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Borough of Saddle River v. 66 East Allendale

March 26, 2012

BOROUGH OF SADDLE RIVER, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
66 EAST ALLENDALE, LLC,
DEFENDANT-RESPONDENT/ CROSS-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8326-06.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued February 14, 2012

Before Judges A. A. Rodriguez, Sabatino, and Fasciale.

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

In this condemnation action, plaintiff Borough of Saddle River (Saddle River) appeals from a final judgment in the amount of $5,250,000, a January 7, 2011 order denying its motion for a new trial or, in the alternative, remittitur, and a July 26, 2010 order denying its motion in limine to bar expert reports and testimony. Defendant 66 East Allendale, LLC (defendant) cross-appeals from that portion of the final judgment awarding simple interest. We affirm on the appeal and cross-appeal.

This appeal requires us to determine if the trial judge correctly made his threshold determination that "the record contains sufficient evidence of a probability of a zoning change to warrant consideration by the jury," as required by State, by Commissioner of Transportation v. Caoili, 135 N.J. 252, 261-62 (1994). We are also called upon to address whether the judge erred by making his threshold determination before summations, rather than before the commencement of the trial.

We conclude that the judge did not err in finding that there was sufficient evidence of a reasonable probability of a zoning variance to allow the jury to consider that probability in its assessment of the fair market value of the property. Although it is preferable to make the threshold determination before the trial begins, we hold that, given the estimated seven-day evidentiary hearing needed to perform his gatekeeping role, the judge did not abuse his discretion by making his findings before summations. I.

In December 2002, defendant purchased a 2.13 acre vacant parcel located at 66 East Allendale Road, the corner intersection of East Allendale Road and West Saddle River Road.*fn1

At that time, Exxon Mobil leased the property and sublet for operation of a gas station. In 2005, Exxon removed the gas station, cleaned up existing contamination, and vacated.

Under the Borough's current zoning ordinance, the subject property is "split-zoned" with approximately 31,799 sq. ft. in the office zone (O-1) and approximately 60,984 sq. ft. in the residential zone (R-1).*fn2 In the O-1 zone, the ordinance restricts improved lot coverage to 30% of the lot's total area, and imposes parking requirements of one parking space for every 75 sq. ft. of space.

In October 2004, defendant sought a construction permit for use of the R-1 portion of the property as a parking lot of a proposed 10,000 sq. ft. bank building. The application relied on a site plan prepared by defendant's planning expert David A. Hals. The permit was denied, noting that the "proposed improved lot coverage exceeds the maximum allowed of 30%." Defendant appealed to the zoning board to seek a "use" variance based on the same site plan. After a zoning board hearing at which several people voiced opposition to the proposed 10,000 sq. ft. building, defendant withdrew the application without any action by the board.

On November 8, 2006, Saddle River filed a verified complaint to acquire defendant's property by authority of eminent domain to use as a public park. After unsuccessful mediation pertaining to the legality of the taking, the court entered a consent order for judgment and appointed three commissioners, who subsequently appraised the property at $1,593,625. The court then entered an order memorializing this valuation.

The parties appealed, demanded a jury trial, and filed motions in limine to bar expert opinions. Saddle River contended that the court should strike the reports and testimony at trial of defendant's four proposed expert witnesses as "net opinion" or, in the alternative, "conduct a plenary hearing in advance of trial pursuant to . . . Caoili, [supra,] 135 N.J. 252." Similarly, defendant argued that the court should bar the report and testimony of Saddle River's appraisal expert as "net opinion." On July 6, 2010, Judge Robert L. Polifroni conducted oral argument and issued an oral opinion denying the motions. On July 26, 2010, the judge entered an order memorializing his decision.

Thereafter, in October and November 2010, Judge Polifroni conducted a ten-day jury trial, during which time the parties presented testimony from eleven witnesses and introduced 117 documentary exhibits. The central dispute at trial, and now on appeal, was whether a willing purchaser utilizing the property for its "highest and best use" would have considered that there was a "reasonable probability" that the local zoning board would grant a variance from the 30% improved lot coverage restriction to allow construction of a 10,000 sq. ft. bank building. Such a building would have substantially increased the fair market value of the property and, therefore, the amount of just compensation due for the taking.

At trial, defendant relied on the expert opinion of Hals, who produced a 2010 planning and engineering report. Hals opined that if parking were provided underneath the building, a prospective purchaser could construct the 10,000 sq. ft. building within the O-1 area without seeking variance from the 30% coverage restriction. However, Hals further opined that a better use would be to position the 10,000 sq. ft. building within the O-1 area and provide parking in the R-1 area. This plan would have required a "use" variance for the parking*fn3 and a "bulk" variance for 42% improved lot coverage. Hals concluded:

It would be likely that the . . . variance for the improved lot coverage would be granted by the Zoning Board of Adjustment.

The proposed building size and development layout is an appropriate sized development for the property. The proposal is not over[-]building of the property. The proposed building coverage is 7.11% which is consistent to the 7% residential building coverage . . . .

