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Howmichael Company, A New Jersey Corporation, and v. the Township of Bernards

August 24, 2012

HOWMICHAEL COMPANY, A NEW JERSEY CORPORATION, AND
ONE TWELVE CORPORATION, A NEW JERSEY CORPORATION, PLAINTIFFS-APPELLANTS,
v.
THE TOWNSHIP OF BERNARDS, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, AND THE TOWNSHIP OF BERNARDS BOARD OF ADJUSTMENT, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-0930-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 14, 2012

Before Judges Sapp-Peterson and Ostrer.

Plaintiffs, Howmichael Company and One Twelve Corporation (collectively "plaintiffs"), appeal from two orders issued by Judge Fred H. Kumpf: (1) the June 10, 2011 order granting summary judgment to defendants, the Township of Bernards (Township) and the Township Board of Adjustment (Board), dismissing plaintiffs' inverse condemnation claim (count two) and denying plaintiffs' cross-motion for summary judgment; and (2) the August 17, 2011 order dismissing plaintiffs' action in lieu of prerogative writs (count one).

I.

Plaintiffs own two properties located on the northerly side of Somerville Road in the Township that were part of thirty-four acres of land purchased by Howmichael on January 16, 1963, by its principal, David Mandelbaum, a real estate investor and attorney. One month prior to Howmichael's acquisition, the State had initiated efforts to acquire the property. Within weeks after purchasing the property, David Mandelbaum corresponded with the State inquiring what, if any, impact construction of Interstate Route 78 would have upon the property. He also indicated in the letter he did not have any knowledge of the proposed highway construction before contracting to purchase the property.

Negotiations with the State continued for the next two years. In the interim, Howmichael transferred 8.79 acres of the property to One Twelve on February 1, 1965. In July 1965, the State purchased 7.811 acres from plaintiffs and the following year, on August 23, 1966, the State purchased an additional 0.043 acres. The combined acreage purchased by the State left plaintiffs with two contiguous lots (Lot 1, owned by Howmichael, and Lot 2, owned by One Twelve) consisting of just over one acre of land, situated in an area surrounded by public rights-of-way. Both lots were also located in the R-1 Residential Zone.

In 1998, plaintiffs approached the Township regarding whether the Township was interested in purchasing the two lots. The Township was not interested, but suggested plaintiffs consider donating the property to the Township.

On March 29, 2006, plaintiffs filed an application with the Board for six variances to construct a 4000-square-foot, single-family house on the two lots: (1) a variance for a pre-existing lot area of 1.037 acres, whereas the minimum required lot area in the R-1 Residential Zone is three acres*fn1 ; (2) a variance for a pre-existing lot width of 256.5 feet and a proposed lot width of 216.5 feet, whereas the minimum required lot widths for a corner lot are 312.5 feet and 250 feet; (3) three variances for proposed front-yard setbacks on the west, east, and south sides of the property of 73.8 feet, 74.9 feet, and 39.2 feet, respectively, whereas the minimum required front-yard setback is 100 feet; and (4) a variance for an improvable lot area of zero square feet, whereas the minimum required improvable lot area is 25,000 square feet.*fn2

The Board conducted hearings after which, by a vote of four to two, it denied the application, citing concerns for the size of the home, the proximity of the home to the roadway, the mountainous and rocky terrain of the property, and the blasting required in order to build the house. Plaintiffs initiated an action in lieu of prerogative writs.

Judge Anthony F. Picheca, Jr., conducted a plenary hearing. At its conclusion, he found that the "record currently before [him] is not completely adequate as to the issues that should be addressed for the conclusion to have been made that was made denying this application[.]" He remanded the matter to the Board for further proceedings. He specifically directed the Board to address whether plaintiffs' hardship was self-created, thereby precluding satisfaction of the "positive criteria" for a c(1) variance, N.J.S.A. 40:55D-70c(1), under the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163.

During the remand proceedings, the Board considered testimony from David Schley, the Board planner and engineer; Craig Villa, a professional engineer; Peter Streletz, a Pennsylvania-licensed builder; Michael Mandelbaum, Howmichael's vice-president; David Mandelbaum; Adrian Humbert, a professional planner; and Eileen Napolitano, a resident of Somerville Road. The Board also considered numerous exhibits, including letters dated between 1963 and 1965 regarding the purchase of the land by the State and eleven additional letters dated from December 1962 through August 16, 1966. Upon completion of the proceedings, the Board, by a vote of seven to zero, denied the application. In its resolution memorializing its findings, the Board found:

Applicants have failed to introduce any testimonial or documentary evidence to support their contention that they were, in essence, forced by the State to be "stuck" with the subject lots. The only witness offered by the Applicants as possibly possessing knowledge of any facts relevant to this issue, David Mandelbaum, testified that he had no independent recollection of the facts and circumstances surrounding the subject transactions, which took place during the 1960[]s. Moreover, none of the documentary evidence introduced by the Applicants or otherwise submitted to the Board indicated, let alone demonstrated, that the Applicants had no choice but to be "stuck" with the subject undersized lots. In fact, certain of the documentary evidence indicated that the converse was true, that is, that the Applicants did have at least some control over whether the State would acquire the subject lots along with the balance of the property. Board members and the public were deprived [of] the opportunity to present such documentary evidence to David Mandelbaum for the purpose of refreshing his recollection of events.

. . . [T]he applicable provisions of the Eminent Domain Act, and the apparent practice and procedure by the State Highway Department in pre-condemnation proceedings, further suggest that the Applicants did have the ability, if not the right, to require that the State Highway Department acquire the subject grossly undersized lots along with the balance of the property acquired by it.

The Board also found that the "Applicants were sophisticated real estate investors," which the Board reasoned belied their contention that "they were without the ability to negotiate to have the State acquire either or both of the subject lots along with the balance of the property." The Board specifically noted the documentary evidence revealing that David Mandelbaum had extensive negotiations with the Department of Transportation, as result of which he "successfully negotiated a higher fair market value for the property and agreed to a settlement rather than proceeding through condemnation, a route he advised the Department of Transportation he would pursue if the Department did not accept his counter[-]demand."

This evidence led the Board to conclude that "David Mandelbaum had bargaining power at least equal to that of the Department." Further, the Board considered the fact that as a result of the construction of Route 78, Old Somerville Road was realigned, resulting in Lots 1 and 2 being re-zoned from a residential zone to a commercial zone.*fn3 The Board inferred that it was "likely that the Applicants viewed the subject property as being valuable to them for future development because of its[] designation as commercial property and its[] proximity to Route 78." The Board viewed this evidence as "further suggest[ing] the likelihood that the Applicants consciously chose to retain the subject undersized lots rather than have the State acquire them."

Additionally, the Board noted that documents obtained pursuant to an Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13, request, disclosed that other property owners impacted by the construction of Route 78 were compensated for their remaining tracts of land in "partial acquisition scenarios." As such, the Board found it "implausible that the Department of Transportation would have purchased Lot 3, the approximately 20,000 square foot tip of the remainder parcel, yet left the two remaining undersized lots to the Applicants, unless the Applicants consciously chose to retain these lots."

Finally, the Board noted that it was the "Applicants" who refused to subject David Mandelbaum to continued questioning. As a result, the Board drew an adverse inference that his "continued testimony on cross-examination would contradict the ...


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