Casino Reinvestment Development Authority v. Banin

320 N.J. Super. 342, 727 A.2d 102 (Law Div. 1998)
  • Opinion Date: July 20, 1998

CONDEMNATION; PUBLIC PURPOSE—Regardless of the rationale for a condemnation, if its effect is to benefit a single developer’s specific project, it may be set aside as lacking a sufficient public purpose.

Case law is clear that property can be condemned by a public authority and transferred to a private entity if the condemnation is in furtherance of a valid public purpose. Where, however, a condemnation is commenced for an apparently valid purpose, but the real purpose is otherwise, the condemnation may be set aside. Generally, when the exercise of eminent domain powers results in a substantial benefit to specific and identifiable private parties, “a court must inspect with heightened scrutiny a claim that the public interest is the predominant interest being advanced.” In this case, the parties objecting to a condemnation as invalid argued that the underlying purpose of the condemnation was not to support a hotel development project which was authorized by applicable statutes and regulations, but that the condemning authority’s primary intent was to benefit a particular developer by using the hotel development project as a pretext to that end. The Court found that although the objectors referred extensively to benefits received by a particular developer from the condemnations, those benefits did not necessarily lead to the conclusion that the condemning authority acted in bad faith or used the hotel development project rationale as a pretext. The Court found that the very nature of such a project necessarily would result in a casino hotel operator receiving substantial benefits.

In support of the validity of its condemnation proceeding, the condemning authority asserted that the following public benefits identified by the Legislature were consequences of the project: (1) the development of additional hotel rooms in Atlantic City dedicated to housing conventioneers using the new Convention Center: (2) redevelopment of a portion of the “Corridor Area”; (3) the construction of additional parking; (4) the alleviation of traffic congestion in the Corridor Area; (5) establishment of green space; (6) creation of a new permanent hospitality industry jobs and short-term construction industry jobs; and (7) promotion of the tourist and convention industries. The objectors, however, asserted that the consequences and effects of the condemnations were quite different. They stated: (1) the developer maintained discretion to determine how the property would be used once title was transferred to it; and (2) the vague language in the transfer documents only stated that the developer must maintain the intended use for a “reasonable time.” In essence, its argument was that if the condemning authority acquired the properties in question by condemnation and then conveyed them to the developer, there would be insufficient assurances that the developer would be bound to use the properties for the public purposes for which they were acquired. This was important, because the failure of such assurances would result in a primarily private rather than public benefit which could not justify the condemnation actions.

The Court was satisfied that there were no disputed issues as to material facts. Although the Court had previously been concerned as to what the parties considered to be a “reasonable period of time,” it was satisfied that the “reasonable period of time” could be determined by the condemning authority if necessary at some future date, subject to challenge only if the condemning party was not reasonable in its determination. Nonetheless, the Court was dissatisfied with the condemning authority’s explanation. It found the condemning authority’s rationale to be overly broad. To it, the properties were being acquired for a specific hotel development project. In fact, the condemnation project did not begin as many redevelopment projects do, with the public agency identifying and putting together an assemblage of land in order to attract a developer. The project was proposed by a specific developer which already owned or controlled most of the land. All of the significant construction was to be done on land already owned or controlled by the developer. In the Court’s view, although the condemning authority did not suggest that the reason for acquiring these properties was to facilitate an assemblage of real estate by the developer for future hotel expansion, that was exactly the consequence and effect of the condemning authority’s actions. Also, although the funding legislation passed by the Legislature emphasized the immediate development of hotel rooms because of the anticipated opening of a new convention center, the condemnation actually was designed to allow the developer to use the land to expand its casino hotel at a future time of its choosing. In the Court’s view, this would achieve a result not sanctioned by the Legislature. Therefore, the Court rejected the condemnation.