Volume 20, Number 6
September 2003


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REAL ESTATE LAW

BULLDOZERS AT YOUR DOORSTEP

By Michael Rikon

Michael Rikon is a partner in Goldstein, Goldstein, Rikon & Gottlieb, PC, in New York City.


Eminent domain is the right of the sovereign to take private property. It is an inherent power of government necessary for the fulfillment of sovereign functions. One will find nothing in the Constitution creating the power-only a limitation on its exercise. That limitation is found in the Fifth Amendment, which states, in part, "nor shall private property be taken for public use, without just compensation."

Public purpose as defined by the courts. Public purpose has enjoyed a broad definition in courts, allowing condemnation to benefit a private enterprise so long as the project has a dominant public purpose. Many condemnations have taken place in furtherance of urban renewal plans, with courts recognizing a public purpose in the elimination of blight or deterioration. In Yonkers Community Development Agency v. Morris the condemnation of private property placed in an urban renewal plan for the removal of "substandard" conditions was allowed. The court stated that the landowners' pleadings had failed to raise properly the issue of the quality of the taken land and instead had focused on an "alleged evil purpose in benefiting a large manufacturer which the city wishes to retain in the community." In fact, the properties were not substandard but were taken for the expansion of Otis Elevator Company, a leading industrial employer in the city. Nonetheless, the court applied a liberal rather than literal definition of a "blighted" area and permitted the taking.

Professor Gideon Kanner has long decried the hypocrisy of the "public use" law. The problem, according to Kanner, is that judges have abdicated their responsibility; instead of enforcing the public use clause, they are allowing "these new robber barons to wreak havoc on the lives of innocent people, and to raid municipal treasuries for subsidies in pursuit of private gain."

Blame the Supreme Court. The blame can be put squarely on the Supreme Court. The genesis for the change in definition came in Berman v. Parker, which upheld the District of Columbia Redevelopment Act. The plaintiffs objected to the taking of their department store, which was not part of any "blight," and argued that the project was simply a taking from one businessperson for the benefit of another. The Supreme Court found the concept of public welfare to be broad and inclusive and permitted the taking. In this author's opinion, however, the act merely allowed low-income housing, much of which may have been substandard, to be replaced with a high-income co-op housing and shopping mall development that did little to improve the welfare of the local residents.

Some years later, the Supreme Court in Hawaii Housing Authority v. Midkiff allowed the breakup of family-owned land for sale to other private individuals. Although acknowledging that a taking for purely private use is unconstitutional no matter the amount of just compensation that may be given, the Court stated that "where the exercise of the eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause."

In Poletown Neighborhood Council v. City of Detroit the Michigan Supreme Court allowed, as part of an urban renewal plan, the condemnation of 465 acres, involving a large number of buildings-including businesses, schools, a hospital, churches, and a cemetery-so that General Motors could build a factory. The project cost Detroit over $200 million. General Motors paid $18,000 per acre and also received a 12-year tax abatement. Although there was little evidence of blight, the argument was that the project would promote the public health and welfare by the creation of jobs and that the economic benefit to General Motors was incidental.

In a Connecticut case, the owners of a diner objected to the proposed condemnation of their property, acquired in 1977, based on a 1963 redevelopment plan that never included their parcel. The trial court permitted the taking. On appeal ( Aposporos v. Urban Redevelopment Commission), the trial court was reversed and the matter remanded with an order to enter a permanent injunction barring the condemnation. The appellate court stated that although a redevelopment agency need not redetermine the level of blight at each stage, it may not rely on its initial finding indefinitely, particularly if the subject property was not targeted for acquisition when the plan was adopted.

The tide may be turning. Recent cases indicate a noticeable judicial backlash. For example, in Illinois a NASCAR racetrack had prospered and increased its seating capacity over the years. When it wanted to increase its parking capacity, it called on the local development authority to condemn its neighbor's property. The proposed parking lot site was owned by a company that operated a metal recycling center. The recycler employed about 100 people and had been in operation since 1975. The development agency offered $1 million for the property. When that was rejected, the agency instituted condemnation proceedings. The trial court in Southwestern Illinois Development Authority v. National City Environmental found that the taking was for a public purpose as there were serious public safety issues involved, including traffic backing up during major race events and pedestrians crossing the highway from parking areas. Acquiring the property would eliminate this safety risk. And, of course, the development of the racing facilities had indirectly helped to eliminate blight in the area. The appellate court reversed, finding that the agency had exceeded its constitutional authority in taking the recycler's land for immediate transfer to a private party whose only interest in the property was the earning of greater profits.

In an interesting turn of events, the Illinois Supreme Court reversed the appellate court, but subsequently granted a petition for rehearing. Then, the court reversed itself and affirmed the appellate court. Citing People ex rel. Tuohy v. City of Chicago, the court stated that before the right of eminent domain may be exercised, the law requires that the use for which the land is taken must be public, as distinguished from a private use. The court recognized that, although great deference should be afforded the legislature and its granting of eminent domain authority, the exercise of that power is not entirely beyond judicial scrutiny, and it is incumbent on the judiciary to ensure that the power of eminent domain is used in a manner contemplated by the framers of the Constitution and by the legislature that granted the specific power in question. The court also noted that the taking was not for the purposes of eliminating blight. The court was not requiring a bright-line test to find that the taking bestowed a purely private benefit and lacked a showing of a supporting legislative purpose in which members of the public were not the primary intended beneficiaries of the taking.


FOR MORE INFORMATION ABOUT THE REAL PROPERTY, PROBATE AND TRUST LAW SECTION
- This article is an abridged and edited version of one that originally appeared on page 53 of Probate & Property, March/April 2003 (17:2).
- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
- Website: www.abanet.org/rppt/.
- Periodicals: Probate & Property, bimonthly magazine; Real Property, Probate and Trust Journal, quarterly journal.
- Books and Other Recent Publications: Probate and Trust: Third Party and Self-Created Trusts, 3d ed. and Client Brochures; Asset Protection Strategies; An Estate Planner's Guide to Qualified Retirement Plan Benefits, 3d ed.; An Estate Planner's Guide to Buy-Sell Agreements for the Closely Held Business; A Guide to International Estate Planning; Bridging the Gap: Drafting for Tax and Administration Issues; An Estate Planner's Guide to Life Insurance, 2d ed.; S Corporations and Life Insurance, 2d ed.; The Irrevocable Life Insurance Trust, 2d ed. Real Property: Synthetic Lease Financing; A Practical Guide to Commercial Real Estate Transactions; Anatomy of a Mortgage; Title Insurance, 2d ed.; The Commercial Property Lease, vol. 3; Accessibility under the Americans with Disabilities Act and Other Laws; Land Surveys, 2d ed.; A State-by-State Guide to Construction and Design Law.


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