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State v. Sherwood Associates

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


October 27, 2008

STATE OF NEW JERSEY, BY THE COMMISSIONER OF TRANSPORTATION, PLAINTIFF-RESPONDENT,
v.
SHERWOOD ASSOCIATES, II, LLC, A LIMITED LIABILITY COMPANY OF NEW JERSEY, DEFENDANT-APPELLANT,
AND TOWNSHIP OF FREEHOLD, IN THE COUNTY OF MONMOUTH, A MUNICIPAL CORPORATION OF NEW JERSEY, DEFENDANT.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3037-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted September 16, 2008

Before Judges Gilroy and Chambers.

This is a condemnation action. Defendant Sherwood Associates, II, LLC (Sherwood) appeals from the January 3, 2008 order of the Law Division entering final judgment and fixing the amount of just compensation to be paid by the State of New Jersey. On appeal, Sherwood challenges the trial court's order of June 18, 2007, barring the testimony of its real property appraiser pertaining "to damages to the remaining portion of Lot 30.02 caused by denial of access along Schanck Road." For reasons that follow, we affirm.

Prior to July 9, 2004, Sherwood owned a 15.2576 acre-tract of property known and designated as Block 71, Lots 19, 20, 21, 30.02, and 30.03, Freehold Township (the Property).*fn1 A vast portion of the Property is located on the west side of State Highway 9, south of the highway's intersection with Schanck Road. In the area of the Property, Highway 9 runs in a north/south direction and is divided by a cement barrier. Except for a paved access road that previously served a motor vehicle inspection station fronting Highway 9, the Property is vacant and is located primarily in the CMX-10 zone, which permits certain commercial and office uses on properties containing a minimum lot area of ten acres. A small portion of the Property is located in the CMX-3 zone, which also permits commercial and office uses but only requires a minimum lot area of three acres.

Access to the Property was provided by two public roadways. The primary access was from Highway 9, with 764 feet of Lots 19, 20, and 21 fronting the highway. A secondary access to the Property was from Schanck Road via Lot 30.02. That lot is approximately sixty feet in width and runs in a northerly direction to Schanck Road, across the back of Lot 21, as well as several other unrelated commercial properties fronting Highway 9. Lot 30.02 had frontage of 56 feet along Schanck Road. As described by Sherwood's real property appraiser, "[t]he access along Schanck Road primarily benefits the [P]roperty by allowing drivers to exit the site and access Route 9 [N]orth without the need of traveling south along Route 9 to the 'U-turn['] area south of Three Brooks Road, and over [one-half] mile south of the [Property]."

On July 9, 2004, the State filed a condemnation complaint seeking to acquire a fee-simple interest in 18,196 square feet of the Property, together with a slope easement along Schanck Road of 472 square feet. On July 23, 2004, the State filed a declaration of taking, acquiring the interests in the Property and depositing with the Clerk of the Court $73,700, the amount estimated by the State as just compensation for the acquisitions.

The purpose of the taking was not only to widen Highway 9, but also to improve the highway's intersection with Schanck Road. Accordingly, the taking affected two separate areas of the Property. As described by Sherwood's appraiser: "[t]he first area . . . contains a combined area of 6,468 square feet and is concentrated along the eastern portion of the site and adjacent to the existing Right-Of-Way along [Highway] 9. The purpose of this taking is to widen [Highway] 9." The second area "contains an area of 11,728 square feet." This area is: concentrated along the northern part of Lot 30.02 and is proposed to be used as part of "Ramp A" which will serve as a jug handle from Stonehurst Road [beginning to the east of the Property] to the intersection of [Highway] 9 & Schanck Road. After the tak[ing], access will be denied to Schanck Road. There will also be a slope easement adjacent to the new Right-Of-Way along Schanck Road containing 472 square feet.

Although a portion of the taking was concentrated along the Property's easterly line adjacent to Highway 9, that part of the taking neither reduced the Property's frontage on the highway, nor reduced its access to the highway. However, the opposite was true as to the second area of the taking along the northern portion of Lot 30.02. As a result of that taking, access to the Property from Schanck Road was denied. The entire taking reduced the Property area from 15.2576 acres to 14.84 acres, including the remaining portion of Lot 30.02 containing approximately .7059 acres. Therefore, the remainder after the taking, excluding the remaining portion of Lot 30.02, is 14.134 acres.

In discussing the remainder after taking, Sherwood's appraiser provided the following site comments in his report. As to the taking along the easterly line, "[i]n the after condition, the overall shape and characteristics of the

[P]roperty remain [fairly] similar to the conditions which existed prior to the taking . . . ." As to the taking of a portion of Lot 30.02, he stated:

The second taking along the Schanck Road frontage is for a jug handle. This portion of the taking will restrict the use of this area for an exit drive and limit the overall design flexibility of the remainder. The tak[ing] creates a .7059 acre remnant (part of Lot 30.02) which has no utility to the larger remainder after.

