CONSTRUCTION & REAL ESTATE BLOG

What is Inverse Condemnation and How is it Applied When Ownership of the Land Changes?

by Gary Nissenbaum | May 10, 2024

In an unpublished opinion, the Appellate Division of the Superior Court of New Jersey addressed the difficult issues surrounding inverse condemnation. Inverse condemnation is when a property owner is deprived of all or substantially all of the beneficial use of the totality of his property by an action of the government. The reason that this is called an inverse condemnation is that it usually involves action by the government that indirectly, but effectively takes the property, rather than a formal proceeding by the government to openly and directly condemn particular property.

The inverse condemnation concept leaves a number of unanswered questions. One of them is whether a purchaser of land that was not inversely condemned can then seek a determination of inverse condemnation based upon the same circumstances as existed when the previous purchaser owned it. This question was addressed in the context of a situation in which the first owner of the property brought a claim for a hardship variance that was denied, and the new owner brought a claim for inverse condemnation regarding the same property. Was the new owner allowed to bring such a claim, or was it too late to do so?

Ciaglia v. West Long Branch Zoning Bd. of Adjustment, No. L-4484-06, 2011 WL 5041329 (N.J. Sup. App. Div. Oct. 25, 2011) the plaintiff, Ciaglia, was the owner of a vacant lot located on De Forrest Plane in West Long Branch. This lot was a part of a larger tract of land prior to its subdivision in 1957. The subdivision placed the lot in a residential district whose zoning ordinance required each lot to have lot frontage of not less than 100 feet and a depth of not less than 150 feet. Id. at 1. Even though the lot did not comply with these zoning requirements, the West Long Branch Planning Board approved the subdivision and certified that the subdivision map conforms with all the laws of the state and municipal ordinances and requirements applicable thereto. Ibid. At some point in future, the lot was subjected to even more restrictive regulations, which required minimum lot areas of 22,500 square feet and 150 feet of street frontage. Ibid

Borst, Ciaglia’s immediate predecessor in title, obtained the title to the lot through a tax foreclosure in 1988. In 1994, Borst applied for a variance for the lot which was denied by the Board of Adjustment (Board). Borst appealed the denial, and in 1997, the Board once again denied Borst’s application. In response to this, Borst asserted a claim for inverse condemnation against the Board. Finally, in 1998, Borst dismissed the Board from the action with prejudice and six months later, the court dismissed the remainder of the action with prejudice. This is when Ciaglia entered into a contingent contract to purchase the lot from Borst, and submitted a variance application seeking permission to construct a single-family home on the lot. The Board denied the application on the grounds that Ciaglia’s proposal was the same or substantially the same as Borst’s application of 1994. Id. at 3. Ciaglia then submitted amended plans which the Board found to be “substantially different from the Borst [a]pplication.” Ibid. In spite of the differences, the Board denied the variances and indicated the possibility of approval of a smaller dwelling. Ciaglia responded by filing a complaint that sought damages for wrongful inverse condemnation from the Borough. The trial court rejected the Boards finding that Ciaglia’s hardship was self-created on the grounds that Ciaglia had met his burden of proving undue hardship and had also attempted to contact the neighboring lot owners regarding the purchase of their lots. However, the trial court affirmed the Board’s denial of Ciaglia’s amended variance application on the grounds that the Board did not act arbitrarily, capriciously or unreasonably in reaching their decision.

Following this ruling, Ciaglia submitted another application based upon the Board’s earlier indication of the possibility of approval of a smaller dwelling. But the Board denied the variance application. In spite of this denial, Ciaglia purchased the land from Borst and then moved for summary judgment on his claim for inverse condemnation. The Borough filed a cross-motion for summary judgment asserting that:

(1) Ciaglias hardship was self-imposed; and

(2) The action for inverse condemnation was barred by the statute of limitations. Id. at 4.

