Rhode Island Economic Dev. V. Parking Co.

• Decision Date: 23 February 2006
• Docket Number: No. 2004-357-Appeal.,2004-357-Appeal.
• Citation: 892 A.2d 87
• Parties: RHODE ISLAND ECONOMIC DEVELOPMENT CORPORATION v. THE PARKING COMPANY, L.P., et al.
• Court: Rhode Island Supreme Court

892 A.2d 87

RHODE ISLAND ECONOMIC DEVELOPMENT CORPORATION v. THE PARKING COMPANY, L.P., et al.

No. 2004-357-Appeal.

Supreme Court of Rhode Island.

February 23, 2006.

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Samuel D. Zurier, Esq., Providence, for Plaintiff.

Deming E. Sherman, Esq., The Parking Co., L.P., Providence, for Defendant.

Stephen E. Snow, Esq., Fleet National Bank, Fleet Real Estate, Inc., for Defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, and SUTTELL, JJ.

OPINION

Justice GOLDBERG, for the Court.

In this case the Supreme Court is confronted with the difficult balance between the constitutional rights of a property owner and the inherent power of the state in a condemnation proceeding: Is a property owner entitled to a hearing on whether a taking by eminent domain is for a public use before the property may be condemned by the state? We have before us a contentious struggle for control of a multimillion-dollar parking facility, known as Garage B, at Theodore Francis Green Airport (airport). The respondent-appellants, The Parking Company, L.P., Fleet National Bank and Fleet Real Estate, Inc., appeal from an order of the Superior Court granting a so-called quick-take condemnation of a temporary easement in Garage B, based on an ex parte petition by the petitioner-appellee, the Rhode Island Economic Development Corporation.

The Superior Court ordered the condemnation in accordance with the quick-take provisions of G.L.1956 § 42-64-9. On appeal, the respondent-appellants raise several challenges to the constitutionality of § 42-64-9 and also question whether, in fact, the taking was for a public use. For the reasons set forth herein, we vacate the condemnation order of the Superior Court.

Facts and Travel

The facts in this case are largely undisputed. In December 1986, the Rhode Island Department of Transportation (RIDOT), owner of the airport, entered into a concession and lease agreement (CLA) with Downing Airport Associates, L.P. (Downing). The CLA provided that Downing would build, on its adjacent land, a parking garage (Garage B), to service the airport, and, in return, Downing would be granted the exclusive right to operate Garage B and all other parking facilities at the airport for a term of twenty years.¹ The CLA also provided that, upon its expiration, Downing would convey Garage B to RIDOT for no further consideration. Further, the CLA guaranteed RIDOT an option to purchase Garage B, before the CLA expired, in accordance with an agreed upon fee schedule.²

Several years after the agreement was made final, the parties to the CLA changed; RIDOT transferred management authority of the airport to the Rhode Island Airport Corporation (RIAC), a public corporation organized as a wholly owned subsidiary of the Rhode Island Economic Development Corporation (EDC),³ and Downing eventually sold its interest to an entity that was renamed The Parking Company, L.P (TPC). Consequently, RIAC and TPC became the parties in interest to the CLA and in the case before this Court.⁴

During the late 1990's the airport experienced a period of rapid growth and great prosperity. As a result, RIAC and TPC formed several new strategic agreements to capitalize on the expanding market. For instance, two new parking facilities were proposed for the land immediately adjacent to the airport and Garage B. One facility was to be constructed by RIAC and managed by TPC in accordance with the CLA (Garage A).⁵ The other facility (Garage C) was to be constructed by a TPC affiliate, New England Parking Company, L.P. (NEP),⁶ and independently managed. However, NEP agreed to pay RIAC 10 percent of the gross revenues from Garage C in return for access to and from the airport circulator road.

RIAC and TPC reached another strategic agreement that is important to this appeal. As valet parking at the airport increasingly grew in popularity, the parties mutually agreed to move this service from an hourly surface lot directly in front of the main terminal to a designated parking facility. This decision, embodied in the fourth amendment of the CLA (valet amendment), granted TPC, for the remainder of the CLA, the exclusive right to use the first four levels of Garage B for express valet parking and, if the space was not needed for valet parking, the remaining two upper levels would accommodate overflow parking from RIAC's adjacent parking structure, Garage A.

