THE BOROUGH OF FORT LEE v. HUDSON TERRACE REALTY MANAGEMENT CORPORATION, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0334-04T20334-04T2

THE BOROUGH OF FORT LEE,

Plaintiff-Respondent,

v.

HUDSON TERRACE REALTY

MANAGEMENT CORPORATION, STATE

OF NEW JERSEY, CRUSADER

SERVICING CORPORATION, BERGEN

COUNTY UTILITIES AUTHORITY,

Defendants,

and

LG INTERNATIONAL (AMERICA),

INC.,

Defendant-Appellant.

______________________________

 

Argued October 24, 2005 - Decided

Before Judges Alley and Fisher.

On appeal from the Superior Court of New Jersey Law Division, Bergen County, BER-4208-04.

Paul P. Josephson argued the cause for appellant (Hill Wallack, attorneys; Mr. Josephson and Todd D. Greene, on the brief).

John J. Curley argued the cause for respondent (Mr. Curley, of counsel; Jacqueline Middleton, on the brief).

PER CURIAM

This appeal pertains to the condemnation of Block 6101, Lots 13, 14, 15 and 20 (the property), also known as 173/175 Bridge Plaza North, in the Borough of Fort Lee. The property contained an unfinished office building and was encumbered by two mortgages totaling $55 million. The Borough (plaintiff) made a written offer to the record title owner, Hudson Terrace Realty Management Corporation (Hudson Terrace), to purchase the property for $600,000 based on its appraisal. LG International (America), Inc. (LGIA), the lienholder, attempted to participate in the negotiations. After plaintiff refused to negotiate with LGIA because it was not the record title owner of the property, LGIA advised plaintiff that it would be obtaining title to the property in order to participate in the negotiations. Before the transaction was completed, however, plaintiff filed its complaint in condemnation, order to show cause, and declaration of taking.

The Law Division entered an order appointing commissioners for the condemnation hearing and denied LGIA's cross-motion to dismiss the complaint for failure to engage in bona fide negotiations pursuant to N.J.S.A. 20:3-6, which LGIA appeals. We affirm, concluding that the Law Division correctly determined that plaintiff had no obligation to engage in bona fide negotiations with LGIA as the lienholder, and that the negotiations with the record title owner prior to the filing of the complaint were made in good faith, and we do so substantially for the reasons stated by the trial judge and for the reasons set forth below.

The record can be thus summarized:

In February 1989, 175 North Marginal Road Associates (North Marginal) was the owner of the property. On February 14, 1989, North Marginal submitted an application for a 38,000 square foot office building on the property. The plan was approved in July 1989, and construction permits for a seven story building were issued in May 1990. The project was not completed because the market deteriorated and the developer went bankrupt.

By deed dated June 29, 1992, Hudson Terrace acquired title to the property from North Marginal for $2,700,000. Also in June 1992, Hudson Terrace applied for and received construction permits for the property, but the work was never started.

On September 23, 1992, Hudson Terrace executed a mortgage and security agreement with LGIA in the amount of $10,237,500. Section 1.12 of the agreement provides:

The Mortgagor, immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Premises or any part thereof, will notify the Mortgagee of the pendency of such proceedings. The Mortgagee may participate in any such proceedings and the Mortgagor from time to time will deliver to the Mortgagee all instruments requested by it to permit such participation. In the event of such condemnation proceedings, the award or compensation payable is hereby assigned to and shall be paid to the Mortgagee. The Mortgagee shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid. In any such condemnation proceedings, the Mortgagee may be represented by counsel selected by the Mortgagee. The proceeds of any award or compensation so received shall, at the option of the Mortgagee, either be applied toward the payment of the Indebtedness, notwithstanding the fact that the Indebtedness may not then be due and payable, or to the restoration of the Improvements. . . . The Mortgagor, upon request by the Mortgagee, shall make, execute and deliver any and all instruments requested for the purpose of confirming the assignment of the aforesaid awards and compensation to the Mortgagee free and clear of any liens, charges or encumbrances of any kind or nature whatsoever. The Mortgagee shall not be limited to the interest paid on the proceeds of any award or compensation, but shall be entitled to the payment by the Mortgagor of interest at the applicable rate provided for in the Note.

