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City of Atlantic City v. Cynwyd Investments

March 10, 1997

THE CITY OF ATLANTIC CITY, A MUNICIPAL CORPORATION, PLAINTIFF-RESPONDENT,
v.
A-55/A-56 CYNWYD INVESTMENTS, A PENNSYLVANIA PARTNERSHIP AND GREATE BAY HOTEL AND CASINO, INC., T/A SANDS HOTEL & CASINO, A NEW JERSEY CORPORATION, DEFENDANTS-RESPONDENTS, AND CORESTATES NJ NATIONAL BANK, ATLANTIC CITY ELECTRIC COMPANY, T/A AS ATLANTIC ELECTRIC, A NEW JERSEY CORPORATION, AND THE STATE OF NEW JERSEY, DEFENDANTS, AND BOARDWALK REGENCY CORPORATION, A NEW JERSEY CORPORATION, AND SQUARE BRIGHTON CORPORATION, INC., A NEW JERSEY CORPORATION DEFENDANTS-APPELLANTS. SQUARE BRIGHTON CORPORATION, INC. A NEW JERSEY CORPORATION AND FLOYD JAMES, A TAXPAYER OF ATLANTIC CITY, PLAINTIFFS-APPELLANTS, V. A-57 THE CITY OF ATLANTIC CITY, A MUNICIPAL CORPORATION AND BODY POLITIC OF THE STATE OF NEW JERSEY, GREATE BAY HOTEL AND CASINO, INC., T/A "SANDS HOTEL & CASINO", A NEW JERSEY CORPORATION, CYNWYD INVESTMENTS, DEFENDANTS-RESPONDENTS, AND BOARDWALK REGENCY CORPORATION, A NEW JERSEY CORPORATION, DEFENDANT.



On certification to the Superior Court, Appellate Division, whose opinions are reported at: 287 N.J. Super. 442 (1996) and 287 N.J. Super. 450 (1996).

The opinion of the Court was delivered by O'hern, J. Chief Justice Poritz and Justices Handler, Pollock, Garibaldi, Stein and Coleman join in Justice O'HERN's opinion.

The opinion of the court was delivered by: O'hern

(The syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The City of Atlantic City v. Cynwyd Investments, et al., 148 N.J. 55, 689 A.2d 712 (A-55/56/57-96)

Argued November 18, 1996 -- Decided March 10, 1997

O'HERN, J., writing for a unanimous Court.

The two separate appeals before the Court are considered as one for purposes of convenience. The two issues raised on appeal are: 1) whether the ordinance authorizing the acquisition of the land by Atlantic City (the City) with funds provided by an adjoining property owner complies with the Local Budget Law; and 2) whether the requirements under the Eminent Domain Act (the Act), for the City to have obtained an appraisal before condemnation and to have made an offer to acquire the land for the appraisal price, may be waived by the record owner of the property.

Greate Bay Hotel and Casino, Inc. (Sands) was the first to develop a casino on property that is the center of this appeal. In 1979, the Atlantic City Planning Board required Sands, as a condition of development, to dedicate a portion of its land to form half of what became known as Pop Lloyd Boulevard, slated to be a north-south road parallel to the boardwalk between Indiana Avenue and Martin Luther King Boulevard. The Planning Board required Sands to position its loading docks on the Pop Lloyd side of its property and to route its bus and patron traffic by way of this new road to its front door.

The adjoining parcel of land to the east, the former site of the Traymore Hotel, was owned by Cynwyd Investments. Cynwyd had given a ninety-nine-year lease, with an option to purchase, to Boardwalk Regency Corporation (Caesars). Caesars planned to build a casino-hotel on the Traymore site. The Planning Board required Caesars, as a condition of its development approval, to dedicate land to make up the other half of Pop Lloyd Boulevard. In 1979, Caesars gave up its plans for building the casino and never dedicated the strip of land for use as a street. Caesars then subleased the Traymore site to Square Brighton Corporation, Inc. (Square), for use as a parking lot. Pop Lloyd Boulevard, however, was built as planned, half on land owned by Sands and half on the Traymore land.

When Square learned that its sublease included one-half of Pop Lloyd Boulevard, it placed a fence across the road that prevented Sands' use of its loading dock. Although the City initially leased the other half of the road, Sands eventually had to rent the 16-foot strip of Pop Lloyd Boulevard (the Property) held by Square, so that it could access its loading dock and front door.

