Utah Supreme Court Rules That Post-Valuation Evidence May Be Admissible in Condemnation Proceedings

The Utah Supreme Court has reversed a lower court rulings and held that evidence of post-valuation sales may be admissible in eminent domain proceedings.  This is an important, and potentially problematic, ruling that property owners should be aware of. 

In 2009, the Utah Department of Transportation (“UDOT”) announced its intent to condemn a parcel of property situated along the I-15 corridor in connection with a project at 11400 South in Draper, Utah.  In the litigation that followed, the parties disagreed on the quantum of damages for the condemned property and on the amount of severance damages to the property owner’s remaining property.  By the time the case went to trial in 2018, the property owner had sold the remaining property, which was developed into two car dealerships.  

Before trial, the property owners move to exclude any evidence of the sales on the basis of a categorical rule prohibiting evidence of any sale or development of property after the date of taking.  The district court granted the motion and endorsed the “general rule that a party may not rely on post-valuation facts and circumstances to prove severance damages.”

On appeal, the Utah Supreme Court reversed the district court’s holding and ruled that “there is no categorical rule foreclosing the relevance of evidence of a subsequent transaction involving the property in question.”  In so doing, the Court stated:  “[E]vidence of a sale or other development after the date of valuation may at least sometimes speak to the market value of the property on an earlier date.  A post-valuation-date sale or development of property may be relevant to the extent it aids the factfinder in checking assumptions about the development potential of the property in question—assumptions made in assessing the value of the property on the valuation date.”

This holding represents a significant shift from how most district courts in the state have approached this issue in the past.  In light of the ruling, property owners should be cautious of entering into any sales or lease transactions on condemned property before the amount of just compensation is determined at trial because doing so could undermine claims for just compensation. 

THE CONDEMNATION LAWYERS PREVAIL ON APPEAL

The Utah Court of Appeals has reversed a lower court ruling that a condemnee could not seek damages for potential highest and best uses of property if that use  has not already been initiated prior to the commencement of condemnation proceedings.  In Rocky Mt. Power, Inc. v. Marriott, the condemning authority, Rocky Mountain Power, asked the district court to exclude damages evidence relating to the condemnees’ ability to relocate utility lines and to obtain certain mining permits, which would dramatically impact the property owners’ right to seek just compensation.  The district court granted the motion.  However, the Utah Court of Appeals unanimously reversed that ruling.  In so doing, the Court explained:  “When a legal barrier prevents a proposed ‘highest and best use,’ the ability to remove that barrier will always be uncertain to some degree.  But a landowner need not show that a legal barrier will certainly be removed, he must show only that its removal is reasonably probable.”  The Court further explained:  “Fair market value is not determined ‘by taking a temporal snapshot of the land’s value according to its use at’ the date of the condemnation.  Instead, the calculation is ‘based upon the highest and best use’ to which the land could have been put at that time.”  (Emphasis added).  This ruling is an important victory for private property owners in the State of Utah facing the threat of eminent domain.  Steven J. Joffee, and his former partner at his previous law firm, litigated the appeal on behalf of the property owners.  A copy of the Utah Court of Appeals opinion can be found here:  https://www.utcourts.gov/opinions/appopin/Rocky%20Mountain%20%20v.%20Marriott20181129_20160956_221.pdf

U.S. SUPREME COURT OPENS DOOR TO FEDERAL TAKINGS CLAIMS

In June 2019, the U.S. Supreme Court overruled its prior decision in Williamson County and cleared the way for takings plaintiffs to assert claims relating to state takings in federal court.  In Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, the Supreme Court held that property owners must seek just compensation under state law in state court before bringing a federal takings claim under 42 U.S.C. § 1983 in federal court.  This ruling was extremely problematic for takings plaintiffs because the Supreme Court has also previously held that a state court’s resolution of a claim for just compensation under state law generally has preclusive effect in any subsequent federal suit.  San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005).  Thus, the state action requirement articulated in Williamson County put a plaintiff in a very difficult Catch-22:  “He cannot go to federal court without going to state first; but if he goes to state court and loses, his claim will be barred in federal court.” 

