Borough of Merchantville v. Malik & Son (072255) , 218 N.J. 556 ( 2014 )

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized).
Borough of Merchantville v. Malik & Son, LLC (A-66-12) (072255)
Argued April 1, 2014 -- Decided August 7, 2014
CUFF, P.J.A.D. (temporarily assigned), writing for a unanimous Court.
In this appeal, the Court considers whether the Eminent Domain Act, N.J.S.A. 20:3-1 to -47, specifically
N.J.S.A. 20:3-6, requires a condemning authority to engage in bona fide negotiations with a mortgage holder that
has obtained a final judgment of foreclosure for the property sought to be condemned.
Malik & Son, LLC (Malik) owned property (the Property) in the Borough of Merchantville (Borough) that
was designated by the Borough as an area in need of redevelopment. Malik defaulted on the Property’s mortgage
loan and a final judgment of foreclosure was entered against it on February 28, 2011. LB-RPR REO Holdings, LLC
(LB), a redeveloper of distressed properties, obtained the rights to the loan and final judgment of foreclosure.
On September 26, 2011, the Borough adopted a redevelopment plan for the Property and engaged an
appraiser to ascertain the Property’s fair market value. The appraiser assigned the Property a pre-renovation fair
market value of $270,000. In a letter dated November 11, 2011, the Borough offered Malik $270,000 for the
Property and enclosed the appraisal and facility assessment evaluation. The Borough informed Malik that it would
assume “that [Malik] [does] not accept this current offer and [does] not wish to proceed with further negotiations
with the Borough,” if Malik did not respond by November 28, 2011. In a letter dated November 23, 2011, Malik’s
attorney replied that “the amount offered by [the Borough was] far less than [Malik] owes [its lender]. Therefore,
[Malik] cannot accept [the Borough’s] offer as [Malik] would not be in a position to provide clear title to the same.”
Malik’s attorney stated the letter should be considered as “formal notification” of his client’s rejection of the offer,
but invited further discussion about “more reasonable compensation in an amount which would satisfy all liens and
encumbrances on the [P]roperty.” That same date, LB’s attorney contacted the Borough and, among other things,
informed the Borough that the Property was scheduled to be sold at Sheriff’s Sale on December 7, 2011 and
expressed its desire to meet with the Borough to discuss reasonable compensation for the Property.
On December 5, 2011, the Borough filed a declaration of taking and verified complaint in condemnation,
and deposited $270,000 with the Clerk of the Superior Court. LB filed a motion to dismiss the complaint, arguing,
among other things, that that the Borough breached its duty to engage in bona fide negotiations with Malik and LB,
as the real party in interest, prior to initiating the condemnation action. The trial court concluded that that the
Borough had no obligation to negotiate with LB, that the Borough had properly submitted its purchase offer to the
owner of record, Malik, and that Malik’s rejection of the offer satisfied the statutory requirement of bona fide
negotiations prior to the exercise of eminent domain authority. The Appellate Division affirmed, holding that the
Borough did not have a duty to negotiate with LB and that that the Borough satisfied its statutory obligation to
negotiate in good faith with the title of record holder. Borough of Merchantville v. Malik & Son, LLC, 429 N.J.
Super. 416 (App. Div. 2013). The Court granted ’s LB’s petition for certification. 214 N.J. 117 (2013).
HELD: Prior to instituting a condemnation action, a condemning authority has an obligation to present an offer to
acquire the subject property and to engage in bona fide negotiations only with the holder of the title of record or the
holder of the interest sought to be condemned. Therefore, the condemning authority here was not required to engage
in negotiations with the holder of the final judgment of foreclosure for the property sought to be condemned.
1. The initiation of foreclosure proceedings does not extinguish the mortgagor’s interest in the encumbered property.
Pursuant to the right to redeem, the mortgagor has the right to satisfy the debt and regain complete ownership of his
property at any time before entry of judgment. In New Jersey, the right to redeem extends beyond the foreclosure
and Sheriff’s Sale to “the ten-day period fixed by [Rule] 4:65-5 for objections to the [foreclosure] sale and until an
1
order confirming the sale if objections are filed under the rule.” Hardyston Nat’l Bank v. Tartamella, 56 N.J. 508,
513 (1970). (pp. 12-14)
2. The State may take private property for public use with the payment of just compensation. N.J. Const. art. I, ¶
20. The Eminent Domain Act (Act) governs such takings. Under the Act, “no action to condemn shall be instituted
unless the condemnor is unable to acquire such title or possession through bona fide negotiations with the
prospective condemnee, which negotiations shall include an offer in writing by the condemnor to the prospective
condemnee holding the title of record to the property being condemned . . . .” N.J.S.A. 20:3-6 (emphasis added).
