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Casino Reinvestment Development Authority v. Teller

384 N.J. Super. 408, 894 A.2d 1215 (App. Div. 2006)

CONDEMNATION; TAX LIENS—Where a property owner would not be entitled to receive any condemnation proceeds, such as where the entire award is used to environmentally remediate the property, a municipal tax lien cannot be satisfied from the award.

A governmental agency filed condemnation proceedings to acquire a parcel of real property. In the condemnation complaint, the agency alleged that the value of the property, if unaffected by environmental contamination, was $55,200. The complaint also alleged that the owners were responsible for the cleanup costs as of the date of filing, which costs were estimated to be between $130,000 and $200,000. As a result, the lower court ordered the agency to deposit the $55,200 into the court pending the determination as to the cleanup costs and responsibility for remediation. The lower court also found that the fair market value of the property, after factoring the environmental cleanup costs, was $1. The agency deposited the money into court pending resolution of the complaint and responsibility for cleanup costs. The municipality then filed a motion to withdraw approximately $40,000 for unpaid tax liens and interest owed for that property. The agency was not given notice of the motion and the motion, unopposed, was granted. The funds were withdrawn and tendered to the municipality. The condemning agency completed the remediation on the property, at a cost of about $250,000, and sought to withdraw the $55,200 deposited with the court to be applied toward the costs. It sought to vacate the earlier order that permitted the municipality to withdraw about $40,000 and to compel the money to be redeposited so that the agency could withdraw the entire funds originally on deposit. The lower court denied the agency’s motion and the agency appealed. The Appellate Division reversed.

The municipality had argued that municipal tax liens have priority, and therefore it was entitled to the funds. The Court disagreed. It found that when funds are deposited with a court in a condemnation proceeding, they are held in trust until the cost of remediation is determined. The funds deposited were calculated based on an environmentally clean property. The Court noted that it would be unfair to value the property as if it was clean and allow the property owner of a contaminated property to withdraw the entire condemnation award without withholding sums to cover the cleanup. The Court found that a property owner is not entitled to any of the funds on deposit until the remediation costs are calculated. Therefore, a municipal tax lien would not attach to those funds until the owner would be entitled to receive them. In this case, since the remediation costs exceeded the funds on deposit, the owner would not have been entitled to any of those funds. Therefore, the municipality was not entitled to any of the funds in payment of its tax liens.

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