“No person shall…be deprived of life, liberty, or property without due process of law; nor shall private property be taken for public use, without just compensation.” Amendment V, The Constitution of the United States of America

“[T]he general Assembly shall not pass…any law whereby private property shall be taken or damaged for public uses, without just compensation… .” Article I, Section 11, The Constitution of Virginia.

When the government or monopolies with the power of eminent domain come knocking at the door of a property owner to condemn property, the property owner most often wishes the knock had never occurred. Homeowners and business owners can spend lives investing money and time in making a home or building a business only to have a government project or utility project take it all away. In some cases, the government or the utility is not legally using the power of eminent domain for a public purpose. Sometimes the condemning authority has not followed statutorily mandated procedures. In recent history, the government and its agencies have extensively used their power of eminent domain to take property for economic development. The issue of whether taking property from one private party to give to another for economic development qualifies as a “public use” under the United States Constitution has come under close scrutiny recently.

Property owners with greater frequency are beginning to challenge the use of the power of eminent domain on statutory and constitutional grounds. They are beginning to meet with success in more and more cases. Unfortunately, in most cases the property owner confronts the prejudice that condemnation cases are only about how much money the owner will receive. Money is always important, but most often when a home owner or business person is given the choice between receiving money through a condemnation proceeding or keeping their hard earned property, that home owner or business person will keep the property.

DEFEATING THE CONDEMNATION GIVES THE POWER OF PROPERTY BACK TO THE OWNER.

When someone defeats the use of the power of eminent domain, the playing field is leveled, and if a property owner decides to sell voluntarily, then a fair price is achievable. The case of City of Virginia Beach v. Christopoulos Family, L.C.1, demonstrates this principle dramatically.

In 2000, the City of Virginia Beach sought to condemn a small retail shopping center at the Oceanfront on 31st Street and Atlantic Avenue. It sought to acquire property of the Christopoulos Family to build a public parking garage, the primary purpose of which was to help two prominent hotel developers at Virginia Beach build a new Hilton hotel on the oceanfront. The Christopoulos Family had for generations operated the Neptune Restaurant on Atlantic Avenue across the street from what had been the site of the old Seaside Amusement Park and was the proposed site for the new four-star hotel. In addition to providing needed parking under favorable lease terms, the City had agreed to give the developers extensive control and options over retail space to be built in the parking garage.

When the Christopoulos Family refused to sell the property for $900,000, the City of Virginia Beach began condemnation proceedings against the family.2 When the City of Virginia Beach filed its petition of condemnation against the Christopoulos Family’s property at the Oceanfront, the family had two choices: they could proceed to trial on the issue of just compensation or they could attempt to defeat the taking of their property because the taking was not allowed under state law or because the taking was unconstitutional. The Christopoulos Family chose to fight the take.

The issues of whether the condemnation was statutorily authorized or constitutionally permitted was for a judge to decide. Judge Thomas Padrick, Jr., of Virginia Beach Circuit Court conducted a hearing on the property owner’s defenses to the taking of the family’s shopping center where they operated their restaurant.

The family argued that the City’s condemnation was ultra vires and cited the Dillon Rule of strict construction of statutes granting municipalities governmental power. The City contended that the condemnation was for a public use because the parking garage was the public purpose for the condemnation.

Judge Padrick identified the parameters of his analysis of the City’s power to take the Christopoulos Family property by quoting from Light v. City of Danville in which the Supreme Court of Virginia precisely described defenses to the government’s use of the power of eminent domain and limits upon those defenses:

A defendant may attack on the grounds of lack of constitutional capacity to exercise the power. He may show that the statute conferring the power has not been strictly followed in procedure. You may show any fact tending to prove that the exercise of the power is unauthorized, that the land is not being taken for a public use, or that he has not been allowed a just compensation ascertained according to law.