N.J.S.A. 20:3-2(c) defines condemnee as “the owner of the interest in the private property being condemned.” This
language has been interpreted to mean exactly what it says, that is, the condemning authority has the obligation to
negotiate only with the title holder of record when it seeks to acquire a fee interest. City of Atl. City v. Cynwyd
Invs., 148 N.J. 55 (1997). In Cynwyd, the Court explained that “[g]iven the breadth of the term ‘condemnee,’”
limiting the party with whom a condemning authority must negotiate to the title holder of record “avoids the
difficult requirement of negotiating with each condemnee having an interest in the property.” Id. at 70. The Court
noted that other condemnees with compensable interests are still protected because they are permitted to participate
in subsequent valuation and allocation proceedings. Id. at 70-71. In Town of Kearny v. Disc. City of Old Bridge,
Inc., 205 N.J. 386 (2011), in which the Court recognized that a condemning authority may condemn less than a fee
simple interest, the Court reaffirmed that “where a fee simple is being condemned, negotiations will take place with
the fee owner alone.” Id. at 407. (pp. 15-20)
3. The Act does not define what is necessary to meet the statutory requirement of a bona fide negotiation. It
provides that the offer must include “[a]n offer in writing by the condemnor to the prospective condemnee . . .
setting forth the property and interest therein to be acquired, the compensation offered to be paid and a reasonable
disclosure of the manner in which the amount of such offered compensation has been calculated, and such other
matters as may be required by the rules.” State by Commissioner of Transportation v. Carroll, 123 N.J. 308, 323
(1991) (citing N.J.S.A. 20:3-6). In addition, this Court has determined that the “one-price” offer method must be
used, which requires “an initial full price offer . . . to prevent the State from making low offers to gain a bargaining
advantage . . . .” Id. at 318. When the property owner rejects the condemning authority’s offer, the condemning
authority may have an obligation to continue to discuss the offering price when the response provides credible
information supporting its opinion that the offer is too low. County of Morris v. Weiner, 222 N.J. Super. 560, 565
(App. Div.), certif. denied, 111 N.J. 573 (1988). (pp. 20-22)
4. Applying these principles, LB’s status as the holder of a final judgment of foreclosure did not require the Borough
to present an offer to it and negotiate with it. Although L.B. anticipated a Sheriff’s Sale within weeks of the
Borough’s pre-taking offer to Malik, L.B.’s judgment could have been satisfied by Malik at any time. Even after the
Sheriff’s Sale, Malik had a right to redeem. Malik’s apparent inability or lack of desire to exercise that right did not
elevate the nature of LB’s interest in the Property to “holding the title of record to the property” under N.J.S.A.
20:3-6. N.J.S.A. 20:3-6 does not recognize real parties in interest or those more concerned about the state of the
subject property than the title holder of record. (pp. 22-24)
5. The Court’s holding that N.J.S.A. 20:3-6 limits negotiations to the record titleholder leads to the inexorable
conclusion that LB lacks standing to challenge the bona fides of the negotiation between the Borough and Malik.
Nevertheless, for the sake of completeness, the Court addresses this issue. At a minimum, the Borough was required
to retain an appraiser to prepare an appraisal of the Property, to use a one-price offer method to formulate its offer,
and to extend the offer accompanied by the appraisal report to the Property owner. The Borough satisfied those
requirements. Although a condemnor must respond to an invitation to engage in further discussions about the
offering price when that invitation is supported by concrete and credible evidence of value, Malik failed to provide
such evidence. Rather, it simply noted that any compensation less than the amount required to satisfy its lenders
was not acceptable. Under those circumstances, the Court cannot conclude that the Borough breached its duty to
engage in bona fide negotiations with Malik. (pp. 24-25)
The judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA and ALBIN and JUDGE RODRÍGUEZ
(temporarily assigned) join in JUDGE CUFF’s opinion. JUSTICES PATTERSON and FERNANDEZ-VINA
did not participate.
2
SUPREME COURT OF NEW JERSEY
A-66 September Term 2012
072255
BOROUGH OF MERCHANTVILLE,
Plaintiff-Respondent,
v.
MALIK & SON, LLC and/or
SHAUKAT MALIK and/or BOBBY
MALIK, WELLWOOD REALTY, LP,
UBS PRINCIPAL FINANCE, LLC,
LASALLE BANK NATIONAL
ASSOCIATION, LB-UBS
COMMERCIAL MORTGAGE TRUST,
BANK OF AMERICA, GERMAN
AMERICAN CAPITAL CORPORATION
(a MARYLAND CORPORATION),
DAWN-BV, LLC, LB-UBS 2000-C3
WELLWOOD MANOR, LLC, WACHOVIA
BANK, NA, TAX LIEN SERVICE
GROUP, CAMDEN COUNTY
MUNICIPAL UTILITIES
AUTHORITY, and THE
MERCHANTVILLE PENNSAUKEN
WATER COMMISSION,
Defendants,
and
LB-RPR REO HOLDINGS, LLC,
Defendant-Appellant,
and
U.S. BANK, AS CUSTODIAN FOR
CRESTAR CAPITAL, LLC,
Defendant-Respondent.
1
Argued April 1, 2014 – Decided August 7, 2014
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at 429 N.J. Super. 416 (2013).
Stuart M. Lederman argued the cause for
appellant (Riker Danzig Scherer Hyland &
Perretti, attorneys; Mr. Lederman and Rudy
S. Randazzo, on the briefs).
Timothy J. Higgins argued the cause for
respondent Borough of Merchantville.
Adam D. Greenberg submitted a letter in lieu
of brief on behalf of respondent U.S. Bank,
as custodian for Crestar Capital, LLC (Honig
& Greenberg, attorneys).
