Opinion ID: 4457066
Heading Depth: 2
Heading Rank: 2

Heading: Condemnation Blight Damages

Text: 8 See note 1, supra. 15 We now turn to the heart of DOH’s criticism of the jury verdict below, which was the trial court allowing the jury to consider pre-take condemnation blight damages as an element of just compensation. “The damages suffered when a ‘cloud of condemnation’ hangs over a property and an actual taking is never effectuated or is longdelayed have been labeled as ‘condemnation blight.’” Dale A. Whitman, Eminent Domain Reform In Missouri: A Legislative Memoir, 71 Mo. L.Rev. 721, 757 (2006). Condemnation blight can be marked by departure of rental tenants, unmarketability, and declines in rentability, capital values, and profits. Id. This Court has addressed the topic of condemnation blight in two cases and only insofar as it related to the market value of the land taken and its effect on the residue. See W.Va. Code § 54-2-9. In Huntington Urban Renewal Authority v. Commercial Adjunct Co., (“HURA”) 161 W. Va. 360, 242 S.E.2d 562 (1978), the condemnor acquired large tracts of land throughout the Huntington downtown area which resulted in the displacement of businesses. The landowner’s property at issue—a parking lot—was located in the project area. While HURA’s plans to acquire the parking lot were pending, it proceeded to acquire large tracts of land throughout the area. This activity caused the landowner to suffer condemnation blight.9 9 Although we did not label it as such, this Court described condemnation blight as follows: (continued . . .) 16 In HURA, the landowner’s parking lot revenues became a crucial issue because of their link with fair market value calculations for the property taken. When arriving at just compensation due the landowner, this Court chose to make adjustments to the property valuation date to account for HURA’s pre-condemnation actions that depressed the fair market value of the property. See Syl. HURA, 161 W. Va. at 360, 242 S.E.2d at 563 (“Any decrease, not of a general character, in the fair market value of real property prior to the date of valuation, caused by the public improvement for which such property is acquired, or by the likelihood that the property will be acquired for such improvement, other than that due to physical deterioration within the reasonable control of the owner, should be disregarded in any determination of the just compensation to be Commercial buildings stood on some of this land, and many were either demolished or allowed to stand vacant until they could be converted to a different use. This displacement of businesses from the project area reduced parking demand and caused parking lot revenues to decline, according to the testimony of [landowner’s] expert witnesses. Also, some of the land acquired by [HURA] was developed into parking lots or parking garages which competed with [landowner’s] lot. The adverse effect of this competition on [landowner’s] parking lot revenues was particularly pronounced because of the reduced demand for parking in the project area. [Landowner] was effectively squeezed on two sides by [HURA], which first reduced the parking demand and then entered into competition for the few remaining parking customers. It is clear that [HURA’s] actions were especially detrimental to [landowner] in this instance and went far beyond the ordinary disruptions that businesses and citizens have come to accept from public works improvement projects. 161 W. Va. at 360, 242 S.E.2d at 563. 17 awarded the property owner for the property.”) (emphasis added). Thus, HURA stands for the proposition that it would be manifestly unjust to permit a public authority to depreciate property values through pre-condemnation activities and then take advantage of such depreciation by actually taking the property at a lower price. In Gomez v. Kanawha County Commission, 237 W. Va. 451, 787 S.E.2d 9042 (2016), the landowner argued that the public project increased the property’s value. This Court mentioned condemnation blight in the context of the project influence rule,10 and found where condemnation proceedings tend to increase the value of property, the property owner is not entitled to the increased value. Id. at 455, 787 S.E.2d at 908. We stressed “that the project influence rule is implicated in condemnation actions for property that is taken.” Id. at 466, 787 S.E.2d at 919. In situations where “only a portion of the property is taken, leaving the landowner in possession of a ‘residue,’ then any increase or decrease in the fair market value of the residue caused by the public improvement may be considered by the jury.” Id. at 466, 787 S.E.2d at 919. DOH argues the trial court erred by allowing the jury to consider condemnation blight outside the framework established by this Court in HURA and Gomez. DOH notes the parties do not dispute the value of the property actually taken and 10 See Gomez, 237 W. Va. at 455, 787 S.E.2d at 908, syl. pt. 4 (“Under the project influence rule, any increase or decrease in value to the condemned land that is directly attributable to the project for which the land is taken must be disregarded in determining the market value of the land.”). 