Concerning the highest and best use analysis of the remainder, the appraiser opined that the highest and best use of the remaining portions of Lots 19, 20, 21, and 30.03 (14.134 acres) was for commercial/office development in accordance with the current zoning regulations. As to the remaining portion of Lot 30.02 (.7059 acres), he opined that the highest and best use was as assemblage to the Freehold Ford automobile dealership property, lying between the easterly boundary line of the lot and Highway 9.

The appraiser further opined that the amount of just compensation for the State's acquisitions was $270,000, including $103,000 for the fee interests, $2,000 for the easement interest, and $165,000 for the damages to the remainder. The appraiser opined that Lot 30.02 had "very limited utility and marketability" in the after condition. According to the appraiser, "[t]he essence of these damages are a fundamental function of the changes in the utility, design flexibility[,] and ultimate highest and best use of Lot 30.02 in an after condition." The appraiser continued: "[a]ccordingly, in an after condition the taking as it impacts Lot 30.02 causes significant change to the utility, design flexibility[,] and utilization potential for this lot."

Because of the statements contained in Sherwood's appraiser's report, the State filed a motion in limine seeking to exclude those portions of the report "alleging damages as a result of loss of utility, where the loss of utility alleged is the restriction on access to Schanck Road." On June 14, 2007, the trial court granted the motion. In reaching its decision, the court reasoned in pertinent part:

In the case before me there is no contention that there is a design flexibility problem caused by this loss of access, nor is there any claim that there's any traffic maneuverability [problem] caused by the restriction of ingress and egress. The only allegation is that there is a loss of value caused by the restriction of ingress and egress[,] which is exactly what Van Nortwick II*fn2 says is not compensable.

Following the court's decision on the motion, the parties reached a settlement, regarding "the issue of the value of the land acquired" by the State. The settlement agreement, however, was subject to Sherwood's right to appeal the June 18, 2007 order barring part of its appraiser's testimony. On January 3, 2008, in accordance with the terms of the parties' agreement and without taking into consideration the excluded testimony, the trial court entered an order determining the amount of just compensation for the Property at $89,500.

On appeal, Sherwood argues that "the motion judge erred in barring Sherwood Associates' expert appraisal testimony relating to the value of on-site damages resulting from the denial of access to Sherwood Associates' property." Although Sherwood acknowledges that per se damages resulting solely from the denial of access along Schanck Road are not compensable, it contends that the trial court should have admitted its expert's valuation testimony regarding the detrimental effect of the denial access of the remainder of Lot 30.02 caused by the unique shape and size of the lot. Sherwood asserts that the excluded testimony was relevant because the denial of access to Schanck Road has a detrimental effect on the remainder of the Property, causing the remainder to be less useful and valuable when developed in accordance with the Property's highest and best use, citing Van Nortwick II. We disagree.

Appellate courts traditionally defer to a trial court's evidentiary rulings. State v. Morton, 155 N.J. 383, 453, (1998). Accordingly, the "admission or exclusion of proffered evidence is within the discretion of the trial judge whose ruling is not disturbed unless there is a clear abuse of discretion." Dinter v. Sears, Roebuck & Co., 252 N.J. Super. 84, 92 (App. Div. 1991). The same principle applies to a trial court's ruling concerning the admission of expert opinion evidence. State v. Burr, 392 N.J. Super. 538, 555 (App. Div. 2007), aff'd, 195 N.J. 119 (2008) (quoting State v. Fortin, 178 N.J. 540, 591 (2004)).

In cases involving the State's acquisition of property under the Eminent Domain Act, N.J.S.A. 20:3-1 to -50, the property owner is entitled to just compensation. Van Nortwick II, supra, 287 N.J. Super. at 70. The fact-finder will determine the amount of compensation by calculating "the fair market value of the property as of the date of the taking, determined by what a willing buyer and willing seller would agree to, neither being under any compulsion to act." Id. at 70. In cases where there is only a partial taking, damages are measured by the value of the portion of the property taken plus "'the value by which the remaining land has been diminished as a consequence of the partial taking.'" Id. at 71 (quoting State v. Silver, 92 N.J. 507, 514 (1983)). "These latter damages are known as severance damages." Ibid.

Accordingly, due to the nature of the method of valuation in cases of partial takings, "the court's inquiry will be broader than when the entire parcel is taken." Ibid. Inquiries should include "all material facts and circumstances, past and prospective, that would influence a buyer or seller interested in consummating the sale." Ibid.

