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New Jersey Transit Corporation, An Instrumentality of the State of New v. Hartz Mountain Development Corporation


December 6, 2010


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4401-09.

Per curiam.


Submitted November 3, 2010 --

Before Judges Skillman, Parrillo and Espinosa.

Defendant, Hartz Mountain Development Corporation (Hartz), appeals from the order of the Law Division both granting plaintiff New Jersey Transit Corporation (NJT) the power to condemn easement parcels located on property owned by Hartz and appointing condemnation commissioners. At issue is a condemnor's obligations, imposed by N.J.S.A. 20:3-6, to engage in "good faith negotiations" for the purchase of property that it plans to acquire, if necessary, by eminent domain, as applied to a temporary taking for a construction easement. The condemnee Hartz alleged that the condemnor NJT had failed to disclose in pre-acquisition negotiations its plan to dump contaminants on Hartz's property. The Law Division found otherwise, that NJT made full disclosure to the property owner of its project-wide soil reuse plan and therefore granted NJT the power to condemn the easement parcels on Hartz's property. The trial court's findings are adequately supported in the record and we now affirm.

By way of background, NJT has undertaken to construct the 69th Street Grade Separation Project (GSP) in North Bergen (the Project) to correct what it terms a "dangerous at-grade rail crossing." The Project involves the construction of a bridge that will elevate 69th Street above railroad tracks so that the roadway no longer crosses those tracks at grade level. In order to complete the Project, NJT must make road and drainage improvements that require dredging and widening of a drainage ditch. The bridge construction will generate excavated soil, and the ditch dredging will produce sediment or "dredge spoils" that NJT intended to reuse as fill in accordance with a soil reuse plan (SRP) prepared in January 2009 by its environmental consultant, BEM Systems, Inc. (BEM).

The Project requires NJT to obtain three permanent and two temporary construction easements on a portion of Hartz's property covering five parcels. NJT plans to hold the temporary construction easements for a period of approximately two months, while the permanent easement parcels will contain permanent drainage, slope and wall support over which NJT will maintain a permanent interest.

In order to acquire the necessary easements for the Project under the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50, NJT had the easements appraised and conducted an environmental investigation of the property. According to NJT, as a result of Hartz's refusal to permit agency employees entry onto its property without a written agreement, NJT took representative samples from a nearby location, and found these samples to be contaminated. As a result, NJT concluded that the Hartz property was likewise contaminated.

Following its assessment and appraisal of the proposed easements, NJT sent Hartz a formal offer letter dated January 8, 2009 (offer letter) to purchase the property at the appraised value of $68,150.00, which did not include an additional $17,000.00 in environmental costs that NJT estimated it would incur in the remediation of soil contamination located within the subject easements. NJT included in the Offer Letter an appraisal report dated September 16, 2008 (Appraisal Report), a draft property purchase agreement, and an environmental report prepared by BEM. The latter, titled the BEM Property Acquisition Environmental Cost Estimating Report of November 2008 (PAECE Report), included an environmental evaluation of the property and proposed cost estimates. Although the PAECE Report, along with the offer letter and purchase agreement, did not explicitly refer to the January 2009 Soil Reuse Plan prepared by BEM, it nevertheless described its intended plans, indicating that soil regulated by the New Jersey Department of Environmental Protection (DEP) would be used as fill and that those "excess" soils that could not be reused on site would be disposed of or recycled. Specifically, in bold typeface on its cost summary page, the PAECE Report provided:

-During NJ TRANSIT's construction activities, soil will be reused within the 69th St GSP limits in accordance with an NJDEP-approved SRP. In addition, excess regulated soil generated during construction activities and not reused on site will be managed properly and subsequently disposed off site at a regulated disposal/recycling facility. This cost has not been included in this cost estimate. [(emphasis added).]

Negotiations occurring in 2009 eventually broke down due to the parties' disagreement over environmental provisions in the draft property purchase agreement. Consequently, on August 28, 2009, NJT filed a verified complaint and order to show cause to acquire the easements through condemnation. An order for payment and possession was filed on September 1, 2009. The estimated amount of the valuation of the property interests for the easements was deposited into court, and on September 21, 2009, a declaration of taking was filed.

On October 20, 2009, Hartz filed a contesting answer and after briefs were exchanged, oral argument was conducted on October 23, 2009 and again on November 18, 2009. During the latter, Hartz's counsel raised the issue whether NJT engaged in good faith bona fide negotiations by not disclosing whether it intended to use contaminated project fill on Hartz's property.