18 states “the issue of condemnation blight that specifically arose in this matter is in the context of determining damages to Respondents’ residue.” On this issue, DOH contends Respondents failed to show that condemnation blight was specific to them rather than general in nature, and their evidence of loss of rental income was improper because lost profits of a business have never been recognized as an element of damages in a condemnation proceeding. DOH’s argument is fundamentally flawed. HURA and Gomez offer little guidance as to the issue before us because those cases addressed condemnation blight within the context of the West Virginia Code § 54-2-9 take. That issue is not before us. Just compensation for the take was negligible, and there was no damage to the residue following the take because Respondents’ property was largely unaffected by the time the condemnation proceeding was filed. If we were to follow DOH’s direction and attempt to force Respondents’ damages into a West Virginia Code § 54-2-9 taking analysis, they would vanish. Respondents would be deprived of just compensation and obliged to absorb economic losses caused by DOH’s protracted delay in implementing the public project alone. Thus, we decline DOH’s invitation to apply an overly restrictive market value concept of compensation based on the facts presented. Instead, the issue here is whether West Virginia landowners can recover damages related to condemnation blight as an element of just compensation. W.Va. Const. art. III, § 9; W.Va. Code § 54-2-9a. This is an issue of first impression. The only 19 West Virginia case cited by the parties that mentions a landowner’s claim for consequential damages in a condemnation proceeding is WPP. In that case, we explicitly declined to address the issue: The parties in this case have not asked us to alter our long-standing rule and thereby hold that lost profits, loss of goodwill, going concern value, or other consequential damages to a business caused by the exercise of eminent domain are elements of just compensation. We note, however, that several state legislatures have required the inclusion of those damages in awards of just compensation. 236 W. Va. at 72, 777 S.E.2d at 641 (footnote omitted).11 We find ample justification for allowing a landowner to recover damages related to condemnation blight under appropriate circumstances. First, our Constitution 11 The distinction between WPP and this case is significant. In WPP, we addressed the issue of future loss of business profits when evaluating their effect on the fair market value of the property. The elements of just compensation in that case included the amount of property taken and damage to the residue that included coal reserves beneath it. The landowner valued his property using only the future lost profits of his coalmine business. This Court made clear that the future lost profits of a business on property taken by condemnation are not recoverable under West Virginia Code § 54-2-9, but are relevant to determining its fair market value. In syllabus point two of WPP, we held: In a condemnation action, the amount of raw profit lost from a business operated either on the condemned real estate or on its residue may not be the sole basis to establish just compensation. Stated another way, business profits lost as a result of a condemnation action may not be recovered as an independent element of damages. 236 W. Va. at 50, 777 S.E.2d at 626. This point of law remains valid considering the facts of WPP. This Court has repeatedly stated that a syllabus point is to be read in light of the opinion. Farley v. Worley, 215 W. Va. 412, 426, 599 S.E.2d 835, 849 (2004). 20 and statutes require just compensation when private property is taken or damaged for public use. W.Va. Const. art. III, § 9; W.Va. Code § 54-2-9a. Second, because property refers to the rights of the landowner, the compensation granted to him or her should take into account appropriate personal losses. As Justice Holmes recognized, constitutions deal “with persons, not with tracts of land.” Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195 (1910). Third, the burden of public projects is best borne by the public, instead of the landowner. The general theory behind the requirements of just compensation is that the individual property owner should be placed in as good a position financially as he or she would have been but for the establishment of the public project. Reichs Ford Rd. Joint Venture v. State Rds. Comm’n, 880 A.2d 307, 313 (Md. Ct. App. 2005). The rationale for compensating a landowner not only for the taking of his or her property for public use, but for the financial loss suffered as a consequence of precondemnation activities, is clear based on the facts before us. When property owners who operate a small business suffer financial loss for several years as a result of the government’s pre-condemnation activities, “then the law should be used to establish a means of recovery, not as a tool to avoid shared responsibility.” Nichols, supra at § G18.07[1]. It “has long been recognized,” that property rights are “basic civil rights,” and that a government’s failure to protect private property rights puts every other civil right in doubt. Lynch v. Household Fin. Corp., 405 U.S. 538, 552 (1972). 21 Other state courts that have allowed damages for condemnation blight specifically focus on the personal losses of the landowner instead of the market value of the property taken and damage to the residue. In Luber v. Milwaukee County, 177 N.W.2d 380 (Wis. 1970), the Wisconsin Supreme Court found that loss in rental damages was recoverable in a condemnation proceeding. 12 In Luber, the state acquired the landowner’s commercial property in 1967; however, the landowner had suffered loss in rental income since 1964. Id. at 381. Luber touched on the precise dilemma Respondents faced here: “[t]he inadequacy of merely awarding the fair market value of the property actually taken is most apparent in cases of partial taking.” Id. at 385. Moreover, [t]he importance of allowing recovery for incidental losses has increased significantly since condemnation powers were initially exercised in this country. During the early use of such power, land was usually undeveloped and takings seldom created incidental losses. Thus the former interpretation of the “just compensation” provision of our constitution seldom resulted in the infliction of incidental losses. The rule allowing fair market value for only the 12 Wisconsin is a “taking” only state. See Wis. Const. art. I, § 13 (“The property of no person shall be taken for public use without just compensation therefor.”). The Wisconsin Legislature expanded this constitutional provision and enacted legislation wherein landowners may recover damages in a condemnation action. See Wis. Stat. Ann. § 32.19 (2018) (“The legislature declares that it is in the public interest that persons displaced by any public project be fairly compensated by payment for the property acquired and other losses hereinafter described and suffered as the result of programs designed for the benefit of the public as a whole[.]”). DOH attempts to distinguish Luber on the basis that Wisconsin has a specific statute that allows such damages. In its brief, however, DOH fails to cite West Virginia’s statute that allows landowners to recover damages in a condemnation action. W.Va. Code § 54-2-9a. Furthermore, West Virginia is a “taking-damaging” state. W.Va. Const. art. III, § 9. 22 physical property actually taken created no great hardship. In modern society, however, condemnation proceedings are necessitated by numerous needs of society and are initiated by numerous authorized bodies. Due to the fact people are often congregated in given areas and that we have reached a state wherein re-development is necessary, commercial and industrial property is often taken in condemnation proceedings. When such property is taken, incidental damages are very apt to occur and in some cases exceed the fair market value of the actual physical property taken. Id. at 384-85 (footnotes omitted). In Clay County Realty Co. v. City of Gladstone, 254 S.W.3d 859 (Mo. 2008), the landowner had commercial property that was slated for redevelopment by the city’s initiative. Almost two years after announcing the project, the city cancelled its agreement with the developer and sought to receive tax funding for the project. The city took no further action to acquire the property, and the landowner sued the city, in an inverse condemnation action, 13 alleging violation of the constitutional right to just compensation.14 The landowner argued that the city delayed the redevelopment project and, as a consequence, retail tenants did not renew their leases, causing the property values to decline. The court held that actions short of actual acquisition or physical 13 Inverse condemnation is a shorthand description for a landowner suit to recover just compensation for a governmental taking of his or her property without the benefit of condemnation proceedings. West Virginia Lottery v. A-1 Amusement, Inc., 240 W. Va. 89, 807 S.E.2d 760 (2017). 14 Missouri is a “taking-damaging” state. See Mo. Const. art. I, § 26 (providing “private property shall not be taken or damaged for public use without just compensation.”). 