March 01, 2003

Bulldozers at Your Doorstep (2003, 17:02)

Bulldozers at Your Doorstep

Probate and Property, March/April 2003, Volume 17, Number 2

By Michael Rikon

Did you ever, in your wildest nightmare, think that your home could be taken from you in condemnation to make way for a Costco? One day you are enjoying all of the rights inherent in the ownership of property and the next day watching a bulldozer plow down your house. How can this happen in a country whose Constitution and Bill of Rights are the envy of other nations?

 

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. Indeed, one will find nothing in the Constitution creating the power—only a limitation on its exercise. That limitation is found in the Fifth Amendment to the U.S. Constitution, which states, in part, “nor shall private property be taken for public use, without just compensation.” This limitation is made applicable to the states by the Fourteenth Amendment. Did the founding fathers ever consider that the Fifth Amendment, adopted in 1791, would one day be used to condemn a small family property to build a store?

 

How did a big box retail establishment become a permissible “public use”? The concept of public use has undergone a metamorphosis over the years. At one time, for a taking to be for a public use, the property acquired actually had to be used by the public. Citizens understand the condemnation of land for a new school, highway, or firehouse; however, the taking of private property to hand over to a private developer enrages many property owners.

Public Purpose as Defined by the Courts

Public purpose has enjoyed a broad definition in New York and other courts allowing condemnation to benefit a private enterprise so long as the project has a dominant public purpose. For example, building a four-way intersection for access to and from a shopping mall was a permissible public purpose. Waldo’s Inc. v. Johnson City , 543 N.E.2d 74 (N.Y. 1989). Similarly, condemning residential property located at 45 Wall Street for an addition to the New York Stock Exchange was a public purpose and was not impaired by the circumstance that the proposed project would incidentally confer a private benefit. In re Fisher, 730 N.Y.S.2d 516 (N.Y. App. Div. 2001).

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 1975, the condemnation of private property placed in an urban renewal plan for the removal of “substandard” conditions was allowed. Yonkers Cmty. Dev. Agency v. Morris, 335 N.E.2d 327 (N.Y. 1975). 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.” Id. at 334. In fact, the properties were not substandard but were taken for the expansion of Otis Elevator Company, a leading industrial employer in the City of Yonkers. Nonetheless, the court applied a liberal rather than literal definition of a “blighted” area and permitted the taking. Adding insult to injury, after receiving such municipal largess, Otis left Yonkers in 1982. Yonkers then sued Otis in the federal court for breach of contract, unjust enrichment, and fraud. The case was dismissed with sanctions because there was no colorable factual basis for a fraud claim. City of Yonkers v. Otis Elevator Co., 649 F. Supp. 716 (S.D.N.Y. 1986). Yonkers had failed to obtain a written commitment by Otis to continue production at its Yonkers facility for a definite period of time. Id.

Professor Gideon Kanner, the editor of Just Compensation and a columnist for the National Law Journal, has long decried the hypocrisy of the “public use” law. The problem, according to Prof. Kanner, is that

judges have abdicated their responsibility and are falling down on their job of safeguarding citizens’ constitutional rights in this field of law. Instead of enforcing the “public use” clause, they allow 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.

Gideon Kanner, The New Robber Barons, Nat’l L.J., May 21, 2001, at A19.

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, 348 U.S. 26 (1954), which upheld the District of Columbia Redevelopment Act of 1945. The plaintiffs objected to the taking of their Washington, D.C., 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 Hous. Auth. v. Midkiff, 467 U.S. 229 (1984), 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.” Id. at 241.

When previously presented with an opportunity to uphold traditional notions of property rights, the same Court had done so forcefully:

[T]he dichotomy between personal liberties and property rights is a false one. Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is in truth a “personal” right whether the “property” in question be a welfare check, a home, or a savings account. In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have meaning without the other. That rights in property are basic civil rights has long been recognized.

Lynch v. Household Fin. Corp. , 405 U.S. 538, 552 (1972). If one has basic civil rights in property, the threshold for losing it surely should be higher than the lowly standard of merely being rationally related to any conceivable public purpose.

The Poletown Case

In Poletown Neighborhood Council v. City of Detroit , 304 N.W.2d 455 (Mich. 1981), the Michigan Supreme Court allowed, as part of an urban renewal plan, the condemnation of some 465 acres, involving a large number of buildings—including 144 businesses, some schools, a hospital, 16 churches, and a cemetery—so that General Motors could build a Cadillac factory. The project cost Detroit over $200 million. General Motors paid $18,000 per acre and also received a 12-year, 50% tax abatement. Although there was very 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. Perhaps blight is in the eyes of the beholder. Does a main street, fully rented with charming ethnic restaurants and antique shops, constitute a blighted area? If a government earmarks a portion of a block for condemnation for many years, does that not itself create blight?

In a case that garnered a great deal of interest in Connecticut, the owners of Curley’s Diner objected to the proposed condemnation of the property, acquired in 1977, based on a 1963 redevelopment plan that never included their parcel. The trial court permitted the taking. On appeal, the trial court was reversed and the matter remanded with an order to enter a permanent injunction barring the condemnation. Aposporos v. Urban Redev. Comm’n,790 A.2d 1167 (Conn. 2002). 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 court noted that new hearings might disclose that there was no longer any blight justifying condemnation of the subject property.

