SteveK November 1st, 2013
In the recent New Jersey Supreme Court decision, Borough
of Saddle River v. 66 East Allendale, LLC, the Court considered whether, in a trial on just compensation, it was proper to allow the jury to hear evidence on the likelihood of a zoning change without the trial court first determining outside of the jury’s presence that there was a reasonable
probability of a zoning change.
By way of background, East Allendale, LLC (hereinafter “East Allendale”) owned a 2.13 acre parcel of land in the Borough of Saddle River (hereinafter, “Borough”). In November of 2006, the Borough exercised its power of eminent domain in order to acquire the property for use as a public park. After the parties agreed that the Borough duly exercised its power of eminent domain, the court appointed commissioners to determine the just compensation owed to East Allendale. The commissioners completed their appraisals and the court entered an order determining the just compensation for the taking to be $1,593,625. The parties appealed and demanded a jury trial on the sole issue of just compensation.
In preparation of trial, East Allendale obtained an expert report regarding the potential for a future zoning change to the piece of land arguing that this zoning change should be assessed when determining the value of the land and the compensation owed to East Allendale by the Borough. In response, the Borough made a motion to strike East Allendale’s expert witness report regarding the probability of a zoning change for the property. The Borough requested that the Court use its gatekeeping functions pursuant to State by Commissioner of Transportation v. Caoili, 135 N.J. 252 (1994), and conduct a preliminary N.J.R.E. 104 hearing outside the presence of the jury to assess whether there was a reasonable probability of a zoning change. The trial court, however, denied the Borough’s motion.
During the trial, the jury was permitted to hear evidence about the probability of a zoning change that was no ruled on by the judge in advance and outside of the jury’s presence. The jury considered the potential zoning changes and returned a verdict for just compensation in the amount of $5,250,000.00. The Borough appealed.
The Appellate Division affirmed the trial court’s decision finding that there was sufficient evidence of a reasonable probability of a zoning change for which the jury could consider when making a decision on compensation. The Appellate Division further found that the trial judge did not abuse his discretion in conducting his gatekeeping function during the trial instead of before the jury heard the evidence. The Borough appealed.
The New Jersey Supreme Court reversed the Appellate Division’s determination and remanded the matter for a new trial on the issue of just compensation. The Supreme Court focused primarily on the holding and standards set out in State by Commissioner of Transportation v. Caoili, 135 N.J. 252 (1994). In Caoili, the Court established a two-step process for evaluating potential zoning changes. First, as a gatekeeping function, the court must determine whether there is sufficient evidence to support the conclusion that a zoning change is “reasonably probable.” After that determination, it is up to the jury to decide whether a premium should be added to the value of the property based on the probability of the future zoning change. The Court stressed the importance of the Caoili holding stating that the purpose of the established gatekeeping function is to avoid having a jury hear speculative evidence that a zoning chance was reasonably probable when assessing compensation. As such, the Court reasoned that only after the trial court first determines that evidence is of a sufficient quality to allow the jury to consider the probability of a zoning change should the jury be permitted to assess a premium based on that
zoning change. The trial Court should have held a pretrial hearing as requested by the Borough to determine the reasonable probability of a zoning change rather than allow the jury to hear speculative testimony on the likelihood of a zoning change. Without the hearing, the trail court failed to undertake its gatekeeping duties. On that basis, the judgment of the Appellate Division was therefore reversed and remanded for a new trial.
DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC ( http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of parties in zoning, land use and local government matters. For additional information about the matters in this bulletin or in the firm’s land use, zoning and municipal practice please contact Jeffrey B. Lehrer, Esq.
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