23 invasion of the property may still constitute a taking or damaging under the constitution. The court also recognized that some delays relating to condemnation proceedings were natural and unavoidable. Thus, it limited and clarified its holding: [B]efore property owners have a viable cause of action for precondemnation damages, they must establish that there has been aggravated delay or untoward activity in instituting or continuing the condemnation proceedings at issue. Without this . . . showing of “aggravated delay or untoward activity,” every condemnation case would give rise to a separate cause of action based on precondemnation activity, because the condemnation process involves governmental and judicial decisions that are endemic with delays. Id. at 869. In State v. Barsy, 941 P.2d 971 (Nev. 1997), overruled on other grounds by GES, Inc. v. Corbitt, 21 P.3d 11 (Nev. 2001), the Nevada Supreme Court addressed the issue presented here and held that pre-condemnation activities of the state entitled the landowner to damages in addition to those resulting from the taking of his property.15 The court in Barsy was persuaded by a leading case on the rights of property owners who sustain damages as a result of pre-condemnation activities by the condemning authority, Klopping v. City of Whittier, 500 P.2d 1345 (Cal. 1972).16 In Buzz Stew, LLC v. City of 15 Nevada is a “taking” state. See Nev. Const. art. I, § 8 (“Private property shall not be taken for public use without just compensation[.]”). 16 In Klopping, the California Supreme Court held that the condemnee must be compensated for loss of rental income attributable to pre-condemnation publicity where a (continued . . .) 24 North Las Vegas, 181 P.3d 670 (Nev. 2008), the court expanded its ruling in Barsy: “to the extent that Barsy indicated that a taking must occur to recover damages related to a municipality’s announcement of intent to condemn and its improper action with respect to that announcement, that requirement has been eliminated as to precondemnation damages.” Buzz Stew, 181 P.3d at 674. We therefore hold that a landowner may seek damages for condemnation blight as an element of just compensation in a condemnation proceeding. W.Va. Const. art. III, § 9; W.Va. Code § 54-2-9a (2016). Because some delays relating to public projects are natural and unavoidable, before a landowner may recover damages for condemnation blight, he or she must establish that there has been an unreasonable delay in instituting the condemnation proceeding following its official announcement. Mere planning of the public project is insufficient to trigger a claim for damages. Additionally, a landowner must prove his or her damages were caused by the condemning authority’s actions or inactions.17 condemnor acts unreasonably “either by excessively delaying eminent domain action or by other oppressive conduct[.]” Id. at 1355. 17 In Clay County Realty, the court held that “property owners can prevail against condemning authorities for claims relating to condemnation blight where they provide specific evidence demonstrating aggravated delay, bad faith, or untoward activity by the condemning authority.” 254 S.W.3d at 869 (emphasis added). In this case, Respondents have not alleged DOH engaged in bad faith, so we need not decide whether landowners (continued . . .) 25 Having determined that the type of damages claimed here are recoverable in a condemnation proceeding, we turn to DOH’s contention that Respondents’ alleged damages were speculative. DOH asserts Mr. Pifer testified only to nonspecific discussions he had with potential renters during the alleged period of blight. DOH notes that Respondents fully operated their businesses and used all aspects of their property following the condemnation announcement. Respondents counter that the threat of condemnation brought to a halt any negotiations with larger gasoline distributors. Mr. Pifer testified that there were no offers of rent, or back and forth negotiations because the larger distributors told him: “When the road’s done we want to talk to you. When the road’s done we will be interested in leasing your facility.” Also, Respondents’ expert, Mr. Rice, gave his opinion as to damages caused by condemnation blight based on reasonable market rental values during the relevant timeframe. This Court has made clear that because a jury’s verdict below is entitled to considerable deference, an appellate court should decline to disturb a trial court’s award of damages on appeal as long as that award is supported by some competent, credible evidence going to all essential elements of the award. Kessel v. Leavitt, 204 W. Va. 95, 188, 511 S.E.2d 720, 813 (1998). may recover condemnation blight damages by simply showing bad faith irrespective of unreasonable delay. 26 After carefully examining the evidence and testimony of damages offered by Respondents, we believe that the jury’s verdict is well within the evidence presented. Respondents offered proof which furnished “reasonable certainty of damages[.]” Syl. Pt. 4, Bartlett, 156 W. Va. at 432, 194 S.E.2d at 384. Accordingly, we decline to disturb the trial court’s award of damages for condemnation blight.18