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Condemnation or Eminent Domain?

Introduction

1. “Condemnation” is a hard word. Its more elegant legal name is eminent domain. Both mean this: property is taken from a private owner for public purposes, and just compensation must be paid. Domina Law Group pc llo handles many condemnation cases. We have tried them to juries and to the US Court of Federal Claims. Our cases have involved housing developments, commercial and industrial structures and warehouses, farms, and family homes. We understand relocation costs, and how they interact with the right to be paid for what is taken.

2. This paper focuses on eminent domain under Nebraska law only, but we know the process elsewhere and have worked in cases in Michigan, Missouri, Kansas, Arizona and in the Federal Courts. This paper is for general readership interest and is not “legal advice” for a specific case. The subject is broken into categories for commentary. These categories are considered:

2.1. What is the Scope of the Power of Condemnation Under Nebraska Law?
2.2. Who is an Eligible Condemning Authority?
2.3. What Can Be Condemned?
2.4. What is “Just Compensation”?
2.5. What is Compensable?
2.6. What is the Procedure Used?
2.7. When and How does Title Pass?
2.8. What is Inverse Condemnation?
2.9. What Costs, Fees, and Expenses must the Condemnee Bear and What can be Recovered from the Condemning Authority?

3. Each Section includes a survey of the law followed, section by section, with suggested changes, or a suggestion that no change be made.

4. Relocation and relocation assistance issues are excluded from this memorandum. They are closely, but not directly, related to the power of eminent domain.

Scope of Condemnation Authority Under Nebraska Law

5. The power to condemn is derived from US Const Amend V, which has been incorporated to apply to the States, and Neb Const Art I Sec 21.

6. The two Constitutions provide:

6.1. US Const Amend V:

…. nor shall private property be taken for public use, without just compensation.

6.2. Neb Const Art I, Sec 21:

The property of no person shall be taken or damaged for public use without just compensation therefore.

Eligible Condemning Authorities

7. Eligible condemnees are identified in at least fifteen (15) separate, uncoordinated statutes. These are:

Nebraska, and its agencies. Neb Rev Stat § 76-725
Municipalities. § 14-366; § 15-229; § 19-709.
Counties. § 23-325.
Utilities. § 70-667; § 86-302.
University of Nebraska and State Colleges. § 85-133; § 85-319.
Public Schools. § 85-319; § 79-1095.
Irrigation Districts. § 46-125.
Library Boards. § 51-210.
Airport Authorities. § 3-503; § 3-601.
Pipelines. § 57-1101.
County Fair Boards. § 2-262.
Public Irrigation Districts. § 46-125.
Railroads. § 74-308.
Natural Resources Districts. § 2-3234.
Sanitary Improvement Districts. § 31-736.

8. Neb Rev Stat § 25-2503 provides references to some uses and might expand this list with this requirement… and particularly that final clause of the statute:

Any agency which proposes to acquire private property for a public purpose shall give notice of such proposed acquisition at least forty-five days before beginning negotiations for such acquisition. The notice shall be directed to each owner of property over or across which any right or interest is to be acquired and shall be deemed properly given if delivered personally or mailed by registered or certified mail addressed to the property owner and to the address shown on the tax records in the office of the county treasurer, except that such notice shall be sufficient if given to the administrator or executor of the estate of a deceased person, the trustee of a trust estate, the guardian of the estate of a minor or incompetent person, or a conservator. The notice shall (1) describe the property proposed to be acquired and the compensation to be given for such property, (2) include a statement of the authority for the acquisition, (3) include the nature of and necessity and purpose for which the land shall be used, (4) include the title, right, or interest in the property to be acquired, (5) specify the amount of property needed for the public purpose, (6) include the reasons for selecting the proposed location or route, and (7) state that if approval of any other agency is required, the condemner shall set forth which other agency's approval shall be necessary and, when the acquisition involves a highway, power line, telephone line, or similar project, shall include a map showing the proposed route [for] by the project.
Neb Rev Stat § 25-2503.

9. Several deficiencies in the lists appear to exist. For example:

9.1. Little guidance about what may be condemned, when and for what purposes is offered.

9.2. There is no requirement that the proposed use of property to be acquired commence, or be scheduled to commence, within a defined time after acquisition.

9.3. There is no prohibition against acquisitions under threat of condemnation before a project is permitted or approved.

9.4. No coordination of purposes occurs. This means that theoretically two condemning authorities could vie for a single parcel without a process to decide which prevails over the other.

