October 10, 2012
STATE OF NEW JERSEY, BY THE COMMISSIONER OF TRANSPORTATION, PLAINTIFF-RESPONDENT,
ST. MARY'S CHURCH GLOUCESTER, A NEW JERSEY RELIGIOUS CORPORATION; THE DIOCESE OF CAMDEN, NEW JERSEY, A NEW JERSEY RELIGIOUS CORPORATION, TRUSTEE, DEFENDANTS-APPELLANTS, AND BOROUGH OF BELLMAWR, IN THE COUNTY OF CAMDEN, A MUNICIPAL CORPORATION OF NEW JERSEY, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3076-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 11, 2012
Before Judges Messano and Lihotz.
Defendants, St. Mary's Church Gloucester and the Diocese of Camden, New Jersey (collectively St. Mary's), appeal from the Law Division's June 23, 2011 order for final judgment in favor of plaintiff, State of New Jersey by the Commissioner of Transportation (the State), authorizing condemnation by eminent domain of defendants' property and appointing commissioners.*fn1
The judge subsequently stayed the judgment pending this appeal.
N.J.S.A. 20:3-6 provides in relevant part:
Whenever any condemnor shall have determined to acquire property pursuant to law, . . . but cannot acquire title thereto or possession thereof by agreement with a prospective condemnee, . . . the condemnation of such property and the compensation to be paid therefore . . . shall be governed . . . 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 . . . 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. Prior to such offer the taking agency shall appraise said property and the owner shall be given an opportunity to accompany the appraiser during inspection of the property. . . . In no event shall such offer be less than the taking agency's approved appraisal of the fair market value of such property. [(Emphasis added).]
On appeal, defendants argue that the State failed to fulfill its statutory obligation prior to filing the condemnation complaint. In particular, St. Mary's argues that the motion judge erred by concluding the State did not have to disclose during pre-litigation negotiations a "review appraisal" it had obtained. Additionally, St. Mary's contends that the judge "erred in not addressing" other claims made in its motion to dismiss, specifically: the State did not engage in bona fide negotiations because it failed to provide specific plans and information and because its offer was based on a "stale appraisal"; the State failed to address claims for potential damages caused by a permanent easement that was part of the taking; and the State failed to make a "bona fide offer" that valued all the interests acquired by the taking. We have considered these arguments in light of the record and applicable legal standards. We affirm.
St. Mary's owns certain property in the Borough of Bellmawr (the property) upon which it has operated, for more than fifty years, one of the larger open-air cemeteries in the Diocese of Camden. The State sought to acquire certain interests in the property as part of the Route 295 Direct Connection project (the project) designed to improve various roadways in the area. On May 20, 2008, the State offered $1.856 million as just compensation for the proposed taking.
The offer was expressly based upon an appraisal report prepared by Anthony S. Graziano (the Graziano report) that was served upon St. Mary's with the State's offer. The Graziano report was prepared on April 3, 2007, with an "effective date" of March 15, 2007. At the same time, the State served a second appraisal it had commissioned from Stephen D. Dinklage (the Dinklage report). The Dinklage report was dated February 5, 2007 and valued the property to be taken at $3.45 million as of January 5, 2007.
St. Mary's responded by letter on June 11, 2008 posing six specific questions and requesting the production of documents in seventeen categories. St. Mary's noted that the State's offer "was made 14 months" after the effective date of the Graziano report, which, by its terms, "include[d] revisions and modifications as per an [a]ddendum [m]emo dated February 4, 2008." St. Mary's requested copies of the addendum memo. It also "requested production of "[a]ll [a]ppraisal [r]eports obtained by the State" and "[a]ll instructions provided by [the State] to its [a]ppraisers . . . ."
The State answered by letter dated June 17, advising that it was "looking into answering the questions . . . posed, as well as supplying . . . all legally permissible information." In a July 15 follow-up letter, St. Mary's posed two additional questions regarding: 1) demolition of an existing structure as part of the taking and the State's commitment to replace it; and
2) a permanent access easement that was part of the taking. On August 14, the State responded to these two questions. On February 20, 2009, St. Mary's rejected the State's offer and made a counter-offer of $19,418,800 as just compensation for the taking.
