Opinion ID: 848629
Heading Depth: 2
Heading Rank: 2

Heading: possibility of rezoning as a factor affecting just compensation

Text: A condemned parcel's fair market value must be determined `based upon a consideration of all the relevant facts in a particular case.' [23] Accordingly, evidence demonstrating the likelihood of a zoning modification, just like any number of circumstance that may affect a property's value on the open market, may be relevant in determining just compensation. However, because just compensation must be calculated on the basis of the market value of a property on the date of the taking, the relevance of any such evidence is wholly dependent on whether, and how, the particular factor at issue would have affected market participants on that date. Our case law is quite clear in this regard. As we noted in State Hwy Comm'r v. Eilender: [24] We look at the value of the condemned land at the time of the taking, not as of some future date. If the land is then zoned so as to exclude more lucrative uses, such use is ordinarily immaterial in arriving at just compensation. But, on the other hand, it has been held, if there is a reasonable possibility that the zoning classification will be changed, this possibility should be considered in arriving at the proper value. This element, too, must be considered in terms of the extent to which the `possibility' would have affected the price which a willing buyer would have offered for the property just prior to the taking.  [Emphasis supplied.] Thus, we concluded in Eilender that a nonfrivolous, nonspeculative reasonable possibility of a zoning change, as evidenced by an already pending zoning modification, could properly be considered in determining just compensation. [25] Similarly, we held in VanElslander, supra, that the trial court abused its discretion in refusing to allow plaintiff MDOT to present into evidence an appraisal of the condemnees' property that was based on the possibility that a zoning variance could be obtained to cure the violations created by the condemnation. Noting that `any evidence that would tend to affect the market value of the property as of the date of condemnation is relevant,' [26] we held that the possibility of obtaining a variance, just like the possibility of a zoning modification, may be relevant to the just-compensation determination. We stressed, however, that such evidence was only relevant to the extent that it aided the fact-finder in determining `the price which a willing buyer would have offered for the property just prior to the taking . . . .' [27] Applying these longstanding principles as reaffirmed in Eilender, VanElslander, and Silver Creek, we would hold that the trial court here committed an error of law, and thus abused its discretion, [28] when it denied MDOT's motion to exclude evidence of the posttaking zoning modification. We of course agree with the Court of Appeals dissent, and with our dissenting colleagues, [29] that relevant evidence is evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. [30] Where we believe the dissenters have gone astray is in misidentifying the  fact that is of consequence.  The dissenters frame this consequential fact as the existence of a reasonable possibility that the property would be rezoned. See post at 394. The possibility of a zoning modification must, indeed, be a reasonable one in order, as a matter of logic, for it to have any bearing on fair market value. However, this is only part of the equation. The reasonable possibility of a zoning change bears on the calculation of fair market value only to the extent that it could have affected the price that a theoretical willing buyer would have offered for the property immediately prior to the taking. [31] Thus, the fact that is of consequence is the reasonable possibility of a zoning modification, as that possibility might have been perceived by a market participant on condemnation day. [32] Any information that was available at the time of the taking may certainly be relevant in determining the price that a property might fetch on the day of the taking. For example, in this case, defendants were properly permitted to present evidence that they had met with city officials regarding their plans for the area, and that these officials had expressed a willingness to make the required zoning changes; that the Novi Chamber of Commerce and other members of the business community supported the proposed zoning change; that Novi's Economic Development Coordinator, Greg Capote, did not believe that the property was suitable for single-family development; that there was a dire need for zoning to accommodate high-tech office development; and that, at the time of the taking, Capote was already involved in the planning for an OST zoning classification to accommodate this type of development. All of this evidence pertains to information that might have affected the value of the property as of the date of condemnation, December 7, 1995. Indeed, at the time defendants acquired their Novi property, beginning in 1988, the property was more valuable in their eyes because of the looming possibility of a future zoning change. [33] In contrast, a posttaking event or occurrence is utterly irrelevant to the calculation of just compensation. Market participants are, as a general rule, not omniscient, and would not be aware on the date of the taking that a posttaking event is absolutely certain to occur. [34] A posttaking occurrence cannot possibly affect the fair market value of property on the day of the condemnation, because the occurrence has not yet come to pass and, thus, cannot contribute to the mass of information affecting the market value of the property on that day. In short, a posttaking zoning change is irrelevant to the just compensation calculation because it does not make the fact of consequence that information regarding the reasonable possibility of a zoning change may have impacted the market value of property on the date of the takingmore probable or less probable. [35] The trial court's ruling and the Court of Appeals dissenting position on the admission of posttaking evidence are