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City of South Amboy v. Great Lakes Dredge & Dock Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 17, 2007

CITY OF SOUTH AMBOY, PLAINTIFF-RESPONDENT,
v.
GREAT LAKES DREDGE & DOCK COMPANY, AND RALPH CLAYTON & SONS MATERIALS, LP, T/A AMBOY AGGREGATES JOINT VENTURE, DEFENDANTS-APPELLANTS, AND BANK OF AMERICA CORPORATION; UNITED STATES OF AMERICA; AND STATE OF NEW JERSEY, DEFENDANTS.
CITY OF SOUTH AMBOY, PLAINTIFF-RESPONDENT,
v.
LOWER MAIN STREET DEVELOPMENT, LLC, AND AMBOY AGGREGATES JOINT VENTURE, DEFENDANTS-APPELLANTS.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket Nos. L-2288-05 and L-2424-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted May 1, 2007

Before Judges Coburn, Axelrad and Gilroy.

This is a consolidated condemnation action in which plaintiff, the City of South Amboy (the City), seeks to acquire real property interests for the purpose of building an access road, a breakwater, and a commuter parking lot, as part of a federally-funded project for a Regional Intermodal Transportation Initiative. The condemned parcels lie within a larger tract that the City seeks to acquire in order to implement a redevelopment plan that, if successful, would create office space, retail uses, a marina, and housing, in addition to the regional transportation center. Defendant Lower Main Street Development, LLC (Lower Main), and defendant Amboy Aggregates Joint Venture (Amboy Aggregates) (collectively, the defendants), related companies that mine and process sand, gravel, and other construction materials along the City's waterfront, appeal from the September 9, 2005 judgment, appointing Commissioners and denying their motion to dismiss the two complaints.*fn1

We affirm in part; reverse in part; and remand the matter to the trial court for further proceedings consistent with this opinion.

Lower Main is a limited liability company whose members are a subsidiary of defendant Great Lakes Dredge & Dock Company and an entity owned and controlled by the Clayton family. Amboy Aggregates is a joint venture, comprised of defendant Great Lakes Dredge & Dock Company and defendant Ralph Clayton & Sons Materials, an entity also owned and controlled by the Clayton family. Amboy Aggregates owns approximately thirty acres of uplands, Block 162, Lot 6.02, consisting of approximately 5.566 acres; and Block 161, Lot 25, consisting of approximately 24.7 acres. Lower Main owns Block 161, Lot 90. This property consists of approximately 22.8 acres of uplands and approximately 10.4 acres of tidelands. Defendants' properties adjoin or are near the Raritan Bay. Amboy Aggregates leases the Lower Main site pursuant to a written lease agreement dated March 1, 2003.

Amboy Aggregates operates a sand and gravel mining operation. Sand is dredged from a shipping channel, known as the Ambrose Channel, transported to the properties, segregated by particle size, sometimes mixed with other natural materials, and then transported off-site by barge or by truck for use in construction and related activities. Defendants' properties are in the City's northern waterfront area, which consists of approximately eighty-four acres, including tidelands. All but twenty acres are owned by defendants; the remaining twenty-acre tract is owned by Consolidated Rail Corporation (Conrail). The northern waterfront area is to be developed for an Intermodal Transportation Center that would involve the construction of a new high-level platform at the New Jersey Transit train station; a new ferry terminal; a bus terminal area, along with improved roads, grade crossings, and a commuter parking area. The State and Federal Governments have allocated approximately $15,000,000 to this project. The ferry terminal would provide high-speed ferry access to and from New York City.

Since 1988, the City has studied whether to declare its waterfront area as in need of development. A 1992 report concluded that the 245-acre waterfront area, comprising approximately 25% of the City's land area, could become a major regional transportation center that would support a variety of industrial, commercial, residential and public uses. Additional redevelopment studies were completed in 1997, 2002, 2003, and most recently, in October 2004.*fn2 In January 2005, the City and its Planning Board approved the redevelopment plan and declared the northern waterfront, including defendants' properties, as in need of redevelopment.

