Detroit v. Detroit Plaza Ltd. Partnership

Decision Date19 December 2006
Docket NumberDocket No. 258479.
Citation273 Mich. App. 260,730 N.W.2d 523
PartiesCITY OF DETROIT, Plaintiff-Appellant, v. DETROIT PLAZA LIMITED PARTNERSHIP, Defendant-Appellee, and Bank One Michigan, J & J Slavik, Inc., James D. Blain, Beztak II Ltd. Partnership, Griswold Holding Company, McCarthy Marine, Inc., Detroit Bulk Storage, Inc., and Mayfair Associates Ltd. Partnership, Defendants.
CourtCourt of Appeal of Michigan — District of US

Williams Acosta, P.L.L.C. (by Avery K. Williams and Ruben Acosta), Detroit, for the city of Detroit.

Steinhardt Pesick & Cohen, Professional Corporation (by Jerome P. Pesick, H. Adam Cohen, and Jason C. Long), Southfield, for Detroit Plaza Limited Partnership.

Before: WHITBECK, C.J., and HOEKSTRA and KIRSTEN FRANK KELLY, JJ.

HOEKSTRA, J.

In this action to determine just compensation for property condemned under the provisions of the Uniform Condemnation Procedures Act (UCPA), MCL 213.51 et seq., plaintiff City of Detroit (the City) appeals as of right a judgment, entered following a jury verdict, requiring it to pay defendant Detroit Plaza Limited Partnership (DPLP) just compensation in the amount of $25 million. The City also challenges the trial court's order fully reimbursing DPLP for its attorney and expert fees. We affirm.

I. Basic Facts and Procedural History

This case arises from efforts by the City to jump-start redevelopment of an area of the city known as "Rivertown." According to the City, although located just east of its burgeoning central business district (CBD), sustainable commercial development of this substantially industrial area had for years been hampered by cement-batching operations located along the neighborhood's Detroit River frontage. In an effort to alleviate the disabling effects of these operations and reclaim the waterfront in that area, the Economic Development Corporation of the City of Detroit (EDC), in approximately 1996 or 1997, began talks with several area cement companies regarding movement of their operations to another part of the city. As part of these talks, the EDC entered into nonbinding agreements with the Holman and Lafarge cement companies, wherein the parties agreed to make a good-faith effort to work toward that goal. At about that same time the EDC, through the efforts of its president and chief executive officer Beth Duncombe, began talks with two of DPLP's three general partners, James Blain and Ronald Slavik, regarding the City's purchase of a 6.3 acre parcel owned by DPLP for use as public parkland. However, when city officials announced plans to site casino-gaming operations in the Rivertown area in 1998, talks to purchase the parcel, which is located south of Atwater Street along the Detroit River immediately east of the Lafarge cement-batching operations, stalled.

Because the EDC was already working to reclaim the waterfront in the Rivertown area, the City combined its casino and waterfront plans into what became known as the Waterfront Reclamation and Casino Development Project. At the City's direction, the EDC drafted a plan for the combined project, which the City adopted on April 29, 1999, by way of a "Resolution of Necessity of the City Council of the City of Detroit for the Taking of Private Property for the Benefit and Use of the Public for the Waterfront Reclamation and Casino Development Project and other Municipal Public Purposes." This resolution defined the project area and authorized the EDC to negotiate and purchase land for the combined projects on behalf of the City. The resolution made clear, however, that the waterfront reclamation portion of the project entailed only property south of Atwater Street, which was to be used for public parkland, while development of the casinos was to be confined to property located north of Atwater.

After obtaining appraisals and environmental reports for the various properties within the project area defined by the resolution, the EDC began negotiating the purchase of the properties from the individual land owners. According to Duncombe, the EDC was able to freely purchase some, but not all, of the desired properties. The City thus instituted condemnation proceedings against the remainder of the properties, as directed by the April 1999 resolution of necessity. Those actions were, however, dismissed for lack of subject-matter jurisdiction resulting from the failure of the City's good-faith offers to conform to the requirements of the UCPA. Rather than institute new actions following the dismissal, the City returned to the process of acquiring the remaining properties through negotiated purchases. When attempts to purchase the subject property failed, the City filed the instant suit for condemnation of the DPLP parcel on September 21, 2000.