9.5. No clarity about condemnation by a greater or bigger government from a smaller one is expressed.

9.6. Section 25-2503 applies to agencies but does not appear to apply to all condemning authorities as it should. “Agency” is defined at § 25-2502 but the definition refers to “privately owned public utility[ies]”, and undefined terms that TranCanada, for example, apparently concluded did not apply to it.

What Can Be Condemned

10. The Constitutions allows condemnation of “private property”. Neb Rev Stat § 25-2502 defines “property” as:

(2) Property shall include any right or interest in real property, including but not limited to easements, but shall not include easements for public utilities located adjacent to and within ten feet of a public road right-of-way

11. Section 76-101 provides, for purposes of the Uniform Real Property Act:

As used in sections 76-101 to 76-123 and unless a different meaning appears from the context: (a) The term property means one or more interests either legal or equitable, possessory or nonpossessory, present or future, in land, or in things other than land, including choses in action, but excluding powers of appointment, powers of sale and powers of revocation, except when specifically mentioned

12. Section 76-201 defines real property:

The term real estate, as used in sections 76-201 to 76-281, shall be construed as coextensive in meaning with lands, tenements and hereditaments, and as embracing all chattels real, except leases for a term not exceeding one year.

13. Section 76-2217 states “[r]eal property means one or more defined interests, benefits, or rights inherent in the ownership of real estate.”

14. Personal property must be compensated when taken for public purposes. Phillips Petroleum Co v City of Omaha, 171 Neb 457, 106 NW2d 727 (1960). Consequential damages must be compensated. Quest v East Omaha Drainage Dist, 155 Neb 538, 52 NW2d 417 (1952).

15. The actual legal rights acquired by the condemning authority, not the use made of them, defines what must be justly compensated. Little v Loup Riv PPD, 150 Neb 864, 36 NW2d 173 (1983).

16. Definitions need to be centralized and harmonized.

Just Compensation Defined

17. “Just compensation” must be paid under the Constitutional provisions. Generally, this means “fair market value” and is measured by the difference between the value before, and the lower value after, the taking.

18. Neb Rev Stat § 76-710.01 provides more definition:

Where any condemner shall have taken or attempts to take property for public use, the damages for taking such property shall be determined according to the laws of this state irrespective of whether the condemner may be reimbursed for a part of such damage from the federal government and such damages shall include all compensable damages suffered by the condemnee including but not limited to reasonable severance damages and condemnee's abstracting expenses. In determining the amount of such severance damages, account shall be taken, together with other relevant factors, of the economic effect, if any, caused by the severance therefrom of the part taken or sought to be taken upon the whole of such property as a going concern as it will be and remain after the severance. Any decrease or increase in the fair market value of real property prior to the date of valuation caused by the public improvement for which such property is acquired, or by the likelihood that the property would be acquired for such improvement, other than due to physical deterioration within the reasonable control of the owner, shall be disregarded in determining the compensation for the property. The provisions of this section shall apply to any case now or hereafter pending.

19. Severance damages for damages to the remainder of lands resulting from diminution of fair market value must be paid. Medelman v Stanton-Pilger Drainage Dist, 155 Neb 518, 52 NW2d 328 (1952). The fair market value of the property interests taken as deployed to their highest and best use, is due. Graceland Park Cemetery Co v City of Omaha, 173 Neb 608, 114 NW2d 29 (1962).

20. The Nebraska Supreme Court has held that the definition of fair market value which must be used is “the price that someone ready to sell, but not required to do so, would be willing to accept in payment for the property, and that someone ready to buy, but not required to do so, would be willing to pay for the property.” Curry v. Lewis & Clark NRD, 267 Neb 857, 678 NW2d 95 (2004); NJI2d 13.02. Value is determined as of the date of the taking.

21. Valuation involves some specifics.

The Unit Rule – Larger Parcel:
The unit rule generally applies to the property itself, its uses and improvements, and the interests in the property. The elements of the property cannot be separately valued and then added together, but must be valued as a unit, as the sum of the parts cannot exceed the whole. However, this does not mean the entire property under the same ownership must always be appraised as a single, larger tract where there are different highest and best uses or areas which do not contribute the same amount to value. Y Motel v. State, Dept. of Roads, 193 Neb 526, 227 NW2d 869 (1973).

Lost Profit / Volume of Business:
The loss of future business profits is not compensable, as profits are not a loss of property value and are too dependent upon management skill. Lantis v. City of Omaha, 237 Neb 670, 467 NW2d 649 (1991); James Poultry v. City of Nebraska City, 135 Neb 787, 284 NW 273 (1939).