Over the next ten months, various correspondence and information was exchanged by the parties, although the State did not provide several documents requested by St. Mary's, never furnished the addendum memo and did not provide answers to every question originally posed. In May 2009, the State forwarded a noise study and, in September, it served a vibration study. In the letter to defense counsel that accompanied the vibration study, the State noted:
You have indicated that your client may wish to obtain reports in response to those already provided. Please advise as to your client's determination as [the State] wishes to move forward with negotiations.
St. Mary's continued to seek further plans and studies from the State, asking, for example, on September 28, 2009, that the State provide "soil borings/testing" it was performing on property "adjacent to the Cemetery." In October, in response to defense counsel's request as to the "status of this matter," the State advised that it was forwarding some plans requested by St. Mary's. Additionally, the State noted: "We are awaiting any final offer of settlement on your part now that the noise monitoring and vibration studies have been made." St. Mary's made no counter-offer.
On December 2, 2009, the State's program manager, Robert M. Cunningham, advised that the State was "honoring [St. Mary's] request to submit this case for condemnation because [St. Mary's] could not state a demand after receiving the noise and vibration studies." Cunningham further noted:
[B]ona fide negotiations have taken place and . . . an agreement acceptable to both parties cannot be reached at this time. If you have any reason to believe that settlement discussions may prove to be useful, please contact me immediately."
On December 7, St. Mary's clarified that it had "never requested the State . . . submit this matter for condemnation" and "d[id] not want the State to condemn its property." St. Mary's counsel indicated that, without design plans previously requested, his "client [could not] assess the full impact of the taking on the cemetery."
On June 16, 2010, the State filed a Verified Complaint and Order to Show Cause seeking to condemn the property. On July 20, the State filed its declaration of taking and deposited $1.865 million with the Superior Court.
Defendants asserted that the State failed to engage in bona fide negotiations and moved to dismiss the complaint. After oral argument on the motion, Judge Robert G. Millenky ordered the State to produce the February 4, 2008 addendum memo (the addendum memo) referenced in the Graziano report and adjourned the matter for a further hearing.
The Deputy Attorney General (DAG) representing the State served the addendum memo on December 16, 2010. The addendum memos was actually a letter from Graziano to another appraiser, Allen Black, and was, by its terms, "[i]n response to [Black's] memos dated January 24, 2008." The addendum memo included revisions to pages in the original Graziano report and otherwise addressed issues raised by Black. In his cover letter to defense counsel, the DAG explained that the Graziano report actually served with the complaint contained these revised pages.
On January 12, 2011, the parties again appeared before Judge Millenky for further argument on St. Mary's motion to dismiss. The judge inquired whether Black's memo, which the DAG referred to as a "review appraisal," should have been disclosed to St. Mary's. The DAG responded that the review appraisal was used in the State's internal deliberative process but was not an appraisal required to be furnished to St Mary's. St. Mary's contended otherwise, noting the disparity between the Graziano and Dinklage reports, and arguing that a condemnee was entitled to "the benefit of the analysis that was done by another appraiser hired by the State to . . . reconcile those two . . . methodologies."
In a comprehensive oral opinion, Judge Millenky set forth in painstaking detail the salient procedural history including the correspondence between the parties and the documents provided by the State. He thereafter thoroughly reviewed relevant precedent as well as the contents of the addendum memo. The judge concluded:
[B]y virtue of a very lengthy . . . addendum memo[,] it is clear that the review [appraisal] is not a document that is related to the actual manner of calculation.
Rather it is something that asks questions as to how the appraiser formulated his document and asks in essence the appraiser to . . . disclose information that forms the basis of the calculation . . . .
Referencing State v. Town of Morristown, 129 N.J. 279 (1992), the judge further stated "that absent a court order[,] a condemnor need not disclose information unrelated to the manner of calculating the offer . . . ." Judge Millenky concluded that the review appraisal was "not a document that was considered when calculating the offer. It [was] not something that . . . must be disclosed to the property owner."
However, the judge found the addendum memo "f[ell] within a different category" because it was "the embodiment of information that is the result of the . . . review process and . . . formed the basis of [the] calculations." Some of what was in the addendum memo was "incorporated into" the Graziano report, but some information was not. The judge succinctly posed the question: "[D]oes the failure to provide the addendum memo in the first instance require this Court to dismiss the complaint . . . [?]"
