CONDEMNATION OF 110 WASHINGTON STREET

• Decision Date: 13 February 2001
• Citation: 767 A.2d 1154
• Court: Pennsylvania Commonwealth Court
• Parties: CONDEMNATION OF 110 WASHINGTON STREET, BOROUGH OF CONSHOHOCKEN, PENNSYLVANIA, BY THE REDEVELOPMENT AUTHORITY OF THE COUNTY OF MONTGOMERY, FOR URBAN RENEWAL PURPOSES, The Premises Being Owned by Montgomery County Industrial Development Authority and R & J Holding Company. R & J Holding Company, Appellant.

767 A.2d 1154

CONDEMNATION OF 110 WASHINGTON STREET, BOROUGH OF CONSHOHOCKEN, PENNSYLVANIA, BY THE REDEVELOPMENT AUTHORITY OF THE COUNTY OF MONTGOMERY, FOR URBAN RENEWAL PURPOSES, The Premises Being Owned by Montgomery County Industrial Development Authority and R & J Holding Company.

R & J Holding Company, Appellant.

Commonwealth Court of Pennsylvania.

Argued May 17, 2000.

Decided February 13, 2001.

Richard L. Bazelon, Philadelphia, for appellant.

Gilbert P. High, Jr., Norristown, for appellee.

Before DOYLE, President Judge, COLINS, Judge, McGINLEY, Judge, FRIEDMAN, Judge, KELLEY, Judge, FLAHERTY, Judge, LEADBETTER, Judge.

KELLEY, J.

R & J Holding Company (Condemnee) appeals from the order of the Court of Common Pleas of Montgomery County (trial court) that sustained in part and overruled in part Condemnee's preliminary objections to the Declaration of Taking filed by the Redevelopment Authority of the County of Montgomery (Condemnor). We reverse.

On January 1, 1986, Condemnor entered into an agreement (1986 Agreement) with the Greater Conshohocken Improvement Corporation (GCIC), whose principal is Donald Pulver (Pulver), which provided for a process intended to lead to the adoption of a redevelopment proposal in the Boroughs of Conshohocken and West Conshohocken to eliminate blight. Under the 1986 Agreement, Condemnor was to acquire properties in a specified project area in the boroughs by eminent domain, and to convey them to Pulver for development. Specifically, under Section 3(c) of the 1986 Agreement, Condemnor was to, inter alia, "[a]cquire by Eminent Domain, any real property, including improvements and fixtures for the public purposes of the Urban Redevelopment Law [(URL)¹] ..." R.R.² at 1065a. However, Section 3(d) of the 1986 Agreement also stated that "[n]otwithstanding anything to contrary contained herein, [Condemnor] shall not undertake any of the activities set forth in section[ ] ... 3(c) of this Agreement except at the specific request of [GCIC] ..." Id. at 1066a. In turn, GCIC was required to compensate Condemnor for all direct and indirect costs incurred in the course of these activities, and was to provide security for any takings in accordance with a formula set out in the agreement. See Id. at 1066a—1069a.

On October 13, 1993, Condemnor again entered into an agreement (1993 Agreement) with GCIC which specifically related to Condemnee's property. Under Section 1(a) of the 1993 Agreement, Condemnor agreed to "[f]orthwith, commence legal acquisition proceedings against [Condemnee's] property ..." Id. at 1328a-1329a. Likewise, under Section 1(c) of the 1993 Agreement, Condemnor agreed to "[t]ake whatever steps are necessary to acquire, pursuant to the Eminent Domain Code [ (Code)³], and any other applicable statute, title to the fee and possession of [Condemnee's] premises ..." Id. at 1329a. Pursuant to Section 1(d) of the 1993 Agreement, Condemnor was to fund the acquisition of Condemnee's property by using the funds provided by a grant from the Commonwealth. Id. Under Section 2 of the 1993 Agreement, GCIC was to cover all direct condemnation costs that exceeded the grant amount. See Id. at 1329a—1332a. Finally, pursuant to Section 7 of the 1993 Agreement, it was agreed that "[n]either the Borough nor [Condemnor] are authorized to file a Declaration of Taking of [Condemnee's property] without the prior written consent of [GCIC]." Id. at 1335a.

On March 14, 1995, Condemnor entered into an agreement (Surety Agreement) with TBFA Partners (TBFA), whose principal is Pulver, in which the rights and obligations of GCIC under the 1993 Agreement were assigned to TBFA. Id. at 1075a. The Surety Agreement recognized that among the responsibilities and obligations which TBFA agreed to assume are those to pay any funds necessary for the acquisition of Condemnee's property which are not covered by the grant from the Commonwealth, and to provide surety to Condemnor that such payments would be forthcoming when due. Id. The Surety Agreement also stated that TBFA was desirous that Condemnor initiate condemnation proceedings to acquire Condemnee's property, and that TBFA was to post security for the taking in the amount of $775,000 less $247,035 attributed to costs already paid. Id. In particular, Paragraph 1 of the Surety Agreement stated that "[t]his surety is posted to induce [Condemnor] to commence acquisition and condemnation proceedings in order to acquire [Condemnee's property]." Id. at 1076a.

