Redevelopment Authority of City of Erie v. Owners or Parties in Interest

• Decision Date: 16 February 1971
• Parties: REDEVELOPMENT AUTHORITY OF the CITY OF ERIE v. OWNERS OR PARTIES IN INTEREST.
• Court: Pennsylvania Commonwealth Court

Page 244

274 A.2d 244

1 Pa.Cmwlth. 378

REDEVELOPMENT AUTHORITY OF the CITY OF ERIE v. OWNERS OR PARTIES IN INTEREST.

Commonwealth Court of Pennsylvania.

Feb. 16, 1971.

Irving Murphy, Erie, for appellant.

John M. Quinn, Erie, for appellee.

Before BOWMAN, President Judge, and CRUMLISH, KRAMER, WILKINSON, MANDERINO and MENCER, JJ.

MENCER, Judge.

This appeal involves the condemnation of a three-story building located at 924 State Street in the main business district of Erie, Pennsylvania. The Redevelopment Authority of the City of Erie filed, in connection with this property, a Declaration of Taking on December 13, 1968. Preliminary objections ¹ challenging the taking of the property were filed by the owners, hereinafter referred to as the appellants, but they were dismissed by the Court of Common Pleas of Erie County. We believe the preliminary objections should have been sustained.

The property in question was purchased by appellants in 1954. At that time, and now, their neighbor to the north was a Murphy's Five and Ten Cent Store. Their neighbor to the south was a three-story structure owned by Mr. Achilles Pulakos, hereinafter referred to as Pulakos, and leased by him to a family corporation, known as Pulakos' Candies, for use as a retail candy store. These properties are located on the west side of State Street, and both the appellants' property and the property of Pulakos are small lots with frontages of twenty feet on State Street and depths of 147 feet.

Appellants' property was originally leased for a retail drug store and later subleased to a discount drug chain for the same purpose. The first floor was used as a drug store and the second and third floors were vacant.

In October of 1962, the City Planning Commission of the City of Erie certified the Downtown Erie Project Area, which included appellants' property, as a blighted area. The Council of the City of Erie, pursuant to the Urban Redevelopment Law of Pennsylvania, Act of May 24, 1945, P.L. 991, 35 P.S. § 1701, as amended, directed the Redevelopment Authority of the City of Erie to prepare a Redevelopment Proposal for the elimination of the blighted and substandard conditions in the project area. The proposal that was developed, with the help of a firm of expert planners, provided that appellants' property, the Pulakos property, and several other properties, be assembled to provide the needed land area for the construction of a downtown hotel. If this proposal had been followed, the appellants likely would not have had a basis to oppose the condemnation of their property because, as was said in Schenck v. Pittsburgh, 364 Pa. 31, 35--36, 70 A.2d 612, 614 (1950), '* * * in the absence of any indication that the Commission did not act in good faith or was wholly arbitrary in certifying the area designated by it as blighted, its certification to that effect is not subject to judicial review,' and, 'since (the Urban Redevelopment Law) gives the power of eminent domain to the Urban Redevelopment Authority, it is for that agency, and not for the courts, to determine whether or not the power should be exercised in this particular instance. It has been held in many cases that where the right of eminent domain is vested in a municipality, an administrative body, or even a private corporation, the question as to whether the circumstances justify the exercise of the power in a given instance is not a judicial one, at least in the absence of fraud or palpable bad faith.' See also: Schwartz v. Urban Redev. A. of Pgh., 416 Pa. 503, 206 A.2d 789 (1965).

It is the phrase 'palpable bad faith' that is the root consideration raised in this appeal. These words have vital meaning when used as a limitation on the power of a governmental authority to condemn property. Bad faith is generally the opposite of good faith and, under the factual situation of the present case, implies a tainted motive of interest. Bad faith becomes palpable when such motive is obvious or readily perceived. The courts have the responsibility to see that an authority has not acted in bad faith, and that property be taken by eminent domain only to the extent reasonably required for the purpose for which the power is exercised.

