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Housing Authority of the City of New Brunswick v. Suydam Investors

December 11, 2002


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L- 2505-00.

Before Judges Skillman, Lefelt and Winkelstein.

The opinion of the court was delivered by: Skillman, P.J.A.D.


Argued September 10, 2002

The primary issue presented by this appeal is whether a condemnor may consider the presence of environmental contamination in valuing the subject property or must value the property as if it were uncontaminated and bring a separate action for costs of cleanup under applicable environmental statutes. We conclude that environmental contamination is relevant to a valuation of property and therefore a condemnor may not be precluded from presenting appraisal evidence that the subject property's value is adversely affected by such contamination. We also conclude that a condemnor that elects to bring an environmental action against a condemnee is not entitled to an order that requires a portion of the condemnation award to be held on deposit to satisfy the condemnor's environmental claims.

This condemnation action involves three parcels of land, totaling 54,000 square feet, located on George Street and Remsen Avenue in downtown New Brunswick. When the action was filed, the property contained four older buildings that were being used for commercial and residential purposes. Plaintiff Housing Authority of the City of New Brunswick (Authority) sought to acquire the property for a redevelopment project in what is called the Lower George Street Redevelopment Area.

Before filing the action, the Authority offered the owner, defendant Suydam Investors, L.L.C. (Suydam), $972,000 for the property based on the Authority's appraisal expert's valuation. The Authority indicated that its offer was"contingent on the satisfactory environmental status of the property, as the appraisal does not take into account any environmental problems that could affect value." Suydam made a counter demand of $2,500,000.

After the parties were unable to negotiate an agreement as to the property's value, the Authority filed a complaint and declaration of taking on March 22, 2000. The complaint stated:

Plaintiff's offer of $972,000 is based upon the assumption that the Property is not subject to any matters not of record, including any assessment, cleanup requirement, penalty or reversion of title that may be imposed pursuant to any environmental statute, regulation, ordinance or other applicable environmental law.

Suydam did not oppose the taking, and on May 23, 2000, the trial court entered a final judgment appointing condemnation commissioners to value the property. On July 11, 2000, the trial court granted Suydam's motion to withdraw the $972,000 the Authority had deposited into court.

Thereafter, the Authority obtained several orders extending the time for the filing of the commissioners' report, based primarily on its need for additional time to obtain an updated appraisal report.

On March 26, 2001, the Authority moved for leave to amend its complaint for the purposes of alleging the presence of environmental contamination as a factor affecting the value of the property and reserving its right to recover environmental cleanup costs from Suydam. The Authority's motion also sought a stay of the commissioners' hearing"for a period of no more than one year, pending final resolution of all environmental liability and cost issues[.]"

Suydam opposed the motion on the ground that the Authority had unfairly withheld information concerning the alleged environmental contamination on its property. Suydam also contended that if the Authority's motion were granted, it would result in an unfair and prejudicial delay in the determination of just compensation for the taking.

The trial court granted the motion, stating in an oral opinion:

[T]he original complaint... indicated that the offer of $972,000 is based upon certain assumptions including the property is not subject to any... clean-up requirements....

Now [the Authority] wants to amend the complaint to... say[,] notwithstanding what they said before, they believe that... the property may be contaminated with asbestos and lead containing paints and that that would detract from the value of the property. So that issue goes to the valuation which is always an issue. And then they reserved the right to go after you for clean-up costs on some other areas under the Spill Act[.]....... They certainly have the right to come after you under the Spill Act, whether they put it in [the complaint] or not.... And the issue of what's on the property is a value issue which is the issue before the commissioners to start with.

Accordingly, the court entered an amended order on May 30, 2001, granting the Authority leave to file an amended complaint alleging the existence of environmental contamination that adversely affects the property's fair market value. The order also granted a six-month stay of the commissioners' hearing to enable the Authority to"attempt to complete its environmental investigations and commence any action that it deems necessary and appropriate to resolve all issues relating to environmental liability and for remediation costs associated with development of the subject property (the'Environmental Issues')."*fn1 The order further provided that"[i]f the Environmental Issues have not been fully and finally adjudicated after six (6) months, the commissioners shall determine the value of the subject property as if clean, and litigation as to the Environmental Issues shall be severed from the condemnation and continue as a separate action." The order also provided that if the commissioners' award exceeds the $972,000 Suydam has already received, the additional amount shall be deposited into court"pending final resolution of the Environmental Issues."

Suydam appeals from this order.*fn2 Suydam argues that the trial court erred in allowing the Authority to amend its complaint to allege that there is environmental contamination on the property. Suydam also argues that the court erred in allowing the Authority to assert that the presence of environmental contamination is a circumstance that may reduce the amount a condemnee is entitled to receive as just compensation for its property. In addition, Suydam argues that the court erred in directing that if the commissioners' award exceeds the ...

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