SLC Corp v. Evans Development

This opinion is subject to revision before final
publication in the Pacific Reporter
2016 UT 15IN THE
SUPREME COURT OF THE STATE OF UTAH
SALT LAKE CITY CORPORATION,
Appellee,
v.
EVANS DEVELOPMENT GROUP, LLC,
Appellant.
No. 20130741
Filed March 24, 2016
Third District, Salt Lake
The Honorable Robert P. Faust
No. 20130741
Attorneys:
Kevin Egan Anderson, J. Elizabeth Haws,
Salt Lake City, for appellee
Robert E. Mansfield, Steven J. Joffee,
Salt Lake City, for appellant
JUSTICE DURHAM authored the opinion of the Court in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
and JUSTICE HIMONAS joined.
JUSTICE PEARCE became a member of the Court on
December 17, 2015, after oral argument in this matter,
and accordingly did not participate.
JUSTICE DURHAM, opinion of the Court:
INTRODUCTION
¶1 Salt Lake City Corp. (City) used its eminent domain power
to condemn land owned by Evans Development Group, LLC
(Evans). Rather than using the Evans property for itself, however,
the City condemned the property in order to exchange it for another
piece of property owned by Rocky Mountain Power. Evans appealed
the district court’s decision authorizing the City to exercise its
eminent domain power for exchange purposes. We conclude that the
SALT LAKE CITY CORP. v. EVANS DEVELOPMENT
Opinion of the Court
City did not follow the condemnation procedures required by
statute, and thus reverse the district court’s decision.
BACKGROUND
¶2 In 2007, Salt Lake City began working on a $50 million
railroad realignment project called the Westside Railroad
Realignment Project. The purpose of this project was to permanently
remove railroad lines running along 900 South and Folsom Street, in
order to decrease noise, pollution, and interference with residential
neighborhoods, as well as to improve traffic circulation.
¶3 To complete this project, the City needed to acquire certain
parcels of land, including a 2.39-acre parcel owned by Rocky
Mountain Power. But Rocky Mountain Power did not wish to sell its
property as it needed the land to build a substation and provide the
future electricity necessary for the northern quadrant of downtown
Salt Lake City. The City initially contemplated condemning the
property, but decided against it because it needed the property
immediately and the City had concerns about whether it could
condemn a property already being held for public use. See UTAH
CODE § 78B-6-504(1)(d) (requiring condemnation to be for a “more
necessary public use” if the land is already held for public use).
¶4 The City and Rocky Mountain Power eventually agreed
that Rocky Mountain Power would transfer its property to the City if
the City would “make an alternative location immediately available
that was equally useful for the construction and operation of a
substation.” The City and PacifiCorp (Rocky Mountain Power’s
parent company) entered into a “Property Exchange Agreement” on
March 14, 2007, which provided that Rocky Mountain Power would
transfer its property to the City in exchange for a parcel of land that
would be “acceptable for the construction and operation of a
substation” and would meet several criteria, including size and
location specifications. At the time of the agreement, the City had
outlined nine potential properties.
¶5 To fulfill its obligation under the Exchange Agreement, the
City decided to condemn Evans’ 2.67-acre parcel of land, located at
approximately 436 West 400 North in Salt Lake City. The City began
the condemnation proceedings on October 3, 2007. The complaint
asserted several public uses and public purposes for the
condemnation, including “acquiring property for an electrical power
plant/generation/transmission site” and “facilitating and enabling
the removal and realignment of freight railroad tracks.”
¶6 Evans moved for summary judgment on November 28,
2007, alleging that the City lacked statutory authority to condemn its
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property. Evans argued that the condemnation was not for a public
use as required by Utah Code section 78B-6-501, but merely for use
as an exchange property, a use not enumerated in the statute. The
City filed a cross-motion for partial summary judgment as to the
issue of public use.
¶7 The district court granted the City’s motion, finding that
after “reviewing the relevant statutory and case law, it is clear the
proposed use for the [Evans] property is public, not private.” Evans
filed a motion to reconsider, and after reconsideration, the district
court again concluded that the City condemned the Evans property
for public, not private, use. The court reasoned that it was
“undisputed the uses the City seeks to condemn the subject property
for: to facilitate the West Side Railroad Relocation project, and for an
electrical power site to ensure adequate electrical power facilities for
a quadrant of the City.” The court further found that the
“condemnation and exchange process [was] merely the method by
which the properties were acquired for the ultimate condemnation
purpose of public uses. The ultimate use of the property is the
controlling factor as to the purpose of the condemnation.”
¶8 Evans appeals the district court’s ruling, asking us to
determine whether a “municipality has statutory authority to
condemn private property when the purpose of the taking is to
exchange or trade the private property to a third party for another
parcel of real property.” 1 We have jurisdiction to review the district
court’s decision under Utah Code section 78A-3-102(3)(j).
