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Township of Piscataway v. South Washington Avenue, L.L.C.

A-0356-10T3 (N.J. Super. App. Div. 2011) (Unpublished)

CONDEMNATION; VALUATION — Although, ordinarily, the condemnation value of a property is determined as of the date the condemnation complaint is filed, if the valuation is established as of a later date, such as the date of the declaration of taking, interest will not necessarily run from the date the complaint was filed as might otherwise be understood from a reading of the applicable statute.

A municipality sought to condemn a seventy-five acre farm in order to preserve it as open space. After the condemnation suit lingered for five years, it filed a declaration of taking and deposited its estimate of the fair market value of the farm into the court. The deposit was calculated based on the property’s value as of the date the complaint was filed, five years earlier. The owners challenged the municipality’s calculation. They argued that since the fair market value of the farm had increased substantially in the five years between the date the complaint was filed and when the declaration of taking was filed, the farm should have been valued as of the date of the declaration of taking. The lower court agreed, and a jury determined the fair market value of the farm to be more than four times the amount the municipality had deposited with the court.

A year later, a plenary hearing was held to determine how much interest was owned. The owners sought interest on the 2004 value to compensate them for their lost use of that value from the date the complaint. The lower court concluded that the interest would accrue from the date the declaration of taking was filed. It reasoned that because the compensation was based on the farm’s value when the taking took effect, an award of interest for the period prior to that date would result in unjust compensation. Also, the court applied the prime rate for the interest rate because the municipality was likened to a low risk borrower who would likely have to pay only prime rate to a lender. The lower court also directed annual compounding of the interest because it found that the owners could have generated additional income from the accumulating interest if it was paid.

On appeal, the Appellate Division held that although N.J.S.A. 30:3-31 requires interest as of the date of the complaint, the owners had not shown a loss attributable to the delayed payment. Thus, it affirmed the denial of interest for the earlier period. Courts are permitted to determine, on a case by case basis, the rate or rate of interest that would best indemnify a condemnee for loss of the use of the compensation. The interest award only has to be sufficient to ensure that the condemnee is placed in a good financial position as it would have occupied if payment had not been delayed. Here, the owners showed no loss and incurred any expenses or loss of profits.


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