Following argument, on December 2, 2009, the court entered final judgment for NJT, finding that NJT had the power to condemn the easement parcels and appointing condemnation commissioners.

Hartz moved for reconsideration based on what it termed "newly revealed" information contained within the BEM soil reuse plan and other documents obtained from NJT and DEP pursuant to the Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13, that supposedly evidenced NJT's bad faith during the purchase negotiations process. According to Hartz, plan maps revealed that excavated soil and dredge spoils were to be imported from the "cut" areas of the project and used as "fill" within the easement areas on Hartz's property, including the temporary construction easement area adjacent to Westside Avenue. In connection with its reconsideration motion, Hartz retained an environmental expert who opined that the PAECE Report reference to the soil reuse plan in the form of a note to a table at the end of the report was not "comprehensible" without the information obtained under the OPRA request and that it was "highly unusual" that BEM did not reference the soil reuse plan in the body of the report.

In denying Hartz's motion for reconsideration, the trial judge expressly found that the soil reuse plan was adequately disclosed, stating: "It's not hidden at all. In fact . . . it's emphasized . . . in comparison to the rest of the language on page 19. It's not hidden . . . at all." Responding to Hartz's contention that reference to the soil reuse plan in the PAECE Report was "intentionally drafted to be opaque and unilluminating," the court emphasized that there was no "effort made to try to find out what [NJT] really meant . . . This is all stuff that could have been presented, could have been learned, could have been presented before." Lastly, the court found that, in any event, Hartz's concerns with the DEP-approved soil reuse plan may be addressed as post-condemnation valuation issues.

On appeal, Hartz contends that NJT lacks power to condemn because it failed to negotiate in good faith by withholding details of the soil reuse plan, resulting in a reduced purchase offer below actual fair market value since the appraisal did not factor the use of contaminated soil on the condemned property. We disagree.

Under the Public Transportation Act of 1979, NJT has "the power to acquire by purchase, condemnation, lease, gift or otherwise, on the terms and conditions and in the manner it deems proper, any land or property real or personal, tangible or intangible which it may determine is reasonably necessary for the purposes of the corporation under the provisions of [the] act." N.J.S.A. 27:25-13(b). If NJT decides to proceed by condemnation, its acquisition is subject to the provisions of the Eminent Domain Act of 1971 (Act), N.J.S.A. 20:3-1 to -50. See N.J.S.A. 27:25-13(c).

The Act "sets forth the procedural framework within which the competing interests in a condemnation case are to be resolved. The statute details when and how a condemnation is to be commenced and continued . . . ." Twp. of W. Orange v. 769 Assocs., LLC, 198 N.J. 529, 537 (2009). "Included within [the Act's] scheme is the mandate that a condemnor engage in bona fide negotiations with the owner of real property prior to filing a complaint." Id. at 538. Specifically, the Act provides, in pertinent part:

Whenever any condemnor shall have determined to acquire property pursuant to law, including public property already devoted to public purpose, but cannot acquire title thereto or possession thereof by agreement with a prospective condemnee, whether by reason of disagreement concerning the compensation to be paid or for any other cause, the condemnation of such property and the compensation to be paid therefor, and to whom payable, and all matters incidental thereto and arising therefrom shall be governed, ascertained and paid by and in the manner provided by this act; provided, however, that no action to condemn shall be instituted unless the condemnor is unable to acquire such title or possession through bona fide negotiations with the prospective condemnee, which negotiations shall include an offer in writing by the condemnor to the prospective condemnee holding the title of record to the property being condemned, setting forth the property and interest therein to be acquired, the compensation offered to be paid and a reasonable disclosure of the manner in which the amount of such offered compensation has been calculated, and such other matters as may be required by the rules. . . . In no event shall such offer be less than the taking agency's approved appraisal of the fair market value of such property. . . . [N.J.S.A. 20:3-6 (emphasis added).]

This provision serves "'to encourage public entities to acquire property without litigation[,] . . . thereby saving both the public and the condemnee the expense and delay of court action.'" 769 Assoc., LLC, supra, 198 N.J. at 538 (quoting Cnty. of Morris v. Weiner, 222 N.J. Super. 560, 565 (App. Div.), certif. denied, 111 N.J. 573 (1988)). The Act is particularly protective of "unsophisticated" and "unknowledgeable" landowners who "may well be unable to afford lawyers and appraisers for condemnation proceedings." State v. Carroll, 123 N.J. 308, 316 (1991).

