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Township of Manchester Department of Utilities v. Even Ray Co., Inc.

315 N.J. Super. 122, 716 A.2d 1188 (App. Div. 1998)

MUNICIPALITIES; CONDEMNATION; VALUATION—For valuation purposes in an eminent domain setting, even if an easement or other compensable property (such as a sewerage system) is not usable by anyone other than the municipality, it still may have a market value.

A municipality filed a condemnation complaint seeking to acquire, by eminent domain, 46,481 feet of underground sewer pipes and sewer appurtenances along a 458,310 square foot sewer easement in lands located in a senior residential community. The assignment judge signed an Order to Show Cause ordering the condemnee to show cause why judgment should not be rendered appointing three commissioners to fix just compensation to paid for the taking of the property. A condemnation hearing was held. The commissioners submitted a report awarding the condemnee $25,000 for the easement and one dollar for the sewer collection system. The property owner filed an appeal from that portion of the report awarding one dollar, while the municipality cross-appealed from the award of $25,000 for the easement.

At trial, the municipality’s own expert valued the easement at $25,000 using the market approach. After the municipality rested its case, it moved for a directed verdict as to the value of the easement. It argued that the easement actually had no market value because there was no authority for anyone without a sewer franchise (which only the municipality could obtain) to use the easements and therefore no one would place any value on the easement. The lower court found for the condemnee and held that the easement had market value because in order for the Utility Authority to get to the pipes that are laid underneath, it would have to utilize the easement itself. The lower court also awarded the condemnee $117,600 for the sewer collection system based on the testimony of the condemnee’s expert. The system, being imbedded in the ground, was, by definition, compensable property. This reading of the law was found to be consistent with holdings in other jurisdictions. The problem, however, as stated by the Appellate Division, was that sewer systems are inherently difficult to value. In the Appellate Division’s opinion, even if the sewer system had no market value (because only the municipality was authorized to transport sewerage), the pipes, manholes, and connections still had value, for which the condemnee was entitled to receive compensation. Consequently, the Appellate Division upheld the lower court’s use of a cost approach.


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