STATE OF NEW JERSEY v. ESTATE OF JAMES M. SALERNO
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APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2630-19
STATE OF NEW JERSEY,
by the COMMISSIONER OF
TRANSPORTATION,
Plaintiff-Respondent,
v.
ESTATE OF JAMES M. SALERNO,
deceased, his unknown heirs,
devisees and personal representatives,
and his, their or any, of their
successors in right, title and interest,
JAI BARANGI INVEST LIMITED
LIABILITY COMPANY, A New
Jersey Limited Liability Company,
UNITED STATES OF AMERICA,
STATE OF NEW JERSEY, and the
CITY OF JERSEY CITY, in the
County of Hudson, a Municipal
Corporation of New Jersey,
Defendants,
and
976 NEWARK REALTY, LLC,
Defendant-Appellant.
____________________________
Submitted February 10, 2021 – Decided March 16, 2021
Before Judges Sumners and Geiger.
On appeal from the Superior Court of New Jersey, Law
Division, Hudson County, Docket No. L-0295-18.
McKirdy, Riskin, Olson & DellaPelle, PC, attorneys for
appellant (Anthony F. DellaPelle, of counsel and on the
briefs; Allan C. Zhang, on the briefs).
Gurbir S. Grewal, Attorney General, attorney for
respondent (Sookie Bae, Assistant Attorney General, of
counsel; Alexander J. Falciani, Deputy Attorney
General, on the brief).
PER CURIAM
Appellant 976 Newark Realty, LLC appeals from a January 17, 2020 order
for final judgment and payment of funds in this partial condemnation action
affecting a small, vacant industrial parcel adjacent to the Pulaski Skyway in
Jersey City. We affirm.
We discern the following facts from the record. As part of the State
Department of Transportation's (DOT) Pulaski Skyway Rehabilitation Project
(the Project) in Jersey City, the DOT exercised its power of eminent domain and
acquired a bridge easement and an aerial utility easement comprising
approximately 360 square feet of the subject property (the Property). The
easements grant a non-exclusive right to the DOT to enter the Property with
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equipment and personnel to inspect, repair, and reconstruct the piers of the
Pulaski Skyway.
The Property is approximately 0.8 acres and consists of nine contiguous
lots—Block 7603, Lots 8-16—bordered by the Pulaski Skyway, a Conrail
freight line, and Port Authority rail lines. The Property is basically unimproved
vacant land with dilapidated pavement, a sidewalk, and metal fencing. It is
zoned Industrial, which limits building heights to fifty feet and prohibits
commercial and residential uses.
The Property is subject to a pre-existing easement. In February 2014,
Public Service Electric & Gas Company (PSE&G) acquired a twenty-foot wide
utility easement bisecting the westerly portion of the Property (Lots 10, 11, and
12) from James M. Salerno for $200,000. The easement prohibits buildings and
structures within the easement area. It permits the relocation of the underground
electric line to a "mutually satisfactory" location at the "sole cost and expense
of the [g]rantor."
In March 2015, appellant contracted with James M. Salerno to purchase
the Property for $1,852,635.99 and Block 7604, Lot 2 (Lot 2) for an additional
$1,346,364.01. A road runs between Lot 2 and the Property. At the time,
Salerno was in poor health and did not market the Property for sale. The
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Property was being leased to a tenant, which may have affected the contract
price. Because of Salerno's illness, the closing was delayed until May 2018.
Salerno died before the purchase was finalized. As of January 23, 2018,
the date DOT filed its condemnation complaint, defendant Estate of James M.
Salerno was still the owner of the Property. DOT filed a declaration of taking
of the Property on February 12, 2018.
The parties retained experts to value the Property and just compensation.
DOT's appraiser, Mark Karavolos, MAI, SCGREA, used the sales comparison
method of evaluation. After adjustments, he opined that the fair market value
of the Property was $982,000 and just compensation for the taking was $4200,
with a highest and best use as industrial as permitted under the zoning code.
Karavolos explained that the Property "is not particularly suitable for residential
or mixed-use . . . development" because it is "located within an active industrial
area that is physically severed from other mixed-use areas of the city."
Appellant retained three experts: Jeffrey Wenger, P.P.; Maurice J. Stack,
II, MAI; and Eli D. Martin, RA. Wenger, a former professional planner,
authored two reports. In his March 18, 2019 report, Wenger opined that if
appellant submitted a plan to develop the property with an eight-story, high-
density residential and commercial building, a zoning change through the
redevelopment process would probably be granted. The report did not consider
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the twenty-foot wide PSE&G easement. Martin prepared a concept plan
illustrating the proposed eight-story, mixed-use structure. The plan did not
consider the pre-existing PSE&G easement. As of the date of taking, appellant
had not approached Jersey City officials to begin the redevelopment process.
