City of Midwest City v. House of Realty, Inc.

• Court: Oklahoma Supreme Court
• Writing for the Court: EDMONDSON, J.
• Citation: City of Midwest City v. House of Realty, Inc., 2004 OK 56, 100 P.3d 678 (Okla. 2004)
• Decision Date: 29 June 2004
• Docket Number: No. 100064,100064
• Parties: CITY OF MIDWEST CITY, a body corporate and politic, and a duly constituted and qualified municipality, Plaintiff/Appellee, v. HOUSE OF REALTY, INC.; ROBERT J. BARTON; PAMELA L. BARTON-STOBER; DOUGLAS D. STOBER; KATHY L. GIVENS; SHARLETTE R. MADISON; JEFFREY C. TACKETT; HARLAN DRAKE; PHILLIS CASEY; KEITH CASEY; LARRY PHILLIPS; IRIS JONES; DONNA GUNTER; DIANE FRITH; RICHARD SPRIGGS; LEONARD SEWELL; ARTHUR LEWIS; DANNY WATSON; MYRON NICEWANDER; WILLIAM KLUKOSKE; LAWRENCE HAWKINS, Defendants/Appellants. CITY OF MIDWEST CITY, a body corporate and politic, and a duly constituted and qualified municipality, Plaintiff/Appellee, v. SHIRLEY A. "GOETSCH" BARTON, Trustee of the Shirley A. "Goetsch" Barton Revocable Trust, dated September 23, 1992; ROBERT J. "BOB" BARTON, Trustee of the Robert J. "Bob" Barton Revocable Trust, dated September 23, 1992, Defendants/Appellants.

2004 OK 56

100 P.3d 678

CITY OF MIDWEST CITY, a body corporate and politic, and a duly constituted and qualified municipality, Plaintiff/Appellee, v. HOUSE OF REALTY, INC.; ROBERT J. BARTON; PAMELA L. BARTON-STOBER; DOUGLAS D. STOBER; KATHY L. GIVENS; SHARLETTE R. MADISON; JEFFREY C. TACKETT; HARLAN DRAKE; PHILLIS CASEY; KEITH CASEY; LARRY PHILLIPS; IRIS JONES; DONNA GUNTER; DIANE FRITH; RICHARD SPRIGGS; LEONARD SEWELL; ARTHUR LEWIS; DANNY WATSON; MYRON NICEWANDER; WILLIAM KLUKOSKE; LAWRENCE HAWKINS, Defendants/Appellants.

CITY OF MIDWEST CITY, a body corporate and politic, and a duly constituted and qualified municipality, Plaintiff/Appellee, v. SHIRLEY A. "GOETSCH" BARTON, Trustee of the Shirley A. "Goetsch" Barton Revocable Trust, dated September 23, 1992; ROBERT J. "BOB" BARTON, Trustee of the Robert J. "Bob" Barton Revocable Trust, dated September 23, 1992, Defendants/Appellants.

No. 100064

Supreme Court of Oklahoma

Decided: June 29, 2004

James R. Waldo, Mock Schwabe, Waldo, Elder, Reeves & Bryant, Oklahoma City, Oklahoma, for Plaintiff/Appellee.

Katherine E. F. Bolles, City Attorney, City of Midwest City, Midwest City, Oklahoma, for Plaintiff/Appellee.

Terry Guy Shipley, Norman, Oklahoma, for Defendants/Appellants.

EDMONDSON, J.

¶1 The central issue in this controversy is whether a municipality's authority to condemn property for economic redevelopment and blight removal is limited to special statutes expressly giving such authority, or in the alternative whether a municipality may condemn property for blight removal and economic development pursuant to a general power of eminent domain. In this controversy a municipality and a public trust have jointly created, funded, and operated an economic redevelopment project that included the removal of blighted property. We hold that a municipality may not use a general power of eminent domain for the purpose of economic development and blight removal when it is acting jointly with a public trust. This is so because the Legislature has provided specific procedures for economic redevelopment and blight removal by the joint conduct of municipalities and public trusts.

¶2 The City of Midwest City and the Midwest City Memorial Hospital Authority have a joint plan to redevelop approximately eighty acres of land on S.E. 29th Street in Midwest City. The eighty acres consist of approximately two-hundred separate parcels known as the City of Midwest City Downtown Redevelopment or "Project Area." Midwest City Hospital Authority agreed to advance funds to the City in an amount not to exceed $30,000,000 (thirty million dollars) for acquiring the property necessary for redevelopment. The members of the City Council for Midwest City are also the Trustees of the Midwest City Memorial Hospital Authority.

¶3 The Authority provides funds to Midwest City to acquire title to some of the property using condemnation proceedings. Once the City obtains the property it transfers title to the Hospital Authority. The Hospital Authority has entered into a contract with a private developer. That contract provides that the Hospital Authority will ground lease the Project Area, which will then be subleased to tenants, primarily retail establishments. In summary, the redevelopment is a project of the Midwest City Memorial Hospital Authority, and the City is exercising a power of eminent domain to supply property to the Authority in those circumstances where the landowners decline to sell their property.