Based upon this conflict, the plaintiff in Knick v. Township of Scott argued that Williamson County had been wrongly decided and that the state action requirement needed to be repealed.  Fortunately for takings plaintiffs, the Supreme Court agreed, concluding that Williamson County was poorly reasoned and conflicted with much of the Court’s takings jurisprudence.  As a result of the opinion in Knick v. Township of Scott, private landowners whose federal constitutional rights have been violated through a taking may now pursue relief in federal court without having to first attempt to litigate the issue in state court. 

UTAH COURT OF APPEALS AFFIRMS $13 MILLION JUST COMPENSATION AWARD AGAINST UDOT

On November 8, 2018, the Utah Court of Appeals affirmed a lower court’s award of $13 million dollars in just compensation to property owners after a condemnation trial against the Utah Department of Transportation (“UDOT”).  In 2011, UDOT filed initiated the eminent domain proceedings seeking to acquire a strip of land that crossed through the property owners’ property (the “Subject Property”).  At the time UDOT initiated the condemnation proceedings, its appraisers opined that the fair market value of the Subject Property was $8,068,800.  The property owners disagreed with that valuation, believing the Subject Property to be worth significantly more.  Ultimately, the parties reached an impasse and the case proceeded to trial.  During trial, “UDOT attempted to convince the trial court that the [Subject Property] was nearly worthless dirt.”  2018 UT App. 213, at ¶ 1.  However, because it “thought more of the [Subject Property], the trial court disagreed with UDOT’s “low-ball” approach, and it ultimately awarded the property owners $13 million in just compensation, approximately $5 million more than UDOT’s appraised value.  Unhappy with the verdict, UDOT appealed, arguing that the district court had erred in at least two ways.

First, UDOT argued that the district court misapplied the project-influence rule—which requires exclusion of “any enhancement or decrease in value attributable to the purpose for which the property is being condemned . . . in determining the fair market value of the property.”  Id. at ¶ 10.  UDOT argued that the district court had erroneously applied the rule by:  (1) not excluding value increases resulting from development patterns that occurred after the relevant project was announced, (2) not excluding project influence in determining the Subject Property’s highest and best use, and (3) relying on comparable properties allegedly influenced by the project.  The Utah Court of Appeals quickly rejected UDOT’s arguments, stating:  “Because evidence was presented at trial showing that the development the court considered would have happened regardless of the construction of the [relevant project], . . . the district court did not misapply the project-influence rule.  Id. at ¶ 9.  This holding represents an important advancement in Utah’s eminent domain law and provides guidance to property owners, attorneys, and appraisers regarding the proper application of the project-influence rule. 

Second, UDOT argued that the valuation method the district court used to arrive at its verdict was flawed.  The Utah Court of Appeals did not, however, reach this issue because it concluded that UDOT had invited any error committed by the district court.  In other words, the Court of Appeals held that, to the extent the district court committed error, it was UDOT’s fault because UDOT encouraged the court to make the allegedly erroneous rulings.

 After rejecting UDOT’s arguments, the Utah Court of Appeals affirmed the district court’s rulings and verdict in whole.  In addition to providing important precedent, this enormous victory for the property owners demonstrates the importance of property owners retaining counsel to represent them in eminent domain proceedings against any condemning authority. 

 A complete version of the Court of Appeal’s opinion can be found here:  https://www.utcourts.gov/opinions/appopin/UDOT%20v.%20LEJ%20Investments20181108_20160648_213.pdf

Utah Court of Appeals Affirms $2.3 Million Award of Severance Damages And Clarifies The Law Regarding What Is Required To Demonstrate Severance Damages

On February 8, 2018, the Utah Court of Appeals in UDOT v. Target Corporation, et al., confirmed a jury’s award of $2.3 million dollars in severance damages arising from the loss of visibility and access to commercial property in American Fork, Utah.  In 2009, UDOT decided to commence two construction projects that required, among other things, the expansion of I-15 and construction of a new freeway interchange in American Fork.  To facilitate construction of the interchange, UDOT condemned two small parcels of land in fee as well as a perpetual slope easement.  During trial, the property owners argued that the interchange significantly decreased visibility into their property and that the takings also caused them to lose a heavily used “right out exit.”  The property owner’s appraiser testified that the reduced visibility and loss of the “right out exit” resulted in a $2.3 million in severance.  The jury agreed with the property owners and awarded them $2.3 million in severance damages and $87,910 in just compensation for the parcels taken in fee and for the perpetual slope easement.

