Borough of Harvey Cedars v. Karan, 214 N.J. 384 (2013). Using the power of eminent domain, the Borough of Harvey Cedars took a portion of defendants’ beachfront property (actually, the Borough took an easement) and constructed a 22-foot high dune. That dune obscured part of the Karans’ view of the ocean. The dune was part of a larger dune construction project that was designed to protect residents of shore communities, including beachfront property owners, from storm surges. The Karans were entitled to just compensation by virtue of the taking of their property. Condemnation commissioners made an award, but the Karans found the award unsatisfactory and demanded a jury trial.
The issue that reached the Supreme Court was how to define “just compensation” in one particular respect. The Borough sought to present expert evidence that the dune actually enhanced the value of the Karans’ property. The Borough’s expert was prepared to tell the jury that, over a 30-year period, and without the dune, there was a 56% chance that a storm would catastrophically damage the Karan’s property. With the dune, however, the property was likely to be spared any such damage for 200 years or more. The Karans sought to exclude that testimony on the grounds that the benefit of storm protection was one that would benefit the entire community, and that such “general benefits,” as distinct from “special benefits” that affected only the property being condemned, could not be considered in valuing just compensation.
The Law Division agreed with the Karans and barred the testimony. The jury awarded the Karans $375,000 as just compensation. The Borough appealed, but the Appellate Division affirmed. Borough of Harvey Cedars v. Karan, 425 N.J. Super. 155 (App. Div. 2012). The Supreme Court, however, reversed that ruling in an opinion by Justice Albin. The standard of review was de novo, since this was a pure issue of law.
Justice Albin exhaustively recounted the evolution of just compensation for partial takings, and noted that there was caselaw, Sullivan v. North Hudson County R. Co., 51 N.J.L. 518 (E. & A. 1889), that endorsed the distinction between general and special benefits. Three years later, however, in Mangles v. Hudson Cty. Bd. of Freeholders, 55 N.J.L. 88 (Sup. Ct. 1892), Justice Dixon, who had also written Sullivan, stepped back from the general/specific distinction and ruled that any non-speculative, reasonably calculable benefit was to be factoredinto the just compensation inquiry. Justice Albin concluded that Justice Dixon “intended Mangles as a refinement of his discussion of special and general benefits in Sullivan.” Thereafter, the Supreme Court of the United States effectively adopted the Mangles approach to just compensation as well.
Despite that, as Justice Albin noted, courts continued to use “the shorthand terms general and specific benefits in differing ways– and sometimes in ways that have obscured or confused those principles.” Here, however, the Court decided that “general benefits” and “specific benefits” were “labels that have outlived their usefulness.” Instead, the Court adopted the approach of Mangles and the United States Supreme Court: “just compensation should be based on non-conjectural and quantifiable benefits, benefits that are capable of reasonable calculation at the time of the taking …. Benefits that both a willing buyer and willing seller would agree enhance the value of property should be considered in determining just compensation, whether those benefits are categorized as special or general” (citation omitted).
Under that test, the jury should have been allowed to consider the expert evidence offered by Harvey Cedars. The Court reversed the Appellate Division, vacated the condemnation award, and remanded the matter for further proceedings.
This is a landmark opinion, in which the Court’s conclusion appears to be the correct one. It properly emphasizes fair market value while de-emphasizing labels whose parameters are uncertain and whose use has led to inconsistent results.
From an appellate practice perspective, the way that the Court treated Sullivan and Mangles, written by the same Justice (who, in those days, could sit on both courts), though not the only reason for the result here, is interesting. It is not often that a decision of a lower court is deemed to override, or even clarify, an opinion of the highest court.