THE BOROUGH OF SOMERVILLE v. PATHMARK STORES, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5578-06T25578-06T2

THE BOROUGH OF SOMERVILLE, A

MUNICIPAL CORPORATION OF THE

STATE OF NEW JERSEY,

Plaintiff-Respondent,

v.

PATHMARK STORES, INC.,

Defendant-Appellant,

and

JSM AT SOMERVILLE, LLC,

Defendant-Respondent,

and

YARDVILLE NATIONAL BANK, THE

CHASE MANHATTAN BANK, and FLEET

RETAIL GROUP, INC.,

Defendants.

________________________________________________________________

 

Argued May 7, 2008 - Decided

Before Judges Lisa, Lihotz and King.

On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-250-07.

Joseph J. Fleischman argued the cause for appellant (Norris, McLaughlin & Marcus, attorneys; Mr. Fleischman and Robert Mahoney, on the brief).

Louis N. Rainone argued the cause for respondent Borough of Somerville (DeCotiis, FitzPatrick, Cole & Wisler, LLP, attorneys; Mr. Rainone and Michael J. Ash, of counsel and on the brief).

William D. Grand argued the cause for respondent JSM at Somerville, LLC (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; Mr. Grand, of counsel and on the brief; Emily A. Kaller and Blakely D. Fishlin, on the brief).

PER CURIAM

In this appeal, Pathmark Stores, Inc. (Pathmark) appeals from a judgment appointing condemnation commissioners. The Borough of Somerville (Somerville) initiated this condemnation action to take by eminent domain Pathmark's lease in the Landmark Shopping Center in Somerville. To justify the taking, Somerville asserted a public use arising out of its determination that the area encompassing the shopping center was in need of redevelopment, pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -49.

In a companion appeal, Pathmark Stores, Inc. v. JSM at Somerville, LLC, No. A-5533-06T1 (App. Div. ________, 2008) (slip op. at 6-14), calendared back-to-back with this appeal, we set forth the factual background pertaining to Pathmark's lease and the redevelopment plan and activity. We issued our decision in that appeal today. We set forth in detail in that opinion the background information underlying these appeals, and we need not provide a detailed recitation here.

By way of very brief summary, we reiterate that Pathmark's shopping center lease, which commenced in 1977, extends, with renewal options, until 2018. In May 2002, JSM at Somerville, LLC (JSM) purchased the shopping center for the purpose of redevelopment. The redevelopment plan contemplated destruction of the entire shopping center except for the supermarket.

In this action, Somerville filed a complaint seeking condemnation of Pathmark's lease. Pathmark answered and moved to dismiss the complaint. It argued that Somerville acted in bad faith in only offering to compensate Pathmark for the value of its trade fixtures and a relocation fee, totaling approximately $1.6 million, and not offering to pay an additional sum reflecting the value of Pathmark's leasehold interest, calculated by comparing the below-market rent in the lease with market rents. This additional amount was estimated to be in the neighborhood of $5 million.

Judge Ciccone rejected the bad faith argument. She noted that although discovery materials revealed discussions between representatives of Somerville and JSM reflecting their awareness of the issue and the possibility that the additional sum might be due to Pathmark, and they obtained appraisals in that regard, this did not establish bad faith in the negotiations. The judge concluded that this merely indicated that Somerville "explored several possible valuation methods and settled on one that did not include the value of the leasehold interest." Therefore, the judge upheld Somerville's authority to condemn. These determinations were set forth in the judge's written decision of March 26, 2007.

However, recognizing the existence of the disputed valuation issue, the judge concluded her decision by directing the parties to brief the issue and scheduling oral argument on a later date. After receiving the briefs and hearing argument, the judge issued another written decision on June 27, 2007. She concluded that article 34(D) of Pathmark's lease applied to the condemnation of Pathmark's interest, as a result of which Pathmark was not entitled to compensation for the remaining lease term. The judge concluded her June 27, 2007 decision stating, "Attached please find an order appointing commissioners, who are hereby directed to value Pathmark's interest in a manner consistent with the lease and this opinion."

On June 27, 2007, the judge signed an order for judgment and appointing commissioners. Pathmark filed this appeal.

In its appellate brief, Pathmark raised three arguments: (1) the condemnation of its lease violates the New Jersey Constitution; (2) the judge erred in not finding that Somerville acted in bad faith; and (3) the judge erred in finding that article 34 of the lease deprives Pathmark of the value of its leasehold interest. In their responding briefs, JSM and Somerville argued that Pathmark is precluded from challenging Somerville's redevelopment plan or the designation of the redevelopment area, including raising its constitutional challenge, because of failure to comply with the time limit of Rule 4:69-6, and pursuant to the doctrines of collateral estoppel, entire controversy, and res judicata. They also argued that Judge Ciccone did not err in finding an absence of bad faith by Somerville. Finally, they argued that the judge correctly found that article 34 of the lease deprives Pathmark of entitlement to compensation for the remaining term of the lease.