On March 15, 1995, Condemnor offered to purchase Condemnee's property for $1,180,000 plus reasonable relocation costs. Id. at 1302a. On July 11, 1996, Condemnor filed a Declaration of Taking for Condemnee's property.⁴ Id. at 7a—15a. On August 26, 1996, Condemnee filed preliminary objections to the Declaration of Taking. Id. at 18a-30a. On June 4, 1997, Condemnee filed amended preliminary objections to the Declaration of Taking. Id. at 124a—139a. The preliminary objections alleged, inter alia, that the Declaration of Taking be set aside because: (1) Condemnor had unlawfully delegated its eminent domain powers to Pulver; (2) Condemnor had acted in bad faith in condemning the subject property; and (3) inadequate security had been posted for the condemnation.

On December 17, 1998, the trial court issued an order disposing of Condemnee's preliminary objections. The trial court overruled Condemnee's preliminary objections relating to unlawful delegation and bad faith. However, the trial court determined that the security that had been posted was inadequate, and ordered Condemnor to post an additional $750,000 in security. Condemnee then filed the instant appeal in this Court.

In this appeal, Condemnee claims: (1) the trial court erred in overruling its preliminary objection that Condemnor had unlawfully delegated its eminent domain powers to Pulver; (2) the trial court erred in overruling its preliminary objection that Condemnor had acted in bad faith; and (3) the trial court's evidentiary errors during the hearing on the preliminary objections requires a new hearing.

We initially note that where a trial court has either sustained or overruled preliminary objections to a Declaration of Taking, our scope of review is limited to determining whether the trial court abused its discretion or committed an error of law. In re Condemnation Proceeding by the Township of Lower Macungie, 717 A.2d 1105 (Pa.Cmwlth.1998), petition for allowance of appeal denied, 558 Pa. 643, 738 A.2d 458 (1999); Olson v. Whitpain Township, 141 Pa.Cmwlth. 270, 595 A.2d 706 (1991). In addition, our review of the URL condemnation cases is to see that the redevelopment authority has not acted in bad faith or arbitrarily, that it has followed the mandated statutory procedures in preparing a redevelopment plan, and that there are no constitutional violations. In re City of Scranton, 132 Pa.Cmwlth. 175, 572 A.2d 250 (1990),petition for allowance of appeal denied, 527 Pa. 619, 590 A.2d 760 (1991).

Condemnee first claims that the trial court erred in overruling its preliminary objection that Condemnor had unlawfully delegated its eminent domain powers to Pulver. In particular, Condemnee argues that the provisions of the 1986 Agreement and the 1993 Agreement under which Condemnor was contractually precluded from acquiring its property by eminent domain constitutes an unlawful delegation of these powers. According to Condemnee, neither the URL nor the Code authorize a redevelopment authority to give private parties control over the authority's functions relating to condemnation. As a result, Condemnee asserts that because Condemnor acted in violation of its statutory authority, it exceeded its powers and its actions in condemning Condemnee's property are void.

Article 1, Section 10 of the Pennsylvania Constitution provides, in pertinent part that "[n]or shall private property be taken or applied to public use, without authority of law and without just compensation being first made or secured." PA. CONST. art. 1, § 10. The power of the Commonwealth to acquire private property through the use of it eminent domain powers directly flows from its attributes as the sovereign. See, e.g., Peters v. Reading, 321 Pa. 220, 221, 184 A. 23, 24 (1936) ("[T]he right of eminent domain is an attribute of sovereignty, inherent in the State, to be exercised subject to applicable provisions of the Constitution and in accord with statutes regulating procedure. It is generally exercised by the State, or by agencies to which the State delegates the power, such as municipal corporations and others sometimes designated quasi-public corporations."). See also People v. Adirondack Railway Company, 160 N.Y. 225, 237, 54 N.E. 689, 692 (1899), aff'd sub nom. Adirondack Railway Company v. People of the State of New York, 176 U.S. 335, 20 S.Ct. 460, 44 L.Ed. 492 (1900)

("[T]he power of taxation, the police power and the power of eminent domain underlie the constitution, and rest upon necessity, because there can be no effective government without them. They are not conferred by the constitution, but exist because the state exists, and they are essential to its existence. They are not rights reserved, by rights inherent in the state as sovereign. While they may be limited and regulated by the constitution, they exist independently of it, as a necessary attribute of sovereignty. They belong to the state because it is sovereign, and they are a necessity of government. The state cannot surrender them, because it cannot surrender a sovereign power. It cannot be a state without them. They are as enduring and indestructible as the state itself ...") (citations omitted).

However, the exercise of this sovereign power is not without limitation. Indeed, as the Pennsylvania Supreme Court stated long ago:

The right of the Commonwealth to take private property without the owner's assent on compensation made, or authorize it to be taken, exists in her sovereign right of eminent...