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Township of West Orange v. 769 Associates

April 9, 2009

TOWNSHIP OF WEST ORANGE, A MUNICIPAL CORPORATION, PLAINTIFF-APPELLANT,
v.
769 ASSOCIATES, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY, DEFENDANT-RESPONDENT, AND MARICUSA CORP., A NEW JERSEY CORPORATION, LOCAL AMERICA BANK OF TULSA, A FEDERAL SAVINGS BANK AND AMERICAN CANCER SOCIETY, NEW JERSEY DIVISION, INC., DEFENDANTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 397 N.J. Super. 244 (2007).

SYLLABUS BY THE COURT

This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the Court is asked to declare the point from which fees and expenses may be recovered by a condemnee under N.J.S.A. 20:3-26(b) of the Eminent Domain Act of 1971 where a condemnation action is abandoned. In addition, the Court must decide whether RPC 1.5(a) (4) is applicable in this type of mandatory fee shifting case.

769 Associates, LLC (Associates) owns property on Northfield Avenue in West Orange. In the late 1980s, Nordan Realty (Nordan), which owns the land behind Associates' property, sought to build a development of ninety-five single-family homes adjacent to a pre-existing development. Access was originally contemplated by use of Cedar Avenue. When neighbors objected to the use of Cedar Avenue, Nordan and the Township of West Orange (West Orange) looked to access via Northfield Avenue.

In 1992, Nordan and West Orange entered into a developer's agreement which, among other things, provided that Nordan would negotiate with adjacent property owners (including Associates) to obtain the right of way to Northfield Avenue from its property and then Nordan would build an access road. If the negotiations failed, West Orange agreed to use its condemnation powers to obtain the land, with Nordan reimbursing it for all costs related to that acquisition.

On July 11, 1995, the West Orange Township Council adopted an ordinance authorizing West Orange to condemn and acquire an easement across Associates' property. In October 1995, Nordan applied to the West Orange Planning Board for major subdivision approval. On December 4, 1996, the Planning Board approved the location of the access road along Associates' property "subject to the applicant acquiring property for the access road to Northfield Avenue, as provided in the developer's agreement." In January 1997, Associates filed an action in lieu of prerogative writs seeking to set aside Nordan's subdivision approval on several grounds, including the argument that the approval should not be conditional, but should await the condemnation proceeding. The action was dismissed upon the trial judge's holding that West Orange was empowered to approve the subdivision conditioned on condemnation of the necessary land.

On September 2, 1997, the West Orange Township Council adopted an ordinance authorizing condemnation of the portion of Associates' land needed to construct the access road for Nordan. It was noted that Nordan had unsuccessfully attempted to purchase the land from Associates. On January 14, 1998, West Orange filed a condemnation complaint and an Order to Show Cause, seeking appointment of commissioners to determine the amount of compensation to be paid to Associates under the Eminent Domain Act. Associates' answer asserted, among other things, that the proposed condemnation constituted an unlawful taking of private property for private use. The condemnation was stayed pending resolution of Associates' challenge.

The trial judge entered final judgment in favor of West Orange based on the court's conclusion that the taking involved a public purpose. The Appellate Division reversed on the ground that the taking sought to advance only Nordan's private interests and, therefore, was not for public use. The Supreme Court granted certification and reversed, finding the proposed taking of a public roadway to be a valid public use despite its benefits to Nordan. The judgment of the Law Division in favor of West Orange was reinstated.

In October 2005, the parties entered into a Consent Order dismissing the condemnation proceeding. Thereafter, on January 30, 2006, Associates filed a notice of motion seeking: a determination that West Orange had abandoned its condemnation of Associates' property; dismissal of West Orange's complaint; and an order for payment of costs, disbursements, fees, and expenses incurred by Associates, totaling $402,476.82. On June 8, 2006, the trial judge entered an order that deemed West Orange to have abandoned its condemnation of Associates' land; dismissed West Orange's complaint with prejudice; and awarded to Associates fees and costs. In calculating the award, the trial judge determined that the condemnation action began on July 11, 1995, the date on which the township ordinance identified Associates' property as a target for condemnation; that Associates could be awarded fees from that date; and that the award of fees was subject to the factors set forth in RPC 1.5(a), including an assessment of the "success" of Associates' efforts under RPC 1.5(a) (4). The judge then identified certain reductions: fees that were not substantiated; those that were duplicative; those incurred for research regarding non-compensable issues, such as attorneys' fees; and fees that were a direct result of a change in counsel. The trial judge also disallowed fees incurred for the prerogative writs action and the planning board meetings. In respect of the unsuccessful public purpose litigation, the judge found that taxpayers should not bear the full costs and awarded only 25% of those fees. The fees awarded to Associates totaled $154,721.56.

The Appellate Division affirmed in part and reversed in part. The panel held that, in the context of an abandonment, the right to recover costs and fees is not contingent to any degree on the success of the property owner's defense strategy, thus obviating application of RPC 1.5(a) (4). The panel also held that to qualify for reimbursement under N.J.S.A. 20:3-26(b), the costs incurred by the property owner must have occurred completely within the condemnation action and, thus, the award of fees incurred prior to the filing of the complaint was not warranted. While significantly reducing the amount of fees Associates was entitled to, the panel refused to allow West Orange to benefit from the ruling because it had not filed a cross-appeal. Ultimately, the Appellate Division awarded fees of $300,546.87, which included pre-complaint fees it had declared improperly awarded by the trial judge, as well as fees the panel held were improperly reduced based on Associates' lack of success.