On November 3, 2004, the City adopted ordinances authorizing the condemnation of the properties. The City seeks to acquire 7.276 acres of uplands from Lower Main, as well as such rights and interest that Lower Main may possess in the 10.404 acres of tidelands. In addition, the City seeks to obtain a temporary construction easement over a portion of the property. The City's appraiser valued the uplands portion of the Lower Main property at $615,500, but he did not ascribe any value to the tidelands because "title to all the underwater tidelands area is held by the State of New Jersey." Following the offer to purchase, Lower Main and the City exchanged correspondence concerning why the City's appraiser had not placed a value on the tidelands acquisition.

On March 29, 2005, the City filed its complaint, seeking to acquire approximately one-third of an acre owned by Amboy Aggregates. On May 24, 2005, judgment by default was entered appointing condemnation commissioners. On April 1, 2005, the City filed a second complaint, seeking to acquire the aforesaid interests in Lower Main's property. On June 1, 2005, the City filed a declaration of taking in the latter action.

On June 3, 2005, defendants filed a motion to vacate the default judgment in the Amboy Aggregates' action, a motion to consolidate the two actions, and a motion to dismiss both complaints. On August 19, 2005, the motion judge issued a written decision granting the motion to vacate and the motion to consolidate, but denying the motion to dismiss the complaints. Judgment appointing commissioners was entered on September 9, 2005.

On appeal, Lower Main argues under Points II and III that the complaint should be dismissed because: a) the proceeding was instituted in bad faith, as it was brought for the purpose of advancing the interest of a private developer, rather than for a "public purpose"; b) the condemnation proceeding is barred by the doctrine of prior public use, as defendant's sand mining operation is serving a public purpose by deepening the shipping channel adjacent to the property; and c) the City failed to engage in bona fide negotiations prior to filing the complaint. Lower Main also argues under Points I and IV that the judgment should be vacated, or the action stayed, pending the trial court resolving the preliminary issues of: a) whether the properties have unity of ownership and unity of use; and b) whether Lower Main has a compensable interest in the tidelands.

We have carefully considered defendants' arguments in light of the applicable law and briefs. As to the arguments presented under Point II and III we are not persuaded by any of them and affirm substantially for the reasons articulated by the motion judge in his written decision of August 19, 2005. Nevertheless, we add the following comments.

Lower Main argues that the motion judge should have dismissed the condemnation complaint because it had been brought for the purpose of advancing the interest of the developer that the City had designated to implement the waterfront redevelopment plan. The City acknowledges that the new South Amboy Development Corp., LLC, ("Devcor") is its designated redeveloper, and that the Intermodal Transportation Center may complement and enhance the redevelopment project, however, the City counters that none of the property being acquired will be transferred to the private redeveloper.

A reviewing court will not set aside a municipality's decision to use its eminent domain power absent of showing of fraud, bad faith or abuse. Twp. of W. Orange v. 769 Assocs., 172 N.J. 564, 571 (2002); Mount Laurel Twp. v. Mipro Homes, 379 N.J. Super. 358, 375 (App. Div. 2005), aff'd, 188 N.J. 531 (2006). Courts hesitate to inquire into a condemnor's motive concerning the necessity of the taking. Twp. of W. Orange, supra, 172 N.J. at 571 (quoting Borough of Essex Fells v. Kessler Inst. for Rehab., Inc., 289 N.J. Super. 329, 337 (Law Div. 1995)). The issue of "whether a taking is for a 'public use' is largely a legislative question beyond the reach of judicial review except in the most egregious circumstances." Id. at 576. The party asserting fraud, bad faith, abuse of discretion, or arbitrary or capricious action has the burden of proof. Essex County Improvement Auth. v. RAR Dev. Assocs., 323 N.J. Super. 505, 516 (Law Div. 1999); Borough of Essex Fells, supra, 289 N.J. Super. at 342; State by Comm'r of Transp. v. Malibu Beach, Inc., 209 N.J. Super. 291, 296 (Law Div. 1986).*fn3

Lower Main relies on the principle that "the power of eminent domain must always be exercised in the public interest and without favor to private interests." City of Atlantic City v. Cynwyd Invs., 148 N.J. 55, 73 (1997). A municipality may not take private property for the purpose of conferring a private benefit on a private party, nor could a municipality "be allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit." Kelo v. City of New London, 545 U.S. 469, 478, 125 S.Ct. 2655, 2661, 162 L.Ed. 2d 439, 450 (2005). For example, a governmental authority may not take a home and two businesses for the purpose of transferring the property to the owner of a casino without restrictions on how the transferee will use the property. Casino Reinvestment Dev. Auth. v. Banin, 320 N.J. Super. 342, 357-59 (Law Div. 1998). However, "the fact that a private party may benefit from the taking does not render the taking private and not for 'public use.'" Twp. of W. Orange, supra, 172 N.J. at 573.

