CHAPTER 15 CONDEMNATION LITIGATION - THE SWORD AND THE SHIELD

• Jurisdiction: United States

Surface Use for Mineral Development in the New West
(Feb 2008)
CHAPTER 15
CONDEMNATION LITIGATION - THE SWORD AND THE SHIELD
Edward J. Blieszner, Esq.
Icenogle, Norton, Smith, Blieszner & Gilida, P.C.
Denver, Colorado

I. INTRODUCTION

The use of eminent domain by state and local governments has received criticism in recent years. Following the United States Supreme Court's decision in Kelo v. City of New London¹ some state legislatures have placed limitations on, or completely prohibited, the use of eminent domain where the sole purpose is to assist in economic development. Eminent domain nevertheless remains a very viable tool which can be used to serve a variety of public interests.

This paper discusses some of the principles governing the use of eminent domain and the general procedures that a condemning agency normally must follow. It outlines some of the ways in which a mineral lessee may consider "wielding the sword" of eminent domain to assist in mineral development and presents some considerations of which mineral developers should be aware should their interests become the object of eminent domain proceedings and it becomes necessary to "raise the shield" against eminent domain powers.

II. GENERAL CONSIDERATIONS

The power of eminent domain is an inherent attribute of the sovereign. City of Thornton v. Farmers Reservoir & Irrigation Company, 194 Colo. 526, 575 P.2d 382 (1978). The exercise of this right has been constrained by our federal and state constitutions. The Fifth Amendment to the Constitution of the United States provides that private property shall not be taken for public use without just compensation. This provision is applicable to the states through the Fourteenth Amendment. Chicago, B. & Q. R. Co. v. Chicago, 166 U.S. 226, 239, 17 S.Ct. 581, 41 L.Ed. 979 (1887).

Article II, Section 15 of the Colorado Constitution gives expanded protection and provides that public property may not be taken or damaged for public or private use without just compensation(emphasis added). The state constitutions of Alaska,² Arizona,³ California⁴

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Nebraska,⁵ New Mexico,⁶ North Dakota,⁷ Montana,⁸ South Dakota,⁹ Utah¹⁰ and Wyoming¹¹ have nearly identical provisions providing that private property shall not be taken or damaged without payment of just compensation. The constitutions of Idaho¹² and Nevada¹³ are similar to the Fifth Amendment of the United States Constitution in that they do not specifically mention damage of property as being compensable. The Texas state constitution provides: "No person's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made..."¹⁴

A. DAMAGE TO PROPERTY

The "damage" language of these constitutions generally may be invoked when some governmental activity on land adjacent to the claimant has caused certain damage to the property. Animas Valley Sand and Gravel, Inc. v. La Plata County, 38 P.3d 59 (2001). This clause applies when there is no physical taking of any of the property. The damage, however, must be something that is unique to that property and not something that is shared with or enjoyed by the public in general. Public Service Co. of Colorado v. Van Wyk, 27 P.3d 377 (Colo. 2001).

B. REGULATORY TAKINGS

A taking for which compensation may be payable may also occur where a governmental entity enacts a regulation which does not substantially advance legitimate state interests or if it prevents any economically viable use of the property. Trailer Haven MHP, LLC v. City of Aurora, 81 P.3d 1132 (Colo. App. 2003). The mere fact that a regulation may reduce the value of certain property, however, does not necessarily mean that there has been a compensable taking. U.S. v. Hill, 896 F.Supp. 1057 (D.Colo. 1995). A property owner also may not have suffered an unconstitutional taking for which compensation is due if deprived of the "highest and best use" of his or her property if other elements of a regulatory taking have not occurred. Animas Valley Sand and Gravel, Inc. v. La Plata County, 38 P.3d 59 (Colo. 2001).

If land has no economically viable use as a result of the regulation, a taking will be deemed to have occurred. Trailer Haven MHP, LLC, 81 P.3d at 1137. Even if the property has some economically viable use as the result of the regulation, however, a regulatory taking may have occurred if, under a fact specific inquiry, the landowner can show the regulation essentially "goes too far." Animas Valley Sand and Gravel, Inc. 38 P.3d at 65. Under this test the court examines the regulation's economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectation, and the character of the government

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action. Id., quoting Palazzolo v. Rhode Island, 533 U.S. 606, 121 S. Ct 2448, 150 L.Ed.2d 592 (2001).

