Low-Ball City in the Windy City

If you think that we have been hard on condemning agencies for their low-ball offers, do read the latest on this subject from the Illinois Appellate Court: City of Chicago v. Zappani, 877 N.E.2d 17 (Ill.App. 2007). The city set out to condemn Zappani’s three parcels for redevelopment, and sent the out-of-town owner the following offers, giving him only 10 days to respond (two of the three letters took more time than that to reach the addressee):           

            First parcel  -  $110,000           

           Second parcel – $140,000           

           Third parcel – $68,000           

           Total – $318,000

It turned out, however, that two of these offers were below the city’s own appraisals. After the condemnation case was filed the city disclosed that its appraisals indicated values of            

          First parcel – $180,000

          Second parcel – $135,000, but  the city agreed to

          increase  that to $140,000 as indicated by the owner’s

          appraisal.

          Third parcel – $290,000, but the city agreed to increase

          that to the owner’s appraisal figure of $305,439

          Total – $625,439, or almost twice as much as the city’s

          prelitigation low-ball offers.

The city’s excuse was that there had been an increase in values between the time its appraisals were prepared and the time of filing of the condemnation action. Ri-i-i-i-ght! At this point we could wax indignant commenting on this bit of municipal jiggery-pokery, but in a tour de force of self-restraint, we will only quote what the court had to say:

“Most troubling to this court for purposes of a good-faith analysis is the discrepancy between the initial offer prices and the subsequent values reflected in both the City’s and the defendant’s appraisals. We are unpersuaded by the City’s argument that its initial offers were lower because they were based upon market values around the time the [offer] letters were sent out and property values had increased in the area. The City filed suit against defendant 83 days, 121 days and 41 days, respectively, after issuing the letters, and we find it incredible that vacant parcels in a blighted area of the city would increase so dramatically in such a short period of time. The City urges us to believe the following: the value of [one parcel] more than doubled in the span of four months; [another parcel] increased in value from $68,000 to $135,000 in approximately six weeks; and [the remaining parcel] increased in value from $110,000 to $180,000 in less than three months. We believe the only reasonable conclusion is that the City offered defendant amounts significantly below the fair market value for all three parcels which, as the court explained in City of Naperville [v. Old Second National Bank of Aurora, 763 N.E.2d 951  (2002)] does not constitute good-faith negotiation.”

At this point you may wonder why was this case up on appeal, given that the city ‘fessed up and upped its offers to the level of the owner’s valuation. Good question. The owners had moved to dismiss the case under Illinois law which requires strict compliance with the statutory requirement of good faith prelitigation offers, arguing that these prelitigation “offers” were not in good faith. But the trial court thought that the city’s offers were hunky dory and denied the motion. The Appellate Court disagreed with Her Lordship and, finding the city’s position incredible, reversed.

And Now, a Dispatch from San Diego.

SignOnSanDiego.com of December 24th, reports that the California Department of Transportation (CalTrans) took a hit in a condemnation trial when a jury awarded $26.5 million for a taking of a 2.8-acre strip from a larger parcel of 58 acres located in the Otay Mesa area of San Diego. The owners contended that the taking would deny access to most of the remainder of the larger parcel. The jury evidently agreed.

We expect to hear more about this case presently, such as what were the legal issues and what was Caltrans’ offer or evidence, so once again, stay tuned.

The Branford, Connecticut, Progress Report

Evidently, Californians in Half Moon Bay are not the only ones to engage in multi-million dollar deeds of litigational derring-do. On September 15th we posted a news item (Zap ‘em, Danno) relating how a court in Branford, Connecticut found a condenmnation by the town seeking to take land on which a developer was just starting to develop several hundred homes, to be in bad faith. Nonetheless the trial court allowed the condemnation to proceed, and awarded $4.6 million as against the town’s proffered compensation of $1 million. On top of that, the court awarded $12.4 million for the developer’s lost profits and investment costs.

We now learn that the trial court heard the Town’s motion for new trial and denied it. The Town vows to appeal and has retained Wes Horton (the winner of Kelo) as its appellate counsel, but under Connecticut law it may have to post a substantial six-figure bond. In the meantime, the owners are seeking another $1.8 million in attorneys fees under 42 U.S.C. Sec. 1988, and that request is yet to be passed on by the trial court. We plan to keep you up to date on the progress of this case, so once again, stay tuned. 

UPDATE: The status of this case is now available via a web page posted by the owners’ counsel. SEE www.branfordtaborrecord.com.

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Sidney Z. Searles — R.I.P.