STANDARD OF REVIEW
¶9 “We review questions of statutory interpretation for
correctness, affording no deference to the district court’s legal
conclusions.” Marion Energy, Inc. v. KFJ Ranch P’ship, 2011 UT 50,
¶ 12, 267 P.3d 863 (citation omitted). We also “‘review a district
court’s decision to grant summary judgment for correctness,’ giving
no deference to the court below.” Giusti v. Sterling Wentworth Corp.,
2009 UT 2, ¶ 19, 201 P.3d 966 (citation omitted).
1 Evans also appealed the issue of whether the construction had
been commenced in a “reasonable time,” as required by Utah Code
section 78B-6-520. We do not reach this issue as we hold the
condemnation itself to be in violation of the statute.
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SALT LAKE CITY CORP. v. EVANS DEVELOPMENT
Opinion of the Court
ANALYSIS
I. THIS TYPE OF PROPERTY EXCHANGE DOES NOT
SATISFY UTAH’S EMINENT DOMAIN STATUTES’
PUBLIC USE REQUIREMENT
¶10 When a government entity condemns property, our
eminent domain statutes require that the entity not only “have the
authority to condemn property,” Utah Cty. v. Ivie, 2006 UT 33, ¶ 16,
137 P.3d 797, but also that “the use to which [the property] is to be
applied is a use authorized by law . . . [and] the taking is necessary
for the use.” UTAH CODE § 78B-6-504(1).
¶11 Utah Code section 78B-6-501 lists the uses for which
eminent domain may be exercised. First, the statute requires that
eminent domain be exercised for a public use. The statute then
continues with a nonexclusive list of public uses. See Utah Dep’t of
Transp. v. Carlson, 2014 UT 24, ¶ 20, 332 P.3d 900 (“[T]hese
enumerated public uses are not exclusive. They merely establish a
general starting point.”). Section 501(4) includes “railroads and street
railways for public transportation.” And section 501(8) includes
“electric light and electric power lines, [and] sites for electric light
and power plants.” The statute also contains a catchall for “all other
public uses for the benefit of any county, city, or town, or its
inhabitants.” UTAH CODE § 78B-6-501(3)(f).
¶12 The City argues that these sections “provide express
statutory authority” for its Exchange Agreement. In order to
complete the Westside Railroad Realignment Project, the City had to
take Rocky Mountain Power’s property, and in order to take Rocky
Mountain Power’s property, the City condemned the Evans property
to provide Rocky Mountain Power with an adequate substitute
property. Both railroads and power plants—the City points out—are
expressly authorized public uses in the statute.
¶13 We disagree with the City’s reading of the statute and
conclude that it does not contemplate this type of property use. It is
not enough to accomplish a public use on some property; the
condemnor must satisfy the public use requirement on the property
subject to the condemnation. See id. § 78B-6-504(1) (“Before property
can be taken it must appear that . . . the use to which it is to be applied is
a use authorized by law.” (emphasis added)). Therefore, while
section 501(4) might provide authority for the City to condemn
Rocky Mountain Power’s property, it does not authorize the City to
condemn the Evans property.
¶14 Likewise, section 501(8) does not provide authorization for
the City to condemn, because even though the ultimate proposed use
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of the property is to provide electricity, it would be a third party—
Rocky Mountain Power—that would own the property and be in
charge of the public use. Even if the City’s planned use of the
property for an exchange purpose could arguably be considered
some “other public use[],” see id. § 78B-6-501(3)(f), there are three
provisions in which the legislature makes clear that the eminent
domain statutes require that it is the condemnor that must maintain
ownership of the property and be in charge of the public use—not a
third party. We discuss each in turn.
A. The Party “in Charge of the Public Use for Which the Property
Is Sought” Must Be Listed as the Condemnor in
the Condemnation Proceeding
¶15 Utah Code section 78B-6-507(1)(a) requires the
condemnation complaint to contain the name of the entity “in charge
of the public use for which the property is sought.” This entity,
which is the condemnor, “must be styled plaintiff.” Id. In this case,
the City condemned the Evans property in order to give it to Rocky
Mountain Power. The only valid public use to which this property
would be put is a substation, but Rocky Mountain Power, the entity
that would build and operate it, is not a party to the condemnation
action.
¶16 The City relies on Utah County to assert that “a public use
can be accomplished by a third party pursuant to an Exchange
Agreement.” In Utah County, Provo City wanted to construct a road
that would “connect two Provo City streets over an island of
unincorporated Utah County” land. 2006 UT 33, ¶ 1. Provo City
lacked constitutional or statutory authority to condemn property
located in unincorporated Utah County, so it entered into a contract
with Utah County in which Utah County would condemn the
property if Provo City paid the expenses of constructing and
maintaining the road. Id. The condemnee opposed the condemnation
on the ground that “Utah County was unlawfully ‘lend[ing] its
condemning powers to Provo City.’” Id. ¶ 5 (alteration in original).
