The Arizona Court of Appeals’ opinion in Arizona Electrical Power Cooperative v. DJL 2007 LLC, No. 1 CA-CV 16-0097 (May 9, 2019), is about the date of valuation in eminent domain, but beyond that is interesting to us because it sheds light on a case we’ve been following about natural gas pipelines and the use of the federal courts’ injunction power to effect immediate possession.
In the Arizona case, the owner purchased land from the BLM subject to the private electric company’s 30-year easement on which it had installed high-voltage transmission lines. The grant of easement expired in 2011, but the electric company did not remove the lines. In 2014, it instituted an eminent domain action to condemn the easement.
The trial court rejected the utility’s request for immediate possession. Instead, it granted a preliminary injunction allowing the utility to continue to operate and maintain the transmission lines.
The parties disputed the date of valuation. The owners asserted “the land should be valued as of the date the court eventually enters the final order of condemnation.” Slip op. at 4. The utility argued the date of valuation was the date of the taking — the date the 30-year easement expired and it began occupying the property without a legal right to do so. The court accepted neither argument, instead concluding the date of valuation was the date the summons issued in the utility’s eminent domain lawsuit.
The court of appeals sided with the owner, rejecting the utility’s argument that the property was physically taken on the date it began holding over when its easement expired. Like many jurisdictions, Arizona’s eminent domain code designates the date of summons as the date of valuation. “But if the summons is remote in time from the take and the value of the property has changed in the interim, the value of the property on the date of the taking must control.” Slip op. at 6.
The court concluded that if it was the government — and not a private utility with the delegated power of eminent domain — then yes, the date of the physical occupation would be the date of the taking. “But the Arizona Constitution imposes additional limitations on the exercise of eminent domain by a private corporation (like Southwest Transmission) that preclude a taking by occupation.” Id.
The court relied on the provision in the Arizona Constitution which recognizes that private entities may exercise eminent domain power, but which also notes that the appropriation cannot take place until compensation as been ascertained and paid:
and no right of way shall be appropriated to the use of any corporation other than municipal, until full compensation therefor be first made in money, or ascertained and paid into court for the owner, … which compensation shall be ascertained by a jury, unless a jury be waived ….
Slip op. at 7 (citing Ariz. Const. art. 2, § 17).
The Arizona Supreme Court has held (Hughes Tool) that this provision prohibited a private entity exercising eminent domain from obtaining prejudgment possession, because it requires the “advance jury determination of damages.” Slip op. at 8. Just as the private condemnor could not obtain immediate possession in that case, the electric company could not take the property by physical occupation here.
As a private corporation, Southwest Transmission cannot take possession of property as a condemnor until after trial and payment of just compensation. See Hughes Tool, 91 Ariz. at 160. To hold otherwise would, in effect, allow the result that Hughes Tool reversed: a private corporation could achieve the same result as an order for immediate possession (even though § 12-1116 is unavailable) by simply entering the property during the pendency of the condemnation action.
Slip op. at 8-9. The court further noted, “in straight-condemnation proceedings under federal law, the date of the taking is similarly the date the government tenders payment after final judgment on just compensation.” Slip op. at 10 (citing Kirby Forest
Indus., Inc. v. United States, 467 U.S. 1 (1984)). This is the issue in the Natural Gas Act condemnations in the case we referenced at the start of this post. If the Arizona Court of Appeals gets this, why can’t the federal courts?
But what about the fact that the electric company continued to physically occupy the property after the expiration of its legal right to do so? It didn’t do so in its capacity as a condemnor, held the court. Slip op. at 10.
“Instead, Southwest Transmission simply became a hold-over tenant on that date, and under the right-of-way clause [in the Arizona Constitution], could not take Landowners’ property in a constitutional sense until after trial and payment.” That, not the date of the occupation or the date of summons, is the date of the taking and hence the date of valuation.