MICH. DEPT. OF TRANSP. v. Haggerty Corridor Partners Ltd. Partnership

• Decision Date: 15 July 2005
• Docket Number: Docket No. 124765. Calendar No. 1.
• Citation: 700 N.W.2d 380,473 Mich. 124
• Parties: MICHIGAN DEPARTMENT OF TRANSPORTATION, Plaintiffs-Appellee, v. HAGGERTY CORRIDOR PARTNERS LIMITED PARTNERSHIP, Paul D. Yager, trustee, also known as Paul D. Yeger, and Neil J. Sosin, Defendants-Appellants.
• Court: Michigan Supreme Court

700 N.W.2d 380

473 Mich. 124

MICHIGAN DEPARTMENT OF TRANSPORTATION, Plaintiffs-Appellee, v. HAGGERTY CORRIDOR PARTNERS LIMITED PARTNERSHIP, Paul D. Yager, trustee, also known as Paul D. Yeger, and Neil J. Sosin, Defendants-Appellants.

Docket No. 124765. Calendar No. 1.

Supreme Court of Michigan.

Argued January 12, 2005.

Decided July 15, 2005.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, Patrick Isom, Assistant Attorney General in Charge, and Raymond O. Howd, First Assistant Attorney General, Lansing, for the plaintiff.

Plunkett & Cooney, P.C. (by Mary Massaron Ross), Detroit, Ackerman & Ackerman, P.C. (by Alan T. Ackerman and Darius W. Dynkowski), Troy, and Jaffe, Raitt, Heuer & Weiss, P.C. (by Brian G. Shannon and Mark P. Krysinski), Southfield, for the defendants.

YOUNG, J.

Defendants own land that was partially taken in condemnation proceedings initiated by plaintiff. At issue is whether the trial court properly allowed defendants to present, in support of their proffered calculation of just compensation, evidence that their property had been rezoned from residential to commercial after the taking.

We conclude that the evidence of the posttaking rezoning was irrelevant to the issue of the condemned property's fair market value at the time of the taking. Because the trial court abused its discretion in admitting this evidence, and because the error was not harmless, we affirm the judgment of the Court of Appeals, which reversed the jury's verdict and remanded the case for further proceedings.

I. FACTS AND PROCEDURAL HISTORY

Defendant Haggerty Corridor Partners Limited Partnership owned approximately 335 acres of an undeveloped tract of land in Novi, Michigan, which it had assembled for the future purpose of building a high-tech office park. Plaintiff, the Michigan Department of Transportation (MDOT), sought to condemn approximately fifty-one acres of this property for construction of a portion of the M-5 Haggerty Road Connector in the city of Novi. As required under M.C.L. ? 213.55,¹ MDOT provided defendants with a good-faith offer of $2,758,000 for the property, based on its then-applicable single-family and agricultural zoning classification.² Defendants, believing that the property's "highest and best use"³ was commercial rather than residential, refused MDOT's offer.

In December 1995, MDOT initiated an eminent domain proceeding under the Michigan Uniform Condemnation Procedures Act (UCPA)⁴ to condemn the property. At trial, as might be expected, the parties presented widely divergent evidence with respect to just compensation.

Consistent with its theory that the highest and best use of the property was residential, MDOT presented evidence that, at the time of the taking, the property was not likely to be rezoned to permit the commercial use proposed by defendants.⁵ MDOT's appraiser testified that it was economically feasible to develop the parcel, both before and after the taking, as a residential subdivision, and that, in 1995, it was not reasonably possible that the land would be rezoned for commercial use. On the basis of an estimation that defendants' land would support development of fifty-four residential lots, MDOT's appraiser testified that the difference in the value of defendants' property before and after the taking amounted to $1,415,000.

Defendants, on the other hand, sought to establish that they, along with other knowledgeable participants in the commercial real estate market, knew at the time of the December 1995 taking that the property was likely to be rezoned to allow for its planned use as an office park.⁶ Defendants' appraiser testified that the land could not have been profitably developed as residential property, and that rezoning was imminent at the time of the taking. Against this backdrop, defendants' appraiser arrived at a just compensation figure of $18.6 million.

