03/26/2019
CD&M LAW IN BRIEF
EMINENT DOMAIN AND CONDEMNATION
City of Albuquerque v SMP Properties, LLC, et.al., In the Court of Appeals of the State of New Mexico, 2019
ISSUES
This case involves a condemnation by the City of Albuquerque, and decides the rights of a property owner whose property was allegedly diminished in value due to unreasonable pre-condemnation conduct by the government, or whose property was allegedly taken or damaged for public use by the government’s substantial interference with the property owner’s use and enjoyment of the property prior to condemnation.
FACTUAL BACKGROUND
The owner’s property housed a sixty-five-door trucking terminal leased to two trucking companies. One lessee company built fuel tanks in a number of its terminals at significant cost. The owner was in negotiations to again renew the lease with that lessee when suddenly, on March 30, 2012, the lessee terminated the lease. The owner found out that a representative of the City had met with the lessee and explained that it was going to cut a road through part of its fuel tanks and prohibit it from using some of its doors. The lessee then called the owner, who responded that this was the first he had heard of any of this. After these events, the lessee continued under a month-to-month lease until shortly after a time at which the lease would have otherwise expired. The lessee vacated the premises on April 30, 2012.
PROCEDURAL HISTORY IN LITIGATION
The City filed a condemnation action and deposited $143,850 with the Court, which it claimed was just compensation for the taking. Defendants answered and denied that the deposited sum was just compensation, and affirmatively countered that the City had caused a lessee of Defendant to not renew its lease, amounting to reverse condemnation and resulting in consequential damages.
The preliminary order of entry was granted to the City on August 6, 2013. The permanent order of entry was granted on November 15, 2015.
The City moved for summary judgment on grounds that: 1) an anticipated lease renewal does not constitute a compensable property right in determining just compensation; and 2) there was no inverse condemnation because its pre-condemnation actions did not substantially interfere with the owner’s use of his property.
The trial court granted the summary judgment in favor of the city on both grounds. The property owner appealed the case to the New Mexico Court of Appeals.
ANALYSIS OF NEW MEXICO COURT OF APPEALS
A. Condemnation Damages for Just Compensation:
In a condemnation proceeding, the measure of damages is the difference between the fair market value of the entire property immediately before the taking and immediately after the taking.
A property owner is constitutionally entitled to “early valuation” fair market value damages—that is, fair market value that occurs before the condemnation action is actually filed and the property actually taken—when (1) the condemning authority has, prior to instituting formal condemnation proceedings, evidenced an unequivocal intention to take the specific parcel of land, and (2) the condemning authority’s communication of its intention to third parties or the public in general substantially impacts the fair market value of the property.
The Court held that the State Taking Clause includes the loss of tenants and a reduction in fair market value resulting from pre-condemnation conduct by the condemning authority. “A condemning authority should not be allowed to engage in deliberate activity causing a reduction in value of the property and then purchase that property at a depressed value.”
B. Inverse Condemnation by Substantial Interference
The State Taking Clause gives express recognition to a cause of action for inverse condemnation. Such action is available for a property owner when private property has been taken or damaged by a public entity for public use and the entity has not paid just compensation or brought formal condemnation proceedings. “Property” includes the group of rights inhering in the citizen’s relation to the physical thing, as the right to possess, use or dispose of it. In an inverse condemnation case, an actual physical taking is not required, as consequential damages are sufficient.
Governmental pre-condemnation publicity and planning is actionable if: 1) the government has publicly announced a present intention to condemn the property in question; and 2) the government has done something that substantially interferes with the landowner’s use and enjoyment of its property.
What constitutes a substantial interference is a question of fact to be determined.
The Court stated that on remand to the trial court, the Defendants are required to prove to the jury: 1) that there was an inverse condemnation; 2) the date of the “taking”; 3) resulting damages.
Because the Defendants asserted defenses to plaintiff’s condemnation in order to increase the value of “just compensation,” and because it had the same or similar positions on damages on its own claim for inverse condemnation, the Court instructed: “The damages on ..[the inverse condemnation claim]...may very well duplicate the “early valuation “ damages on the City’s condemnation claim because the date of the “taking or damage” may be identical under each claim. If both claims are submitted to the jury, Defendants will not be entitled to recover the same damages under both… [theories of recovery].”
DECISION OF NEW MEXICO COURT OF APPEALS
The New Mexico Court of Appeals reversed judgment of the trial court and remanded the case back for trial, and held that, based upon the facts of the case, lost rents may be considered by a jury in determining the fair market value before and after the taking by the government on the issue of just compensation; and that, based upon the facts of the case, a jury should be allowed to determine whether the government substantially interfered with the property owner’s use of the property prior to condemnation, and if so, may consider awarding consequential damages for resulting losses from such inverse condemnation.
RESPECT. RESPONSE. RESULTS.
CRENSHAW, DUPREE & MILAM, L.L.P.
726 East Michigan
Hobbs, New Mexico 88240
Phone (806) 762-5281
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