Shortly after the valet amendment was ratified, the horrific September 11, 2001, terrorist attacks shocked the nation and its air-traveling citizenry. This national tragedy had a serious impact on the air travel industry, the effects of which still are felt today. In an effort to combat resultant financial deficits in the parking sector, TPC and NEP representatives attempted to negotiate the sale of Garage C to RIAC in exchange for a twenty-five year extension of the CLA. It was also communicated to RIAC that if an agreement was not reached, TPC/NEP would be forced to drop parking rates in Garage C to attract more business, thus, initiating a price war with similarly situated parking garages, such as Garage A. Ultimately, the negotiations proved unsuccessful.

Although unwilling to accept TPC and NEP's joint proposal, RIAC likewise was concerned about the decrease in airport parking revenues. In a letter dated October 3, 2003, RIAC informed TPC that it wanted to move valet parking out of Garage B or end it altogether so that Garage B could be used for daily parking, a move RIAC expected to produce a significant increase in parking revenues for both TPC and RIAC.⁷ According to RIAC, the valet amendment was costing both parties significant revenue, given the hundreds of valet parking spaces in Garage B that were underused on a daily basis.⁸

These negotiations also stalled, and the relationship of the parties began a steep descent and crash-landed. Ultimately, RIAC asked EDC, its parent, to condemn the valet amendment. On January 26, 2004, the EDC board (board) voted to condemn the valet amendment on behalf of RIAC. This vote was disclosed to TPC in a letter from EDC counsel on February 23, 2004. The letter also notified TPC that the board instructed counsel to negotiate a termination of the amendment in lieu of proceeding forward with the condemnation proceedings. In a sharply worded reply, TPC challenged EDC's authority "to condemn an amendment to a contract for concession services." Further, TPC questioned whether such an invocation of the state's eminent domain power would qualify as a public purpose under the Takings Clause.

Several months later, on June 28, 2004, EDC again addressed valet parking in Garage B. Rather than launch a condemnation of the valet amendment, the board voted to condemn, "a temporary easement in Garage B during the term of which [EDC] would have the exclusive use of the interior of Garage B, as well as all entrances and egresses therefrom, with the term of the temporary easement to begin as soon as practicable and last [through the remaining] Basic Term of the CLA * * *."⁹

On July 26, 2004, in accordance with the quick-take statute, the chairman of EDC issued a declaration that a temporary easement in Garage B, "which property is owned by the Parking Company, LP with mortgages held by Fleet National Bank and by Fleet Real Estate, Inc.," was taken pursuant to chapter 64 of title 42. The following day, EDC filed in the Warwick land evidence records, a copy of the chairman's statement and board resolution, in addition to a description of the condemned property. Thereafter, EDC proceeded to file in the Kent County Superior Court, an ex parte "Petition to Condemn Real Property Interest." The petition was accompanied by a memorandum and further documentation.¹⁰ A justice of the Superior Court initially took up the petition in conference with EDC counsel, but it was set down for an ex parte hearing the next day.

At the hearing, again only counsel for EDC was present because TPC had not been informed of the proceeding. The hearing justice, clearly concerned about EDC's ex parte approach, asked counsel to outline the procedure that EDC followed in order to effectuate the condemnation. The hearing justice and counsel then discussed the issue of just compensation, the singular issue before the Superior Court. EDC counsel relied upon affidavits of real estate appraisers that valued TPC's leasehold easement in the property at $685,000. According to EDC this amount was reached by projecting revenues for the remaining three-and-a-half-year period that TPC would control Garage B. EDC counsel said further:

"Now, just for the record, this is not to own the garage. This is just instead to condemn the easement in the garage for three and a half years. The six hundred eighty-five thousand dollars is designed to compensate, in fact in our view overcompensate, The Parking Company."

Thereafter, the hearing justice, although noting that TPC could contest the amount of compensation ultimately approved by the Superior Court, inquired into any procedural safeguards concerning TPC's rights:

"THE COURT: * * * What procedure is available to the party whose interest is being condemned post-condemnation to challenge the appropriateness of the taking under the statute? I'm just curious how that takes place.

"EDC COUNSEL: Well, we didn't see anything specific in the statute, Judge. If I could * * *.

"THE COURT: I'm not sure there is anything specific in any condemnation statute. I'm just curious as a matter of judicial curiosity how that takes place.

"EDC COUNSEL: If I were [TPC] and I did not think that the statute was constitutional or that this was being applied outside of the statute's authority, I would be looking to contest that as part of this proceeding."

The trial justice, satisfied that the amount suggested by EDC was adequate compensation, entered counsel's proposed order. The order then was filed in the Warwick...