On March 15, 1993, Hudson Terrace executed a second mortgage and security agreement with LGIA in the amount of $45,000,000. This agreement contains the same clause quoted above, requiring notice of any condemnation proceedings and assignment of compensation to LGIA.

In 1996, Hudson Terrace applied for a new building permit for a nine story office building but the permit was denied. Hudson Terrace appealed the denial and the Board of Adjustment approved a revised site plan for a 63,000 square foot office building in June 1996. No building permits were issued. Plaintiff claims that only the July 1989 site plan remains in effect and the June 1996 approvals lapsed because of inactivity. At the time of the hearing, the property was 27,693 square feet or .636 acres, and was improved with an unfinished six story office building.

On February 7, 2002, plaintiff adopted a resolution to investigate two areas in Fort Lee to determine if the areas met "the criteria to be declared an area in need of redevelopment as defined in the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq." Area 1 included the subject property.

On September 26, 2002, plaintiff adopted a resolution declaring the two areas investigated as "areas in need of redevelopment pursuant to N.J.S.A. 40A:12-6." The resolution directed the Fort Lee Planning Board to prepare a development plan for the areas.

Plaintiff then adopted an ordinance on March 27, 2003, "establishing a redevelopment area and adopting a redevelopment plan for Block 6101, Lots 13, 14, 15 and 20 . . . and amending and supplementing the zoning code so as to establish the D-1 redevelopment overlay district."

In September 2003, plaintiff issued a request for proposals (RFP), soliciting bids for a redeveloper. The RFP suggested completion of the unfinished structure and asked for a statement of intent by the developer to use the building as its corporate headquarters. Com Office Developers, LLC (COM), submitted the only bid. On November 13, 2003, plaintiff adopted a resolution to designate COM as the redeveloper for the project.

On behalf of COM, Hannoch Appraisal Company notified Hudson Terrace, by letter dated December 12, 2003, of its intention to inspect the property on December 19, 2003. The letter was returned to Hannoch by the post office as undeliverable. Hannoch inspected the property on December 19, 2003. No one appeared on behalf of Hudson Terrace.

On January 4, 2004, plaintiff authorized the execution of COM's redevelopment agreement. By letter dated January 14, 2004, COM contacted William Kim, counsel for LGIA, in regard to the buyout of the mortgages on the property, but made no offer. COM also contacted in-house counsel for LGIA, Sean Macpherson, who had informed COM on January 15, 2004, that it was in discussions with Hudson Terrace to buy out the two existing mortgages.

On January 15, 2004, plaintiff adopted a resolution to continue the designation of COM as the redeveloper. Also by letter dated January 15, 2004, COM confirmed its conversation with Frank Jablonski, counsel for Hudson Terrace, wherein Jablonski refused to meet with COM to negotiate a voluntary acquisition of the property. The letter further confirmed Jablonski's representation that Hudson Terrace had an agreement to sell the property to a third party, Cafasso, and that Jablonski had refused to disclose how the outstanding mortgages on the property would be handled or provide the name of Cafasso's attorney.

Macpherson, in a January 16, 2004 letter, told LGIA's in-house counsel, COM, that LGIA would not suggest a price for the buy-out of the two mortgages but would be open to any reasonable offers.

Plaintiff executed the agreement with COM to redevelop a blighted area in Fort Lee which included the subject property on January 22, 2004. Thereafter, Louis Flora of the office of Dennis J. Oury, plaintiff's special redevelopment counsel, confirmed by letter dated January 29, 2004, that Jablonski represented Hudson Terrace, owner of the property. This letter repeated that notice of the intent to inspect for appraisal purposes had been sent to Hudson Terrace and that the owner was free to attend the inspection.

