Lead Opinion
We granted leave to appeal in this case to consider whether environmental-contamination conditions are factors to be considered when a court is determining fair market value to establish just compensation in a condemnation action under the Uniform Condemnation Procedures Act (ucpa), MCL 213.51 et seq. We hold that they are to be considered. Accordingly, we reverse the judgment of the Court of Appeals in this regard and remand this matter to the trial court for further proceedings consistent with this opinion.
Defendant Extrusions Division, Inc. (Extrusions), operates a plastics extruding business and owned an eight-acre parcel of vacant land adjacent to its operations complex in Grand Rapids. In 1992, Extrusions applied to the city of Grand Rapids for a permit to build a warehouse on the eight acres. The application was denied, and Extrusions was informed that the Silver Creek Drain District (Drain District), in 1991, had identified the parcel as its desired site for a storm-water retention pond. Extrusions claimed that denial of a permit, together with the failure of the Drain District to commence a condemnation action, amounted to an unconstitutional taking of private property without just compensation. Accordingly, in 1992, Extrusions initiatеd an inverse-condemnation action against the city and the Kent County Drain Commissioner.
On March 7, 1994, the Drain District, pursuant to the ucpa, tendered a good-faith “just compensation” offer
On May 26, 1994, the Drain District executed, as required
In June, the $211,300 good-faith “just compensation” amount was placed in escrow. The Drain District then filed its condemnation action and again reserved the right to bring a federal or state cost-recovery action.
On February 20, 1995, the parties stipulated, and the trial court ordered, that the parcel be conveyed to the Drain District and that the Drain District pay Extrusions $211,300 for the taking. Following this, the Drain District, notwithstanding the stipulation and order, sought an order that would hold the funds in escrow as security for the remediation costs as allowed under the UCPA. Extrusions, in response, citing part 201 of the Natural Resources and Environmental Protection Act (nrepa), MCL 324.20101 et seq., claimed that it was not the cause of the contamination as identified in the amendments and, thus, was not liable for remediation costs. Accordingly, it argued, on the authority of MCL 213.55(5) and MCL 213.58(4), that the funds should be released. On November 3, 1995, by stipulation, the court ordered the escrowed sums, as well as interest, paid to Extrusions.
In a 1997 bench trial concerning valuation, the court found that the value of the eight-acre parcel, if environmental concerns were ignored, was $278,800. The court then determined that the parcel “was an environmentally contaminated site, with respect to which a reasonably prudent purchaser would have required, at a minimum, a formal Type-C Closure from the [Department of Natural Resources] as a condition precedent to closing.”
Because the court found that the reasonable cost of the Type-C closure was $237,768, it concluded that the net fair market value was $41,032. The court entered an order to that effect and reiterated in the order that the once-escrowed $211,300 was awarded to Extrusions.
On appeal, the Court of Appeals reversed in part and remanded the case to the trial court.
We granted leave to appeal to consider the Drain District’s claim that a court may consider a parcel’s environmental condition as a factor affecting fair market value in a determination of just compensation under the UCPA. We conclude that a court may consider such conditions in establishing fair market value and, thus, reverse the judgment of the Court of Appeals on this issue only.
n. standard of review
This case presents an issue of statutory interpretation of ucpa provisions. Statutory interpretation is a question of
III. analysis
“Eminent domain” or “condemnation” is the power of a government to take private property. The power arises from the sovereign power of the state and is of ancient provenance.
In Michigan, in furtherance of this constitutional power, statutes have regulated the exercise and procedure of condemnation. In 1980, the Legislature unified all condemnation statutes in the UCPA. Under the act, echoing the Constitution, it was stated at MCL 213.55(1) that a court was to “. . . ascertain and determine just compensation to be made for the acquisition of the [condemned] property.”
