Housing Authority of the Birmingham District v. Logan Properties, Inc.

Citations: 127 So. 3d 1169; 2012 Ala. LEXIS 164; 2012 WL 6062568Docket: 1111015

Court: Supreme Court of Alabama; December 6, 2012; Alabama; State Supreme Court

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The Housing Authority of the Birmingham District (HABD) is appealing a Jefferson Circuit Court judgment that awarded Logan Properties, Inc. $350,000 for its inverse-condemnation claim, $100,000 for litigation expenses, and $10,000 to Alamerica Bank for litigation expenses. Logan Properties, a real estate and property management firm, purchased the Patio Court apartment complex in January 2002 for about $101,000 and began renovations. In 2004, Logan Properties learned of HABD’s plans for the Hope VI project, which involved the redevelopment of the adjacent Tuxedo Court housing complex. Following the announcement, tenants began vacating Patio Court, leading to a decline in the property's condition due to theft and vandalism, ultimately rendering it unlivable. 

In September 2005, HABD offered to purchase Patio Court for $200,000, which Logan Properties rejected. Instead, Logan Properties countered with an offer of $415,000. Although negotiations continued, the property deteriorated further. An appraisal in May 2007 valued the property at $425,000, but the following month, HABD offered $104,200 based on its own appraisal, noting that if the offer was declined, it would pursue condemnation proceedings. Logan Properties did not accept this offer, leading HABD to initiate condemnation proceedings on September 26, 2007. The court's decision has now been reversed and remanded.

HABD filed a lis pendens notice on properties as mandated by Ala.Code 1975, § 18-1A-75(a). The probate court approved HABD's condemnation application, appointing three commissioners to assess compensation for Logan Properties, which was set at $104,950 on February 25, 2008. Due to the probate court's failure to adopt this report within the required seven-day period under § 18-1A-282, Logan Properties successfully moved to dismiss the condemnation action on July 2, 2008. In May 2009, HABD sought to reacquire the property, obtaining a new appraisal valuing it at $108,700, and made a formal purchase offer, warning of potential eminent domain actions if declined. On January 21, 2010, Logan Properties filed an inverse-condemnation claim against HABD, alleging a de facto taking of its property. Alamerica Bank intervened as a mortgagee of the property, and a jury trial began on October 4, 2011. HABD's motions for judgment as a matter of law were denied, resulting in a jury verdict favoring Logan Properties for $350,000. Following this, both Logan Properties and Alamerica Bank requested litigation expenses, which the trial court awarded: $100,000 to Logan Properties and $10,000 to Alamerica Bank. HABD's postjudgment motions were denied, and it subsequently appealed. The court referenced its standard of review concerning motions for judgment as a matter of law, emphasizing the necessity for sufficient evidence to warrant jury deliberation on factual issues.

A reviewing court assesses whether the party with the burden of proof has presented substantial evidence that establishes a factual dispute for the jury to resolve. The court evaluates evidence favorably for the nonmovant when considering a motion for judgment as a matter of law, allowing reasonable inferences as the jury would. Legal questions do not receive a presumption of correctness regarding the trial court’s decision. 

Under Section 235 of the Alabama Constitution, entities with the authority to take property for public use must provide just compensation before any taking, injury, or destruction occurs. Although Section 235 does not explicitly mention inverse condemnation, established statutes and case law allow property owners to pursue such claims if compensation is not provided prior to a governmental taking or damaging of property. Inverse condemnation involves legal action against a governmental body to recover property value taken without formal condemnation proceedings.

To establish a claim for inverse condemnation, a plaintiff must demonstrate: (1) the defendant is authorized to take property for public use, (2) the plaintiff's property was taken, injured, or destroyed, and (3) this was caused by the defendant’s construction or enlargement activities. It is acknowledged that the Housing Authority of Birmingham District (HABD) possesses eminent-domain powers. However, HABD contends that there was no actual taking, injury, or destruction of Logan Properties’ property, asserting that the alleged injuries were not caused by its construction activities. Furthermore, it is undisputed that HABD did not seize or physically impact the Patio Court property or adjacent triplex owned by Logan Properties, nor impede access to these properties. Consequently, HABD argues it is entitled to judgment as a matter of law due to the lack of evidence of any taking or injury to Logan Properties’ property.

