Silver Creek Drain Dist. v. Extrusions Div., Inc.

• Citation: 468 Mich. 367,663 N.W.2d 436
• Decision Date: 17 June 2003
• Docket Number: Docket No. 119721, Calendar No. 8.
• Parties: SILVER CREEK DRAIN DISTRICT, Plaintiff-Appellant, v. EXTRUSIONS DIVISION, INC., and Azzar Store Equipment, Inc, Defendants-Appellees.
• Court: Michigan Supreme Court

663 N.W.2d 436

468 Mich. 367

SILVER CREEK DRAIN DISTRICT, Plaintiff-Appellant, v. EXTRUSIONS DIVISION, INC., and Azzar Store Equipment, Inc, Defendants-Appellees.

Docket No. 119721, Calendar No. 8.

Supreme Court of Michigan.

Argued November 19, 2002.

Decided June 17, 2003.

Varnum, Riddering, Schmidt & Howlett LLP (by Mark S. Allard and Matthew Zimmerman), Grand Rapids, MI, for the plaintiff-appellant.

Warner Norcross & Judd LLP (by Douglas A. Dozeman and Christian E. Meyer), Grand Rapids, MI, for the defendants-appellees.

Miller, Canfield, Paddock & Stone, PLC, (by James R. Lancaster, Jr., Clifford T. Flood, and Thomas C. Phillips), Lansing, MI, Amici Curiae, for the Michigan Municipal League.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Patrick F. Isom, Assistant Attorney General, Lansing, MI, Amici Curiae, for property owners in Ypsilanti.

Ackerman & Ackerman, P.C., (by Alan T. Ackerman), Troy, MI, Amici Curiae, for the Michigan Department of Transportation.

TAYLOR, J.

We granted leave to appeal in this case to consider whether environmental-contamination conditions are factors to be considered when a court is determining fair market value to establish just compensation in a condemnation action under the Uniform Condemnation Procedures Act (UCPA), M.C.L. § 213.51 et seq. We hold that they are to be considered. Accordingly, we reverse the judgment of the Court of Appeals in this regard and remand this matter to the trial court for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Defendant Extrusions Division, Inc. (Extrusions), operates a plastics extruding business and owned an eight-acre parcel of vacant land adjacent to its operations complex in Grand Rapids. In 1992, Extrusions applied to the city of Grand Rapids for a permit to build a warehouse on the eight acres. The application was denied, and Extrusions was informed that the Silver Creek Drain District (Drain District), in 1991, had identified the parcel as its desired site for a storm-water retention pond. Extrusions claimed that denial of a permit, together with the failure of the Drain District to commence a condemnation action, amounted to an unconstitutional taking of private property without just compensation. Accordingly, in 1992, Extrusions initiated an inverse-condemnation action against the city and the Kent County Drain Commissioner.

On March 7, 1994, the Drain District, pursuant to the UCPA, tendered a good-faith "just compensation" offer¹ in the amount of $211,300 to Extrusions for the parcel. This offer, as allowed under M.C.L. § 213.55(1) of the UCPA also reserved the Drain District's right to proceed against Extrusions in a federal or state action for contamination-cost recovery.² Cost-recovery actions are intended to give governmental authorities the ability to seek reimbursement from those responsible for the damage done to the land by the release of hazardous substances. At the time of this litigation, the procedure to reserve the right to bring a cost-recovery action against the condemnee was new, having been established by amendments of the UCPA in 1993. The purpose of the amendments was not merely to allow the condemnor to reserve the right to demand remediation costs, but also to ensure that, if a reservation of rights occurred, the funds for condemnation would be escrowed to satisfy any judgment that the condemnor might eventually secure against the condemnee.³

On May 26, 1994, the Drain District executed, as required by M.C.L. § 213.55(4)(e), a "declaration of taking," which indicated that this private property was being taken for purposes of a necessary public improvement.

In June, the $211,300 good-faith "just compensation" amount was placed in escrow. The Drain District then filed its condemnation action and again reserved the right to bring a federal or state cost-recovery action.

On February 20, 1995, the parties stipulated, and the trial court ordered, that the parcel be conveyed to the Drain District and that the Drain District pay Extrusions $211,300 for the taking. Following this, the Drain District, notwithstanding the stipulation and order, sought an order that would hold the funds in escrow as security for the remediation costs as allowed under the UCPA. Extrusions, in response, citing part 201 of the Natural Resources and Environmental Protection Act (NREPA), M.C.L. § 324.20101 et seq., claimed that it was not the cause of the contamination as identified in the amendments and, thus, was not liable for remediation costs. Accordingly, it argued, on the authority of M.C.L. § 213.55(5) and M.C.L. § 213.58(4), that the funds should be released. On November 3, 1995, by stipulation, the court ordered the escrowed sums, as well as interest, paid to Extrusions.