As is evident, the “just compensation” requirement in the statute mirrors the identical requirement in our Constitution. This reiteration of the constitutional language is significant becausе to the degree the Constitution has been construed to outline the nature of “just compensation,” the statute must be similarly construed because no act of the Legislature can take away what the Constitution has given. Sharp v City of Lansing,
Thus, we must determine the meaning of the phrase “just compensation” in our Constitution. As we recently outlined in Michigan Coalition of State Employee Unions v Civil Service Comm,
Throughout our history and clearly by the 1960s, it was uncontroversial that a determination of “just compensation” required the consideration of all the multiplicity of factors that go into making up value. In the nineteenth century, while summarizing just compensation and its meaning in American constitutional law, Michigan Supreme Court Justice Thomas M. Cooley, in his treatise The General Principles of Constitutional Law in the United States of America, said:
The rule by which compensation shall be measured is not the same in all cases, but is largely affected by the circumstances. If what is taken is the whole of what the owner may have lying together, it is clear that he is entitled to its value, judged by such standards as the markets and the opinions of witnesses can afford, and that this, except in extraordinary cases, must be the full measure of his injury.[11 ]
The United States Supreme Court has had a similar and unvarying view of this matter, holding in Searl v Lake Co School Dist No 2,
Michigan’s understanding of just compensation has been identical in all relevant particulars.
That the legislators who amended the UCPA in 1993 provided the procedures and means for securing remediation costs and dovetailed those with the just-compensation determination indicates no intent to abrogate the meaning of “just compensation” established in our jurisprudence. Indeed, to attribute such an intent, i.e., the intent to diminish a constitutional standard by statute, is to place the legislators in the posture of acting unconstitutionally. This we avoid unless no other construction is possible
Moreover, we agree with the argument made in the brief amicus curiae of the Attornеy General, on behalf of the Michigan Department of Transportation, that the Court of Appeals was led to error by the commingling of two different concepts: (1) accounting for contamination in a determination of fair market value and (2) making an assessment of liability and damages for the cost of remediation of environmental contamination.
As the Attorney General pointed out, a condemnation action is an in rem proceeding governed by the ucpa. It is instituted to allow a state agency to take title to privately owned property; thus, the agency and the owner are partiеs. An essential part of the proceeding is the determination of the fair market value of the property. Because this proceeding is not designed to assign liability for environmental contamination, the value of the property is unaffected by whether its owner would be liable for the contaminated state of the property. The estimated costs of remediation are relevant only as they pertain to the fair market value of the property
In contrast, a cost-recovery action under Michigan’s environmental-cleanup laws is an in personam proceeding specifically designed to assign liability for remediation costs. Those costs are typically sought under cercla or the nrepa and the fair market value of property is not relevant in such proceedings. Further, in a cost-recovery action, in addition to the agency and the owner, any other person or entity, such as prior owners, lessees, adjacent property owners, or other third parties who may have contributed to the contamination, may be parties. Finally, that the damages awarded in a cost-recovery action are different, sometimes dramatically so, from the amount by which contamination reduced fair market value,
The trial court, we believe, understood this matter properly and merely considered contamination as one factor, albeit a significant one, in establishing a fair market value. It was the trial judgе’s conclusion that any purchaser would have insisted on a minimal cleanup (the Type-C closure) that would have made the property useable. The cost of this Type-C closure is far different from the amount remediation would have cost.
We reverse that portion of the judgment of the Court of Appeals holding that the
Notes
“Before initiating negotiations for the purchase of property, the agency shall establish an amount that it believes to be just compensation for the property and promрtly shall submit to the owner a good faith written offer to acquire the property for the full amount so established . . . .” MCL 213.55(1).
Cost-recovery proceedings may be brought under the federal Comprehensive Environmental Response Compensation and Liability Act (cercla), 42 USC 9601 et seq., or under part 201 of the Natural Resources and Environmental Protection Act (nrepa), MCL 324.20101 el seq.
As discussed above, § 5 of the amended ucpa (MCL 213.55) requires a condemning agency to deposit its estimated just-compensation amount in escrow when it files the condemnation complaint; this escrowed amount is to pay the condemnee upon the order of the court. MCL 213.55(5); MCL 213.58(4). However, in the 1993 amendments of the ucpa, in order to facilitate the collection of remediation costs of environmental contamination, the Legislature allowed the agency, when it submits a “good faith” written offer, to reserve the right to seek contamination costs from the condemnee. If this is done, the escrowed funds may remain in escrow “as security for remediation costs of environmental contamination . . . .” MCL 213.58(2).