Ultimately, Judge Millenky concluded that, even though the addendum memo was not released to St. Mary's prior to the complaint being filed, the State displayed "a good faith process of disclosure." Although St. Mary's had requested the addendum memo in its first response to the State's offer, the judge observed that no further request was ever made. Instead, "the parties went on to focus on a number of other issues . . . and . . . there is only limited information contained within [the addendum memo] which was not in the final analysis incorporated within the [Graziano report]." The judge viewed the failure by the State to furnish the addendum memo as "some de minimus infraction . . . adequately remedied" by his prior order requiring disclosure. The judge also concluded that the documentary record demonstrated the State had engaged in "bona fide negotiations."
Judge Millenky decided to "allow time before the appointment of commissioners for the negotiation process . . . to continue" "based upon this newly provided information." He denied St. Mary's motion to dismiss the complaint but provided an additional period of ninety days for negotiations to continue. He also ordered the State to supply the review appraisal. On March 24, 2011, the judge entered an order reflecting his decision.
On April 7, St. Mary's moved for reconsideration based upon receipt of the review appraisal done by Black. In essence, St. Mary's argued that Black certified as to the "fair market value" of the taking, an amount equal to the Graziano report's valuation, and, pursuant to the Uniform Standards of Professional Appraisal Practice (USPAP), the review appraisal was actually a third appraisal. The State filed opposition that included a certification from Black in which he claimed the review appraisal was in accordance with his assignment "to develop my opinion whether the opinion of value articulated in the Graziano [report] was reasonable and well supported." Black contended that the document he authored was not an appraisal under USPAP standards.
Judge Millenky once again comprehensively addressed the issues in an oral opinion. He concluded that the review appraisal "did not . . . offer something [new] related to the manner in which the offer was calculated . . . . Rather, . . . the [review appraisal] did . . . offer . . . confirmation that the manner in which the offer had been calculated was valid . . . ." The judge denied the motion for reconsideration. The record does not contain an order reflecting that decision, however, on June 23, 2011, Judge Millenky entered an order for final judgment that is the subject of our review.
St. Mary's first contends that the judge erred in concluding the State was not required to provide Black's review appraisal before filing the condemnation complaint, and, therefore, the complaint should have been dismissed because the State failed to engage in bona fide pre-litigation negotiations. We disagree and affirm substantially for the reasons expressed by Judge Millenky. R. 2:11-3(e)(1)(A).
In Morristown, supra, 129 N.J. at 285, the Court explained that "[o]ne of the primary purposes of [N.J.S.A. 20:3-6] is to encourage acquisition without judicial involvement." Thus, "[t]he bona fide negotiation stage was created to precede judicial involvement in the hope of avoiding it entirely." Ibid. "If the State does not conduct the requisite negotiations, the condemnation complaint will be dismissed." State by Comm'r of Transp. v. Carroll, 123 N.J. 308, 316 (1991).
The statute "provides a clear description of the condemnor's disclosure obligation: in addition to the terms of the offer, the condemnor must provide 'a reasonable disclosure of the manner in which [the offer] has been calculated.'" Morristown, supra, 129 N.J. at 286 (quoting N.J.S.A. 20:3-6). While the "disclosure obligation is broad," it is not without limits. Id. at 287. N.J.S.A. 20:3-6 "requires a reasonable disclosure only of information that relates to the manner in which the offer was calculated." Ibid.
"[T]he condemnor must identify any appraisals used and disclose the valuation methodology it employed." Town of Kearny v. Discount City of Old Bridge, Inc., 205 N.J. 386, 409 (2011) (citing Carroll, supra, 123 N.J. at 323). "The reasonableness of pre-negotiation disclosure centers on the adequacy of the appraisal information; it must permit a reasonable, average property owner to conduct informed and intelligent negotiations." Carroll, supra, 123 N.J. at 321. We have consistently held that "reasonable disclosure" requires disclosure of all appraisals of the subject property obtained by the condemnor. See, e.g., State v. Testa, 247 N.J. Super. 335, 338 (App. Div. 1991); Cnty. of Morris v. 8 Court St. Ltd., 223 N.J. Super. 35, 37 (App. Div.), certif. denied, 111 N.J. 572 (1988). Appraisals of neighboring properties, however, need not be disclosed during the negotiation period unless the condemnor "considered those appraisals in calculating the amount it would offer to the condemnee." Morristown, supra, 129 N.J. at 289 (emphasis added).