Stack, appellant's appraiser, reviewed both Wenger's and Martin's reports
and valued the fair market value of the Property and Lot 2 at $13,620,000,
explaining that "a mixed-use redevelopment was maximally productive
compared to any other viable alternative as of the date of value." He initially
valued just compensation for the taking at $520,000. Shortly before trial he
reduced it to $475,000.
The case was presented to the condemnation commissioners for a decision
on the compensation to be paid to appellant for the partial taking of its property.
Following a July 10, 2018 hearing, the commissioners filed a report with their
award.1 Appellant sought a trial de novo in the Law Division pursuant to
N.J.S.A. 20:3-13(a) and (b), contesting the amount of just compensation.
Prior to trial, DOT moved in limine to bar appellant's experts from
testifying as to the potential use of the Property for a mixed-use, eight-story
building. DOT contended that appellant's experts' opinions were based on
1
The results of that hearing are not part of the record.
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highly speculative evidence. It argued appellant's experts: (1) failed to value
the actual condition of the Property; (2) failed to show a reasonable probability
of obtaining the necessary zoning changes for a high-density, eight-story mixed
use building; (3) failed to address the positive and negative criteria to sustain
needed variances; (4) failed to address the PSE&G easement; (5) did not
consider that appellant was not the record title owner of the Property on the
valuation date; (6) did not refer to any filed site plan approval applications; (7)
improperly expanded the Property by including non-contiguous Lot 2; and (8)
based their valuation on conjecture and inadmissible net opinions.
The court granted the motion in part, ordering a N.J.R.E. 104 hearing be
conducted "for the court to perform its gatekeeping function and determine
whether there exists sufficient evidence of a reasonable probability of a zoning
change and approvals to permit an alternate use of a mixed-use [eight]-story
development." The court denied DOT's motion.
During the hearing, appellant moved in limine to bar reference to the
$1,852,635.99 purchase price of the Property, contending that the purchase price
was not relevant to fair market value and would be unduly prejudicial. DOT
argued the purchase was highly probative and that DOT would be prejudiced if
it could not use the purchase price during cross-examination of Stack. The court
denied appellant's motion. The court concluded the jury would want to know
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the purchase price, that it was relevant to the jury's overall decision, and that the
purchase price was not unduly prejudicial because appellant could produce
evidence explaining why the purchase price was so low—that Salerno was
unhealthy and the subject property never officially went on the market, and thus
not indicative of fair market value.
The jury trial began on November 12, 2019. Karavolos testified that in
valuing the just compensation at $4200, he evaluated the highest and best use of
the Property as industrial. Karavolos determined the fair market value of the
Property by reference to recent comparable sales of four nearby properties.
Karavolos acknowledged that unlike the properties evaluated by appellant's
appraisal expert, the comparable sales he used were not delineated in a
redevelopment area. On cross-examination, Karavolos was asked whether he
used the 2015 purchase price in his valuation. Karavolos replied that "[he] could
not."
Appellant offered the expert testimony of Wenger, Martin, and Stack.
Consistent with his report, Wenger testified that appellant had a reasonable
probability of obtaining approval to construct an eight-story, mixed use building
up to 100 feet in height on the Property. He acknowledged that the proposed
use would require a zoning change. Wenger further acknowledged that as of the
date of taking, appellant had not approached Jersey City to redevelop the
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Property nor had Jersey City conducted a preliminary investigation or adopted
a resolution declaring the Property in need of redevelopment. Wenger further
testified that DOT's taking impacted appellant's ability to redevelop the Property
because Jersey City would require a fifteen-foot-wide sidewalk for a structure
of this scale. This would require pushing back the portion of the proposed
building adjacent to the Pulaski Skyway by almost 800 square feet, thereby
limiting development.
Stack testified that in arriving at his revised estimate of just compensation
of $475,000, he concluded that the highest and best use of the Property would
be a mixed-use redevelopment, not the currently zoned industrial use, and
evaluated the Property by comparing the sale prices of nearby redeveloped
properties. He explained that appellant had purchased the Property for
redevelopment.
