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State by Com'r of Transp. v. Shein

August 11, 1995

STATE OF NEW JERSEY, BY THE COMMISSIONER OF TRANSPORTATION, PLAINTIFF-APPELLANT,
v.
ROBERT J. SHEIN, MINDA SHEIN, MICHAEL SENOFF AND JANE SENOFF, DEFENDANTS-RESPONDENTS, AND STATE OF NEW JERSEY, JACK BORRUS; ESHAM CORP., A DEFUNCT CORPORATION OF NEW JERSEY; TOWNSHIP OF NORTH BRUNSWICK, IN THE COUNTY OF MIDDLESEX, A MUNICIPAL CORPORATION IN NEW JERSEY, DEFENDANTS.



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

Approved for Publication August 11, 1995.

Before Judges King, *fn1 D'Annunzio and Eichen. The opinion of the court was delivered by Eichen, J.s.c. (temporarily assigned)

The opinion of the court was delivered by: Eichen

The opinion of the court was delivered by EICHEN, J.S.C. (temporarily assigned)

This is a condemnation case in which the dispute focuses on the question of just compensation for property taken by the State of New Jersey, Department of Transportation (the State), under its eminent domain powers. The main issue presented involves the interpretation of the term fair market value in determining just compensation in circumstances where the actual condition of the property, alleged here to be freshwater wetlands, was unknown to either the State or the owners on the date of valuation.

Prior to trial, the owners sought to bar, as irrelevant, evidence of the property's status as freshwater wetlands because, they argued, a reasonable buyer could not have been expected to know its condition on the date of valuation. The State cross-moved in limine to exclude the owners' appraisal and all resulting valuation testimony because the appraiser had not valued the property in its actual physical condition as freshwater wetlands.

The trial Judge denied both applications reasoning that the jury should be allowed to determine whether a reasonable buyer and seller would have investigated the condition of the property to determine whether it was wetlands. Thus, the pivotal issue at trial upon which the jury was allowed to base its determination of just compensation was whether the owners could reasonably have discovered the alleged wetlands' condition of the property at the date of valuation. For the most part, the evidence presented at trial assumed the property was actually freshwater wetlands. The owners did not present an expert to contradict the State's expert's opinion that the property was wetlands; instead, they used cross-examination in an attempt to undermine the credibility of that opinion. The jury returned a favorable verdict to the owners of $250,000.

We conclude the Judge erred in focusing the factual issue on whether a reasonable buyer and seller would have known that the property was wetlands. We are satisfied that a fair and just compensation award had to have been based on the actual condition of the property. Fair market value, by necessity, must depend upon the actual condition of the property, not what a reasonable person would know about the property. We reverse.

I.

Some Discussion of the background of the case is helpful in understanding how this dispute arose and our resolution of it. In September 1989, the State condemned 0.66 of an acre of a 6.02 acre tract of wooded, vacant land owned by defendants located at the intersection of southbound Route 1 and Aaron Road in the Township of North Brunswick, Middlesex County. The condemned property consisted of an irregularly shaped strip between 7 and 107 feet wide, along 864 feet of the property's existing frontage along Route 1, the existing jughandle and Aaron Road. The State also took a slope easement between one and five feet in width amounting to 0.33 of an acre.

On November 27, 1989, the State filed a complaint to condemn the property for the purpose of redesigning and enlarging the jughandle and for widening of Aaron Road. The State determined that $132,000 was just compensation for the condemned property and deposited that amount with the Clerk of the Superior Court on filing of the complaint. The estimated fair compensation for the taking was based on a report prepared by the State's appraiser, Joseph Martin, MAI, for K. Hovnanian Corporation, a well-known real estate development company. The owners did not challenge the taking but disputed the State's valuation. As a result, a panel of commissioners was appointed to value the condemned property. On April 2, 1992, prior to the commissioners' hearing, the State for the first time learned that the property might be eligible for regulation under the Freshwater Wetlands Protection Act, N.J.S.A. 13:9B-1 to -30, and engaged an environmental scientist, Amy Greene, to conduct a wetlands evaluation.

Greene, an environmental scientist for twenty years, testified that she delineated the property as wetlands based on "National Wetland Inventories" prepared by the United States Fish and Wildlife Service which were published in 1979 and prepared from aerial photographs taken in the mid-1970's. She also testified that she reviewed wetlands maps published by the Department of Environmental Protection in 1991 based on aerial photographs taken in 1986. In addition, she testified her opinion was based on "county soil surveys," prepared from analyses of aerial photographs published in 1987, as well as information obtained by experienced soil scientists' "walking the property." From all of these she concluded that the entire tract is freshwater wetlands.

The owners presented no evidence at trial to rebut this testimony. As noted, the focus of their effort was to attempt to show that reasonable parties negotiating at arms length to purchase the property in 1989, the date of valuation, could not reasonably have been expected to know the property was wetlands. To support its contention, the owners introduced a letter to them from K. Hovnanian Corporation, dated October 24, 1988, offering to buy the condemned portion of the tract for $145,200.

As a result of Greene's report, the State revised its valuation of the land from $200,000 per acre to $70,000 per acre and changed its estimate of ...


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