A Tale of Two Valuations: High Courts in Pa and NJ Issue Just Compensation Rulings in Eminent Domain Proceedings

 

By John R. Embick, Esq.

Co-Chair, Environmental Law Section

August 13, 2013

 

The New Jersey Supreme Court and the Pennsylvania Supreme Court recently issued rulings regarding property valuation in eminent domain proceedings.  Both rulings seemingly expand the scope of evidence that may be presented in order to prove property value.

In Borough of Harvey Cedars v. Harvey Karan and Phyllis Karan, Doc. No. A-120-11 (July 8, 2013), the NJ High Court was presented with a just compensation appeal related to a dune development project on that skinny strand of land known as Harvey Cedars on Long Beach Island.  In an effort to protect property on Long Beach Island from storm damage, municipalities commenced dune elevation projects all along the coast line (by the way, most geologists acknowledge that barrier reef islands constantly shift position naturally, and have done so for millennia, and are expected to do so for the foreseeable future).

In order to raise up the dunes, the municipalities sought easements from beach front homeowners in order to perform the dune development work.  In instances where property owners refused to grant easements, the municipalities exercised eminent domain power to condemn the desired easements.  The Karans refused to grant an easement.  Reports indicate that Harvey Cedars offered $300.00 for the easement, and the Karans for their part demanded about $500,000.00.  With so much distance between the offers, this case was doomed to “go up.”

After a jury trial, the Karans were awarded $375,000.00, in recognition that the higher dunes partially obstructed the view of the beach and ocean from the house.  The municipality appealed, complaining that they were precluded from introducing evidence that would have shown that the dune development project benefitted the Karan’s greatly, thus offsetting any diminution in value.  The trial court refused to allow this evidence, holding that the dune replenishment was a general benefit for all residents, as opposed to a specific benefit to the Karans, and could not be counted.

The NJ Supreme Court disagreed, saying that it did not matter that the dune development project benefitted others.  As long as the alleged benefit was not speculative, this evidence could be introduced and considered by the jury.  The case was remanded for a new trial.   Since it is likely that the Karan house would be destroyed or severely damaged by a very strong storm without the fortified dunes, most experts think that the diminution of value will come out closer to the town’s original offer than to the Karan’s initial demand.

In Lower Makefield Township v. Dalgewicz, et al., Docket No. 33 MAP 2011 (May 29, 2013), the Pennsylvania Supreme Court ruled on an eminent domain case in Bucks County.  In 1996, Lower Makefield Township condemned a 166 acre farm for a public golf course development.  A board of view set the value at $3,990,000.00.  The parties were not able to agree on the damages, and the case on valuation went to a jury.

At the trial, the Dalgewiczs introduced evidence about purchase offers that had received for the property, both before and after condemnation, that were millions of dollars higher than the amount granted by the board of view. One of the written offers was from Pulte Homes, Inc., in the amount of $ 8,000,000.00.  The trial court allowed the testimony and admitted the documentary evidence, saying it was relevant.  The jury ultimately determined the fair market value of the property was $5,850,000.00, significantly higher than the board of view.  Commonwealth Court upheld.

In its decision, Commonwealth Court noted prior case law holding that mere offers generally should not be admitted into evidence (due to concerns about hearsay, speculation, and introduction of confusing collateral issues), but seemingly created an exception, where “a sufficient foundation was laid to establish that the offer was made in good faith, by a party acquainted with the value of the [p]roperty, and of sufficient intention and ability to pay” so as to make it a bona fide offer and, therefore, admissible. Lower Makefield Twp. v. Lands of Dalgewicz, 4 A.3d 1114, 1120 (Pa. Cmwlth. 2010). 

In sustaining the result, the Pa High Court stated that Commonwealth Court’s creation of an exception to longstanding precedent was unnecessary due to the 1964 amendments to the Eminent Domain Code, 26 Pa.C.S. §101, et seq., the latter which expanded the scope of evidence which could be considered.

The Pa Supreme court concluded by saying:

“Accordingly, we hold there is no bright-line rule prohibiting testimony of bona fide offers into evidence, especially, as in the present case, when a contract has been signed and the offer is used to show that contract’s reasonableness. In so holding, we are guided by the principle that “[t]he admission or exclusion of evidence is within the sound discretion of the trial court[.]” Lehigh-Northampton Airport Authority v. Fuller, 862 A.2d 159, 168 (Pa. Cmwlth. 2004) (citations omitted). Whether an offer is bona fide and whether it should be admitted are questions best left to the trial court as the gatekeeper of the evidence.”  Slip Op. at 9.

So, it looks like unprecedented evidentiary issues made a big winner of one shore town in NJ, and a big loser of a Pennsylvania township.  Municipal solicitors and elected officials must stay cognizant that land valuation for eminent domain matters is not all “cut and dry.”

 LBI, NJ, 2014, Dune Replenishment Project

LBI, NJ, 2014, Dune Replenishment Project