Defendant also presented testimony from appraiser Jon Brody, who performed an analysis of market data from comparable properties whose highest and best use was a bank site. Based on this "market approach" and his review of Hals' 2010 planning report, Brody determined that the property had a value of $5,250,000. He stated:

We have considered the facts demonstrating the probability of a variance as they would be considered by a buyer and seller and conclude that the parties would anticipate the variance to develop the property as a bank/office facility consistent with the physical characteristics of the property and densities derived from the market[,] which . . . would accommodate and permit a two (2) story 10,000 square foot bank/office with adequate on-site parking.

In his report, Brody accounted for "the factors indicative of an impending variance, neighborhood development trends, and conclusions discussed in [Hals' 2010] planning report." Additionally, he stated that he had not valued the subject property "on the assumption that the variance is an accomplished fact[,] but rather the valuation represents the value of the unapproved land, taking into account as a factor in valuation, its probable variance, which we believe to be reasonably probable." Finally, defendant also presented the testimony of Shergoh Alkilani, a real estate and bank development expert, who opined that the high-income demographics of the area would have made the property particularly valuable for a bank site.

Saddle River relied on the opinion of planning expert Richard Preiss, who agreed that the highest and best use of the property was for a bank building. However, Preiss opined that the zoning board would not have granted the bulk variance needed for a 10,000 sq. ft. bank building because a smaller building could have been constructed. Preiss relied, in part, on a conceptual site plan prepared by Saddle River's engineer, Martin K. Spence, showing a 3,312 sq. ft. bank building meeting the existing lot coverage requirement.*fn4 Relying in part on Preiss' planning report, Saddle River's appraiser, Hugh A. McGuire, Jr., testified that the property had a market value of $1,325,000.

On November 3, 2010, the jury returned a verdict in favor of defendant in the amount of $5,250,000. On January 7, 2011, Judge Polifroni denied Saddle River's request for a new trial, issued an oral opinion, and entered an order for final judgment. Thereafter, Saddle River appealed and defendant cross-appealed.

II.

On appeal, Saddle River contends that the judge wrongly denied its motion for a new trial. As at the time of its motion, Saddle River's primary contention is that the judge erred by not determining, prior to the commencement of trial, whether there was a "reasonable probability" that the local zoning board would have approved a variance from the existing lot coverage restriction. Saddle River argues that the judge did not adequately "serve as a 'gate-keeper' and determine, in advance of the trial, as an issue of law, if there exist[ed] a 'reasonable probability' that all essential statutory criteria required to approve a 'bulk' variance under N.J.S.A. 40:55D-70c*fn5

ha[d] been established by competent evidence." Thus, Saddle River contends that the judge "improperly and prejudicially allowed [defendant's experts] to testify on issues of law before the jury and permitted the jury to decide those issues of law as a matter of witness credibility."

We address the governing legal principles regarding new trial motions and condemnation actions. Generally speaking, granting or denying a motion for a new trial rests with the sound discretion of the trial court and should only be granted if, "'having given due regard to the opportunity of the jury to pass upon the credibility of the witnesses, it clearly and convincingly appears that there was a miscarriage of justice under the law.'" Risko v. Thompson Muller Auto. Grp., Inc., 206 N.J. 506, 521 (2011) (quoting R. 4:49-1(a)). "A jury verdict is entitled to considerable deference and 'should not be overthrown except upon the basis of a carefully reasoned and factually supported (and articulated) determination, after canvassing the record and weighing the evidence, that the continued viability of the judgment would constitute a manifest denial of justice.'" Ibid. (quoting Baxter v. Fairmont Food Co., 74 N.J. 588, 597-98 (1977)). Furthermore, trial courts cannot substitute their own judgment merely because they would have reached a different conclusion. Dolson v. Anastasia, 55 N.J. 2, 6 (1969).

We apply to the new trial motion the same review standard that the trial judge applied, i.e., "whether there was a miscarriage of justice under the law." Risko, supra, 206 N.J. at 522 (citing Bender v. Adelson, 187 N.J. 411, 435 (2006)). At the same time, we give "'due deference' to the trial court's 'feel of the case.'" Ibid. (quoting Jastram v. Kruse, 197 N.J. 216, 230 (2008)).

Pursuant to the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50, to take private property, the State must pay the property owner "just compensation." Caoili, supra, 135 N.J. at 260 (citing N.J. Const. art. I, ¶ 20). "Just compensation" means "'the fair market value of the property as of the date of the taking, determined by what a willing buyer and a willing seller would agree to, neither being under any compulsion to act.'" Ibid. (quoting State v. Silver, 92 N.J. 507, 513 (1983)). In other words, it is the amount that "'knowledgeable parties freely negotiating for its sale under normal market conditions based on all surrounding circumstances at the time of the taking.'" Ibid. (quoting Silver, supra, 92 N.J. at 514).

Furthermore, the property owner "shall receive the fair market value of the land for any use for which it has a commercial value in the immediate present or in reasonable anticipation in the near future." State v. Gorga, 26 N.J. 113, 116 (1958). Thus, the property's "highest and best use" is "most relevant in ascertaining fair market value," and any applicable zoning ...


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