Flora then sent Jablonski a letter of January 30, 2004, confirming his agreement to accept service of the Notice of Right of Preliminary Entry pursuant to N.J.S.A. 20:3-16. The letter requested entry for an appraisal inspection on or after February 9, 2004, and invited Hudson Terrace to participate. The property was inspected again on February 9, 2004. No one appeared on behalf of Hudson Terrace.

Plaintiff's appraisal, dated February 25, 2004, valued the subject property at $600,000 as of September 25, 2002, the day before the adoption of the resolution designating the area in need of redevelopment. The appraisal noted severe physical deterioration and structural deficiencies due to physical depreciation, functional obsolescence, and code violations. Using the sales comparison/cost approach, the land was valued at $1,520,000 and the contributory value of improvements was a negative $934,580, leaving the indicated value at $585,420. On February 26, 2004, plaintiff adopted a resolution to accept, approve, and adopt the February 25, 2004 appraisal and set the purchase price to be offered to Hudson Terrace at $600,000.

Plaintiff then made a formal offer to acquire the property for $600,000, the appraised value of the property, in a letter dated February 27, 2004, addressed to David Chang, registered agent for Hudson Terrace. A copy of the appraisal was included with the letter.

On March 4, 2004, Flora confirmed his conversation with Jablonski two days earlier, in which Jablonski agreed to accept service of the offer to acquire--which had been returned as undeliverable--as of March 1, 2004, with the provisions of N.J.S.A. 20:3-6 to start from that date. By letter dated March 2, 2004, however, a new lawyer for Hudson Terrace, Richard Contant, told plaintiff that his firm had just been retained with respect to the February 27, 2004 offer to acquire. This letter notified plaintiff that there had been "one (1) or more recent appraisals of the subject premises and Contracts for the purchase thereof, which place the Fair Market Value in the $3.8 million to $5 million dollar range." The letter further indicated that Contant was waiting for copies of the documentation confirming those values and that Chang intended to obtain his own appraisal of the property.

Flora responded to Contant by letter dated March 5, 2004, and asked for copies of the documentation referenced in the letter within two business days. By letter dated March 9, 2004, Contant asked for time for Hudson Terrace's appraiser to review the documents and requested a meeting to discuss value thereafter. In another March 9, 2004 letter, Flora told Contant that he was still waiting for copies of the documents referred to in the March 2, 2004 letter and requested a meeting on March 11, 2004. The next day, Flora again asked Contant, in a letter dated March 10, 2004, to provide copies of the other appraisals and/or contracts of sale referenced in the earlier letter and suggested adjourning the meeting to March 24, 2004, to allow plaintiff time to review Hudson Terrace's appraisal information that Contant had advised would be available by the end of the next week.

On March 11, 2004, plaintiff adopted an "ordinance for the acquisition of real property and improvements by purchase or by condemnation" of the subject property and authorized negotiations with Hudson Terrace, the record owner of the property for the $600,000 appraised value.

On March 16, 2004, LGIA retained Hill Wallack to represent its interests in the condemnation of the property owned by Hudson Terrace because of the $55 million mortgage.

Contant advised Flora on March 17, 2004, that the appraiser might be unavailable for the March 24, 2004 meeting, but he would not know for sure until the beginning of the week. Flora responded the following day, telling Contant that he would wait for confirmation of the meeting. He again requested copies of the documentation referred to in the March 2, 2004 letter that had still not been provided. Flora certified, however, that on March 22 or 23, 2004, when he called Contant to confirm the March 24, 2004 meeting, Contant stated that he no longer represented Hudson Terrace and would not be attending the meeting.

Paul Josephson, counsel for LGIA, told Oury in a March 23, 2004 letter that LGIA would be acquiring the property from Hudson Terrace and the transfer was expected to be completed by March 26, 2004. Josephson's letter requested an adjournment of the meeting scheduled for March 24, 2004, to allow for the transfer and for LGIA's experts to review the appraisal. According to Josephson, when he and Oury spoke by phone, Oury advised him that the meeting was to be adjourned but that plaintiff did not intend to deal with LGIA because it was not the property owner and that the condemnation complaint would be filed "in the following day or days." Josephson contends that Oury also asked LGIA to waive the statutory period for bona fide negotiations.

