Those statutes that require that if a condemnor doesn't use property taken, that it must try and sell it back to the (former) owner seem like a pretty good thing. You have your property taken, but if the taker doesn't actually need it or use it, hey you can get it back. Feels pretty good. In theory.
But in practice, maybe not so much. Try tracking down the former owners after years and see how easy it is to find them (not). Try figuring out the price. Now don't get us wrong: we're not saying that these provisions aren't good or -- especially -- don't mean well. Just that, as in many things in law, the devil is in the details.
So it is with Utah's version. At least according to the Utah Court of Appeals in Cardiff Wales, LLC v. Washington County School District, No. 20191035-CA (Mar. 4, 2021). There, the school district wanted Cardiff Wales's property. It did the right thing: it offered to buy it. But as is often the case, during the negotiations for sale the district reminded Cardiff Wales that the district possess the power to simply take the property if CW didn't agree to a voluntary sale. "So, '[i]n order to avoid an eminent domain lawsuit, [Cardiff] agreed to sell the Property to [WCSD].'" Slip op. at 2.
The parties did what parties do when selling property: they drew up a purchase and sale agreement (statute of frauds flashback), that noted:
The Agreement indicated that WCSD had advised Cardiff that it intended “to acquire a portion of the [Property] through condemnation if necessary” but that the parties had “negotiated an alternative to the condemnation proceeding.” The Agreement further stated, “In lieu of an involuntary conversion thereof, [Cardiff] agrees to sell the [Property] to [WCSD] . . . upon the terms . . . set forth in this Agreement.”
Slip op. at 2-3.
Flash forward 10 years. The school district decided "it no longer needed the Property and decided to sell it." Utah's statute says that "[i]f the state or one of the state's subdivisions, at the state's or the state's subdivision's sole discretion, declares real property that is acquired through condemnation or threat of condemnation to be surplus real property, it may not sell the real property on the open market unless ... the real property has been offered for sale to the original grantor, at the highest offer made to the state or one of its subdivisions with first right of refusal being given to the original grantor..." Utah Code § 78B-6-521. But the district didn't offer it back to Cardiff Wales and instead sold it to a developer.
Cardiff Wales sued under the statute, asserting it possessed a right of first refusal because it sold the property to the district under threat of condemnation. The trial court granted the district's motion to dismiss for failure to state a claim because the sale wasn't "under the threat of condemnation." The court of appeals affirmed. The statute defines the term "threat of condemnation" as not merely a casual threat of condemnation as the case here (i.e., "you better sell it to us, property owner, at the price we're asking because if you don't, we're going to take it anyway and force a price"), but only when the state or municipality "specifically authoriz[es]" the use of eminent domain to take. As the court phrased it, "Because Cardiff made no allegation that a final vote was taken and the use of eminent domain powers approved in the complaint, the district court correctly dismissed the complaint for failure to state a claim upon which relief can be granted." Slip op. at 7. In short, the property owner here should have held out and made the district institute the condemnation process. Now we realize this is a statute, and the court was limited to how the legislature framed the text. So we're not suggesting that the court got it wrong. Just that the point of the statute seems to be that when an owner sells after being under the eminent domain gun -- whether official, or merely "reminded" of -- the point is the same: it is not really an arms-length market transaction. Maybe this case is one that pushes the legislature to clean up the wording of the statute. Either that, or smart real estate transaction lawyers are going to be advising their clients not to voluntarily negotiate and sell to purchasers who possess the power of eminent domain, and instead insist they institute the condemnation process (and only then complete the sale), just to preserve the owners' rights.
Cardiff Wales, LLC v. Washington County School District, No. 20191035-CA (Utah App. Mar. 4, 2021)