In this case, Judge Millenky concluded that Black's review appraisal was part of a deliberative process employed by the State to confirm the validity of the Graziano report. The review appraisal added no new information that the State in turn used to "calculate[e] the amount if would offer" to St. Mary's. Ibid. Indeed, the Graziano report fully set forth the method utilized in making the pre-litigation offer and incorporated comments and suggestions made by Black before it was served upon St. Mary's. Additionally, St. Mary's had the Dinklage report which, utilizing a different method of calculation, set the fair value of the taking at a far greater amount. Together, these two appraisals were sufficient to "permit a reasonable, average property owner to conduct informed and intelligent negotiations." Carroll, supra, 123 N.J. at 321. We fully agree with Judge Millenky that the review appraisal was not subject to pre-litigation disclosure, and the failure by the State to serve it before filing the complaint was not a failure to engage in pre-litigation "bona fide negotiations." N.J.S.A. 20:3-6.
We briefly consider the remaining arguments. St. Mary's contends that Judge Millenky failed to consider that the State did not engage in bona fide negotiations because: 1) the State never responded to St. Mary's request for specific plans and information regarding the duration of an easement; and, 2) because the Graziano report was "stale."
Our review of the record, however, clearly indicates Judge Millenky reviewed all the communication between the State and St. Mary's that occurred between the State's offer and the filing of the complaint. During the second oral argument on St. Mary's motion to dismiss, Judge Millenky concluded the "process [that] took place" demonstrated "the State was intent on providing and involving itself in bona fide negotiations and it did so." We agree with the judge's conclusion.
Although Judge Millenky did not specifically address the alleged "staleness" of the Graziano report, St. Mary's cites no reported case that requires the date of the condemnor's appraisal report be within a certain period of time preceding the offer. The issue strikes as being relevant to the proofs adduced at the hearing before the commissioners, N.J.S.A. 20:3-12, and at trial, see R. 4:73-11 (permitting an exchange of expert reports, "including but not limited to appraisers").
St. Mary's also argues that Judge Millenky failed to address its claims for damages caused by a portion of the State's taking, specifically, a permanent access easement to permit maintenance of improvements. While Judge Millenky may not have specifically addressed this argument, it is clear from the record that the State provided information to St. Mary's regarding the nature and scope of the access easement. The record contains a certification from the State's project manager that indicated he met with St. Mary's and members of the public on November 5, 2008, and advised that the easement was going to be used "occasional[ly]" and the State would not cause any damage to the roadways. St. Mary's may contend otherwise.
Regardless, the point is that the State did respond to St. Mary's requests for information regarding the easement.
Lastly, part of the taking included a temporary "Diversionary Road Easement," the purpose of which was to provide access during construction. The Graziano report valued the easement based upon a projected thirty-six-month period of use. St. Mary's argues that Judge Millenky failed to address its contention that the State never made a valid pre-litigation offer because the temporary easement, by its terms, could be "extended simply by written notice."
Unlike the cases cited by St. Mary's, this was not a permanent easement. Under such circumstances, St. Mary's would be entitled to the full value of the land taken without regard to the State's promise of its intended use for the property. See, e.g., South Orange v. Alden Corp., 71 N.J. 362, 366 (1976) (quoting Ridgewood v. Sreel Inv. Corp., 28 N.J. 121, 130 (1958) ("'To admit promissory representations of the condemnor's intention might well deprive a landowner of damages to which he is justly entitled on the mere expression of an intention to do something which might never be done.'").
Here, the taking was clearly a "temporary right" "for a duration of 36 months." The easement further provided that if the "temporary right is extended, payment will be made semi- annually during the extended term . . . based upon the rental value of the area . . . ." The Graziano report specifically valued the easement right for the duration set forth in the taking. This was appropriate. See State by Comm'r of Transp. v. Sun Oil Co., 160 N.J. Super. 513, 527 (Law Div. 1978) (noting the appropriateness of compensation for a temporary easement "taken for highway purposes," the payment "on a periodic basis" of the rental value as a measure of damages and the possibility of "further relief" to the condemnee "for subsequent periods"). The State did not fail to make an offer that valued the full extent of its taking simply because St. Mary's contented that the easement might be used for longer than thirty-six months.