Norfolk Housing v. C and C Real Estate, Record No. 051708.

• Decision Date: 08 June 2006
• Docket Number: Record No. 051708.
• Citation: 630 S.E.2d 505
• Parties: NORFOLK REDEVELOPMENT AND HOUSING AUTHORITY v. C AND C REAL ESTATE, INC.
• Court: Virginia Supreme Court

630 S.E.2d 505

NORFOLK REDEVELOPMENT AND HOUSING AUTHORITY v. C AND C REAL ESTATE, INC.

Record No. 051708.

Supreme Court of Virginia.

June 8, 2006.

COPYRIGHT MATERIAL OMITTED

William G. Broaddus (Robert L. Hodges, Richmond; James L. Chapman, IV; Donald C. Schultz, Norfolk; Shawn A. Voyles, Richmond; McGuireWoods; Crenshaw, Ware & Martin, on briefs), for appellant.

Joseph T. Waldo (Henry E. Howell, III, Norfolk; Waldo & Lyle, on brief), for appellee.

Amicus Curiae: City of Norfolk (Bernard A. Pishko; Wayne Ringer, Norfolk, on brief), in support of appellant.

Present: All the Justices.

OPINION BY Justice ELIZABETH B. LACY.

This appeal pertains to the dismissal of a housing authority's petition to acquire property by condemnation pursuant to the authority's conservation plan.

Code § 36-49.1 authorizes localities to prepare, adopt, and execute conservation plans to identify and rehabilitate "slum, blighted, deteriorated or deteriorating areas" within the locality. Pursuant to this authority, the Norfolk City Council adopted a resolution in 1987 commissioning the Norfolk Redevelopment and Housing Authority (the Authority) to examine blighted and deteriorating land in the North Church Street area of Norfolk to determine whether conservation was possible. The following year, after a public hearing, the City Council adopted the conservation plan (the Plan) recommended by the Authority. See Code § 36-49.1(8).

The Plan allowed the Authority to acquire property included in the conservation area by exercising the power of eminent domain. The Property Acquisition section of the Plan sets out the procedure for acquiring properties through eminent domain and references a "Boundary and Land Acquisition Map" that identifies properties to be acquired.

The Plan stated that there were "two large junk yards in the area which add to the blighted condition of the district." The Boundary and Land Acquisition Map identified those two parcels as property "To Be Acquired" under the plan. C and C Real Estate, Inc. (C & C) owns one of the parcels identified in the Plan. C & C purchased this property (the Property) in 1997 and leased it to Downtown Used Auto Parts for use as an automobile salvage yard. Downtown Used Auto Parts originally leased the Property in 1992 from the former owner, who had also operated a salvage yard on the Property.

In 1990, the Authority sent a notice to correct the conditions considered as deficiencies to the owner of the second junkyard identified in the Plan; however, it sent no such notice to the owner of the Property now owned by C & C. The Authority did notify C & C of its intent to acquire the Property by letter dated December 1, 1999. During this time period, the Mid-Atlantic Coca-Cola Bottling Company (Coca-Cola) began discussions with the Authority about the possibility of an expansion of its operations in the Mid-Town area. Coca-Cola suggested that the City convert the Property into a parking lot that could be used by Coca-Cola's employees. No action was taken on Coca-Cola's suggestions at that time.

By letter dated August 16, 2000, the Authority offered to purchase the Property for $400,000. C & C did not reply to the offer for over two years. During the interim, the owner of a neighboring property successfully petitioned the City to close a part of Armistead Avenue in an area adjacent to the Property. C & C acquired part of the closed street from the City during the first half of 2002 and, in November of that year, rejected the Authority's purchase offer and asked that the Authority "proceed to file the Petition in Condemnation." The following year, on July 22, 2003, the Authority sent another letter offering to buy the Property for $560,000. C & C again refused the offer. On October 27, 2003, the Authority passed a resolution authorizing the condemnation of the Property. The petition for condemnation was filed in the Circuit Court of the City of Norfolk on November 25, 2003.