In a March 25, 2004 letter, Josephson refused plaintiff's request to waive the statutory period for bona fide negotiations. He repeated LGIA's assertions that it was the real party in interest and that it intended to engage in bona fide negotiations with plaintiff as soon as title was transferred. The letter also alleged that, in light of the $3 million tax assessment and the "preliminary" and "conceptual" cost estimates, the $600,000 offer could not be considered bona fide negotiations. Josephson requested copies of all relevant documents and time for its experts to review same.

Flora responded to Josephson by letter the next day, detailing the previous unsuccessful efforts in negotiating with Hudson Terrace and indicating that the condemnation complaint had been filed the day before, prior to receipt of Josephson's letter, since the fourteen day period had lapsed.

By letter dated March 26, 2004, counsel for COM sent LGIA copies of the structural report and redeveloper's agreement.

LGIA filed a deed on April 2, 2004, recording the transfer of title of the Block 6101, Lot 13 from Hudson Terrace for $7,500,000. The record does not contain copies of deeds transferring title to the other three lots. The following week, in an April 9, 2004 letter, Josephson told plaintiff's counsel, John Curley, that the process of obtaining an appraisal had begun and requested continuing access to the property for that purpose. Flora responded by letter dated April 13, 2004, claiming that LGIA had received plaintiff's appraisal documents from the redeveloper's counsel and plaintiff would grant permission for entry on the land if counsel agreed to certain terms and conditions limiting plaintiff's liability for same. The letter also requested a copy of the deed or document proving LGIA succeeded to the rights of the former owner.

These proceedings began in March 2004, when plaintiff obtained an order to show cause returnable April 30, 2004, as to why an order should not be entered authorizing the condemnation and appointing commissioners and with plaintiff's deposit with the court. The declaration of taking took place on March 29, 2004, and the transfer of title was filed on March 30, 2004. LGIA opposed the application and asserted that it was the real party in interest in the condemnation.

Judge Moses heard argument on the order to show cause and delivered an oral opinion dismissing LGIA's objections on July 27, 2004. The August 5, 2004 order appointed commissioners to determine the value of the property.

We first consider LGIA's contention that plaintiff was obligated to negotiate with it prior to filing the complaint because plaintiff had actual notice of the two recorded mortgages that "far exceeded the value of the property" and gave LGIA "a 100% interest in any offer or award." Plaintiff submits that the Law Division was correct in finding that it had no duty to negotiate with a lienholder based on City of Atlantic City v. Cynwyd Invs., 148 N.J. 55 (1997).

Preliminarily, we note that "[a]n action in condemnation shall be brought in the Superior Court in a summary manner pursuant to R. 4:67." R. 4:73-1. Summary actions typically proceed as this case did, by way of complaint and order to show cause. R. 4:67-2. The hearing is usually held on the return day for the order to show cause in the following manner:

If no objection is made by any party, . . . or the affidavits show palpably that there is no genuine issue as to any material fact, the court may try the action on the pleadings and affidavits, and render final judgment thereon. If any party objects to such a trial and there may be a genuine issue as to a material fact, the court shall hear the evidence as to those matters which may be genuinely in issue, and render final judgment.

[R. 4:67-5.]

The aim of the summary proceeding is to expedite the litigation "by short-cutting procedural steps to the end that the merits will be tried at the earliest time consistent with fairness." County of Bergen v. S. Goldberg & Co., 39 N.J. 377, 380-81 (1963). Where a genuine issue of material fact is present, the issue should be "tried in an appropriate way." Id. at 381. Here, there are no genuine issues of material fact, but the parties dispute the legal significance of the facts as to whether the actions of plaintiff satisfied N.J.S.A. 20:3-6. The standard of review thus is de novo, and we accord no deference to the trial court's legal conclusions. Manalapan Realty, L.P. v. Twp. Comm. of Twp. of Manalapan, 140 N.J. 366, 378 (1995).