¶4 The House of Realty, Inc., declined the offer made by Midwest City for its property. The offer did not include any relocation expenses or business losses. The House of Realty has been located in its present location near the corner of South Air Depot and 29th Street for more than thirty years. In an effort to stay at its location near Tinker Field, House of Realty offered to transfer title to all of its property, except for its office building, and then remodel that building to be consistent with the architecture of the new construction. House of Realty also offered to add parking and storage areas, and to make other improvements consistent with the new construction and the Project. The City Manager of Midwest City initially expressed approval of this plan, but the City of Midwest City subsequently rejected this offer.

¶5 The House of Realty provides rental services to military and other personnel employed at Tinker Field. The parties stipulated that these rental services constitute a substantial part of the total business of House of Realty, and that "Relocation of their offices would be ruinous to their business of providing rental services to military and other personnel who work at Tinker Field." This military facility is located south of 29th Street, and one of its entrances is located on South Air Depot, a short distance from the House of Realty. The City has stipulated that its officials have "searched the entire City for a comparable location [to be occupied by the House of Realty] and have found none." A portion of the property the City seeks to condemn is also used by a restaurant.

¶6 Midwest City brought a condemnation proceeding against the House of Realty, Inc. (Landowners). The City's petition to condemn the property stated that "Plaintiff has deemed advisable and necessary to own, in fee simple, certain private properties for economic development purposes and uses incidental thereto." Attached to the City's Petition is a Resolution stating that "economic development is a legitimate public purpose for which municipalities can condemn private property."¹ Both Petition and Resolution are silent on whether the property the City seeks to condemn is blighted, or if it possesses some attribute justifying the exercise of an eminent domain power other than economic development. Two months later the City filed an amended petition stating the same language that certain private properties were necessary for economic development purposes.

¶7 The City argued that it could exercise a general power to condemn lands pursuant to 27 O.S.2001 § 5,² and that its stated purpose of economic development was a public purpose that justified the exercise of such power. Commissioners were appointed to appraise the property. Midwest City filed a brief in support of its motion to instruct Commissioners, and stated that it was relying upon 11 O.S.2001 § 22-105³ as authority for eminent domain, and further argued that 11 O.S.2001 § 22-104⁴ did not apply.

¶8 Landowners argued that the City possessed an eminent domain power to take their land for economic redevelopment if the City exercised such power pursuant to the Urban Renewal Act (11 O.S.2001 §38-101-§38-123), or the Neighborhood Redevelopment Act (11 O.S.2001 §40-101-§40-115). Landowners argued that the City had not followed the Neighborhood Redevelopment Act, that 27 O.S.2001 § 5 did not provide authority for the City to condemn property for economic redevelopment, that pursuant to 11 O.S. 2001 § 22-104(3) Landowners were entitled to additional compensation (including business losses and relocation expenses), and that the City had not met requirements for condemning the property. Midwest City disagreed and stated that it relied upon 27 O.S.2001 § 5 as authority to condemn the property. The City stated that it need not follow the Urban Renewal Act or the Neighborhood Redevelopment Act.

¶9 On January 25, 2002, an evidentiary hearing was held in the District Court on the motion for, and objection to, instructions to the Commissioners. The testimony of the Development Services Director for the City of Midwest City described the project. When asked why the City "elected not to follow any of the special statutes," he explained that one reason was that the Authority was providing a source of funding for the City. His testimony also revealed that the Urban Renewal and Neighborhood Redevelopment Acts have procedures that involve certain public hearings, and the City would be required to make certain determinations of conditions of the property in order to officially determine that it was blighted for the purposes of those statutes. Hearings and a determination that blight was present would, pursuant to these special statutes, precede any condemnation proceedings in a District Court.

¶10 The Development Services Director stated that the City decided to develop the property in the manner it did because the City thought that economic development was a legitimate public function, the Hospital Authority was making funds available for the project, and the property didn't meet all of the definitions for blighted conditions. The Director agreed with counsel that Urban Renewal or Neighborhood Redevelopment Acts have procedures that allow the public to be involved with the process that determines whether property is blighted. He then explained that the City did give notice to the public of its meetings on the project. He stated that people attending the meetings would have known that the City "was acquiring property in the area."

¶11 In summary, the City argued that economic redevelopment was a public purpose, and that a municipality such as Midwest City could exercise eminent domain for a public purpose. Thus, according to the City, it could exercise eminent domain to condemn property if the purpose of the taking was economic development. The City argued that acts such as the Urban Renewal Act or the Neighborhood Redevelopment Act were possible alternatives for municipalities to use in redevelopment, but neither were required when the City itself, as opposed to a public trust, was the entity exercising eminent domain. Landowners asserted that specific statutes on economic development must be followed by a municipality when it sought to exercise eminent domain for economic development.

¶12 In March of 2002 the Report of Commissioners was filed, and they determined that just compensation for the condemned property was $375,000.00. Landowners objected...