Update: someone blinked - between the time we drafted this post and the time is actually posted, we understand that this case settled. But the "spite takings" issue remains of interest, so we're leaving this post up.
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You already know about the prior public use issue, often arising in government-to-government takings. The Fifth Amendment requires a public use and compensation for the taking of "private property," so does it apply where the condemnor is seeking to take property owned not by a private owner, but by the public or by the government?
The Kentucky Supreme Court has agreed to review a case with an interesting twist on that scenario. In City of Cold Spring v. Campbell County Bd. of Education, No. 2021-CA-001470 (Dec. 16, 2022), a county board of education sought to exercise eminent domain to take property owned by a city. The twist is that the city apparently purchased the land in question in order to prevent the board from purchasing the property itself.
Here's the story. The board says it needs a new school. It was negotiating with the Disabled American Veterans to buy its property, when "DAV informed the Board of Education that it would not sell the property to the Board." Slip op. at 2. The Board thought that DAV wanted to sell to a private developer, and was "convinced that the City intended to buy the disputed property in order to thwart its [the Board's] condemnation of the property and that the City would transfer it to Neyer for private development." Id.
It turned out that DAV and the private developer (Neyer) "had already executed a purchase agreement[.]" Id. Soon thereafter, the board approved the taking of the property by eminent domain. But not long after that, Neyer assigned its purchase agreement to the city. The consideration for the assignment was that the city agreed to grant Neyer the exclusive right to develop the property and to "own the private investment made to that end" (meaning that the city agreed that Neyer would control development and use of the property in its "sole and absolute discretion." Slip op. at 4.
The same day as the assignment, the board commenced an eminent domain lawsuit against DAV, which remained the record owner of the property. But the city intervened, asserting an equitable interest in the property. The DAV and the city closed on the city's purchase, and "the City immediately filed a motion to dismiss, arguing that the Board of Education could not condemn public property." Slip op. at 6.
The trial court concluded that the city was not using the property for a public purpose, and it was therefore subject to taking by the board.
The Court of Appeals reversed, agreeing with the city that the board's authority delegated by the State is limited to taking only private property, and this is public property:
The provisions of KRS 162.030 do not expressly, or by necessary implication, expand the boundaries of the power of eminent domain delegated to the Board of Education to encompass the taking of public property.
Slip op. at 13.
The court rejected the board's argument that the city's ownership is "a ruse," but the court dismissed that as "peripheral or speculative." Slip op. at 14. All that matters is that the city undisputedly held an equitable interest on the date of the taking. "Public property is not converted to private property - even where the municipality owns it in a proprietary capacity. The nature of the ownership of the disputed property - not its use - controls this case." Id.
Next stop, the Kentucky Supreme Court. Stay tuned.
City of Cold Spring v. Campbell County Bd. of Education, No. 2021-CA-001470 (Ky. Ct. App. Dec. 16, 2022)