Missouri Heritage Value statute declared constitutional; family awarded $2 million in eminent domain proceeding

by Gary Taylor

St. Louis County v. River Bend Estates HOA
(Missouri Supreme Court, September 10, 2013)

The Missouri Heritage Value statute (statute) was adopted by the Missouri legislature in 2006.  It provides for additional compensation for the exercise of eminent domain over homesteads, and properties held within the same family for 50 or more years.  If a property has been owned within the same family for 50 or more years, “just compensation” is determined by statute to be fair market value plus an additional 50 percent (“heritage value”), thus equaling 150 percent of fair market value.

St. Louis County condemned 15 acres of property for a highway extension project.  The property was deeded to Arthur Novel in 1904, who farmed it with his wife until their deaths in 1968.  It stayed in the family and was owned by the Novels’ descendents until the condemnation proceedings.  The condemnation court awarded the descendents $320,000 for acquisition of the property, and an additional $160,000 for heritage value, resulting in a total award of $480,000.  The descendents appealed, and at trial the jury awarded them $1.3 million, to which the court added $650,000 for heritage value for a total award of approximately $2 million (including interest).  The county appealed.  Because the challenge was to the constitutionality of the statute the appeal went directly to the Missouri Supreme Court.

The bulk of the opinion addressed numerous evidentiary and procedural issues, but the Court did eventually address the County’s  three constitutional challenges: (1) the statute impermissibly altered the judicial definition of “just compensation” by permitting the addition of heritage value to fair market value; (2) the statute requires condemning authorities (in this case, the County) to expend public funds without a public purpose in violation of the Missouri Constitution; and (3) the statutory requirement that a judge compute heritage value invades the province of the jury to determine just compensation – also in violation of the Missouri Constitution.

Definition of “just compensation.”  The Missouri Constitution declares that “private property shall not be taken or damaged for public use without just compensation.” The US Supreme Court has interpreted “just compensation” to mean the fair market value of the property at the time of the taking.  The County argued that constitutional interpretation is the province of the judiciary, not the legislature.  The Court did not disagree; noting, however, that the statute does not alter the definition of “just compensation,” but rather “provid[es] additional benefits to certain property owners whose real property is taken for public use.” It cited US Supreme Court cases that “support the proposition that a legislature may compensate losses and damages beyond those traditionally included in its interpretation of ‘just compensation.'”  “‘Just compensation’ is a minimum measure that must be paid, not a maximum one.”

Expenditure of public funds.  Missouri Constitution Article III, Section 38(a) states that the legislature “shall have no power to grant public money or property …to any private person, association or corporation….”  The County asserted that compensation payments beyond the constitutional minimum serve no public purpose and are therefore unconstitutional.  To determine whether there is sufficient public purpose behind a grant of public money the Missouri courts have employed the “primary effect” test.  This test allows expenditures whose primary object is to serve a public purpose, even if it involves as an incident an expense which, standing alone, would not be lawful.  The Court determined that the primary purpose of the expenditure was to acquire property for a public purpose, and that the payment for heritage value is merely incident to that public purpose.

Computation by judge of heritage value.  Missouri Constitution Article I, Section 26 requires that just compensation “be ascertained by a jury.”  The Court quickly dismissed this argument by noting its previous declaration that heritage value is a payment in addition to “just compensation” – not part of the just compensation calculation.

The Court upheld the roughly $2 million jury award.

Contract for deed purchaser not “owner” for condemnation purposes

by Kaitlin Heinen

City of Cloquet v. Julie Crandall, et al.
(Minnesota Court of Appeals, December 10, 2012)

Kerry and Julie Crandall operated an auction business out of a downtown building when the City of Cloquet took the building’s parcel by condemnation for the construction of a new human services building. The district court granted title to the City in July 2010. Three court-appointed commissioners determined that $198,000 was fair compensation under a fair-market-value analysis and under a minimum-compensation analysis under Minnesota Statutes section 117.187. When the parcel was condemned, the Crandalls had been in the process of purchasing it under contract for deed. In August 2010, the contract for deed sellers executed a satisfaction, stipulating with the Crandalls that the contract was fully paid. In September 2010, the district court recognized the satisfaction and entered a stipulation order observing that the sellers disclaimed any continuing interest in the property.

