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County of Wayne v. Hathcock: Condemnation for Developer Rejected

Michigan’s highest court has considered whether the government could, through a condemnation proceeding, shift ownership of land from one private owner to another, on the grounds that the second owner was going to create a business park which would benefit the entire community.

Michigan law allows local governments the power to condemn private property in certain circumstances. A developer sought to create a technology business park in Wayne County (“County”) named the “Pinnacle Project” (“Development”). The Development’s stated benefits for the County were new jobs and increased tax revenue. The County selected a 1,300 acre site near the airport for the Development. Through purchase and prior ownership, the County assembled 1,000 acres. At that point, the County identified an additional 46 parcels it would need to acquire for the Development and so began condemnation proceedings against those properties. Twenty-seven of the properties owners then sold their property to the County.

The remaining nineteen property owners (“Challengers”) challenged the County’s ability to condemn their property. The trial court ruled that the County had the power to condemn the Challengers’ properties because the Development served a public purpose, and the appellate court affirmed the trial court’s ruling. The Challengers appealed.

The Michigan Supreme Court reversed the lower courts and ruled in favor of the Challengers. The court first considered the statute which gave the County the power to condemn property. The state statute (“Statute”) allows a “public corporation” like the County the power to condemn property when such condemnation is “necessary” for one of three reasons: a public improvement; advancement of the “public corporation’s” purpose; or for a public purpose within the scope of the “public corporation’s” powers. Also, the proposed condemnation must be “for the use or benefit of the public”. The County argued that the proposed condemnation was a “public improvement”.

The court considered whether the Statute gave the County the necessary authority to condemn the Challengers’ properties. First, the court considered whether the power to condemn was “for a public purpose within the scope of the [County’s] power”. The Statute gave the County the authority to condemn, and the Michigan Constitution gives local governments the authority to govern matters of local concern. The County’s charter gave it the power to take actions necessary for the general welfare of its citizens, and here it was entering into the condemnation for the economic improvement of the County. Thus, the court ruled that it was within the County’s power to condemn the property.

Next, the court considered whether the condemnation was “necessary”. Michigan courts are bound by a municipality’s determination that a condemnation is necessary, unless it can be shown that the condemnation is based on fraud, an error of law, or is an abuse of discretion. Since the Challengers could not make of these showings, the court determined that the condemnation passed this step of the Statute.

The court then considered whether the condemnation was “for the use or benefit of the public”. The Challengers argued that all of the Development’s financial benefits would all inure to private parties and so would not benefit the general public. The court rejected this argument, finding that the County had identified appropriate benefits (i.e., jobs and tax revenue) that the public would receive from the Development. Thus, the court ruled that the County’s proposed condemnation met the requirements of the Statute.

The only remaining question for the court was whether the condemnation was constitutional. Michigan’ constitution states that “[p]rivate property shall not be taken for public use without just compensation therefore being first made or secured in a manner prescribed by law.” The Challengers argued that this condemnation was unconstitutional because the condemnation was not for a public use, since the properties were being transferred to private developers. Looking at prior case law, the court found there were three instances when courts had approved condemnations where the properties in question were ultimately transferred to private entities: first, when the land transfer involves a “public necessity of the extreme sort otherwise impractible”, such as a transfer to a railroad or for use as a highway; second, transfers when the private entity remains accountable to the public in the use of its property, such as a transfer to a utility company; and finally, when the transfer of the land is itself based on a public concern, such as the removal of a slum and subsequent redevelopment of an area.

The County’s proposed condemnation did not fall into either of the first two categories, as there was no public necessity for the condemnation nor would there be public oversight over the Development. The court also found that the condemnation did not pass the third step, as nothing about the condemnation itself served the public good, such as the removal of a slum. Thus, the court concluded that the condemnation was unconstitutional because it did not meet the standards proscribed by the Michigan constitution, as the condemnation was not an approved “public use”. The lower court decisions were reversed, and the case was sent back to the trial court for entry of judgment in favor of the Challengers.

County of Wayne v. Hathcock, 684 N.W.2d 765 (Mich. 2004).