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Township of West Windsor in the County of Mercer v. Nierenberg

June 30, 1997

TOWNSHIP OF WEST WINDSOR IN THE COUNTY OF MERCER, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
YVETTE NIERENBERG AND PRINCETON MANOR ASSOCIATES, DEFENDANTS-APPELLANTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 285 N.J. Super. 436 (1995).

The opinion of the Court was delivered by Stein, J. Justices Pollock, Garibaldi And Coleman join in Justice Stein's opinion. Justice O'hern filed a separate Dissenting opinion in which Chief Justice Poritz and Justice Handler join.

The opinion of the court was delivered by: Stein

(This 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).

TOWNSHIP OF WEST WINDSOR V. YVETTE NIERENBERG (A-46/47-96)

Argued November 4, 1996 -- Decided June 30, 1997

STEIN, J., writing for a majority of the Court.

Pursuant to N.J.S.A. 20: 3-30(c) of the Eminent Domain Act of 1971 (section 30(c)), the date on which an action is taken by the condemnor which substantially affects the use and enjoyment of the property by the condemnee is one possible date used to value property subject to condemnation. The issue raised in this appeal is whether a letter written by a municipality to a potential condemnee "substantially affected" the value of the property, thereby setting the valuation date pursuant to section 30(c).

In 1987, Stuart Nierenberg, Marilyn Nierenberg, Philip Kramer, Sol Kramer, and Ely Kramer formed the partnership Princeton Manor Associates (PMA) for the purpose of developing a 50-acre tract of land owned by Yvette Nierenberg, Stuart's and Marilyn's mother. The property is zoned R-2 Residential by the Township of West Windsor (Township). Prior to July 8, 1987, the date PMA purchased the property from Yvette Nierenberg for $4,320,700, the property had been designated on the Township's Master Plan as a potential site for West Windsor's proposed Community Park.

PMA prepared a plan for a forty-eight-lot residential subdivision of the property and submitted a subdivision application to the Township on May 13, 1988. While PMA was considering whether to propose an amendment to the municipal sewer plan in order to obtain subdivision approval, Yvette Nierenberg received a certified letter from the Township Administrator, dated July 29, 1988, formally notifying her, among other things, that West Windsor Township may acquire her property for the purpose of establishing a Community Park. PMA's attorney advised PMA that it was unlikely that it would obtain Township approval for enlargement of the sewer system in view of the Township's apparent intent to condemn the property.

The Township had the property appraised and, on April 19, 1989, PMA was notified that the Green Acres program had approved the acquisition and had accepted an appraisal valuing the property at $3,022,000. The parties attempted to negotiate the purchase price of the property. Unfortunately, what occurred was a lengthy process of failed attempts. Initially, the Township realized that it could not afford to purchase the property and develop the Park, resulting in negotiations relating to the partial acquisition of the property by the Township with development of the remainder by PMA. PMA proposed the dedication of thirty-seven acres to the Township with a townhouse development on the thirteen-acre remainder. West Windsor rejected that proposal but suggested it might agree to a forty-eight-lot single-family-home development.

On September 5, 1989, West Windsor's Township Committee adopted a resolution accepting an offer by PMA to sell thirty-seven acres to the Township for $1,250,000. In return, PMA would complete a residential development of no more than sixty units on the remaining thirteen acres, subject to a rezoning of the property and planning board approval. On August 15, 1990, the Township Committee declined to approve the necessary zoning amendments. Thereafter, the Township Committee agreed in closed session to purchase the Nierenberg tract for $3.2 million and to introduce a bond ordinance to cover the debt; however, the bond ordinance was defeated.

On January 22, 1991, PMA filed a complaint in the Law Division, seeking, among other relief, just compensation for the Township's alleged destruction of the value of its property or, alternatively, specific performance of its prior agreement with the Township whereby PMA would receive $1,250,000 and the property would be rezoned to permit construction of no more than sixty units on the remaining thirteen acres.

While the lawsuit was pending, continued negotiations produced a new plan whereby PMA would retain thirty-seven acres on which a thirty-four-lot subdivision would be permitted and the Township would acquire the remaining thirteen acres. The Township issued a pre-condemnation letter and on May 29, 1992, West Windsor purchased the thirteen acres for $700,000. On July 17, 1992, the Township Committee authorized the condemnation of the remaining thirty-seven acres. When PMA rejected the Township's monetary offers, the Township on May 3, 1993 filed a complaint for condemnation.