Following an ore tenus hearing, the circuit court issued a letter opinion concluding that the Authority's condemnation petition should be dismissed because: (1) that part of the Plan purporting to authorize condemnation of property solely on a finding of blight or a blighting influence was invalid; (2) C & C did not receive a one-year notice to correct deficiencies to which it was entitled under the Plan; and (3) the Authority's 15-year delay in filing the condemnation proceeding raised due process concerns. The circuit court also held that Code § 36-49.2 does not prevent the Authority from using its condemnation power to acquire property designated as blighted pursuant to a conservation plan even if the property will be used for industrial purposes after rehabilitation. Following further briefing and argument of counsel, the circuit court entered a final order on May 12, 2005, incorporating its letter opinion and dismissing the Authority's condemnation petition. The Authority timely filed this appeal.

On appeal, the Authority raises eight assignments of error. Four of these challenge the findings made by the circuit court in conjunction with its conclusion that the Authority's condemnation action violated C & C's due process rights. Three assignments of error relate to the circuit court's interpretation and application of the Plan. Finally the Authority challenges the admission of certain expert testimony. Additionally, C & C assigns cross-error to the circuit court's holding that Code § 36-49.2 did not prohibit the Authority from using its eminent domain powers for acquiring property that will be used for industrial purposes. We will consider these issues in order.

THE AUTHORITY'S APPEAL

1. Due Process

The circuit court's conclusion that the Authority's attempt to take C & C's Property violated due process was based on the 15-year delay from the time the Authority made its finding of blight until it attempted to correct the blighted condition of the Property by filing the condemnation petition.¹ This delay, according to the circuit court, "argues strongly against" a finding that the elimination of blight was the "real reason" the Authority sought to acquire the Property. The circuit court further found that this delay gave rise to a "reasonable expectation" that the Authority would not take the Property and that the delay allowed C & C to expand its business while the Authority was insulated from paying for the "value of the ongoing business" in a condemnation proceeding. The Authority challenges each ground relied upon by the circuit court, arguing that the condemnation did not offend principles of due process because the passage of 15 years did not alter the reason for the taking, did not violate any limitations period, and would not result in unfair compensation for the Property to be taken. For the following reasons we agree with the Authority.

The due process clauses of the Constitutions of the United States and of the Commonwealth of Virginia prohibit the government from taking private property unless such property is taken for public use and the property owner receives just compensation for the property taken. U.S. Const. amend. V; Va. Const. art. 1, § 11; Kelo v. City of New London, ___ U.S. ___, ___ n. 1, 125 S.Ct. 2655, 2658 n. 1, 162 L.Ed.2d 439 (2005); State Highway & Transp. Com'r v. Linsly, 223 Va. 437, 443, 290 S.E.2d 834, 838 (1982).

Taking private property to stem blighting and deteriorating conditions is a public purpose. Mumpower v. Housing Authority, 176 Va. 426, 437, 11 S.E.2d 732, 735 (1940). A locality's determination pursuant to a conservation plan that property is blighted and subject to acquisition is a legislative act which, on review, is entitled to a strong presumption of validity. Runnels v. Staunton Redevelopment & Housing Authority, 207 Va. 407, 410, 149 S.E.2d 882, 884 (1966). The locality's determination may be set aside by a circuit court only on a showing that the locality acted arbitrarily. The burden is on the challenger to establish that the decision was invalid by clear and convincing proof. Id. In this case, C & C failed to carry that burden of proof.

As the circuit court noted, in 1988 the Authority determined that the Property was a blight and exerted a blighting influence on the area.² The owner of the Property at the time did not challenge that decision. The question before us then is whether a challenge to that determination arising many years later but before property has been acquired is resolved by examining the condition of the property at the time of the initial designation or at the time of acquisition. This is an issue of first impression for this Court. We conclude that while the original determination retains the strong presumption of validity attached to such legislative acts, the current status of the property must be considered when determining whether the original purpose of the acquisition remains viable at the time the condemnation occurs. This standard is dictated by the statutes governing conservation plans which allow the use of eminent domain only for the specific public purposes of eliminating deteriorating properties or arresting the blighting influence. If a property no longer meets that criteria, acquisition by condemnation pursuant to a conservation plan would no longer be authorized. See Code §§ 36-49.1, -50.1. Therefore, in this case, to rebut the presumption of validity, C & C bore the burden to show by clear and convincing evidence that the Property no longer was a blight or no longer exerted a blighting influence on the surrounding area.

The evidence relied upon by the circuit court to show a change in acquisition purpose included the Authority's discussions with Coca-Cola and improvements to the Property, including adding water and sewer service, cleaning up trash, painting and otherwise fixing one building while demolishing another, and erecting a fence limiting the visibility of the interior. The evidence of discussions...