In 1991, Sands sued the City, Cynwyd, Caesars, and Square to compel the City to acquire the Property by eminent domain or to pay damages to Sands for the effect on its property. In 1994, Sands and the City entered into a settlement ("the Stipulation"), under which the City agreed to acquire the Property for public right-of-way purposes, either by purchase or by eminent domain. Sands agreed to pay 100% of the fair market value compensation as defined in the Eminent Domain Act, plus all associated costs paid by the City to acquire the Property. Atlantic City Ordinance #61-1994 (Ordinance 61), adopted on August 31, 1994, authorized the implementation of the Stipulation and the acquisition of the Property by condemnation if necessary. Because the Property was to be acquired through funds supplied by Sands pursuant to the Stipulation, the ordinance made no appropriation of funds for the acquisition of the Property.

The City negotiated an acquisition price of $625,000 with Cynwyd despite having an appraisal valuing the Property at $1,122,400 for tax purposes. This alleged underpayment would have had a devastating monetary effect on Caesars. In addition, under its sublease with Caesars, Square would lose its right to charge Sands rent for use of the Property. Because Cynwyd could not deliver an unencumbered title, the City had to institute condemnation proceedings under the Act. Both Square and Caesars challenged the taking, claiming in separate actions primarily that Ordinance 61 was invalid and that the City had not complied, in the condemnation action, with the requirements of the Act. Square claimed that Ordinance 61 and the contract that it approved violated the Local Budget Law. Because Ordinance 61 obligated the City to acquire real property without appropriating funds for the costs of acquisition, Square contended that the ordinance is void, under to the Local Budget Law, as an authorization of an expenditure without an appropriation. Sands countered that the Local Budget Law did not apply because the City was not expending public funds.

On motions for summary judgment, the trial courts held that Ordinance 61 was valid, in that it complied with the Local Budget Law, and that the City had not violated the Act because the owner of the Property had waived compliance with the Act's requirements. The Appellate Division affirmed the decision of the trial courts.

The Supreme Court granted Square's and Caesars' petitions for certification.

HELD:

Atlantic City Ordinance #61-1994, authorizing the acquisition of land with funds provided by an adjoining landowner, complies with the Local Budget Law. The requirements under the Eminent Domain Act, for Atlantic City to have obtained an appraisal before condemnation and to have made an offer to acquire the land for the appraisal price, may be waived by the record owner of the property, unless the waiver works an actual prejudice on other condemnees.

1. The Local Budget Law regulates the budget-making process for all counties and municipalities in the State; its purpose is to require local governments to follow sound business principles in their budgetary practices. As the trial court found, that purpose was addressed by the adoption of the Stipulation and the ordinance to implement it. The Court would be more concerned about an action to acquire lands without presently available funds were it not for the enforceable Stipulation and the concurrent judicial supervision of the obligations of Sands. Thus, the City did not violate the Local Budget Law under these circumstances. (pp. 11-14)

2. Section 6 of the Eminent Domain Act requires that the condemnor conduct "bona fide negotiations with the prospective condemnee" before any condemnation action under the Act may be instituted. Before any offer may be made to the condemnee, the taking agency is to appraise the property and no offer is to be less that the taking agency's approved appraisal of the fair market value of the property. Although these pre-condemnation requirements of Section 6 cannot be dispensed with over the objection of a condemnee, the requirements may be waived by a condemnee. (pp. 14-17)

3. Under the Act, negotiations are to be undertaken with the condemnee who owns title of record to the property. The rights of all other condemnees with a compensable interest are better protected by allowing them to participate in later proceedings. The purpose of the statutorily-required negotiations set forth in Section 6 is to encourage settlement and the voluntary acquisition of property needed for public purposes, allowing both the public entity and the landowner to avoid the expense and delay of litigation, while enabling the landowner to receive just compensation. That statutory purpose was accomplished here because the compensation agreement eliminated any legal dispute between the City and Cynwyd. Those with whom the condemnor negotiates prior to the filing of suit may elect to waive strict compliance with the provisions of Section 6. However, a condemnation complaint should not be dismissed for failure strictly to comply with the procedural prerequisites to suit without an inquiry into whether the title holder was prejudiced thereby. (pp. 17-19)

4. Although ninety-nine-year lessees are considered equivalent to fee simple owners for certain purposes under the law, the Court will not apply that doctrine in condemnation cases. A condemnee holding record title may not waive the procedural rights under the Act without consideration of the rights of other condemnees. Thus, a court probably should dismiss a complaint in condemnation if the waiver of procedural rights by a holder of record title works an actual prejudice to other condemnees, including ninety-nine-year lessees. Although Caesars and Square may not have had a compensable interest in the award itself, there were differing interests in the outcome of the condemnation that would have required their participation. The proper solution to vindicate the public interest would have been to have Caesars and Square participate in the valuation proceedings to present evidence of fair value. (pp. 19-22)

Judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and COLEMAN join in JUSTICE O'HERN's opinion.

The opinion of the Court was ...


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