The trial court concluded that the date of the Township's letter, which stated that the Township may acquire the property owner's land to use as a community park, had obtained financing for the acquisition, and had intended to obtain prompt appraisal of the property's value, constituted the proper date for valuing the property. The court reasoned that the July 29 letter impeded development, thereby significantly diminishing the possibility that the land would be put to its highest and best use as a residential development. The court also concluded that the letter had devalued the property by 25%.

On appeal, the Appellate Division reversed, holding that the letter did not substantially affect PMA's use and enjoyment of the property within the meaning of section 30(c) and was merely a preliminary step to a potential future condemnation. The Appellate Division also found that PMA could have perfected its application for major subdivision approval, thereby forcing the Township to determine its acquisition plans.

The Supreme Court granted certification .

HELD:

The July 29, 1988 letter written to Yvette Nierenberg on behalf of the Township of West Windsor "substantially affected" the value of the property and, therefor set the valuation date pursuant to N.J.S.A. 20: 3-30(c) of the Eminent Domain Act of 1971.

1. When private property is condemned for public use, the condemnor is required to pay "just compensation" to the property owner. In order to make the condemnee whole, eminent domain proceedings are required to produce a "fair market value" for the property. (pp. 18-21)

2. New Jersey Sports & Exposition Authority v. Giant Realty Associates is a recent case that is consistent with precedent in New Jersey and other jurisdictions. The court addressed the legislative policy underlying section 30(c), noting that its purpose was to protect the condemnee from a diminution in value resulting from the cloud of condemnation being placed on the property by a potential condemnor and insulate the condemnor from spiraling inflation. A substantial affect on the use and enjoyment of the property was defined as the occasion when the condemnor takes action which directly, unequivocally and immediately stimulates an upward or downward fluctuation in value and which is directly attributable to a future condemnation. (pp. 21-26)

3. Governmental action merely sufficient to set a date of valuation under section 30(c) need not support a cause of action for inverse condemnation. The critical issue is not whether PMA could have continued its attempts to develop the property, but whether PMA's use and enjoyment of its property was substantially affected by the July 29 letter. The record indicates that any attempt by PMA to continue to seek development approval from the Township would have been futile and, given the cloud of condemnation over the property, PMA could not have sold the land at an economically feasible price to another developer. (pp. 29-31)

4. The trial court found that: the letter disclosed the Township's firm intention to acquire the property; the property could not be put to its highest and best use as a residential development because of the letter; and the Township's assertion of its plan to acquire the property and of its ability to finance the acquisition, as set forth in the letter, caused the property to be devalued by approximately 25%. Those factual findings were amply supported by substantial credible evidence in the record and should not have been rejected by the Appellate Division. (pp. 31-32)

5. The legislative objective of section 30(c) was to identify events that affected the value of property so significantly that it would be unfair, either to the condemnor or the condemnee, to allow the post-event fluctuation in value to be reflected in the condemnation award. That principle applies whether the governmental action prompts a decrease or an increase in the value of the property. The Court's determination should not discourage municipalities from responsibly notifying potential condemnees of an intention to condemn, nor should its Disposition be viewed as penalizing condemnors. (pp. 32-35)

Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law Division for further proceedings consistent with this opinion.

Justice O'HERN Dissenting, in which CHIEF JUSTICE PORITZ and JUSTICE HANDLER join, is of the view that what occurred in this case was the result of a lengthy negotiation process in which the Township attempted, in good faith, to acquire the PMA property. Accordingly, the facts do not demonstrate the kind of obstructive governmental action that substantially affects the use and enjoyment of property.

JUSTICES POLLOCK, GARIBALDI AND COLEMAN join in JUSTICE STEIN'S opinion. JUSTICE O'HERN filed a separate Dissenting opinion in which CHIEF JUSTICE PORITZ and JUSTICE HANDLER join.

The opinion of the Court was delivered by

STEIN, J.

This case concerns the appropriate date for valuing condemned property pursuant to the Eminent Domain Act of 1971 ( N.J.S.A. 20:3-1 to -50) (Act). The Act provides for three possible valuation dates: the date the condemnor takes possession of the property being condemned either in whole or in part, N.J.S.A. 20:3-30(a); the date on which the condemnation action is commenced, N.J.S.A. 20:3-30(b); and "the date on which action is taken by the condemnor which substantially affects the use and enjoyment of the property by the condemnee," N.J.S.A. 20:3-30(c). *fn1 Just compensation for the condemnee is determined as of the earliest of those dates. N.J.S.A. 20:3-30.