On cross-examination, Stack was asked about the 2015 contract to sell the
Property and Lot 2, and Stack answered that it was roughly $3.2 million. Later,
Stack testified regarding the difference between the $3.2 million purchase price
and his $13 million valuation. He stated: "[T]he party that purchased [the
Property] had the vision, knowing that . . . the market was heading in a direction
or else they wouldn't have paid $3 million for a parking lot." When asked why
he did not use the sale price of the Property to indicate its value, Stack answered:
A-2630-19
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One of the . . . reasons you check to make sure
that a sale is really kind of a -- a negotiated transaction,
. . . it has to meet the test of market value, and it really
has to involve competition. There has to be exposure
to the marketplace, as opposed to, you know, one
person that’s coming in, buying a property from a
person that’s not really motivated. And that was the
. . . situation here.
And, in the technical terms, this is referred to as
a non-useable sale. That’s the way the City of Jersey
City treated it for property-tax purposes, because it
involved an estate and . . . the seller really . . . didn’t
take advantage of the . . . full real-estate market.
Stack testified that he did not feel the 2015 sale price was accurate for
purposes of determining fair market value because "it's not the same area as it
was in 2015." When pressed, Stack explained that the combined $3.2 million
purchase price involved two transactions and two deeds. Appellant purchased
the Property for $1,852,635.99 and Lot 2 for $1,346,364.01, as reflected in in
Stack's March 19, 2019 report. DOT then challenged Stack's credibility by
having him acknowledge that his appraised value was $13 million. Appellant
did not object to DOT's reference to the purchase price during cross-examination
and did not request a curative or limiting instruction.
DOT presented two rebuttal witnesses: Roger Trudeau of PSE&G's real
estate division and professional planner Keenan Hughes, AICP, PP, CRE.
Trudeau testified regarding the significant impact of PSE&G's utility easement,
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which prohibited construction of any buildings within the easement area, and
the requirement that any relocation of the powerline would have to be agreed
upon by both parties. He explained that it was not feasible to relocate PSE&G's
recently installed 230-kilovolt underground transmission line to an off-site
location since PSE&G never consented to its relocation and it was doubtful the
PSE&G ever would consent given the physical location and alignment of the
Pulaski Skyway piers. He also noted that the developer would have to satisfy
the high costs, permits, and legal obstacles associated with the relocation.
Hughes testified that approval of the proposed eight-story, mixed use
building was not reasonably probable as to either redevelopment approval under
the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -73, or the
granting of necessary use and bulk variances under the Municipal Land Use
Law, N.J.S.A. 40:55D-1 to -163. Hughes explained that Jersey City's Master
Plan and land use policies provided for industrial development of the Property,
not mixed-use development as proposed by appellant.
During closing, without objection by appellant, DOT emphasized that the
Property is zoned industrial, subject to the PSE&G easement with a 230-kilovolt
underground cable, was not located in a redevelopment zone, and had not been
approved for redevelopment by Jersey City. DOT argued that appellant, a
developer, purchased the Property and the accompanying lot on speculation for
A-2630-19
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$3.2 million but its expert claimed that even though the purchase closed after
the taking, the fair market value of the Property and Lot 2 was actually $13
million.
The trial court instructed the jury that the attorneys were there as
advocates for their clients, nothing the attorneys said was evidence, and their
comments were not binding. As to expert testimony, the court instructed the
jury that expert testimony was offered for their consideration, that an expert's
opinion should be used only if they found it helpful, and that they may consider
the expert's "skill, training, experience, and general credibility." Appellant did
not object to the jury charges.
The jury returned a verdict of $56,000. Appellant did not move for a new
trial. This appeal followed.
Appellant raises a single point for our consideration:
POINT I
THE TRIAL COURT ERRED IN PERMITTING
EVIDENCE RELATING TO THE SALE OF THE
SUBJECT PROPERTY TO BE CONSIDERED AND
HEARD BY THE JURY AS SUCH EVIDENCE WAS
NOT RELEVANT AND, TO THE EXTENT IT HAD
ANY PROBATIVE VALUE, SUCH PROBATIVE
VALUE WAS OUTWEIGHED BY THE
PREJUDICIAL IMPACT IT HAD UPON THE JURY.
A-2630-19
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A. The Price Paid For The Subject Property By 976
Newark Realty Was Irrelevant To The Issue Of Just
Compensation.
B. Any Probative Value That The Price Paid For The
Subject Property May Have Had Was Substantially
Outweighed By Its Prejudicial Impact Upon 976
Newark Realty.
