On certification to the Superior Court, Appellate Division, whose opinion is reported at 234 N.J. Super. 37 (1989).
For reversal and remandment -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein. The opinion of the Court was delivered by Handler, J.
In this condemnation case, the State sought to acquire a portion of the frontage of private property to widen a highway. The property owner challenged the action on the grounds that the State, contrary to requirements of statute, failed to conduct bona-fide negotiations prior to the condemnation. The trial court found that the State had not conducted bona-fide negotiations because of deficiencies in the State's appraisal, inter alia, the omission of information relating to increased traffic noise, which the court considered to be a compensable element of severance damages. The trial court therefore dismissed the condemnation complaint. Following an appeal by the State, the Appellate Division affirmed. 234 N.J. Super. 37, 559 A.2d 1381 (1989).
The State petitioned for certification. It contended that, contrary to the findings of the courts below, the appraisal was not deficient and did not impermissibly omit noise-impact information as an element of compensable damages. Thus, the State claimed it had not violated its statutory duty to undertake bona-fide negotiations prior to the condemnation. We granted the petition. 118 N.J. 197, 570 A.2d 961 (1989).
This dispute arises from a State highway project. Because of traffic congestion and high accident rates, the New Jersey Department of Transportation (the DOT or Department) sought to enlarge the portion of Route 38 extending from the New Jersey Turnpike in Mount Laurel Township to Pemberton Road in Mount Holly Township.
Defendant Philip Carroll owns 14.124 acres of land adjacent to Route 38 in Mount Laurel Township. The property is used
as a horse farm and is improved with a single-family dwelling, several outbuildings, and fence-enclosed training areas. The DOT requires a fourteen-foot-wide strip of defendant's 586.96 feet of frontage along Route 38 to complete expansion of the highway. The total taking amounts to 0.189 acre or 8,232.84 square feet, and includes twenty-nine trees and bushes, 240 square feet of gravel driveway, and an established lawn area.
On November 15, 1982, the DOT held a public hearing on the proposed project, which at that time called for an expansion from two to four lanes. Carroll attended that hearing and assumed that none of his land would be taken because the aerial map used at that hearing showed no encroachments on his property.
The project plan was later changed to widen the highway to six lanes, which required a 138-foot right-of-way rather than the 110-foot right-of-way under the original proposal. The DOT did not conduct a second public hearing because it concluded there was no "substantial change" from the initial proposal. Carroll alleges that fifty or more property owners, including himself, were affected by the change, but were given no opportunity to be heard.
By letter dated August 11, 1986, the DOT notified Carroll that the Route 38 project required the purchase of a portion of his property. The Department's letter briefly outlined the appraisal and negotiations process, and referred the property owner to DOT representatives for further information. The letter also informed Carroll that an appraiser would be sent to inspect his property, and that he could accompany the appraiser. Further, the letter stated that DOT "negotiators will be prepared to explain the basis of the State's monetary offer and to answer any questions that you may have regarding the transactions."
The DOT's independent appraiser wrote to Carroll on February 24, 1987, and arranged for an inspection of his property on March 13, 1987. Following that inspection, the appraiser completed
an appraisal report dated April 21, 1987, indicating a pre-taking value of $69,500 per acre, or $981,618 for the entire tract. The appraisal ascribed a value of $13,136 to the 0.189 acre being taken, and $1,364 for damages to the remaining property, resulting in an aggregate value of $14,500 for the taking.
The appraisal also disclosed that the valuation was done by the "comparative approach," rather than the "cost and income approaches." While the report did not include any general descriptions of the three common appraisal methods, it did include three sales of comparable properties in Mount Laurel and Evesham Townships, which were used to value Carroll's property.
The appraisal further disclosed that the property's actual use as a horse farm and single-family residence was not its "highest and best use"; its highest and best use would be the commercial-industrial use for which it was zoned. The record indicates that the comparable sales were selected because those properties were also zoned for commercial-industrial use. The appraisal discounted any damage to the property's improvements because they were not relevant to its use for commercial-industrial purposes. Similarly, the appraisal did not include damages for the trees and bushes along the Route 38 frontage because such landscaping "add[ed] no value to the tract" and would not be necessary if the property were devoted to commercial-industrial use.
Following the appraisal, a DOT negotiator met with Carroll on July 8, 1987. The negotiator showed Carroll a map of the area needed for the Route 38 project and pointed out that various trees would have to be removed; she also gave him a copy of the appraisal and a written offer of $14,500 as compensation for the partial taking. The negotiator attempted to explain the appraisal, but Carroll told her that the offer was much too low and that there was no need to discuss the matter any further. At Carroll's request, the negotiator left.
Subsequently, the negotiator telephoned Carroll on July 17, 1987, and again on August 5, 1987, to schedule another meeting to discuss the State's offer. Carroll refused to negotiate further, and told the negotiator that another meeting would not be necessary because he would not accept the State's offer unless it was increased and compensated him for the trees. The negotiator explained that the trees were not included in the State's offer because "sometimes appraisers do not feel that trees enhance the value of the property." Carroll also asserted that the State should change the basis of its appraisal from the "square-foot" method to the "front-foot" method. The negotiator explained that in the State's view, the front-foot method was not appropriate where a property owner, like Carroll, was not losing his "entire buildable depth behind the frontage." Carroll further told the negotiator that if the appraisal could not be changed, the matter would have to be resolved by the courts.
The DOT again explained its position in a letter dated August 11, 1987, addressing Carroll's concerns about the trees and about the square-foot valuation method. The letter offered an opportunity for further negotiations, while also making clear that if the DOT could not reach an agreement with Carroll, condemnation proceedings would be necessary. The letter nonetheless indicated that the State would "continue negotiations at the next [management] level to protect your rights" and that it "would like to continue negotiations with you if you feel it's possible to resolve this matter." The letter also stated that if Carroll failed to respond within five days, the State would assume the proposed settlement was not acceptable to him and would have the matter reassigned for "preliminary condemnation." Carroll responded by letter dated August 25, 1987, indicating a willingness to try "to enter into good faith negotiations."
Carroll next received two separate, and apparently contradictory, letters from the DOT. One, dated September 2, 1987 and signed by a representative of the Bureau of Acquisition,
stated that "negotiations have been conducted" and that Carroll had rejected a suggested settlement of $14,500; it also stated that Carroll had fourteen days to accept the State's offer or the State would institute condemnation proceedings. The second, dated September 3, 1987, asserted that the State was "ready and willing to meet with you at your convenience, to negotiate this taking." Carroll did not respond to either letter, and on October 30, 1987, the State filed its condemnation complaint.
The trial court dismissed the complaint, concluding that the State had not engaged in bona-fide negotiations as required by statute. The court based its determination on four factors: (1) the appraisal was accompanied by a "one-price offer"; (2) the appraisal was unintelligible; (3) the appraisal omitted information on noise damages, which the court found to be an element of compensation in partial-taking cases; and (4) appraisals of neighboring properties should have been made available.
On the State's appeal, the Appellate Division affirmed the order dismissing the complaint, but on somewhat different grounds. Unlike the trial court, the Appellate Division determined that the duty to engage in bona-fide negotiations was not violated by (1) the State's one-price offer; (2) any unintelligibility of the appraisal report; or (3) the failure to provide appraisals of neighboring properties. 234 N.J. Super. at 50, 53-55, 559 A.2d 1381. Nevertheless, the Appellate Division concluded that the State had not negotiated in good faith for two reasons. First, the State had failed to provide a sufficient description of the appraisal valuation method. Second, it had failed to provide information concerning the impact ...