JUDGE CUFF (temporarily assigned) delivered the opinion of
the Court.
In this appeal, the Court must determine whether N.J.S.A.
20:3-6 requires a condemning authority to engage in bona fide
negotiations with a mortgage holder that has obtained a final
judgment of foreclosure for the property sought to be condemned.
In this case, the condemning authority initiated eminent domain
proceedings after the property owner rejected its offer to
acquire the property, just days before the holder of the
foreclosure judgment expected the property to be sold at a
Sheriff’s Sale. The judgment holder contended it was the real
party in interest, and that the condemning authority had an
obligation to negotiate with it rather than the property owner
prior to initiating condemnation proceedings.
2
The trial court concluded that the condemning authority had
properly submitted the offer to the owner of record, and the
subsequent rejection of the offer satisfied the statutory
requirement of bona fide negotiations prior to the exercise of
eminent domain authority. The trial court also determined that
the condemning authority had no obligation to advise the
foreclosure judgment holder of its intention to condemn or to
engage in bona fide negotiations with it. In a reported
decision, the Appellate Division affirmed.
We hold that a condemning authority has an obligation to
present an offer to acquire property and to engage in bona fide
negotiations with no party other than the individual or entity
that holds title to the property or the holder of the interest
sought to be condemned. In addition, we determine that the
offer presented in this case and the reply by the property owner
satisfied the statutory requirement of bona fide negotiations
with the property owner before initiating condemnation
proceedings. We therefore affirm the judgment of the Appellate
Division.
I.
A.
Malik & Son, LLC (Malik) owned property commonly known as
606 West Maple Avenue, and referred to as Block 9, Lots 2 and 3
(the Property) on the municipal tax map in the Borough of
3
Merchantville (Borough), Camden County. The Property contains a
fifty-four unit apartment building and had been designated by
the Borough as an area in need of redevelopment.1 Malik assumed
a mortgage loan issued by LB-RPR REO Holdings, LLC’s (LB)
predecessor, and defaulted on the loan. LB’s predecessor in
interest filed a complaint to foreclose the mortgage, and Malik
did not file an answer. On February 28, 2011, the court entered
a final judgment of foreclosure. LB’s predecessor in interest
transferred all its rights and interest in the Property to LB
the next day.
LB is a redeveloper of distressed properties. Once it
acquired the loan, LB had a receiver appointed for the Property
and made substantial repairs to the building. In an effort to
protect its interest in the Property, LB sought, and the court
entered, an order that directed that Malik could not sell the
Property without the express approval of the sale price by LB.
Throughout 2010 and 2011, the Borough pursued a plan to
redevelop the Property. Following designation of the Property
as an area in need of redevelopment, the Planning Board prepared
1
The Planning Board found that the building on the Property was
“substandard, unsafe, unsanitary, dilapidated, or obsolescent,
or possess[ed] any of such characteristics,” N.J.S.A. 40A:12A-
5(a); that the characteristics described in subsection 5(a) “are
detrimental to the safety, health, morals, or welfare of the
surrounding area or community,” N.J.S.A. 40A:12A-5(d); and that
redevelopment was “consistent with smart growth planning
principles adopted pursuant to law or regulation,” N.J.S.A.
40A:12A-5(h).
4
a proposed redevelopment plan for the Property and adopted a
resolution recommending that plan to the Mayor and Council. On
September 26, 2011, the Borough designated Citadel Wellwood, LLC
(Citadel) as the redeveloper of the Property, and adopted the
redevelopment and rehabilitation plan for the Property.
As the Borough considered a redevelopment plan for the
Property, Malik listed it for sale. On February 14, 2011,
months before Citadel was designated as the redeveloper of the
Property, Citadel entered a contract to purchase it for
$1,250,000. Richard DePetro, the principal of Citadel,
cancelled the contract on June 24, 2011, after seeking a
$200,000 reduction in the purchase price due to the deteriorated
condition of the building. Malik rejected the offer, citing the
amount due on the LB mortgage. Prior to cancelling the
contract, Citadel contacted LB and offered to purchase the
Property for $1,250,000 if LB agreed to a short sale to permit
satisfaction of other liens. In the course of those
discussions, DePetro mentioned to LB’s representative that the
Borough would probably condemn the Property. In June 2011, in
response to an inquiry from an LB representative, the Borough
denied any intention to condemn the Property.
However, once the Borough adopted the redevelopment plan on
September 26, 2011, the Borough engaged an appraiser to
ascertain the fair market value of the Property. The appraiser
5
opined that as of August 24, 2011, its fair market value was $0.
He calculated that value because the cost to renovate the
Property far exceeded its market value following renovation and
rehabilitation. The appraiser also assigned a fair market value
of $270,000 without renovations.
In a letter dated November 11, 2011, the Borough offered
Malik $270,000 for the Property. The Borough explained that the
offer reflected the pre-renovation fair market value of the
Property. The Borough enclosed the appraisal and a facility
assessment evaluation. The Borough informed Malik that it would
assume “that [Malik] [does] not accept this current offer and
[does] not wish to proceed with further negotiations with the
Borough,” if Malik did not respond by November 28, 2011. In a
letter dated November 23, 2011, Malik’s attorney replied that
“the amount offered by [the Borough was] far less than [Malik]
owes [its lender]. Therefore, [Malik] cannot accept [the
Borough’s] offer as [Malik] would not be in a position to
provide clear title to the same.” Malik’s attorney stated the
letter should be considered as “formal notification” of his
client’s rejection of the offer, but invited further discussion
about “more reasonable compensation in an amount which would
satisfy all liens and encumbrances on the [P]roperty.”