We are guided by certain well-established principles. When the
government takes private property for public use, it must pay just compensation
to the property owner. U.S. Const. amend. V; N.J. Const. art. I, ¶ 20. "Just
compensation is 'the fair market value of the property as of the date of the taking,
determined by what a willing buyer and a willing seller would agree to, neither
being under any compulsion to act.'" Comm'r of Transp. v. Caoili, 135 N.J. 252,
260 (1994) (quoting State v. Silver, 92 N.J. 507, 513 (1983)).
The Eminent Domain Act of 1971 requires that just compensation be
calculated as of the earliest of:
(a) the date possession of the property being
condemned is taken by the condemnor in whole or in
part; (b) the date of the commencement of the action;
(c) the date on which action is taken by the condemnor
which substantially affects the use and enjoyment of the
property by the condemnee; or (d) the date of the
declaration of blight[.]
[N.J.S.A. 20:3-30.]
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Here, the condemnation complaint was filed on January 23, 2018, and the
declaration of taking was filed on February 12, 2018.
We have previously described eminent domain trials relating to the value
of just compensation as "essentially an information inquisition in which the
boundaries of the inquiry must for pragmatical reasons be liberally entrusted to
the sound discretion of the trial judge." N.J. Highway Auth. v. Rudd, 36 N.J.
Super. 1, 3 (App. Div. 1955).
"'Relevant evidence' means evidence having a tendency in reason to prove
or disprove any fact of consequence to the determination of the action." N.J.R.E.
401. Relevant evidence is generally admissible, N.J.R.E. 402, but may be
excluded "if its probative value is substantially outweighed by the risk of: (a)
[u]ndue prejudice, confusion of issues, or misleading the jury; or (b) [u]ndue
delay, waste of time, or needless presentation of cumulative evidence." N.J.R.E.
403. "Evidence should be barred if its probative value 'is so significantly
outweighed by [its] inherently inflammatory potential as to have a probable
capacity to divert the minds of the jurors from a reasonable and fair evaluation
of the basic issue[s].'" Green v. Mfrs. Ins. Co., 160 N.J. 480, 491 (1999)
(alterations in original) (quoting State v. Thompson, 59 N.J. 396, 421 (1971)).
We review the trial court's evidentiary rulings under an abuse of discretion
standard, so long as the court's ruling is consistent with the applicable law.
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Hisenaj v. Kuehner, 194 N.J. 6, 12 (2008); Verdicchio v. Ricca, 179 N.J. 1, 34
(2004). We likewise review a trial court's grant or denial of a motion in limine
for abuse of discretion. Brenman v. Demello, 191 N.J. 18, 31 (2007) (citing
Green, 160 N.J. at 492). An abuse of discretion "arises when a decision is 'made
without a rational explanation, inexplicably departed from established policies,
or rested on an impermissible basis.'" Flagg v. Essex Cty. Prosecutor, 171 N.J.
561, 571 (2002) (quoting Achacoso-Sanchez v. I.N.S., 779 F.2d 1260, 1265 (7th
Cir. 1985)). "Under that standard, an appellate court should not substitute its
own judgment for that of the trial court, unless 'the trial court's ruling "was so
wide of the mark that a manifest denial of justice resulted."'" State v. Brown,
170 N.J. 138, 147 (2001) (quoting State v. Marrero, 148 N.J. 469, 484 (1997)).
The price the owner paid for the Property, "if it meets certain
qualifications," is "an exceedingly important piece of evidence" Rudd, 36 N.J.
Super. at 4-5 (citing 5 Nichols, Eminent Domain 266, § 21.2). The sale must be
"bona fide, such as to exemplify the bargain of a willing seller and a willing
buyer, and that the sale occurred within a reasonable time of the value date in
the condemnation proceedings." Id. at 5. "Where evidence of sale to the owner
possesses the requisite essentials and is not destitute of probative worth because
of special circumstances, it is admissible." Rudd, 36 N.J. Super. at 5 (citations
omitted).
A-2630-19
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During the Rule 104 hearing, it became clear the State planned to
introduce evidence of the Property's purchase price. Appellant moved in limine
to exclude reference to the purchase price, arguing that admittance of the
purchase price would unduly prejudice it by "letting [the] jury hear that the
property was purchased three years before the date of taking from an estate under
some sort of non-market conditions." In response, DOT argued that the purchase
price would be probative with respect to the expert witnesses' valuations. DOT
contended that a categorical bar of the purchase price would prejudice it by
hindering its ability to impeach appellant's appraisal expert.