Much has been written of the improper use of the power of eminent domain across the country. In Merriam, Kansas, property taken from a Toyota dealership was turned over to a BMW dealer. Dean Starkman, Condemnation Is Used to Hand One Business Property of Another, W all St. J., Dec. 2, 1998, at A1. In New London, Connecticut, the local development agency wanted to condemn some homes for an office building and parking lot. Land Seized for “Public Use” by Private Firms, USA Today, Jan. 26, 2001, at A4 (as corrected April 26, 2001).

The Wall Street Journal , on its editorial page, wrote of the proposed condemnation of 17.9 acres of land in Cypress City, California, owned by the Cottonwood Christian Center. Editorial, The First Church of Costco, Wall St. J., May 30, 2002, at A14.The land was to be sold to Costco. The editorial noted, “The powers of eminent domain are tricky enough when exercised for highways, schools or other public uses. But when invoked on behalf of a private business it represents the worst form of political collusion. Our advice to Cottonwood is not to turn the other cheek.” Id.

The Tide May Be Changing

In 1998, 99 Cents Only Stores moved into a vacant piece of property located next to a Costco in a newly developed shopping mall in Lancaster City, California. Costco wanted to expand and threatened to relocate unless it was provided with additional space in the shopping center. Costco wanted 99 Cents’s space. Viewing Costco as an “anchor tenant” and fearful of Costco’s relocation to another city, the redevelopment agency made a deal with Costco. It sought to buy out 99 Cents’s lease and, when that failed, adopted resolutions that authorized the condemnation of the 99 Cents store site. In an action to enjoin the condemnation of its property, the plaintiff prevailed. 99 Cents Only Stores v. Lancaster Redev. Agency, No. CV-00-07572, 2001 WL 811056 (C.D. Cal. June 26, 2001). The court stated that “the evidence is clear beyond dispute that Lancaster’s condemnation efforts rest on nothing more than the desire to achieve the naked transfer of property from one private party to another.” Although the city claimed that the loss of the Costco project would cause “reestablishment of blight,” the court noted that there was no “ existing blight.” Id. (emphasis in original).

Perhaps the tide is changing. Recent cases from across the country indicate a noticeable judicial backlash. In East St. Louis, Illinois, Gateway International Motor Sports, a NASCAR racetrack, had prospered and increased its seating capacity over the years. When it wanted to increase its parking capacity as well, it called on the local development authority to condemn its neighbor’s 148.5 acres. The proposed parking lot site was owned by National City Environmental, L.L.C., which operates a metal recycling center. The recycler employed upwards of 100 people and had been in operation since 1975. The Southwestern Illinois Development Authority (SWIDA), the development agency, offered $1 million for the property. When that was rejected, SWIDA instituted condemnation proceedings. Southwestern Ill. Dev. Auth. v. National City Envtl. L.L.C., 768 N.E.2d 1 (Ill. 2002).

The lower Illinois court held a hearing and found that the taking was for a public purpose, as there were serious public safety issues involved. Apparently traffic backed up during major race events, and pedestrians often crossed the highway from parking areas east of the racetrack. This safety risk would be eliminated by acquiring the property. And, of course, the development of the racing facilities had indirectly helped to eliminate blight in the area. The court also made a preliminary finding that $900,000 was just compensation for the property.

Upon appeal, the appellate court reversed the decision. Southwestern Ill. Dev. Auth. v. National City Envtl., L.L.C., 710 N.E.2d 896 (Ill. App. Ct. 1999). The appellate court determined that SWIDA 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, in a decision filed April 4, 2002, the court reversed itself and affirmed the appellate court. Southwestern Ill. Dev. Auth. v. National City Envtl., L.L.C., 768 N.E.2d 1 (Ill. 2002). Citing People ex rel. Tuohy v. City of Chicago, 68 N.E.2d 761 (Ill. 1946), the court stated that: “ ‘[b]efore the right of eminent domain may be exercised, the law, beyond a doubt, requires that the use for which the land is taken shall be public as distinguished from a private use.’ ” 768 N.E.2d at 7. 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 upon 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. “We do not require a bright-line test to find that this taking bestows a purely private benefit and lacks a showing of a supporting legislative purpose” in which members of the public are not the primary intended beneficiaries of the taking. Id. at 10. The agency had argued that the wisdom of the legislation and the means of executing the project were beyond judicial scrutiny once the public purpose had been established. The court disagreed, citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 439 (1982), in which the Supreme Court had stated that “the government does not have unlimited power to redefine property rights.” “The power of eminent domain is to be exercised with restraint, not abandon,” the Illinois Supreme Court concluded.768 N.E.2d at 11.

Conclusion

Public purpose should mean exactly what it says. The definition of a valid public purpose should not be stretched to an illogical conclusion to allow something that the authors of the Bill of Rights clearly prohibited—the taking of private property for a private purpose.


Michael Rikon is a partner in Goldstein, Goldstein, Rikon & Gottlieb, P.C., in New York City and is chair of the C-2 Condemnation Committee. A version of this article appeared in the June 26, 2002, edition of the New York Law Journal. Reprinted with permission.