Municipalities and corporations with the authority to take property for public use are obligated to provide 'just compensation' for property that is taken, injured, or destroyed during construction or improvements, as outlined in Section 235. The case of Reid v. Jefferson County established that a claim for inverse condemnation was denied because there was no direct physical injury to the plaintiff's property due to the construction of a pedestrian bridge. Similarly, Alabama Power Co. v. City of Guntersville reinforced that merely competing with a business, without any physical disturbance to property, does not constitute an injury under Section 235. Logan Properties contends that the Housing Authority of Birmingham District (HABD) engaged in actions that devalued its property by indicating a potential condemnation of Patio Court and an adjacent triplex, leading to tenant departures and financial difficulties in maintaining the properties. Logan Properties argues that the lis pendens notice, which was placed in September 2007 and not removed even after a dismissal of condemnation in July 2008, rendered the property unmarketable and forced them to initiate legal action in January 2010. However, the court concluded that the decrease in property value related to the Hope VI project does not constitute a compensable taking under Section 235, as compensation is generally warranted only for physical taking or injury to property.

§ 235 applies when an authorized entity's construction or improvements disrupt a nearby property owner's access rights. Case law establishes that abutting landowners have distinct private rights to access streets or highways, which cannot be infringed without just compensation. Interference with this access is a recognized form of damage. Despite Logan Properties asserting that their situation parallels the precedent set in McEachin v. City of Tuscaloosa, where a property owner was compensated for loss of value due to municipal actions despite no physical damage or access impairment, it is undisputed that no physical interference occurred in this case. HABD contends that McEachin is an outlier and argues for a stricter interpretation requiring physical disturbance or access interference for a valid claim under § 235. They reference City of Guntersville, which supports this view, and argue that the Court has implicitly questioned McEachin's validity in past cases. Ultimately, the Court agrees with HABD that McEachin's interpretation, allowing compensable injury without physical intrusion or access impairment, is erroneous.

Section 235 mandates that entities with eminent domain authority must provide just compensation for property taken, injured, or destroyed due to the construction or expansion of their projects. This section emphasizes that any claim of taking or injury must involve a direct physical impact on the property. Logan Properties’ claim of injury, based solely on its property being designated for acquisition or condemnation—which allegedly hindered renovation and reduced market value—lacks evidence of physical harm. Consequently, in line with the precedent established in City of Guntersville, just compensation is warranted only when a physical disturbance of property rights occurs, leading to specific damages beyond what the general public experiences.

HABD did not inflict any direct physical disturbance upon Logan Properties’ property, thereby necessitating the trial court’s reversal of its judgment in favor of Logan Properties, which had awarded $350,000 in damages and $100,000 in litigation costs. Alamerica Bank, as the mortgagee, was also awarded $10,000 for litigation costs. The appellate court mandated a remand for the trial court to enter judgment for HABD due to the absence of evidence demonstrating a physical injury. This ruling aligns with U.S. Supreme Court decisions that clarify threats of condemnation and precondemnation activities do not equate to a taking. The California Supreme Court similarly upheld that municipalities' planning efforts, which don’t culminate in actual eminent domain actions, do not constitute a taking even if they temporarily restrict property sales.

Fluctuations in property value during government decision-making, unless accompanied by extraordinary delays, are considered 'incidents of ownership' and do not constitute a 'taking' under the Constitution, as established in Danforth v. United States and Tahoe-Sierra Pres. Council. Mandating compensation for every delay would make governmental processes excessively costly and incentivize rushed decisions. The court disagrees with the City of Guntersville's finding that the removal of trees constituted a 'direct physical injury' to the plaintiff's property. Logan Properties contends that the jury should determine if there was an injury or taking under § 235, given that this case involves inverse condemnation. However, a jury issue only arises if there is a genuine dispute of material fact. The court cites Reid and Avery, noting that summary judgments were upheld in favor of government entities in similar inverse-condemnation claims. In this instance, facts are undisputed; no physical injury occurred, eliminating any basis for a jury issue, thus a judgment as a matter of law is deemed suitable.