet with a 50-foot frontage. It required sewer and city water for development. The permitted uses were: detached single-family residences, parks and playgrounds, public buildings, religious facilities, charitable organizations and necessary public utilities and services.

The Pohatcong portion was zoned R-3A with permitted uses of one-family dwellings on 65,000 square feet lots with well and septic systems, and other uses such as religious facilities, farming and parks. The R-3A zone also had conditional uses

of cluster residential development and planned unit development (P.U.D.) on minimum size parcels of 50 acres. A mixed, residential, commercial and business use was permitted under a P.U.D. There was also a planned unit residential development (P.U.R.D.) conditional use available on parcels of 25 acres or more. Public water and sewer service, which were not available, were required for all conditional use development.

The State presented three expert witnesses: Francis A. Goeke, P.E., an expert on sewer and water issues; Susan S. Gruel, a professional planner, and Linford L. Collins, a professional appraiser.*fn1 Defendant presented two witnesses: Peter J. Miller, Phillipsburg Town Manager and Robert L. Holenstein, a professional appraiser.

Due to zoning requirements of sewers and public water for residential development in Phillipsburg and for conditional use development in Pohatcong, a question was presented concerning the probable availability of sewer and water on September 21, 1984, or thereafter. The engineer, Goeke, gave his opinion that sanitary sewers were not available to be extended to new developments. The Phillipsburg sewer plant was not in good condition. In 1981, the United States Environmental Protection Agency (EPA) required Phillipsburg to clean up the plant, and to that end, a consent order was entered. Phillipsburg did not comply with the order and on August 12, 1985, a sewer moratorium was imposed by the New Jersey Department of Environmental Protection (DEP). In March 1988, Phillipsburg still had not complied with the cleanup schedule and consequently, an administrative consent order was entered which established a new schedule for completion of the cleanup of the existing plan by 1992. In Goeke's opinion, the DEP could not have issued sewer permits in September 1984 for new development. Further,

the sewer plant capacity was not available because during rain storms the plant exceeded technical capacity.

Goeke also testified that the existing Garden State Water Company lines near the subject property had only limited capacity and would have to be upgraded to comply with fire insurance regulations. In addition, a 1966 Sewer Agreement between Phillipsburg, Pohatcong and Alpha, which was still in effect on the date of trial, did not cover defendant's land in Pohatcong. Goeke also estimated costs to upgrade the sewer and water lines and extend them to the subject property.

To counter the State's testimony on the unavailability of sewer and water, defendant presented a fact witness, Peter J. Miller, who became town manager of Phillipsburg in January 1984. Miller admitted that, when he was appointed, the 1981 consent order to clean up the Phillipsburg sewer plant was still in effect. He nevertheless testified that there were no limitations on the sewer plant in 1984. He opined that there was nothing to prevent the sewer plant from adding new customers.

On cross-examination, Miller admitted that raw sewerage with only manual chlorination was still discharged into Pohatcong Creek during heavy rains and that when there was a power outage, the plant did not function properly. He acknowledged that Phillipsburg was penalized for failure to cleanup the plant by July 1, 1988 under provisions of the federal Clean Water Act of 1972. Miller confirmed that the 1966 sewer agreement was still in effect and had been modified only by a change in fees.

Susan S. Gruel, P.P., analyzed the property in question from a planner's perspective. She outlined the property's history from the time it was acquired by defendant in 1961 and concluded that the land in Phillipsburg had never been subdivided. Although prior owners laid out the lots, and lots were sketched in on the Phillipsburg tax maps in the 1950's, no formal subdivision was ever made.

Gruel concluded that the highest and best use for the Pohatcong section was the zoned permitted use for single-family dwellings on 1 1/2 acre lots with individual wells and septic systems. There were no environmental restraints on this use. All conditional uses, cluster, P.U.D. and P.U.R.D., required public water and sewers which, she concluded, were not available in the near future.

Finally, Gruel determined that there was no market for housing on September 21, 1984. She studied population trends, building permit information and employment statistics and found no demand between 1980 and 1984 for housing either in Phillipsburg or Pohatcong.

The appraisers presented by the State and defendant agreed on only one point, i.e., that the land in Pohatcong without availability of sewer and water was valued at $3,800 per acre. The State's appraiser, Lindford L. Collins, determined that the highest and best use for the subject property would be to sell it in its entirety for future residential development in accordance with zoning regulations. His analysis of sales in the area indicated that the real estate market was inactive and had been so since 1979 due mainly to high mortgage rates which depressed market value into 1985. He pointed to a 1985 comparable sale to show this lack of change.

Collins relied upon information received from Phillipsburg that sewer and public water were available and, therefore, valued the subject property initially assuming this availability. He arrived at a value of $4,500 per acre for the fee taking and $285 for the small bridge easement for a total just compensation of $36,500 for the entire taking. He made his appraisal subject, however, to an engineering report. Assuming unavailability of sewer and water, 15% would be subtracted from the value for a per acre price of $3,825 for a total compensation of $31,070 as of September 21, 1984.

Defendant's appraiser, Robert L. Holenstein, divided the effected lands into two areas: Section I, consisting of the ten lots

in Phillipsburg and Section II, consisting of 38.598 acres in Pohatcong. He prepared two appraisals: the first dated February 6, 1985 was prepared shortly after the valuation date and used all pre-taking sales. His second appraisal, dated January 20, 1987 revalued the Pohatcong part of defendant's land based on 1986-87 post-taking sales.

Holenstein appraised the Phillipsburg area on the basis that ten building lots were available. As a result of the State's acquisition, he concluded that eight lots were lost and an additional lot was damaged 100% as a result of the acquisition of the bridge easement. Holenstein based his lot method on the assumption that the lots sketched on the town's tax maps were in fact subdivided lots. His determination of just compensation for the Phillipsburg section was $76,500, i.e. $68,000 for the fee taking (loss of eight lots at $8,500 per lot) plus $8,500 for the easement. He predicated this value on four sales of improved building lots in Phillipsburg which had an average value of $19,062. Holenstein then estimated $11,000 to $13,000 for improvement costs which were not in his appraisal.*fn2

Holenstein valued the Pohatcong section of the subject property based on the "new sales evidence" in the second appraisal. Over the State's objection, the trial court permitted him to use both his before and after sales in his 1987 report. Holenstein found a highest and best use for multi-family housing. He assumed that sewer and water were available. In his 1985 appraisal, made 4 1/2 months after the taking date, he had valued the Pohatcong area before taking at $8,000 per acre for a value of ...

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