On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-2349-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 21, 2009
Before Judges Rodríguez, Reisner and Chambers.
Defendants James Farm Market Corp. and James Wholesale Warehouse, Inc. (collectively, James or defendants) appeal from two trial court orders dated July 29, 2008 authorizing the Town of Kearny to proceed with condemnation, terminating James's tenancy, and denying James's motion to dismiss the condemnation complaint. We remand this matter to the trial court for further proceedings consistent with this opinion.
This case concerns James's leasehold interests in a parcel owned by defendant DVL Kearny Holdings, L.L.C. (DVL), known as the "Del Toch property." On July 21, 1994, DVL and James entered into a lease agreement for space at the Del Toch property (the Market Lease). On March 31, 1995, DVL and James entered into a lease agreement for a second space at the Del Toch property (the Warehouse Lease).
Both the Market Lease and the Warehouse Lease contain identical "condemnation" clauses:
If the Complex of which the Premises are a part, or any portion thereof, shall be taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation, or if in lieu of any formal condemnation proceedings or actions, Landlord shall grant an option to purchase and or shall sell and convey the Premises or any portion thereof, to the governmental or other public authority, agency, body of public utility, seeking to take said land or any portion thereof, then this lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as Landlord shall fix by notice in writing; and Tenant shall have no claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale, or conveyance in lieu of formal condemnation proceedings; and all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such public authority, seeking to take or acquire the Premises, or any portion thereof. Tenant covenants and agrees to vacate the Premises, remove all the Tenant's personal property and deliver up peaceable possession thereof to Landlord, or to such other party designated by Landlord in the aforementioned notice.
Failure by Tenant to comply with any provisions in this clause shall subject Tenant to such costs, expenses, damages and losses as Landlord may incur by reason of Tenant's breach hereof. [(emphasis added)]
In an effort to revive its waterfront area, in 2001 the Town of Kearny adopted the "Passaic Avenue Redevelopment Plan," of which the Del Toch property was the "centerpiece." The plan sought, among other things, "[t]o achieve the vision of Passaic Avenue as a vibrant, mixed-use, waterfront entertainment destination," and anticipated that the "high buildings and funky architecture" of the Del Toch area will "lend itself to adaptive reuse" as loft spaces and night clubs. Through an agreement dated December 11, 2007, Kearny appointed DVL as the redeveloper, pursuant to N.J.S.A. 40A:12A-8(f).
Section 2.02 of the Redeveloper Agreement provided that Kearny would use its eminent domain powers to acquire property needed to allow DVL to complete the redevelopment:
With regard to the Del Toch Parcels, Redeveloper is requesting that the Town use its eminent domain powers, at the sole cost and expense of the Redeveloper, to acquire the property interests identified on the attached Exhibit E. The Town agrees to use reasonable efforts, at the cost and expense of the Redeveloper, to acquire these interests.
Exhibit E of the final Redeveloper Agreement confirmed the various leaseholds that would be acquired by condemnation, along with a fee interest and a "potential implied easement." The paragraph ...