However, even if the governmental agency reserves the cost-recovery option against a condemnee, under subsection 6a (MCL 213.56a) a court can order an agency to waive its right to pursue a cost-recovery action under certain circumstances. The predicate for seeking this reversal of the agency’s election is that, under part 201 of the nrepa, the condemnee has no liability because it did not cause the contamination. MCL 213.58(3). If the court orders the waiver of the rights, the agency is required to submit a revised good-faith offer. Subsection 6a(3) also allows the parties to a condemnation action to stipulate the reversal of the reservation.
Id. at 563.
See Magna Carta, Grant 39 (1215): “No freeman shall be . . . disseised . . . unless by the lawful judgment of his peers, or by the law of the land.”
See Const 1835, art 1, § 19; Const 1850, art 18, § 2; Const 1908, art 13, § 1.
Const 1963, art 10, § 2.
It is, perhaps, useful to illustrate the correctness of the point, inasmuch as the partial concurrence and dissent of Justice Weaver asserts the contrary. In establishing value for residential properties, for example, can sentimental factors such as long-time ownership or historic importance be considered? Or in the case of commercial properties, can business interruption be considered in establishing value and, if so, how? Should an income-capitalization approach be considered in a business valuation, or should some other approach, such as cost-less-depreciation or sales of comparable properties be used to assist in fixing value? As is obvious, one cannot merely review the dictionary definitions of “just” and “compensation” and combine them to produce a coherent meaning for this phrase. Rather, as a result of longstanding legal practice and custom, as revealed through countless judicial opinions over the centuries, this phrase means something more than the sum of its discrete parts. That juries would make decisions on these issues, after being instructed on the law, is not contradictory to the point we raise. That is always the process whether the statute at issue is susceptible to plain-meaning analysis or is interpreted using some other method of statutory explication.
Cooley, Constitutional Law (Boston; Little, Brown and Co, 1880), p 341.
This continues to be the universal rule. As it was stated more recently, just compensation “has been held to be equivalent to the full value of the property. All elements of value inherent in the property merit consideration in the valuation process.” 4 Nichols, Eminent Domain (rev 3d), ch 12, § 12.01, pp 12-2 to 12-3.
The effect on market value of the condemnation proсeeding itself may not be considered as an element of value. MCL 213.70(1); In re Urban Renewal, Elmwood Park Project,
We reiterated the general rule recently in Dep’t of Transportation v VanElslander,
See Gora v Ferndale,
The actual cost of remediation in this case was approximately $2.3 million, while the loss of value caused by the contamination was found by the trial court to be $237,768.
See n 16.
Concurrence Opinion
(concurring in part and dissenting in part). I concur in the result only of the majority. I write separately to express my disagreement with the majority’s construction of the constitutional concept, “just compensation.”
comрensation” is a “technical legal term or phrase of art” that cannot be grasped by those not “sophisticated in the law.” Ante at 375. This incorrect suggestion leads the majority to conclude that the meaning of “just compensation” must be restricted to the “consensus understanding in 1963, by those skilled in this area of the law, of the meaning of ‘just compensation.’ ” Ante at 376.
While it may be that the understanding of “just compensation” of those sophisticated in the law of condemnation in 1963 may not differ significantly from that of the common person, either past or present, this Court should not engage in a method of constitutional construction that unnecessarily sidesteps the long-established primary rule of constitutional construction. The primary rule
“A constitution is made for the people and by the people. The interpretation that should be given it is that which reasonable minds, the great mass of thepeople themselves, would give it. ‘. . . the intent to be arrived at is that of the people, and it is not to be supposed that they have looked for any dark or abstruse meaning in the words employed, but rathеr that they have accepted them in the sense most obvious to the common understanding . . . ” [Traverse City School Dist v Attorney General, 384 Mich 390 , 405;185 NW2d 9 (1971).]
The Supreme Court has reiterated this primary rule of constitutional construction: “Each provision of a State Constitution is the direct word of the people of the State, not that of the scriveners thereof.” Lockwood v Comm’r of Revenue,
Thus, the issue in this case is whether the term “just compensation” can be said to possess a “plain meaning.” Contrary to the majority’s suggestion, the meaning of “just compensation” is neither difficult to discern nor does it require “sophistication in the law” to be grasped. Ante at 375, generally.