The motion judge held that the subdivider’s 1957 application for a substandard lot constituted a self-imposed hardship, and this self-imposed hardship was imputed to the successors of the lot, namely Ciaglia. Ibid. Therefore, Ciaglia was disqualified from inverse condemnation relief. Furthermore, the motion judge held that Ciaglia was not barred by the statute of limitations but later amended his opinion and held that the statue of limitations had expired.

Ciaglia appealed and the Appellate Division held that Ciaglia was entitled to relief for his claim of inverse condemnation. In arriving at its decision, the Court first looked at the underlying constitutional principles that prohibit governmental takings of private property without paying just compensation. The Takings Clause of the Fifth Amendment of the United States Constitution bars taking of private property for public use without paying just compensation. U.S. Const. Amend. V. The Takings Clause is made applicable to the States by the Fourteenth Amendment. Kelo v. City of New London, 545 U.S. 469, 477 (2005). The New Jersey Constitution provides protections against governmental takings of private property without just compensation, coextensive with the Takings Clause of the Fifth Amendment of the United States Constitution. Id. The taking can be physical (e.g., deprivation of access, land seizure) or it can be a regulatory taking (when government regulations deprive the property owner of all economically viable use of land). Klumpp v. Bor. of Avalon, 202 N.J. 390, 405 (2010). A property owner who is deprived of all or substantially all of the beneficial use of the totality of his property can bring a claim for inverse condemnation. Greenway Dev. Co. v. Bor. of Paramus, 163 N.J. 546, 553 (2000).

The Court held that due to the fact-sensitive nature of the action for inverse condemnation, its adjudication must be individually tailored to the particular circumstances at the time the claim is presented. Id. at 7. The Court stated that at any time, Borst could have submitted a completely different variance application, or subsequent submissions, that would not be barred on land use res judicata grounds. Ibid. Therefore, the Court held that Borst’s dismissal of his inverse condemnation claim with prejudice did not bar Ciaglia from bringing an independent cause of action for inverse condemnation.

The Court also held that the availability of hardship variance depends always on how the hardship was created, not on who suffers from it at the time of application for a variance. Id. at 8. Furthermore, the Court disagreed with the Board’s contention that the hardship was self-created because the Planning Board approved the subdivision map with its eyes wide open and in conformity with existing law. It also imposed more restrictions on the lot, thereby zoning the lot into idleness. See ibid.

Therefore, Ciaglia was entitled to a judgment requiring the Borough to commence procedures for the acquisition of the lot pursuant to the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50.

Therefore, Ciaglia was entitled to a judgment requiring the Borough to commence procedures for the acquisition of the lot pursuant to the Eminent Domain Act of 1971.

Comments/Questions: gdn@gdnlaw.com

Is a homeowner who retains and manages contractors for his own home improvement project able to enforce his rights under the New Jersey Consumer Fraud Act (CFA) and New Jersey Contractor’s Registration Act?

by Gary Nissenbaum | May 10, 2024

In a published case, the Appellate Division of Superior Court of New Jersey determined that even though a homeowner may have acted as a “contractor” for his own project by retaining and managing all the other contractors, nevertheless, he still had the protections of a “homeowner” under the Consumer Fraud Act (“CFA”) and Contractor’s Registration Act (“CRA”). Murnane v. Finch Landscaping, LLC, 420 N.J. Super. 331 (App. Div. 2011). Murnane, a homeowner, contracted with Finch Landscaping, LLC to construct a bluestone patio in the backyard of his home. He also contracted with other building contractors and a patio designer to undertake other parts of the project. He did not engage the services of a general contractor and at one point also referred himself as the “general contractor” for this construction project.

The parties entered into a written contract that also specified the thickness of the bluestone. As the work progressed, various changes were made to the construction specifications but these changes were not reflected in writing. Although, Murnane paid the full contract price of $26,300, Finch Landscaping, LLC sent Murnane invoices for additional costs it incurred due to the various changes made during the construction. Murnane refused to pay the additional charges and brought an action for breach of contract and a violation of the CFA in the Superior Court of New Jersey, Special Civil Part. Finch Landscaping, LLC counterclaimed for the amount incurred for the additional work it performed.

