DD 6/23/03 Uniform Condemnation Act and Environmental Conditions

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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