Archive | Property Rights

A Proper Use of Eminent Domain?

The City approval to try to use eminent for this questionable purpose is expected to face strong legal challenges.

California city backs plan to seize negative equity mortgages

By Jim Christie; published in WHTC
Wednesday, September 11, 2013 5:03 a.m. EDT

RICHMOND, Calif (Reuters) – Richmond, California’s leaders approved on Wednesday morning a plan for the city to become the first in the nation to acquire mortgages with negative equity in a bid to keep local residents in their homes. The power of ‘eminent domain’ allows governments to seize private property for a public purpose. Critics say the plan threatens the market for private-label mortgage-backed securities.

Richmond’s city council voted 4 to 3 for Mayor Gayle McLaughlin’s proposal for city staff to work more closely with Mortgage Resolution Partners to put the plan crafted by the investor group for the city to work. Richmond can now invoke eminent domain if trusts for more than 620 delinquent and performing “underwater” mortgages reject offers made by the city to buy the loans at deep discount pegged to their properties’ current appraised prices to refinance them and reduce their principal.

A mortgage is under water when its unpaid balance is greater than its property’s market value. MRP has failed to get similar plans approved by local governments elsewhere – most recently in North Las Vegas, Nevada and earlier this year in San Bernardino County in Southern California – as the mortgage industry and local real estate businesses rallied against them.

But in Richmond, MRP found an ally in a Wall Street-bashing Green Party mayor of one of the San Francisco region’s poorest cities who sees working with the investor group to acquire mortgages as a public purpose if it makes the loans more affordable, averts foreclosures and alleviates blight. Richmond’s residents have been “badly harmed by this housing crisis,” McLaughlin said, defending the plan and partnership with MRP during an often contentious city council meeting that began Tuesday evening and ended early Wednesday morning. “Too many have already lost their homes.”

City council members opposed to the plan countered that using eminent domain would put Richmond at risk of expensive lawsuits that could destroy the city’s finances. “A 1 percent chance of bankruptcy from this program is a deal-breaker for me,” Councilman Jim Rogers told a crowd of about 300 people at the meeting, moved to a city auditorium from the council’s chamber. Other council members warned of a backlash from financial institutions, noting Richmond had no takers last month when the successor to its redevelopment agency put $34 million of bonds up for sale to refinance previous debt. The eminent domain plan had been disclosed to the U.S. municipal bond market.

While housing advocates urged support for the plan, realtor Jeffrey Wright warned that going through with eminent domain could prompt a clampdown in mortgage lending in Richmond or push up mortgage interest rates in the city of about 104,000 residents. Responding to the plan, the Federal Housing Finance Agency recently said it would press Fannie Mae and Freddie Mac to limit or cease its business where such proposals get approved, effectively closing off most mortgage financing there.

Investors holding the mortgages targeted by Richmond dispute altruism motivates the plan and charge the city would lend its eminent domain power to San Francisco-based MRP to split profits from refinancings. The investors have sued through trustees Wells Fargo & Co and Deutsche Bank AG in U.S. District Court to block the plan, which they say relies on them swallowing losses. The two sides square off in court in person for the first time on Thursday. McLaughlin’s proposal directs city staff to work with other local governments interested in the plan, calls for city staff and MRP to resolve its legal issues and confirms the city council would hold votes to seize mortgages by eminent domain if necessary. That would require a supermajority vote of the council.   (Reporting by Jim Christie; Editing by Toby Chopra)

Evidence of Purchase Offers


The Pennsylvania Supreme Court has decided a case which allowed evidence of purchase offers in addition to the traditional evidence of comparable sales. In Lower Makefield Township v. Lands of Dalgewicz, (No. 33 MAP 2011, Decided 5/29/13) the Supreme Court allowed the property owner to testify to an offer to purchase his property.  An offer letter was admitted into evidence. Both parties stipulated to the authenticity of the offer.  The court reasoned that the owner had provided a sufficient foundation to establish that the offer was made in good faith, by a party acquainted with the value of the property and with sufficient intention and ability to pay.

