On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-1080-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Fuentes and Gilroy.
This is a real property condemnation action. On March 7, 2001, plaintiff City of Long Branch (the City) filed a complaint seeking to acquire title to property known as 74 Ocean Avenue, or Block 292, Lots 5.01, 5, 6, 20, 21 and 26, on the City's tax map (the property). Defendant West of Pier Associates, LLC, owned the property, and defendants, Carmen V. Cicalese, Jr.; Anthony M. Cicalese; Jennifer E. Cicalese; Patrick Cicalese; and JAC Corporation held secured interests in the property.*fn1
Defendants appeal from the September 30, 2008 order determining that pre-judgment interest on the condemnation judgment was to be calculated at the court rule rate, R. 4:42-11.*fn2 We reverse and remand for further proceedings consistent with this opinion.
The core facts underlying this appeal are not in dispute. On April 27, 2001, the court entered an order for judgment appointing three condemnation commissioners. On May 3, 2001, the City filed a declaration of taking and deposited $1,184,000 into court. On October 9, 2001, defendants filed an appeal from the commissioners' award.*fn3
On October 6, 2006, the parties voluntarily dismissed the action, agreeing to submit the issue of fair market value of the property to binding arbitration before a panel of three arbitrators. On December 14, 2007, the arbitrators rendered their award, setting the fair market value of the property as of May 2001, at $3,940,000. On inquiry as to whether the award was with or without interest, the arbitrators advised that interest would be allowed, either by application to the court or by the arbitrators if the court so ordered.
On January 17, 2008, the City's designated developer paid defendants the difference between the amount of the award and the City's initial deposit, disbursing $2,716,000 and $40,000, on January 17, and January 22, 2008, respectively. On March 7, 2008, defendants filed a motion seeking to confirm the arbitration award and to schedule a hearing to determine the amount of interest the City owed on the award. On March 28, 2008, the court entered judgment confirming the arbitration award, and without conducting an evidentiary hearing, directed that interest be allowed on the judgment "pursuant to court rules."
On April 16, 2008, defendants filed a motion seeking reconsideration of that part of the March 28, 2008 order that allowed interest on the judgment at the court rule rate, and requesting a hearing to determine the appropriate interest rate. In furtherance of their motion, defendants attached a report prepared by Kristin K. Kucsma, an economist, setting forth several alternative methods of calculating commercial interest rates. After comparing the various commercial interest rates against the court rule rates from the time when the complaint was filed through entry of judgment, Kucsma opined that she did "not consider the court rule rates to be rates that would best indemnify the condemnee," because "the application of the court rules rates is particularly unreasonable for the time period under consideration in this case, and would tend to penalize [the condemnee] unfairly." Rather, Kucsma opined that interest should be allowed on the judgment calculated at the ten-year U.S. Treasury rate with a markup of 290 basis points as a risk premium. On May 23, 2008, the court granted reconsideration, scheduled a hearing to fix the amount of interest on the judgment, and granted the City leave to submit an expert report.
On September 5, 2008, the City filed a certification from Hugh McGuire, the City's real property appraiser, comparing the average rate of interest under Rule 4:42-11 against the average rates of interest of one-year, ten-year, twenty-year, thirty-year U.S. Treasury rates, thirty-year fixed rates for residential mortgages, AAA corporate bonds, and the prime interest rate. McGuire opined that the interest rates allowed under court rule would provide "appropriate just compensation" to defendants.
On September 12, 2008, defendants filed a supplemental report from Kucsma, and on September 22, 2008, defendants filed a motion to bar McGuire's certification. In her supplemental report, Kucsma again opined that interest should be allowed on the judgment calculated at the ten-year treasury rate but with a markup for a risk premium of 290 basis point as reported by the Federal Deposit Insurance Corporation to 350 or 450 basis points as charged by various mortgage lenders for similar type real property developments. It was her opinion, depending upon the risk premium basis points charged, that the interest owed on the judgment was between $1,681,054 and $2,418,788.
On September 26, 2008, without addressing the motion seeking to bar McGuire's certification, the court denied defendants' request for an evidentiary hearing, and determined that interest was to be calculated in accordance with Rule 4:42-11. On September 30, 2008, the court ...