In Re Condemnation by the Urban Redevelopment Authority ( 1991 )

OPINION

ZAPPALA, Justice.

E-V Company and Keller Office Equipment Company (hereinafter condemnees) filed preliminary objections to a declaration of taking filed on October 9, 1981, by the Urban Redevelopment Authority of Pittsburgh (URA). Allegheny County Common Pleas Court overruled the objections and Commonwealth Court affirmed. 117 Pa.Cmwlth. 475, 544 A.2d 87. We granted their petition for allowance of appeal limited to the questions: 1) “whether the condemnees have been unconstitutionally denied a meaningful hearing at a meaningful time to challenge the certification of blight____” and 2) “whether the taking is invalid for failure of the certification of blight process to comply with the requirements of the Local Agency Law.” Put another way, the question before the Court is whether the Local Agency Law, or the Constitution, require a planning commission to notify property owners and hold hearings before determining that an area is appropriate for redevelopment according to the Urban Redevelopment Law, Act of May 24, 1945, P.L. 991, 35 P.S. § 1701 et seq.

The Urban Redevelopment Law, 35 P.S. § 1702(a), declares as a matter of legislative findings and policy that urban areas may become blighted because of: (1) unsafe, unsanitary, inadequate or over-crowded conditions of the dwellings in the particular area; (2) inadequate planning of the area; (3) excessive land coverage by the buildings in the area; (4) lack of proper light and air and open space; (5) the defective design and arrangement of the buildings in the area; (6) faulty street or lot layout; or (7) land uses in the area which are economically or socially undesirable. It further provides:

(c) That the foregoing conditions are beyond remedy or control by regulatory processes in certain blighted areas, or portions thereof, and cannot be effectively dealt with by private enterprise under existing law without the additional aids herein granted and that such conditions exist chiefly in areas which are so subdivided into small parcels and in divided ownerships that their assembly for purposes of clearance, replanning and redevelopment is difficult and impossible without the effective public power of eminent domain.

35 P.S. § 1702(c). When a planning commission certifies an area as a redevelopment area according to the foregoing standards, the redevelopment authority is empowered to prepare a plan for redeveloping the area for submission to the governing body. If the plan is approved, the authority or its agent may then proceed to implement the plan, including taking of property within the area by eminent domain.

On December 18, 1964, pursuant to a Basic Conditions Report¹, the Planning Commission of the City of Pittsburgh certified an area containing 203 acres located on the North Side of Pittsburgh as blighted within the meaning of the Urban Redevelopment Law. At that time, the area certified as blighted was called, for project purposes, the “Federal Anderson” area. Included in the “Federal Anderson” area were, among many others, properties located on Isabella Street in the block between the Sixth Street Bridge and Federal Street on the West and the Seventh Street Bridge and Sandusky Street on the East. After the Planning Commission certified the “Federal Anderson” area as blighted, no further action of any kind was taken by the Planning Commission or the URA with respect to the project.

On October 4, 1971, the City Planning Commission met and certified as blighted 90.8 acres located in the North Side of Pittsburgh. Approximately 63 of those acres were part of the 203 acres which previously had been certified as blighted in 1964. The revised 90.8 acres project was referred to as the “North Shore Project” area. Included among the 63 acres that was “recertified” as blighted were the Isabella Street properties between Federal Street and Sandusky Street which had been a part of the area certified as blighted in 1964.

Pursuant to 35 P.S. § 1710(a)-(c), the URA then prepared a redevelopment proposal for the North Shore project area. The proposal showed in detail the proposed method for redevelopment of the area, listed properties to be acquired during the first year of the project, and indicated that rehabilitation was to be a significant part of the redevelopment, mostly as private action with technical assistance provided by the URA. The proposal also provided that “Property will be acquired and cleared to: ... provide developable parcels for redevelopment.”

This redevelopment proposal was submitted to the Pittsburgh City Council, which held a public hearing on the proposal on April 12, 1972. The proposal was approved by City Council on May 5, 1972, and the URA commenced implementing the proposal, over the next several years, acquiring and demolishing properties, applying for federal and state funds, and submitting modifications to the proposal.

The property on Isabella Street owned by the condemnee E-V Company, which is leased by condemnee Keller Office Equipment Company for the operation of its business, was included in the 203 acres certified as blighted in 1964 and in the 90.8 acres certified as blighted in 1971. That Isabella Street property included a four story building known as 32 Isabella Street, an eight story building known as 36 Isabella Street, and a two story building known as 38 Isabella Street. When E-V Company purchased the property in 1977, Keller Office Equipment Company moved from the four story building (32 Isabella Street) to the eight story building (36 Isabella Street). Eventually, in March of 1980 E-V Company sold the four story building. Later, in February, 1981, the two story building was sold. After the condemnee E-V Company had purchased the real estate and buildings in 1977, E-V Company continued to invest money in the property by remodeling the eight story building.

