Here's the latest in a case we've been following.
A Utah statute requires that if a condemnor doesn't actually use property it acquired "under a threat of condemnation," it must try and sell it back to the (former) owner. The statute defines "threat of condemnation" as when "an official body of the state or a subdivision of the state, having the power of eminent domain, has specifically authorized the use of eminent domain to acquire the real property."
So what does "specifically authorized" mean? The Utah Court of Appeals held it means only when the potential condemnor takes a "final vote" and actually and finally "approves the use of eminent domain powers."
In Cardiff Wales, LLC v. Washington County School District, No. 20210221 (May 26, 2022), however, the Utah Supreme Court disagreed, concluding it means any specific threat to take. The condemnor must do something more than indicate it is thinking about eminent domain, but need not take the final step in approving an eminent domain lawsuit.
The school district wanted Cardiff Wales's property, and offered to buy it. 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. And with that kind of offer, CW agreed to the sale.
Flash forward a decade. The district decided it wasn't actually going to use the land, and no longer needed it, so decided to get rid of it. But it didn't offer it back to CW, and instead sold it to a developer. Now hold on, CW asserted, you acquired the property under threat of condemnation (we remember your "reminder" that you could just take the property if we didn't sell), so we have the right of first refusal and we want to exercise that right.
The trial court disagreed that the sale was "under threat of condemnation," and as noted above, the court of appeals agreed: the condemning authority must authorize an eminent domain lawsuit in order to trigger the statute's right of first refusal. As the Supreme Court put put it, the court of appeals held that "to survive the motion to dismiss under the theory that [the School District] acquired the Property by threat of condemnation, Cardiff [Wales] must allege that [the School District] voted and approved the use of its eminent domain power to acquire the Property." Slip op. at 5. "Specific authorization" means final vote.
The Supreme Court disagreed. It held that the process doesn't need to be that far along in order to for a sale to be under the threat of condemnation. The court held that it isn't enough when a potential condemnor simply signals "the government's general ability to condemn land." That alone isn't enough to constitute a threat of condemnation, and a "general fear" by the owner that the government might take the land if it isn't voluntarily sold won't support a right of first refusal. Slip op. at 11. (After all, every property owner lives under such a general fear, no?) But the Supreme Court wasn't willing to draw the line as late in the game as the court of appeals, either:
Instead, to meet her statutory burden, a landowner must plead and prove some government action that indicates the government has authorized the use of its eminent domain authority in a way that bespeaks a specific intent to condemn the landowner’s property.
Id.
What does this mean when pleading a right of first refusal under the statute? "This means that to survive a motion to dismiss, Cardiff Wales needed to plead that the School District took some sort of action that transformed its general eminent domain power into a specific threat to take Cardiff Wales’s parcel by eminent domain." Slip op. at 12. CW's complaint "did not use the words 'specifically authorize' in its complaint," but it did allege enough to infer that the district did enough to have made a "specific threat" to take. Things like:
- The district told CW that we want to buy your property, but it you don't sell, we're going to condemn it.
- CW also alleged that it sold in order to avoid eminent domain.
Slip op. at 13. In other words, it doesn't take the condemnor formally adopting a resolution of taking, but on the other hand, a general power to condemn isn't enough either. The answer lies somewhere in between.
This is a statutory case, so may have limited utility to those of you not in Utah. But the overall vibe seems pretty Goldilocks: not too late, but not too soon, emphasizing that these things are all about facts, facts, and facts, and the presumption should be that these cases are resolved on proof of those facts, not the law.
So maybe the jury should decide. Sounds about right to us.
Cardiff Wales, LLC v. Washington County School District, No. 20210221 (Utah May 26, 2022)
