Strategies for effectively settling the eminent domain action on behalf of the landowner
Before counsel can effectively design a strategy for the owner in a condemnation dispute, there are three concepts that overlay every fight. A lawyer must understand the legal bases and limitations that exist on the right to take. Next, you must understand all damages an owner is and is not entitled to collect. Finally, you must have an exact understanding of fee shifting provisions. This chapter is designed to give you a concise primer and reference guide on these three topics. It supplements but will not duplicate the seminar presentation that is instead a more practical discussion of litigation tactics and options available to help the landowner.
A. The Right to Take
1. Constitutional Limitations
Eminent domain is the inherent power of a sovereign to take land and other privately owned property for use by the public in exchange for compensation. The inherent power is recognized and limited by the United States Constitution in the Fifth Amendment, which mandates that no private property be taken for public use unless the government makes just compensation. The Oklahoma Constitution contains two provisions limiting the use of eminent domain. First, private property may not “be taken or damaged for private use, with or without compensation, unless by consent of the owner,” except for a few enumerated exceptions. Second, taking or damaging private property for public use requires just compensation.
Oklahoma statutes expressly provide municipalities with the power of eminent domain. Cities have the power of eminent domain for “highways, rights-of-way, building sites, cemeteries, public parks and other public purposes.” The enumerated powers of municipalities found in title 11, section 22-104-3 of the Oklahoma statutes include exercising the right of eminent domain for any municipal purpose. This statute reinforces the constitutional protections by providing that “private property may be taken for public use … for any necessary purpose” as long as adequate compensation is made.
The Oklahoma Supreme Court has interpreted these constitutional and statutory provisions to provide an analytical framework for a municipality’s use of eminent domain. The power of eminent domain “lies dormant with the State” until the legislature declares who may use it and for what purpose. The legislature enacts “the occasion, modes, and agencies by which” eminent domain may be used. Consequently, a municipality may not utilize the power of eminent domain without this statutory authority. The court recognizes the constitutional limitations by requiring that any taking must be “necessary for the accomplishment of a lawful public purpose.” Finally, whether a taking serves a public purpose “presents a judicial question.”
2. Who decides how to take?
A common misconception for landowners is that a condemning authority must choose the best way or a certain way in a taking. In fact, Oklahoma gives condemning authorities great deference in their determination of how to take. The statute giving municipalities a general power of eminent domain requires the taking to be necessary to serve a valid public purpose. Although not present in the text of the Oklahoma Constitution, the Oklahoma Supreme Court has interpreted the constitutional limitations on the use of eminent domain by any entity to have the necessity requirement. Case law demonstrates that the necessity requirement is not as limiting as it might seem. The court consistently has interpreted necessity to mean only reasonable necessity rather than absolute necessity. The court has said it would defer to a condemning authority’s determination of reasonable necessity absent fraud, bad faith, or an abuse of discretion. Luccock v. City of Norman demonstrates the deference given to the condemning authority. In Luccock, a landowner protested the condemnation of a right-of-way for a sewer when the sewer could be placed under the street. The landowner even cited an additional statute that required the sewer be placed under the street if practicable. The city argued that such a placement, while possible, would be significantly more expensive. The court held the use of eminent domain when other means were determined burdensome by the condemning authority to be compliant with the statute and the Oklahoma Constitution’s necessity requirement.
An additional final argument a landowner may wish to make is that a taking in a certain way is actually for the benefit of a neighbor rather than for the public. For example, if a street is going to be routed between two landowners, a municipality may rout the street where each landowner bears the burden equally. The municipality may instead rout the street entirely on one of the landowner’s property leaving the other landowner without any burden. In this case, the landowner losing land may wish to argue that taking in this mariner amounts to a prohibited taking for the benefit of the neighbor. This issue arose in Graham v. City of Tulsa. The routing of a proposed street made the landowner on one side of the street bear more of the burden of the taking than the neighboring landowner. To route the street in this manner, the city added a curve that would have been unnecessary had the burden been shared equally. The court found that the unequal burden allocation did not make the taking for a private use instead of a public use. The court also specifically found that the allocation did not constitute bad faith or an abuse of discretion.
