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Michigan Supreme Court Lansing, Michigan

Opinion
MICHIGAN DEPARTMENT OF TRANSPORTATION, Plaintiffs-Appellee, v HAGGERTY CORRIDOR PARTNERS LIMITED PARTNERSHIP, PAUL D. YAGER, trustee, also known as PAUL D. YEGER, and NEIL J. SOSIN, Defendants-Appellants. _______________________________ BEFORE THE ENTIRE BENCH YOUNG, J. Defendants own land that

Chief Justice:

Justices:

Clifford W. Taylor

Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Maura D. Corrigan Robert P. Young, Jr. Stephen J. Markman

FILED JULY 15, 2005

No. 124765

was

partially

taken

in

condemnation proceedings initiated by plaintiff.

At issue

is whether the trial court properly allowed defendants to present, in support of their proffered calculation of just compensation, evidence that their property had been

rezoned from residential to commercial after the taking. We rezoning conclude was that the to evidence the issue of of the the posttaking condemned

irrelevant

property's fair market value at the time of the taking. Because the trial court abused its discretion in admitting

this evidence, and because the error was not harmless, we affirm reversed the the judgment jury's of the Court and of Appeals, the which for

verdict

remanded

case

further proceedings. I. Defendant Partnership FACTS PROCEDURAL HISTORY Corridor Partners 335 acres Limited of an

AND

Haggerty

owned

approximately

undeveloped tract of land in Novi, Michigan, which it had assembled for the future purpose of building a high-tech office park. Plaintiff, (MDOT), the Michigan to condemn Department of

Transportation

sought

approximately

fifty-one acres of this property for construction of a portion of the M-5 Haggerty Road Connector in the city of Novi. As required under MCL 213.55,1 MDOT provided

defendants with a good-faith offer of $2,758,000 for the property, based on its then-applicable single-family and agricultural zoning classification.2 Defendants, believing

MCL 213.55(1) requires a condemning agency, before initiating negotiations for the purchase of property, to make a "good faith written offer" based on the agency's appraisal of just compensation for the property. At the time, the property was zoned by the city of Novi for single-family homes and agricultural uses (R-A Residential/Acreage). In May 1998, approximately two and Footnotes continued on following page. 2
2

1

that the property's "highest and best use"3 was commercial rather than residential, refused MDOT's offer. In December 1995, MDOT initiated an eminent domain proceeding under the Michigan Uniform Condemnation At trial, widely

Procedures Act (UCPA)4 to condemn the property. as might be expected, the parties

presented

divergent evidence with respect to just compensation. Consistent with its theory that the highest and best use of the property was residential, MDOT presented

evidence that, at the time of the taking, the property was not likely to be rezoned to permit the commercial use proposed by defendants.5 MDOT's appraiser testified that

one-half years after the taking occurred, Novi rezoned the property for office/service/technology uses (OST). "`Highest and best use' is a concept fundamental to the determination of true cash value. It recognizes that the use to which a prospective buyer would put the property will influence the price that the buyer would be willing to pay." Edward Rose Bldg Co v Independence Twp, 436 Mich 620, 633; 462 NW2d 325 (1990). Thus, a condemnee is generally entitled to compensation based on the "highest and best use" of his property. St Clair Shores v Conley, 350 Mich 458, 462; 86 NW2d 271 (1957).
4 5 3

MCL 213.51 et seq.

For example, MDOT presented the testimony of Novi's chief planning consultant that, in 1993, the planning commission recommended that the parcel not be rezoned commercial. The consultant further testified that, as of the date of the taking, there was no plan to rezone the Footnotes continued on following page. 3

it was economically feasible to develop the parcel, both before and after the taking, as a residential subdivision, and that, in 1995, it was not reasonably possible that the land would be rezoned for commercial use. an estimation of that defendants' land On the basis of would lots, support MDOT's

development

fifty-four

residential

appraiser testified that the difference in the value of defendants' property before and after the taking amounted to $1,415,000. Defendants, on the other hand, sought to establish that they, along with other knowledgeable participants in the commercial real estate market, knew at the time of the December 1995 taking that the property was likely to be rezoned to allow for its planned use as an office park.6 Defendants' appraiser testified that the land could not have been profitably developed as residential property, and that rezoning was imminent at the time of the taking. property because dollar homes.
6

of

the

demand

for

large-lot,

million-

For example, defendants presented evidence that city officials had made representations concerning their interest in rezoning the area to accommodate business interests and that, at the time of the taking, Novi's economic development coordinator was already involved in the planning for an OST zoning classification to accommodate defendants' planned use of their property. At the time of the taking, however, defendants had not petitioned the city to have the land rezoned. 4