The case thus blurs the prior bright line distinction that offers were not adequate evidence, while comparable sales were valid evidence. The ruling appears to favor property owners as being the ones to be in receipt of the offers to purchase. Nevertheless, property owners should be mindful that it is possible that a condemnor would uncover evidence of a low offer and attempt to make use of such an offer as evidence. Property owners would be wise to obtain written proof of offers of relatively high purchase offers.

Mike Faherty identifies defenses to Sunoco’s attempt to use eminent domain power

Sunoco files for eminent domain to acquire Penn land for pipeline

Photo: Lillian DeDomenic | For The Penn Trafford Star
By Chris Foreman
Staff Reporter, Tribune-Review
Published: Wednesday, July 17, 2013

Sunoco Pipeline officials are trying to use eminent domain to acquire an easement in the vicinity of a retirement home and assisted-living center in Penn Township for a 50-mile liquid gas-transmission line. The company last week filed a petition in Westmoreland County Common Pleas Court against Quest Realty Partnership, which owns an 89 acres that are bordered by Mellon, Ader and Walton Roads. Quest also owns an adjacent property at Ader and Walton that has the William Penn Care Center and William Penn Senior Suites and Personal Care.

Court records show the filing is Sunoco’s first attempt in the county to take right-of-way against a property owner’s wishes for the Mariner East project. Sunoco also initiated cases last week to request court orders enabling it to go onto properties in Sewickley and South Huntingdon townships to perform environmental testing related to the proposed pipeline path.

Sunoco has plans to run its pipeline — to transport ethane and propane as natural gas liquids — along the same route as an existing line owned by Dominion Transmission Inc. Dominion previously got a court order to condemn via eminent domain a portion of Quest’s property along Mellon Road in August 2011.

In its filing against Quest, Sunoco said it may use the right of eminent domain because it is considered a “public utility corporation” under Pennsylvania’s Business Corporation Law.

But a Harrisburg attorney who represents some Washington County property owners in the pipeline’s path says it’s not clear to him that Sunoco has the authority for eminent domain.

Under the law Sunoco cites, a company may receive permission to condemn land for pipes transporting natural gas, petroleum or petroleum products but not natural-gas liquids, Michael Faherty said.

“I think it’s open to a number of challenges,” Faherty said after reviewing a copy of Sunoco’s filing.

Quest’s attorney, George Pomper, also disputed Sunoco’s authority in a letter earlier this year in which he opposed Sunoco’s court filing to conduct environmental testing on Quest’s property.

“Sunoco is not a ‘utility’ to the best of our knowledge,” Pomper said in the Jan. 24 letter filed in court records. “Sunoco is known as a gasoline retailer and purveyor of motoring products such as wiper blades, tires and convenience store goods. “The owners of Quest Realty are not aware of any electricity, natural gas, water and the like sold by Sunoco to the public.” Pomper did not return messages from the Penn-Trafford Star about Sunoco’s filing.

Sunoco spokesman Joe McGinn and Sunoco’s Greensburg-based attorneys, George Stewart and Dara DeCourcy, also did not respond to requests for comment.

Landowners who oppose eminent domain can raise objections questioning whether a company is properly licensed or if a project could create environmental concerns, said Peter Georgiades, a Pittsburgh attorney who specializes in eminent domain issues. But simply saying “I don’t want it” isn’t sufficient, he said.

“There’s no leg to stand on if you don’t want it,” Georgiades said.

As of Monday, Sunoco reached agreements for rights-of-way for 16 Penn Township residential and industrial properties, county records show. Two months ago, Penn Township commissioners declined to act on Sunoco’s offer of a $1,550 payment for an easement on vacant property the township owns behind Smartie Artie’s at Zackel’s restaurant in Claridge. Manager Bruce Light he hasn’t heard anything from Sunoco since, but the township has received notice that Sunoco applied for an erosion and sedimentation control permit from the Westmoreland Conservation District.

