Legislative Reform.  Is More Needed?  Is eminent domain an issue that should grab the attention of legislators and be the subject of more serious review and reform?  That is a question the Ombudsman has presented in prior newsletters such as when he suggested that small businesses be paid compensation for loss of goodwill when displaced from their established locations by eminent domain or that public agencies, not property owners, bear the burden of persuading the judge that a redevelopment or economic development project that utilizes eminent domain is in fact for a public use and not merely use of public funds and governmental power for private gain.

The Quarry Case.  Now a Superior Court judge in a long and carefully written opinion has rendered a severe judgment against the Department of Transportation (DOT) which raises the question whether the legislature should revise the eminent domain statutes as they apply to DOT.  Judge Barbara J. Sheedy wrote that DOT had “conducted itself throughout [the period between first notice of taking and the actual taking] as unprofessional, lacking in diligence, and less than scrupulous” and further stated the procedures followed “disserved not only this plaintiff” [Rock Acquisition Limited Partnership, the owner of a stone quarry in Brookfield] but also “the residents of this state.” 

In particular, Judge Sheedy found that neither of two DOT appraisers was credible and one, Kenneth Jones dba Global Evaluations, in the judge’s words, “his testimony made patently clear his willingness to formulate opinions based upon the master he served-here, the DOT.”  She characterized his participation in the preparation of DOT’s case to “solidly identify oneself as a member of the defendant’s [DOT] cheering section.  It is to venture far beyond the USPAP’s [Uniform Standards of Professional Appraisal Practice and Code of Ethics] prohibition of advocating for any party or issue other than one’s own appraisal practices.  Some of the functions for which Jones was paid (at “expert rates”) is work customarily done by a lawyer or paralegal; so inappropriate was his willing assumption of those tasks as to discredit his testimony and to seriously question the judgment and fair play of the party that retained him.”

Mr. Jones’ timesheet for work performed for the period 10/17/07 through 7/31/08 showed 743.5 hours at the rate of $200 for a total of $148,700.  That would have meant that Mr. Jones worked exclusively for DOT nearly nineteen weeks, based on a forty hour work week, in the eight and one-half month period. 

The judge found the estimates of value by Jones at $2,365,000 and by the other DOT appraiser of $4,100,000 irreconcilable with “two earlier obtained outside fee appraisals ranging from $14,600,000 to $18,250,000.”   More baffling said the judge was DOT’s own estimate of value on June 14, 2000 of $25,000,000 to $30,000,000 and its payment four years later at the time of the actual condemnation of $4,100,000 for the entirety of the property.

The judge found the testimony of one of the plaintiff’s appraisers, Ned Heberger, “believable.”  Mr. Heberger appraised the 108 acres including approximately 15.16 million tons of stone and other minerals in the ground at $29,100,000.  Judge Sheedy determined the amount of just compensation for the taking to be $22,900,000 after backing out of Heberger’s appraisal $6,200,000 of profits to be earned from tipping fees he called a back end added value that would be paid by contractors who deposit clean fill into the mined areas.  Judge Sheedy called these amounts “speculative.”  With interest set at the highest rate permitted under Section 37-3c, 10%, the total cost of the acquisition exceeds $30,000,000.

In the Ombudsman’s March 2009 newsletter, after discussing several cases in which both DOT and two cities had paid less than 50% of value to property owners at the time of the taking, he wrote, but for the court’s review and the decisions to raise the amount of compensation, in each case by more than 100%, the property owner would have been denied just compensation.  The Ombudsman observed, “The prevailing wisdom of public agencies seems to be to “lowball” the amounts offered at the time the property is taken.”  The payment of interest and owner’s costs as imposed by the court against DOT in the quarry case exposes the fallacy of underpaying the owner at the time of the taking.  Eminent domain is an equitable proceeding.  A judge has great discretion in setting the amount of compensation and under Sec. 37-3c to award interest up to 10% per annum on any deficiency.

The quarry case demonstrates the pitfalls of failing to do what is right in the first instance.    The public agency is burdening a productive parcel of private land with a public responsibility and use when it constructs a new highway.   It owes the owner a fair and unbiased method for determining value that does not violate his or her rights under the fifth amendment of the U.S. Constitution and Sec. 11 of Connecticut’s constitution. 

