Court Opinion

ID: 9770088
Source: CourtListenerOpinion
Date Created: 2023-08-29 15:38:57.567943+00
Date Added: 2024-06-11T07:31:13.179998
License: Public Domain

Justice LaVECCHIA,
dissenting.
This appeal presents an issue of contract interpretation that divides the Court. Specifically, two approaches to construction of a condemnation provision in a lease are pitted against one another. The majority reverses based on a presumption that the condemnation provision of a lease becomes operative only when some portion of a landlord’s fee interest is condemned. However, I believe that the terms of an arms-length negotiated commercial lease should control and must be applied as written. The facts that give rise to the present action are within the ambit of the condemnation provision at issue, therefore, I must respectfully dissent. I would affirm the Appellate Division judgment that enforced the condemnation provision and cut off the lessee’s right to any compensation.
I.
The Eminent Domain Act, N.J.S.A 20:3-1 to -50, requires negotiation between the condemnor and the “condemnee holding the title of record to the property.” N.J.S.A 20:3-6. The majority quite rightly observes that absent a specific contractual allocation of rights, a redeveloping body taking only a lease interest would be required to negotiate proper compensation with a lessee, who would be “the owner of [the] interest in the private property being condemned.” N.J.S.A 20:3-2(e) (defining “condemnee”); see ante at 404-06, 16 A 3d at 311-12. However, in this ease the lessee had contractually stipulated that in any conveyance of the property “or any portion thereof’ to a redeveloping body, the right to bargain and to receive compensation was solely the landlord’s. See City of Atlantic City v. Cynwyd Invs., 148 N.J. 55, 72, 689 A.2d 712 (1997) (explaining that the rights for a long-term leaseholder in a taking can “depend on the contract”); United *417States v. 8286 Square Feet of Space in Paca-Pratt Bldg., 61 F.Supp. 737, 741 (D.Md.1945) (“[I]f by the proper construction of the [condemnation] clause the interest of the tenant is ended and determined by the fact of condemnation, then the tenant has no compensable interest in the property condemned.”). The allocation of that right to the landlord in this commercial lease was the product of arms-length negotiation between sophisticated bargaining parties. Specifically, the lease contained a condemnation provision that stated:
If the Complex of which the Premises are a part, or any portion thereof, shall be taken under eminent domain or condemnation proceedings, or if suit, or other action shall be instituted for the taking or condemnation, or if in lieu of any formal condemnation proceedings or actions, Landlord shall grant an option to purchase and or shall sell and convey the Premises or any portion thereof, to the governmental or other public authority, agency, body or public utility, seeking to take said land or any portion thereof, then this lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as Landlord shall fix by notice in writing; and Tenant shall have no claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings; and all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such public authority, seeking to take or acquire the Premises or any portion thereof. Tenant covenants and agrees to vacate the Premises, remove all the Tenant’s personal property and deliver up peaceable possession thereof to Landlord, or to such other party designated by Landlord in the aforementioned notice. Failure by Tenant to comply with any provisions in this clause shall subject Tenant to such costs, expenses, damages and losses as Landlord may incur by reason of Tenant’s breach hereof.
The trial court, on remand from the Appellate Division with instructions to consider the intended effect of that provision, heard from the parties and concluded that the reference to “the Premises or any portion thereof’ in the condemnation provision of the lease demonstrated that the parties considered and allowed for the provision to apply in a variety of condemnation proceedings, and not only those in which the landlord’s fee interest in the property is taken. Furthermore, the court found that the provision specifically contemplated and permitted a class of “friendly” condemnation proceedings, based on the provision authorizing the landlord *418to “grant an option to purchase and or sell and convey the Premises or any portion thereof, to the governmental or other public authority ... seeking to take said land or any portion thereof.” The court reasoned that that language acknowledged that the landlord’s participation in the variety of initiating steps to a governmental condemnation would not provide a basis for conferring on the tenant a compensable interest in the condemnation.
The Appellate Division, in an unpublished opinion, affirmed the trial court’s logical and persuasive reading and application of this contractual condemnation provision. Although a majority of our Court now reverses, I respectfully dissent. I would affirm the Appellate Division.
In my view, the majority reverses based on a presumption that the condemnation provision of a lease becomes operative only when some portion of a landlord’s fee interest is condemned. And, it engages in an unduly narrow interpretation of the word “portion,” ascribing to it a meaning that limits the clause’s application only to takings of some physical part of the landlord’s fee interest in the property.1 In my view, the colloquial interpretation of a “portion” of the property adopted by the majority, one that requires a taking of some portion of the fee in order to trigger the condemnation clause, is wrongly based on treatises’ generalized discussion of the purpose of condemnation clauses in leases.2 See *419ante at 412-14, 16 A.3d at 316-17. Such an artificial interpretation of that term, particularly as used in the context of this provision as a whole, required substantial evidence to support such intent by the parties that negotiated the contract. The majority points to no such evidence, nor can it: no such evidence was advanced before the remand court. The majority’s circumscribed interpretation does injustice to the wording of the provision actually agreed to as a result of the parties’ arms-length negotiation of this commercial lease. Indeed, the majority has rewritten a better contract for this lessee than the one for which it bargained. Furthermore, the majority’s decision may well bring instability and uncertainty to a great many existing commercial leases in this State.3
Here, by the terms negotiated by the parties to this lease-contract, the landlord possessed the only interest compensable in a taking. The right to negotiate the value of that interest—entwined with the formal requirements of N.J.S.A. 20:3-6 that ensure procedural fairness between negotiating parties and that facilitate mutual agreement where hostile takings can be avoided—logically belongs to the only party entitled to receive compensation in a taking, friendly or otherwise. There is no evidence that the negotiation requirements of the Eminent Domain Act *420were intended to override a contract’s assignment of the right to compensation.
Finally, it bears emphasizing that the proceedings here were not untoward in any way, despite James’s4 efforts to cast them in such light; as a result, a balancing of the equities also does not justify the majority’s result.
The recently decided Iron Mountain Information Management Inc. v. City of Newark, 202 N.J. 74, 995 A.2d 841 (2010), illustrates the point. It held that a leaseholder is not statutorily entitled to actual notice of a potential blight designation under the Local Redevelopment and Housing Law (LRHL), N.J.S.A 40A:12A-1 to -49. Iron Mountain, supra, 202 N.J. at 78-79, 995 A.2d 841. We found no due process violation on the facts of that case. Id. at 79, 995 A.2d 841. Similarly, if Iron Mountain retains any validity, the facts of this case can present no discernable due process violation of the leaseholder’s rights, as the majority opinion appropriately reflects. See ante at 403-05, 16 A.3d at 310-13. The leaseholder here had exactly the same notice, and the same ability to challenge the blight designation as did the lessee in Iron Mountain. Moreover, any lessee has the power to protect his own interest by recording his name in the official tax records, thus entitling him to the same personalized notice of a proposed blight designation that is due an owner of property. See Harrison Redevelopment Agency v. DeRose, 398 N.J.Super. 361, 413, 942 A.2d 59 (App.Div.2008) (holding that where “contemporaneous individual written notice” is not provided to party with recorded interest, that party retains power to challenge redevelopment designation beyond ordinary statutory period); see also N.J.S.A 40A:12A-6(b)(3) (“[Njotice shall ... be sent to all persons ... whose names are noted on the assessment records as claimants of an interest in any such parcel.”). James chose not to protect its interests in this manner.
*421Furthermore, a deeper look into the proceedings illustrates that there is nothing unseemly about the exercise of eminent domain here. The lease between DVL and James was agreed upon in 1995, and the blight designation was made, in the face of DVL’s challenge, in 2000. Only in 2006 did the town appoint DVL redeveloper because the original redeveloper had unexpectedly dropped out. Before DVL knew it would have any role in the redevelopment the following had occurred: a comprehensive redevelopment plan was formulated and included James’s property; James’s right to challenge the blight designation had expired; and James had bargained away by contract its right to receive compensation in a taking, friendly or otherwise.
To conclude, there is nothing in the lease which even suggests that its terms do not apply where the landlord is the developer or where no portion of the landlord’s fee interest is taken. The lease would have deprived the tenant of any compensable interest in the condemnation if the original developer proceeded. Similarly, the tenant would not have had any compensable interest if its landlord, DVL, abandoned the project and another developer was substituted. There is simply nothing in this commercial lease to even suggest the rights of the tenant are affected, or should be affected, by the city’s designation of the landlord as its redevelopment agent. The majority’s decision upends the established and customary meaning of a lease provision at use in countless commercial leases throughout this state and fails to demonstrate any equitable basis for the relief it affords. Indeed, in the absence of any showing whatsoever of the parties’ intent that would overcome the clear language of the lease-contract, I respectfully dissent.
For reversal and remandment—Chief Justice RABNER and Justices LONG, ALBIN and HOENS-4.
For affirmance—Justices LaVECCHIA, RIVERA-SOTO and STERN (temporarily assigned)—3.