Consistent with their theory that the fair market value of the residential property on the date of the taking was increased because of the realistic prospect that it would soon be rezoned commercial, defendants sought to introduce evidence of the fact that the property had, in fact, been later rezoned. Defendants wished to show that in May 1998, approximately two and one-half years after the taking occurred, defendants' property was rezoned for office/service/technology (OST) uses. MDOT filed a motion in limine to bar this evidence, arguing that it was irrelevant to the fair market value of the property as of the date of the taking. The trial court denied MDOT's motion. Additionally, the trial court refused to grant MDOT's alternative request to present evidence that the rezoning took place solely as a result of the taking.⁷

At MDOT's request, the jury was taken on a bus tour of defendants' property. The parties vigorously dispute what the jurors saw on this tour. MDOT contends that the jurors saw mainly an undeveloped tract with some commercial buildings under construction on a portion of the property. Defendants contend, on the other hand, that the jurors saw many completed office buildings on the developed portion of the property and that only a small portion of the property remained undeveloped. There is no record to support either party's contention.

The jury was instructed that fair market value must be assessed as of the date of the condemnation, and not as of some future date. The jury was further instructed, with respect to the zoning reclassification, that

if there was a reasonable possibility, absent the threat of this condemnation case, that the zoning classification would have been changed, you should consider this possibility in arriving at the value of the property on the date of the taking.

The jury determined that just compensation was owed to defendants in the amount of $14,877,000.

On appeal to the Court of Appeals, MDOT contended that the trial court erred in denying its motion to exclude evidence of the posttaking rezoning decision and in further prohibiting MDOT from introducing evidence establishing that the zoning change was caused by the condemnation itself. The Court of Appeals majority agreed that the trial court abused its discretion in allowing the jury to consider evidence of the posttaking zoning change and that the error was not harmless:

The subject property was to be valued "as though the acquisition had not been contemplated." M.C.L. ? 213.70(1). Plaintiff attempted to introduce evidence establishing that the subject property was rezoned because of the condemnation. If so, the actual rezoning was irrelevant. Indeed, the value of condemned property should have been determined without regard to any enhancement or reduction of the value attributable to condemnation or the threat of condemnation. State Highway Comm. v. L & L Concession, 31 Mich. App. 222, 226-227, 187 N.W.2d 465 (1971). Defendants were not entitled to the enhanced value that resulted from the condemnation project, only the value of the property at the time of taking. In re Urban Renewal, Elmwood Park Project, 376 Mich. 311, 318, 136 N.W.2d 896 (1965). Although the potential for rezoning on the date of taking was properly considered, evidence of the actual zoning change was irrelevant to the value of the property on the date of taking and should not have been disclosed to the jury. Moreover, we agree with plaintiff's contention that the evidence improperly contributed to the jury's finding that the rezoning was reasonably possible. At the very least, the improperly admitted evidence tainted the jury's resolution of the "reasonable possibility" question of fact. Therefore, we conclude that the trial court abused its discretion in admitting the evidence.

We reject defendants' contention that the evidentiary error was harmless. Had the evidence not been admitted, it is unlikely that the jury would have been exposed to the evidence that defendants now claim renders the improperly admitted evidence harmless.⁸ Consequently, we deem it appropriate to reverse and remand for further proceedings.⁹ [Unpublished opinion per curiam of the Court of Appeals, issued July 22, 2003 (Docket Nos. 234099, 240227), 2003 WL 21699884 at *2.]

The dissenting judge opined that the evidence was properly admitted:

As the trial court concluded, evidence of the actual rezoning had the tendency to make the existence of the possibility of rezoning more probable than it would be without the evidence. MRE 401. More importantly, however, is the fact that there is no Michigan case on point regarding the admissibility of the subsequent fact of rezoning, and our Sister States' case law provide [sic] divergent views. However, one respected source (also cited by the trial court) indicates that "[t]he fact that, subsequent to the taking, the zoning ordinance was actually amended to permit the previously proscribed use has been held to be weighty evidence of the existence (at the time of the taking) of the fact that there was a reasonable probability of an imminent change." 4 Nichols, Eminent Domain (3d ed.), ? 12C.03[3]. Accordingly, it cannot be said that the decision to admit the evidence was an abuse of discretion when no prior case has so held, and there is respected authority that favors the ruling made by the trial court.

Moreover, even if the admission of the evidence was an abuse of discretion, it was harmless error in light of the jury instructions and other competent, admissible evidence that allowed the jury to properly conclude that rezoning was a reasonable possibility. Here, the jury was presented with sufficient evidence regarding whether there was a reasonable possibility that the subject property would be rezoned, independent of the evidence of the actual rezoning, a fact which the majority concedes. Further, the trial court properly instructed the jury on the principles of condemnation law set forth by the majority, and repeatedly stressed the principle that the jury must value the property as

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