3. Economic Development and the Question of Blight
Board of County Commissioners of Muskogee County v. Lowery held that economic development alone is not a valid public purpose for which eminent domain may be used. However, blight removal is still viewed as a valid public purpose. In City of Midwest City v. House of Realty, Inc., the Oklahoma Supreme Court required that municipalities follow the letter of blight removal statutes. Municipalities may not use eminent domain for blight removal under a general power of eminent domain. For landowners facing condemnation, Lowery and City of Midwest City provide a good deal of protection. But if the municipality can comply with the blight removal statutes, the municipality still may condemn the land. That compliance occurs if and only if the city council makes the required findings of blight acting as a legislative body. The law has long been that municipal ordinances are legislative acts of the city’s governing body and have the same effect within the corporate limits as a state statute. The City’s exercise of legislative authority is binding on the courts. The provisions of the three acts covering blight removal are therefore very important.
The Local Development Act allows a city to grant tax and fee benefits to private individuals or corporations plan and carry out redevelopment, and use taxes and fees for the financing of the redevelopment. The act contains no express grant of eminent domain. Although the act does not explain the significance of finding property to be blighted, the act does provide a definition of blight. Under the Local Development Act, blight is the presence of one or more of a long list of factors such as overcrowding and abandonment. Since the act provides no express grant of eminent domain, a municipality may not use the act to condemn land.
Under the Urban Renewal Act, a city is authorized to develop a plan to “eliminate and prevent the development or spread of blight, to encourage needed rehabilitation, [and] to provide for the redevelopment of blighted areas.” An urban renewal authority, which oversees the city’s interest in implementing the act, can compensate displaced persons and businesses for expenses and loss of property, and is expressly granted condemnation powers for blight rernoval. The finding of blight is slightly more restrictive than the Local Development Act. In order for property to be considered blighted under the Urban Renewal Act, the city must find one or more of the following factors to be present in the blighted area: a substantial impairment on the growth of the city, economic or social liability, endangerment to life or property, or conduciveness to health problems, disease, death, crime, or juvenile delinquency.
The Neighborhood Redevelopment Act also provides municipalities with a mechanism for blight removal and redevelopment. While a municipality acting with a public trust may use the power of eminent domain for blight removal, the act contains no express grant of eminent domain for a municipality acting alone. The Neighborhood Redevelopment Act has the strictest definition of blight. For property to be considered blighted, the municipality must find a majority of ten factors present in the area. These ten factors are (1) a substantial number of deteriorated structures; (2) defective or inadequate street layout; (3) unsanitary conditions; (4) building deterioration; (5) absentee ownership; (6) tax delinquencies exceeding the value of the land; (7) defective title; (8) improper or obsolete subdivisions, platting or land uses; (9) existence of dangerous conditions; or (10) conditions creating economic obsolescence.
A municipality may not condemn land for economic development alone. If, however, the city council makes the legislative findings of blight and otherwise cornplies with the letter of the blight removal statutes, the taking is permissible unless a court finds that the determination is so unwarranted that it was an arbitrary and capricious act. There must be no reasonable basis in fact for the legislative determination for such a finding to be made. Landowners must thus be mindful that municipalities may effectively take land for the ultimate purpose of economic development by making the required findings of blight through their legislative bodies.
B. Damages to Which an Owner Is Entitled
Both the Oklahoma and United States constitutions require that the owner of private land taken for a public use receive just compensation. Oklahoma takes an expansive view of this term. Specifically, the Oklahoma Supreme Court has interpreted article 2, section 24 of the Oklahoma Constitution to require that the owner receive “full” compensation for the land subject to condemnation. The owner must “be placed as fully as possible in the same position as that before the government’s taking.” This constitutional mandate requires that relocation expenses and some consequential damages are considered in addition to the fair market value of the land. While conceding a general rule against allowing compensation for business losses, the court has still shown willingness to allow a jury to hear evidence about the changes in amount of business as part of the jury’s determination of the fair market value.