 Under the majority's interpretation, the leasehold owner would have no right to compensation so long as any portion of the fee interest containing the leasehold was condemned, whether it was 1 percent or 99 percent of that fee interest. The majority recognizes that property encompasses a host of interests, including fee interests, leasehold interests, easement interests, etc. See ante at 404-07, 16 A.3d at 311-13. There simply is nothing in the condemnation provision that even suggests it only applies when the property rights encompassed by a fee interest, rather than other possessory interests, are taken.

 In fact, condemnation clauses have a number of salutary purposes: they "enable [a] landlord to terminate [a] leasehold interest in the event of condemnation or its equivalent" without dispute or litigation; they allow for clear allocations of condemnation proceeds; they ensure no party reaps "a windfall"; and they minimize the "delay between [the] taking [of a property] and its utilization.” *419Twp. of Bloomfield v. Rosanna’s Figure Salon, Inc., 253 N.J.Super. 551, 559-60, 602 A.2d 751 (App.Div.1992).

 A narrow reading of the majority's holding would allow a landlord-redeveloper with an existing lease to ensure that its condemnation clause is not circumvented by engaging in one of two procedural tactics: (1) naming the fee interest itself in a condemnation complaint even though only the lease interest is actually sought; or (2) having the municipality purchase the fee interest from the landlord for nominal compensation and then returning the property to the landlord-redeveloper. See ante at 414-15, 16 A.3d at 317-18. To the extent that these avenues would be open to a redeveloper in a similar position as here, the majority opinion is elevating form over substance. Here, it allows a poorly drafted complaint to control the disposition of the case, despite the existence of a contract that reveals exactly how the parties intended to allocate compensation in the event the property was taken for redevelopment.

 Parly designations used by the majority opinion are retained here.