State, by Com'r of Transp. v. Jan-Mar Inc.

• Decision Date: 09 December 1985
• Docket Number: JAN-MAR
• Parties: STATE of New Jersey, by COMMISSIONER OF TRANSPORTATION, Plaintiff, v.INC., et als, Defendant.
• Court: New Jersey Superior Court

Page 236

210 N.J.Super. 236

509 A.2d 310

STATE of New Jersey, by COMMISSIONER OF TRANSPORTATION, Plaintiff, v. JAN-MAR INC., et als, Defendant.

Superior Court of New Jersey, Law Division,

Monmouth County.

Decided Dec. 9, 1985.

Peter A. Valenti, Deputy Atty. Gen., for State (Commissioner of Transportation)

Bruce P. Fromer, Oakhurst, for defendant Jan-Mar Inc. (Karasic, Stone & Susser, Oakhurst, attorneys).

S. David

Brandt, Haddonfield, for defendant Mobil Oil Corp. (Brandt, Haughey, Penberthy, Lewis, & Hyland, Haddonfield, attorneys).

MILBERG, A.J.S.C.

This condemnation action presents a novel question of law to the court: To what extent, if any, may a tenant who holds an option to purchase the leased premises participate in condemnation proceedings involving the taking of the owner's property? The answer to this question will determine whether the tenant may appear before condemnation commissioners, with a right of appeal to the trial court, or is relegated to participation only in the allocation proceedings under R. 4:73-9(b).

On August 13, 1985, the State commenced the instant condemnation action for the purpose of acquiring certain property, totaling 0.540 acre, for the use of the Department of Transportation and, more particularly, New Jersey Transit Corporation.

The subject property is located at the southwesterly corner of Morris and Third Avenues in the City of Long Branch, County of Monmouth, and is known as Lot 1B, Block 188, on the tax map of the City of Long Branch. It is further designated as Parcel 197 on the "New Jersey Transit Corporation General Property Parcel Map, North Jersey Coast Line".

On August 27, 1985, the State filed a declaration of taking asserting that it had duly exercised its power of eminent domain and was entitled to possession of the subject premises. Thereupon, the State deposited into court the sum of $215,000, the amount of compensation offered for the parcel.

At the time of the taking, the record owner of the premises was Jan-Mar, Inc. (hereinafter referred to as "Jan-Mar"), a corporation of the State of New Jersey. Mobil Oil Corporation (hereinafter "Mobil"), a New York Corporation, occupied a portion of the premises as a tenant of Jan-Mar by virtue of a lease dated August 2, 1955, and amended in 1956. Mobil operated a gasoline station on its leasehold portion of the premises.

The original term of the lease, as amended, ran for 15 years, commencing November 1, 1956, and ending October 3, 1971; the original rental obligation was $385 per month. Paragraph 6 of the lease granted Mobil options for three successive renewals, each renewal period to run five years. Each option was duly exercised and, up to the time of the taking, Mobil was paying a reduced monthly rent of $300 under the lease as extended.

Paragraph 7 of the lease granted Mobil an option to purchase the leasehold premises for the sum of $60,000. As of the date of the State's taking, this option remained unexercised. It is upon this option, however, that Mobil bases the rights it asserts herein.

On November 8, 1985, counsel for the State, Jan-Mar, and Mobil appeared before the court upon the State's application for an appointment of commissioners. Also before the court at that time were two motions made on behalf of Mobil: one was for an Order permitting Mobil to participate in the condemnation proceedings "in the same manner as any owner of property"; the other was for an Order dismissing the complaint in condemnation for failure of the State to provide Mobil with a copy of the appraisal upon which the offered compensation was based.

Following a review of the briefs submitted, and after oral argument was heard on the respective applications, the Court reserved decision pending supplemental briefing by counsel. Hence, this decision.

I

Fundamental to Mobil's asserted standing in these proceedings is the notion that its option to purchase the leasehold premises, coupled with the leasehold interest itself, entitles it to more than an allocation hearing under R. 4:73-9(b) following an ultimate award to Jan-Mar.

The State and Jan-Mar contend that, under the Supreme Court's holding in State v. New Jersey Zinc Co., 40 N.J. 560, 193 A.2d 244 (1963), Mobil lacks standing to participate in the condemnation proceedings. In New Jersey Zinc, the Court held that an option does not create an interest in land and, unless the option is exercised, the optionee has no standing to intervene in a condemnation proceeding or to share in an award. New Jersey Zinc, 40 N.J. at 576-577, 193 A.2d 244.

