Case Title: CITY OF MIDWEST CITY v. HOUSE OF REALTY, INC.

Citation: 

Docket Number: 100064

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2004-06-29T00:00:00Z

Document:
CITY OF MIDWEST CITY v. HOUSE OF REALTY, INC.  CITY OF MIDWEST CITY v. HOUSE OF REALTY, INC. 2004 OK 56 100 P.3d 678 Case Number: 100064 Decided: 06/29/2004 THE SUPREME COURT OF THE STATE OF OKLAHOMA CITY OF MIDWEST CITY, a body corporate and politic, and a duly constituted and qualified municipality, Plaintiff/Appellee, v. HOUSE OF REALTY, INC.; ROBERT J. BARTON; PAMELA L. BARTON-STOBER; DOUGLAS D. STOBER; KATHY L. GIVENS; SHARLETTE R. MADISON; JEFFREY C. TACKETT; HARLAN DRAKE; PHILLIS CASEY; KEITH CASEY; LARRY PHILLIPS; IRIS JONES; DONNA GUNTER; DIANE FRITH; RICHARD SPRIGGS; LEONARD SEWELL; ARTHUR LEWIS; DANNY WATSON; MYRON NICEWANDER; WILLIAM KLUKOSKE; LAWRENCE HAWKINS, Defendants/Appellants. CITY OF MIDWEST CITY, a body corporate and politic, and a duly constituted and qualified municipality, Plaintiff/Appellee, v. SHIRLEY A. "GOETSCH" BARTON, Trustee of the Shirley A. "Goetsch" Barton Revocable Trust, dated September 23, 1992; ROBERT J. "BOB" BARTON, Trustee of the Robert J. "Bob" Barton Revocable Trust, dated September 23, 1992, Defendants/Appellants. APPEALS FROM THE DISTRICT COURT OF OKLAHOMA COUNTY ¶0 A municipality brought two condemnation proceedings in the District Court of Oklahoma County for the purpose of obtaining property located in an economic redevelopment project designed to remove blighted property. The Honorable Daniel Owens, District Judge, confirmed the reports of the commissioners and the landowners appealed. This Court retained the two appeals and heard oral argument en banc. We consolidate the two appeals for the purpose of one opinion addressing both. We hold that the municipality did not possess authority to exercise one of its eminent domain powers to remove blighted property for purposes of the Local Development Act, ORDERS OF THE DISTRICT COURT REVERSED James R. Waldo, Mock Schwabe, Waldo, Elder, Reeves & Bryant, Oklahoma City, Oklahoma, for Plaintiff/Appellee. Katherine E. F. Bolles, City Attorney, City of Midwest City, Midwest City, Oklahoma, for Plaintiff/Appellee. Terry Guy Shipley, Norman, Oklahoma, for Defendants/Appellants. EDMONDSON, J. ¶1 The central issue in this controversy is whether a municipality's authority to condemn property for economic redevelopment and blight removal is limited to special statutes expressly giving such authority, or in the alternative whether a municipality may condemn property for blight removal and economic development pursuant to a general power of eminent domain. In this controversy a municipality and a public trust have jointly created, funded, and operated an economic redevelopment project that included the removal of blighted property. We hold that a municipality may not use a general power of eminent domain for the purpose of economic development and blight removal when it is acting jointly with a public trust. This is so because the Legislature has provided specific procedures for economic redevelopment and blight removal by the joint conduct of municipalities and public trusts. ¶2 The City of Midwest City and the Midwest City Memorial Hospital Authority have a joint plan to redevelop approximately eighty acres of land on S.E. 29th Street in Midwest City. The eighty acres consist of approximately two-hundred separate parcels known as the City of Midwest City Downtown Redevelopment or "Project Area." Midwest City Hospital Authority agreed to advance funds to the City in an amount not to exceed $30,000,000 (thirty million dollars) for acquiring the property necessary for redevelopment. The members of the City Council for Midwest City are also the Trustees of the Midwest City Memorial Hospital Authority. ¶3 The Authority provides funds to Midwest City to acquire title to some of the property using condemnation proceedings. Once the City obtains the property it transfers title to the Hospital Authority. The Hospital Authority has entered into a contract with a private developer. That contract provides that the Hospital Authority will ground lease the Project Area, which will then be subleased to tenants, primarily retail establishments. In summary, the redevelopment is a project of the Midwest City Memorial Hospital Authority, and the City is exercising a power of eminent domain to supply property to the Authority in those circumstances where the landowners decline to sell their property. ¶4 The House of Realty, Inc., declined the offer made by Midwest City for its property. The offer did not include any relocation expenses or business losses. The House of Realty has been located in its present location near the corner of South Air Depot and 29th Street for more than thirty years. In an effort to stay at its location near Tinker Field, House of Realty offered to transfer title to all of its property, except for its office building, and then remodel that building to be