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 and Development Agreement" in which the agency agreed to acquire five privately-owned parcels, by eminent domain if necessary. The agreement also required the agency to sell the parcels to the developer. When the agency failed to obtain financing, the developer stepped in, and the parties agreed to a "Loan Agreement" which also "obligated the Renewal Authority to initiate litigation in eminent domain for the immediate possession and acquisition of the parcels" if a negotiated purchase 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 as required by the contracts. The developer sued for breach of contract and equitable estoppel, and sought "specific performance" as a remedy. The developer asked the court to order the agency to live up to the terms of the agreements and take the property it promised it would.
The Colorado Supreme Court held that a court has no power to affirmatively order a government agency to take property, even if it agreed by contract to do so. So far, so good. But here's where the opinion becomes difficult to process.
Reserved powers
The court first dismissed the "reserved powers" argument by the agency, which claimed the sovereign power of eminent domain could not be the subject of a contract. The court attempted to distinguish between a contract surrendering the power of eminent domain, which would be void under the reserved powers doctrine, with a "commercial agreement" to acquire private property by condemnation and sell them to someone else." Slip op. at 15. The court does not explain why an agreement binding the government to take property is different in kind from 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 it described as "the ability to take private property in the public interest," but "not the ability to refrain from such a taking." Slip op. at 16. This is nonsense. The court relied on the the word "power," arguing that the term could not be used to describe refraining from action. But why not? After all, the government's choice of whether to take Parcel X or to take Parcel Y for a new public school is recognized as an exercise of the "power" of eminent domain; and if the government chooses to take Parcel X, it is, by necessity, refraining from taking Parcel Y. Cf. slip op. at 15-16 n.2. And if refraining from taking property is not an exercise of the power of eminent 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:
As long as government has not surrendered its power to take private property -- as distinguished from its "power" not to take private property -- it remains empowered to take, or retake as the case may be, that or other property in the future (for compensation) and redistribute it in any manner that future circumstances and the public welfare demand.
Slip op. at 17. Whoa, eminent domain is a tool to "redistribute" private property "in any manner that future circumstances and the public welfare demand?" I thought eminent domain was supposed to be used to take property when it is needed "for public 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 to private parties in legislation or by contract. A law or a contract that 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 condemn certain parcels of land effectively transferred the decision-making process of whether to take or not take the properties from the agency to the developer, and could rightly be labeled "contract eminent domain." See this case for an example.
Another case also illustrates the concept very well. In In re Condemnation of 110 Washington Street, 767 A.2d 1154 (Pa. Cmwlth. 2001), the county entered into an agreement with a private developer under which the developer would control what property was taken, and was to pay for all expenses. The county and the developer also entered into a separate agreement under which the developer was entitled to demand the county institute eminent domain proceedings against the owners of 110 Washington Street. That agreement 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 these agreements and demanded the county institute eminent domain proceedings, which it did. The owner of the property objected, claiming that the agreements by which the developer directed the condemnations were void. The court held that the agreements were void and 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 its power or right of eminent domain; judgment entered pursuant to settlement agreement with a landowner was void because it limited the commission’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 of power was unnecessary. The illegal delegation doctrine would have taken the court to the same result, without the difficulties noted above.