On October 9, 1981, the URA exercised the power of eminent domain and filed a declaration of taking in the Court of Common Pleas of Allegheny County, Pennsylvania, appropriating the properties located on Isabella Street in the North Shore project area, including the property of condemnee E-V Company which property housed the business of condemnee Keller Office Equipment Company at 36 Isabella Street. As stated, preliminary objections were filed. When the case was called for trial, it was ordered to be tried by depositions. In due course various witnesses were subpoenaed and deposed and various documents were produced. Following the taking of depositions, the court filed an Adjudication and Order on February 21, 1986, denying appellants’ preliminary objections. On appeal, the Commonwealth Court concluded that the trial court neither abused its discretion nor committed an error of law and, therefore, affirmed the order overruling the preliminary objections. We granted allowance of appeal, limited to the two questions set out above.

Treating the statutory issue first, the appellants argue that the taking of their property by eminent domain is invalid because the process by which the public purpose for the taking was established, the certification of blight, did not conform to the requirements of the Local Agency Law, originally enacted as the Act of December 2, 1968, P.L. 113, 53 P.S. § 11301, effective January 1, 1969, now found at 2 Pa.C.S. §§ 101 and 102, Chapter 5, Subchapter B, and Chapter 7, Subchapter B. That Law provides that “[n]o adjudication of a local agency shall be valid as to any party unless he shall have been afforded reasonable notice of a hearing and an opportunity to be heard.” 2 Pa.C.S. § 553. An adjudication is defined as “any final order, decree, decision, determination or ruling by an agency affecting personal or property rights, privileges, immunities, duties, liabilities or obligations of any or all parties to the proceeding in which the adjudication is made.” 2 Pa.C.S. § 101.

The Commonwealth Court has held that a planning commission’s certification of blight is not an adjudication under Section 553 of the Local Agency Law, Cass Plumbing & Heating Company v. PPG Industries, Inc., 52 Pa.Commw. 600, 416 A.2d 1142 (1980). The appellants urge the adoption of the view set out in Judge Blatt’s dissenting opinion in Cass Plumbing, that the action of certifying an area as blighted must be considered an adjudication because it exposes landowners to eminent domain and other powers of redevelopment authorities, which they would not have been exposed to otherwise.

We are of the view that a certification of blight does not, in and of itself, have a legal effect on property rights. It must be emphasized that a certification of blight does not necessarily lead to the taking of all, or even any, of the property in the certified area by eminent domain. The Urban Redevelopment Law recognizes “[t]hat certain blighted areas, or portions thereof, may require total acquisition, clearance and disposition ... and that other blighted areas, or portions thereof, ... may be susceptible to rehabilitation or conservation or a combination of clearance and disposition and rehabilitation or conservation____” 35 P.S. § 1702(c.l). Among the specific powers given to redevelopment authorities is the power “to initiate preliminary studies of possible redevelopment areas to make and assist in implementing (1) plans for carrying out a program of voluntary repair, rehabilitation and conservation of real property, buildings and improvements, [and] (2) plans for the enforcement of laws, codes and regulations relating to the use of land and the use and occupancy of buildings and improvements____” 35 P.S. § 1709(b). Indeed, the Law has recently been amended to explicitly give redevelopment authorities the power “[t]o make, directly or indirectly, secured or unsecured loans” and “[t]o make loans to or deposits with, ... without requiring collateral security therefor, any financial institution” to finance, among other things, rehabilitation of a redevelopment program. 35 P.S. §§ 1709(aa), (bb), as amended March 30, 1988, P.L. 304, No. 39. Thus, the mere designation of a redevelopment area does not inevitably lead to acquisition by eminent domain.²

Of equal significance to our finding that the certification itself does not affect property rights is the fact that the certification merely sets the stage for redevelopment of the area. The redevelopment authority must thereafter devise a plan and submit a detailed proposal to the governing body of the municipality. Only after the governing body has held public hearings and given its approval to the plan can the redevelopment authority take any action that affects property rights in the area. The planning commission's designation of a redevelopment area is thus seen as a preliminary or advisory matter.

The appellants also argue from evidence introduced by way of expert testimony that a certification of blight “affects property rights/’ and thus is an adjudication, because when it becomes public knowledge that an area has been certified as blighted, deleterious consequences befall landowners and business owners in that area. The testimony was to the effect that real estate, as well as equipment, machinery and fixtures situated are no longer readily saleable on the open market; it is difficult for property owners to obtain mortgages or other loans secured by real estate within the area certified as blighted; business and residential tenants alike have a tendency to move from the area as soon as possible, often before the end of their lease terms, resulting in vacant and boarded-up buildings; and maintenance and repair of the structures within the area are usually neglected by the property owners, further affecting the real estate in a negative way.

