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