On the other hand, a condemnation proceeding is not subject to collateral attack upon the question of the wisdom of construction of the public improvement, or the means, or the manner in which such improvement is to be constructed, or the economic soundness of the proposition. The decision of such questions lies within the judgment of the agency proposing to enter into and effectuate the public purpose.3

Judge Padrick correctly held that “whether a taking under eminent domain is for public use, as well as the municipality’s authority to condemn, fall within the realm of judicial determination and may properly be raised in a condemnation action.”4

Inevitably in many condemnation cases involving redevelopment, private parties do ultimately benefit from the government’s condemnation of another person’s property. The test in Virginia has been whether the public interest dominates over the private gain. The court in City of Virginia Beach v. Christopoulos Family, L.C., relied on Nichols v. Central Virginia Power Company5 quoting the following:

A use to be public must be fixed and definite. It must be one in which the public, as such, has an interest, and the terms and manner of enjoyment must be within the control of the State, independent of the rights of the private owner of the property appropriated to the use. The use of the property cannot be said to be public if it can be gainsaid, denied, or withdrawn by the owner. The public interest must dominate the private gain.6

In light of the degree of control that the City of Virginia Beach had given to the developers over the use of the parking garage and the retail space in the parking garage, the court ruled that City had acted ultra vires and beyond the statutory authority to condemn the property of the Christopoulos Family. The judge dismissed the City’s petition of condemnation. In the wee hours of December 31, 2000, with deadlines looming on the project, the City ultimately paid 2.45 million dollars for the property of the Christopoulos Family.

THE UNITED STATES SUPREME COURT WEIGHS IN ON WHETHER ECONOMIC DEVELOPMENT CONSTITUTES PUBLIC USE UNDER THE UNITED STATES CONSTITUTION.

Is it just about the money? Oftentimes it is not. If the taking of property involves taking a retail outlet of a large corporation, that corporation can absorb the loss of one of its retail outlets and has the resources to fight for the full amount of just compensation. In this case, it is a financial decision based on money. But if the government is taking a family home or a mom-and-pop business that a family has spent thirty years building, then the taking is about changing people’s lives dramatically and involuntarily. In these cases involving property of average individuals, if the government is using its eminent domain power for economic development which ultimately benefits a specially favored business interest, then the constitutional issue of whether the taking of property is truly for a public use becomes especially charged and controversial. In these cases, it is not mainly about the money.

Under a Connecticut law that expressly empowers Connecticut municipalities to condemn property solely for economic development, the City of New London, Connecticut condemned 115 land parcels in the Fort Trumbull neighborhood of New London. The property included a mixture of homes and small businesses.7 New London was implementing the Fort Trumbull Municipal Development Plan that the New London Development Corporation, a private, non-profit development corporation, had devised for the development of approximately 90 acres in New London. The city’s condemnation of peoples’ homes included taking homes of individuals who had been born in the house, who had raised their own families in the house, and who intended on living their entire lives in the same home. One such person is Wilhelmina Dery, one of the plaintiffs in the case Kelo v. City of New London. Mrs. Dery is now one of the petitioners whose petition for writ of certiorari the United States Supreme Court granted on September 28, 2004.8

The first paragraph in the statement of the petition of Mrs. Dery and her neighbors tells Mrs. Dery’s story and the desires of her neighbors:

Petitioner Wilhelmina Dery was born in her house in the Fort Trumbull neighborhood of New London, Connecticut in 1918. She lives there now, as she has for her entire life, along with her husband of over fifty years and the rest of her family. She and her neighbors, the other Petitioners in this case, stand to lose their homes through eminent domain to make way for private business development. Mrs. Dery’s city government and a private development corporation hope that the new development projects will create more tax revenue and jobs than the homes that currently occupy this peninsula of land along the Thames River. Petitioners have poured their labor and love into their homes. They are places where they have lived for years, have raised their families, and have grown old. Petitioners do not want money or damages. They merely seek to stop the use of eminent domain to take away their most sacred and important of possessions: their homes.9

The issue before the Connecticut Supreme Court in Kelo v. City of New London was whether the United States Constitution and the Connecticut Constitution authorize the exercise of the eminent domain power for an economic development plan that the City of New London projected would create more than one thousand jobs, increase tax and other revenues, and contribute to the revitalization of an economically distressed city. The Connecticut Supreme Court concluded that condemning property for economic development is constitutional. The court stated the following:

We conclude that economic development projects created and implemented pursuant to Chapter 132 (the Connecticut statute authorizing “Municipal Development Projects”) that have the public economic benefits of creating new jobs, increasing tax and other revenues, and contributing to urban revitalization, satisfy the public use clauses of the state and federal constitutions.10

The court deferred to the legislature’s declaration of public use.