The judge denied appellant's motion, explaining that although he was not
yet sure whether the price was important, it would be "if the experts used that
price in any sense at all." He concluded that the price was not "unduly
prejudicial because there's an explanation from both experts as to that." He
noted that the jury would want to know the price and any related explanation.
The judge further noted Stack's explanation "that it was, in effect, a short sale.
It was a fire sale." The seller did not foresee the potential development of the
property that appellant envisioned. The judge ruled the price was admissible,
finding it was relevant and not unduly prejudicial because appellant could
overcome any prejudicial impact.
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Appellant contends that the trial court erred by denying its motion in
limine to categorically bar evidence of the Property's purchase price.
Specifically, it contends that the trial court should have barred this evidence
because the $3.2 million purchase price in 2015 is not indicative of the subject
property's fair market value. Appellant claims that the purchase price was not
bona fide and was otherwise not used in either party's expert's fair market
valuations. We are unpersuaded by its argument.
The judge's findings are supported by the record. The price paid by
appellant was still relevant even though not relied upon by the experts in valuing
the property. The March 2015 sale contract was entered into three years before
the taking, but the sale was closed three months after the taking. In contrast, the
purchase in Rudd closed almost seven years before the taking. It was also
relevant to Stack's credibility, who referred to the purchase price in his report.
At trial, appellant had a full opportunity to demonstrate reasons why it
contended the price was not indicative of the fair market value. Moreover,
during cross-examination of Stack, the State asked: "Why didn't you use the
sale of the subject property, the assemblage sale of the subject property, as a
sale to indicate the value in this appraisal assignment?" Stack answered:
One of . . . the reasons you check to make sure
that a sale is really . . . a negotiated transaction, . . . it
has to meet the test of market value, and it really has to
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involve competition. There has to be exposure to the
marketplace, as opposed to, you know, one person that's
coming in, buying a property from a person that's not
really motivated. And that was . . . the situation here.
And, in the technical terms, this is referred to as
a non-useable sale. That’s the way the City of Jersey
City treated it for property-tax purposes, because it
involved an estate and . . . that the seller . . . didn't take
advantage of the -- of the full real-estate market.
Stack further testified that he included in his valuation report that the
seller of the subject property was ill and, in an effort to rationalize how a
property worth over $13 million in 2018 was sold in 2015 for $3.25 million,
opined that "the party that purchased [the subject property] had the vision . . .
the market was heading in a direction or else they wouldn't have paid $3 million
for a parking lot." In addition, appellant asked Karavolos during cross-
examination whether he used the 2015 purchase price in his valuation.
Karavolos replied that "[he] could not." Indeed, the purchase price was not used
by either Karavolos or Stack as a comparable sale. Its use was limited to
impeaching Stack. Consequently, the sale to appellant did not have to qualify
as a comparable sale.
When coupled with Karavolos' testimony that his valuation was based on
the comparable sales he used, not the purchase price, Stark's testimony
demonstrates that DOT's use of the purchase price during cross-examination was
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not unduly prejudicial. We are therefore convinced the judge did not abuse his
discretion by denying appellant's motion in limine.
Similarly, DOT's references to the purchase price during its closing were
permissible comment on the credibility of appellant's appraisal expert.
Appellant's reliance on State by Comm'r of Transp. v. Birch, 115 N.J. Super.
457 (App. Div. 1971), is misplaced. In Birch, plaintiff's counsel improperly
admonished the jury that "this is going to be a landmark case," that "will largely
determine how much the State Treasury will have to pay in similar situations"
in the future. Id. at 466. Counsel then told the jury, "[w]e know where the
money is coming from." Ibid. Unlike in Birch, this case did not include any
inappropriate comments by DOT's counsel.
In addition, appellant did not object to counsel's comments. We therefore
review for plain error that is "clearly capable of producing an unjust result." R.
2:10-2. We find no such plain error.
Finally, we reject appellant's speculation that the jury based its decision
on the purchase price rather than following the court's instructions "to decide
. . . which witnesses to believe and which witnesses not to believe," to consider
whether the witness was biased, and to consider whether the "witness' testimony
[was] reasonable when considered in the light of other evidence [the jury]
believe[d]." We presume that the jury followed the court's instructions. Bldg.
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Materials Corp. of Am. v. Allstate Ins. Co., 424 N.J. Super. 448, 475 (App. Div.
2012) (citing Windmere, Inc. v. Int'l Ins. Co., 208 N.J. Super. 697, 715 (App.
Div. 1986)).
In sum, we discern no basis to overturn the jury's verdict.
Affirmed.
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