At oral argument, we were informed that Pathmark has permanently vacated the premises and will not seek reentry. Accordingly, Pathmark's counsel acknowledged that Pathmark now abandons all arguments pertaining to Somerville's right to condemn, and pursues only its arguments pertaining to valuation. We were also informed that the condemnation commissioners have conducted a hearing and rendered an award and that the matter is now pending a jury trial. Further, Pathmark has withdrawn funds deposited in the condemnation proceeding.

The only order that is before us for review is the June 27, 2007 order for judgment and appointing commissioners. That is deemed a final judgment for purposes of appeal. See State v. New Jersey Zinc Co., 40 N.J. 560, 572 (1963). That judgment memorializes the determination by the trial court that Somerville has the right to condemn Pathmark's lease. In light of the developments outlined in the preceding paragraph, there is no longer any dispute as to Somerville's right to condemn. Indeed, Pathmark has abandoned its arguments to that effect.

In our view, the judge's supplemental decision of June 27, 2007 regarding valuation is not part of the final order. Certainly, it is not expressly included in the June 27, 2007 judgment. And, conceptually, the valuation determination was not necessary to or integral in the determination of the right to condemn. The valuation issue relates solely to damages. The damages aspect of this condemnation proceeding remains pending. We deem the judge's supplemental decision as interlocutory in nature. It remains subject to further consideration in the trial court proceedings pertaining to valuation. Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 263 (App. Div. 1987), certif. denied, 110 N.J. 96 (1988). Accordingly, it is not now before us and we decline to render what would amount to an appellate advisory opinion pertaining to an ongoing trial court proceeding.

For these reasons, we dismiss the appeal as moot. For the sake of completeness, we note that we agree with the arguments of Somerville and JSM that principles of collateral estoppel and the entire controversy doctrine bar Pathmark's challenge to the redevelopment plan or the designation of the redevelopment area.

As we set forth in our opinion in Pathmark Stores, Inc., supra, slip op. at 2-3, there were three related cases involving this property, the two appealed and one additional matter. In addition to the appealed cases, Pathmark filed a June 2, 2005 complaint in lieu of prerogative writs seeking to overturn approval of the site plan, naming Somerville's planning board, mayor, and borough council, and JSM as defendants. On July 11, 2006, Judge Kumpf dismissed all claims challenging the adoption or validity of the redevelopment plan, and then on February 26, 2007, dismissed the remaining claims that addressed parking issues. Pathmark has not filed an appeal in that case.

In Olds v. Donnelly, 150 N.J. 424, 431-32 (1997), the Court explained:

[T]he entire controversy doctrine seeks to assure that all aspects of a legal dispute occur in a single lawsuit. The goals of the doctrine are to promote judicial efficiency, assure fairness to all parties with a material interest in an action, and encourage the conclusive determination of a legal controversy. DiTrolio v. Antiles, 142 N.J. 253, 267, 662 A.2d 494 (1995); Prevratil v. Mohr, 145 N.J. 180, 187, 678 A.2d 243 (1996). One part of the doctrine, described generally as "claims joinder," requires that parties should present all affirmative claims and defenses arising out of a controversy. R. 4:30A; Wm. Blanchard Co. v. Beach Concrete Co., Inc., 150 N.J. Super. 277, 292-94, 375 A.2d 675, certif. denied, 75 N.J. 528, 384 A.2d 507 (1977). Another part, known as "party joinder," requires the mandatory joinder of all parties with a material interest in a controversy. R. 4:30A.

In Ashe v. Swenson, 397 U.S. 436, 443, 90 S. Ct. 1189, 1194, 25 L. Ed. 2d 469, 475 (1970), the Court explained that collateral estoppel "means simply that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit."

"The term 'res judicata' refers broadly to the common-law doctrine barring relitigation of claims or issues that have already been adjudicated." Velasquez v. Franz, 123 N.J. 498, 505 (1991). In Culver v. Insurance Co. of North America, 115 N.J. 451, 460 (1989), the Court stated:

The doctrine of res judicata "contemplates that when a controversy between parties is once fairly litigated and determined it is no longer open to relitigation." Lubliner v. Board of Alcoholic Beverage Control, 33 N.J. 428, 435 (1960). Where the second action is no more than a repetition of the first, the first lawsuit stands as a barrier to the second. "The rule precludes parties from relitigating substantially the same cause of action." Kram v. Kram, 94 N.J. Super. 539, 551 (Ch. Div.), rev'd on other grounds, 98 N.J. Super. 274 (App. Div. 1967), aff'd, 52 N.J. 545 (1968).