At issue is whether a letter written by a municipality to a potential condemnee "substantially affected" the value of the property, thereby setting the valuation date pursuant to N.J.S.A. 20:3-30(c). The trial court determined that the date of the letter, which stated that the municipality may acquire the property owner's land for use as a community park, had obtained financing for the acquisition, and intended to obtain a prompt appraisal of the property's value, constituted the proper date for valuing the property. The Appellate Division reversed the trial court's decision, holding that the letter was "merely a preliminary step to a potential future condemnation." 285 N.J. Super. 436, 451 (1995). We granted certification, 145 N.J. 371 (1996), and now reverse.

I

In 1987, Stuart Nierenberg, Marilyn Nierenberg, Philip Kramer, Sol Kramer, and Ely Kramer formed Princeton Manor Associates. The purpose of the partnership was to develop a 50-acre tract of land owned by Yvette Nierenberg, Stuart's and Marilyn's mother. The Nierenbergs contemplated that Yvette would be given a sum certain for her property, while her adult children would receive, without financial obligation, proceeds from development of the property. Philip Kramer, a highly experienced real estate developer, would handle most of the responsibilities of development.

The property is zoned R-2 Residential by the Township of West Windsor (Township). That zoning permits single-family detached dwellings on three-quarter acre lots. R-2 zoning also allows open-space cluster developments as a conditional use if the lot size is at least 20,000 square feet and is served by either public water or public sewer. The subject property is serviced by public water and partially by public sewer.

At some time prior to 1987, the property, together with two contiguous parcels, was designated on the Township's Master Plan as a potential site for West Windsor's proposed Community Park. On July 8, 1987, Princeton Manor Associates purchased the property from Yvette Nierenberg for approximately $4,320,700, and Yvette simultaneously acquired an interest in the partnership.

In the months following the sale, Princeton Manor Associates prepared a plan for a forty-eight-lot residential subdivision of the property. The partnership spent approximately $25,000 in engineering costs preparing the plan. The final plan conformed with the municipal zoning ordinance. The partnership's attorney Peter Buchsbaum would later testify that it was "a relatively straightforward submission." The partnership's subdivision application was presented to the Township on May 13, 1988.

By letter dated May 19, 1988, the Township's Director of Community Development acknowledged receipt of the partnership's application. The Director notified the partnership that certain administrative requirements had not been met, such as payment of a required application fee/security deposit and submission of additional copies of certain documents. On June 3, 1988, the Township forwarded a second letter, stating that "on further examination of the . . . development application," the Township determined, apparently inaccurately, that the subject property in its entirety was not within the area served by public sewers. Therefore, percolation tests and soil log data for the property would be required before the application would be considered further.

The partnership was then faced with a choice. It could wait at least seven months for the seasonal high water period to conduct percolation tests, at an approximate cost of $40,000. Alternatively, the partnership could attempt to have the municipal sewer plan amended to provide service to the entire property. The partnership was studying the sewer plan amendment process when Yvette Nierenberg received a certified letter from Robert Bruschi, the Township Administrator. That letter, dated July 29, 1988, read:

Dear Ms. Nierenberg:

TOWNSHIP MASTER PLAN/COMMUNITY PARK

Enclosed is a copy of the facilities portion of the Township Master Plan. Three (3) properties to comprise a potential Community Park have been designated in it.

In conjunction with the Master Plan, the Township applied to the New Jersey Green Acres for a low-interest loan for the properties' purchase. Several months ago, the Governor notified us of our award of a $3 million loan to supplement the Township's funding for purchasing this property. On June 27, 1988, the Township Committee authorized the Mayor to enter into an agreement with New Jersey Green Acres to fund this acquisition.

Therefore, this is formal notification that West Windosr [sic] Township may acquire this property for the purpose of establishing a Community Park.

Shortly, the Township along with independent appraisers and the Green Acres Office will determine a fair-market value for the property.

In the interim, I am available to answer your questions regarding the above items.

Upon review of the July 29 letter, Buchsbaum advised his clients that they could not secure Township approval for enlargement of the sewer system when the Township appeared intent on condemning the property.

On August 23, 1988, an appraiser retained by the Township wrote to Yvette Nierenberg, stating "this firm has been retained by the Township of West Windsor to make an appraisal on the above captioned property which is part of the Community Park Project." That letter stated that Nierenberg could accompany the appraiser during his inspection of the subject property. On September 2, 1988, a second appraiser hired by the Township wrote to Nierenberg, stating that "we have been retained by the Township of West Windsor to independently appraise the property to be acquired from you." Shortly ...


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