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New Jersey Schools Construction Corp. v. Lopez

February 19, 2010

NEW JERSEY SCHOOLS CONSTRUCTION CORPORATION, A SUBSIDIARY OF THE NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY, A PUBLIC BODY CORPORATE AND POLITIC, PLAINTIFF-APPELLANT,
v.
DAVID LOPEZ AND THE CITY OF UNION CITY, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS, AND UNIVERSAL AMERICAN MORTGAGE COMPANY, VALLEY NATIONAL BANK, AND CRUSADER SERVICING CORPORATION, DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-6174-04.

The opinion of the court was delivered by: Parrillo, J.A.D.

FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued January 5, 2010

Before Judges Parrillo, Lihotz and Ashrafi.

In this condemnation action involving property located at 1501 Palisade Avenue, Union City, plaintiff, New Jersey Schools Construction Corporation (plaintiff or SCC),*fn1 challenges certain rulings of the Law Division on in limine motions: (1) determining that the value of the improvements to the property made after the owner, defendant David Lopez, received a notice of interest (NOI) letter from plaintiff are included in setting just compensation; (2) excluding evidence attacking the validity of variance and site plan approvals issued by the Union City Zoning Board of Adjustment (Zoning Board); and (3) holding that defendant had no obligation to inform the Zoning Board of his receipt of the NOI letter. The case below focused on the question of whether defendant and his agents had knowledge of the imminent condemnation of the property, and with that knowledge constructed a building on the property for the sole purpose of enhancing the condemnation award. Following the ruling on plaintiff's last in limine motion, memorialized in an order of March 12, 2008, the parties negotiated a settlement, which provided that plaintiff pay $1,825,000 as just compensation for the property. As part of the settlement, plaintiff reserved the right to appeal the Law Division's interlocutory rulings, including the latest embodied in the March 12, 2008 order. On April 25, 2008, the Law Division judge entered a consent order for final judgment memorializing the settlement, from which plaintiff now appeals.

Some background is in order. When defendant and his two brothers bought the property in 1996, the structure that once stood there had already been torn down. The plan was to erect a new building, but in the meantime to use the lot for parking spaces. So until construction of the new building commenced in 2003, the property was used as a parking lot. The Lopez brothers' first attempt to develop the property was in November 1999, when the Union City Planning Board denied their application to construct a three-story mixed residential/commercial structure because a use variance from the Zoning Board was required. The matter was abandoned for lack of financing.

The next attempt in 2003 was more successful, eventually resulting in a three-story structure consisting of a dental office and four-car garage on the first floor, and four apartments on the second and third floors. Each floor consisted of 2500 square feet and the building covered one hundred percent of the lot. Title was placed in defendant's name on April 24, 2003, in order to secure financing because he enjoyed the best credit rating of the three brothers. Another brother, Daniel, managed construction of the improvements to the property. The third brother, Samuel, a licensed dentist, planned to reside at the property and use the ground floor for his dental practice. Their parents lived in a home next door.

An architect was hired in March 2003 and prepared site plans dated May 22, 2003. On April 25, 2003, the Union City Planning Board again rejected defendant's development application because a use variance was required, and advised that defendant must go before the Zoning Board. On April 30, 2003, defendant retained an attorney to prepare a zoning application. On June 3, 2003, defendant applied for site plan approval and variances for the property.

Defendant's property sits adjacent to the Christopher Columbus Middle School, in the Union City School District (School District), a designated "Abbott District."*fn2 On March 15, 1999, the facilities management plan for the School District, which called for construction of a new school and acquisition of other adjacent lots, did not contemplate use of the Lopez property. However, a later plan, adopted at the December 6, 2002 meeting of the New Jersey Economic Development Authority, did call for the use of defendant's lot. On December 18, 2003, the Union City Board of Education approved the site acquisition of adjacent lots, including defendant's, for construction of a new school. On February 5, 2004, the Board of Education sought the approval of the SCC, the State agency charged with the responsibility of implementing the State's school construction program under Abbott v. Burke, supra.

Meanwhile, on August 27, 2003, plaintiff wrote a NOI letter to defendant at 1501 Palisade Avenue, stating that plaintiff was considering the property for development of a school facility.*fn3

It also stated: "This letter does not represent an offer on the part of NJSCC to purchase your property, as no final decision to acquire your property has been made at this time." The letter indicated that plaintiff was seeking to exercise its right of preliminary entry onto the property to conduct an engineering and site feasibility investigation, which would include surveys, soil sampling, underground storage tank investigations, and soil borings.

After discussing the NOI letter with his attorney, defendant was advised to proceed with the zoning application because there were a number of such notices being sent around and there was no way of knowing whether any legitimate condemnation proceedings would evolve. The attorney did not inform defendant that he had an obligation to disclose the NOI letter to the Zoning Board. Architect Feld also saw the NOI letter and did not advise defendant to stop construction.

On September 11, 2003, less than two weeks after receipt of the NOI letter, defendant's application before the Zoning Board proceeded to a public hearing, at which no objection was voiced. The Board voted to approve the application with the proposed variances.*fn4 On October 9, 2003, the Board passed a resolution of findings and conclusions memorializing the approval.

On November 26, 2003, the Zoning Board granted a construction permit for "footings only at owner[']s risk," with $400,000 listed as the cost of construction. Building Department plan review logs show that plumbing subcode review was approved on November 21, 2003; building subcode review was approved on April 15, 2004; and fire and electric subcode review was approved on May 18, 2004.

In June 2004, the building was about eighty percent completed. On October 26, 2004, defendant received condominium certification from the Department of Community Affairs allowing for the sale of five units at 1501 Palisade Avenue. The dental office was completed with dental chairs, a phone line, ...


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