Before the district court trial, the City unsuccessfully moved to exclude any evidence bearing on a minimum-compensation analysis, arguing that the Crandalls were contract for deed vendees rather than owners. Appraiser John Vigen testified as an expert witness for the City, stating that the “Carlton property” was comparable to the Crandalls’. The Carlton property’s building was older, smaller, poorly constructed, and had limited access by comparison, but Vigen testified that it was comparable because the Crandalls’ auction business did not use all of the space available on the parcel and because the Carlton property zoning classification allowed it to be used as an auction business. To the contrary, the Crandalls’ real estate expert David Reach testified that the small size, poor condition, and limited access made the Carlton property unsuitable for the Crandalls’ business. Instead, he identified the Kolar property (formerly a car dealership) as comparable, though it was much larger and more expensive. Reach testified that it was comparable because the Kolar property included a building with floor space equal to the Crandall property’s building. The district court found that the Carlton property was a comparable property, thus upholding that the Crandalls were entitled to $198,000 in compensation. Both the Crandalls and the City appealed to the Minnesota Court of Appeals.

The Minnesota Court of Appeals first addressed the September 2010 order recognizing the August 2010 satisfaction of the contract for deed. The Crandalls claim that the order’s stipulated satisfaction functioned as an assignment to them of vendors’ rights, vesting in them a fee title interest in the property. However, neither the satisfaction nor the order is an assignment. An assignment requires the grantor’s manifest intention to assign a specific right. The satisfaction of the contract for deed only releases the Crandalls from contract obligations. Further, the district court had already transferred title to the City in its July 2010 order. When the satisfaction was executed in August, the vendors had no title to transfer to the Crandalls. So the Minnesota Court of Appeals held that the September order did not grant vendors’ rights to or vest fee title to the property in the Crandalls.

Both the Crandalls and the City argue that the district court misinterpreted section 117.187, which states: “For the purposes of this section, ‘owner’ is defined as the person or entity that holds fee title to the property.” The Crandalls argued that they are entitled to minimum compensation as contract for deed vendees. Though section 117.187 is restricted to “owners,” the Crandalls claim that contract for deed vendees are still considered owners. Section 117.036, enacted at the same time as section 117.187, defines “owner” as “fee owner, contract purchaser, or business lessee who is entitled to condemnation compensation under a lease.” This section indicates that the legislature classifies fee owners and contract purchasers separately, but “contract purchaser” is not expressly defined nor is the term used elsewhere in regards to real estate. The Minnesota Court of Appeals concluded that “contract purchaser” must include contract for deed purchasers. To interpret “fee title” owner in section 117.187 to include contract for deed vendees would mean that “contract purchaser” in section 117.036 is superfluous. So it must be inferred that the legislature intended to exclude contract for deed purchasers from the scope of section 117.187. If the legislature wanted to include contract purchasers in section 117.187,  it would have included them explicitly. In fact, “fee owners” traditionally includes only those holding legal title.

Furthermore, section 507.092 states that “[n]o contract for deed or deed conveying fee title to real estate shall be recorded…” The separate specification of “contract for deed” and “deed conveying fee title” shows that the legislature does not intend for a contract for deed to include fee title. Additionally, section 117.187’s history suggests that the legislature intended to exclude contract for deed vendees. When the Eminent Domain Conference Committee added the definition of “owner” to section 117.187, committee members specifically discussed the meaning of the language at issue here.  Legislative counsel Bonnie Berezovsky asserted that “fee owner would not include a purchaser under a contract for deed.” Although the opinion of legislative counsel is not proof of legislative intent, the court found her comment persuasive as a legal explanation of what is  and is not included as an “owner” in section 117.187.

Because the Crandalls were not fee title owners entitled to minimum compensation under section 117.187, the district court erred by denying the City’s motion to exclude the Crandalls’ minimum-compensation evidence at trial. The Minnesota Court of Appeals reversed and remanded the district court’s ruling.

Landowner could not limit access of easement holder to one specific route

by Victoria Heldt

Enbridge Energy, LP v. Donovan Dyrdal, et al.
(Minnesota Court of Appeals, October 24, 2011)

The Dyrdals own agricultural property that is subject to easements held by Enbridge Energy.  The easements were granted in 2009 by the power of eminent domain and allowed Enbridge “rights of ingress and egress as are reasonably necessary or convenient in the exercise of such easement rights.”  Enbridge, a public-service corporation, installed and maintained pipelines in the easement.  Soon after completing the pipeline installation, Enbridge discovered problems at two locations, so the crew began working to correct them in January of 2010.  They used a field road on the Dyrdal property to access the two spots.  In response, the Dyrdals placed large hay bales across the field road and in the ditch between the problem sites, preventing Enbridge from accessing their work site.  Enbridge claimed this delay cost them an additional $28,697.80 in project costs.