Access and Flooding

A road improvement project took frontage of a commercial enterprise. The condemnor offered $115,000 in damages. Engineering analysis showed the consequential elimination of access of large trucks and also showed flooding as a result of a faulty drainage design. The matter settled, without litigation for $156,000.

Sunoco Pipeline Coming to Southwestern Pennsylvania

As of April, 2013 Sunoco Logistics is attempting to purchase easements for a fifty (50) mile pipeline in Southwestern Pennsylvania from Chartiers to Delmont. Sunoco has asserted that it possesses the right of eminent domain for the pipeline. Property owners are urged to be cautious in protecting their property rights. The Sunoco filings with the Federal Energy Regulatory Commission (FERC) do not provide the power of eminent domain for this pipeline. Property owners approached by Sunoco Right-of-Way agents are encouraged to retain an experienced eminent domain attorney to protect property rights.

Relocation Benefits after 72 years in her home….

Clara was 100 years old and had lived in her home for 72 years when her home was condemned for a road improvement project. The condemnor offered $120,000 for the value of the real estate. The condemnor failed to offer relocation benefits as provided for in the Pennsylvania Eminent Domain Code and in Federal Regulations. The condemnor later agreed with the eligibility for relocation benefits, but insisted on low benefits based upon Clara moving by herself to a similar, single-family home. Eventually, the condemnor agreed that the requirement of “decent, safe and sanitary” housing required payment for an assisted living relocation to satisfy the safety requirement. The matter settled at $207,000. Clara, at the age of 101, comfortably moved into her choice of an assisted living facility.

Negotiations Save Convenience Store

A bridge project led to a $230,000 offer for a convenience store property. The
acquisition would have taken one-third of the corner lot and a temporary construction
easement over the remaining land along with demolition of the store. The lot would
have become and economic remnant. Negotiations led the parties to agree with the
owner’s demolition of a small part of the building with reconstruction. The owner was
able to retain a building and the convenience store business. Additionally, financial
compensation of $244,000 was paid.

Supreme Court Rules in Favor of Arkansas Wildlife Agency

The U. S. Supreme Court has decided a landmark case clarifying that government temporary flooding of property may amount to a taking, or condemnation, of property.  This is a strong case in favor of property rights.  The Owner’s Counsel of America had submitted an amicus, friend of the court, brief.  On the day after the decision, I used that legal authority in written argument in a case involving flooding with water with acid rock drainage from a highway project.

High Court Sides with State Wildlife Agency in
Corps of Engineers Suit

By Peter Urban Stephens Washington Bureau
Arkansas News

WASHINGTON – The U.S. Supreme Court on Tuesday rejected the government’s argument against compensating the Arkansas Game and Fish Commission for damages caused by temporary flooding.

In a unanimous opinion, the high court found “no solid grounding in precedent” for setting flooding apart from other government intrusions on property.

The Supreme Court reversed a federal appeals court decision last year that overturned a ruling that would have awarded the Arkansas wildlife agency $5.7 million for hardwood timber lost over six years of summer flooding at the Dave Donaldson Black River Wildlife Management Area in northeastern Arkansas.

“No decision of this court authorizes a blanket temporary-flooding exception to our Takings Clause jurisprudence, and we decline to create such an exception in this case,” wrote Justice Ruth Bader Ginsburg.

However, the decision does not guarantee that the commission will be compensated. The justices noted that the government raised several challenges that were not considered by the appeals court. Those challenges remain open for consideration.

“Obviously we are thrilled with the Supreme Court’s decision,” AGFC Chief Legal Counsel Jim Goodhart said. “It’s been a long road to get to this point and we’ve still got a ways to go, but the 8-0 decision sends a strong message about what our agency has been litigating with the U.S. Army Corps of Engineers over the past seven years.”

Property rights advocates hailed the decision.