consistent with the architecture of the new construction. House of Realty also offered to add parking and storage areas, and to make other improvements consistent with the new construction and the Project. The City Manager of Midwest City initially expressed approval of this plan, but the City of Midwest City subsequently rejected this offer. ¶5 The House of Realty provides rental services to military and other personnel employed at Tinker Field. The parties stipulated that these rental services constitute a substantial part of the total business of House of Realty, and that "Relocation of their offices would be ruinous to their business of providing rental services to military and other personnel who work at Tinker Field." This military facility is located south of 29th Street, and one of its entrances is located on South Air Depot, a short distance from the House of Realty. The City has stipulated that its officials have "searched the entire City for a comparable location [to be occupied by the House of Realty] and have found none." A portion of the property the City seeks to condemn is also used by a restaurant. ¶6 Midwest City brought a condemnation proceeding against the House of Realty, Inc. (Landowners). The City's petition to condemn the property stated that "Plaintiff has deemed advisable and necessary to own, in fee simple, certain private properties for economic development purposes and uses incidental thereto." Attached to the City's Petition is a Resolution stating that "economic development is a legitimate public purpose for which municipalities can condemn private property." ¶7 The City argued that it could exercise a general power to condemn lands pursuant to ¶8 Landowners argued that the City possessed an eminent domain power to take their land for economic redevelopment if the City exercised such power pursuant to the Urban Renewal Act ( ¶9 On January 25, 2002, an evidentiary hearing was held in the District Court on the motion for, and objection to, instructions to the Commissioners. The testimony of the Development Services Director for the City of Midwest City described the project. When asked why the City "elected not to follow any of the special statutes," he explained that one reason was that the Authority was providing a source of funding for the City. His testimony also revealed that the Urban Renewal and Neighborhood Redevelopment Acts have procedures that involve certain public hearings, and the City would be required to make certain determinations of conditions of the property in order to officially determine that it was blighted for the purposes of those statutes. Hearings and a determination that blight was present would, pursuant to these special statutes, precede any condemnation proceedings in a District Court. ¶10 The Development Services Director stated that the City decided to develop the property in the manner it did because the City thought that economic development was a legitimate public function, the Hospital Authority was making funds available for the project, and the property didn't meet all of the definitions for blighted conditions. The Director agreed with counsel that Urban Renewal or Neighborhood Redevelopment Acts have procedures that allow the public to be involved with the process that determines whether property is blighted. He then explained that the City did give notice to the public of its meetings on the project. He stated that people attending the meetings would have known that the City "was acquiring property in the area." ¶11 In summary, the City argued that economic redevelopment was a public purpose, and that a municipality such as Midwest City could exercise eminent domain for a public purpose. Thus, according to the City, it could exercise eminent domain to condemn property if the purpose of the taking was economic development. The City argued that acts such as the Urban Renewal Act or the Neighborhood Redevelopment Act were possible alternatives for municipalities to use in redevelopment, but neither were required when the City itself, as opposed to a public trust, was the entity exercising eminent domain. Landowners asserted that specific statutes on economic development must be followed by a municipality when it sought to exercise eminent domain for economic development. ¶12 In March of 2002 the Report of Commissioners was filed, and they determined that just compensation for the condemned property was $375,000.00. Landowners objected and challenged the City's authority to condemn the property pursuant to ¶13 Then, while the condemnation proceeding was pending, the City of Midwest City passed two resolutions linking its Project to specific redevelopment statutes. On April 9, 2002, the City of Midwest City passed Resolution No. 2002-05. The Resolution states that the City and the Hospital Authority "wish to facilitate reinvestment in historic downtown Midwest City in accordance with the Local Development Act, ¶14 On April 23, 2002, the City passed Resolution 