That same date, LB’s attorney contacted the Borough. In an
email, citing its discussion in June, LB expressed its surprise
6
that the Borough intended to condemn the Property and noted that
the Borough’s offer was far less than the price offered by
Citadel in June 2011. LB’s attorney informed the Borough that
it had obtained a final judgment of foreclosure and that the
Property was scheduled to be sold at Sheriff’s Sale on December
7, 2011. Noting that it would soon own the Property, LB
expressed its desire to meet with the Borough to discuss
reasonable compensation for the Property.
B.
The Borough filed a declaration of taking and verified
complaint in condemnation on December 5, 2011. The Borough
deposited $270,000 with the Clerk of the Superior Court. In
response to the Order to Show Cause entered by the trial court,
LB filed a motion to dismiss the complaint.
In its motion, LB argued that the Borough had failed to
engage in bona fide negotiations with Malik and it. LB also
contended that the Borough was bound by the earlier offer of
Citadel, its later-designated redeveloper, and that the Borough
had failed to honor its obligation to deal candidly and fairly
with LB. Holding that the Borough had no obligation to
negotiate with LB and that the Borough had discharged its
obligation to engage in bona fide negotiations with the Property
owner prior to initiating condemnation proceedings, the trial
court filed an order for final judgment and appointed a panel of
7
commissioners to examine and appraise the Property and to fix
the compensation to be paid by the Borough.
In its appeal to the Appellate Division, LB argued that the
trial court erred in finding that the Borough had satisfied its
statutory pre-taking obligation to engage in bona fide
negotiations with Malik, that the Borough had a duty to engage
in direct negotiations with it as the real party in interest,
and that the Borough had failed to treat “the condemnees with
absolute candor and fairness.” LB contended that the trial
court failed to recognize that the offered compensation was
grounded in a patently deficient appraisal, and that the Borough
used the designated redeveloper to circumvent the protections
provided to condemnees by statute.
The Borough responded that it had a duty to negotiate only
with the individual or entity holding the title of record, that
it had satisfied its statutory obligation to negotiate in good
faith with Malik, and that the formulation of its offer was
consistent with law. Finally, the Borough argued that LB’s
contention about the Borough’s lack of candor or “sleight-of-
hand” did not undermine the Borough’s authority to take the
Property or the good faith of its offer and negotiations with
8
Malik. It suggested that, at most, those arguments might be
relevant to the appropriate date of valuation.2
In a reported opinion, the Appellate Division affirmed.
Borough of Merchantville v. Malik & Son, LLC, 429 N.J. Super.
416 (App. Div. 2013). It held that the Borough did not have a
duty to negotiate the offer of just compensation for the
Property with LB. Id. at 428. The appellate panel noted that
N.J.S.A. 20:3-6 requires the condemning authority to negotiate
only with the individual or entity holding the title of record
to the property to be condemned, or, when the fee is not at
issue, with the holder of an interest sought to be condemned,
such as a leaseholder. Ibid. (citing Town of Kearny v. Disc.
City of Old Bridge, Inc., 205 N.J. 386, 407 (2011)). The panel
observed that limiting the duty to negotiate only with the title
holder of record still protects the interests of condemnees with
a compensable interest because they are permitted to participate
in subsequent valuation and allocation proceedings. Id. at 429.
The appellate court determined that the Borough had
provided the appraisal report to Malik, that it was prepared in
accordance with professional standards, and that the report
provided a clear description of the Property, a clear
2
Crestar Capital, LLC, the holder of a tax lien certification
against the Malik Property, had filed a motion to disburse the
funds on deposit with the trial court. It took no position on
the merits of the appeal.
9
description of the valuation approach chosen, and a clear
explanation of the fair market value of the Property. Id. at
429. The Appellate Division also concluded that the Borough had
no obligation to respond to Malik’s November 23, 2011 letter and
that the initiation of condemnation proceedings shortly after
Malik rejected the Borough’s offer did not evince a lack of good
faith by the Borough. Id. at 434. The panel concluded that
“the Borough dealt ‘forthrightly and fairly’ in its negotiations
with Malik and satisfied its obligations to ‘turn square
corners.’” Id. at 433 (quoting F.M.C. Stores Co. v. Borough of
Morris Plains, 100 N.J. 418, 426 (1985)). We granted LB’s
petition for certification. 214 N.J. 117 (2013).
II.
LB reiterates its arguments presented in the trial court
and Appellate Division. It maintains that the Eminent Domain
Act, specifically N.J.S.A. 20:3-6, requires a condemning
authority to engage in bona fide negotiations not only with the
title holder of record but also with the holder of a final
judgment of foreclosure, particularly when that party has
obtained an order from the court requiring the judgment holder’s
approval of any sale of the property and when the condemning
authority has received notice that a Sheriff’s Sale has been
scheduled. LB maintains that the appellate opinion questions
its right to contest the taking because it implies that “a non-
10
title owner condemnee does not benefit from the bona fide
negotiations requirement and therefore does not have standing to
complain when a condemnor fails to negotiate.”