Nor should the agency’s procedures result in unreasonable delay in taking a property after notice of intent to acquire has been given.  Delay puts the owner in a disadvantageous position and affects value negatively.  Judge Sheedy called the seven years that passed between DOT’s first notice to the owner and the taking “clearly unreasonable.” DOT’s other appraiser described that period of time as the “cloud of condemnation.”

When a public agency hires two independent appraisers as was done in the quarry case and they determine the value of the property is more than the amount agency employees want to pay, the agency has a good faith obligation in negotiation to disclose the existence of those appraisals.  The agency’s obligation is similar to that of a fiduciary.  It has an obligation to disclose what is in its possession that relates to value.  It may not withhold such information and wait to see whether the owner discovers the existence of such appraisals. 

If the value of the property is greater than previously thought, then is it not reasonable to determine if there are alternatives that allow the project to continue without using such expensive property?  If no alternative exists or those that do are not better or less expensive, then the higher than anticipated price will have to be paid.  Hiring more appraisers until one finally sets a value low enough to satisfy the agency’s own estimates of the cost of purchasing the land is not the right way to go.  Nor is it fair to the owner of the property or upholding the constitutional principle of paying just compensation.  In the quarry case the judge stated that Jones’ credentials and impartiality were questionable or worse and as a result his testimony worthless.  She also questioned “the judgment and fair play of the party [DOT] that retained him.”

If intent to deceive and/or unlawfully deny a person his or her constitutional rights, including the right to just compensation, can be proved, 42 U.S.C. §1983 provides a potential remedy.  This is the situation in which town officials of Branford now find themselves, waiting for the Connecticut Supreme Court to rule on their appeal of a jury verdict in the amount of 12.7 million dollars in favor of an owner and owner’s optionee who claimed the taking of their property (77acres) by eminent domain violated their constitutional rights.  42 U.S.C. §1988 provides for payment of plaintiff’s attorney’s fees.  No matter the outcome in the Supreme Court, Branford will have paid legal fees of more than one million dollars to take land by eminent domain and defend the town’s actions.

In 2008 the Ombudsman for Property Rights adopted a regulation Sec. 48-52-1 through and including Sec. 48-52-6 in which obligations of the parties in mediation are set forth.  One such obligation is that each party will negotiate in good faith with the other party.  Another is that the parties are required to submit to the Ombudsman and to each other copies of all appraisals produced by or for the public agency or property owner pertaining to the property.  Had this matter been submitted to mediation prior to trial, disclosures of all appraisals and other statements of value would have been exchanged by and between the parties.  Had the parties agreed to stipulate judgment to a settled upon amount of compensation, no interest would have been paid.  DOT will pay interest in accordance with Judge Sheedy’s judgment of approximately 9 million dollars.  

Two years ago the legislature addressed the issue of appraising properties taken by municipalities pursuant to Chapters 130, 132 and 588l in Sec. 8 of Public Act No. 07-141 by requiring two independent appraisals, each appraisal to be conducted by a state certified real estate appraiser without consultation with the appraiser conducting the other appraisal.  Both appraisals are required to be prepared in accordance with generally accepted standards of professional appraisal practice as described in the Uniform Standards of Professional Appraisal Practice.  Additionally, each appraiser is required to provide a copy of the appraisal to the agency and the property owner.  Compensation paid the owner at the time of the taking shall be not less than the average of the amounts determined.

The Ombudsman recommends: 1. that Sec. 13a-73 and other statutes authorizing the use of eminent domain by DOT be amended to add the provisions of Sec. 8 of P.A. No. 07-141 as set forth above and to add an additional provision that requires good faith negotiation by DOT, and, 2. that Sec.13a-76a be amended to provide that “unreasonable delay” shall be measured from the date DOT first notifies the owner of its intent to acquire property and not from the date DOT files on the land records a map under provisions of Sec. 13a-57, Layout of State Highway.

The decision in the quarry case reminds us that eminent domain, an inherent power of state sovereignty, can not be abused without all of our constitutional liberties being negatively affected.  Judge Sheedy scrutinized carefully the facts and never lost sight of what was important, adherence to the constitutional principles of due process of law and payment of just compensation to the private property owner.  Without the latter she knew there would be no justice.