C. PUBLIC USE

Generally, private property may only be taken by eminent domain for a public use. Kelo v. City of New London, 545 U.S. 469, 125 S.Ct. 2655, 162 L.Ed.2d 429 (2005); Buck v. District Court for Kiowa County, 199 Colo. 344, 608 P.2d 350 (1980). The United States Supreme Court in Kelo stated:

On the one hand, it has long been accepted that the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation. On the other hand, it is equally clear that a State may transfer property from one private party to another if future "use by the public" is the purpose of the taking; the condemnation of land for a railroad with common-carrier duties is a familiar example.

Kelo, 545 U.S at 477, 125 S.Ct. at 2661. Some states have enacted statutes which enumerate the specific purposes for which property may be condemned.

Whether property is intended for a public use is subject to judicial review. Denver West Metropolitan District v. Geudner, 786 P.2d 434 (Colo. App. 1989)(certiorari denied). The appropriate inquiry is whether the essential purpose of the acquisition is to obtain a public benefit. Id. at 436.

D. NECESSITY

There also must be a determination by the condemning authority that the particular parcel of property is necessary for the intended public purpose. That determination is a legislative act and is reviewable only upon a showing of fraud or bad faith. City of Thornton v. Farmers Reservoir & Irrigation Company, 194 Colo. 526, 575 P.2d 382 (1978). Whether a project is feasible or practicable, and whether it will be a financial success are not questions into which the court may inquire. Silver Dollar Metropolitan District v. Goltra, 66 P.3d 170, 172 (Colo. App. 2002)(certiorari denied).

E. PRIVATE USE

Section 14 of Article II of the Colorado Constitution provides: "Private property shall not be taken for private use unless by consent of the owner, except for private ways of necessity, and except for reservoirs, drains, flumes or ditches on or across the lands of others, for agricultural, mining, milling, domestic or sanitary purposes." Similar provisions exist in other state constitutions as well. See, Arizona Constitution, Article II, Section 17.

The Wyoming Constitution contains a nearly identical provision in Article I, Section 32 which provides: "Private property shall not be taken for private use unless by consent of the owner, except for private ways of necessity, and for reservoirs, drains, flumes or ditches on or

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across the lands of others for agricultural, mining, milling, domestic or sanitary purposes, nor in any case without due compensation."

This language which is present in many state constitutions seems to recognize a right to condemn private property for private purposes which seemingly contradicts the public purpose requirement mentioned above. Such language, however, has not been construed to allow condemnation of property for a purely private purpose. While there is mention of a "private use" there still must be some relation between the actual use and a broader public purpose. Lamborn v. Bell, 18 Colo. 346, 32 P. 989 (1893). The fact that certain specific uses are mentioned has been deemed to be an implication that such uses are so closely connected with the public interest as to be at least quasi public or affected with a public interest. Pine Martin Mining Company v. Empire Zinc Co. 90 Colo 529, 11 P.2d 221 (1932). See also, Clark v. Nash, 198 U. S. 361, 25 S. Ct. 676, 49 L. Ed. 1085 (1905).

III. GENERAL EMINENT DOMAIN PROCEDURES

The exercise of eminent domain power also is regulated by statutes setting forth basic prerequisites and procedures for its exercise. A table has been provided at the end of this paper listing citations to general eminent domain statutes in various states along with references to certain portions of those statutes discussed below. Many states have separate statutes relating condemnations by pipeline companies, utilities and similar entities which may be codified in other parts of the statutes.

A condemning authority often is required to give an initial notice to the owner that it intends to acquire the property. An offer and good faith negotiations between the condemning authority and the land owner may be prerequisites to the formal filing of a condemnation action and may even be jurisdictional. Welch v. City and County of Denver, 141 Colo. 587, 349 P.2d 352 (1960).

Questions such as whether the condemning party has eminent domain powers, whether the intended use of the property is such that eminent domain is appropriate, the necessity for the taking of the property at issue and whether statutory or constitutional prerequisites have been met are usually preliminary issues that must be raised in the court upon the initiation of the proceedings. If such matters are not raised in a timely fashion, and often by the time a response to the initial petition or complaint is due, they may be waived.

Once it has been determined that the...