Enbridge sought a declaratory judgment and injunctive relief in district court alleging a breach of easements and a violation of the eminent-domain order, among other things.  They also moved for a temporary injunctive relief to prevent the incident from reoccurring during litigation, which the court granted.  The Dyrdals countered with a claim of immunity under Minnesota’s statute preventing strategic litigation against public participation (SLAPP).  The statute’s goal is to prevent parties from using the threat of costly litigation to silence those who want to debate public issues.  The district court eventually granted Enbridge’s motion for summary judgment on the issue of declaratory relief, finding Enbridge did indeed have the right to access the property to maintain the pipelines.

The Dyrdals appealed, their first claim being that the district court erred when it denied their request for partial summary judgment on the grounds of Minnesota’s anti-SLAPP statutes.  The anti-SLAPP statute can be used to dismiss claims that relate to public participation.  The Court noted that public participation is defined as “speech or lawful conduct that is genuinely aimed in whole or in part at procuring favorable government action.”  The Dyrdals argued that, since Enbridge gained access to the property by means of an eminent-domain procedure, it was acting as a government agent in its actions.  Consequently, they claimed that the anti-SLAPP statue was applicable.  The Court disagreed.  They noted that the power of eminent domain does not make the entity a government agent once the power has been exercised.  In addition, they found that Enbridge was exercising its rights as an easement owner, not a government agent, in accessing the property.  Further, the Dyrdals previously claimed that they placed the hay bales on the road in order to load them and not to interfere with Enbridge’s work.  If that is true, then their conduct was not to “procure favorable actions from Enbridge,” but for their own private farming operations.  As a final note, the Court noted that it had recently found that a preexisting legal relationship could limit a party’s ability to file an anti-SLAPP claim.

The Dyrdals also alleged that the district court abused its discretion when it granted temporary injunctive relief.  In evaluating whether a temporary injunction is appropriate, the Court considers five factors:  1) the nature and background of the relationship between the parties; 2) the balance of harm to the parties; 3) the likelihood that the party seeking the injunction will prevail on the merits of the action; 4) wither there are public-policy considerations; and 5) whether there are any administrative burdens involved in judicial supervision and enforcement of the temporary injunction.  After analysis, the Court found that the first three factors favored Enbridge, while the last two were neutral.

The Dyrdals focused mainly on the third factor.  The Court had reasoned that the language in the eminent-domain ruling showed Enbridge had a clear right to access the property and that constituted a showing that they would most likely win on the merits of the case.  The Dyrdals claimed that the real-estate doctrine of practical location limited Enbridge’s right of entry to one specific route.  The boundary by practical location can be established by acquiescence if one party chooses a specific route and the other agrees accepts it over a period of time.  The Dyrdals contend that an alternative route (and not the field road) that was previously used had been established by acquiescence.  The Court noted the plurality in the phrase “rights of ingress or egress” that appeared in the eminent-domain ruling.  It found that the ruling did not prescribe one specific route of access, so the Dyrdal’s claim was insufficient to disprove the likelihood of Enbridge’s success in a claim.  Additionally, the practical location by acquiescence doctrine requires acquiescence over a period of time.  In this case, the easement was relatively new and substantial time had not passed in which to establish a route by acquiescence.  The Court affirmed the district court’s decision regarding the temporary injunction.

Wyoming wind task force votes for limits on eminent domain

The Associated Press released the following article concerning the use of eminent domain in Wyoming for private companies building collector lines for wind turbines:

CASPER, Wyo. (AP) — Private companies that want to string small power lines from wind turbines to the main power grid wouldn’t be able to seize land from Wyoming landowners under a recommendation made by a task force Thursday.

The Wind Energy Task Force voted 5-4 to deny the power of eminent domain to private companies building so-called collector lines for wind projects in the state. Eminent domain is the forced acquisition of private property for public use and has been used to build railroads, pipelines and other projects.

At the same time, the panel recommends that regulated public utilities retain the power of eminent domain. Public utilities are subjected to more scrutiny from state Public Service Commission regulations and oversight.
Task force chairman Rep. Kermit Brown, R-Laramie, said the panel’s eminent domain recommendation seeks fairness for landowners whose land is needed only for small collector lines.

“All he gets is one lump sum payment for the fair market value of what little property they need and he never sees another dime,” Brown said.

Landowners with the wind turbines on their land pocket monthly checks from the wind producer, Brown said.
The task force’s recommendations go the Legislature, which would have to approve any change in state eminent domain law.

