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"'American
Rule' Governs Eminent Domain"
By Barry A. Springer
Chicago Daily Law Bulletin, May 2, 1994
While landowners are entitled to just compensation when a
government agency condemns their land for public use, they
are not due attorney fees expended to obtain a
just-compensation award, according to an Illinois Appellate
Court ruling.
In the case of Department of Transportation v. Carriage Hills
Kennels, 627 N.E.2d 303 (1st Dist. 1993), the court
reversed a decision awarding a landowner more than $15,000
in attorney fees and costs, as well as 10 percent interest
on the difference between preliminary and final
compensation.
In 1988, the Illinois Department of Transportation sued to take
property owned by Carriage Hills Kennels. IDOT initiated the
action as part of a project to widen Waukegan Road along the
borders of Northfield and Glenview.
In a quick-take proceeding, Carriage Hills was awarded $22,000 in
preliminary just compensation.
Three years later, a jury trial was held to set final just
compensation. The verdict at trial was for $62,369.
Thereafter, Carriage Hills sought reimbursement of attorney fees
and costs, plus 10 percent interest on the unpaid balance of
the compensation due. Carriage Hills reasoned that IDOT had
attempted to take the property by misrepresentation and
fraud and for far less than market value. Carriage Hills
based its argument on trial testimony of IDOT's expert
appraisal witnesses, who admitted that a certain supposed
comparable sale that they both relied on in forming their
opinions was in fact not a sale at all.
Carriage Hills thus petitioned that it was compelled to seek just
compensation, through otherwise protracted and expensive
litigation, and in light of this, the compensation to which
it was otherwise entitle was diminished by these
expenditures. Just compensation could only be full and just
if Carriage Hills was reimbursed for those expenditures, it
argued.
A Cook County Circuit Court judge agreed and awarded expenditures
based on IDOT's appraisers' not being properly prepared. The
judge, however, reduced the fee award to $15,266.
Both sides appealed.
The 1st District Appellate Court first looked at the proprietary of
the award of attorney fees and costs. The court reversed,
saying that "just compensation" does not include attorney
fees and costs under the federal Constitution (Dohany v
Rogers, 281 U.S. 362(1930)). The court said the
"American Rule" applied, meaning each party must bear its
own litigation expenses.
In addition, under the state Constitution, which provides that just
compensation should be set according to Illinois law,
attorney fees must be excluded, the court said. The Illinois
Eminent Domain Act, the governing statute here, does not
provide for such an award in this circumstance, the court
said. The court further refused to carve out an exception to
these rules, leaving that job to the legislature.
The appeals court then examined the propriety of the award of 10
percent interest. The court noted the eminent domain
statute's 6 percent interest rate on the difference between
the preliminary and final awards of compensation. The court
also cited the decisions in Department of Transportation
v. Rasmussen, 108 Ill.App.3d 615 (2d Dist. 1982) (6
percent rate was constitutionally inadequate for a certain
time period under the facts of the case and should be
considered a statutory minimum, with the "trier of fact" to
determine the proper interest rate); Department of
Transportation v. Gass, 165 Ill.App.3d 562 (5th Dist.
1988) (the matter is supplemental issue of law to be decided
by the court); and Illinois State Toll Highway
Authority v. American National Bank & Trust Co., 236
Ill.App.3d 696 (2d Dist. 1922) (defendant not entitled to
receive a higher rate than 6 percent having failed to
request a higher rate at the time of trial, interpreting
Rasmussen to say that it was a question of law for the
court to decide whether the 6 percent was insufficient, but
that the determination of the appropriate rate of interest
above 6 percent was for the jury).
The court here elected to follow Gass and agreed with IDOT
that there was insufficient evidence for the trial court to
have made a decision on the proper interest rate for the
time period involved.
The appeals court remanded the case for a determination of the
proper interest rate.
In another eminent domain ruling, the appeals court examined a
trustee's petition to intervene, Department of
Transportation v. Heritage-Pullman Bank and Trust Co.,
627 N.E.2d 191 (1st Dist. 1993).
In 1985, the Illinois Department of Transportation sued to take
property held in a trust by defendant Heritage-Pullman Bank
and Trust Co., the beneficiary of which was Heritage Olympia
Bank. In 1986, Heritage-Pullman through another trust, whose
beneficiary was Lorenzetti, Inc., bought the remainder of
property that was not condemned.
The beneficiaries disputed entitlement to the final condemnation
award, but settled their differences three years later, with
Olympia assigning its interest in that award to the sole
shareholder of Lorenzetti.
Heritage-Pullman then filed a petition to intervene under the
Illinois Eminent Domain Act, 735 ILCS 5/7-124, and a
cross-petition to recover damages to the property remaining
after the taking. A cook County Circuit Court judge denied
the petition to intervene and dismissed the cross-petition.
The bases for the trial court's ruling was that the letter
assigning the interest in a the award was not a valid
assignment and that Heritage-Pullman, as trustee of the
Lorenzetti trust, lacked due diligence in filing its
cross-petition.
The 1st District Appellate Court reversed. The court found that the
assignment letter plainly demonstrated Olympia's intent to
vest ownership of any claim to just compensation for the
remainder property in Lorenzetti's shareholder.
In addition, the court said, no evidence indicated that the
cross-petition was filed as a delay tactic. The
cross-petition was filed about 16 months after Olympia
assigned its claim for final just compensation to Lorenzetti,
the court noted.
Finally, it could not be determined what interest, if any, that the
plaintiff had in the apportionment of any final award or how
it was prejudiced in the delay in the filing of the
intervening or cross-petition.
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