“Just compensation” has long been readily and reasonably understood to be that amount of money that puts the property owner whose property is taken in as good, but not better, a financial position after the
taking as the property owner enjoyed before the taking.
In addition, I write to express concern with the majority’s adoption of a one-size-fits-all rule in the context of just compensation. The majority asserts that contamination costs must be considered in just-compensation determinations or the court would “place the legislators in the posture of acting unconstitutionally.” Ante at 379.
Before initiating negotiations for the purchase of property, the agency shall estаblish an amount that it believes to be just compensation for the property and shall submit to the owner a good faith written offer to acquire the property for the full amount so established. . . . The good faith offer shall state whether the agency reserves or waives its rights to bring federal or state cost recovery actions against the present owner of the property arising out of a release of hazardous substances at the property and the agency’s appraisal of just compensation for the property shall reflect such reservation or waiver. The amount shall not be less than the agency’s appraisal of just compensation for the property. . . . [MCL 213.55(1).]
The statute’s express consideration of what compensation is just under the constitution does not necessarily mean that the Legislature intended, or was constitutionally obligated to require, that a good-faith offer be reduced by the cost of remediation in order to constitute “just compensation.” Though market value typically serves as a measure of just compensation, it is not the sole criterion. As recognized by the United States Supreme Court, where the market value is “too difficult to find” or the “payment of market value wоuld result in ‘manifest injustice’ to the owner or the public,” the market value should not be the measure of just compensation. Kirby Forest Industries, Inc v United States,
Because the effect of contamination on the value of a property is difficult to determine and is susceptible to different remediation and calculation approaches, it is perhaps more appropriate to leave this fact-laden and case-specific determination to the judge or jury rather than the majority’s one-size-fits-all formula or artificial rule. A determination by a judge or jury is consistent with this Court’s prior holdings that just-compensation awards in condemnation proceedings should be decided on a case by case basis. “[T]he determination of value in condemnation proceedings is not a matter of formula or artificial rules but of sound judgment and discretion based upon a consideration of all relevant
Article 10, § 2 of the Michigan Constitution provides:
Private property shall not be taken for public use without just compensation therefor being first made or secured in a manner prescribed by law. Compensation shall be determined in proceedings in a court of record.
This case was brought under the Uniform Condemnation Procedures Act, MCL 213.51 et seq., which prescribes the manner in which just compensation is “first mаde or secured” pursuant to Const 1963, art 10, § 2.
If the plain meaning is unascertainable, secondarily, “the circumstances surrounding the adoption of the constitutional provision and the purpose sought to be accomplished may be considered .... Finally, whenever possible, an interpretation that does not create constitutional invalidity is preferred to one that does.” State Highway Comm v Vanderkloot,
In certain circumstances, it is appropriate and necessary to consider the meaning of constitutional terms that are established in the law. See, e.g., Michigan United Conservation Clubs v Secretary of State (After Remand),
Wayne Co v Britton Trust,
Brown v Legal Foundation of Washington,
Under the current constitutional and statutory framework, a just-compensation award is determined by a jury or the court. Const 1963, art 10, § 2 provides in pertinent part that “[cjompensation shall be determined in proceedings in a court of recоrd.” MCL 213.63 provides in pertinent part, “[t]he jury or the court shall award in its verdict just compensation for each parcel.”
The majority notes that “the primary connection between a condemnation proceeding and a cost-recovery action is the escrow that may be created during the condemnation proceeding to provide security for the payment of the potential cost-recovery award.” Ante at 381. However, the existence of the escrow mechanism does not answer whether the Legislature intended that the cost of remediation should be considered in condemnаtion proceedings.
Concurrence Opinion
(concurring).
Although the majority arrives at the correct result, it unnecessarily reaches a constitutional issue. We have stated previously, “there exists a general presumption by this Court that we will not reach constitutional issues that are not necessary to resolve a case.” Booth Newspapers, Inc v Univ of Michigan Bd of Regents,
Additionally, I write separately to note that I am concerned about the majority’s focus on original intent. As I noted in my concurrence in WPW Acquisition Co v City of Troy,