In a 1954 case involving blight and not economic development per se the United States Supreme Court had approved the concept of the government’s using the power of eminent domain to eliminate blight in cities, and, after the clearance of blighted property, the government’s transfer of condemned property to private enterprise for redevelopment. In Berman v. Parker,11 the Supreme Court ruled constitutional the Congressional act providing for condemnation of blighted property in the District of Columbia and the subsequent transfer of that property to private parties. Embracing the role of private enterprise in redevelopment projects, the Court stated the following:

The public end may be as well or better served through an agency of private enterprise and through a department of the government – or so the Congress might conclude. We cannot say that public ownership is the sole method of promoting the public purposes of community redevelopment projects. What we have said also disposes of any contention concerning the fact that certain property owners in the area may be permitted to repurchase their properties for redevelopment in harmony with the over-all plan. That, too, is a legitimate means which Congress and its agencies may adopt, if they choose.12

The Supreme Court of Appeals of Virginia, now the Supreme Court of Virginia, had similarly endorsed the use of eminent domain power to clear slums for redevelopment projects that included eventually the transfer of condemned property back to the private sector for development. In Mumpower v. Housing Authority,13 the court held that the transfer of condemned property to private parties after the property is taken for a redevelopment project was constitutional because the transfer to private parties was incidental or collateral to the primary purpose of the act which was to eliminate blight. Similarly, the court in Hunter v. Norfolk Redevelopment Housing Authority14approved the section of the 1946 Housing Authorities Law15 that expressly permitted making condemned property in a redevelopment project available for use for private enterprise. The court in Hunter stated the following:

The Act contemplates that in the course of a large slum clearance operation there will be some sections which are not needed or suitable for long-range public use, and that after being purged of their unwholesome characteristics, they will be returned to a restricted private use.16

The court’s decisions in Mumpower v. Housing Authority and Hunter v. Norfolk Redevelopment and Housing Authority are distinct from the Connecticut Supreme Court’s out- right endorsement of economic development as a constitutional public use. Is the distinction between transferring property taken as part of slum clearance back to private developers and transferring economically underutilized property to developers for more profitable economic development one of substance or one of form? The Supreme Court’s granting the petition for writ of certiorari in Kelo v. City of New London can only mean that the Supreme Court has decided to answer this question.

The trend among the courts appears to be moving away from approving the use of eminent domain power solely for the purpose of economic development. Just before the Supreme Court issued the writ in Kelo, the Michigan Supreme Court in County of Wayne v. Hathcock17 reversed its long standing case Poletown Neighborhood Council v. City of Detroit18 that had given judicial approval to condemnation for economic development for over 20 years in Michigan. The Michigan Supreme Court in Poletown had ruled constitutional a plan of the Detroit Economic Development Corporation to condemn a large tract of land for the purpose of conveying it to General Motors Corporation for its construction of an assembly plant.

Empowered under Poletown, Wayne County initiated a huge development project using the power of eminent domain for constructing a large business and technology park with a conference center, hotel accommodations, and a recreational facility. Wayne County called it the “Pinnacle Project.” It included a 1,300-acre area adjacent to its airport.

In County of Wayne v. Hathcock, the Michigan Supreme Court put the brakes on the use of the power of eminent domain for economic development, overruling the Poletown decision and making its decision in Hathcock retroactive in application. The court in Hathcock looked to the history of the term “public use” as used in Michigan’s constitution to determine that the original intent of this important term was violated by Wayne County’s condemning property for the Pinnacle Project. The court stated the following: “In this case, Wayne County intends to transfer the condemned properties to private parties in a manner wholly inconsistent with the common understanding of public use at the time our constitution was ratified.”

Seven states have held that increasing tax revenues and creating jobs are in and of themselves public purposes justifying the government’s use of eminent domain power. Connecticut joined the ranks of Kansas, Maryland, Michigan, Minnesota, New York and North Dakota. Nine states have held that condemnation for increasing taxes and jobs when not coupled with the elimination of slums or blight is not a public use. Michigan in July, 2004, joined Arkansas, Florida Illinois, Kentucky, Maine, Montana, South Carolina and Washington. Three states have indicated they probably will not uphold condemnation for private development in the absence of blight. They are Delaware, New Hampshire, and Massachusetts.19

Virginia’s decisions upholding the transfer of condemned property to private enterprise as part of a redevelopment project, the purpose of which is the clearance of slum and blight, would suggest that Virginia is among those states which would probably not approve condemnation for private development in the absence of blight.

The middle ground which may appeal to the United States Supreme Court is a procedure whereby condemnations for economic development receive heightened scrutiny from the judiciary. Judicial heightened scrutiny has been an integral part of the courts’ application of the equal protection clause of the 14th Amendment of the United States Constitution. Unequal treatment under the law based on race has received strict scrutiny which has always resulted in the invalidation of the state action. Gender discrimination, in comparison, has received an intermediate standard of scrutiny which sometimes resulted in invalidation but other times validation. The lowest level of scrutiny, the arbitrary and capricious standard, almost always results in validation.

