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City of Long Branch v. West of Pier Associates, LLC

A-1292-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

CONDEMNATION; INTEREST — Where there is a conflict between a condemning authority and a property owner as to the basis upon which interest on an award is to be calculated, an evidentiary hearing should be held.

A municipality filed a condemnation action to acquire a commercial property. The lower court entered an order appointing three condemnation commissioner to value the property. The municipality then filed a declaration of taking and deposited funds into court. The property owner appealed the commissioner’s award. The parties then agreed to dismiss the action and have the property’s value determined by means of binding arbitration before a panel of three arbitrators.

The arbitrators set the property’s value, but did not determine the amount of interest to be allowed on the award, finding only that interest should be determined either by applying to the court or by the arbitrators if the court directed them to do so. The property owner filed a motion to confirm the arbitration award and to schedule an evidentiary hearing to determine the amount of interest it was entitled to receive. The lower court confirmed the arbitration award, but that the property owner was only entitled to interest pursuant to the Rules of Court. It did not hold an evidentiary hearing before making that finding.

The property owner filed a motion for reconsideration and requested a hearing to determine the proper method for calculating interest on the condemnation award. The property owner attached a report prepared by its expert. It opined that interest should be calculated at commercial interest rates because the Court Rule rates did not fairly indemnify a property owner, and inappropriately penalized property owners. The municipality’s appraiser’s certification compared residential interest rates, corporate bonds, and prime interest rates and concluded that the interest rate prescribed by the Rules of Court was appropriate.

The lower court denied the property owner’s request for an evidentiary hearing on the appropriate method for calculating interest on the condemnation award and found that the property owner was entitled to interest only in accordance with the Rules of Court. The property owner appealed, the Appellate Division reversed, noting that in cases where the actual taking of a property is not contemporaneous with the payment of just compensation, a municipality is required to pay interest on the condemnation award. Further, the statute provides that if the parties cannot agree on the amount of interest owed, the court may determine the interest owed in a “summary manner.” However, even though the legislature’s intent in allowing interest to be fixed summarily was to avoid protracted and costly proceedings, it was not intended to allow for a proceeding “devoid of evidential input.” Therefore, depending on the circumstances of each particular case, an evidentiary hearing may be warranted before a court determines the interest payable to a property owner. The Court rejected the lower court’s conclusion that an evidentiary hearing was not necessary here, because the lower court had received and reviewed the reports from the municipality and property owner. The Court found that an evidentiary hearing was required because of the significant disparity between the interest to be awarded under the sharply different interest rates suggested by the experts for the municipality and the property owner. According to the Court, the property owner was entitled to confront the municipality’s expert concerning his recommendation before the lower court awarded interest.

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