January 25, 2008
M-INDUSTRIES, LLC, PLAINTIFF-APPELLANT,
NEW JERSEY TRANSIT CORPORATION, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3954-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 8, 2008
Before Judges Skillman and Winkelstein.
This is an appeal from a summary judgment dismissing an inverse condemnation action.
Plaintiff owns an 80,000 square foot commercial building in North Bergen that is used as a warehouse. The building is divided into two sections by a wall. One section, which is approximately 43,500 square feet, is currently leased to a clothing manufacturer, and the other section, which is approximately 36,500 square feet, is vacant.
On March 3, 1997, defendant notified plaintiff's predecessor in title by letter that a portion of its property had been "identified for potential use as part of a Light Rail Transit system" and that it would be undertaking surveys and subsurface soil investigations of the property shortly. On July 31, 1998, defendant again notified plaintiff's predecessor in title by letter that a portion of its property would be acquired for the proposed light-rail system and that an appraiser would be inspecting the property in the near future. However, defendant did not proceed with the proposed light-rail system, apparently due to lack of funding, and it did not take any further steps regarding the anticipated partial acquisition of the property over the next seven years. Sometime during that period, plaintiff acquired title to the property.
In April 2005, plaintiff entered into a five-year lease of the vacant section of the building with Allstate Produce Corporation, which intended to use the warehouse for its produce distribution business. The lease included a clause which stated: "Landlord has no knowledge of any eminent domain or condemnation proceedings which are pending or threatened against the Real Property of which the Demised Premises are a part as of the date of this Lease." Allstate made approximately $35,000 worth of improvements to the property in preparation for taking occupancy on August 1, 2005.
On July 12, 2005, defendant notified plaintiff by letter that a portion of its property had been identified for potential acquisition for the proposed light-rail system and that it planned to start surveying, appraisal and environmental investigation work shortly. The portion of plaintiff's property that defendant identified for potential acquisition was the same portion it had identified in its July 31, 1998 letter.
Plaintiff notified Allstate Produce of the defendant's acquisition and construction plans. Following discussions among Allstate Produce, plaintiff and defendant, Allstate Produce concluded that defendant's proposed light-rail project would make it impossible for Allstate Produce to operate its produce distribution business from the warehouse and terminated its lease with plaintiff.
Since Allstate Produce's termination of its lease, plaintiff has been unable to find another long-term tenant. Consequently, it has leased the part of its property that was to be occupied by Allstate Produce to two temporary tenants, one for four months and the other for six months. The other half of the building has continued to be occupied by the clothing manufacturer.
On March 31, 2006, defendant informed plaintiff in a conference telephone call that, due to a change in the project's funding source, defendant would not begin acquiring properties until 2007 and would not start the project until 2008. On June 6, 2006, defendant notified plaintiff by letter that the appraisal of its property had been put on hold pending receipt of federal funding, which could become available before the end of the year, and that defendant planned to begin utility relocation work for the light rail project in early 2008 and bridge construction work in late 2008.
Shortly after receiving the June 6, 2006 letter, plaintiff filed this inverse condemnation action. Plaintiff alleged that defendant had caused plaintiff to lose all economic and beneficial use of its property and to suffer substantial destruction of the value of its property. Plaintiff sought condemnation of its property by defendants or, alternatively, an order that defendant abandon the proposed light-rail project, and compensatory and punitive damages.
Defendant moved for a summary judgment dismissing plaintiff's complaint. The motion was heard by Judge Gallipoli, who concluded in a comprehensive written decision that defendant's planning activities for acquisition of plaintiff's property had not substantially destroyed its beneficial use and therefore plaintiff was not entitled to an order compelling defendant to proceed with acquisition of the property or other relief. Judge Gallipoli concluded that plaintiff's building should be treated as a single property, even though it is currently separated into two warehouse facilities. Therefore, even if one-half of the building had been rendered useless by defendant's acquisition and construction plans, there would be no basis for concluding that the beneficial use of the property had been substantially destroyed because the other half is currently leased to a clothing manufacturing company. Judge Gallipoli also concluded that even if the now vacant part of the building were treated as a separate property, it has not been rendered practically useless because it is still capable of being leased to a tenant other than Allstate Produce, sold or made substantially useful.
On appeal from the summary judgment in defendant's favor, plaintiff presents the following arguments:
I. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS NO DISCOVERY HAD YET TAKEN PLACE.
II. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS THERE EXIST GENUINE ISSUES OF MATERIAL FACT.
III. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS THE ACTIONS OF NEW JERSEY TRANSIT LED TO SUBSTANTIAL DESTRUCTION OF THE SUBJECT PROPERTY, RESULTING IN INVERSE CONDEMNATION.
We reject these arguments and affirm the summary judgment substantially for the reasons set forth in Judge Gallipoli's written decision.
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