informed by a common logical fallacy. As our dissenting colleague, Justice Markman, argues: That the property was, in fact, rezoned makes it `more probable' that a `reasonable possibility' of rezoning existed at the time of the taking. Post at 405. At its core, this argument supposes that the probability of a particular occurrence at a specific point in time is made stronger by after-the-fact events. [36] This fallacy presumes that a zoning event occurring after the date of condemnation has logical and legal relevance to the hypothetical willing buyer's calculation of the price of the property on the condemnation date. In order to understand the flaw in the probability theory and rationale of the Court of Appeals dissent and the trial court, it is important to remember the context of the just compensation valuation goal. Although condemnation results in a forced sale, the price the condemning agency is required to pay must approximate that price which a willing buyer would have offered for the property at the time of the taking. Consequently, because information concerning events occurring after the condemnation could not possibly have influenced the conduct of a willing buyer on the date of the taking, it can never be logically, and thus legally, relevant in determining the price that the theoretical willing buyer and seller would have agreed upon on the date of the taking. Consider the application of this theory of probability to an event-such as the toss of a die-the probability of which is known. That a six is rolled after one predicts this outcome does not increase the strength of the prediction beyond the usual one-in-six chance of being correct. However, contrary to conventional probability theory, the proffered dissenting probability theory suggests that the predictive force of a six call is made stronger by the mere fact that the thrown die actually revealed a six. It is hard to understand how such a back to the future probability theory works any more logically when an event less predictable than the roll of a die is at issue. While a posttaking change in zoning may suggest that one party may have had a more astute prognostication of local zoning practices, it cannot seriously be advanced that a zoning change made after the taking could in any way have influenced a willing buyer's pricing decision on the day of the taking. Only that which could legitimately influence a buyer at the time of the taking is legally and logically relevant to the amount of compensation that must be paid for a taking. Because events that occur after the taking fall outside this zone of potential influence, they cannot logically and therefore legitimately be considered in determining just compensation. This case well illustrates the illogic of admitting evidence of postcondemnation events to influence the fact-finder's determination of just compensation under the statute. Here, the change in zoning occurred two and one-half years after the date of the taking. It is difficult to envision how a theoretical willing buyer of defendants' property would have factored into his purchase offer in 1995 a zoning decision made by Novi [37] more than two years after that date. [38] As noted by the Court of Appeals dissent and by our dissenting colleague, post at 409, 4 Nichols, Eminent Domain (3d ed.), § 12C.03[3], indicates that `[t]he fact that, subsequent to the taking, the zoning ordinance was actually amended to permit the previously proscribed use has been held to be weighty evidence of the existence (at the time of the taking) of the fact that there was a reasonable probability of an imminent change.' [39] Although it is true that some courts have, indeed, permitted the introduction of posttaking rezoning evidence, for the reasons we have expressed, we reject the reasoning employed by these courts. [40] We do not, for example, agree with the New Jersey Supreme Court that evidence of a posttaking zoning change may serve to support the reasonableness of the factual claim that on the date of taking the parties to a voluntary sale would have recognized and been influenced by the probability of an amendment in the near future in fixing the selling price. [41] The issue, again, is whether the perception of the existence of a market factor (such as the possibility of an imminent rezoning) would change the amount that a fictional buyer would be willing to pay on a given date. The fact that something that was only a possibility on day 1 becomes a reality on day 2 is not relevant to fair market value on day 1. [42] Our dissenting colleague, as evidenced by his lengthy discussion describing the imperfect nature of the eminent domain procedure in calculating just compensation, appropriately explains why condemnation, being a forced sale, can only approximate a real market real estate transaction. Although we are certainly not unsympathetic to the plight of the innocent landowner who is compelled to sell its property to the public, the governmental power of condemnation is one that is specifically condoned by our Constitution and regulated by the UCPA. Justice Markman's proposal-that we allow in evidence of posttaking events in order to counterbalance the artificial construct of the hypothetical willing buyer and seller-is not only inimical to the constitutional and statutory duty to determine fair market value as of the date of the taking; it is also illogical. We submit that Justice Markman incorrectly assumes that the inadmissibility of evidence of posttaking occurrences leads to the invariable detriment of the property owner and the benefit of the government. Post at 411. Although the property owners in this particular case might be benefited by the introduction of such evidence, the converse would be true were the government permitted to introduce evidence of posttaking events having a diminishing effect on property value. It is not difficult to imagine a situation in which a condemning authority might seek to present, in connection with its just-compensation calculation, evidence that the condemned property was rezoned after the taking from commercial to residential, resulting in a lower market value. [43]