The United States Supreme Court, by contrast, takes a more restrictive approach with respect to just compensation. In Unites States v. Miller, while stating that the owner should be put in as good a pecuniary position as he would have occupied but for the taking, the U.S. Supreme Court found the Constitution to require compensation in the amount of the market value of the property. The Court, however, did not find the Constitution to require the payment of consequential damages. Since the protections of the Oklahoma Constitution exceed the protections of the U.S. Constitution, landowners will turn to the Oklahoma protections to receive the most compensation.
State ex. rel. Department of Transportation v. Little, demonstrates the status of just compensation in Oklahoma. Little is the logical conclusion of a line of just compensation cases dating back to 1905. In Little, the court reiterated a common phrase that property means every valuable interest which can be enjoyed and recognized as property. The Oklahoma constitutional protection of just compensation for takings of these property interests is strong. In Little, both a state and federal act provided for compensation to the displaced landowner. The Oklahoma Supreme Court held that the “relocation assistance acts do not add to or subtract from the components of value or damage due a condemnee as just compensation under the state law of eminent domain.” Just compensation still requires the landowner to “be placed as fully as possible in the same position as that occupied before the government’s taking.” Little allows a landowner to effectively opt out of the relocation assistance acts and look to the Oklahoma Constitution for protection.
Landowners often think they should receive compensation any time the value of their property is decreased as a result of the actions of a governmental entity. However, the government must use eminent domain in order for the landowner to be entitled to just compensation. When the government acts under the police powers, compensation is not required. In Suntide v. State ex rel. Oklahoma State Highway Commission, a landowner had direct access to an abutting expressway. The state converted the expressway into a limited access highway. The change left the landowner with no direct access to the expressway. Instead the landowner and its customers had to use a circuitous route. In approving the jury instructions provided at trial, the court said that “acts done in the proper exercise of the police power, which merely impair the use of property, do not constitute a taking.” Furthermore, the court noted that limiting and regulating street and highway traffic may occur without compensation “as long as there is no unreasonable or absolute denial of ingress or egress.” Landowners should be aware that if no compensable action occurs, they will receive no compensation even when harmed by a governmental action.
Landowners must also understand damages in cases of partial takings. Frequently the condemning authority will use eminent domain to take only part of the landowner’s property. The Oklahoma Constitution requires just compensation to include the value of the property taken and the injury to the part not taken. Since the landowner may receive damages for the part not taken, the landowner subject to a partial taking is in a better position than a landowner who is barred from receiving damages by Suntide. However, the constitution offsets compensation for injury to the remainder by the benefits provided by the project. For example, the landowner may now have access to a better street. The offset cannot result in the landowner owing money even if the benefits exceed the damages. While the landowner subject to a partial taking is entitled to the diminution in value of the remainder, the compensation is offset by the benefits provided to the landowner.
C. Fee Shifting Provisions
Fee-shifting provisions are strategically important to the landowner. In a regular condemnation proceeding, three situations result in the award of reasonable attorney, appraisal and engineering fees actually incurred because of the proceeding. The first two situations arise under the issue of the right to take. When a final judgment determines the property cannot be taken by condemnation or the condemnation proceeding is abandoned, the fee shifting provisions apply. The third situation is helpful even when the government has the right to take. In a condemnation proceeding, a commission first determines the amount of just compensation due. If the landowner protests the appointed commissioners’ award and a later jury award for just compensation exceeds the award of the commissioners by at least 10%, the fee shifting provisions apply.
In State ex. rel. Department of Transportation v. Watkins, the Oklahoma Court of Civil Appeals held that both sides bear the burden of getting the proper instructions and issues framed for condemnation commissioners. This holding prevents a landowner from using a technique of not disclosing the full value of the land in hopes of receiving costs under the fee shifting provisions at a later trial. When the information provided to the commissioners is insufficient, the court would allow a supplemental commissioners’ appraisal “as right and justice may require on good cause shown.” On the other hand, Watkins places the same burden on the condemning authority.
In an inverse condemnation proceeding, a landowner files the condemnation proceeding when the govemrnent takes property without initiating a condemnation proceeding. In these types of proceedings, any successful plaintiff may receive “reasonable costs, disbursements, and expenses including reasonable attorney, appraisal and engineering fees, actually incurred because of [the] proceeding.”