LB also contends that the failure of the Borough to respond
to Malik’s letter rejecting its offer but inviting a higher
offer breached the condemning authority’s duty of candor and
fairness to owners of property targeted for condemnation. By
declaring that Malik’s letter did not trigger the need for
further negotiations, LB asserts that the Appellate Division
placed “a substantial burden on condemnees to use very specific
and special language when responding to condemnation offers or
else lose the opportunity to enjoy the bona fide negotiations
that New Jersey considers essential to a true award of just
compensation.” It maintains that the Appellate Division opinion
on this issue is in direct conflict with County of Morris v.
Weiner, 222 N.J. Super. 560 (App. Div.), certif. denied, 111
N.J. 573 (1988), and misconstrues State by Commissioner of
Transportation v. Carroll, 123 N.J. 308 (1991).
The Borough responds that LB misstates the issue. It
contends the issue in this appeal is with whom the Borough owed
a duty to negotiate before initiating a condemnation proceeding,
not whether the Borough engaged in bona fide negotiations prior
to initiating the condemnation proceeding. The Borough urges
that the Appellate Division correctly determined that it was
11
obliged to tender a good faith offer supported by an appropriate
appraisal to Malik, the owner of record of the Property, that LB
was not the record owner of the Property, and that it engaged in
bona fide negotiations with Malik.
III.
The principal issue presented in this appeal, the party
with which a condemning authority must negotiate prior to
commencing a condemnation proceeding, requires an understanding
of the nature of the interest acquired by a holder of a final
judgment of foreclosure and the interest retained by the owner
of record following entry of that order and until a Sheriff’s
Sale. We commence our discussion with a brief review of the
post-judgment mortgage foreclosure process followed by an
examination of the condemnation process and the obligations
imposed on the condemning authority.
A.
The initiation of foreclosure proceedings does not
extinguish the mortgagor’s interest in the encumbered property.
The mortgagor has the right to satisfy the debt at any time
before entry of judgment and thereafter under certain
circumstances. This right is referred to as the right to redeem
or the right of redemption.
The right to redeem is the right of a mortgagor to reassert
complete fee simple ownership of his property by paying the
12
complete debt and any other charges assessed under the terms of
the mortgage or under statutory provision. 55 Am. Jur. 2d
Mortgages § 787 (2009). The right of redemption evolved as a
right of the debtor in equity to prevent the loss of the
property at any time before the judgment of foreclosure.
Carteret Sav. & Loan Ass’n v. Davis, 105 N.J. 344, 347 (1987).
In many states, a further statutory right of redemption exists
following the Sheriff’s Sale of a property to further protect
mortgagees, however this is not the case in New Jersey.3
Instead, it has been the settled law in this State that an
owner-mortgagor has a right to redeem the mortgaged property
following foreclosure and Sheriff’s Sale, by the payment in full
of the mortgage indebtedness, costs of foreclosure, and costs of
sale. Hardyston Nat’l Bank v. Tartamella, 56 N.J. 508, 513
(1970). Under Hardyston, the right must be exercised “within
the ten-day period fixed by [Rule] 4:65-5 for objections to the
[foreclosure] sale and until an order confirming the sale if
objections are filed under the rule.” Ibid. If an objection to
the sale is filed, the right to redeem continues until the
disposition of the filed objections. Brookshire Equities, LLC
3
There is no statutory right of redemption of a mortgage in New
Jersey other than the right of redemption given to persons
against whom a deficiency judgment is entered for a period of
six months following the deficiency judgment. N.J.S.A. 2A:50-4.
13
v. Montaquiza, 346 N.J. Super. 310, 316 (App. Div.), certif.
denied, 172 N.J. 179 (2002).
“This right of redemption confirmed in Hardyston is not
fashioned by nor dependent upon statute; instead, it is a right
created and devised by equity to protect a mortgagor from the
forfeiture of his title.” Lobsenz v. Micucci Holdings, Inc.,
127 N.J. Super. 50, 52 (App. Div. 1974) (internal quotation
marks omitted). This right is of such utmost importance that
our laws do not permit it to be waived in a mortgage instrument
or in a contemporaneous agreement. Hardyston, supra, 56 N.J. at
513 (citing Dorman v. Fisher, 31 N.J. 13, 15 (1959)). This
right “is a valuable right . . . subject to transfer and
conveyance[,] just as is any other right, title or interest in
or to real property.” Lobsenz, supra, 127 N.J. Super. at 52.
“A purchaser at the foreclosure sale bids and buys with actual
or implied knowledge of this existence of the right to redeem
and with full awareness that his purchase is subject to being
defeated by the timely exercise thereof.” Id. at 55. Indeed,
this Court has recognized the situations are probably rare in
which a mortgagor can profitably assert a right to redeem after
the Sheriff’s Sale, but “the right should be his unless some
public interest would be significantly offended.” Hardyston,
supra, 56 N.J. at 513.
B.