The trial court held that since Murnane held himself out as the “general contractor” for his patio construction project, he was barred from asserting a CFA claim against Finch Landscaping, LLC. The jury ruled in favor of Finch Landscaping, LLC on its counterclaim and returned a verdict of no cause of action on the contract claim but at the same time found Finch Landscaping, LLC liable for damages to Murnane’s property. Murnane appealed from the dismissal of its CFA claim and Finch Landscaping, LLC appealed from the denial of its motion for counsel fees.

Since home improvement contracts are prone to consumer fraud violations, the New Jersey Supreme Court has applied the CFA and the CRA to these transactions. This is significant because, for example, under the CFA, every home improvement contractor is required to register with the Division of Consumer Affairs. See N.J.S.A. 56:8-138.

The Court held that even if “a homeowner could be characterized as a general contractor, he is still ‘an owner … of a residential … property’ who has entered into a ‘home improvement contract’ with a contractor.” Murnane, 420 N.J. Super. at 338 (quoting N.J.S.A. 56:8-137). The Court distinguished this case from the holding in Messeka Sheet Metal Co. v. Hodder, 368 N.J. Super. 116 (App. Div. 2004). In Messeka Sheet Metal, a homeowner contracted with a general contractor who in turn contracted with a subcontractor to install air conditioning. The subcontractor asserted a direct claim against the homeowner and the homeowner asserted a CFA claim against the subcontractor. The Court dismissed the homeowner’s CFA claim because the homeowner had no direct contractual relationship with the subcontractor. However, in the present case, Murnane had a direct contractual relationship with Finch Landscaping, LLC. Therefore, he was not barred from bringing a claim under CFA in spite of holding out as a general contractor for the construction project. In other words, the key distinguishing fact was the contractual relationship between the homeowner and the contractor.

Comments/Questions: gdn@gdnlaw.com

What is a Quit Claim Deed and How is it Used?

by Gary Nissenbaum | May 29, 2014

How do you sell something you don’t know if you own? That may sound like a nonsensical question, but there are many situations in which it comes up under the law.

The typical example is with respect to real estate. Many times the real estate records do not tell the whole story about who has an interest in the property. Sometimes there is a dispute about ownership. Other times people may have proprietary rights that are not necessarily related to actual ownership of the land, but instead may relate to how it is used (or restrictions on that use).

The law has come up with a way of dealing with such situations. It is called a quit claim conveyance. It means that the person will convey whatever interest they may have, whether or not they can define it.

One of the more interesting ways this is currently used has to do with the assignment of intellectual property. Often someone might be involved in a group project that results in creating a trademark, copyright or other such property rights. In such a situation the parties will often create a company that they jointly own and have everyone sign a quit claim transfer assigning any rights they may have, known or unknown, to that company.

A quit claim conveyance or transfer is a powerful tool for those involved in legal situations that may involve a level of obscurity or ill-defined rights.

Can a Subcontractor Collect Money it is Owed Without Providing Evidence of Why it is Owed that Sum?

by Gary Nissenbaum | Feb 5, 2014

When asserting damages under the New Jersey Prompt Pay Act, what evidence should be submitted to the Court? That issue was discussed in United States v. APS Contracting, Inc., CIV. 11-779-KMW, 2013 WL 530576 (D.N.J. Feb. 11, 2013).

In that case, Plaintiff, Cardinal Contracting Company, LLC, filed a motion for final judgment by default against Defendant A.C.C. Construction, LLC (“ACC”) and to amend the pleading. No opposition was filed.

Plaintiff had sued Defendants APS Contracting, Inc. Fidelity and Deposit Company of Maryland and ACC. Plaintiff alleged that ACC entered into a subcontract with Plaintiff wherein Plaintiff was the sub-subcontractor and was to provide a portion of the labor and material required for the construction project of a Combined Maintenance Facility at the Fort Dix United States Army Installation.

Plaintiff performed under the contract and ACC failed to pay.

