Thanks to Timothy Sandefur at PLF on Eminent Domain for calling attention to the Colorado Supreme Court’s opinion in Wheat Ridge Urban Renewal Auth. v. Cornerstone Group XXII, LLC, No. 06SC591 (Dec. 3, 2007).
In that case, the court refused to order a redevelopment agency to condemn private property and turn it over to a developer to build a Walgreen’s store. The court held that judges have no authority to compel an agency to take property even if the agency had entered into a contract with the developer in which it agreed to do so. While not expressly relying on separation of powers, the court’s opinion clearly was based on its concern with preserving the agency’s discretion to condemn (or not condemn) private property. See slip op. at 21-22. The bottom line is that in Colorado, courts have no jurisdiction to fashion a specific performance remedy requiring the government to exercise a sovereign power.
Professor Ilya Somin calls the victory “Pyrrhic” in his analysis of the decision, suggesting the court’s “reasoning is likely to undermine property rights in the long run.” While the opinion is often opaque and many of its premises difficult to fathom, I’m not so sure the case should be considered so poorly. After all, the court reached a good result, although its analysis ventures into areas it need not have gone.
Agency breaches development agreement
The agency and the developer entered into a “Disposition andDevelopment Agreement” in which the agency agreed to acquire fiveprivately-owned parcels, by eminent domain if necessary. The agreementalso required the agency to sell the parcels to the developer. Whenthe agency failed to obtain financing, the developer stepped in, andthe parties agreed to a “Loan Agreement” which also “obligated theRenewal Authority to initiate litigation in eminent domain for theimmediate possession and acquisition of the parcels” if a negotiatedpurchase was not possible. Slip op. at 5.
Thereafter, the agency, for reasons not disclosed in the opinion,decided to disregard the agreements, and did not take the property asrequired by the contracts. The developer sued for breach of contractand equitable estoppel, and sought “specific performance” as a remedy. The developer asked the court to order the agency to live up to theterms of the agreements and take the property it promised it would.
The Colorado Supreme Court held that a court has no power toaffirmatively order a government agency to take property, even if itagreed by contract to do so. So far, so good. But here’s where theopinion becomes difficult to process.
Reserved powers
The court first dismissed the “reserved powers” argument by theagency, which claimed the sovereign power of eminent domain could notbe the subject of a contract. The court attempted to distinguishbetween a contract surrendering the power of eminent domain, whichwould be void under the reserved powers doctrine, with a “commercialagreement” to acquire private property by condemnation and sell them tosomeone else.” Slip op. at 15. The court does not explain why anagreement binding the government to take property is different in kindfrom an agreement whereby the government abstains from taking property.
The “power” to take . . . or not take
The court took refuge in its definition of eminent domain, which itdescribed as “the ability to take private property in the publicinterest,” but “not the ability to refrain from such a taking.” Slipop. at 16. This is nonsense. The court relied on the the word”power,” arguing that the term could not be used to describe refrainingfrom action. But why not? After all, the government’s choice ofwhether to take Parcel X or to take Parcel Y for a new public school isrecognized as an exercise of the “power” of eminent domain; and if thegovernment chooses to take Parcel X, it is, by necessity, refrainingfrom taking Parcel Y. Cf. slip op. at 15-16 n.2. And ifrefraining from taking property is not an exercise of the power ofeminent domain, then what is it?
Eminent domain as redistribution of private property?
The next portion of the court’s opinion is where its assumptions, as Tim Sandefur points out, really break down. The court stated:
Aslong as government has not surrendered its power to take privateproperty — as distinguished from its “power” not to take privateproperty — it remains empowered to take, or retake as the case may be,that or other property in the future (for compensation) andredistribute it in any manner that future circumstances and the publicwelfare demand.
Slip op. at 17. Whoa, eminentdomain is a tool to “redistribute” private property “in any manner thatfuture circumstances and the public welfare demand?” I thought eminentdomain was supposed to be used to take property when it is needed “forpublic use.” Silly me.
Illegal delegation: contract zoning, contract eminent domain
The determination of when to exercise the power of eminent domain,like other governmental powers such as zoning, may not be delegated toprivate parties in legislation or by contract. A law or a contractthat does so is void. See, e.g., Hsiung v. City & County of Honolulu, 378 F. Supp. 2d 1258, 1266 (D. Haw. 2005). In the zoning context, this is known as illegal “contract zoning.” In Wheat Ridge,the two contracts by which the agency became obligated to condemncertain parcels of land effectively transferred the decision-makingprocess of whether to take or not take the properties from the agencyto the developer, and could rightly be labeled “contract eminentdomain.” See this case for an example.
Another case also illustrates the concept very well. In In re Condemnation of 110 Washington Street,767A.2d 1154 (Pa. Cmwlth. 2001), the county entered into an agreement witha private developer under which the developer would control whatproperty was taken, and was to pay for all expenses. The county and thedeveloper also entered into a separate agreement under which thedeveloper was entitled to demand the county institute eminent domainproceedings against the owners of 110 Washington Street. Thatagreement provided that the county needed “the prior written consent”of the developer in order to take the property.
Eventually, the developer exercised its rights under theseagreements and demanded the county institute eminent domainproceedings, which it did. The owner of the property objected,claiming that the agreements by which the developer directed thecondemnations were void. The court held that the agreements were voidand that the attempted takings were invalid, because the eminent domain“power may not be delegated by agreement or contract.” Id. at 1160. See also Evans v. Smyth-Wythe Airport Comm’n,495 S.E.2d 825 (Va. 1998) (airport commission could not relinquish itspower or right of eminent domain; judgment entered pursuant tosettlement agreement with a landowner was void because it limited thecommission’s ability to take the landowner’s property).
In the end, although the result in Wheat Ridge was correct, the court’s analysis of reserved powers and whether inaction is an exercise ofpower was unnecessary. The illegal delegation doctrine would havetaken the court to the same result, without the difficulties notedabove.