We were all set to dig into the New Jersey Supreme Court's opinion in Township of Manalapan v. Gentile, No. A-14-19 (June 2, 2020), when our colleague Joe Grather posted about it on their firm's blog. See also this story ("Manalapan farm owner's $4.5M eminent domain payday dumped as 'miscarriage of justice'") (PS - the video embedded in the story is actually from a different case, not this one).
The short story is that the property owner's appraiser opined that the highest and best use of the property was to divide it into smaller lots. The problem was that under its current zoning (RE - "Residential Environmental") that wasn't possible. It would need an upzoning to its former designation, R20. But the appraiser did not offer an opinion on whether an upzoning would have been probable, or even possible. During closing arguments, the property owners reminded the jurors that the property is surrounded by R20 zones, and "repeatedly referenced the possibility of rezoning." Jury came in above the Township's appraiser's testimony of $2.83 million. Way above ($4.5 million).
You know where this is heading, don't you? After the Appellate Division affirmed, the Supreme Court easily reversed. As you know, to have the jury consider that the highest and best use of the property is a use other than its existing use (including the applicable regulations), the owner has to show four things: the HBU is legally permissible, physically possible, and financially feasible, and maximally productive.
The existing RE zoning meant that it was not "legally permissible." That doesn't mean it is impossible, however, and the owner might argue that an upzoning would be considered by a hypothetical market buyer, of course. Thus, the owner could argue that upzoning was possible, by introducing some evidence that the upzoning was reasonably likely.
Under New Jersey procedures, the trial court is supposed to conduct a "Rule 104" hearing in which the judge serves as a "gatekeeper" to evaluate whether the evidence of probability of upzoning is allowed to be presented to the jury, presumably because things like changes of zoning and the like are mostly legal determinations. The court here didn't do so, meaning the jury should never have been allowed to go beyond the Township's evidence. Game, set, and match.
Go back, do it again, and if the owner wants to offer evidence of the use of the property other than its current use, the court needs to hold a Rule 104 hearing.
Township of Manalapan v. Gentile, No. A-14-19 (N.J. June 2, 2020)