The Plaintiff filed suit against ACC for breach of contract and violations of the New Jersey Prompt Payment Act. Defendant ACC was properly served but failed to answer the complaint or otherwise enter an appearance in the case. The Clerk of the Court entered default against Defendant ACC, and Plaintiff filed a motion seeking final judgment by default.

The Court noted that the New Jersey Prompt Payment Act provides that,

“[i]f a … subsubcontractor has performed in accordance with the provisions of its contract with the … subcontractor and the work has been accepted …, and the parties have not otherwise agreed in writing, the prime contractor shall pay to its subcontractor and the subcontractor shall pay to its subsubcontractor within 10 calendar days of the receipt of each periodic payment, final payment or receipt of retainage monies, the full amount received for the work of the … subsubcontractor based on the work completed or the services rendered under the applicable contract.” N.J. Stat. Ann. § 2A:30A–2(b). “If a payment due pursuant to the provisions of this section is not made in a timely manner, the delinquent party shall be liable for the amount of money owed under the contract, plus interest at a rate equal to the prime rate plus 1%.” N.J. Stat. Ann. § 2A:30A–2(c). Further, “the prevailing party shall be awarded reasonable costs and attorney fees.” N.J. Stat. Ann. § 2A:30A–2(f).

United States v. APS Contracting, Inc., CIV. 11-779-KMW, 2013 WL 530576 (D.N.J. Feb. 11, 2013)

So far so good. The problem arose when the Plaintiff sought to prove its damages. Plaintiff proffered a very terse certification stating that Defendant failed to pay $74,002.50 and that interest was calculated pursuant to the Prompt Pay Act. Further Plaintiff certified as to $30,808.00 in attorneys fees.

The Court found that Plaintiff was entitled to final judgment but did not enter that judgment. It ruled that Plaintiff had submitted insufficient evidence to support its claim for damages. It required Plaintiff to provide evidence in the form of an affidavit with supporting documentation for each aspect of the damages claimed.

If a Home Improvement Contract Violates the Requirements of the Consumer Fraud Act May the Contractor Recover for the Value of the Services Rendered?

by Gary Nissenbaum | May 14, 2013

The Consumer Fraud Act (“CFA”) aims to protect New Jersey consumers from unfair and unethical trade practices. In part, the CFA attempts to do this by requiring businesses to disclose certain information in writing when dealing with consumers. The CFA’s goal is to promote truth and fair dealing in the market place.

In Gemini Restoration Inc. v. Dr. Joseph Leone, et. al., A-6171-09T4 (N.J.Super. App. Div., August 3, 2012), a dispute arose between a homeowner (“Defendant”) and a contractor (“Plaintiff”) in regard to the performance of home renovations. Defendant hired Plaintiff to perform extensive renovations on his home because Defendant’s architect and friend, Christine Miseo (“Miseo”), recommended him for the job. The original contract between the parties was for the estimated total of $221,735.55. Id.at 2.

After Plaintiff began the renovations, Miseo sought a series of additions to the scope of the renovations. Plaintiff did not prepare a subsequent contract incorporating the additional work. However, he did submit to both Defendant and Miseo detailed bills reflecting the additional cost of labor and materials incurred each month. He submitted the bills to Miseo because Defendant explicitly told him that she was authorized to approve the bills each month. Indeed, she authorized various changes to the plan as the project progressed and accordingly, Plaintiff continued to work. Id.at 3-5.

Plaintiff sought payment from Defendant for the additional completed work that was not included in the initial contract. Defendant paid him for a portion of the additional cost; however he refused to pay Plaintiff the remaining $89,581.36. Id. at 3. Plaintiff filed suit in the Law Division of the Superior Court of New Jersey (the “Lower Court”) against Defendant for the balance due on a theory of breach of contract. Defendant asserted the defense to that claim by alleging Plaintiff’s contract violated the CFA in his counterclaim.

The Lower Court dismissed the breach of contract claim because it determined that the contract violated the CFA regulations that govern home improvement contractors. However, the Lower Court permitted Plaintiff to proceed under quantum meruit against Defendant. Quantum meruit is an equitable principle that allows a person to recover for the reasonable value of his or her services that he or she has rendered. It applies when there is, either, no contract or the contract is deemed unenforceable. Based on that principle, the jury returned a $92,000.00 verdict in Plaintiff’s favor. Id.at 1.