2002-07. The Resolution states that the City and the Authority are "undertaking concurrent actions to facilitate reinvestment in historic downtown Midwest City in accordance with the Local Development Act, 1. Pursuant to the Local Development Act, One month later on May 28, 2002, the City of Midwest City passed Resolution No. 2002-11. This Resolution determined that the Project Area is blighted, and stated that the City Council was authorized to perform the redevelopment pursuant to ¶15 On August 27, 2002, the City passed Ordinance No. 2852. The ordinance states in part that: SECTION 10. Acquisition of the redevelopment project property within the Increment District by the City of Midwest City is authorized and confirmed pursuant to its general powers to exercise the right of eminent domain for any municipal purpose and to carry out the purposes of the Local Development Act in accordance with 11 Okla. Stat. § 22-1043(3), (8). SECTION 15. The Midwest City Hospital Authority, a public trust, is designated as the public entity authorized to carry out and administer the provisions of the Project Plan and to exercise all powers necessary thereto except those powers reserved to the municipal governing body by this ordinance and the Local Development Act at 62 Okl. Stat. § 854. In October of 2002 the City of Midwest City filed an amended petition that requested the appointment of Commissioners. The petition asserted that the City possessed eminent domain to take the property pursuant to ¶16 The trial court overruled the objections to the Report of the Commissioners and confirmed the Report. Landowners appealed. We retained the appeal and heard oral argument en banc. The trial court's order in City of Midwest City v. House of Realty, Inc., is on appeal in Okla. Sup. Ct. No. 100,064. In a companion case, Okla.Sup.Ct. No. 100,065, Midwest City brought a similar condemnation proceeding to acquire property located in the Project Area. Landowners requested that business losses be included in the amount of the award. They asserted that their property was used as rental property, and that such use should be included in the determination of fair market value. They also requested that relocation expenses be included. They challenged the City's right to condemn the property. At oral argument before the Court en banc, Defendants in both appeals stated that they seek reversal of the trial court's confirmation of the amount of the award, and a reversal of the trial court's action in overruling their objection to the City's taking. We have treated the two appeals as companion appeals, and now consolidate them for the sole purpose of one opinion on the issue of the City's authority to condemn the property for blight removal and economic redevelopment by a public trust. II. ¶17 The Legislative power of the State includes the power of eminent domain. Berman v. Parker, ¶18 The City of Midwest City agrees that the Local Development Act does not contain any express grant of eminent domain authority to municipalities. The City argues that its authority to exercise eminent domain power when executing provisions of the Local Development Act is implied in § 854 of the Act which lists additional powers granted to municipalities and states in part that: In addition to any other powers conferred by law, a city, town or county may exercise any powers necessary to carry out the purpose of this act, including power to: . . . . 18. Do all things necessary or convenient to carry out the powers granted in this act and otherwise authorized by the laws of this state. The City then combines this language with a general eminent domain power found in Every municipality shall have the right to: . . . 3. Exercise the right of eminent domain for any municipal purpose, within or without its corporate limits, and to establish, lay, and operate any plant or pipeline upon any land or right-of-way taken pursuant to eminent domain. Any business or profession which is affected by the right of eminent domain as exercised pursuant to the provisions of this section shall be considered as a property right of the owner thereof and proper allowance therefor shall be made; . . . 8. Exercise powers necessary to carry out the purpose of the Local Development Act as set forth in Section 854 of Title 62 of the Oklahoma Statutes. 