On appeal, UDOT argued that the property owners had not presented sufficient evidence of a necessary causal link between the taking of their property and their claimed severance damages resulting from the loss of visibility due to the new interchange.  In rejecting this argument, the Utah Court of Appeals explained that “[t]here are two methods by which a landowner can demonstrate the requisite causal link.  First, if the visibility issues stem from a ‘structure’ that is built upon the part of the property that was taken, causation is presumed.  Second, if the visibility issues stem from a ‘structure’ that was not built on the part of the property that was taken, causation is not presumed, and the property owner is entitled to severance damages only if it can demonstrate that ‘the use of the condemned property is essential to the completion of the project as a whole.’”  Both on appeal and before the district court, the property owners argued that they were entitled to a presumption of causation because a slope supporting a retaining wall for the new interchange was located on the condemned property.  Agreeing with the property owners, the Court of Appeals announced four important holdings, which clarify Utah law.  First, “to be considered to have presumptively caused severance damages,” a structure “does not have to be entirely constructed on land taken from the claimant.”  Second, the Court determined that the relevant “structure” for purposes of the severance damages analysis was the new interchange, rather than the interchange’s individual component parts.  Third, although only “one extremely small part . . . of the [i]nterchange was built on land taken,” the Court held that the property owners were “entitled to recover severance damages caused by loss or visibility resulting from construction of the entire [i]nterchange.”  (Emphasis added).  Fourth, because the interchange was at least partially constructed on the condemned property, the Court of Appeals held that it was not necessary for the property owners “to prove that the taken parcels were ‘essential’ to the Projects as a whole.”

With respect to the severance damages awarded for the lost exit, UDOT suggested on appeal that the property owners did not present sufficient evidence of damages during trial because their appraiser did not separately assess the severance damages caused by the loss of visibility and the loss of the exit.  In rejecting this argument, the Court of Appeals held that “there is no requirement . . . that Claimants must present their severance damages on a line-item basis, including a discrete value for, specifically, damages suffered by virtue of the loss of the right-out exit.”  Rather, “Claimants are free to present their severance damages evidence in a more general way, by presenting to the factfinder evidence of what the property was worth prior to the taking, and what it is worth after the taking.”  The Court noted, however, that “in some cases and under some factual circumstances, appraisers would be able to itemize and individually value the various factors that compromise the total diminution in value” and that “[w]here this is possible, and where appraisers are comfortable making this attempt, claimants may wish to consider presenting such evidence, since stating diminution in value only in general terms carries some risk.”

It is currently unclear whether UDOT will seek certiorari from the Utah Supreme Court to appeal the Court of Appeal’s opinion.  The full text of the Court of Appeal’s opinion can be found here:  http://www.utcourts.gov/opinions/appopin/UDOT%20v.%20Target%20Corporation20180208_20160122_24.pdf.

Condemnee Prevails Before Utah Court of Appeals In Eminent Domain Case

On May 5, 2016, the Utah Court of Appeals issued its decision in Utah Department of Transportation v. Boggess-Draper Company, LLC, an eminent domain case.  In 2010, the Utah Department of Transportation (“UDOT”) initiated condemnation proceedings against Boggess-Draper Company, LLC (“Boggess-Draper”) to take several parcels of Boggess-Draper’s private property.  Although UDOT initially indicated otherwise, in 2013 it filed a motion contending that Boggess-Draper had previously conveyed to UDOT all rights appurtenant to the property during an earlier, unrelated eminent domain matter.  Before the trial court, Boggess-Draper argued that extrinsic evidence demonstrated that UDOT’s position was incorrect, but the district court refused to consider such evidence.

On appeal, Boggess-Draper contended that the district court erred by refusing to consider extrinsic evidence.  In its May 5, 2016 decision, the Utah Court of Appeals unanimously agreed with Boggess-Draper’s position.  In so doing, the Court stated:  “We conclude that Boggess-Draper’s extrinsic evidence indicated the existence of a latent ambiguity” and “that the district court committed reversible error by declining to consider the extrinsic evidence.”

Steven J. Joffee, along with his former partner at his previous law firm, litigated the appeal on behalf of Boggess Draper.  A copy of the Utah Court of Appeals’ opinion can be found here:  https://www.utcourts.gov/opinions/appopin/UDOT%20v.%20Boggess-Draper20160505.pdf

Important Victory At Utah Supreme Court For Condemnees.

