106 North Walnut, LLC v. City of East Orange (In re 106 North Walnut, LLC)

Summarized by Richard Corbi , Otterbourg P.C.
14 years 4 months ago

Citation:

Case No. 09-3047 (3d Cir. Oct. 6, 2011) (Not Precedential)

Tag(s):

Ruling:

The term "inverse condemnation" is a short description of the manner in which a landowner recovers just compensation for a taking of his property by the government when condemnation proceedings have not been instituted. A property owner is only entitled to recover if the government action "deprived him of all or substantially all of the beneficial use of the property." The District Court held that under the totality circumstances, including the location of the Debtor's property in the redevelopment zone, the City's delay in implementing the Redevelopment Plan, and the demolition of the building, deprived the Debtor of all economically beneficial use of the property. The Third Circuit held that the District Court erred because the demolition was completely unrelated to the Redevelopment Plan because, as the Bankruptcy Court found, the City construction official was acting pursuant to his duties as an official motivated by a desire to abate an unsafe condition and public eyesore. Therefore, the Bankruptcy Court's determinations were not clearly erroneous. In addition, the Third Circuit explained that a "municipality may, in the exercise of its police power, without compensation destroy a building or structure that is a menace to the public safety or welfare, or require the owner to demolish the dangerous piece of property." In such a situation, an inverse condemnation is not available. In this case, the City Construction Official acted to ensure public safety. It was irrelevant that the Debtor's property was in the redevelopment zone. The Third Circuit concluded that there is no basis for finding of inverse condemnation. Finally, the Third Circuit relied on the Bankruptcy Court ruling that there was no evidence that the City prevented the Debtor from rebuilding the structure to a rentable or marketable condition. Thus, the District Court erred in concluding that the Debtor was left without way to regain the lost value of the property and as a result, no taking by the government occurred.

Procedural context:

The Third Circuit Court of Appeals reversed the U.S. District Court of New Jersey's ruling that the demolition of a building on the Debtor's property constituted inverse condemnation.

Facts:

In October 2002, a fire damaged the upper floor and roof of an apartment building at 106 North Walnut Street in East Orange, New Jersey. As a result of the fire, the City of East Orange (the "City") issued a notice of unsafe structure and notice of imminent hazard. On March 17, 2003, 106 North Walnut, LLC (the "Debtor") acquired the property and hired a contractor to renovate the building and fix the damages. In February 2004, the City adopted the North Walnut Street Redevelopment Plan (the "Redevelopment Plan"), which designated the area in which the Debtor's property was located as in need of redevelopment. In May 2004, City officials told the Debtor that the property was subject to demolition. However, on November 1, 2004, Ronald Kleckley, the City's Assistant Corporation Counsel, told the Debtor that the City did not have any immediate plans to condemn the property and the Debtor was free to proceed with rehabilitation efforts. That conversation was memorialized. However, that night, Lloyd Raheem, the City's Construction Official, instructed a contractor to demolish the structure. The Debtor subsequently filed for chapter 11 and instituted an adversary proceeding to impose liability against the City for, among other things, inverse condemnation, arguing that the City had deprived the Debtor of "substantially all of the beneficial use" of its property.

Judge(s):

Fisher, Hardiman, Greenaway, Jr.

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