Wyoming imposed a moratorium on the use of eminent domain for collector lines that went into effect in March and will last through June 30, 2011. It’s meant to buy some time for Wyoming citizens and policymakers to examine the issue.

The Legislature last made changes to the state’s eminent domain law in 2007 mainly because of complaints from landowners who felt run over by booming oil and gas development. The process proved contentious.
Brown still refers to the 2007 debate as the “eminent domain wars.”  “They’re just tough, tough issues every time they come up,” he said.

Jill Morrison, an organizer with the Powder River Basin Resource Council, which advocates for private landowners, applauded the panel’s decision.

“If we can restrict eminent domain in any way I think our landowners support that because we believe these issues should be addressed through private negotiations and agreement, not through holding a gun to somebody’s head and threatening eminent domain, which basically forces the landowner to take whatever the condemner is offering because they have the greater power,” Morrison said.

Cheryl Riley, executive director of the Wyoming Power Producers Coalition, declined immediate comment on the task force’s action until she can study its recommendation.

Brown said he couldn’t say how the task force’s recommendations might affect the growing wind industry in Wyoming.
The dozens of wind farms that have been built or are being proposed in the state so far have hugged the main power transmission lines that cross the state. Building wind farms farther away from the grid will mean erecting many more of the collector lines.

Wyoming is one of the most reliably windy inland areas of the United States, and its wind energy potential has attracted wide interest in recent years.

Minnesota SC addresses valuation of contaminated, condemned properties

by Gary Taylor

Moorhead Economic Development Authority v. Anda
(Minnesota Supreme Court, September 2, 2010)

In March 2001 the Moorhead Economic Development Authority (MEDA) exercised its condemnation power to take Roger Anda’s commercial property as part of a redevelopment project. MEDA used the “quick-take” eminent domain procedure allowed in Minnesota law.  Under the quick-take procedure the government entity is allowed to take title and possession of the property prior to the valuation of the property by the condemnation commission (in contrast to the traditional procedure, through which the valuation is set first, then title is transferred).  After taking title to and possession of Anda’s property through the quick-take procedure, MEDA and the property’s developer, Moorhead Holiday Associates (MHA), discovered fuel-oil contaminated soil on Anda’s property and two adjoining properties. Under contractual time pressure to deliver Anda’s property and the adjoining properties to a franchise developer, MHA acted quickly to remediate the contaminated properties. The remediation process for the three properties took approximately one week to complete and cost $1,599,568.

In the condemnation commissioners subsequently awarded Anda $488,750 as compensation for the taking of his property. Both Anda and MEDA appealed the commissioners’ award. MEDA also commenced a separate action against Anda to recover damages for the cost of remediating the contamination discovered on the two adjoining properties, which MEDA alleged was a result of fuel oil leaking from Anda’s property. The parties agreed to consolidate the actions. At trial, the jury found Anda’s property was worth $455,000 “had it not been impaired by fuel oil contamination” and $0 “taking into account the fuel oil contamination.” The jury also found Anda liable for the contamination of the two adjoining parcels in the amount of $474,512. The court then concluded that Anda was not entitled to damages for the taking of his property because the cost of remediating Anda’s property exceeded the property’s fair market value. Both parties appealed.

The issue of valuation of contaminated, condemned property was one of first impression for the Minnesota Supreme Court.  The threshold question the court addressed was the date upon which the property value was to be determined.  The court held that in a quick-take eminent domain proceeding, the date of valuation is the date when title and possession of the condemned property are transferred from the owner to the condemning authority, not the date of valuation by the compensation commission.  The court then found that when the government condemns property that is contaminated at the time of the taking, the property should be valued “as remediated” rather than as contaminated or as “clean” (never contaminated).  This being the case, the actual costs of remediation are not admissible, except to the extent necessary to determine the value of the property “as remediated”-namely, if there is any loss of value to the property due to the stigma of the contamination.  It is appropriate for the condemnation commission to take into account conditions that exist at the time of the taking even if those conditions are discovered subsequent to the taking.  In the context of environmental contamination conditions, the condition can be taken into account only to determine any impact stigma may have on the value of the property.

With these issues clarified, the court determined that Anda was entitled to a new condemnation commission trial because evidence of remediation costs was admitted at his trial and used to determine the amount he was awarded as damages for the taking. A new trial is also necessary because although the jury valued his property both “as clean” and “as contaminated,” the jury did not value the property as remediated. At a new trial, the fact finder can consider the past fuel-oil contamination, but only to determine whether the stigma of that former contamination affects the fair market value of the remediated property.

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