Activities of public authorities should be subject to judicial scrutiny. We agree with what Justice Roberts said in Price v. Philadelphia Parking Ahthority, 422 Pa. 317, 329, 221 A.2d 138, 145 (1966): 'As public bodies, they exercise public powers and must act strictly within their legislative mandates. Moreover, they stand in a fiduciary relationship to the public which they are created to serve and their conduct must be guided by good faith and sound judgment. See Schwartz v. Urban Redevelopment Auth., 411 Pa. 530, 536, 192 A.2d 371, 374 (1963); Heilig Bros. Co. Inc. v. Kohler, 366 Pa. 72, 77--78, 76 A.2d 613, 616 (1950). The mushrooming of authorities at all levels of government and the frequent complaint that such bodies act in an arbitrary and capricious manner in violation of existing law dictate that a check rein be kpet upon them. Schwartz v. Urban Redevelopment Auth., 411 Pa. 530, 536, 192 A.2d 371, 374 (1963); Keystone Raceway Corp. v. State Harness Racing Comm., 405 Pa. 1, 5, 173 A.2d 97, 99 (1961).'

In the instant case the original proposal was changed. What caused the change to be made? An examination of the record discloses that Pulakos decided that he would fight the taking of his property. He was determined to show the Redevelopment Authority that acquiring his property was not going to be as easy as taking candy from a baby. He had a recipe which he believed would produce for himself a sweet result. The chief ingredient that he had at his disposal was political influence. Mr. Adolph Agresti, Vice Chairman of the Authority, testified that Pulakos (and family) 'had doors open to him.' A review of what transpired to satisfy Pulakos is indeed revealing of how the doors swung open to Pulakos and shut to appellants.

The Authority began by offering Pulakos several other downtown properties but none was acceptable to him. If this was not the answer, what would be satisfactory to Pulakos? How about deleting appellants' lot from the property being assembled for hotel development and selling it to Pulakos? If this could be accomplished, then Pulakos could merely move his candy store next door and everything would be dandy.

The mix was started in 1966 by John Corapi, Executive Director of the Authority, travelling to Memphis, Tennessee, in an effort to convince Holiday Inns that the hotel could be built in Erie without using appellants' property. The effort was unsuccessful. The Authority next turned its attention to Metropolitan Hotels, Inc., of Baltimore, Maryland. The Vice Chairman, the Executive Director and the Assistant Director of the Authority, together with the Mayor of the City of Erie, travelled to Baltimore with Gus Pulakos and his son, Achilles Pulakos. The testimony of Adolph Agresti, Vice Chairman of the Authority, is most enlightening as to what occurred at the meeting in Baltimore: 'Q. Mr. Agresti, coming to the events which lead to the deletion of the Kaufman parcel ² from the transit housing offer, would you explain in your words what occurred from your personal knowledge? A. Well, during the interim from 1966 to the present time, or 1968, the past two years we were fortunate enough to have the Hilton Hotel or the Statler Hilton Hotel people show an interest in the location on Tenth and State, and the developers are called the Metropolitan Hotel in Baltimore. They have the franchise and they have, we've had negotiations with them for several months, eight or ten months, in regards to the location, the size of the land and number of rooms, and so forth, and in the meantime we tried to negotiate the twenty feet for Pulakos and we were not successful. So, With pressures to bear, whether it be members of Council or the Mayor, they prevailed on the Authority that we should probably set up a meeting in Baltimore with the hotel people. Q. Were you present at that meeting? A. Yes. Q. Were you the Authority representative at that meeting? A. I was the only member of the Authority with our executive directors. Q. Continue. A. And the Mayor was at the meeting with the two Pulakos, Gus and Achilles. We had a meeting with the staff of the Metropolitan Hotels, Inc. and some of the Hilton officials and we met with them most of the day, and at that time they showed us a prototype that would be feasible for Erie, and when we approached them on the subject of deleting the twenty feet For Pulakos, they were upset about this because they felt that they needed as many sleeping rooms as possible, and at the present time they were planning on 250 sleeping rooms and deleting this twenty feet, they would sacrifice 18 sleeping rooms, and this, they did not like, and They thought the Authority was wrong to allow this twenty feet because They needed all the land they wanted, but Because of the pressures being put upon them, they were willing to concede and modify their plans and be satisfied with 232 sleeping rooms instead of the 250, and, of course, they wanted an adjustment in the land price. Q. Are you aware of the dollar amount of that adjustment? A. Well, at the time of the first proposal, six months prior to that, the offer was a $125,000 from the Metropolitan Hotels and when their preferential treatment expired, they gave us another offer which was only $100,000.' (Emphasis supplied.)

Thus, not having been successful in previous negotiations, the Authority and the Mayor applied pressure to force Metropolitan Hotels, Inc., to modify its plans with an adjustment of the land price offer from $125,000 to $100,000. The Pulakos interests were to be served at the expense of the public and of the appellants.

Much paperwork and backtracking then had to be done to move the plan from the back burner of the Baltimore meeting to the front burner of legal...