Bona Fide Negotiations

The condemning authority must conduct "bona fide negotiations" with the condemnee prior to filing a complaint for condemnation. N.J.S.A. 20:3-6. The phrase, "bona fide negotiations," is not defined in the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50 (the Act). N.J.S.A. 20:3-6 provides, however, that they must include

an offer in writing by the condemnor to the prospective condemnee holding the title of record to the property being condemned, 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 making the offer, the condemning authority must appraise the property and give the owner an opportunity to accompany the appraiser during the inspection. Ibid. The offer itself must be served by certified mail and shall not be less than the fair market value determined by the approved appraisal. Ibid.

"The purpose of N.J.S.A. 20:3-6 is to encourage acquisitions without litigation, thus saving both the acquiring entity and the condemnee the expense and delay of litigation." Casino Reinvestment Dev. Auth. v. Katz, 334 N.J. Super. 473, 481 (Law Div. 2000). "If the [condemning authority] does not conduct the requisite negotiations, the condemnation complaint will be dismissed," without prejudice. State by Comm'r of Transp. v. Carroll, 123 N.J. 308, 316 (1991).

Relying on City of Atlantic City v. Cynwyd Invs., supra, 148 N.J. 55, in which the holder of a ninety-nine year lease challenged a condemnation claiming that N.J.S.A. 20:3-6 required negotiations with the tenant, Judge Moses held that plaintiff had no duty to negotiate with LGIA. Indeed, "[u]nder the [Eminent Domain] Act, the negotiations are to be undertaken with the condemnee who holds title of record to the property" as opposed to tenants or other parties with an interest in the condemned property. City of Atlantic City v. Cynwyd Invs., supra, 148 N.J. at 70. The Court found that "[t]he rights of all other condemnees with a compensable interest are better protected by allowing them to participate later during the Commissioner's hearing, where value is determined, N.J.S.A. 20:3-12, and during the still subsequent proceeding when the compensation is allocated." Id. at 70-71.

LGIA asserts that City of Atlantic City v. Cynwyd Invs., supra, is not controlling because it dealt with a tenant, whose interest in the property was not recorded, and the language about other interested parties was dicta. LGIA contends that plaintiff was on notice of its interest in the property because its mortgages were duly recorded. LGIA's argument, however, has no merit. The Court's holding is supported by the plain language of N.J.S.A. 20:3-6, requiring a written offer to the condemnor holding the title of record, not the holder of a recorded interest in the property.

In sum, we agree with the Law Division's determination that plaintiff had no duty to negotiate with LGIA because it was not the record title owner of the property, and there is nothing in the statute that would impose a duty to wait for LGIA to obtain title in order to continue the negotiation process.

Bad Faith

LGIA also contends that the complaint should have been dismissed because the "$600,000 lowball offer, representing a mere 20% of the property's assessed value, is prima facie evidence of a lack of good faith." LGIA also cites the following factors as evidence of plaintiff's bad faith: (1) the taking of this property from one private owner to transfer it to another is for private gain; (2) the RFP was purposely tailored for only COM; (3) plaintiff's appraisal reduces the value of the property significantly because of code violations but the redevelopment agreement agrees to waive those requirements; (4) plaintiff "raced to the courthouse" to file the complaint after learning that LGIA intended to obtain title to the property in order to negotiate the condemnation; and (5) the one "take it or leave it offer" did not satisfy the requirement for interactive negotiations prior to filing the complaint. Plaintiff counters that LGIA offered no evidence to the Law Division to contradict the $600,000 appraisal, even though it had sufficient time and access to the property, between the filing of the complaint and the adjourned date of the order to show cause.

