Opinion ID: 901068
Heading Depth: 1
Heading Rank: 4

Heading: Whether the City's finding of necessity for condemnation of Finn's property was based on bad faith.

Text: [¶ 9.] The trial court found that the City acted in bad faith when it initiated a condemnation proceeding against Finn. The City contends that the condemnation resolution was valid and based on necessity. The City denies any basis of fraud, bad faith, or abuse of discretion. The property owner's right to challenge the City's taking is set forth in SDCL 21-35-10.1 which states: Within thirty days from the date the summons described in § 21-35-9 is served, the defendant may demand a hearing in circuit court on the petitioner's right to take. Failure to make such demand or to consent in writing to the taking, within the thirty-day period, shall constitute a waiver of the right to question the necessity of the taking. The finding of necessity by the plaintiff, unless based upon fraud, bad faith or an abuse of discretion, shall be binding on all persons. (Emphasis added.) [¶ 10.] The City asserts that the trial court erred in determining that the condemnation proceeding was to further a private interest and that the City acted in bad faith. The City contends that the evidence established that it was in the public interest to condemn the access easement across Lot 23 in order to facilitate public travel. [¶ 11.] This Court has said that [a] municipality acts in bad faith when it condemns land for a private scheme or for an improper reason, though the superficially stated purpose purports to be valid. Salis, 2001 SD 84, ¶ 12, 630 N.W.2d at 703. The use of eminent domain solely to benefit a private individual or individuals constitutes bad faith and the taking is void. Pheasant Ridge Associates Ltd. Partnership v. Burlington, 399 Mass. 771, 506 N.E.2d 1152, 1155 (1987) (citations omitted). [¶ 12.] In determining that the City acted in bad faith, the trial court relied on the following findings: (1) that the City made an agreement with Hamm to obtain the sixty-six foot access easement; (2) that no notice of the agreement between the City and Hamm was provided to the owners of Lots 18 through 23 or to Wildwood Association; (3) that an e-mail evidenced a deliberate decision not to contact Daniel and Melinda Finn; (4) that prior to this agreement, the City had demonstrated no interest in the property it ultimately sought to condemn; and (5) that the City, in an attempt to purchase Finn's property, made contradictory representations about the location of the access from Wildwood to Hamm's property and Red Rock Estates. In addition, the trial court found that the City failed to act in conformity with its usual practice of performing traffic studies, engineering studies and drainage studies before instituting a condemnation action. The trial court also based its decision on the City's failure to specifically identify the location of the sixty-six foot access to be condemned and the change of its location and width immediately before trial. [¶ 13.] At trial, the evidence established that for 20 years the City held the position that no roads extending into Wildwood subdivision should be built because of the geographical nature of the land. A 1978 staff report stated that [a]fter investigation of future development potential and proposed road grades, it is the staff's recommendation that a collector system [1] not be extended through this development. Several years prior to the condemnation proceeding, Hamm tried, on two separate occasions, to obtain the easement for dedication to public use. The City informed Hamm that in order to dedicate the easement across Lot 23 to public use, he would have to pave the easement and do drainages studies. On both occasions, Hamm abandoned his plan. [¶ 14.] It was not until Red Rock Estates began negotiating with Hamm that the City became interested in Finn's property. It was only after Hamm demanded that the City obtain the easement for public dedication that the City chose to acquire Finn's property. Despite the City's prior position that a collector system should not be extended through Wildwood, it decided to make a deal with Hamm to obtain the access easement for public use. In a letter dated April 7, 2000, the mayor acknowledged Hamm's demand and responded, I am willing to pursue City acquisition and if necessary condemnation to acquire that land. At a public meeting held July 19, 2001, the mayor made it clear that the City would be condemning part of Lot 23 stating, [t]he City has made the commitment to Leo Hamm and I fully intend to see that it's carried out. [¶ 15.] During the negotiations with Hamm, the City gave no notice to Finn or to the Wildwood property owners. In fact, information about the negotiations was purposely withheld from Finn. In an e-mail from Marcia Elkins (Elkins), City Planning Director, to the mayor, Elkins informed the mayor that Hamm did not want the City to approach Daniel and Melinda Finn at that time. On September 25, 2000, Bonnie Hughes (Hughes), Community Development Director for the City, sent a letter to Finn expressing the City's desire to obtain the access easement for dedication as a public right-of-way. Hughes made no mention of the deal with Hamm. Finn called Hughes to inquire further about the future of the access easement. After speaking to two of the City's engineers, Hughes told Finn that the major street plan had been amended to show Wildwood Drive as a local street onlymeaning access through the area for future development would not be allowed. The engineers also told Hughes that, in their opinion, it was a poor place to put a road and that the proper location would be farther south. In a letter dated March 23, 2000, Hughes again indicated to Finn the City's desire to purchase the property. Included in the letter was Hughes' assurance that the major street plan showed Wildwood as a local street only and that access through the area to future developments would not be allowed. [¶ 16.] The Wildwood residents first discovered that a road was being constructed from Red Rock in the direction of Shooting Star Trail in June of 2001. Again Finn called Hughes who assured Finn that any road coming in that direction would divert south and would join Sheridan Lake Road. In late June as the construction progressed further, another resident of Wildwood found construction workers putting stakes in his back yard as Hamm stood nearby watching. The resident went to the city engineers who informed him that no permits had been issued for road construction in that area. Without a permit the City was forced to stop construction. Despite the City's clear intention to build a road on Shooting Star Trail, the city engineers at a July 2, 2001 meeting still maintained that there were no plans to build a road on Shooting Star Trail. Apparently, the city engineers were not privy to the deal between Hamm and the City or that a road had, in fact, been planned. The agreement between Hamm and the City to build a road across Lot 23 to the section line had the appearance of a private agreement since neither the Wildwood residents nor the City's own engineering departments were notified. [¶ 17.] Additionally, the City failed to conform to its usual practices in condemning property. The City's Public Works Director admitted that the City usually conducts a preliminary engineering evaluation to determine the feasibility of a road at the proposed location. The City Project Manager agreed. Contrary to its normal procedure, the City condemned the property without determining whether a street would meet any of the required standards. [¶ 18.] Despite the City's contention that the condemnation of Finn's property was necessary to facilitate public travel, the evidence indicates otherwise. The main purpose of the condemnation was to fulfill the City's commitment to Hamm. The City's actions in furthering Hamm's private interest were improper. Based on the evidence, we cannot say that the trial court's findings of fact were clearly erroneous. Nor do we find the trial court erred in concluding that the condemnation action was instituted in bad faith.