11 O.S. § 22-104 (3) & (8). The City argues that it has a general power to condemn property for a public purpose, in this case economic development and blight removal, and that this general power is not limited unless a City decides to follow a particular redevelopment statutory scheme that limits the exercise of the City's general condemnation power. ¶19 The power of eminent domain lies dormant within the State "until such time as the Legislature by specific enactment delineates the manner and through whom it may be exercised." City of Tahlequah v. Lake Region Elec., Co-op., Inc., 2002 OK 2, ¶ 7, 47 P.3d 467 , 471. The Legislature, and not a municipality, "by specific enactment designates the occasion, modes, and agencies by which it [the eminent domain power] may be placed in operation." City of Pryor Creek v. Public Service Co. of Oklahoma, 1975 OK 81, 536 P.2d 343 , 345 - 346, (explanation added). A municipality may not exercise a power of eminent domain in the absence of statutory authority. Id. ¶20 The Local Development Act does not expressly give authority to exercise eminent domain. A project may be created pursuant to the Local Development Act without the exercise of eminent domain by any entity. Eminent domain is not necessary to carry out those powers expressly conferred by § 854 of the Local Development Act. We also conclude that a municipality exercising power pursuant to § 22-104 (8) is not given an implied eminent domain power. The Legislature has tied the power of eminent domain for an economic public purpose to removal of blight when municipalities and public trusts jointly create such projects, and a municipality is not possessed with an unfettered discretion to condemn property for economic redevelopment projects outside of the scope of statutory schemes that the Legislature has provided for removal of blighted property. These conclusions are supported by how the Legislature has designed statutes for economic redevelopment and blight removal. ¶21 Our State Constitution sets limits on the State's exercise of its eminent domain power.7 Private property may not be taken or damaged by the condemning agency unless the taking or damage is necessary for the accomplishment of a lawful public purpose. Luccock v. City of Norman, 1978 OK 66, 578 P.2d 1204 , 1206, citing, Okla. Const. Art. 2 §§ 23, 24. Whether the property is taken for a public purpose presents a judicial question. Public Service Co. of Oklahoma v. B. Willis, C.P.A., Inc., 1997 OK 78, ¶ 19, 941 P.2d 995 , 1000 . ¶22 The cases before us involve a municipality using eminent domain for the purpose of economic redevelopment and blight removal in a joint project with a public trust. Many redevelopment statutes use condemnation to economically redevelop areas that have become blighted. These statutes frequently authorize private use of the property after the blighted conditions are removed. For example, one author has explained: Urban redevelopment statutes were upheld almost unanimously even though following clearance, redevelopment sites were usually sold to private redevelopers. The courts declared that resale for private use was "incidental" to the main justification for these laws: "blight" removal. Removing blight was, constitutionally, a sufficient public purpose. 12 Thompson on Real Property, § 98.02(d), (David A. Thomas ed., 1994), (Supp.2003), (note omitted). In Isaacs v. City of Oklahoma City, 1966 OK 267, 437 P.2d 229 , cert. denied, 389 U.S. 825, 88 S. Ct. 63, 19 L. Ed. 2d 79 (1967), this Court upheld the constitutionality of urban renewal laws that allowed post-condemnation use of the property by private interests. We said: Without exception, redevelopment programs have been upheld against this type of objection, usually on the grounds that the public use or public purpose is legitimately served by the legislative object of slum or blighted area clearance, and the fact that private interests benefit incidentally or that private parties acquire ownership after the public purpose of the elimination of the undesirable conditions has been served, is merely incidental to the main legislative purpose. Isaacs v. City of Oklahoma City Both Thompson and Isaacs make a distinction between removal of blight and economic redevelopment. The former is the public purpose that constitutionally justifies the subsequent sale of the property for private use. Midwest City's efforts at redevelopment are best understood in the context of how the Legislature has linked the removal of blight with economic development. ¶23 In 1959 the Legislature created two urban renewal Acts, and a third in 1961. ¶24 The current urban renewal statutes provide that a municipality formulates a program "to eliminate and prevent the development or spread of blight, to encourage needed rehabilitation, and to provide for the redevelopment of blighted areas . . . ." ¶25 In 1981 the Legislature created the Central Business District Redevelopment Act. ¶26 In 1998 the Legislature amended the Central Business District Redevelopment Act and renamed it the Neighborhood Redevelopment Act. ¶27 The statute that formerly provided a municipality with an express power of eminent domain for the purpose of the Act, ¶28 The Urban Renewal Act, Neighborhood Redevelopment Act, and Local Development Act contain definitions of blight. The Urban Renewal Act's definition of "blighted area" is broad for the purposes of urban renewal, and may be based upon one or several factors that (1) substantially impair or arrest the sound growth of a municipality or (2) constitute an economic or social liability or (3) endangers life or property by fire or other causes or (4) are