Volume of business may be used if it is shown to affect the value of the property as a consideration in the open market. Y Motel, Inc. v. State, Dept. of Roads, 193 Neb 526, 227 NW2d 869 (1973) (motel value was based upon gross room rents).

Reasonable Access:
Loss of reasonable access to any street or road abutting the property is compensable. Reasonable of access is a question of fact. Balog v. City of Lincoln, 177 Neb 826, 131 NW2d 402 (1964). Temporary loss of access is compensable. Maloley v. City of Lexington, 3 Neb App. 976, 536 NW2d 913 (1996). Medians, one-way streets, or barricades on one end of a street, are not compensable. Verzani v. State, Dept. of Roads, 188 Neb 162, 195 NW2d 762 (1972).

22. There is a body of thought that severance damages are not recoverable where only easements are taken. This should be corrected. Taking an easement, as for a power like across the middle of a lot making it non-buildable, damages the entire lot, not just the area where the easement lies.

23. In other respects, the law governing what constitutes just compensation is well developed. It has long been held that the amount of just compensation is a question for the jury, while the property interests taken, when disputed, pose a question of law for the Court.

What is Compensable

24. In the condemnation situation, there are often issues that are decided by the court, not the jury. For example, “[i]n a condemnation case issues as to the amount of property needed and the estate or interest in such property are questions of fact for the court. Likewise, issues as to what constitutes a public use and whether a taking is lawful are judicial issues for the court.” Krauter v. Lower Big Blue NRD, 199 Neb 431, 439, 259 NW2d 472, 476 (1977) (citations omitted). In that regard, the Comment to NJI 13.11 (1969) stated that the argument that the taking is not for a public purpose “is invariably raised by an action for an injunction brought before the condemnation action or immediately after it has been brought.” See, Monarch Chem. Works, Inc. v City of Omaha, 203 Neb 33, 41, 277 NW2d 423, 427 (1979)

25. What constitutes a property interest under the federal or Nebraska constitution is also a question for the court—and such interests are not defined by the United States Constitution. Property interests are not created and defined by the federal Constitution, but rather by existing rules or understandings that stem from an independent source such as state law.

26. See also comments in preceding section concerning the definition of just compensation.

27. Changes in what is Compensable upon exercise of the power of eminent domain are in order in these areas:

27.1. Easements: As noted above an easement can devastate the value of an entire parcel. Compensation for all damage is not generally thought to be available.

27.2. Value added by past public works should be a part of the condemnation compensation analysis, but there should be no adjustment in the condemning authorities favor for perceived benefits from the proposed project as they come about only after the taking that requires compensation.

The Condemnation Procedure

28. The general procedure for all condemnations is established by the legislature at Neb Rev Stat § 76-701 et seq. Before this procedure begins, for most projects informational hearing and notice to affected property owners is required for some, but not all, acquisitions of private property for public purposes.

29. For many public projects, there must be an informational public hearing, following notice to all affected landowners. Neb Rev Stat § 25-2504. At the hearing, the condemner is required to explain the need for the project and why the route or location was selected, and must receive questions and objections from the public. The uniform procedure requires 45 days notice to the owner(s) of any interest to be condemned, prior to commencement of negotiations. The notice informs the owner of the project, the selection of the location, the need to acquire the property, the authority for the acquisition, the description of the property, the interest to be acquired, and the agency approvals which are required. § 25-2503.

30. The condemner must negotiate in good faith with the owner of the interest to be condemned. State v. Mahlock, 174 Neb 190, 116 NW2d 305 (1962). The requirements of good faith negotiations include: 1)A definite description of the property to be acquired; 2) An offer of a specific dollar amount, based upon valid valuation information; 3) An attempt to obtain the owner’s acceptance of the offer; and 4) A document for the owner to sign to accept the offer.

31. Either side may appeal within 30 days after the return of appraisers. The appeal is to the district court of the county in which the condemner’s petition was filed. Neb Rev Stat § 76-715. A notice of appeal, request for transcript, and appeal bond, with notice to all interested parties, is filed in county court. A petition on appeal is then filed in district court. § 76-717.

32. The appeal is heard as a civil action at law, and the rules of procedure and discovery apply. Matters of law, including challenges to good faith negotiations, public need or public use, are determined by the court, and the amount of compensation to the condemnee is determined by a twelve member jury..

