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"Pollution
Irrelevant in Assessing Worth in Takings Proceedings"
By Barry A. Springer
Environmental Compliance & Litigation Strategy, Vol.
10, No. 6: November 1994
In a case of first impression in Illinois, and possibly the
nation, an Illinois appeals court has ruled that a
government agency may not introduce cleanup costs into
evidence to determine the value of property sought in an
eminent domain action. Department of Transportation v.
Parr, 633 N.E.2d 19 (Ill. App. 3d Dist.). The Illinois
Department of Transportation (IDOT) sued the Parrs to take
over their land to make way for a bridge in the takings
proceeding. IDOT sought to introduce testimony about alleged
contamination on the property and remediation costs. The
trial court denied IDOT's motion. Affirming, the appellate
court determined that:
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cleanup costs,
standing alone, have no direct bearing on the valuation
of the subject property; and
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admission of such
costs into evidence would violate the property owners'
due process rights under state environmental laws.
The Aug. 12 ruling
supports the proposition that environmental conditions of
property have no relevance at all to a condemnation case in
determining the market value of the property and that the
property owner in such a situation might well argue that he
should be paid constitutionally mandated "just
compensation," without regard to the environmental condition
of the property, based on the following:
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"Just compensation"
is the sole issue in a condemnation case and is defined
as the "fair case market value" of the property sought
to be taken, at its highest and best use, as of the date
the lawsuit to take the property is filed by the
government;
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"Fair cash market
value" is defined as the price that a willing buyer
would pay to a willing seller, neither being under
compulsion to buy or sell and both being knowledgeable
of all facts relevant to the property and proposed sale
and purchase;
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Evidence as to sales
of other properties, used as a reference with regard to
the valuation of the subject property in the
condemnation case, must exhibit the traits of "fair cash
market value," in order to be relevant to--i.e., tend to
prove--the issue of "just compensation";
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For property that is
environmentally unsound and is sought to be acquired by
the exercise of eminent domain power, it might be
difficult, if not impossible, to find sales that are
environmentally comparable to and thus, arguably, tend
to prove the fair cash market value of the subject
property. Without such "market" date to use as a basis
for an appraiser's value opinion, such an opinion may
have to be based on valuation factors that do not
reflect a "market" or "market value."
Accordingly,
it might be argued that environmentally unsound property is
not bought and sold in the open market and, thus, such
property may not have a market with which to be compared. In
effect, it would be a "special use" property (as is a
cemetery), to which more liberal rules may apply regarding
factors that a value appraiser may consider. Indeed,
"special use" properties often are assessed using creative
approaches other than the "market" or "sales" approach that
consider normally extraneous factors, such as business /
rental income. For example, a three-bayed service station on
a busy, conveniently located interstate cloverleaf may be a
contamination nightmare with attendant exorbitant
remediation costs, and thus might not be sellable on the
open market. However, it arguably has substantial
value "in place" --i.e., in use--given the tremendous volume
of automobile repair / servicing and gas-pumping business it
handles.
The court in Parr, by recognizing the irrelevance of
environmental remediation expenses in a condemnation case,
impliedly may have recognized many of the points made above.
At least, it provides material with which an attorney can
formulate arguments to further exclude environmental related
evidence from a jury's consideration of property value in a
takings case. |