The application of res judicata doctrine requires substantially similar or identical causes of action and issues, parties, and relief sought. Eatough v. Board of Medical Examiners, 191 N.J. Super. 166, 173 (App. Div. 1983); Constant v. Pacific Nat'l Ins. Co., 84 N.J. Super. 211, 216 (App. Div. 1964). In addition, there must be a "final judgment by a court or tribunal of competent jurisdiction." Charlie Brown of Chatham v. Board of Adjustment, 202 N.J. Super. 312, 327 (App. Div. 1985).

The Culver Court explained that the test to determine whether there is "identity of a cause of action for claim preclusion purposes is not simple." Id. at 461. This is because the term "cause of action" cannot be precisely defined, and there is no simple test to determine what constitutes a cause of action for res judicata purposes. Ibid. The Court explained, quoting from United States v. Athlone Industries, Inc., 746 F.2d 977, 984 (3d Cir. 1984), that to decide if two causes of action are the same, a court must consider:

(1) whether the acts complained of and the demand for relief are the same (that is, whether the wrong for which redress is sought is the same in both actions); (2) whether the theory of recovery is the same; (3) whether the witnesses and documents necessary at trial are the same (that is, whether the same evidence necessary to maintain the second action would have been sufficient to support the

first); and (4) whether the material facts alleged are the same.

[Culver, supra, 115 N.J. at 461-62 (citations omitted).]

"The principle of res judicata applies not only to 'all matters litigated and determined by such judgment but also as to all relevant issues which could have been presented, but were not.'" Id. at 463 (quoting Anselmo v. Hardin, 253 F.2d 165, 168 (3d Cir. 1958)).

The term "collateral estoppel" refers to the "'branch of the broader law of res judicata which bars relitigation of any issue which was actually determined in a prior action, generally between the same parties, involving a different claim or cause of action.'" Sacharow v. Sacharow, 177 N.J. 62, 75-76 (2003) (quoting State v. Gonzalez, 75 N.J. 181, 186 (1977)). In Culver, supra, 115 N.J. at 470, the Court explained that collateral estoppel, also called "issue preclusion," has been defined in Restatement (Second) of Judgments 27 (1982) as follows: "When an issue or fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim." The Court added: "'A judgment is not conclusive in a subsequent action as to issues which might have been but were not litigated and determined in the prior action.'" Ibid. (quoting Restatement, supra, 27 comment e).

The estoppel argument here is whether the question at issue, the challenge to the blight determination, has been directly determined adversely against Pathmark so that Pathmark is estopped from relitigating the issue. Although collateral estoppel and res judicata are closely related and overlap, it is collateral estoppel alone that bars relitigation of issues in suits that arise from different causes of action. Selective Ins. Co. v. McAllister, 327 N.J. Super. 168, 173 (App. Div.), certif. denied, 164 N.J. 188 (2000). At issue is whether Pathmark raised a challenge to the blight determination in one of the other two actions regarding this property.

We conclude that both the entire controversy doctrine and collateral estoppel apply to bar litigating the issue of the constitutionality of the blight determination. Pathmark raised the same claims and allegations in the prerogative writs action. On July 11, 2006, Judge Kumpf dismissed "[a]ll claims challenging the adoption or validity of the Redevelopment Plan or the Land Use Ordinance of the Borough of Somerville."

Pathmark claims, without referring to the complaint in the action in lieu of prerogative writs, that "[t]he Redevelopment Plan was implicated only insofar as it set forth parking requirements that Pathmark argued were impermissibly vague and that resulted in the approval of JSM's plans without the grant of a variance." It is true that the only count in that complaint that refers to the redevelopment plan is count two, which addressed parking and claimed that the term "mixed-use shared parking approach" was not defined in the redevelopment plan and was impermissibly vague. Nevertheless, in that count, Pathmark sought judgment "[r]escinding the Redevelopment Plan, or in the alternative, requiring the Borough to provide for definitive, unambiguous parking provisions therein." Based on the broad language in Judge Kumpf's order, we are satisfied that Pathmark's challenge to the adoption or validity of the redevelopment plan was dismissed.

Even if the order did not cover the challenge raised here, Pathmark should have brought the challenge in that case. It could have raised a challenge to the blight determination generally, and under the entire controversy doctrine, Pathmark was required to present all affirmative claims and defenses arising out of this single controversy.

There is another reason why all issues other than valuation are now precluded. Subsequent to oral argument on this appeal, another panel of this court decided Township of Piscataway v. South Washington Avenue, LLC, ___ N.J. Super. ___ (App. Div. 2008). The panel held that when a condemnee withdraws deposited funds in a condemnation action, the condemnee is barred from attacking the condemning authority's right to condemn its property on appeal. Id. at ____ (slip op. at 17).

Therefore, we dismiss as moot the appeal from the judgment appointing commissioners. We reiterate and emphasize that all valuation issues, including the applicability and effect of article 34 of Pathmark's lease, remain open in the trial court and are subject to substantive review on appeal by any party dissatisfied with the final Law Division judgment, when it is rendered.

The appeal is dismissed.

(continued)

(continued)

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A-5578-06T2

June 24, 2008