Courts have dismissed condemnation complaints when the condemning authority fails to comply with the pre-litigation requirements of N.J.S.A. 20:3-6. For example, in Borough of Rockaway v. Donofrio, 186 N.J. Super. 344, 354 (App. Div. 1982), we dismissed a complaint because the Borough failed to give the property owner the opportunity to accompany the appraiser on his inspection of the property. The courts have also dismissed complaints when the appraisals and the manner in which the offer was calculated was not disclosed prior to the filing of the complaint. See County of Monmouth v. Whispering Woods at Bamm Hollow, 222 N.J. Super. 1, 9 (App. Div. 1987); New Jersey Hous. and Mortgage Fin. Agency v. Moses, 215 N.J. Super. 318 (App. Div.), certif. denied, 107 N.J. 638 (1987); State by Comm'r of Transp. v. Hancock, 208 N.J. Super. 737 (Law Div.), aff'd, 210 N.J. Super. 568 (App. Div. 1985). In Casino Reinvestment Dev. Auth. v. Katz, supra, 334 N.J. Super. at 487, we dismissed the condemnation complaint because the condemnor failed to use the actual rents generated by the property in the appraisal, resulting in a less than full-price offer, and because the condemning authority failed to negotiate or reconsider its appraisal using the actual rents. Id. at 483.

In this case, it is undisputed that plaintiff provided notice to the property owner of the date of inspection and that plaintiff provided a copy of the appraisal relied upon in determining the property's value. The offer letter requested a response within fourteen days pursuant to N.J.S.A. 20:3-6 which provides that

A rejection of said offer or failure to accept the same within the period fixed in written offer, which shall in no case be less than 14 days from the mailing of the offer, shall be conclusive proof of the inability of the condemnor to acquire the property or possession thereof through negotiations.

Hudson Terrace changed attorneys and made unsubstantiated representations that it had evidence of a higher value for the property before firing the second attorney. At that point, on March 22 or 23, 2004, more than the required fourteen days had passed, plaintiff had no way to contact Chang because the mail kept getting returned, and there was no information on subsequent counsel for Hudson Terrace.

"The Legislature certainly intended that the Act's requirements of a fair offer, reasonable disclosure, and bona-fide negotiations be construed and applied in a manner protective of property owners." State by Comm'r of Transp. v. Carroll, supra, 123 N.J. at 316. Further, "the Act's requirement of bona-fide negotiations has been strictly construed by the courts." Id. at 317. Yet, "[t]he [condemning authority]'s duty to negotiate in good faith can be tempered by a property owner's failure to cooperate." Id. at 323. In this case, the record supports the Law Division's determination that plaintiff's efforts satisfied N.J.S.A. 20:3-6 requirements for bona fide negotiations with the record title holder and that the property owner failed to cooperate with the negotiations.

The Tax Assessment as Evidence of Value or Bad Faith

LGIA's argument that plaintiff failed to engage in bona fide negotiations because the offer is significantly less than the property tax assessment is also without merit. Besides the fact that it was premature to discuss evidence of value prior to the appointment of commissioners, it is well settled in New Jersey that "evidence of tax valuation is not admissible for the purpose of establishing fair market value" in condemnation cases. Bergen County Sewer Auth. v. Borough of Little Ferry, 15 N.J. Super. 43, 53 (App. Div. 1951). Nonetheless, LGIA asks this Court to reconsider this decision because it "seeks to use the Borough's assessment as a statement against interest and only for the limited purpose of attacking the bona fides of the Borough's lowball offer."

LGIA relies on Casino Reinvestment Dev. Auth. v. Katz, supra, to support its position. But, unlike LGIA in this case, the condemnee in that case had provided the condemning authority with evidence of the actual rents earned on the property, which contradicted the condemning authority's appraisal. 334 N.J. Super. at 477. Here, LGIA has not made any specific objections to the appraisal provided by plaintiff and has only objected to the offer based on a comparison to the tax assessment.

