New Jersey Case of the Month (October 2008)

October 2008 In The Zone

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A New Jersey appellate court in City of Long Branch v. Louis Thomas Anzalone handed a victory to homeowners in a long-running eminent domain dispute with the city of Long Branch, N.J. (the City), finding no evidence of actual blight as required by N.J.S.A. 40A:12A-5 and the New Jersey Constitution.

In a unanimous 85-page opinion, approved for publication, the Appellate Division reversed the decision of the trial court and remanded the controversial eminent domain case for a plenary hearing, determining that the City failed to find actual blight in the 25-acre parcel of beachfront it hoped to take over from landowners and convert to a 185-unit condominium development.

The homeowners reside in a neighborhood which is part of a larger area the City declared to be in need of redevelopment and for which the City adopted a redevelopment plan in 1996. In late 2005 and early 2006, the City filed condemnation actions against the homeowners, who responded by filing motions to dismiss.Without granting the homeowners' request for discovery and a plenary hearing, the trial judge, after hearing oral argument, denied the motions and granted judgment in favor of the City, appointing condemnation commissioners.

The trial court determined that the City properly found, pursuant to N.J.S.A. 40A:12A-5(a),(c), (d) and (e), that the area comprising the homeowners' properties was in need of redevelopment. The homeowners argued that the trial court erred by:

1) finding substantial evidence to support the City's findings that the area was in need of redevelopment

2) failing to find that the taking of the properties represented a change in the plan that required readoption

3) failing to conduct a plenary hearing on disputed material facts

4) failing to find that conflicts of interest invalidated the City's findings

5) failing to dismiss the condemnation complaints because the City failed to pursue bona fide negotiations

6) failing to find that the City improperly delegated eminent domain authority to the redeveloper

The Appellate Division agreed with the homeowners, finding that material facts were in dispute regarding not only whether substantial evidence supported a finding of a need for redevelopment, but also as to the subsidiary issues (if the plan is otherwise valid) of (1) construction of the terms of the redevelopment plan as it applied to the homeowners’ neighborhood, and thus whether the taking of the properties represented a change in the plan that required readoption, and (2) whether the neighborhood was integral to the overall redevelopment area and whether its inclusion was necessary to the redevelopment plan.

The Appellate Division noted that the trial court issued its ruling prior to the Supreme Court's decision in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007), which reaffirmed that the New Jersey Constitution requires a finding of actual blight before private property may be taken for the purpose of redevelopment and that a municipality can't condemn property as blighted by saying it is "not fully productive" and thus needs development.

Gallenthin involved only a finding under N.J.S.A. 40A:12A-5(e), but the Appellate Division in the Long Branch matter determined that the constitutional and legislative history analysis in Gallenthin applies equally to subsections (a), (c) and (d). As such, the court concluded that, under Gallenthin's heightened standard, the trial court record did not contain substantial evidence to support the City's findings under any of the subsections upon which it relied. Specifically, the Appellate Division found that the City had presented little evidence beyond "a bland recitation of applicable statutory criteria and a declaration that those criteria are met," along with a poorly evidenced "expert" report.That was not considered enough to justify condemnation and, accordingly, the court reversed the judgments appointing commissioners.

Notably, the Appellate Division ruled that Gallenthin and the New Jersey Constitution require that an area can only be declared "blighted" if there is "substantial evidence" of blight. And blight justifying eminent domain is only present if the poor condition of the area to be taken causes genuine harm to surrounding neighborhoods. A mere insufficiency of economic growth and development is not enough for a blight designation.

The court specifically noted that its reading of Gallenthin, and thus N.J.S.A. 40A:12A-5, requires a municipality to find that the physical condition of the properties at issue was contributing to social problems not only within the redevelopment area, but also in nearby areas. Even though redevelopment would be expected to result in higher property tax payments and more spending for local businesses, the difference between the actual level of economic activity in the redevelopment area and the level that might be achieved after its transformation does not by itself amount to blight. Eminent domain based solely on such a difference would instead amount to condemnation due to the area's perceived insufficiency of wealth, and it would exemplify the [NJ Supreme] Court's fear that most property would be continuously subject to forced redevelopment if the threshold requirement were nothing more than the possibility of a more profitable use of the land.

Despite the above determination, the Appellate Division still gave broad leeway to local governments by emphasizing that blight designations are considered "presumptively valid" and that proof of blight requires only that there be substantial evidence of "deterioration" or stagnation that might harm surrounding areas.

For more information about this issue, please contact Peter Sarkos at 609.572.2252 or [email protected].