Condemning Authority Need Not Negotiate With Party Other Than Record Title Holder

Borough of Merchantville v. Malik & Son, LLC, 429 N.J. Super. 116 (App. Div. 2013).  In this condemnation case, one of the defendants, LB-RPR REO Holdings, LLC (“LB”), the assignee of a final judgment of foreclosure on the subject property, contended that the plaintiff Borough was obligated by the Eminent Domain Act, N.J.S.A. 20:3-1 to -50, to negotiate with LB as to the potential purchase of the property by the Borough.  The Borough had made an offer to the property owner, defendant Malik & Son, LLC (“Malik”).  Malik rejected that offer but invited the Borough to “discuss more reasonable compensation in an amount that would satisfy all liens and encumbrances on the property.”  The Borough declined to offer more, and instead instituted condemnation proceedings, naming Malik, LB, and others as defendants.  The Law Division ruled that the Borough was not required to negotiate with LB, and the Appellate Division, in an opinion by Judge Axelrad, affirmed.

Whether the Borough was obligated to negotiate with LB was a question of law that implicated the de novo standard of review.  Judge Axelrad found that the Law Division properly rejected LB’s argument, “based on the language and spirit of the [Eminent Domain] Act, as well as the case law.”  N.J.S.A. 20:3-6 requires negotiations to occur with “the prospective condemnee holding the title of record to the property being condemned,” and also refers to the “owner” of that property.  Cases such as City of Atlantic City v. Cynwyd Investments, 148 N.J. 55 (1997), and others, confirmed that the condemnor need not negotiate with other parties, such as a 99-year lessee.  LB argued that it was the “real party in interest” and a “stakeholder” with a right to be negotiated with, despite not being the title holder.  The Appellate Division disagreed that being a “stakeholder” was sufficient, given the statutory language and the caselaw.

LB also argued that the Borough had filed its condemnation action prematurely because Malik had not rejected the Borough’s offer but instead had invited a more generous buyout offer.  Judge Axelrad did not agree.  The invitation “to discuss more reasonable compensation” constituted a rejection of the Borough’s offer that allowed the Borough to proceed with a condemnation suit.

Finally, LB contended that the Borough had breached its obligation to “turn square corners” in dealing with Malik and with LB.  The Appellate Division rejected that notion.  Judge Axelrad found that the Borough had dealt “forthrightly and fairly” with Malik, and that the Borough had not shown bad faith in dealing with LB, with whom the Borough had no obligation to negotiate.  The Borough could have chosen to pursue further negotiations before filing suit, but it was not obligated to do so because the prerequisites for commencing an action had been satisfied.