¶17 We held that “two governmental entities of unequal
power could contract in their areas of inequality so long as neither
exceeded its own powers in performing the contract.” Id. ¶ 10.
Because Utah County had authority to condemn the property, and
Provo City had authority to pay for the construction and
maintenance of a public road, we held that “the Agreement is a valid
exercise of both Utah County’s and Provo City’s general contracting
powers.” Id. ¶ 11.
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SALT LAKE CITY CORP. v. EVANS DEVELOPMENT
Opinion of the Court
¶18 Unlike the agreement in Utah County, the Exchange
Agreement entered into in this case did not contemplate a valid
exercise of condemnation power. The City exceeded its powers by
condemning the Evans property not for its own use but solely for the
ownership and use of Rocky Mountain Power. In Utah County,
although Provo City paid the costs for the construction and
maintenance of the road, Utah County maintained ownership, and
was ultimately in charge of and responsible for the condemned
property. Nothing in our statutes precludes this type of
indemnification arrangement.
B. The Condemnor Must Commence and Complete Construction
and Use of the Property
¶19 Utah Code section 78B-6-520 requires the condemnor to
commence and complete construction and use within a reasonable
time. The statute contemplates that it is the condemnor that will
oversee the construction on the property. The statute does not
require the condemnor to physically commence construction itself.
The condemnor could enter into a contract with a construction
company or other third party to complete the construction, but,
importantly, the condemnor must remain “in charge of” the
property and must ultimately be responsible for construction of the
public use. See supra ¶¶ 16–18. In this case it is not the City that
would construct a substation on the Evans property, but rather
Rocky Mountain Power. By the time Rocky Mountain Power could
commence construction of its substation, the City—pursuant to its
Exchange Agreement—would have transferred title to Rocky
Mountain Power, and would therefore maintain no oversight over
the commencement and completion of construction on the property.
This scenario is not contemplated by the statute, and is thus an
invalid use of the City’s eminent domain authority.
C. The Condemnor Must Retain Ownership and Control of the Property
so that the Condemnee May Set Aside the Condemnation
After a Reasonable Time Has Passed
¶20 Other language in Utah Code section 78B-6-520 explains
an important part of the rationale for requiring the condemnor to
maintain ownership and control of the property. Section 520(1)
provides that if construction and use of the property have not been
accomplished within a reasonable time, the “condemnee may file an
action against the condemnor to set aside the condemnation of the
entire parcel or any portion upon which construction and use was to
have taken place” (emphasis added).
¶21 Reading this section in conjunction with section 507
(requiring the condemnor to be “in charge of” the public use), it
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seems readily apparent that the condemning entity must be in
charge of the property and the use to which the property will be
applied, so that if the condemnor fails to follow proper statutory
procedures, the condemnee will have recourse against the
condemnor. Under the City’s position in this case, for example,
should the statutory requirement not be met, Evans (the condemnee)
would not be able to recover its property from the City (the
condemnor) because Rocky Mountain Power would presumably
have title to and control of the property. This would leave Evans
without its statutorily guaranteed remedy. We will not read the
statute to violate the legislature’s intent to provide the condemnee
with a remedy when the condemnor has not fulfilled its statutory
requirement to commence and complete construction within a
reasonable time.
¶22 We note that nothing in the statutes precludes a
condemnor from entering into a lease or indemnification agreement
with another entity, so long as neither entity exceeds its own powers.
See Utah Cty., 2006 UT 33, ¶ 10. If, hypothetically, the City in this case
had entered into a 100-year lease with Rocky Mountain Power, and
Rocky Mountain Power failed to commence or complete
construction within a reasonable time, Evans would still be able to
bring suit against the City to recover the property, and the City
would presumably be able to allocate damages with Rocky
Mountain Power. This solution would have maintained Evans’
remedy under the statute.
CONCLUSION
¶23 We hold that although a property exchange may not be
altogether prohibited by our eminent domain statutes, it may not be
accomplished in the manner attempted here. The City in this case
failed to follow statutory requirements that the condemnor be in
charge of the public use to which the property will be put and to
oversee the construction of that public use. Here, the City was the
sole condemnor, but it was Rocky Mountain Power that was to be in
charge of the public use of building and operating an electrical
substation. This arrangement would leave Evans without recourse to
bring an action against the City to recover the property if the
substation was not built within a reasonable time. We therefore
vacate the district court’s Final Judgment of Condemnation. We
instruct the district court to order the City to return the property to
Evans and resolve Evans’ remaining claims for damages and
attorney fees.
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