Newark Property Owner Snuffed on Damage Claim After Dismissal of Taking
A New Jersey appellate court recently decided the sequel to a failed condemnation action from 2012 regarding property in Newark. The property in question was commercial property owned in condominium form by New United Corp. and the Essex County Improvement Authority (“ECIA”), containing five buildings and a parking garage. Due to prior disputes between the parties which resulted in litigation, a receiver was appointed to oversee the condominium association, during which time the Essex County Vocational Schools Board of Education (“Board”) became interested in using the premises as a school. The Board unsuccessfully utilized its eminent domain powers in the prior 2012 opinion, where the Appellate Division concluded that the Board had failed to comply with its obligations to conduct bona fide negotiations with the property owner prior to instituting condemnation. The matter was thus remanded and the present appeal stemmed from the trial court’s disposition of the matter on remand.
After the remand, the Board was ordered to discharge and dismiss the prior taking, its Declaration of Taking, and the Notice of Lis Pendens it had filed. New United subsequently sought damages and expenses resulting from the failed condemnation, as is permitted by New Jersey’s Eminent Domain Act. the damages included a claim of nearly $40,000,000 representing New United’s claim for rent and restoration of the property, several hundreds of thousands of dollars representing alleged remediation costs for fire code violations, and nearly $75,000,000 representing alleged delay damages for the completion of a development project by New United. New United also sought damages in the form of mortgage expenses, and nearly $600,000 in attorneys fees and costs.
The Board opposed these claims by New United, and the trial court thereafter permitted discovery and held an evidentiary hearing on the issues in late 2012. The trial court essentially denied all of New United’s claims, except for the claim for attorneys’ fees and expenses, which was granted in part. This latest appeal followed.
In the current appeal, the court recognized the mandatory nature of an award of fees and costs incurred by a condemnee where the condemnor abandons a taking. N.J.S.A 20:3-24 and 26. The appellate panel affirmed the trial court’s decision denying New United’s claim for monies expended to retrofit the buildings to correct fire code violations. With respect to New United’s claim for damages to the largest building, which claim exceeded $37 million, New United had offered evidence of damage caused, in part, by a series of burglaries that occurred during the Board of Education’s ownership, and also by the alleged use of the Essex County Sheriff’s office of the building for training exercises which caused physical damage. Here, the appellate panel noted the obligation of the condemning authority to act prudently while occupying condemned property, and to avoid waste, mismanagement and self-dealing. Failure to do so, during the condemnor’s temporary ownership, could result in liability for failing to restore the property to the condition it had at the time of the original taking. Because there was insufficient evidence produced at trial as to these issues, the appellate court remanded the matter for further findings.
As to New United’s claim that it was entitled to approximately $74 million in lost development opportunities due to the abandoned taking, the appellate panel found these items speculative, non-compensable, and “pie-in-the sky”. Accordingly, the trial court’s denial of these damages was affirmed, as was the claim by New United to stay the indebtedness it had to a lender on a mortgage and to discharge that mortgage.
Finally, with respect to the counsel fees and expense award by the trial court – totaling nearly $200,000 — the appellate court concluded that the trial court had improperly excluded fees for time spent after the initial reversal and remand, and questioned the hourly rate approved by the trial court, so the issue of counsel fees and expenses was remanded so that the trial court could “reevaluate the entire fee and expense award” and would be required to include any fees and expenses “reasonably incurred even after the judgment of condemnation was reversed”. Slip. Op. at 35-36.
As is the case with many appellate opinions involving remands, it remains to be seen whether the ultimate outcome will be the subject of a written or reported opinion, but we’ll keep an eye on this one for any further updates.
