The Law Archive

Negotiation in Advance of a Condemnation Action
by Michael Blahy

Is a business entitled to relocation benefits if it is required to move due to the municipality requiring the property for a public works project?

In 2011, the City of Topeka Kansas (the City) needed to replace a structurally deficient drainage system to prevent flooding within the city. The city enacted legislation for a public works project. The ordinance did not mention “condemnation”.

In 2013, the City negotiated with a rental property owner/landlord to purchase the property where Kansas Fire and Safety Equipment, Bueno Food Brand, Topeka Vinyl Top and Minuteman Solar Film (the former tenants) operated their businesses. Charles Nuaheim (Nuaheim) was one of the business owners.

The purchase agreement required the property vacant prior to taking ownership. Nauheim and the other former tenants, relocated their businesses to another property. They sued the City for relocation costs under K.S.A. 2017 Supp. 26-518, which states:

"Whenever federal funding is not involved, and real property is acquired by any condemning authority through negotiation in advance of a condemnation action or through a condemnation action, and which acquisition will result in the displacement of any person, the condemning authority shall:

"Provide the displaced person, as defined in the federal uniform relocation assistance and real property acquisition policies act of 1970, fair and reasonable relocation payments and assistance to or for displaced persons."

Among the documentation submitted by the former tenants were three emails between officials of the City and the landlord, and an affidavit from the landlord containing the following excerpts:

"The Deputy City Attorney is concerned that the lease will allow the tenant to stay beyond the 60-90 days and force the City to condemn their lease interest and force us to pay relocation expenses, etc. I know you are working on some kind of arrangement with them, so you may already have a resolution. But we will not be able to move forward until that lease interest is resolved."

"I don't want the City to have to exercise its eminent domain power to purchase the leasehold interest of [a tenant's business] should [that tenant] refuse to move to its new location."

"I suppose, if we do not close this transaction, that the City will then have to condemn to get these properties. That is not a sure thing, as City management has been very reluctant to use condemnation [and] the City Council is not happy to see that going on.

"I guess we will wait until we get closer to closing to see where we stand."

"Through conversations with at least two representatives, the City of Topeka indicated to Affiant that if negotiations failed, the City would then have to condemn the properties."

The former tenants argued that the plain reading of the statue K.S.A. 2017 Supp. 26-518 says that since the City, which is a condemning authority, acquired the property through negotiation, means that the property was acquired "in advance of" condemnation. The former tenants argued “they should not need to file a lawsuit and prove the City's intention to condemn had the negotiation failed.” They claimed that the statute is "designed to provide relocation assistance in order to avoid putting the burden and expense of a public benefit on individuals."

The city argued that the statute did not apply. The project engineering study provided two options to deal with the potential drainage problem and one of them did not require the property to be acquired. The city said that “it never intended to condemn the property had the negotiation failed”. The City contended that the “tenants relocated because of agreements with the property owner”.

The Shawnee District Court granted the City's motion for summary judgement explaining:

"According to [the tenants'] suggested reading of K.S.A. 26-518, every negotiation conducted by a condemning authority—regardless of how the acquisition is being made—would be 'in advance of a condemnation action' simply because the condemning authority holds that option to condemn. Put another way, under this reading, there would never be a negotiation not in advance of a condemnation action, and the condemning authority would have to pay relocation benefits for every acquisition. Such an interpretation is clearly against the legislative intent behind K.S.A. 26-518, because the legislature added the qualifier 'through negotiation in advance of a condemnation action or through a condemnation action.'"

The district court ruled:

“the tenants were not displaced persons as defined by law”

“uncontroverted facts proved the property acquisition was not made ‘in advance of a condemnation action’, but occurred instead by the City exercising its corporate power”

The tenants appealed to the Court of Appeals to consider:

Whether the former tenants met the definition of “displaced persons”

Whether the phrase "negotiation in advance of a condemnation action" requires one to prove that there was an intent to condemn by the condemning authority

“Whether the summary judgment record supported the City's claim it never intended to condemn the property”.

The Court of Appeals panel decided that:

There was no other reason "for the landlord to force the tenants to relocate from the property other than the fact that it was a necessary prerequisite for the sale of the property to the City." The district court ruling was reversed saying “the tenants qualified as displaced persons”

The phrase "negotiation in advance of a condemnation action" requires that displaced person prove that the condemning authority "either threatened or took affirmative action towards condemnation prior to the acquisition". It reasoned:

Material facts are in the record that support a claim “that the City intended to condemn the property if negotiation failed. These disputed facts made summary judgment improper”. The issue was reversed and remanded back to the district court.

Not happy with the appeals panel decision, the former tenants appealed to the Supreme Court of the State of Kansas and was granted a hearing.

The Supreme Court rejected the former tenants understanding of the statute, that the condemning authority owes relocation benefits anytime real property is acquired for a public project. It said “The statute is not that generous”.

The Supreme Court said of “the statutory phrase ‘negotiation in advance of a condemnation action,’:

[T]he language is both temporal and contextual. To be entitled to relocation benefits, a displaced person must show: (1) a negotiation resulted in the property's acquisition before any eminent domain proceedings commenced; and (2) a condemnation would have followed had that negotiation failed.

“The second element is where our present controversy lies. It provides that the negotiation occur in a context in which eminent domain would have followed had negotiations failed to secure the property for the condemning authority. But does this mean, as the district court held, that

‘negotiation in advance of a condemnation action’ occurs only ‘once a municipality has threatened condemnation or has taken some affirmative step towards instituting a condemnation action, and when the municipality has entered negotiations for purposes of efficiency and fairness as to the condemnation action’? …

we conclude this too narrowly construes what evidence might show entitlement to benefits. Whether a negotiation is in advance of a condemnation action is a question of fact a claimant needs to prove by a preponderance of the evidence”.

“When determining whether a plaintiff meets that burden, the finder of fact should consider any relevant evidence that might reasonably bear on this disputed question. Evidence is relevant if it tends to establish a material fact at issue”.

“The lower courts erred by requiring a specific evidentiary showing that the condemning authority either threatened or took affirmative action towards a condemnation action”.

“Summary judgment is appropriate only when the material facts are uncontroverted”.

“Judgment of the Court of Appeals reversing the district court is affirmed on the issue subject to review. Judgment of the district court is reversed, and the case is remanded”.

(Nauheim et al. v. City of Topeka (Kansas Supreme Court, No. 114,271))

Decided: January, 2019
Published: January, 2019

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