14
Eminent domain involves the taking of private property, and
“‘has always been subject to constitutional limits.’” Kearny,
supra, 205 N.J. at 399 (quoting Harrison Dev. Agency v. DeRose,
398 N.J. Super. 361, 391 (App. Div. 2008)). The eminent domain
clause of the New Jersey Constitution provides that
[p]rivate property shall not be taken for
public use without just compensation.
Individuals or private corporations shall
not be authorized to take private property
for public use without just compensation
first made to the owners.
[N.J. Const. art. I, ¶ 20.]
The Court has explained that this clause
imposes three significant limitations on the
State’s eminent domain power. First, the
State must pay “just compensation” for
property taken by eminent domain. Second, no
person may be deprived of property without
due process of law. Third, . . . the State
may take private property only for public
use.
[Gallenthin Realty Dev. v. Borough of
Paulsboro, 191 N.J. 344, 356 (2007).]
The New Jersey Constitution also addresses property that
has been declared blighted and in need of redevelopment:
The clearance, replanning, development or
redevelopment of blighted areas shall be a
public purpose and public use, for which
private property may be taken or acquired.
Municipal, public or private corporations
may be authorized by law to undertake such
clearance, replanning, development or
redevelopment; and improvements made for
these purposes and uses, or for any of them,
may be exempted from taxation, in whole or
15
in part, for a limited period of time . . .
. The conditions of use, ownership,
management and control of such improvements
shall be regulated by law.
[N.J. Const. art. VIII, § 3, ¶ 1.]
Pursuant to this provision, a municipality may exercise its
eminent domain power if it adheres to the governing
constitutional provisions and any applicable statutory
provisions. See Gallenthin, supra, 191 N.J. at 359 (noting
“clause operates as both a grant and limit on the State’s
redevelopment authority”).
The Eminent Domain Act (Act), N.J.S.A. 20:3-1 to -47,
governs the taking of private property for public use. The Act
requires that private property may not be taken for a public
purpose unless the condemning authority has engaged in bona fide
negotiations to purchase the property with the party holding
title to the property. N.J.S.A. 20:3-6 provides in pertinent
part,
[w]henever any condemnor shall have
determined to acquire property pursuant to
law . . . no action to condemn shall be
instituted unless the condemnor is unable to
acquire such title or possession through
bona fide negotiations with the prospective
condemnee, which negotiations shall include
an offer in writing by the condemnor to the
prospective condemnee holding the title of
record to the property being condemned,
setting forth the property and interest
therein to be acquired, the compensation
offered to be paid and a reasonable
disclosure of the manner in which the amount
16
of such offered compensation has been
calculated, and such other matters as may be
required by the rules. (Emphasis added.)
Furthermore, N.J.S.A. 20:3-2(c) defines condemnee as “the owner
of the interest in the private property being condemned for a
public purpose under the power of eminent domain.”
To determine whether the Legislature intended to enlarge
the circle of parties with whom a condemning authority must
negotiate beyond “the condemnee holding the title of record to
the property being condemned” as required by N.J.S.A. 20:3-6, we
start with the plain language of the statute. N.J. Dep’t of
Children & Families v. A.L., 213 N.J. 1, 20 (2013); DiProspero
v. Penn, 183 N.J. 477, 492 (2005). If the plain language of the
statute is clear and susceptible to only one interpretation,
then the court should apply that plain language interpretation.
A.L., supra, 213 N.J. at 20; DiProspero, supra, 183 N.J. at 492;
see also 2A Norman J. Singer & J.D. Shambie Singer, Sutherland
Statutory Construction § 46.1 at 137-41 (7th ed. 2007) (“[W]hen
the language of the statute is clear and not unreasonable or
illogical in its operation, the court may not go outside the
statute to give it a different meaning.”)
The plain language of N.J.S.A. 20:3-6 directs that the
condemning authority is required to negotiate with the party
holding the title of record it seeks to acquire. Moreover,
N.J.S.A. 20:3-2(c) defines a condemnee “as the owner of the
17
interest in the private property being condemned.” This
language has been interpreted to mean exactly what it says, that
is, the condemning authority has the obligation to negotiate
only with the title holder of record when it seeks to acquire
the fee interest. City of Atl. City v. Cynwyd Invs., 148 N.J.
55, 70 (1997).
Justice O’Hern explained the rationale for this limitation:
Under the [Act], the negotiations are
to be undertaken with the condemnee who
holds title of record to the property.
Given the breadth of the term “condemnee,”
the limitation in Section 6 on the
“condemnee” with whom the condemnor must
negotiate to the “condemnee who holds title
of record” avoids the difficult requirement
of negotiating with each condemnee having an
interest in the property . . . . The rights
of all other condemnees with a compensable
interest are better protected by allowing
them to participate later during the
Commissioner’s hearing, where value is
determined, N.J.S.A. 20:3-12, and during the
still subsequent proceeding when the
compensation is allocated. N.J.S.A. 20:3-
34; Rule 4:73-9.
[Id. at 70-71.]