Although it initially challenged the necessity of the taking, DPLP ultimately withdrew that challenge and the matter proceeded to trial on the issue of just compensation. The City's expert appraiser, Thomas Walsh, testified at trial that the parcel held a fair market value of approximately $50 per square foot, or $13,712,500, on the date of valuation. In support of his valuation, Walsh indicated that he believed the cement operations and poor infrastructure in the area rendered development of the property on the date of valuation, i.e., September 21, 2000, infeasible, and that because the area surrounding the subject property was largely industrial, with many vacant and dilapidated buildings and worn streets, the "highest and best use of the property [was as] investment land for future development." Walsh further testified that in order to get the "same neighborhood effect," he limited his search for comparable sales on which to base his valuation to properties located in the Rivertown area, which he defined as the area east of the Renaissance Center to the Belle Isle Bridge.

In contrast, DPLP's expert appraiser, David Burgoyne, testified that he was not at all concerned about the cement operations in the Rivertown area, including those conducted by the Lafarge cement company immediately next door to the subject property. Rather, Burgoyne testified that given its riverfront location just two blocks east of the Renaissance Center on the edge of the CBD, and its inclusion within the City's Downtown Development District (DDD), the highest and best use of the DPLP property as of September 21, 2000, "was for a major mixed use development that would take advantage of the subject location close to the Renaissance in the DDA [sic] and particularly on the river."

Burgoyne determined the value of the subject property to be $115 per square foot, for a total parcel valuation of $31.5 million, which he explained was "[b]ased upon the fact that the property has substantial river frontage, located in the downtown development authority, zoned for major development, located in the shadow of the Renaissance two blocks away, [and] has adequate size for major development without a need for assemblage ...." Regarding the comparable sales used by him in reaching his valuation, Burgoyne testified that because of the "uniqueness of [the subject property's] specific location," including its position within the DDD, he believed it was necessary to consider more than just the specific neighborhood in which the property is located. Thus, unlike Walsh, he looked to the "immediately surrounding CBD and downtown" for comparable sales on which to base his valuation of the subject property.

Burgoyne further testified that after reaching his conclusion regarding value, he found other transactions that provided support for his valuation of $115 per square foot. Regarding these transactions, which Burgoyne described as "confirming sales," Burgoyne explained that the

[C]ity purchased some additional property shortly after the date of valuation in the vicinity of the subject property largely to the east of the subject property in Rivertown. At the time there . . . originally had been a condemnation lawsuit which had been dismissed and the [C]ity was purchasing property consistent with the designated casino site being in the eastern or front end river town; these sales were made outside of the context of the condemnation lawsuit....

* * *

... and were purchased by the city of Detroit in the close vicinity of the subject property albeit for casinos.

Burgoyne testified that he considered several of these sales, all of which occurred in the Rivertown area during the spring or summer of 2001, as supportive of his $115 per square foot valuation. Burgoyne further testified that the City also paid $100 per square foot for the eight-acre Lafarge property located immediately to the west of the subject property, in addition to agreeing that Lafarge would be given another city-owned parcel further south in an industrial area of the Detroit riverfront, on which to relocate its batching operations.

At the close of trial, the jury determined the fair market value of the property on September 21, 2000, to be $25 million, on which the trial court entered judgment. DPLP thereafter successfully moved to recover the attorney and expert fees incurred by it in defending the condemnation suit. This appeal followed.

II. Analysis
A. Evidentiary Issues

The City challenges as erroneous a number of the trial court's rulings regarding the evidence admissible in this matter on the question of just compensation. In resolving these challenges on appeal, we adhere to the following principles of law generally applicable to condemnation cases.

When the government takes private property pursuant to its constitutional power of eminent domain, see Const. 1963, art. 10, § 2, it must do so for a public use and must pay to the property owner just compensation—an amount that takes into account all factors relevant to [the] market value of that property Silver Creek Drain Dist. v. Extrusions Div., Inc., 468 Mich....

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