Sidney Z. Searles, originally from New York, passed away at the age of 92 in Tucson where he lived in retirement for a number of years. Searles was one of the pioneers in the practice of eminent domain law on the property owners’ side and eventually partnered with the late Julius Sackman, author of the modern version of multi-volume treatise Nichols on Eminent Domain. 

Searles emerged as planning chairman of well regarded and well attended CLE programs on eminent domain, first for PLI and later for ALI-ABA.  Even after he retired from CLE activities, Searles retained an active interest in educating lawyers in this arcane field, and faithfully attended the annual ALI-ABA programs on eminent domain, inverse condemnation and land use until the very end.

Searles came to prominence in 1963 when he authored Bulldozers at Your Door, a Reader’s Digest article that focused public attention on the plight of property owners displaced from their homes and businesses by the rising tide of eminent domain cases.  He was the recipient of ALI-ABA’s Harrison Tweed Award for excellence in continued legal education and of the Arthur May Memorial Award of the American Institute of Real Estate Appraisers. He served on Governor Nelson Rockefeller’s State Commission on Eminent Domain in New York, whose activities led to revision in the New York Eminent Domain Law.

Sidney Z. Searles was throughout a genuine, classic New York character who was passionate about his work that he saw as a way of doing good in life, and of making a contribution to improving the world.

R.I.P. Sidney.

Dropping the Other Shoe in Half Moon Bay

Following up on its November 28th decision in Yamagiwa v. City of Half Moon Bay, awarding $36,795,000 against the city for its taking of the plaintiffs’ 24.7-acre parcel by first flooding it and then refusing permission to develop it, asserting that it was now a “wetland,” the U.S. District Court issued an order directing the entry of judgment and awarding interest on the award at the rate of 9.62 %, which comes to over $5000 per day. The order rejects the city’s contention that the date of value should be March 2000, the date on which the city denied the owners a coastal development permit, a time when the value of the property was only $12,030,000. This, pointed out the court, would be inconsistent with California law that calls for valuation as of the date of trial (Pierpont Inn, Inc. v. State, 70 Cal.2d 282, 297-298 (1969)). Using the valuation date suggested by the city would deprive the owners of the substantial appreciation of the property that took place in the interim. How substantial? The city contended that the value as of 2000 would have been only $12,030,000, whereas its own appraiser testified at trial to a current value of $26,620,000.

 

Judgment was entered on December 19th.

 

Update: The city of Half Moon Bay has retained Orrick, Herrington & Sutcliffe of San Francisco to represent it on appeal. Orrick beat out the appellate powerhouse Horvitz & Levy and the pro-government true believers Shute, Mihaly & Weinberger. An interesting coincidence: Orrick’s George Yuhas represented the City of Monterey in the U.S. Supreme Court in City of Monterey v. Del Monte Dunes, 526 U.S. 687 (1999) against Michael Berger (now with Manatt, Phelps & Phillips), so it looks like this confrontation has the makings of a return match unseen since Abdul the Bulbul Emir confronted Ivan Skavinsky Skovar. Berger won in Del Monte Dunes on a record of conduct by Monterey that made the Justices recoil with indignation during oral argument. It remains to be seen if they will be similarly moved by Half Moon Bay’s display of chutzpa in first flooding the subject property and then arguing that it was an unusable ”wetland” but nevertheless assessing a million dollars against it for sewers that by its lights could never be used.

 

Update 1/24/08: The City’s motion to amend court findings is now set for February 21st. The court has set April 24th to hear the plaintiffs’ motion for attorney fees and litigation expenses.

 

For another comment on this case see Ronald Zumbrun, The Cost of Wetlands in Half Moon Bay, [Sacramento] Daily Recorder, Jan. 14, 2008. See also Julia Scott, Half Moon Bay Explores Settlement, San Mateo Times, insideBayArea.com, 1/24/08.

 

Stay tuned.

What Happened to the Vaunted “People’s Right to Know”?

Just for the sheer hell of it we went on line this morning to check out what the general press may have had to say about Yamagiwa v. Half Moon Bay. We figured that given the stir that case produced among informed legal bloggers, it might be of some interest to the general public as well, and it would be interesting to see what the press had to say about it. After all, thirtysomething million dollar awards against small towns are not exactly in the dog-bites-man category. But guess what?  Except for the local papers (which by our lights include the San Francisco Chronicle and the San Jose Mercury), there is nary a peep about this case. Mind you, it’s not like we would expect the legal misadventures of Half Moon Bay to make headlines like Linda Greenhouse’s latest insights into the souls of the Magnificent Nine. On the other hand, given Yamagiwa’s achievement of poetic justice  and its megabuck award, to say nothing about its saga of a blood-stirring confrontation between goodness and evil (i.e. “the developer” vs. “the government”) you’d think that some major newspaper editors would find a few column inches to mention this case. But it looks like we’re wrong again.

