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Penn Auto Sales of Route 21, Inc v. State of New Jersey

March 1, 2011


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3784-07.

Per curiam.


Submitted: February 3, 2011 - Decided: Before Judges Axelrad and J. N. Harris.

Defendant, the State of New Jersey Department of Transportation (the DOT), appeals from a January 7, 2010 judgment of the Law Division awarding damages to plaintiff, a high-end used automobile dealership, for a taking of its premises. The DOT argues the court erred as a matter of law in determining a taking had occurred, and further erred by not following the proper procedure to award just compensation. Plaintiff cross-appeals, arguing the court erred in not crediting its evidence regarding lost inventory and lost profits. We reverse and remand.


On May 11, 2007, plaintiff filed a complaint against the DOT alleging negligence, tortious interference with economic advantage, and violations of the constitutional right to acquire, possess, and protect property under Article I, paragraph l of the State Constitution. The DOT filed an answer, asserting general denials and nineteen separate defenses.

On February 28, 2008, plaintiff moved to strike the DOT's answer for failure to comply with discovery, which was denied on March 14, 2008 because of plaintiff's failure to comply with the court rules. After correcting the deficiencies, plaintiff renewed its motion. The court granted plaintiff's motion by order of April ll, 2008, striking the DOT's answer without prejudice.

On August 21, 2008, plaintiff moved to convert the dismissal order to one dismissing the answer with prejudice and for the entry of a judgment of liability in its favor against the DOT. The DOT opposed the motion, claiming discovery had been provided. Following oral argument on September 12, 2008, the Law Division judge granted plaintiff's motion, striking the DOT's answer with prejudice. He then informed plaintiff that his "next step" would be to move to enter a default and conduct a proof hearing, which plaintiff's counsel confirmed was his understanding of the court rules. However, on the same date, the court signed the order submitted by plaintiff, which not only struck the DOT's answer with prejudice, but also entered a "judgment of liability" in favor of plaintiff against the DOT.

A bench trial commenced before another judge on October 6, 2009. The DOT renewed its objection to a damages-only trial due to the lack of a factual basis for a finding of liability.*fn1 The court responded that liability was not at issue based on prior orders and this was a damages-only trial. Testimony concluded the next day. The court rendered its decision on the record on November 6 and December l7, 2009, characterizing the proceeding before it as a "proof hearing" and finding the case was, "in effect," a condemnation proceeding. Accordingly, the court concluded the DOT was responsible for the value of the temporary taking of the premises and consequential business losses. The court awarded plaintiff compensatory damages in the principal amount of $1,074,695.83, memorialized in a final judgment of January 7, 2010. The DOT appealed and plaintiff cross-appealed.


Starting around 2002, the DOT decided to widen or otherwise improve a portion of Route 21 in Newark, known also as McCarter Highway. The dealership, a lessee of premises located at 974 McCarter Highway, relocated its business to 1225 McCarter Highway after the DOT condemned the first property. It leased the property for a year and a related entity of plaintiff's purchased it in the spring of 2003 and leased it to plaintiff.*fn2

Prior to the closing, the seller told Andrade the DOT had permanently acquired a strip along the property's Route 2l frontage for the widening of the highway and a parallel strip for a temporary easement to be used for construction staging.

Andrade was initially informed by letter from the DOT that the anticipated time for the project was three months; the contractor actually occupied the temporary easement for about four to four and one-half years, until sometime in late 2006 or early 2007.

Andrade testified about the DOT's activities, which he claimed caused a significant reduction in visits from potential customers and a drop in sales. For example, construction vehicles and materials blocked the entrance to the dealership, obstructing customer visibility. The paving also changed the height of the highway and made access difficult from the primary entrance off of Route 21. Signs were posted on the property listing it for sale or lease, some of which were obstructed by the DOT equipment. The dealership closed its doors on October 22, 2005, and the property remained vacant through the end of 2006. In January 2007, after the DOT vacated the easement, Deluxe ...

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