Legal Briefs

Domain Disputes

Land-use issues gain new attention in the court system.

Eminent domain issues affect residents and businesses in many communities where the law permits the local government to take private property for public-use real estate developments or public purposes. While state laws vary greatly, the U.S. Supreme Court recently agreed to hear Kelo v. City of New London, a case in which Connecticut residents are challenging the state's current position on eminent domain. The Supreme Court's decision to hear the case comes at a time when eminent domain issues are increasingly important in cash-strapped communities: More than 10,000 properties were threatened or condemned between 1998 and 2002, according to the Institute for Justice. The Court's decision ultimately may provide future guidance for state courts ruling on these important cases. A recent Michigan Supreme Court decision reversing a landmark eminent domain ruling illustrates the need for such direction.

Michigan Supreme Court Ruling

In 2004 the Michigan Supreme Court overruled its own landmark Poletown Neighborhood Council v. City of Detroit decision. The 1981 ruling set the stage for more than two decades of national land-use decisions favoring the use of eminent domain to transfer land to private users. In the Poletown decision, the Michigan Supreme Court held that the city of Detroit properly used its power of eminent domain to condemn nearly 500 acres of residential and business property to sell to General Motors for a new auto plant. Nearly 1,400 homes and more than 100 businesses were condemned for the project, which was expected to transform the blighted neighborhood, produce more jobs, and generate higher tax revenues. After the ruling, Poletown became the principal case upon which many courts nationwide relied in permitting their respective states to take similar actions.

While Michigan is one of seven states that allow eminent domain condemnations for private business developments in addition to public-use developments, over time the state's Supreme Court became concerned that the Poletown ruling was a mistake. Last year, the court formally reversed its opinion in Wayne County v. Hathcock. “We must overturn Poletown in order to vindicate our constitution, protect the people's property rights, and preserve the legitimacy of the judicial branch as the expositor, not the creator, of fundamental law,” the court stated.

Wayne County v. Hathcock
As in Poletown, Wayne County intended to transfer condemned properties to private parties, which in this case planned to construct a business and technology park near the Detroit Metropolitan Airport. The proposed development consisted of 1,300 acres of largely empty and unused real property lying directly south of the airport's newest terminal. The county, which owns 98 percent of the property, purchased most of it from other private property owners under the threat of condemnation.

The defendant property owners held the remaining 2 percent of the land. When the defendants refused two good-faith offers for the purchase of their property, the county authorized the condemnation. Relying on Poletown, the county contended that the public use would reinvigorate the local economy, increase tax revenue, and generate jobs.

The dispute between the homeowners and the county originated from the airport's previous renovations. Concerned that noise from increased air traffic would plague neighboring landowners, the county, funded in part with a $21 million Federal Aviation Authority grant, began a program of purchasing neighboring properties through voluntary sales. Eventually, the county purchased approximately 500 acres in nonadjacent plots and conceived the business and technology park development.

Having acquired more than 1,000 acres, the county determined that an additional 46 parcels were needed, 27 of which were purchased after written offers were made. However, 19 parcels still were required to complete the development.

Wayne County initiated condemnation actions against the 19 property owners. In response, each owner filed a motion to review the necessity of the proposed condemnations. They argued, first, that the county lacked statutory authority to exercise the power of eminent domain in this manner. Second, the defendants contended that acquisition of the subject properties was not necessary as required by statute. Finally, they challenged the constitutionality of these condemnation actions, maintaining that the project would not serve a public purpose.

After a four-week evidentiary hearing, the trial court affirmed the county's determination of necessity and held that the takings were authorized under Michigan's statutory law. Relying on Poletown, the state's appeals court affirmed the trial court's decision, though one judge opined that Poletown was “poorly reasoned, wrongly decided, and ripe for reversal by this Court.” Ultimately, the Michigan Supreme Court agreed and reversed the decision.

The Michigan Supreme Court concluded that the transfer of condemned property is a public use when it possesses one of three characteristics. First, condemnations in which private land is constitutionally transferred by the condemning authority to a private entity involves “public necessity of the extreme sort otherwise impracticable.” The “necessity” requires the exercise of eminent domain for private corporations and is limited to those enterprises generating public benefits whose very existence depends on the use of land that only can be assembled by the central government.

Second, the court found that condemned property transfers to private entities are consistent with the constitution's public-use requirement when the private entity remains accountable to the public in its use of that property.

Third, condemned land may be transferred to a private entity when the selection of the land to be condemned is itself based on public concern. The property must be selected on the basis of “facts of independent public significance,” meaning that the underlying purposes for resorting to condemnation, rather than the subsequent use of condemned land, must satisfy the state constitution's public-use requirement. This refers to the traditional situation in which blighted areas are condemned for redevelopment; in such cases the taking itself achieves a public goal, not the reuse of the property.

In Wayne County v. Hathcock, the county's taking of the land for the private business did not fit into any of the aforementioned categories, thus the court held the condemnation violated Michigan's constitution. The taking of private property to transfer to another private property does not necessarily have a public purpose, even when the transfer may increase tax revenues and enhance the community's economy.

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