Whatever the validity of this evidence, which was not referred to, much less credited, by the court in its findings of fact, it demonstrates only that property interests may be affected by subjective reactions to the certification. It does not establish that legal rights are affected by the certification itself. Indeed, the experience of the parties to this action belies the claim they advance, for they asserted that following the initial certification of blight in 1964, and again following the 1971 certification, buildings were demolished, there was new construction, properties were bought and sold, and buildings were rehabilitated.³ Although the appellants attempt to negate this fact by arguing that the expert’s assessment applies only where a certification of blight is generally known, this reinforces the conclusion that the deleterious effects flow not from the certification itself but from speculative subjective reactions to it.

Our analysis of the appellants’ constitutional argument follows a similar course. The appellants rely on Armstrong v. Manzo, 380 U.S. 545, 85 S.Ct. 1187, 14 L.Ed.2d 62 (1965), as setting out the applicable interpretation of the due process guarantees — that persons may not be deprived of their rights or property without a meaningful opportunity to be heard at a meaningful time, and that proceedings in which the burden of proof has been shifted are inadequate to protect the interests guarded by the due process clauses.⁴

The appellants argue that preliminary objections to a declaration of taking do not offer a meaningful opportunity to be heard at a meaningful time on the propriety of the certification of blight, especially in these circumstances, where nine and a half years passed between the certification and the declaration of taking of their property. They further argue that the ability to file preliminary objections is inadequate to cure the due process deprivation caused by lack of a hearing, since condemnees bear a heavy burden of proving fraud or abuse of discretion by the condemning body, which burden, it is suggested, they would not have borne at an earlier hearing. We cannot agree with this argument in either respect.

The appellants suggest that planning commissions must hold public hearings to consider whether to certify an area for redevelopment, and that at such hearings the commission would have the burden of proving that the conditions necessary for invoking the Redevelopment Law existed. Such is clearly not the scheme provided in the Law itself, and the constitutional guarantees of due process cannot be stretched to hold that it is constitutionally required. As detailed above, we view the decision of the commission to designate an area for redevelopment as one that does not itself affect property rights. It is an internal decision made by a government body presumed to perform its duties in good faith and according to law. Planning commissions, like other government agencies, are not required to conduct their decision-making process according to an adversarial model, bearing a burden of “proving” that their proposed actions conforms to the power delegated to them by their enabling legislation.

A comparison between the redevelopment process and the process for planning and building a new highway is instructive. The Department of Transportation is authorized to prepare and continually revise a “twelve year program” for construction and improvement of transportation systems. 71 P.S. § 512(a)(13). Depending upon priorities and funding, the proposals included in such program may or may not be undertaken. Once a project has proceeded to the stage where a preliminary plan or design has been submitted that will require the acquisition of new or additional right-of-way, the Department is required to hold public hearings and consider the effects of the project on a host of concerns. 71 P.S. § 512(b)(l)-(23). Statutory newspaper notice of such hearings is sufficient, In re Condemnation by Commonwealth Department of Transportation of Right of Way for Legislative Route 201, Section 5 R/W, 22 Pa.Commw. 440, 349 A.2d 819 (1976). The Department is also required to make written findings that the project will not adversely affect those concerns or that there is no feasible and prudent alternative to such effects. Id. Persons aggrieved by any of the Department's findings in this regard may appeal to the Commonwealth Court, 71 P.S. § 512(e), which reviews the actions of the Department under the “abuse of discretion” standard, Snelling v. Department of Transportation, 27 Pa.Commw. 276, 366 A.2d 1298 (1976).

Similarly, the Redevelopment Law provides for designation of areas in need of redevelopment as a first step, to be followed by preparation of detailed proposals for redevelopment, 35 P.S. § 1710(a)-(c), submission of the proposals to the planning commission for recommendations, 35 P.S. § 1710(e), and submission of the proposals and planning commission recommendations to the governing body for approval. Before deciding to approve or reject the proposal, the governing body is required to hold public hearings on the redevelopment proposal and give notice of such hearings by newspaper publication, 35 P.S. § 1710(g).