"[I]t is the generally recognized rule that the assessed valuation of property for purposes of taxation is ex parte and may not be received in evidence to prove market value in . . . [condemnation] proceedings." Bergen County Sewer Auth. v. Borough of Little Ferry, supra, 15 N.J. Super. at 53. In fact, in Casino Reinvestment Dev. Auth v. Katz, supra, 334 N.J. Super. at 487, which is relied on by LGIA, the court stated that "valuing property for local property taxes is vastly different than valuing property which is unwillingly taken from a private owner for public purposes."

LGIA invokes authority from two other jurisdictions who allow tax assessments as evidence of value in condemnation proceedings. As plaintiff points out, however, the two cases cited by LGIA are in a footnote to the following statement in 5-22 Nichols on Eminent Domain 22.1 (3rd ed. 2004): "Despite the great weight of authority to the contrary, a few cases have permitted the introduction of evidence of assessed valuation as evidence of value." In fact, the beginning of that section recognizes that

[i]t is almost everywhere the law that the value placed upon a parcel of land for the purposes of taxation by the assessors of the town in which it is situated is no evidence of its value for other than tax purposes. This rule of exclusion has been applied in the determination of value in eminent domain proceedings. While ordinarily it is the condemnor who seeks to introduce the evidence of assessed value, the rule of exclusion has been invoked where it was sought to introduce such evidence against a municipal condemnor, especially where the assessment was made by a state agency. The assessment is res inter alios acta, and is inadmissible upon general principles of the law of evidence. Such evidence has been rejected on the ground that the assessed value is based on a valuation for a different purpose, and that it represents an ex parte statement of the assessor which is not subject to cross-examination. Although the assessment roll, considered as a public document, has been admitted in actions other than condemnation proceedings, as an exception to the hearsay rule, even as evidence of value, the rule of exclusion has been justified as a rule of practicality. Although the assessor is required to appraise the value of the property, it is an open secret that the assessment rarely approaches the true market value.

Evidence of assessed value . . . cannot be introduced by the land-owner, even when the taking is made by the city or town for the benefit of which the assessment was made, for even if the city or town should contend that the land was worth less than its assessed value, the assessment would not estop the municipality from such a contention, or even constitute an admission to the contrary, since assessors of taxes, even though appointed by the municipal administration and paid by the city or town, are public officers and not agents of the municipality in which they serve, and the municipality is not in any way bound by their acts.

[Ibid. (footnotes omitted).]

It is apparent that LGIA's main objection to the condemnation is that plaintiff's offer is too low. LGIA's objections to the offer should be directed to the commissioners at the hearing on valuation.

The Public Purpose/RFP Challenge

LGIA did not raise the issue of plaintiff's authority to condemn or the propriety of the RFP at the hearing on the order to show cause and made no objection when the court summarized LGIA's challenge to the condemnation as only a failure to engage in bona fide negotiations. An issue not raised below, even a constitutional issue, will not be addressed on appeal unless it goes to the jurisdiction of the trial court or concerns matters of substantial public interest. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). Moreover, any challenge to plaintiff's authority to condemn the property based on its blighted condition--the skeleton building has remained unfinished for almost fifteen years--would be difficult to sustain in light of the recent United States Supreme Court decision in Kelo v. City of New London, ___ U.S. ___, 125 S. Ct. 2655, 162 L. Ed. 2d 439 (2005), holding that economic development was a sufficient public purpose for the exercise of eminent domain.

While LGIA also alleges that plaintiff "rationalizes an 80% downward adjustment by claiming that millions will be needed to be spent to bring the existing structure up to the current code standards," the agreement provides that the "favored redeveloper" may seek permission for grandfathering the structure under the prior code. Even though the redevelopment agreement states that the redeveloper shall apply to the New Jersey Department of Community Affairs and/or the construction code office or plaintiff for a determination as to whether the property can be grandfathered under the code in effect at the time the structure was completed, the appraisal actually indicates that the renovation costs estimates do not include the correction of any existing code violations.