The Act imposes on a government entity seeking condemnation the "overriding obligation to deal forthrightly and fairly with property owners in condemnation actions." Jersey City Redevelopment Agency v. Costello, 252 N.J. Super. 247, 257 (App. Div.), certif. denied, 126 N.J. 332 (1991). In other words, government must "turn square corners" in dealing with the public. F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426 (1985). This mandate is "not of form, but of high moral principle for violation of which redress should be liberally given." Cnty. of Morris v. 8 Court St. Ltd., 223 N.J. Super. 35, 39 (App. Div.), certif. denied, 111 N.J. 572 (1988). Consequently, the government may not conduct itself so as to achieve or preserve any kind of bargaining or litigational advantage over the property owner. Its primary obligation is to comport itself with compunction and integrity, and in doing so government may have to forego the freedom of action that private citizens may employ in dealing with one another. [F.M.C. Stores Co., supra, 100 N.J. at 427.]

Thus, the Act provides a landowner the assurance that "government is treating them with absolute candor and fairness[,]" which only occurs with "full disclosure during negotiations of all the information upon which the government relies in making its offer." 8 Court St. Ltd., supra, 223 N.J. Super. at 39. As such, courts will strictly construe the Act's jurisdictional prelitigation requirements and dismiss the complaint of a condemnor who has failed to comply with these requirements. City of Atl. City v. Cynwyd Invs., 148 N.J. 55, 69 (1997); City of Passaic v. Shennett, 390 N.J. Super. 475, 482 (App. Div. 2007).

Rule 4:73-1 tracks the statutory requirements for condemnation proceedings. Cynwyd Invs., supra, 148 N.J. at 68. Specifically, Rule 4:73-1 requires that the condemnation complaint include the amount of compensation offered to the property owner and "reasonable disclosure of the manner in which the amount has been calculated." Under Rule 4:73-1, "reasonable disclosure by the condemnor shall include . . . any unusual factors known to the condemnor which may affect value." Nevertheless, Rule 4:73-1 "impl[ies] that prelitigation 'reasonable disclosure' under N.J.S.A. 20:3-6 would ordinarily not be as extensive as discovery during litigation." Carroll, supra, 123 N.J. at 320 (emphasis added).

In Carroll, supra, our Supreme Court concurred in our disagreement with the Law Division's order dismissing the condemnor's complaint due to an "unintelligible" appraisal form provided to the property owner by the Department of Transportation. 123 N.J. at 319-20. Specifically, "practical deficiencies" did not render the appraisal "'unintelligible' in the sense that it could not be read and understood by a property owner[, and] although in need of improvement and clarification, [the report remained] sufficiently comprehensible and did not per se frustrate bona fide negotiations." Id. at 320 (citing State v. Carroll, 234 N.J. Super. 37, 55 (App. Div. 1989)).

Although the Act does not define "bona fide negotiations," clearly it necessitates more than a mere offer and time period for acceptance or rejection. Weiner, supra, 222 N.J. Super. at 566. But courts "also presume that a public entity of this State will act diligently, responsibly and honorably[,] recogniz[ing] that '[t]here is a prima facie presumption that the power and discretion of governmental action has been properly exercised.'" City of Asbury Park v. Asbury Park Towers, 388 N.J. Super. 1, 11 (App. Div. 2006) (quoting Miller v. Passaic Valley Water Comm'n, 259 N.J. Super. 1, 14 (App. Div.), certif. denied, 130 N.J. 601 (1992)). In other words, we will presume the good faith of public officials. Miller, supra, 259 N.J. Super. at 14-15.

Hartz, a sophisticated real estate developer, simply has not rebutted the good faith presumption nor demonstrated that NJT's disclosures during negotiations were inadequate or unreasonable. It is undisputed that Hartz obtained the PAECE Report at the start of negotiations with NJT, and the Report referenced a soil reuse plan. Specifically, the PAECE Report indicated that, "[d]uring NJ Transit's construction activities, soil will be reused within the 69th St GSP limits in accordance with an NJDEP-approved SRP." (emphasis added). Furthermore, Hartz makes no claim that NJT misled or misrepresented the existence of such a plan, or that NJT would have denied access to the plan had Hartz requested it or made further inquiry during negotiations.