The Pacific Legal Foundation, which advocates for private property rights, said the Supreme Court had closed a “dangerous loophole in takings law.”

“Simply put, the Takings Clause does not come with a stopwatch. If government commits a taking, including flooding or occupying someone’s land, there is an obligation to pay, period. That obligation doesn’t depend on how long the government uses the property,” the organization wrote on its website.

The National Federation of Independent Business issued a statement supporting the Supreme Court ruling.

“This decision is a victory for small-business owners – farmers and ranchers especially – whose property is essential to their livelihood and the success of their business,” said Karen Harned, executive director of the NFIB Small Business Legal Center. “Temporary government invasions can be costly if left uncompensated.”

During oral arguments in October, Deputy Solicitor General Edwin Kneedler, arguing for the government, said the Army Corps of Engineers should not have to compensate downstream landowners whose property is temporarily flooded.

“It is in the nature of living along a river. Riparian ownership carries with it certain risks and uncertainties, from weather, from intervening causes,” Kneedler said.

Goodhart, the Game and Fish Commission lawyer, argued that flooding should not be treated any differently than any other type of government “taking,” and that in this case there was “substantial intrusion” that demands compensation.

“Apply the rule of law here for physical taking and look at it as the Court of Federal Claims did: Was there a direct physical injury? Did it result in substantial intrusion on the commission’s property? If so … there should be just compensation,” Goodhart said.

Judge Says Coal Company Had No Right to Coal Under Flight 93 Crash Site

 October 25, 2012-Judy D.J. Ellich | Daily American Reporter Somerset County

As part of a pending civil lawsuit, a Pittsburgh senior federal judge determined that Svonavec Inc. did not establish that it possessed any right to mine the coal under the Flight 93 National Memorial at the time the United States acquired the company’s land by eminent domain, other than eight acres not in dispute.

On Sept. 2, 2009, the federal government acquired Svonavec Inc.’s 275.81 acres in Stonycreek Township by eminent domain for use as the Flight 93 National Memorial. The acquisition was subject to existing easements and certain rights of third parties that included coal mining rights.

Immediately after the Sept. 11, 2001, crash of Flight 93, on which crew and passengers gave up their lives to fight a terrorist takeover of the aircraft, Svonavec Inc. set up a temporary memorial on its property at the crash site. Within weeks the public was using the temporary memorial to honor the heroes of Flight 93. The coal company did not use its land for any other purpose from that date until the United States took ownership of the property on Sept. 2, 2009.

The federal government has the authority to take private property for public use as long as it satisfies its constitutional obligation to provide “just compensation.” In general just compensation means the fair market value of the property on the date it is taken, according to federal case law.

By law, the government must explore all aspects of the value of a property it takes ownership of through eminent domain to determine the amount it needs to pay for the property. Mineral rights are one aspect. “This is a very complex case. The case is still active. The judge’s decision (on the coal mining rights) is just one small issue that is involved in the case,” said Somerset attorney Patrick Svonavec, who represents Svonavec Inc. of Somerset. The federal government did not dispute that Svonavec Inc. owned the 275.81 acres of surface land on Sept. 11, 2001, but it argued that the company did not own the coal underneath. If the court had determined that Svonavec Inc. owned the right to mine coal, the property more than likely would have a higher value. Senior U.S. District Judge Donetta Ambrose agreed with the federal government’s argument.

In the civil action, Svonavec, the defendant, was required to present documentation on the chain of possession of mining rights under the tract. “Defendant relies primarily on missing, unrecorded and incomplete documents to support its chain of title for the alleged coal leases,” Ambrose wrote. “The existence, terms and/or validity of these documents are unknown and unknowable to the court.”

The government believes $611,000 is just compensation for the property. A company official has said he believes that amount is too low. “I anticipate the court will tell us soon a timeline, and hopefully we get it to trial and get a resolution,” Svonavec said. U.S. Attorney Albert Schollaert, who is listed as the attorney on behalf of the federal government, did not respond to a telephone request for comment.