Lower Main does not dispute that municipalities have the statutory authority to condemn property for a public parking lot, N.J.S.A. 40:60-25.2, to improve public roads, N.J.S.A. 40:67-12.1, or to make waterfront improvements, N.J.S.A. 40:68-1. See Twp. of W. Orange, supra, 172 N.J. at 573 ("the condemnation of private property for use as a public road fulfills the public use requirement"); City of Trenton v. Lenzner, 16 N.J. 465, 473-74 (1954) (parking lot), cert. denied, 348 U.S. 972, 75 S.Ct. 534, 99 L.Ed. 757 (1955). Lower Main contends that the property is being taken to benefit Devcor because in a January 9, 2002 study, Devcor identified these properties, among others, as having the potential for being used for projects ranging from a parking garage to an office complex or strip mall. Richard Rosamilia, general manager of Lower Main and president of Amboy Aggregates, stated in a certification that Devcor had been hired to reconstruct the bridge that is located on Conrail's property and provides access to the properties in question. From this, Lower Main leaps to the conclusion that the real purpose of the acquisition is to assist Devcor in the larger redevelopment plan. We disagree.

The property being acquired is related to, but independent of, the redevelopment plan. The approximate seven acres of uplands and ten acres of tidelands owned, or being utilized by, Lower Main are necessary for the construction of a breakwater and an access road to the ferry terminal and the municipal marina, along with a parking lot. The ferry terminal will be located on property owned by Conrail. The Intermodal Transportation Center will be completed irrespective of whether further redevelopment occurs along the City's waterfront. Accordingly, we are satisfied that Lower Main has not met its burden of proving that the City is taking its property for the purpose of benefiting Devcor. Even assuming Devcor incidentally benefits from the taking, that is not sufficient to demonstrate that the taking is for a private and not for a public use. Twp. of W. Orange, supra, 172 N.J. at 573.

Lower Main argues next that plaintiff lacks the power to condemn because Lower Main's dredging operation serves a public purpose, namely deepening a shipping channel. Lower Main contends that plaintiff is barred from exercising the power of eminent domain by the prior public use doctrine. Twp. of Weehawken v. Erie R.R. Co., 20 N.J. 572, 579 (1956). Plaintiff counters that the prior public use doctrine did not survive the enactment of the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50. Plaintiff asserts Lower Main cannot invoke the doctrine because it is a private company without the power to condemn private lands.

The prior public use doctrine "denies exercise of the power of condemnation where the proposed use will destroy an existing public use or prevent a proposed public use unless the authority to do so has been expressly given by the Legislature or must necessarily be implied." Twp. of Weehawken, supra, 20 N.J. at 579. "The rule stems from the recognition that municipal and many private corporations possess general powers of condemnation delegated by the Legislature. If one such body may acquire land used or held for a public purpose by another corporation under a general power of condemnation, the latter would logically be free to reacquire the same property." Ibid.

Lower Main argues that the prior public use doctrine is applicable because Amboy Aggregates holds a permit from the Army Corp of Engineers and a license from the New Jersey Department of Environmental Protection to dredge and thereby deepen the Ambrose Channel. Lower Main contends this shipping lane "is a major shipping route in the Atlantic Ocean that enables larger ships from all over the world to gain access to the Port of New York and New Jersey." Lower Main asserts that the sand mining activity "saves the Government millions of dollars in dredging expenses which previously had been paid for by the Army Corp of Engineers."