Defendant argued that Plaintiff should not have been allowed to proceed to the jury under quantum meruit because he violated the CFA. The Lower Court rejected that argument. It explained that Defendant was prohibited, based upon notions of fairness (equitably estopped), from invoking the CFA against Plaintiff because he was the one who induced the behavior. For example, Miseo, as Defendant’s representative, approved the bills, did not object to the fairness of the bills, nor did she indicate to Plaintiff that he should cease performance of the renovations. Id. at 4.

Defendant appealed to the Superior Court of New Jersey, Appellate Division (the “Appellate Court”). The Appellate Court explained that the CFA regulations governing home improvement contracts required the changes to the terms and conditions of a home improvement contract to be in writing and signed by all parties. Also, the regulations required that time and material contracts must clearly state the hourly rate for labor along with all other terms and conditions of the contract that affected the price. Furthermore, it stated that a violation of the CFA regulations were a per se violation of the Act. Id. A “per se” violation was a violation that was unlawful on its face, requiring no further inquiry into the facts. Id. at 5.

However, one may be equitably estopped from asserting the CFA as a defense to withhold payment from a general contractor when it would be unjust to do so. In its holding, the Court cited D’Edgio Landscaping v. Apicella, 337 N.J. Super. 116 (App.Div.2004). In D’Edgio, the defendant homeowner was equitably estopped from invoking the CFA against a contractor because defendant was the one who insisted that a written contract was unnecessary in light of their longstanding relationship. Id. at 6.

The Court also referenced Messeka Sheet Metal Co. Inc. v. Hodder, 368 N.J. Super. 116 (App.Div.2004) in which the plaintiff-subcontractor sued the defendant-homeowner to collect on a bill for installing air conditioners. In Messeka, the homeowner was not the one who hired the plaintiff. Rather, it was the homeowner’s general contractor who hired and directly dealt with the plaintiff. Therefore, because the CFA was designed to protect homeowners who deal directly with contractors, the defendant could not assert the CFA as a defense. Id.

Accordingly, in this case, the Court explained that Defendant was equitably estopped from bringing a CFA counterclaim because:

1)      Similar to the defendant in Messeka, Defendant interposed his construction professional, Miseo, as an expert intermediary between himself and Plaintiff. Therefore he was not a vulnerable consumer who needed the CFA’s protection;
2)      Plaintiff disclosed the amended work and the rates charged for that work;
3)      Defendant and Miseo were aware of those rates and Miseo approved them on behalf of the Defendant; and
4)      Miseo recognized the rates as fair and reasonable within the industry.

Id. at 7-8.

Furthermore, the Court addressed Defendant’s argument that the Lower Court should not have allowed Plaintiff to proceed to the jury based on quantum meruit after determining that he committed consumer fraud. Id. at 14. The Court rejected Defendant’s argument. It stated that when a claim was stricken for failure to comply with the CFA regulations, the contractor could, under certain circumstances, proceed in quantum meruit. Thus, the Court upheld the jury verdict in favor of Plaintiff. Id. at 12.

Are New York Property Owners Entitled to Common Law Indemnification for a Third Party’s Injury by a General Contractor if That General Contractor Did Not Control or Supervise the Worksite?

by Gary Nissenbaum | Apr 29, 2013

In McCarthy v. Turner Construction, Inc., 17 N.Y. 3d. 369 (2011), Boston Properties, Inc. and Time Square Tower Associates, LLC (collectively “Property Owners”) leased a retail storefront to Ann Taylor, Inc. (“Ann Taylor”). Subsequently, by agreement (the “Agreement”), Ann Taylor engaged a general contractor, John Gallin & Son, Inc. (“Gallin”) to perform construction on its storefront. The Agreement stated that Gallin was solely responsible for and in control of the construction and was required to take reasonable safety precautions to protect the workers from injury. Id. at 372.