Although the Redevelopment Law does not specifically provide for an appeal for persons aggrieved by a governing body’s decision to accept a redevelopment proposal, this Court has held that an action will lie in equity to challenge a certification of blight. In Crawford v. Redevelopment Authority, 418 Pa. 549, 211 A.2d 866 (1965), the planning commission had certified a designated area as being in need of redevelopment and had approved a proposal prepared by the redevelopment authority, which, after public hearings, was adopted by the city council and county commissioners. The first issue the Court considered was “the propriety of an attack in equity of a Redevelopment Authority Certification that an area is blighted.” Id., 418 Pa. at 553, 211 A.2d at 868. The ready answer was that “[w]e have long held that such an attack is proper when it is alleged and proven that the Authority, in making its certification, acted in bad faith, arbitrarily, or failed to follow a statutory requirement.” Id., citing Oliver v. Clairton, 374 Pa. 333, 98 A.2d 47 (1953). We emphasized, however, the limited scope of judicial review, stating that an authority’s exercise of its discretion should not be disturbed “in the absence of fraud or palpable bad faith.” Id.

Since a finding of blight is but the first step in a process that could have any number of effects, positive as well as negative, on the area and the individual properties within it, it does no more to “expose property to the powers of eminent domain” (Dissenting Opinion of Larsen, J., at 13) than does a highway department's preliminary plan to locate a highway in a given area.⁵ The requirement that the governing body hold public hearings and give notice of those hearings by publication, prior to formal adoption of a proposal for redevelopment, is sufficient to satisfy the due process requirement that those affected have an opportunity to voice their objections. As noted, an action is available in equity for those aggrieved to challenge the certification until declarations of taking have been filed, at which point the same issue may be litigated by way of preliminary objections to the taking. And since those objecting to the certification are required in any case to bear the heavy burden of overcoming the presumption that the authority performed its duties in good faith and according to law, the argument based on Armstrong v. Manzo, that preliminary objections to a declaration of taking are an inadequate cure because they shift the burden of proof, must fail. There is no deprivation to cure and the burden does not shift.

Because we find the procedures set out in the Redevelopment Law, the Eminent Domain Code, and the case law adequate under the Due Process Clause and the Local Agency Law to protect property interests at the initial stage of the redevelopment process where an area is certified as a redevelopment area, we affirm the Order of the Commonwealth Court.

LARSEN, J., files a dissenting opinion in which PAPADAKOS, J., joins. FLAHERTY, J., files a dissenting opinion in which PAPADAKOS, J., joins.

1 . A Basic Conditions Report was defined by witness William B. Waddell (community planner with the City of Pittsburgh Planning Department, 1970-80) as “a report on the basic conditions of an area.” (R.Rec. 1307a) Mr. Waddell explained that there are three sections to a Basic Conditions Report: First “is the basic conditions as they're recorded in line with a certain format of what the conditions are in an area.” Second "is taking these conditions and analyzing them in relation to the seven conditions of blight as defined in the redevelopment law.” Third "is ... the recommendation based on that analysis of the redevelopment law.” (R.Rec. 1307a)

2 . In fact, the redevelopment proposal in the present case specifically declared that “rehabilitation is a significant part of the proposed redevelopment,” and "for the most part, rehabilitation will be carried out as a program of private action.” Unfortunately for the appellants, their particular piece of property was not one that could be rehabilitated consistent with the redevelopment program for the area.

3 . If in fact the publicity surrounding a certification of blight has such a drastic effect on the property, and it appears inevitable at that early stage that the property will be condemned, the property owner has resort to the established law of de facto taking to remedy the loss. See Conroy-Prugh Glass Co. v. Commonwealth, 456 Pa. 384, 321 A.2d 598 (1974).

4 . In that case, a step-father and his wife petitioned for the adoption of a child born of the wife and her previous husband. The petitioners alleged that the consent of the natural father was not necessary because he had failed to contribute to the support of the child for more than two years. The previous husband was not notified, and did not have the ‘slightest inkling,’ of the pending adoption proceedings. After the adoption had been approved, the natural father learned of the action and promptly filed a motion to set aside the adoption decree. The Texas courts recognized that the natural father was entitled to due process, but held that the failure to give him notice and an opportunity to be heard prior to the adoption had been cured by the hearing he received upon his motion to set aside the adoption. The Supreme Court reversed, reasoning that if the natural father had been given the timely notice to which he was entitled, the step-father and his wife (the child’s mother), as the moving parties, would have had the burden of proof at any contested proceeding. After a decree of adoption had been entered, the natural father was faced with the affirmative burden of overcoming that adverse decree by one judge based upon a finding of nonsupport made by another judge.

5 . Indeed, in this sense it may be said that all property is "exposed to the power of eminent domain”, See Pa. Const. Art. 1, Sec. 10, subject only to the limitation that the government agency exercising that power must not do so arbitrarily or in bad faith.