33. Post trial appeals are to the Nebraska Court of Appeals as are other civil actions.

34. Challenges to the condemnation, such as lack of statutory authority, failure of condemner to negotiate in good faith, lack of public use or public need, or failure to provide sufficient notice, are raised by pleadings in district court on appeal. Chimney Rock Irrigation District v. Fawcus Springs Irrigation District 218 Neb 777, 359 NW2d 100 (1984). It is the condemner’s burden to prove these prerequisites. Dawson v. Papio NRD, 210 Neb 100, 313 NW2d 242 (1981). Such challenges are heard and determined by the district judge prior to empaneling a jury for determination of compensation. Suhr v. City of Seward, 201 Neb 51, 266 NW2d 190 (1978); Engelhaupt v. Village of Butte, 248 Neb 827, 539 NW2d 430 (1995).

35. In some situations, an action in district court for injunction may be proper to prevent the county court from proceeding. Father Flanagan’s Boys’ Home v. Millard School District, 196 Neb 299, 242 NW2d 637 (1976); City of Lincoln v. Cather & Sons Construction, Inc. 206 Neb 10, 290 NW2d 798 (1980).

36. Deficiencies in these procedures do exist. They are perceived as:

36.1. Absence of a penalty for wrongful intimidation of property owners under the threat of condemnation. “Impersonation” of condemnation authority has devastating effects as great as impersonating a law enforcement officer.

36.2. Abuse of property owners by threatening condemnation before full, final approval of a public works project.

36.3. No clear ability to submit damages claims due to adverse effects of delays in condemnation after approval of public works projects.

36.4. No clear way to present evidence of property owner actions, in bad faith, to try to escalate damages artificially or unreasonably, as in construction planning, or platting efforts that are responsive to lawful deliberation about a public works project, where property owner actions are in bad faith.

Passage of Title

37. The condemning authority is required to deposit the amount of board of appraisers’ award within 60 days. It is then entitled to take possession. Neb Rev Stat § 76-711. However, the condemner may not dispossess the condemnee until the condemner is ready to devote the property to a public use, and the condemner does not obtain title or other interest condemned until the property is put to the public use for which taken. Neb Rev Stat § 76-714. The date of filing is the date of taking and the date of valuation. Chaloupka v. State, Dept. of Roads, 176 Neb 746, 127 NW2d 291 (1964).

38. No problems with this process are perceived.

Inverse Condemnation

39. When a political subdivision with the power of eminent domain damages property for a public use, the property owner may seek damages in an action for tort, in a statutory action for inverse condemnation, or in a constitutional action for inverse condemnation Dishman v. Nebraska Pub. Power Dist., 240 Neb 452, 454, 482 NW2d 580, 582 (1992).

40. If the condemner takes or damages property without instituting condemnation proceedings, the condemnee may file a condemnation petition with the county judge. The proceedings are the same as if the condemner had filed. Neb Rev Stat § 76-705. The statutory procedure is not exclusive. The property owner may elect to file suit in district court for damages, as the constitutional protection of property is self executing. Kula v. Prososki, 219 Neb 626, 365 NW2d 441 (1985).

41. If filed in district court, a claim for damages may be joined with a claim for regulatory taking or claim for relief under 42 U.S.C. § 1983, or with a request to enjoin a nuisance. Whitehead v. City of Lincoln, 245 Neb 680, 515 NW2d 401 (1994); Dishman v. NPPD, 240 Neb 452, 482 NW2d 580 (1992).

42. The date of taking in an inverse proceeding is not the date the petition is filed, but is the date of actual appropriation for public use. Rose v. City of Lincoln, 234 Neb 67, 449 NW2d 522 (1989).

43. A 10 year statute of limitations applies, from the date of appropriation. The rules of adverse possession apply in determining the running of the statute of limitations. Neb Rev Stat § 25-202; Krambeck v. City of Gretna, 198 Neb 608, 254 NW2d 691 (1977); Kimco v. Lower Platte South NRD, 232 Neb 289, 440 NW2d 456 (1989).

44. No deficiencies in the inverse condemnation processes are perceived.

Costs, Fees & Expenses

45. The district court may award attorney fees and fees of 2 expert witnesses for the appeal to district court, if:

45.1. Condemnee appeals and increases the award 15% or more above the award of the county court board of appraisers, or

45.2. Condemner appeals and does not decrease the award to less than 85% of the award of the board of appraisers, or

45.3. Both condemner and condemnee appeal and the award is increased in any amount. Neb Rev Stat § 76-720.

45.4. “May” in the statute means “shall” in this statue. The Court decides the amount in its discretion . Prucka v. Papio NRD, 206 Neb 234, 292 NW2d 293 (1980). Fees prior to appeal to district court are not included. In re SID no. 384 of Douglas County, 259 Neb 351, 609 NW2d 679 (2000).

46. The costs and fees procedures are working and no suggestions for their adjustment or revision are made.


David A Domina,
Domina Law Group pc llo

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