However, Gallin did not perform the construction itself; Gallin engaged Linear Technologies Inc. (“Linear”) as its subcontractor. Shortly thereafter, Linear hired Samuels Datacom, LLC (Samuels) as its sub-subcontractor. An electrician employed by Samuels (“Plaintiff”) was injured when he fell from a ladder while working on the project site. Subsequently, he brought an action in the Supreme Court of New York (“Lower Court”) for his injuries against Gallin and the Property Owners. Id. The Property Owners asserted a cross claim against Gallin for common law indemnification. Id. at 373. Indemnification is a legal concept that enables a defendant the right to be reimbursed for some or all costs associated with the suit by another person or entity.

The Lower Court held that the Property Owners and Gallin were vicariously liable for Plaintiff’s injuries. Vicarious liability is a legal concept that holds a third party responsible for the acts of another solely because of his or her relation to the actual wrongdoer. For example, under certain circumstances an employer could be held vicariously liable for his or her employee’s unlawful conduct.

Property Owners and Gallin reached a settlement under which they each paid the Plaintiff $800.000.00. The settlement itself was not in dispute. Instead, the question before the Court was whether the Property Owners could recoup some or all of that money from Gallin.

The Lower Court rejected the Property Owners’ cross claim for common law indemnification because Gallin was not actively at fault in bringing about the injury. Id. at 373. Thus, the Lower Court held that Gallin was not required to reimburse the Property Owners for some or all of the $800,000.00 they paid to Plaintiff.

The Property Owners appealed to the Supreme Court of New York, Appellate Division (“Appellate Court”). The Appellate Court affirmed the Lower Court’s holding.

The Property Owners appealed to the Court of Appeals of New York (the “Court of Appeals”). In their appeal, they argued that they were entitled to common law indemnification by Gallin, whether or not Gallin directly supervised and controlled Plaintiff’s work, based upon the Agreement. Id. at 374. That was the central issue before the Court of Appeals: whether a person or entity that does not supervise or control another can be liable to indemnify for the damages that party causes.

First, the Court of Appeals considered Labor Law §240(1) which imposes upon owners and general contractors and their agents a nondelegable duty to provide safety devices necessary to protect workers from the risks inherent in elevated work sites. Further, the Court of Appeals noted that §240(1) holds owners and general contractors absolutely liable for any breach of the statute, even if the job was performed
by an independent contractor whom they did not supervise nor control.

Having said all of that, the Court of Appeals nevertheless held that a general contractor’s authority to supervise the work and implement safety procedures was not a sufficient basis for requiring common law indemnification. It explained that liability for indemnification may only be imposed against parties who exercised actual supervision. Thus, the Court asserted that a common law indemnification claim did not lie against a party who had contractual authority to direct and supervise the work at a job site but never exercised that authority because it subcontracted its contractual duties to another. Id. at 378.

The Court of Appeals also noted that an owner or general contractor, who was not at fault for the misconduct, still has the right to seek full indemnification from the party who was actually responsible for the accident. Id. A party’s right to indemnification may not only arise from a contract but may have also be based upon equity (what is fair and proper between the parties). Common law indemnification is generally
available in favor of an innocent party who was held vicariously liable for the wrongdoing of another. Id. at 375.

In its analysis, the Court explained that although the Agreement required Gallin to supervise and direct the work at the worksite, such a provision was insufficient to establish that Gallin actually supervised or directed
Plaintiff’s work. The Court noted that this was especially so considering the following facts:

Gallin had no supervisory authority over Samuels’ (Plaintiff’s employer’s work) work.

Gallin would not have directed Plaintiff as to how to perform his work. and

Gallin did not provide any tools or ladders for the subcontractors that worked at the
site.

Id.

Therefore, the Court affirmed the dismissal of Plaintiff’s cross claim for common law indemnification, holding that Gallin did not actually supervise, nor direct, Plaintiff’s work. Id. Thus, Gallin did not have to compensate the Property Owner for any of the $800,000.00 they paid to Plaintiff in order to settle his personal injury claim.

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