A property owner has a right of access to public highways; and thus, a denial of access requires that the owner receive just compensation. Mueller v. N.J. Highway Auth., 59 N.J. Super. 583, 589 (App. Div. 1960). However, the same principle does not always apply where there is only a partial diminution of access. Id. at 595. Simply stated, an owner is entitled to "'free and convenient access'" to his or her property, and any improvements on that property, but this right does not include access to the property from "every point between it and the highway." Ibid. Therefore, if the State's acquisition causes access to be limited but reasonable, the owner is not entitled to just compensation. Van Nortwick II, supra, 287 N.J. Super. at 62.

However, "a diminution of access may cause other conditions on the property itself which may be compensable" including things such as "limitation of design options or on-site maneuverability." State v. Van Nortwick (Van Nortwick I), 260 N.J. Super. 555, 558 (1992), certif. denied, 143 N.J. 320 (1995). As an example, a property owner may claim that "the restriction and location of the limited access, combined with the prevailing zoning requirements in the town, caused his [or her] property to be less useful and less valuable in terms of its highest and best use." Van Nortwick II, supra, 287 N.J. Super. at 72-73. The effects of the diminution of access may be due to the characteristics, shape or size of the property. However, these effects or on-site damages caused by the limitation of access may only be considered if determined "actual and specific" to the property. Id. at 73. A property owner who suffers a diminution of access is not entitled to an award for "generalized, speculative or hypothetical damages." Ibid.

Sherwood seeks to reverse the trial court's order barring a portion of its appraiser's report. The barred section of the report pertains to the "after taking" value of the Property. Sherwood contends that the expert's opinion supports the argument that the remainder of Lot 30.02 would be unusable after the taking, to someone seeking the land for commercial or office development, its "highest and best use." The expert opines in the report that this is because of the peculiar shape of Lot 30.02. Sherwood asserts that because of the lot's size and shape, the diminished value is due to loss of utility, not to denial of access per se.

Sherwood relies heavily on Van Nortwick II. However, we find that reliance misplaced. In Van Nortwick II, the State filed a condemnation proceeding acquiring property as part of the State's Highway 37 improvement project. Id. at 62. The property was located in a rural highway business zone and used by the owner to operate a tour bus company. Id. at 64. The State took a twenty-eight and one-half foot strip of land across the property's frontage on Highway 37. Ibid. The taking reduced the property's access to the highway from 228 feet to 140 feet. Ibid. Over the State's objection, the jury was instructed that it could consider damages to the remainder caused by the "relocation of access, specifically the loss of on-site vehicular maneuverability and building design options." Id. at 63. On appeal, we affirmed, determining that the property owner's expert had presented proof of actual and specific on-site damages caused by diminution of access to Highway 37.

In this case, if the jury accepted that the highest and best use of the land was as a commercial development with the existing improvements demolished, then there was ample credible testimony before it that a potential commercial developer would be restricted in the size and shape of the structure he could build on the property, and in the number of units he could build. This is because room would have to be allowed for wider driving aisles on the property to permit cars to double back and exit from the same driveway they entered. That double-backing was directly due to the fact that the State had not only decreased the amount of defendant's access[,] but also changed the location of it. [Id. at 73.]

Here, the trial court recognized that "diminution of access may cause other conditions on the [P]roperty itself which may be compensable" and cited "limitation of design options" and "on[-]site maneuverability" as two examples. However, he found that in this case: there is no contention that there is a design flexibility problem caused by this loss of access, nor is there a claim that there's any traffic maneuverability caused by the restriction of ingress and egress.

The only allegation is that there is a loss of value caused by the restriction of ingress and egress which is exactly what Van Nortwick II says is not compensable.

We conclude the trial court did not abuse its discretion in barring the expert testimony. Unlike the defendant in Van Nortwick II, Sherwood's expert did not state any specific and actual on-site damages to the remainder occasioned by the diminution of access to Schanck Road, other than the loss of that access itself. Sherwood argues that no such proofs are necessary because the loss of access left Lot 30.02 unusable, which is different from diminution per se. We disagree.

The argument is incorrectly premised on the predicate that Lot 30.02 is now isolated and should be valued separate and apart from the balance of the remainder when, in fact, it remains contiguous to and part of the remainder. Sherwood does not assert that the loss of access to Schanck Road will cause difficulties in developing the remainder of the tract for its highest and best use, only that it suffered an economic harm by virtue of the fact that it lost a secondary means of access to the Property, forcing future motorists using the Property to take a more circuitous route to drive north on Highway 9 by having to first travel south on the highway to a designated jug handle. Such possible economic loss is not compensable. Van Nortwick II, supra, 287 N.J. Super. at 62; see also State of N.J. by Comm'r of Transp. v. Monmouth Hills, Inc., 110 N.J. Super. 449, 452 (App. Div.), certif. denied, 57 N.J. 133 (1970).

Affirmed.


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