Against this backdrop, defendants' appraiser arrived at a just compensation figure of $18.6 million. Consistent value taking that of the with their theory property of that on the the fair date market of the

residential

was

increased soon

because be

the

realistic

prospect

it

would

rezoned

commercial,

defendants

sought to introduce evidence of the fact that the property had, in fact, been later rezoned. show that in May 1998, Defendants wished to two and one-half

approximately

years after the taking occurred, defendants' property was rezoned for office/service/technology (OST) uses. MDOT

filed a motion in limine to bar this evidence, arguing that it was irrelevant to the fair market value of the property as of the date of the taking. denied refused MDOT's to motion. MDOT's Additionally, alternative The trial court the trial to court

grant

request

present

evidence that the rezoning took place solely as a result of the taking.7

Evidence of value related solely to the taking itself, including evidence of a rezoning that occurs because of the taking, is not admissible for just compensation purposes. See MCL 213.70(1); Silver Creek Drain Dist v Extrusions Div, Inc, 468 Mich 367, 378 n 13; 663 NW2d 436 (2003), citing In re Urban Renewal, Elmwood Park Project, 376 Mich 311, 318; 136 NW2d 896 (1965) ("The Footnotes continued on following page. 5

7

At MDOT's request, the jury was taken on a bus tour of defendants' property. The parties vigorously dispute MDOT contends that the tract with some

what the jurors saw on this tour. jurors saw mainly an

undeveloped

commercial buildings under construction on a portion of the property. the jurors Defendants contend, on the other hand, that many completed office buildings on the

saw

developed portion of the property and that only a small portion of the property remained undeveloped. record to support either party's contention. The jury was instructed that fair market value must be assessed as of the date of the condemnation, and not as of some future date. The jury was further instructed, There is no

with respect to the zoning reclassification, that if there was a reasonable possibility, absent the threat of this condemnation case, that the zoning classification would have been changed, you should consider this possibility in arriving at the value of the property on the date of the taking. The jury determined that just compensation was owed to defendants in the amount of $14,877,000. On appeal to the Court of Appeals, MDOT contended that the trial court erred in denying its motion to

effect on market value of the condemnation proceeding itself may not be considered as an element of value."). 6


exclude evidence of the posttaking rezoning decision and in further prohibiting that the MDOT zoning from introducing was caused evidence by the

establishing

change

condemnation itself.

The Court of Appeals majority agreed

that the trial court abused its discretion in allowing the jury to consider evidence of the posttaking zoning change and that the error was not harmless: The subject property was to be valued "as though the acquisition had not been contemplated." MCL 213.70(1). Plaintiff attempted to introduce evidence establishing that the subject property was rezoned because of the condemnation. If so, the actual rezoning was irrelevant. Indeed, the value of condemned property should have been determined without regard to any enhancement or reduction of the value attributable to condemnation or the threat of condemnation. State Highway Comm v L & L Concession, 31 Mich App 222, 226-227; 187 NW2d 465 (1971). Defendants were not entitled to the enhanced value that resulted from the condemnation project, only the value of the In re Urban property at the time of taking. Renewal, Elmwood Park Project, 376 Mich 311, 318; 136 NW2d 896 (1965). Although the potential for rezoning on the date of taking was properly considered, evidence of the actual zoning change was irrelevant to the value of the property on the date of taking and should not have been disclosed to the jury. Moreover, we agree with plaintiff's contention that the evidence improperly contributed to the jury's finding that the rezoning was reasonably possible. At the very least, the improperly admitted evidence tainted the jury's resolution of the "reasonable possibility" question of fact. Therefore, we conclude that the trial court abused its discretion in admitting the evidence. 7


We reject defendants' contention that the evidentiary error was harmless. Had the evidence not been admitted, it is unlikely that the jury would have been exposed to the evidence that defendants now claim renders the improperly admitted evidence harmless.[8] Consequently, we deem it appropriate to reverse and remand for further proceedings.[9] [Unpublished opinion per curiam of the Court of Appeals, issued July 22, 2003 (Docket Nos. 234099, 240227), slip op, p 3.] The dissenting judge opined that the evidence was

properly admitted: As the trial court concluded, evidence of the actual rezoning had the tendency to make the existence of the possibility of rezoning more probable than it would be without the evidence. MRE 401. More importantly, however, is the fact that there is no Michigan case on point regarding the admissibility of the subsequent fact of rezoning, and our Sister States' case law provide [sic] divergent views. However, one respected source (also cited by the trial court) indicates that "[t]he fact that, subsequent to the taking, the zoning ordinance was actually amended to permit the previously proscribed use has been held to be weighty evidence of the existence (at the time of the taking) of the fact that there was a reasonable probability of an imminent change." 4 Nichols, Eminent Domain (3d ed),

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