Applying this rationale in Cynwyd, the Court rejected the
contention that a lessee of property under a ninety-nine year
lease would be considered equivalent to a holder of a fee simple
in condemnation proceedings. Id. at 72. The Court explained
that generally the rights of the holder of such a lengthy lease
depend on the contract. Ibid. Identifying the nature and
18
extent of the rights held by the holder of a ninety-nine year
lease might burden the pre-condemnation appraisal and bona fide
negotiation process and counselled against recognizing this
interest as one that triggered the duty to negotiate. Ibid.
To be sure, a condemning authority may condemn less than a
fee simple interest. The very language of N.J.S.A. 20:3-6
requiring the condemnor to identify the property and the
interest to be taken recognizes this principle. This Court
recognized the authority of a condemning authority to take less
than a fee simple interest in Kearny. There, the town never
took any action, formal or informal, to acquire the fee simple
interest. Kearny, supra, 205 N.J. at 408. The only interest
sought to be acquired was a leasehold and, under those
circumstances, the condemning authority was required to conduct
bona fide negotiations with the leaseholder. Ibid. Notably,
the Court reaffirmed the rule that “where a fee simple is being
condemned, negotiations will take place with the fee owner
alone.” Id. at 407.
This limitation to the title holder of record is consistent
with generally recognized and applied principles throughout the
country. One of these basic principles is that the owner of the
property at the time of taking is the party entitled to
compensation. Nichols on Eminent Domain, Ch. 5, § 5.01[5][d]
(Matthew Bender, 3d ed.). Another basic principle is that the
19
duty to negotiate extends only to the owner of the property to
be taken. Id. at Ch. 24, § 24.13(2). Indeed, in a case
preceding the 1971 enactment of the Act, the Supreme Court held
that a condemning authority had no obligation to negotiate with
or seek the consent of the mortgagee of property to be taken to
erect poles and wires. Coles v. Midland Tel. & Tel. Co., 67
N.J.L. 490, 493 (Sup. Ct.), aff’d, 68 N.J.L. 413 (E. & A. 1902).
C.
The Act does not define what is necessary to meet the
statutory requirements of a bona fide negotiation. Carroll,
supra, 123 N.J. at 316. Instead, it provides that the offer
must include
[a]n offer in writing by the condemnor to
the prospective condemnee . . . setting
forth the property and interest therein to
be acquired, the compensation offered to be
paid and a reasonable disclosure of the
manner in which the amount of such offered
compensation has been calculated, and such
other matters as may be required by the
rules.
[Ibid. (citing N.J.S.A. 20:3-6).]
In Cynwyd, supra, this Court emphasized that the uniform
procedures prescribed by the Act are designed to protect the
citizen whose property is condemned. 148 N.J. at 68.
In furtherance of this policy, the condemning authority
must identify any appraisals used and its valuation methodology.
Carroll, supra, 123 N.J. at 323. The lens by which the
20
condemning authority views the offer must be from the
perspective of what the condemnee will lose, not what the
condemnor may gain. Casino Reinvestment Dev. Auth. v. Katz, 334
N.J. Super. 473, 484-86 (Law Div. 2000). Thus, the offer should
place the condemnee “in as good a position monetarily as the
owner would have occupied had the property not been taken.” Id.
at 485.
To ensure that the condemnee receives the constitutionally
required just compensation, this Court has approved the “one-
price” offer method. Carroll, supra, 123 N.J. at 318. We
explained that
[t]he objective of requiring an initial full
price offer is to prevent the State from
making low offers to gain a bargaining
advantage, forcing owners into adversarial
positions in order to secure the full market
values of their properties . . . . Indeed,
the whole thrust of the eminent-domain
process is that the State should operate
differently from an open-market, arms-length
buyer.
[Id. at 318-19.]
The condemning authority’s obligation to conduct good faith
negotiations does not end with making an offer and furnishing
the appraisal on which the offer was formulated. Weiner, supra,
222 N.J. Super. at 565. Rather, even when the property owner
rejects the offer, the condemning authority may have an
obligation to continue to discuss the offering price when the
21
response provides credible information supporting its opinion
that the offer is too low and invites “further discussion based
on a reasonable expectation that [the condemning authority]
would take a more ‘realistic’ view of the property’s worth.”
Id. at 565.
On the other hand, the condemning authority’s duty to
negotiate “can be tempered by a property owner’s failure to
cooperate.” Carroll, supra, 123 N.J. at 323. In Carroll, the
property owner met with the condemning authority’s negotiator
but insisted that the offer was too low, continuously maintained
that position, and stated that “the matter would have to be
resolved by the courts.” Id. at 322. Under those
circumstances, the condemning authority satisfied its obligation
to negotiate in good faith with the property owner. Id. at 323.
Although the duty to continue negotiations does not cease simply
because the positions of the parties on the issue of value are
widely disparate, the condemning authority has no obligation to
continue to negotiate if the other party refuses to do so.
Cnty. of Monmouth v. Whispering Woods, 222 N.J. Super. 1, 9
(App. Div. 1987), certif. denied, 110 N.J. 175 (1989).
IV.
Applying these principles to the issues presented by LB, we
conclude that its status as the holder of a final judgment of
foreclosure did not require the Borough to present an offer to
22
it and negotiate with it. Moreover, the negotiations between
the Borough and Malik satisfied the obligation to conduct bona
fide negotiations with the Property owner.
