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Daily Development for Monday, June 23,
2003
by: Patrick A. Randolph,
Jr.
Elmer F. Pierson Professor of
Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper
Martin
Kansas City, Missouri
dirt@umkc.edu
EMINENT DOMAIN; VALUATION; ENVIRONMENTAL
CONDITIONS: Under Uniform Condemnation
Procedures Act,
environmental
contamination conditions are factors that court must
consider in determining fair market value, even
though statute provides
that condemnor
has no right to pursue a cost recovery action against
condemnee
Silver Creek Drain District v. Extrusions Division,
Inc., No. 119721
2003 Westlaw
21386333 (Mich. 6/17/2003)
District sought to acquire property that everyone
agreed contained
pollutants.
Condemnee established that it did not cause the pollution and
was not liable under federal law for the cost of
cleanup. The question,
arose
whether, under recent uniform amendments to the the Michigan
version of the Uniform Condemnation Procedures Act,
added specifically
to deal with
environmental issues, the District was entitled to ask the
court to take the environmental condition into
account in determining the
condemnation
award paid to condemnee.
Under the Act, a condemnor must pay the
condemnee "just
compensation." But
in computing the "good faith offer" of such
compensation, the statute requires that the condemnor take into
account
whether it will or will not seek
cost recovery for remediation for
environmental conditions. If it will seek such cost recovery,
proceeds
from the sale may be escrowed in
anticipation of such eventual cost
recovery claim. The condemnee here argued that this
indicates that
under the statute
environmental conditions are taken account through the
mechanism of the cost recovery action. In this case,
the condemnee could
not be pursued in a
cost recovery action, since it did not cause the
pollution, and condemnee thus concluded that there should be
no
discount from what would otherwise be
the fair market value of the
property.
Although the trial court had rejected condemnee's
position and found
that the value should
be discounted by the environmental condition, the
Michigan Court of Appeals had reversed, basing its
conclusion on the
notion that to take
environmental conditions into account in a case like
this would not be "just compensation"
according to the "ordinary
meaning" of
the concept, when the condemnee did not cause the
pollution and the condemnor retained the right to
recover the costs of
pollution from
others, (should it even in fact seek to remove the
pollution). The Court of Appeals, following the
"plain meaning" of the
language and
looking at the framework of the Uniform Act, concluded
that environmental condition should not be taken into
account in
determining just condemnation
under the circumstances of this case,
basically because to do so would not really compensate the
condemnee
"justly."
The Michigan Supreme Court rejected the Court of
Appeals approach,
concluding that it
should instead try to discern what the drafters of the
statute really intended by their use of the term when
they put it in the
Constitution and
statute. Based upon this analysis, the Supreme Court
reversed the court of appeals decision.
.
The
Supreme Court ruled that the term "just compensation" is a
technical term that such terms must be given the
meaning "that those
sophisticated in the
law understood at the time of enactment unless it is
clear from the constitutional language that some
other meaning was
intended." . It
noted that it was important for the administration of
justice that the concept be given the same meaning
each time it is used in
a condemnation
setting.
Having said that, the court embarked on an exegesis in
which it pointed
out that Michigan courts
historically have construed the Constitutional
term "just compensation" to require that a court take into account
"all
elements of value that inhere in the
property." Again: "[t]he calculation
is to 'include any element of value that [property] might have by
reason
of a special adaptation to
particular uses.'" It then turned to the question
of whether it would be appropriate to ascribe a
different, more narrow,
meaning to the
term in the context of the Uniform Act. It acknowledged
that the Uniform Act does provides that the condemnor
is not entitled to
recover costs for
environmental damages against a party who has not
caused the pollution, but notes that this is a very
different question from
the question of
the value of the property to be condemned. The court
noted that this case illustrates the significant
difference between the two
concepts. The actual cost of remediation of the pollution,
were it to be
carried out, would be $2.3
million. The impact on market value,
however, was considerably lower, because it was possible that a
party
seeking to make use of the property
could use a "Type-C closure" which
would
lead to a reduction in market value of only $237,768.
A concurring opinion maintained that the case could
readily be resolved
by resort to the
statutory language alone, and that it was unnecessary to
reach the meaning of "just compensation" under the
Michigan
Constitution as a predicate to
such interpretation. A dissenting opinion
supported the notion that the concept of "just compensation" is one
that
ought to be construed by a trier of
fact according to the plain meaning of
the words and that in the appropriate circumstance, "market value"
need
not be seen as the measure of what
compensation is just. In this case, the
dissent argued, a "just" form of compensation would take into
account
the fact that there can be no
cost recovery against for environmental
conditions under the statute and therefore would not discount
the
condemnation value by such
conditions.
Comment: The Uniform Environmental Procedures
Act is relatively common, and this interpretation of
the environmental conditions issue is a matter of
first impression at the state supreme court level.
Readers are encouraged to respond to or criticize this
posting.
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