Although the holding in New Jersey Zinc has stood firm for over 20 years, Mobil seizes upon the separate opinion of Judge Conford (P.J.A.D., temporarily assigned) in State v. Bakers Basin Realty Co., 74 N.J. 103, 376 A.2d 1189 (1977), as being supportive of its asserted right of standing herein. In Bakers Basin, the Court affirmed, per curiam, a judgment of the Appellate Division which held that certain instruments, though containing provision only for nominal liquidated damages as the sole remedy of the sellers in case of breach by the purchaser, constituted contracts of sale rather than options and, therefore, gave the purchaser sufficient interest in the property to challenge the condemnation or participate in an award. Bakers Basin, 74 N.J. at 104-105, 376 A.2d 1189 aff'g. 138 N.J.Super. 33, 350 A.2d 236 (App.Div.1975). In agreeing that the instruments were contracts of sale rather than options, the Court found it "unnecessary ... to reconsider [its] earlier holding in State v. New Jersey Zinc Co." Id. at 105, 376 A.2d 1189.

However, Judge Conford, concurring in part and dissenting in part, called for the overruling of New Jersey Zinc. He urged the Court to dispense with the "fine-spun distinction" between contracts and options and to adopt the view of the California Supreme Court to the effect that sound land-development policy requires that realty optionees be accorded standing in condemnation proceedings. Id. at 106, 376 A.2d 1189 citing County of San Diego v. Miller, 13 Cal.3d 684, 119 Cal.Rptr. 491, 532 P.2d 139 (1975).

Even assuming that the Court has hinted in Bakers Basin, supra, that it may be ready to overrule its holding in Yet this case differs from New Jersey Zinc in at least one significant respect: here, the option to purchase was coupled with Mobil's leasehold interest; in New Jersey Zinc the Court was concerned only with a bare option, that is, a mere prospective interest devoid of the clothing of any present interest in the condemned realty. Thus, the issue of Mobil's standing in these proceedings turns not on its option to purchase but on its lease and the rights created thereby.

New Jersey Zinc, supra, it is not this judge's place either to tempt fate or to change the long-standing decisional law of the State at this level; to do so would be presumptuous indeed. Accordingly, this Court is bound by the Court's holding in New Jersey Zinc, supra, that an optionee has no standing to intervene in a condemnation proceeding or to share in the resulting award.

It is undisputed that Mobil, as a tenant, will be entitled to participate in an allocation proceeding and receive an appropriate division of the ultimate condemnation award to the extent of its remaining leasehold interest. See State v. New Jersey Zinc Co., supra, 40 N.J. at 574, 193 A.2d 244; New Jersey Highway Authority v. J & F Holding Co., 40 N.J.Super. 309, 316, 123 A.2d 259 (App.Div.1956); R. 4:73-9(b). Yet Mobil's participation should not begin and end there. In the opinion of this Court, the owner of a leasehold interest should not be prevented from offering proofs in the original condemnation proceedings in order to assure the consideration of specific values contributing to the overall value to be made the basis of the general award. See New Jersey Sports & Exposition Authority v. East Rutherford, 137 N.J.Super. 271, 348 A.2d 825 (Law Div.1975); 94 A.L.R.3d 696, 699-700 (1979).

In New Jersey Sports & Exposition Authority v. East Rutherford, supra, Judge Petrella held that various tenants who had not ceded their claim to the value of their remaining lease term could participate in the condemnation proceedings and present non-cumulative proofs to the extent of their respective This judge finds the reasoning of Judge Petrella both sound and persuasive. ⁴ Accordingly, although Mobil may not receive Mobil's participation in these proceedings will ensure that the ultimate general award of lump sum compensation reflects all those items which affect the value of the property condemned. New Jersey Sports & Exposition Authority, supra, 137 N.J.Super. at 282, 348 A.2d 825. Such participation, however, would be subject to the trial judge's control "to preserve order and avoid repetitious proofs." Id. at 285, 348 A.2d 825.

                interests.   N.J. Sports & Exposition Authority, 137 N.J.Super. at 285, 292, 348 A.2d 825.  He reasoned that the definitions of "property," 1 "condemnee", 2 and "parties" 3 under the 1971 Eminent Domain Act or court rule compel the conclusion that lessees have party standing to participate in the condemnation proceedings leading to a determination of the compensation to be awarded.  Id. at 281-283, 348 A.2d 825.  Additionally, Judge Petrella deduced that since a waiver of the appointment of commissioners requires the stipulation of all condemnees,  N.J.S.A. 20:3-12(a), "it cannot be said that certain condemnees are not to participate (unless they have given up that right), and it would be logical that [lessees] have standing to participate at a hearing they have the power to waive."  Id. at 283, 348 A.2d 825.  Indeed, as Judge Petrella acknowledged, lack of participation at the commissioners' hearing would preclude an appeal by the tenants.  Id. at 283-284, 548 A.2d 825
                separate and additional compensation for its leasehold under the "undivided fee" rule, see State v. New Jersey Zinc Co., supra, 40 N.J. at 574, 193 A.2d

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