Reichs Ford Road Joint Venture v. State Roads Comm'n of the State Highway …

• Decision Date: 12 August 2005
• Docket Number: No. 137,137
• Citation: 880 A.2d 307,388 Md. 468
• Parties: REICHS FORD ROAD JOINT VENTURE v. STATE ROADS COMMISSION OF THE STATE HIGHWAY ADMINISTRATION, Maryland Department of Transportation.
• Court: Maryland Court of Appeals

880 A.2d 307

388 Md. 468

REICHS FORD ROAD JOINT VENTURE v. STATE ROADS COMMISSION OF THE STATE HIGHWAY ADMINISTRATION, Maryland Department of Transportation.

No. 137, September Term, 2004.

Court of Appeals of Maryland.

August 12, 2005.

Dennis E. Ettlin (Brown & Sturm, Rockville, on brief), for petitioner.

Janet Bush Handy, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., Peyton Paul Phillips, Asst. Atty. Gen., on brief), for respondent.

Argued before BELL, C.J., RAKER¹, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

HARRELL, J.

We issued a writ of certiorari in this case to determine whether an award, in settlement of a formal eminent domain proceeding, of "fair market value," as defined in Md.Code (1974, 2003 Repl.Vol.), § 12-105 of the Real Property Article, contemplates the inclusion of lost rents, carrying costs, and other damages incurred as a result of the condemnor's pre-condemnation conduct. Concluding that such damages are indeed compensable under that statute, we hold that, when a condemnor's pre-condemnation conduct results ultimately in formal condemnation proceedings, all damages resulting from that conduct ordinarily would be included in the award of "fair market value" relating to the condemnation award. On the record of this case, however, a justification may exist to permit the former property owner to pursue the alleged pre-condemnation damages in a separate action. In order to resolve whether that is appropriate, fact-finding may be required. A remand to consider that, therefore, is appropriate.

I.

This case involves 33,000 square feet of commercially zoned land, previously owned by Reichs Ford Road Joint Venture ("Reichs Ford"), a Maryland general partnership, located along Urbana Pike in Frederick County, Maryland. Prior to the formal exercise of eminent domain in 2001 by the State Roads Commission of the State Highway Administration of the Maryland Department of Transportation ("SHA" or "Administration"), the land was improved with a gasoline service station.

In the summer of 1987, the SHA, pursuant to powers vested in it under § 40B of Article III of the Maryland Constitution,² issued a general public announcement pertaining to a newly proposed interchange at Routes 85/355, near the subject property, in Frederick County. In October of that year, Griffith Consumers ("Griffith") entered into a ten-year lease agreement with Reichs Ford to operate a gas station on the property.

In a letter dated 20 December 1988, the SHA informed Reichs Ford that it had scheduled construction for the new interchange and that the project would affect substantially the subject property. The letter also stated that an appraiser was selected to appraise the subject property and that the SHA would make a purchase offer within six months. Although the SHA commissioned a number of ensuing appraisals, for which Reichs Ford made available its lease agreement and the monthly rental receipts during the lease term, the Administration made no offers to purchase the subject property.

Seven years later, in August of 1995, Reichs Ford received another letter from the SHA advising that yet another appraiser had been selected to appraise the subject property, after which an offer of just compensation would be made. In February of 1996, the SHA offered to purchase the subject property for $950,000. A negotiated sale did not result from this offer.

Between 1996 and 1997, the SHA met with Griffith, the lessee of the subject property, to inform it of the intended condemnation and its entitlement to relocation assistance. The SHA also drafted a lease termination agreement for Griffith to execute and deliver to Reichs Ford. Upon the expiration of the initial lease term in 1997, Griffith elected not to exercise its option to extend the lease term with Reichs Ford, apparently due to the looming specter of condemnation. Griffith, however, did hold over temporarily on a month-to-month basis at a reduced rent, eventually vacating the property on 30 June 1998. Thereafter, Reichs Ford claims that it was unable to lease the property as a gas station or for any other economically viable use due to the SHA's plans.

Between 1998 and 2000, Reichs Ford requested informally, on several occasions, that the SHA formally exercise its eminent domain powers or abandon the proposed taking of the subject property. During this period, Reichs Ford continued regularly to update the SHA regarding the alleged damages being incurred as a result of the Administration's indecision. Nevertheless, the SHA did not take any meaningful steps toward the institution of formal condemnation proceedings.