In a 1997 bench trial concerning valuation, the court found that the value of the eight-acre parcel, if environmental concerns were ignored, was $278,800. The court then determined that the parcel "was an environmentally contaminated site, with respect to which a reasonably prudent purchaser would have required, at a minimum, a formal Type-C Closure from the [Department of Natural Resources] as a condition precedent to closing."

Because the court found that the reasonable cost of the Type-C closure was $237,768, it concluded that the net fair market value was $41,032. The court entered an order to that effect and reiterated in the order that the once-escrowed $211,300 was awarded to Extrusions.

On appeal, the Court of Appeals reversed in part and remanded the case to the trial court.⁴ The Court of Appeals held that the UCPA gave no authority for a court to consider any contamination factor in the establishment of fair market value. Rather, contamination could only be considered in separate proceedings for remediation costs. It was the Court's position that this outcome was appropriate because § 5 of the UCPA provided "little guidance regarding the factors a court should consider when called on to determine just compensation."⁵ Given the minimal guidance, the Court concluded that the plain language of the UCPA amendments addressing federal and state cost-recovery actions meant that only in those separate proceedings could such factors be considered.

We granted leave to appeal to consider the Drain District's claim that a court may consider a parcel's environmental condition as a factor affecting fair market value in a determination of just compensation under the UCPA. We conclude that a court may consider such conditions in establishing fair market value and, thus, reverse the judgment of the Court of Appeals on this issue only.

II. STANDARD OF REVIEW

This case presents an issue of statutory interpretation of UCPA provisions. Statutory interpretation is a question of law that we review de novo. Cruz v. State Farm Mut. Auto. Ins. Co., 466 Mich. 588, 594, 648 N.W.2d 591 (2002).

III. ANALYSIS

"Eminent domain" or "condemnation" is the power of a government to take private property. The power arises from the sovereign power of the state and is of ancient provenance.⁶ The federal government's power in this regard is found in the Fifth Amendment of the United States Constitution, in which it is stated that the government may not take private property unless it is done for a public use and with just compensation. Every Michigan constitution has had a similar clause requiring just compensation in these circumstances.⁷ Our current Constitution states that: "[p]rivate property shall not be taken for public use without just compensation...."⁸

In Michigan, in furtherance of this constitutional power, statutes have regulated the exercise and procedure of condemnation. In 1980, the Legislature unified all condemnation statutes in the UCPA. Under the act, echoing the Constitution, it was stated at M.C.L. § 213.55(1) that a court was to "... ascertain and determine just compensation to be made for the acquisition of the [condemned] property."

As is evident, the "just compensation" requirement in the statute mirrors the identical requirement in our Constitution. This reiteration of the constitutional language is significant because to the degree the Constitution has been construed to outline the nature of "just compensation," the statute must be similarly construed because no act of the Legislature can take away what the Constitution has given. Sharp v. City of Lansing, 464 Mich. 792, 810, 629 N.W.2d 873 (2001).

Thus, we must determine the meaning of the phrase "just compensation" in our Constitution. As we recently outlined in Michigan Coalition of State Employee Unions v. Civil Service Comm., 465 Mich. 212, 222-223, 634 N.W.2d 692 (2001), in analyzing constitutional language, the first inquiry is to determine if the words have a plain meaning or are obvious on their face. If they are, that plain meaning is the meaning given them. If, however, the constitutional language has no plain meaning, but is a technical, legal term, we are to construe those words in their technical, legal sense. Moreover, in that undertaking, we are to rely on the understanding of the terms by those sophisticated in the law at the time of the constitutional drafting and ratification. The rule is, as we said in Michigan Coalition, that "if a constitutional phrase is a technical legal term or a phrase of art in the law, the phrase will be given the meaning that those sophisticated in the law understood at the time of enactment unless it is clear from the constitutional language that some other meaning was intended."⁹

The meaning of "just compensation" cannot be discerned merely by a careful reading of the phrase. The words themselves, as the Court of Appeals found, just do not inform a court about the potential complexity and variety of factors to be considered in determining value.¹⁰ This circumstance is not unusual in the realm of statutory construction. For example, it can be seen also when statutes, as the...