LB is in the business of redeveloping distressed
properties. The record suggests that the Property owned by
Malik satisfied its business plan as a property that would be
desirable to own, renovate, operate, or sell, presumably for a
profit. Certainly, it was interested in the Property, but it
did not hold an interest in the Property that qualified it to be
consulted before the Borough proceeded with its redevelopment
plan.
To be sure, LB had made substantial progress in achieving
its business plan. It held a final judgment of foreclosure and
anticipated a Sheriff’s Sale within weeks of the date the
Borough presented its pre-taking offer to Malik. LB, however,
held a judgment that could have been satisfied by Malik at any
time. Even after the Sheriff’s Sale, Malik had a right to
redeem. Malik’s apparent inability or lack of desire to
exercise that right did not elevate the nature of LB’s interest
in the Property to “holding the title of record to the property”
as required by statute.
Furthermore, the plain language of the Act, specifically
N.J.S.A. 20:3-6, limits negotiations to the title owner of
record. The Act does not recognize real parties in interest or
23
those with more interest and concern about the state of the
property than the title holder of record. This Court has
written extensively about the wisdom of limiting the parties
with whom the condemning authorities must negotiate. Cynwyd,
supra, 148 N.J. at 70-71. The Court has also observed that an
interested party other than the title holder is not without
recourse because the eminent domain scheme protects those with
compensable interests. Kearny, supra, 205 N.J. at 407; Cynwyd,
supra, 148 N.J. at 70-71.
The Appellate Division assumed, but did not decide, that LB
had standing to challenge the bona fides of the negotiation
process between the Borough and Malik. Merchantville, supra,
429 N.J. Super. at 429. We infer that the Appellate Division
questioned LB’s standing to pursue this argument, as do we.
Indeed, our holding that N.J.S.A. 20:3-6 limits negotiations to
the record titleholder and the existence of other forums to
contest the value assigned by the Borough to the Property leads
to the inexorable conclusion that LB lacks standing to pursue
this issue. Nevertheless, for the sake of completeness, we have
addressed the issue.
As noted in Whispering Woods, supra, we must approach, with
a touch of realism, the evaluation of the efforts made by the
condemning authority to engage in good faith negotiations with
the Property owner. 222 N.J. Super. at 9. At a minimum, the
24
Borough was required to retain an appraiser to prepare an
appraisal of the Property, to use a one-price offer method to
formulate its offer, and to extend the offer accompanied by the
appraisal report to the Property owner. Weiner, supra, 222 N.J.
Super. at 564. The Borough satisfied those requirements.
A condemnor must also respond to an invitation to engage in
further discussions about the offering price when that
invitation is supported by concrete and credible evidence of
value. Id. at 565; see Carroll, supra, 123 N.J. at 323
(discussing circumstances when no further discussions required).
Here, Malik offered no such evidence of value. Rather, the
Property owner simply noted that any compensation less than the
amount required to satisfy LB and other lienholders would be of
no benefit to him, and provided no evidence that the amount of
the liens even approximated the fair market value of the
Property. Although Malik could not be considered intransigent,
he was realistic about his situation. Under those
circumstances, we cannot conclude that the Borough breached its
duty to engage in bona fide negotiations by failing to engage in
further discussion about the amount of its offer.
V.
The judgment of the Appellate Division is affirmed.
CHIEF JUSTICE RABNER, JUSTICES LaVECCHIA and ALBIN, and
JUDGE RODRÍGUEZ (temporarily assigned) join in JUDGE CUFF’s
25
opinion. JUSTICES PATTERSON and FERNANDEZ-VINA did not
participate.
26
SUPREME COURT OF NEW JERSEY
NO. A-66 SEPTEMBER TERM 2012
ON CERTIFICATION TO Appellate Division, Superior Court
BOROUGH OF MERCHANTVILLE,
Plaintiff-Respondent,
v.
MALIK & SON, LLC and/or
SHAUKAT MALIK and/or BOBBY
MALIK, WELLWOOD REALTY, LP,
UBS PRINCIPAL FINANCE, LLC,
LASALLE BANK NATIONAL
ASSOCIATION, LB-UBS
COMMERCIAL MORTGAGE TRUST,
BANK OF AMERICA, GERMAN
AMERICAN CAPITAL CORPORATION
(a MARYLAND CORPORATION),
DAWN-BV, LLC, LB-UBS 2000-C3
WELLWOOD MANOR, LLC, WACHOVIA
BANK, NA, TAX LIEN SERVICE
GROUP, CAMDEN COUNTY
MUNICIPAL UTILITIES
AUTHORITY, and THE
MERCHANTVILLE PENNSAUKEN
WATER COMMISSION,
Defendants,
and
LB-RPR REO HOLDINGS, LLC,
Defendant-Appellant,
and
U.S. BANK, AS CUSTODIAN FOR
CRESTAR CAPITAL, LLC,
Defendant-Respondent.
DECIDED August 7, 2014
Chief Justice Rabner PRESIDING
OPINION BY Judge Cuff
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY
CHECKLIST AFFIRM
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE PATTERSON ---------------------------- ---------------------
JUSTICE FERNANDEZ-VINA ---------------------------- ---------------------
JUDGE RODRÍGUEZ (t/a) X
JUDGE CUFF (t/a) X
TOTALS 5
1