Frustrated with the SHA's inaction, Reichs Ford filed a complaint in the Circuit Court for Frederick County on 31 January 2000, claiming damages based on a theory of inverse condemnation.³ Reichs Ford claimed that, by placing its property "under the cloud of imminent condemnation" for such a lengthy period of time, the SHA rendered the property economically unusable and thus was liable for damages that accrued as a result of the unwarranted delay. Reichs Ford's complaint sought damages incurred from the time Griffith failed to exercise its option to extend the lease and the filing of the complaint. The damages included, among other things, lost rents, property taxes, and carrying costs.⁴

On 8 March 2001, the State instituted condemnation proceedings in the Circuit Court for Frederick County to acquire the subject property and the improvements thereon. Sometime thereafter, Reichs Ford and the SHA initiated settlement negotiations regarding all pending claims related to the subject property. Reichs Ford proposed two alternatives. First, it proposed to settle both the SHA's eminent domain action and the pending inverse condemnation suit for the total sum of $1,525,000. Alternatively, Reichs Ford proposed to settle only the eminent domain claim for $1,325,000, on the condition that it could continue to prosecute the inverse condemnation claim. The SHA, by letter of its counsel dated 19 June 2001, chose the second option and the parties executed an Agreed Inquisition in the eminent domain action calling for $1,325,000 in damages.

This agreement was filed with the Circuit Court on 22 June 2001, resolving effectively the condemnation claim. The parties continued to litigate the inverse condemnation action. After the parties engaged in discovery, the SHA filed a motion in limine on 30 January 2003. The motion argued that the damages Reichs Ford was seeking, described in the body of the brief motion as "lost rental income, real property taxes, mortgage interest, etc.," were "not allowed in a condemnation case" and asked the court for the following relief:

A. That the Court enter an order barring plaintiff from introducing evidence at trial pertaining to lost rental income, real property taxes, etc.; and

B. For such other and further relief as the nature of the case may require.

The Circuit Court held a hearing on the motion in limine on 3 March 2003, during which the trial judge made the following observation:

Basically what is before the court now is defendant's motion in limine, which I think, although it's not framed as a motion to dismiss, if I grant the motion in limine, I believe, ... it is, in effect, dismissing plaintiff's claim because the only element of damages alleged in this case are the lost profits and those items which are subject to [the SHA'S] motion in limine.

The court continued, reasoning that

basically this is an in rem action and the measure of damages is the value of property taken. I don't find any authority that the Court finds compelling to authorize a suit in these circumstances where the measure of damages is loss of rental income in the in rem proceeding.

Therefore, I am going to grant [SHA's] motion in limine as to any evidence as to lost profits and lost rental income for the period of time at issue in this case, which is prior to the actual condemnation being taken. So in effect, it is a legal motion to dismiss, and quite honestly, let the Court of Special Appeals tell us how we're supposed to proceed in these circumstances because this Court is just not clear, and I'm erring on the side of viewing the statute being the value of the land taken.

On 16 April 2003, the Circuit Court entered an order granting SHA's motion in limine and dismissing the case. Reichs Ford noted a timely appeal to the Court of Special Appeals. On 19 October 2004, in an unreported opinion, the Court of Special Appeals affirmed the judgment of the Circuit Court, holding that the proper vehicle for Reichs Ford to have proven and recovered the damages sought in the inverse condemnation suit was the settled action for condemnation. The intermediate appellate court found that, although the damages claimed by Reichs Ford may be recoverable in some instances, "[c]learly, the General Assembly intended for any diminution in value of property caused by the pre-condemnation activities of the condemnor be considered in computing fair market value" in the SHA's eminent domain action. The Court of Special Appeals noted also that, although the General Assembly has provided for recovery beyond the fair market value in certain specified circumstances, none of these circumstances was present in Reichs Ford's claim. Reichs Ford petitioned this Court for a writ of certiorari, which we granted, 385 Md. 162, 867 A.2d 1062 (2005), in order to consider the following question:

Did the Circuit Court err in precluding Reichs Ford from introducing evidence of lost rental income, real property taxes, etc. resulting from the SHA's activities prior to its exercise of the power of eminent domain?

II.

A.

The Circuit Court granted the SHA's motion in limine, treating it as a motion to dismiss for failure to state a cause of action. Md. Rule 2-322. The question before us thus becomes whether the Circuit Court erred in dismissing Reichs Ford's inverse condemnation...