On March 24, 2016, the Utah Supreme Court issued an important decision for private property owners in the State of Utah facing the threat of eminent domain proceedings.  In Salt Lake City Corporation v. Evans Development Group, LLC, the Utah Supreme Court unanimously held that the Salt Lake City Corporation (the “City”) lacked statutory authority to condemn private property owned by Evans Development Group, LLC (“Evans Development Group”).  In so holding, the Court concluded that the City “did not follow the condemnation procedures required by statute” and that condemning authorities do not have power to take property for exchange purposes in the manner the City had attempted.  Based upon these conclusions, the Utah Supreme Court vacated the district court’s Final Judgment of Condemnation, ordered the City to return the property to Evans Development Group, and instructed the district court to determine the monetary damages and attorney fees to which Evans Development Group is entitled as a result of the City’s wrongful condemnation of their property.  Steven J. Joffee, and his former partner at his previous law firm, litigated the appeal on behalf of Evans Development Group.  A copy of the Utah Supreme Court’s opinion can be found here:  https://www.utcourts.gov/opinions/supopin/SLC%20Corp%20v.%20Evans%20Development20160324.pdf

Utah Court of Appeals Affirms Trial Court’s Ruling That Section 78B-6-510 Prohibits Cross-Examination Of Expert Appraiser Regarding Prior Appraisal Prepared To Obtain Immediate Occupancy.

On August 20, 2015, the Utah Court of Appeals in UDOT v. TBT Property Management, Inc., affirmed a district court’s finding that Section 78B-6-510 of the Utah Code (“Section 78B-6-510”) prohibits a private property owner from cross-examining an expert appraiser regarding a prior appraisal of the subject property that the expert prepared to support a motion for immediate occupancy.  Section 78B-6-510 states:  “If a condemning authority seeks immediate occupancy of the condemned property, the condemner must file with the clerk of the court a sum equal to the condemning authority’s appraised valuation of the property sought to be condemned.  That amount shall be for the purposes of the motion only and is not admissible in evidence on final hearing.” 

During trial, TBT Property Management, Inc. (“TBT”), the private property owner, attempted to cross-examine UDOT’s expert appraiser on a prior appraisal that he had performed of the subject property in connection with a motion for immediate occupancy.  UDOT’s counsel objected to the questioning, arguing that it was prohibited by Section 78B-6-510, and the district court sustained the objection.

On appeal, TBT challenged the district court’s ruling, arguing that the line of questioning “would have fallen outside of Section 78B–6–510’s bar because TBT did not seek to elicit the amount UDOT tendered to obtain occupancy of the property but rather sought only to question [UDOT’s expert appraiser] about how he arrived at the fair market value of the property in [a] 2008 appraisal.”  TBT further argued “that the question posed to [UDOT’s expert appraiser] was a legitimate attempt to impeach [UDOT’s expert appraiser] on his subsequent valuation and that it was therefore error for the trial court to restrict its cross-examination on this point.”  The Utah Court of Appeals rejected these arguments, stating:  “Even if TBT did not seek to elicit testimony prohibited by Section 78B–6–510 by asking [UDOT’s expert appraiser] to confirm the amount of the 2008 valuation, TBT’s question placed before the jury the precise information that Section 78B–6–510 bars from evidence. The trial court therefore did not abuse its discretion in striking the testimony and ruling that TBT could not inquire as to the specific valuation reached by [UDOT’s expert appraiser] in his 2008 appraisal.”

It is currently unclear whether TBT will seek certiorari from the Utah Supreme Court to appeal the Court of Appeal’s decision.  The full text of the Court’s opinion can be found here:    https://www.utcourts.gov/opinions/appopin/UDOT%20v.%20TBT%20Property%20%20Management,%20Inc.20150820.pdf

Utah Supreme Court Questions But Does Not Decide Whether Condemnation Of Excess Property Satisfies The "Public Use" Requirement Of The State And Federal Constitutions.

On June 24, 2014, the Utah Supreme Court issued an opinion in UDOT v. Carlson, 332 P.3d 900 (Utah 2014).  In its opinion, the Court questioned but did not decide whether condemnation of excess property satisfies the the "public use" requirement of the state and federal constitutions.  The full text of the Court's opinion can be found here:  https://www.utcourts.gov/opinions/supopin/UDOT142420140624.pdf