On appeal from the Superior Court, Law Division, Monmouth County.
Havey, Stern and Brochin. The opinion of the court was delivered by Havey, J.A.D.
In this condemnation case, the State of New Jersey appeals from a $1,450,000 judgment entered on a jury verdict in favor of defendant-condemnee Hope Road Associates. The State argues that the trial court erred in: (1) admitting evidence concerning defendant's "illusory" 1987 site plan approval which was conditioned upon a permanent access defendant had relinquished to the State in 1983; (2) admitting "speculative evidence" that defendant's site plan would be reapproved based on access to and from the condemned property by way of an unimproved easement in which defendant had no legal interest; (3) admitting the evidence in contravention of a pretrial order, thereby violating the "law of the case" doctrine; and (4) excluding testimony regarding a 1983 appraisal of the subject property. We reverse and remand for a new trial.
Defendant originally owned 16.3 acres of undeveloped land in Eatontown fronting on Hope Road, near its intersection with State Highway 36 and the Garden State Parkway. In a negotiated settlement on October 12, 1983, the State acquired the front-westerly 7.155 acres of defendant's parcel, as well as defendant's access to Hope Road, for the purpose of constructing ramps for
the Route 18 freeway. The 1983 deed provided that defendant would have a temporary right of access from its remaining 9.164-acre parcel (the subject property), across the State's parcel to Hope Road "until such time as the aforesaid Freeway is constructed and open for traffic and/or an alternate means of access is provided by the construction of Ferncliff Drive Extension to [defendant's] remaining lands." Ferncliff Drive, an existing roadway, was to be extended to the easterly corner of the subject property, to provide access for the property by way of the extension and other public streets to Wyckoff Road. The extension was also intended to provide a means of access for a cemetery, contiguous to the subject property.
In 1985 or 1986, the owner of the property to the east of the subject property negotiated with the Borough of Eatontown and the State for changes in the proposed Ferncliff Drive extension to accommodate a subdivision known as Deepwood Estates. Deepwood's developer sought to provide access to the cemetery by a means other than the proposed Ferncliff Drive extension. Sometime prior to 1988, the developer and defendant conveyed a twenty-foot easement across their properties to the Borough for the purpose of providing access to and from the cemetery to Wyckoff Road. The "cemetery" easement runs easterly through a portion of defendant's property and bends in a southerly direction across the Deepwood tract several hundred feet where it connects with Wyckoff Road.
The subject property is in the PBO-200 zone, which permits office use. On October 26, 1987, defendant obtained final site plan approval for a 99,900 square-foot office complex. However, the approval was expressly subject to defendant's right of access to Hope Road across the 7.155-acre parcel defendant had deeded to the State in 1983. The resolution granting the approval provided that any change in plans concerning a different means of ingress and egress "will constitute a major change requiring reapplication and public notice." Thereafter, the State constructed the Route
18 ramp, thereby precluding defendant's use of the Hope Road access.
On May 3, 1988, the State filed its present complaint condemning the subject property. Prior to trial, the State moved in limine to exclude defendant's appraisal report and related trial testimony "based upon permanent access to Hope Road, . . . or along any permanent way other than Ferncliff Drive Extension." By order dated May 13, 1992, Judge McGann granted the State's motion.
During trial, the State's appraiser, Cornelius Guiney, testified that the subject property's highest and best use was residential subdivision and development, notwithstanding that the PBO-200 zone permitted commercial and office building use. Based on his conversations with residents and municipal officials, Guiney was of the view that it was unlikely the Borough would ever approve a site plan for defendant's proposed office complex because of the traffic it would generate onto adjoining residential streets by way of the Ferncliff Drive extension. He rejected the existing site plan approval because it was premised on nonexistent access to Hope Road. Relying upon residential-sale comparables in nearby towns, Guiney concluded that the property was valued at $687,500.
Defendant's appraiser, John Brody, evaluated the property at $1,650,000. He reached that figure using three comparable commercial sales located on Hope Road, within one mile of the property, adjusting for time, location and topography. Over the State's objection, Brody treated the subject property as having a valid site plan approval for development of an office building, and adjusted its value upward accordingly. Ignoring the 1983 deed providing for permanent access by way of Ferncliff Drive, Brody assumed alternative access, probably over the "cemetery" easement. Notwithstanding the State's continued objection, Brody was permitted to express his view that the municipality would look favorably upon this means of access because "it's a very logical course." He explained that the easement to Wyckoff Road is through undeveloped lands and would act as "a nice buffer zone"
between Deepwood Estates and the commercial development on defendant's tract. However, Brody also stated that defendant's use of the Ferncliff Drive extension as its means of ingress and egress to and from the office complex would not affect his appraisal.
The State argues that Brody should not have been permitted to value the property based on the 1987 site plan approval, since that approval had no legal viability, defendant having relinquished its right of access to Hope Road. It also contends that the trial court committed reversible error by permitting defendant to hypothesize that the site plan would be reapproved based on defendant's use of the "cemetery" easement from the subject property to Wyckoff Road. The State points out that the easement is only twenty-feet wide, is unimproved, and defendant has no property interest in it. It argues that, consequently, the only ingress and egress available for the purposes of measuring the probability of site plan approval was the Ferncliff Drive extension conveyed by the State to defendant in its 1983 deed.
When property is taken under the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50, the measure of damages is the fair market value of the property as of the date of taking, "determined by what a willing buyer and a willing seller would agree to, neither being under any compulsion to act." State v. Silver, 92 N.J. 507, 513, 457 A.2d 463 (1983). "Fair market value" is that value assigned by knowledgeable parties freely negotiating under normal market conditions "based on all surrounding circumstances at the time of the taking." Id. at 514, 457 A.2d 463. A determination of fair market value requires the antecedent finding as to highest and best use of the property. State v. Cooper Alloy Corp., 136 N.J. Super. 560, 567-68, 347 A.2d 365 (App.Div.1975); State v. Mehlman, 118 N.J. Super. 587, 590, 289 A.2d 539 (App.Div.1972); 4 Nichols, Law of Eminent Domain § 12B.14, at 138-39 (3rd ed.1990). "Highest and best" use has been defined as "[t]he reasonably
probable and legal use of . . . an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value." Chevron U.S.A., Inc. v. City of Perth Amboy, 10 N.J. Tax., 114, 145 (1988) (alterations in original) (quoting American Institute of Real Estate Appraisers, The Appraisal of Real Estate 169 (9th ed. 1987)), aff'd, 237 N.J. Super. 280, 567 A.2d 597 (App.Div.1989), certif. denied, 121 N.J. 628, 583 A.2d 324 (1990).
The market value, for condemnation purposes, is not limited to value for the use to which the land is actually devoted. Nichols, supra, at 139. It is well-settled that "the owner shall receive the fair market value of the land for any use for which it has a commercial value in the immediate present or in reasonable anticipation in the near future." State v. Gorga, 26 N.J. 113, 116, 138 A.2d 833 (1958) (emphasis added). The "inquiry into relevant facts at the time of the taking may include those that have a bearing on an available future use of the property." Silver, 92 N.J. at 515, 457 A.2d 463. However, "[t]he potential use must be reasonable, and within the realm of possibility in the not too distant future. The property must be available for ...