conducive to ill health, transmission of disease, mortality, juvenile delinquency, or to crime and by reason thereof, is detrimental to the public health, safety, morals or welfare. ¶29 Although the presence of blight may be based upon the presence of a single factor when applying the Urban Renewal Act, the Neighborhood Redevelopment Act requires the presence of a majority of ten factors. The following terms, whenever used or referred to in this act, shall, unless a different intent clearly appears from the context, be constructed to have the following meaning: 1. "Blighted conditions" means conditions which, because of the presence of a majority of the following factors, substantially impair or arrest the sound development and growth of the municipality or constitute an economic or social liability or are a menace to the public health, safety, morals or welfare in its present condition and use: a. a substantial number of deteriorated or deteriorating structures, b. predominance of defective or inadequate street layout, c. unsanitary or unsafe conditions, d. deterioration of site improvements, e. absentee ownership, f. tax or special assessment delinquency exceeding the fair value of the land, g. defective or unusual conditions of title, h. improper subdivision or obsolete platting or land uses, i. the existence of conditions which endanger life or property by fire and other causes, or j. conditions which create economic obsolescence, or areas containing obsolete, non-functioning or inappropriately developed structures; 11 O.S.2001 § 40-113(1), (emphasis added). ¶30 The Local Development Act's definition for blight occurs in the context of a definition for a "reinvestment area," and the Act provides that an area may become blighted by one or more of certain factors. The definition of a blighted area in the Local Development Act also incorporates the definition for a blighted area that is used in the Urban Renewal Act. 17. "Reinvestment area" means any area located within the limits of a city, town or county requiring public improvements, including but not limited to transportation-related projects identified by any transportation authority pursuant to Section 1370.7 of Title 68 of the Oklahoma Statutes, to reverse economic stagnation or decline, to serve as a catalyst for retaining or expanding employment, to attract major investment in the area or to preserve or enhance the tax base or in which fifty percent (50%) or more of the structures in the area have an age of thirty-five (35) years or more. Such an area is detrimental to the public health, safety, morals or welfare. Such an area may become a blighted area because of any one or more of the following factors: dilapidation; obsolescence; deterioration; illegal use of individual structures; presence of structures below minimum code standards; abandonment; excessive vacancies; overcrowding of structures and community facilities; lack of ventilation, light or sanitary facilities; inadequate utilities; excessive land coverage; deleterious land use or layout; depreciation of physical maintenance; and lack of community planning. Such an area includes a blighted area as defined in Section 38-101 of Title 11 of the Oklahoma Statutes at the time of approval of the project plan; and 62 O.S.Supp.2003 § 853 (17), (emphasis added). Although the definition of a "blighted area" in § 853 "includes a blighted area as defined . . . [by the Urban Renewal Act]," § 853 does not require applying the Urban Renewal definition in order for an area to be blighted for the purpose of the Local Development Act. ¶31 The definition of a "blighted area" in the Local Development Act is broader, and more easily applied by a municipality than the definitions in either the Urban Renewal or Neighborhood Redevelopment Acts. The Neighborhood Redevelopment Act requires the presence of a majority of ten factors. The Urban Renewal Act requires that the factors used to show the presence of a blighted area have at least one of four effects on the municipality: substantial impairment of growth, economic or social liability, danger to life or property, or detrimental conduciveness to disease or social disorder. 11 O.S.2001 § 38-101(8). Such predicates are not required by the Local Development Act. ¶32 Both the Urban Renewal Act and the Neighborhood Redevelopment Act provide certain benefits to landowners that the Local Development Act does not provide. For example, an urban renewal plan may be adopted by a municipal governing body if it finds that "[a] feasible method exists for the relocation of families and businesses who will be displaced from the urban renewal area in decent, safe and sanitary accommodations within their means and without undue hardship to such families and businesses . . . ." 11 O.S.2001 § 38-106(E). The Urban Renewal and Neighborhood Redevelopment Acts provide for payments to displaced families and businesses in the form of relocation assistance. 