Supreme Court Fails to "c" Property Owner’s Argument on Variance

by: Anthony F. Della Pelle
11 Nov 2013

The New Jersey Supreme Court recently considered whether it was proper, at a trial to determine just compensation, to allow a jury to hear evidence regarding the likelihood of a zoning approval without having the trial court first determine, outside of the jury’s presence, that there was a reasonable probability of such approval.  The issue arose when the Borough of Saddle River acquired a property which lay in an office zone and a residential zone.  The property owner, through its experts, sought to argue that it would be entitled to a “c” variance to develop a larger percentage of the property than the local zoning laws permitted.  The Borough disagreed and filed a motion before trial to exclude the evidence, but the trial court denied the motion by deferring its decision until the information was presented at trial.

At trial, the property owner’s experts testified that the highest and best use of the property would be a 10,000 square foot bank building, and that there was a reasonable likelihood that the application would be entitled to a bulk variance.  Prior to jury deliberation, the Borough renewed its motion to strike the testimony of East Allendale’s experts which the trial court denied by finding that a reasonable probability of a potential zoning change existed based on the testimony.  On appeal, the Borough argued that although the experts were permitted to present the arguments that they would have set before the Board in favor of the bulk variance, they did not address the positive and negative criteria under the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, which would have been required for Board approval.  The Appellate Division affirmed the trial court’s decision, concluding that there was sufficient evidence of a reasonable probability of a zoning change and that the jury could consider that evidence.  Borough of Saddle River v. 66 East Allendale, LLC, 424 N.J. Super. 516 (App. Div. 2012).  The New Jersey Supreme Court granted certification to hear the Borough’s appeal.

The Supreme Court, in a 3-2 decision, reversed the Appellate Division and trial court.  It noted that, although potential zoning approvals and changes can be considered in eminent domain trials because they may have an impact upon the fair market value of a property, such considerations must first be addressed as part of a two-step process under State by Commissioner of Transportation v. Caoili, 135 N.J. 252 (1994).  According to Caoili, the court must first act as a “gatekeeper” to determine whether there is sufficient evidence to show a “reasonable probability” of a zoning change.  The jury is then permitted to consider the weight of the evidence in determining just compensation.

The Court’s majority here found that the trial court’s failure to hold a pretrial hearing on the reasonable probability of a zoning change was at odds with Caoili’s gatekeeper function because it permitted the jury to hear potentially speculative testimony on the likelihood that a bulk variance would be granted. Significantly, the Court did recognize that not every condemnation action involving a future zoning change or approval would require an N.J.R.E. 104 plenary hearing prior to trial, but further held that the trial court here should have first determined whether it could render its determination on the papers alone, and then could have held an evidentiary hearing to resolve the issues raised if the issue could not be resolved on the parties’ written submissions.

Justice Albin, joined by the Chief Justice, filed a dissent stating that he would have affirmed.  In strong language, he stated that “the majority is not entitled to its own facts. The majority’s decision cannot be reconciled with the record. Nor can it be reconciled with the deferential standard of review that cautions this Court against substituting its judgment for evidentiary rulings made by the trial court and factual determinations made by the jury.”  Justice Albin seemed to be chiding the majority as he outlined the extensive testimony provided at trial in support of the reasonable probability that a “c” variance would have been granted for the property owner’s bank plan.

A copy of the Court’s opinion in Borough of Saddle River v. 66 East Allendale, LLC, __ N.J. __ (2013) can be found here.

For more on evidence issues in condemnation cases, please see the following blog posts:

Karan and Dune Replenishment: Where Do We Go From Here?

Real Estate Tax Appeal Evidence: Admissible in Eminent Domain Case?

Expert’s “Gut Feeling” on Costs Survives Dismissal Claim

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