The Supreme Court granted certification.

HELD: Where a condemnation action is abandoned, a condemnee is entitled to reasonable fees and expenses from the point at which the property is formally targeted for condemnation. In respect of the calculation of fees, the analysis, as in all other cases, is governed by the reasonableness principles of RPC 1.5. However, RPC 1.5(a) (4) has no role to play on the issue of the condemnee's entitlement to fees; that entitlement is triggered by the abandonment itself. Nor is there warrant in an abandonment case for a proportionality reduction under RPC 1.5(a)

(4) based on a comparison of "the amount involved and the results obtained."

1. N.J.S.A. 20:3-26(b) provides for the award of counsel fees where a court declares that the condemnor cannot acquire the property by condemnation, or where the condemnation action is abandoned by the condemnor. The likely purpose of this provision is twofold: to make the condemnee whole in respect of fees reasonably incurred in defense of the condemnation proceeding, and to encourage care on the part of the condemnor in exercising its condemnation power. (Pp. 9-12)

2. For an abandonment to take place under N.J.S.A. 20:3-26(b), a condemnation complaint must have been filed, otherwise there would be no "action" to abandon. The question presented here is whether pre-action fees that could not be recovered in the absence of a complaint may be awarded if the complaint is filed but ultimately abandoned. The trial judge properly concluded that reasonable fees actually incurred as a direct result of the public entity's formal action targeting Associates' property (the July 11, 1995 ordinance) were reimbursable once the condemnation complaint was filed and later abandoned. That reading of the statute furthers the Legislature's intent to return the condemnee to the position in which it would have been in had its property never been targeted. (Pp. 12-16)

3. Rule 4:42-9(b) sets forth the procedure for calculating a fee and provides that all applications for the allowance of fees be supported by an affidavit of services addressing the factors enumerated in RPC 1.5(a), requiring that the lawyer's fee be reasonable. The Appellate Division properly concluded that when a condemnation is abandoned, the right to recover fees is absolute and is not contingent on the "success" of the property owner's various defense strategies. The fees must be actually incurred as a direct result of the public entity's exercise of its condemnation power and must be reasonable. In making a reasonableness determination, courts should apply all other relevant aspects of RPC 1.5. Moreover, the court should look at the substance of the work performed. Pivotal to this inquiry is whether the defenses interposed to the condemnation were those that a reasonably skilled attorney would have advanced. The trial judge may consider the success of defendant's strategies as but one measure of what a reasonably skilled lawyer would have done. A strategy need not succeed in order to be considered a reasonable response to a condemnation complaint. This matter is remanded to the trial court for a review of the award. The judge should clarify on remand whether certain fees were excluded under RPC 1.5 (a) (1) or (a) (4). Any calculation will still be subject to the restrictions previously imposed by the trial judge. (Pp. 16-23)

4. If an issue is squarely presented, relief need not be withheld simply because it would inure to the benefit of a non-appealing party. To the extent that the resolution of the sole question presented in this case inured to the benefit of West Orange, relief should have been afforded by the court, regardless of the absence of a cross-appeal. (Pp. 23-25)

Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial judge for reconsideration of the fee award in accordance with the principles to which the Court has adverted.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, WALLACE and RIVERASOTO join in JUSTICE LONG'S opinion. JUSTICE HOENS did not participate.

The opinion of the court was delivered by: Justice Long

Argued October 21, 2008

We are called upon in this matter to interpret the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50, which provides in relevant part that:

If the court renders final judgment that the condemnor cannot acquire the real property by condemnation or, if the condemnation action is abandoned by the condemnor, then the court shall award the owner of any right, or title to, or interest in such real property, such sum as will reimburse such owner for his reasonable costs, disbursements and expenses actually incurred, including reasonable attorney, appraisal, and engineering fees. [N.J.S.A. 20:3-26(b).]

In particular, we have been asked to declare the point from which fees and expenses may be recovered by the condemnee where a condemnation action is abandoned, and to decide whether RPC 1.5(a)(4) is applicable in this kind of a mandatory fee shifting case.

We have concluded that where a condemnation action is abandoned, a condemnee is entitled to reasonable fees and expenses from the point at which the property is formally targeted for condemnation. In respect of the calculation of fees, we hold that, as in all other cases, the analysis is governed by the reasonableness principles of RPC 1.5. However, RPC 1.5(a)(4) has no role to play on the issue of the condemnee's entitlement to fees; that entitlement is triggered by the abandonment itself. Nor is there warrant in an abandonment case for a proportionality reduction under RPC 1.5(a)(4) based on a comparison of "the amount involved and the results obtained." The polestar of the inquiry is reasonableness.

I.

The history of this action is explained in detail in our opinion in Township of West Orange v. 769 Associates, LLC (769 Associates II), 172 N.J. 564 (2002). Briefly, 769 Associates ("Associates") owns property on Northfield Avenue in West Orange. In the late 1980s, Nordan Realty ("Nordan"), which owns the land behind Associates' property, set out to build a development of ninety-five single-family homes adjacent to a pre-existing development. Access was originally contemplated by use of Cedar Avenue. When neighbors objected to the use of Cedar Avenue, Nordan and West Orange turned their sights toward access via Northfield Avenue.

In 1992, Nordan and West Orange entered into a developer's agreement which, among other things, provided that Nordan would negotiate with adjacent property owners (including Associates) to secure the right of way to Northfield Avenue from its property and would construct the access road. If the negotiations failed, West Orange agreed to use its powers of eminent ...


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