11 O.S.2001 § 38-108(8) and § 40-109.13 ¶33 The City of Midwest City argues for being allowed to use the least restrictive definition for a "blighted area" when condemning private property without an express grant of that authority, although the Legislature has imposed more restrictive definitions for blight when express statutory authority for eminent domain is granted to a municipality and a public trust implementing an economic redevelopment plan. The absence of a grant of authority to condemn property in the Local Development Act is consistent with that Act's absence of protections for landowners. ¶34 The Legislature has expressed a public policy to provide certain benefits to landowners when their property is taken for economic development by the concerted effort of municipalities and their public trusts. The City of Midwest City has failed to point to any public policy that would support its argument that the Legislature did not want to provide such benefits when a municipality is the sole named party seeking to condemn property for economic development engaged in by a municipality and an associated public trust. ¶35 The City of Midwest City states that the property for its project is blighted for purposes of the Local Development Act. The City's made this determination using, with one exception, language from the Local Development Act. The City of Midwest City passed ordinance No. 2002-11 on May 28, 2002, and stated therein: WHEREAS, the members of the City Council have personal knowledge of the conditions prevailing in the Project Area, and find the following conditions existed as of January 1, 1999, prior to the Economic Development Resolutions, and continue to the present: 1. the Project Area has been underdeveloped for many years; and 2. the Project Area requires public improvements to reverse economic stagnation or decline, to serve as a catalyst for retaining or expanding employment, to attract major investment in the area and enhance the tax base; and 3. fifty percent (50%) or more of the structures in the Project Area have an age of thirty-five (35) years or more; and 4. the Project Area is and was a blighted area because of each and a combination of the following factors: dilapidation, obsolescence, deterioration, presence of structures below minimum code standards, abandonment, excessive vacancies, arrested economic development, deleterious land use or layout, depreciation of physical maintenance and lack of community planning; and 5. the Project Area is and was a reinvestment area under the terms of Section 853 of Title 62 of the Oklahoma Statutes and is and was unproductive, underdeveloped and blighted under Article 10, Section 6C of the Oklahoma Constitution; and 6. pursuant to Oklahoma statutes, the Project Area is and was detrimental to the public health, safety or welfare; . . . . Paragraph number 4 above refers to "arrested economic development" of the Project Area. This language is not listed as a factor in § 853, but is one that may be used to show blight for the purposes of the Urban Renewal Act. 11 O.S.2001 § 38-101(8). ¶36 The City determined that the Project Area was detrimental to the public health, safety or welfare, and blighted, and therefore subject to an exercise of a general eminent domain power by the City to effectuate economic development. Landowners challenge this conclusion. They agree that the Local Development Act provides a definition for a blighted area. However, they argue that, unlike the Urban Renewal and Neighborhood Redevelopment Acts, the Local Development Act fails to provide guidelines or limits on a municipality's exercise of discretion when exercising an eminent domain power for the purpose of economic redevelopment. They argue that the absence of such limits or guidelines makes unconstitutional the exercise of a general eminent domain power for the purpose of economic redevelopment. We need not address this challenge by the Landowners. ¶37 A municipality, the City of Midwest City, and a public trust, the Midwest City Memorial Hospital Authority, have a joint project to remove blighted property and establish economic redevelopment. The municipality and public trust did not follow those statutes that the Legislature has provided for circumstances when a municipality and a public trust jointly remove blighted property and establish economic redevelopment. The City argues that it followed the Local Development Act. We need not decide, for the purpose of these appeals, whether the City complied with that Act, for that Act contains no express, or necessarily implied, grant of an eminent domain power to a municipality. ¶38 We reverse the orders of the District Court herein because the City did not possess authority pursuant to its general eminent domain powers to condemn the property apart from those statutes regulating the joint conduct14 of municipalities and public trusts when removing blighted property and creating economic redevelopment. The orders of the District Court are reversed. ¶39 ALL JUSTICES CONCUR FOOT