We reject Lower Main's argument. While the public may benefit from Lower Main's activities, the doctrine is inapplicable to private companies that lack the power to condemn, even non-profit organizations that perform activities or manage property devoted for important public purposes. Texas Eastern Transmission Corp. v. Wildlife Preserves, Inc., 48 N.J. 261, 267-68 (1966). Although not disputing this principle, Lower Main argues that the court should, nonetheless, examine whether the proposed taking could be accomplished in a manner that has a lesser impact on the beneficent public purpose already being performed on the property to be taken. While Texas Eastern so indicates, id. at 273, the issue there was whether the condemnor could reroute its proposed pipeline at minimal expense and inconvenience and thereby minimize the impact on the existing use of the property, a wildlife preserve. Id. at 273. Here, there is no evidence in the record that would support a finding that the sand mining operation could coexist with the access road and parking lot designed to serve the ferry terminal.

We now address Lower Main's argument under Points I and IV that the judgment should be vacated or the action stayed, pending the trial court resolving the preliminary issues of: a) whether the properties have unity of ownership and unity of use; and b) whether Lower Main has a compensable interest in the tidelands.

We first address the issue concerning unity of ownership and unity of use. Lower Main argues that the issue was required to be resolved prior to entry of judgment. Lower Main contends that plaintiff acted in bad faith because it failed to negotiate severance damages. Plaintiff responds that Lower Main will suffer no severance damages, or any lack of access; therefore, there was nothing to negotiate. The motion judge held that the commissioners would decide whether the taking of a portion of the property would cause damage to the remainder.

In the case of a partial taking it is necessary to assign a value to the property left as well as the property actually taken, which is referred to as "severance damages." State, by Comm'r of Transp. v. Silver, 92 N.J. 507, 515 (1983); State, by Comm'r of Transp. v. Simon Family Enters., 367 N.J. Super. 242, 249 (App. Div. 2004). The condemnation commissioners in the first instance determine the value of the property taken as well as severance damages. State v. N.J. Zinc Co., 40 N.J. 560, 573 (1963). Severance damages are available only when there is a unity of use and a unity of ownership. Hous. Auth. of Newark v. Norfolk Realty Co., 71 N.J. 314, 323 (1976); State v. Whitehead Bros. Co., 210 N.J. Super. 359, 367 (Law Div. 1986).

We disagree that the issue was required to be resolved prior to entry of judgment, Lower Main not having formerly raised the issue during negotiations prior to the filing of the complaint. It is not an issue that is required to be determined pre-trial, although in many instances the better practice is to resolve such an issue by a plenary pre-trial hearing. State v. Bakers Basin Realty Co., 138 N.J. Super. 33, 37 (App. Div. 1975) aff'd, 74 N.J. 103 (1977). Nothing precludes Lower Main from presenting a claim for severance damages before the condemnation commissioners.

Where we part ways with the motion judge is on his decision to defer the issue of ownership of the tidelands to the condemnation commissioners. Lower Main contends that the City failed to negotiate in good faith because it did not ascribe a value for the ten acres lying under water. Lower Main contends that there is no evidence that the ten acres is underwater. Plaintiff counters that the land is described as tidelands, and Lower Main has offered no evidence that any portion of the tidelands has been filled by Lower Main's predecessors in title; therefore, Lower Main does not possess ownership of the tidelands, citing The United Companies Act, L. 1869 c. 386 and River Development Corp. v. The Liberty Corp., 51 N.J. Super. 447, 460 (App. Div. 1958) aff'd, 29 N.J. 239 (1959).

We are satisfied that the question of title to the tidelands is a legal issue for the court, not a valuation issue for the condemnation commissioners. State v. Orenstein, 124 N.J. Super. 295, 298 (App. Div.) (holding "[i]f there are any issues to be decided other than that of value and damages . . . those issues must be presented to and decided by the court before it enters judgment appointing condemnation commissioners."), certif. denied, 63 N.J. 588 (1973). Plaintiff does not dispute that the question is one of law. Plaintiff invites this court to exercise its original jurisdiction, R. 2:10-5, and decide the issue. We decline the invitation and remand the matter to the trial court to decide the issue concerning Lower Main's ownership interests in the tidelands.

Affirmed in part; reversed in part; and remanded to the trial court for further proceedings consistent with this opinion. We do not retain jurisdiction.


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