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Township of Manchester Department of Utilities v. Even Ray Co.

August 31, 1998


Before Judges Shebell and Keefe.

The opinion of the court was delivered by: Shebell, P.j.a.d

[9]    Submitted August 25, 1998

On appeal from the Superior Court of New Jersey, Law Division, Ocean County.

The opinion of the court was delivered by

On January 25, 1996, plaintiff/appellant Township of Manchester Department of Utilities (Manchester) filed a Complaint in Condemnation in the Law Division, Ocean County, seeking to acquire, by Eminent Domain, from defendant, Even Ray Company, Inc. (Even Ray), 46,481 feet of underground sewer pipes and sewer appurtenances along with a 458,310 square foot sewer easement in lands located in a senior residential community known as Cedar Glen Lakes in Manchester Township. A Declaration of Taking was filed by plaintiff and recorded in Deed Book 5347, page 119 of the Ocean County Clerk's office. On February 6, 1996, the Assignment Judge filed an Order to Show Cause ordering defendant to show cause why judgment should not be rendered appointing three Commissioners to fix the just compensation to be paid for the taking of the property.

On May 10, 1996, the Assignment Judge appointed the commissioners. On October 24, 1996, a condemnation hearing was held. The commissioners submitted a report dated December 6, 1996, awarding defendant $25,000 for the easement and $1.00 for the sewer collection system.

On December 30, 1996, defendant filed an appeal in the Law Division from that portion of the Commissioner's Report which awarded defendant $1.00 for the sewer collection system. On January 3, 1997, plaintiff filed a cross-appeal from that portion of the Report which awarded defendant $25,000 for the easement.

Plaintiff filed a motion for summary judgment returnable on May 30, 1997, requesting that an order be entered fixing compensation at $1.00 for the easement and sewer collection system. Defendant filed a cross motion for partial summary judgment requesting that an order be entered in the amount of $25,000 for the taking of the easement. On May 30, 1997, both motions for summary judgment were denied.

On July 7, 1997, the matter was tried by the Honorable Rosalie B. Cooper, J.S.C., without a jury. Judgment was entered on July 28, 1997, in favor of defendant for $117,600.00 representing the just compensation to be paid inclusive of $25,000 representing just compensation for the easement.

On October 22, 1997, plaintiff filed a notice of appeal from the May 30, 1997 order denying summary judgment and the July 28, 1997, order for judgment.

Cedar Glen Lakes is an adult residential cooperative, constructed in three sections, commencing in 1970. The streets and ways, together with their improvements, were and still are privately owned. They were conveyed by Even Ray to Cedar Glen Lakes, Inc. as part of the procedure for turnover by the developer. When development began, Even Ray obtained approvals from Manchester for the project. A septic system was to serve the sewerage needs of the residents at that time. At the time, Manchester did not have a utilities authority. Even Ray, however, was nonetheless required to install a dry collection system in order to hook up to any sewerage treatment facility to be developed in the future.

Even Ray retained Sambol Construction Company, an Ocean County contractor, to design the system and install it. The construction was done in accordance with the standards of the industry as they existed at that time. The design cost and expense of installation were borne by Even Ray, in addition to the cost of the septic system.

After the installation of the system, Manchester created the Manchester Municipal Utilities Authority (MUA), which entered into negotiations with Even Ray to connect the system to the treatment system that the MUA was to operate. These negotiations were not completed.

When Even Ray turned the development over to the Cedar Glen Lakes Association, it reserved the rights in the sewer collection system and the easements in the streets in which they were located. These ownership rights were confirmed in a quit-claim deed granted by Cedar Glen Lakes, Inc., to Even Ray dated July 20, 1994. As a result of the deed and reservation of rights, Even Ray retained an easement in the lands running through the private streets of Cedar Glen Lakes, extending approximately nine miles, together with the sewer collection system.

After the residents of Cedar Glen Lakes began experiencing frequent septic failure, they requested that Manchester complete construction of the necessary sewer lines and connect the lines to a sewage treatment facility. In order to accomplish these objectives, Manchester proceeded with the within condemnation action. The sewer lines have now been made operable by Manchester after substantial repairs and improvements. The system is in use and is connected to the system operated by the Ocean County Utilities Authority by way of a four mile sewer line installed as part of this project, known as the Crestwood Interceptor line.

Manchester has taken the position that the sewer lines were not operational at the time of taking and could not be legally operated by any party other than Manchester. It, therefore, requested that an award of $1.00 be entered for the taking of the sewer lines and the related easement, despite its own expert's appraisal of the value of Even Ray's interest in the easement at $25,000. Plaintiff's counsel argued at summary judgment, as follows:

[W]e actually appealed from our own expert's of $25,000. And our reason, our expert in his report states that his determination is based without reference to any legal rights to operate the easement. Even Ray cannot operate a sewer franchise without township permission and they don't have a sewer franchise. And no one would purchase a sewer franchise within the township because the township already operates the only sewer franchise.

At trial held on July 7, 1997, Manchester called as an expert James Stuart, a real estate appraiser from Stuart Appraisal Company. Stuart had prepared an appraisal report of the subject easement and sewer line dated September 1995 for Manchester. In valuing the easement, Stuart applied the market approach, which is a direct sales comparison. By comparing three other sales to the subject property, Stuart found that the value of the property if it were in fee simple was $10,000 to $12,000 per acre. Since the area of the easement is 10.5 acres, the value of the property subject to the easement would be $126,000. However, Stuart valued the easement only at 20 percent, since it was not a complete taking. Therefore, he valued the easement at $25,000.

Stuart utilized the cost approach in valuing the sewer collection line. Under the cost approach, Stuart estimated the replacement cost of the improvements utilizing the base cost of the system supplied by Marshall Evaluation Service, a nationally recognized cost service which provides estimates of the reproduction or replacement costs of improvements, such as sewer lines, office buildings, or houses. The base cost was then adjusted by a cost multiplier and a local multiplier. Finally, he ...

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