Evidently, the people don’t need to know all this legal stuff. It’s just not very important, as compared with, say, the Half Moon Bay Pumpkin Festival which, according to Lexis, was duly noted by the Wall Street Journal’s Weekend Journal, Oct. 18, 2004, at p. W2. You don’t believe  us? See for yourself:  www.miramarevents.com/pumpkinfest/facts.html

It’s all about keeping national priorities straight. Right?

Update. We ran this one past a wise, experienced reporter of our acquaintance, and we think his comment deserves to be shared. Quoth he: “Editors understand pumpkin festivals.”

Further your affiant sayeth naught. 

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Another Reason Why Precondemnation Offers Are So Often Lowballs

Quotable quote:

   “The most important factor that affects appraisers preparing reports for governmental agencies is that the majority of assignments involve ‘projects’ that have multiple parcels. An example of this type of project is a road widening project that requires the acquisition of right-of-way from several parcels along a particular road. In these multiple parcel projects the initial appraisals are written with time and budget restraints. Appraisers who are hired by government agencies must submit a fee schedule that is competitive with other appraisers who are bidding on the project. The appraisal process and fees are part of the overall budget that the government agency has set in order to complete the project.

      “It is difficult for appraisers who accept these multiple parcel assignments to spend time and effort in preparing an effective initial report due to the fact that the fee allocated to each parcel reflects a bulk discount and the appraiser is not in a mindset that each report will end up being involved in a court proceeding. As appraisers we all know that an appraisal that is intended to assist in eminent domain proceedings can end up being involved in a court proceeding and we may have to provide expert testimony based on the initial report. However, we also realize that if a property owner does not accept the offer of just compensation based on the initial report and condemnation proceedings are filed, we will have the opportunity to complete another report knowing that this appraisal will have to stand up to cross examination and much more scrutiny.

     “I call the initial appraisal process involving a multiple parcel project, ‘Throw it against the wall and see what sticks.’ As appraisers we know that only a few private property owners want to take their cases to court.”  Keith Harper, MAI, Preparing an Effective Appraisal Report, Handout at CLE International Eminent Domain Program, Las Vegas, Mar. 18-19, 2004, at H1.

One Reason Why Precondemnation Offers Are So Often Lowballs

We recommend that you read a new article, Protecting Private Property Rights After the Public Use Ship Has Sailed, in the ABA publication, Litigation, Vol. 34, No. 1, Fall 2007, p. 25, by Charles B. McFarland, a practicing lawyer who gives us a practitioner’s perspective on eminent domain. Of particular significance is McFarland’s astute exposition of the reasons why precondemnation offers are so often too low. His words, at p. 30 of his article, speak for themselves.

       “The underlying principle of the takings clause is that public  burdens should be borne by the public and not by individual property owners. Therefore, it is critical that this calculus include the full magnitude of the burden to be imposed on the property owner as a result of the taking. Too often, however, it does not. The proponents of public projects have an incentive to understate the property acquisition costs associated with a project to facilitate its approval. It is particularly easy to understate or omit damages to property that is not acquired but will suffer a negative impact from the project. When the true cost of the acquisition is revealed through the judicial process, usually years later, these same  proponents blame the property owners, the attorneys representing them, or juries for the cost overruns. In fact, these overruns are the direct and natural result of their own conduct in failing to assess the compensation question fully.”

New London Update – The Perils of Pauline

The December 12, 2007, issue of the New London newspaper, the Day, reports in an article by Elaine Stoll (NLDC And Developer Agree To Terms On Fort Trumbull) that New London and its redeveloper Corcoran Jamison (CJ) have agreed to grant the latter until May 29, 2008, to come up with financing for the Fort Trumbull redevelopment project.

       “If it fails to come up with the money for the housing portion  of  the project, the developer would forfeit all rights to that housing as well as two office buildings and a hotel it planned to build without litigation and would allow the NLDC to seek another developer.” NLDC is the New London Development Corporation, a city-created nonprofit to whom the execution of the Fort Trumbull project was delegated.

So is it a done deal now? A definite maybe. The CJ President is expected to sign the extension agreement on Monday, but if he fails to do so NLDC will hold CJ in default of the development agreement.

 Stay tuned.