The heightened scrutiny test for validating condemnation for economic development was first suggested in the Poletown decision of the Michigan Supreme Court. The court in Poletown found the heightened scrutiny test met when it found that the public benefit resulting from the General Motors assembly plant was not speculative or marginal but clear and significant. Delaware and North Dakota have adopted the heightened scrutiny test for approving condemnation for economic development.20

Whatever approach the United States Supreme Court may take to deciding the issues that the Court confronts in Kelo, it is likely the Court did not grant the petition for writ of certiorari to affirm a decision of a state supreme court that was in part based on state law.

VIRGINIA HAS A LONG HISTORY OF PROTECTING PRIVATE PROPERTY RIGHTS AGAINST THE USE OF THE POWER OF EMINENT DOMAIN.

The state in which Thomas Jefferson and John Marshall learned the law under the tutelage of George Wythe at William and Mary College has a long history of giving strict scrutiny to the government’s use of the power of eminent domain. Both Jefferson and Marshall understood the importance of protecting an individual’s power over property from governmental usurpation of that personal power. Jefferson would not endorse the Constitution without a guarantee that the first ten amendments of the Constitution would immediately be ratified. These included importantly the Firth Amendment’s protections of the individual against the use of governmental power, including that of eminent domain.

The touchstone for Virginia courts’ interpreting eminent domain statutes was stated in the 1896 case School Board v. Alexander which Virginia courts have repeatedly quoted approvingly:

It is said that, in the construction of statutes conferring the power of eminent domain, every reasonable doubt is to be resolved adversely to the right; that the affirmative must be shown, as silence is negation; and that unless both the spirit and letter of the statue clearly confer the power, it cannot be exercised.21

Moreover, strict scrutiny of eminent domain statutes requires condemning authorities to follow to the letter procedures set forth in the condemnation statutes. “The courts everywhere hold that acts conferring the power of eminent domain shall be strictly construed against the grant, and that one claiming the power must bring himself strictly within the grant, both as to the extent and manner of its exercise.”22

The Virginia General Assembly has denied industrial development authorities the power of eminent domain.23 It has furthermore denied redevelopment and housing authorities the power of eminent domain to create industrial sites.24 The statues governing development of industrial sites demonstrate the General Assembly’s appreciation of the risk of abusing the power of eminent domain in the context of industrial development which necessarily involves taking property from one private party to give to another private party for economic advantage.

The Virginia Supreme Court may never confront the issue of whether the Virginia and United States Constitutions permit condemnation solely for the purpose of economic development. The municipal and county authorities that are created under Virginia’s Industrial Development and Revenue Bond Act, whether they are called industrial development authorities or economic development authorities, do not have the power of eminent domain. Housing authorities do not have the power of eminent domain if the immediate or future use of the condemned land is for an industrial site.25

If the economic development plan under judicial scrutiny turns property over to private developers with relatively unfettered use of the property, then the condemning authority will confront the precedent of Rudee Inlet Authority v. Bastian.26 The court in Rudee Inlet invalidated the act of the General Assembly creating the Rudee Inlet Authority because the act permitted the authority to lease condemned property to private business for unencumbered use. The Authority’s ostensible purpose under the act was to acquire property and invest funds to operate a harbor facility at Rudee Inlet. The Authority's power, however, to lease and sell property to private parties was written without restraint on that power. Laying the groundwork for the Virginia Beach Circuit Court’s decision in City of Virginia Beach v. Christopoulos Family, Judge Wahab of the Virginia Beach Circuit Court wrote in Rudee Inlet the following which the Virginia Supreme Court of Appeals subsequently quoted approvingly:

Under the power conferred by the act, the Authority could acquire private property by condemnation one day and the next day lease or sell it unconditionally, or on such terms and conditions as it may deem proper, to a private party… . Any such unconditional lease or sale would be, in effect, the exercise of the power of eminent domain for private use, not public use. It would be completely repugnant to the fundamental principle of eminent domain – private property may be taken by the state only for public use.27

During the debates of the Constitutional Convention of the State of Virginia in 1901, the members of the convention debated whether the Constitution of Virginia would grant property owners the right to just compensation for property not only taken but also damaged for public uses. Many at the convention did not want Virginia’s constitution to give property owners the right to sue the government if public works damaged their property. Those opponents to this constitutional right argued that such a provision would stifle progress and cause business to turn away from the state.