The "Race to the Courthouse"

Plaintiff filed the complaint on March 25, 2004, despite the fact that the March 24, 2004 meeting with Hudson Terrace had just been adjourned without date. The required fourteen-day period for Hudson Terrace to accept or reject the offer had lapsed, however, and as a result, plaintiff never met with the owner to discuss its challenges to the appraisal. It is also clear that Hudson Terrace did not cooperate with plaintiff's efforts to meet, Chang changed attorneys more than once, and Hudson Terrace failed to provide copies of documents it claimed that it had evidencing a much higher value than the plaintiff's appraisal. Further, LGIA had notice of the condemnation as early as January 15, 2004, when its in-house counsel advised COM that it was in discussions with Hudson Terrace to buy out the mortgages, but took no immediate action to protect its interests.

The "One-Price" Offer Method

Contrary to LGIA's assertions, the fact that plaintiff made only one offer is not the equivalent of a "take it or leave it" position. Condemning authorities are required to offer the full amount of the approved appraisal up front. N.J.S.A. 20:3-6. This "procedure is meant to protect landowners negotiating with the State" because "[t]he one-price procedure assures that the property owner will obtain no less than the State's genuine determination of the fair market value." State by Comm'r of Transp. v. Carroll, supra, 123 N.J. at 318. After making the offer, plaintiff appeared open to further negotiations since it repeatedly asked for the appraisals or contracts that Hudson Terrace claimed it had. Since no evidence was provided by the record title owner revealing flaws in plaintiff's appraisal or contrary evidence of a higher value, there was no reason for plaintiff to make a second offer.

In sum, we conclude that the record supports the Law Division's determination that plaintiff satisfied the pre-litigation requirements of N.J.S.A. 20:3-6. LGIA's main objection that the offer was too low should be addressed at the commissioners' hearing on valuation.

 
The order appealed from is affirmed.

The appraisal also noted that the property was assessed at $1,310,000 for the land and $1,690,000 for the building, for a total 2002 tax assessment of $3,000,000. The equalized assessment for the property was calculated to be $3,427,788 for 2002.

The transfer from Hudson Terrace to LGIA on April 1, 2004, has no legal significance. Pursuant to N.J.S.A. 20:3-21(a), title to the property passed to plaintiff on March 30, 2004, when the declaration of taking was filed and recorded.

Plaintiff's complaint in condemnation against defendants was signed and dated on March 25, 2004. The complaint is stamped as filed on March 22, 2004. The record does not explain the discrepancy.

On September 20, 2004, LGIA moved for a stay of proceedings. On September 21, 2004, LGIA filed this appeal of the August 5, 2004, order. The motion for a stay was argued on October 8, 2004. By order dated October 18, 2004, Judge Moses denied the stay. We also denied LGIA's motion for a stay dated December 27, 2004.

On February 18, 2005, plaintiff filed a notice of hearing before commissioners for April 19 and 20, 2005. No further information as to the status of the hearing is in the record.

We disagree with LGIA's contention that the mortgages gave LGIA "all rights to and control over any condemnation proceedings and awards, and permits [LGIA] to unilaterally determine whether to accept or contest offers in compromise." Section 1.12 of both mortgages says only that LGIA "may participate in any such proceedings" and that "the award or compensation payable is hereby assigned to and shall be paid to" LGIA.

During the argument on the order to show cause on July 27, 2004, the following exchange between Judge Moses and plaintiff's counsel occurred:

MR. CURLEY: The point is, your Honor, that we have taken multiple steps to bring us to this particular point in time. It's a lengthy process.

THE COURT: They're arguing that you did not engage in good faith negotiations. That's the argument.

MR. CURLEY: That's the sole argument?

THE COURT: That's the argument. What's your response to the argument? Put aside the trial brief.

LGIA did not object to the court's comment on the substance of its argument and, at the hearing on the motion for a stay, LGIA conceded that the issue was not raised at the hearing on the order to show cause.

(continued)

(continued)

28

A-0334-04T2

November 22, 2005