Condemning Authority Not Required To Negotiate With Mortgagee

by: Peter J. Gallagher

In a recent opinion, Borough of Merchantville v. Malik & Son, LLC, the New Jersey Appellate Division held that a condemning municipality was not required to negotiate with a party that had obtained a final judgment of foreclosure on the property that the municipality was looking to condemn. Under New Jersey law, before condemning real property, a condemning authority must, among other things, engage in bona fide pre-litigation negotiations with the party that "owns title of record to the property." Prior case law had made clear that this limitation meant that a condemning authority was not required to negotiate with a leaseholder or some other party that might have an "interest" in the property, but was instead required to negotiate only with the record title owner.

In Malik & Son, a lienholder argued that, by virtue of it having obtained final judgment of foreclosure on the property, it stepped into the shoes of the record title holder, and the municipality should have been negotiating with it instead of the record title holder. Specifically, the lienholder argued that it was not like a leasholder or even a "mere mortgage holder," but was instead the true "stakeholder and only party with a genuine interest in negotiating the sale of the property" because it had possession of the property, the right to sell it, a final judgment of foreclosure, and had scheduled a sheriff's sale by the date of the taking . Relying on the plain language of the relevant statutes, the trial court rejected this argument, and the Appllate Division affirmed its decision. The Appellate Division further explained that the municipality did not preclude the record title holder from discussing the negotiations with the lien holder, and that the lienholder — as a "condemnee with a compensable interest," albeit not the record title holder — could participate in subsequent valuation and allocation eminent domain proceedings.

Stop The Beach (Again): Supreme Court Agrees To Hear Another Potential Case On Judicial Takings

by: Peter J. Gallagher

Somewhat lost amid the flurry of opinions handed down by the United States Supreme Court at the end of the 2010-11 session was its grant of certiori in PPL Montana LLC v. Montana (the link takes you to the SCOTUSblog page for the case, which contains the underlying opinion and the cert documents). PPL Montana, Montana's largest private producer of hydroelectric power, appealed a decision from the Montana Supreme Court that, among other things, required the company to pay rent for its use of Montana rivers. The Montana Supreme Court concluded that the Missouri, Madison, and Clark Fork Rivers were owned by the state because the rivers as a whole were navigable when Montana entered the Union. The company argued, unsuccesfully, that the navigability of a river must be determined "section by section," rather than in the entirety, and that the portions of the rivers that the company uses are not navigable.

The case is seen by many commentators as another opportunity for the U.S. Supreme Court to address the notion of "judicial takings" that it recently addressed in Stop the Beach Renourishment v. Flordia Dept. of Environmental Protection. (Broadly speaking, the question presented in that case was whether a judicial decision can qualify as a "taking" – think eminent domain – that requires the person from whom property is taken to be compensated under the U.S. Constitution.) In Stop the Beach, Chief Justice Roberts and Justices Scalia, Kennedy, and Alito held that there was such a thing as a judicial taking (although no member of the court believed there was a taking in the case itself). Several other justices suggested that they might be persuaded to join these four in a future decision, but that Stop the Beach was not the right case to do so because there was no taking and thus the court did not need to reach the broader, essentially theoretical, question of whether judicial action could ever amount to a taking. The PPL Montana case may provide the opportunity for at least one of these justices to join the four who are already willing to recognize judicial takings. Stay tuned for more details as the case develops.

“Put Your Makeup On, Fix Your Hair Up Pretty, And Meet Me Tonight In Atlantic City.”

by: Peter J. Gallagher

Apparently there is more than fist bumping (pumping?) going on "down the Shore." The PropertyProf Blog has an interesting story about what it calls "A Non-Taking On The Jersey Shore." If nothing else, the story gives me a work-related reason to go down to Atlantic City. I don't really want to go down to the casinos, I have to do it for the sake of the blog . . .

The article tells the story of a tiny lot sandwiched in between Trump Plaza and Cesar's Palace. It is zoned for gambling, which the post notes "doesn't exactly seem like the highest and best use." But, the lot has some history, as it was at the center of a high-profile takings case from the early days of the once booming (now not really booming) gambling mecca:

Vera Coling and her husband bought the property in 1961, when Atlantic City was still a thriving beachtown. A decade later, as the city fell into decline, it made the drastic decision to legalize gambling and welcome big-time casino development. The prime location of Coking's three-story house quickly attracted the interest of the real estate industry. In 1983, for example, Bob Guccione (the founder of Penthouse), offered to purchase the house for $1 million to build a casino. Coking said no.

Soon enough, the property attracted the attention of another tycoon – Donald Trump. Unlike Guccione, Trump had the local redevelopment agency attempt to acquire the property through eminent domain for $250,000, a much reduced price. Coking sued Trump and the redevelopment agency, claiming that the taking was not for a public purpose. The Superior Court in New Jersey agreed with Coking. It ruled that because there were few restrictions on what Trump could do with the property, there were "no assurances that the public interest will be protected."

The post notes that the arguments raised in the case are "[o]f historical interest for property profs" and other folks interested in takings, because it was "the Institute for Justice's first test case for the theories it later advanced in Kelo [v. City of New London]," the controversial eminent domain/takings case decided by the U.S. Supreme Court a few years back.

Also of historical interest is the interview with Donald Trump embedded in the post, which presents a much younger, pre-Apprentice, less coiffed, but no less pompous, version of the Donald.

Finally, in case you are interested, the property is for sale. Here is the listing. It can be yours for only $5 million, or slightly less than what this guy took from the Tropicana in a marathon gamling session a few weeks ago.

Imminent Changes To Eminent Domain In New Jersey?

The Asbury Park Press reports on the latest efforts to reform New Jersey's eminent domain law. In the five years since the landmark U.S. Supreme Court decision in Kelo v. City of New London— which upheld the government's right to take land for private redevelopment — 43 states have revised their eminent domain laws, but New Jersey has not yet done so. On October 7, 2010, a proposal passed the Senate Community and Urban Affairs Committee that would revise New Jersey's current eminent domain law to require additional notification and hearing requirements in an effort to protect homeowners. The measure's sponsor touts the proposal as an effective balance between residents' rights and local government's ability to redevelop blighted areas. Critics have emerged on both sides of the issue – with some saying it goes to far, and others complaining that it doesn't go far enough towards meaningful reform. As the article notes, the bill "requires at least four additional approvals before it could get to Gov. Chris Christie's desk," so it remains to be seen whether the latest efforts at eminent domain reform will come to fruition or die on the vine as they have in the past.

Iminent Changes To Eminent Domain In New Jersey?

The Asbury Park Press reports on the latest efforts to reform New Jersey's eminent domain law. In the five years since the landmark U.S. Supreme Court decision in Kelo v. City of New London— which upheld the government's right to take land for private redevelopment — 43 states have revised their eminent domain laws, but New Jersey has not yet done so. On October 7, 2010, a proposal passed the Senate Community and Urban Affairs Committee that would revise New Jersey's current eminent domain law to require additional notification and hearing requirements in an effort to protect homeowners. The measure's sponsor touts the proposal as an effective balance between residents' rights and local government's ability to redevelop blighted areas. Critics have emerged on both sides of the issue – with some saying it goes to far, and others complaining that it doesn't go far enough towards meaningful reform. As the article notes, the bill "requires at least four additional approvals before it could get to Gov. Chris Christie's desk," so it remains to be seen whether the latest efforts at eminent domain reform will come to fruition or die on the vine as they have in the past.