R.S. Parks of Page and Rappahanock Counties stood at the convention to speak in favor of the right. On Thursday, October 10, 1901, he answered the opponents to the right of just compensation for damage to property by stating the following:

No, gentlemen, as much as I desire to see the progressive cities of this State go forward, as much as I should like to see increased population for the city represented by the gentlemen from Roanoke and for the town of Ashland, so noted, represented by the gentlemen by Hanover, it should not be done at the expense of the individual. If it is necessary for progress that these great works should go on, then let the burden be born by the entire community, or let the burden be born by the corporation which is seeking for it’s own private gain to take or injure into or to destroy or to damage the property of the individual.

***

Mr. Chairman and gentlemen of the committee, I shall trespass on your time but for a short while longer. It is an important question, and that I feel a deep interest in, as every gentleman in this convention should feel. It is a matter that may affect any individual property owner in our State, and when I ask and insist that these words be added to the present provision in our Constitution it is, I assure you, not in the interest of the people in any political or partisan sense, but it is in the interest of the people as regards the due and fair administration of law as regards the meting out of even-handed justice to all alike.

I have not sought to make any appeal to your prejudices, nor would I make any appeal to your prejudices if I could. I have no desire, I assure you, to stop the wheels of progress. I longingly look for the day when the material progress of this dear old Commonwealth will be unsurpassed by that of any of her sister States. Her history is a glorious one, and I desire to see commercial progress keep step with the glory of Virginia, which has been the pride of her history in the past and which is the hope of her future.

Partisans will share in the desire for economic health and progress. The test well be, as Mr. Franks stated in 1901, whether that health and progress will be at the expense of the individual or whether it will be achieved with “even handed justice to all alike.” Using the power of eminent domain to cause economic development may well fail the test when the Supreme Court decides Kelo v. City of New London. The Appellant’s brief is due in March, 2005, and arguments will follow.

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1. 54 Va. Cir. 95 (Virginia Beach Circuit Court 2000)
2. Information on offers and purchase price obtained from the City of Virginia Beach.
3. Light v. City of Danville, 168 Va. 181, 196, 190 S.E. 276, 282 (1937).
4. City of Virginia Beach v. Christopoulos Family, L. C., 54 Va. Cir. 95 (Va. Beach 2000).
5. 143 Va. 405 (1925).
6. 143 Va. at 415-416, quoting Fallsburg, etc., Co. v. Alexander, 101 Va. 98 (1903) (emphasis added).
7. 268 Conn. 1, 843 A.2d 500 (Conn. 2004).
8. 125 S. Ct. 27 (Sept. 28, 2004).
9. Petition for Writ of Certiorari , Kelo v. City of New London, Connecticut, page (1).
10. 268 Conn. at 26-27, 843 A.2d at 520.
11. 348 U.S. 26 (1954).
12. 348 U.S. at 33-34.
13. 176 Va. 426 (1940).
14. 195 Va. 236 (1953).
15. Va. Code § 36-48.
16. 195 Va. at 336.
17. 684 N.W.2d 765 (Mich. July 30, 2004).
18. 304 N.W.2d 455 (1981).
19. See Petition for Writ of Certiorari in Kelo v. City of New London, Connecticut.
20. Wilmington Parking Auth. v Land with Improvements, 521 A. 2d 227 (Del. 1987); City of Jamestown v Leevers, 552 N.W. 2d 365 (N.D. 1996).
21. City of Richmond v Carneal, 129 Va. 388 (1921) (quoting School Bd. v Alexander, 126 Va. 407 (1896)).
22. City of Richmond v Childrey, 127 Va. 261, 103. S.E. 630, 631 (1920).
23. Virginia Code§15.2-4900, et seq., Industrial Development and Revenue Bond Act.
24. Va. Code§36-49.2: Power to purchase or lease land for certain other redevelopment projects. – In addition to the other powers to acquire real property by purchase or lease, an authority is specifically empowered to purchase or lease real property for immediate or future use, without the exercise of the power of eminent domain, for improvement and development for sale, lease, or sublease as an industrial sites, scientific research laboratory sites, educational institution sites for housing persons displaced from other lands of the authority. (1964, Ex. Sess., c. 16).
25. Va. Code § 36-49.2.
26. 206 Va. 906, 147 S.E.2d 131 (1966).
27. 206 Va. at 912, 147 S.E.2d at 136.