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City of Long Branch v. Cangemi

A-2975-07T1 (N.J. Super. App. Div. 2009) (Unpublished)

MORTGAGES; AFFORDABLE HOUSING — Even where a municipality condemns property upon which it holds an affordable housing mortgage whose repayment would have been waived if title to the property were not conveyed within ten years after the date of the mortgage, repayment is not waived even though the conveyance was involuntary and, in fact, made to the municipality.

A municipality adopted an ordinance authorizing the institution of eminent domain proceedings to acquire a homeowner’s property. Prior to the adoption of the ordinance, the homeowner granted a mortgage to the municipality in return for funds from the municipality to allow the homeowner to rent its property to low and moderate income families for a ten year period. The mortgage called for deferment of the loan during the ten year period provided the property was rented or was sold as low or moderate income housing, after which the mortgage would be terminated. It also provided that if the property was transferred for any reason, the municipality could declare the homeowner in default of the note and mortgage. After the ordinance was adopted, a complaint was filed by the municipality to acquire the property by eminent domain. A jury trial awarded the homeowner compensation for the taking of their property. The homeowner filed a motion for a new trial and/or additur, which was denied by the Law Division. The municipality filed a cross-motion for repayment of the mortgage on the property. This motion was granted. The homeowner appealed both the denial of its motion and the lower court’s granting of the municipality’s motion.

The Appellate Division affirmed. As to the issue of the value of the property, the Court held that each party had presented expert witnesses who used the “comparable sales” approach and each party had the opportunity to cross examine the other party’s witnesses. Although the numbers were totally different, the Court found that because the jury’s determination was within the range of the two experts’ opinions as to the value of the property, the verdict was not against the weight of the evidence and was reasonable. Further, the Court ruled that there are no precise guidelines that need to be applied as to the degree of similarity required in order to admit comparable sales testimony. Thus, even though the property was a “beach block” property, the Court held the similarities need not be found in all comparative respects, so long as there is sufficient similarity in some significant respects to permit the fact-finder to draw rational probative valuation inferences. The Court also noted that the property was in a deteriorated beach-front area with a multitude of boarded up and vacant buildings and that the municipality’s expert had taken the location of the property into account when he made his appraisal.

As to the repayment on the loan, the homeowner argued that it did not voluntarily convey the property and thus did not violate the plain language of the mortgage. It contended that the municipality should be equitably estopped for requesting payment as the homeowner complied with its “end of the bargain.” Further, the homeowner argued that the interests of justice, morality, and common fairness should preclude the municipality from getting a windfall after condemning the property. The municipality countered by stating that the doctrine of equitable estoppel is rarely applied against municipalities. It also argued that the no-waiver provision clearly prohibited it from permitting the homeowner to not pay back the mortgage.

The Court held that the appraised value of the property included the increase in value occasioned by the improvements added to the house that were available as a result of the loan proceeds given by the municipality to the homeowner. The Court also believed the municipality was not receiving a windfall from the repayment of the loan because the funds would be recycled in connection with the low and moderate housing program to rehabilitate other affordable housing stock.


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