Nevertheless, Hartz contends that documents subsequently disclosed pursuant to its OPRA request, namely NJT's September 5, 2003 Waterfront Development Permit (WDP) application to the DEP; a July 31, 1997 correspondence from BEM to NJT; and the soil reuse plan itself, reveal additional information demonstrative of NJT's bad faith negotiations. First, Hartz argues that the 2003 WDP application indicates a plan to reuse contaminated soil from dredging activity, a fact concealed during negotiations. Actually, the WDP application provides otherwise:

The dredging of the ditch is not anticipated to encounter areas of significant hazardous material contamination. BEM Systems, Inc. conducted soil and sediment testing of the tidal ditch. The analytical results indicate that low to moderate concentrations of metals are present in the soil and sediment samples Dewatering of the dredged material will probably be required before removal to a recycling facility. Contaminated material will be disposed of off-site in accordance with NJDEP requirements for the project. Uncontaminated dredged material will be stockpiled at an upland location [of the project]. Following dewatering and sorting, reusable material will be transported back to the 69th Street construction site, or other suitable . . . project area, for incorporation into the fill areas which meet the requirements of the NJDEP-approved Soil Reuse Plan. . ..

Second, Hartz contends that the 1997 BEM letter to NJT discloses contaminated dredge spoils would be reused as fill for the Project. Here again, the actual language of the BEM letter is as follows:

As the soil and sediment analytical results indicate, the distribution of contamination within the channel is fairly heterogeneous. Therefore, BEM has conservatively assumed for cost estimating purposes that all dredge spoils will be disposed off-site at a non-hazardous soil recycling facility.

BEM requested cost information from several local recycling facilities for the loading, transportation and disposal of the dredge spoils. Based on several price quotes, the cost for loading, transportation and off-site disposal of the dredge spoils at a recycling facility has been estimated to be $73 per cubic yard. The total estimated cost for the loading, transportation and disposal of the dredge material is, therefore, approximately $934,400 ($73 per cubic yard x 12,800 cubic yards). This estimate assumes the dredge spoils will already be removed and stockpiled for loading out by the transporter at a rate of 400 cubic yards per day. Also, the cost estimate does not include the cost of any additional analytical testing required by the recycling facility prior to acceptance of the material.

However, please note that with the exception of the Crvi hot spot at G11-SD04 which would require off-site management, if geotechnically acceptable the available analytical data suggests NJDEP would allow the material to be reused as construction fill within the project corridor. . . .

Thus, the BEM letter does not, as Hartz argues, provide that NJT will place contaminated soils on Hartz's property, but merely states that contaminated soil will be brought off-site to a soil recycling facility unless it is acceptable under DEP regulations for use as fill.

Lastly, Hartz's reliance on the soil reuse plan, which it did not request during negotiations, fares no better. The plan addresses the management of an estimated 25,000 cubic yards of regulated soil and/or sediment generated during construction of the project. It categorizes soil into three categories: eligible regulated soil, ineligible regulated soil, and significantly contaminated soil, and then explicitly defines each category. The plan then goes on to expressly provide for off-site disposal:

BEM does not anticipate encountering potentially hazardous or petroleum contaminated materials during construction. If encountered, these materials will have to be properly characterized, managed, and disposed of off-site.

Regulated soil and/or sediments not meeting the Project Specifications as construction fill, will be temporarily stockpiled before transportation to a permitted recycling/disposal facility. Approximately 20,000 [cubic yards] of the excavated regulated soil and/or sediments, not meeting Project Specification as construction fill due to its high organic contents, from the detention basin and drainage channel area will require off-site disposal. . . .

In addition, any potentially regulated materials/objects discovered during construction will be properly characterized, managed, and disposed of off-site in accordance with any applicable regulations.

We fail to see how these OPRA documents evidence NJT's bad faith. Indeed, the source document - the soil reuse plan - was mentioned in the PAECE Report and was at all times available to Hartz upon its request. The PAECE Report itself expressly referenced "regulated" soil and therefore its further reference to the soil reuse plan, although not fully described, could be easily read and understood by a sophisticated and experienced entity such as Hartz to place it on notice of NJT's plans for the project. Neither the WDP application nor the BEM correspondence enhances or clarifies the essential substance of the soil reuse plan. In sum, we conclude that NJT made reasonable disclosure and provided adequate appraisal information such that Hartz was able to conduct informed and intelligent negotiations. Sufficient evidence in the record therefore supports the trial judge's like determination. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).

We have considered Hartz's remaining arguments and deem them of insufficient merit to warrant discussion in this opinion. R. 2:11-3(e)(1)(E).



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