O'CONNELL, P.J.
In this condemnation action under the Uniform Condemnation Procedures Act (UCPA), MCL 213.51 et seq., plaintiff, Lyon Charter Township, appeals as of right the trial court's judgment awarding compensation to the intervening defendant, Milford Road East Development Associates, L.L.C. (hereafter defendant). We reverse and remand.
In 2002, plaintiff and defendant executed and recorded a planned development agreement for the creation of the Lyon Towne Center commercial development in Lyon Charter Township, Oakland County. A related company, Milford Road West Development Associates, L.L.C., executed and recorded a similar agreement to develop a nearby site called Lyon Crossing. Both Lyon Crossing and Lyon Towne Center are situated south of highway I-96.
Defendant sold condominium units in the Lyon Towne Center to retail businesses; each business became a unit owner/coowner and a member of the condominium association. Defendant sold Unit 11 of Lyon Towne Center to McDonald's USA, L.L.C., for $900,000. Like the other unit owners, McDonald's took its unit subject to both the Lyon Towne Center Master Deed and Bylaws, which described the benefits and burdens for the unit owners and for defendant. Those benefits and burdens included "Easements and Other Rights Retained by Developer [defendant]":
In addition, the master deed stated:
The bylaws specifically addressed eminent domain:
The bylaws also created restrictions on improvements: "No building, structure or other improvement shall be constructed within a Condominium Unit or elsewhere within the Condominium Project . . . unless plans and specifications therefor . . . have first been approved in writing by the Developer." Bylaws, art. VI, § 3. The same bylaws section reserved to defendant "the absolute right to refuse to approve any plans, or any part thereof, in [defendant's] sole discretion." Bylaws, art. VI, § 3(B). The section also stated that "improvements must also receive any necessary approvals from Lyon Township." Bylaws, art. VI, § 3(D).
Between 2004 and 2006, a separate entity, Republic West, sought to develop property for a Bob Saks General Motors dealership north of highway I-96. The original building plan for the auto dealership included a septic system, but subsequent studies indicated that the property was not suitable for a septic system. At the time, no water and sewer lines served the proposed Bob Saks property north of highway I-96. After various negotiations, plaintiff arranged to extend the water and sewer utilities from the Lyon Towne Center area to provide utilities for the proposed auto dealership. Plaintiff filed a condemnation action against McDonald's, seeking a permanent subsurface water and sewer utility easement under the McDonald's unit.
Defendant filed a motion to intervene in the condemnation action, claiming an interest in the McDonald's unit. Plaintiff opposed defendant's motion. The trial court allowed defendant to intervene. In 2007, the trial court granted the easement and awarded compensation to McDonald's in the amount of $50,000. The trial court then entered a stipulated order dismissing McDonald's from the action.
Defendant continued to seek compensation in the condemnation action, claiming a compensable interest in the McDonald's easement. Plaintiff sought summary disposition, which the trial court denied. At the subsequent bench trial, both parties presented evidence concerning defendant's interest in the easement and the easement's value. Plaintiff's expert testified that the easement affected only the ownership interest of McDonald's, not any ownership interest of defendant. In contrast, defendant's expert testified that defendant had retained an ownership interest in the easement. He further testified that he deemed Lyon Towne Center and Lyon Crossing to be a single parcel, referred to as Lyon Centers. Defendant's expert continued that plaintiff had taken a property interest from defendant, that the taking had resulted in a loss of marketability and desirability of defendant's property, and that the taking had resulted in defendant's being "outpositioned in the marketplace."
The trial court found that plaintiff's taking of the water and sewer easement made Lyon Centers "less desirable from a competitive standpoint," and further found that "the effect of the use of the property by Plaintiff was to reduce the value of the Lyon Centers Parcel." The court held: "[T]he taking outpositioned Lyon Centers in the marketplace and, thus, Defendant Milford Road East sustained damages." The court concluded that as a result of the taking, defendant sustained a reduction in the value of Lyon Centers in the amount of $1,503,520. The court entered judgment for defendant in that amount.
This Court outlined the tenets underlying condemnation law in Chelsea Investment Group LLC v. City of Chelsea, 288 Mich.App. 239, 261, 792 N.W.2d 781 (2010):
The UCPA governs the procedure for public agencies to acquire property in condemnation proceedings. See, e.g., Dorman v. Clinton Twp., 269 Mich.App. 638, 645, 714 N.W.2d 350 (2006). Property interests compensable under the UCPA include both tangible and intangible property, as well as real and personal property rights. MCL 213.51(i).
In this action, there is no dispute that plaintiff took property for the easement from McDonald's by eminent domain. The disputed issue is whether that taking affected any compensable property interest retained by defendant. See Adams Outdoor Advertising v. East Lansing (After Remand), 463 Mich. 17, 24, 614 N.W.2d 634 (2000) (a preliminary inquiry in a takings action is whether the claimant possesses the interest at issue). The extent of defendant's property rights are found in the master deed and bylaws. This Court must apply the plain terms of those documents as written. See Rossow v. Brentwood Farms Dev., Inc., 251 Mich.App. 652, 658-659, 651 N.W.2d 458 (2002).
The trial court concluded that the master deed and bylaws retained for defendant the right to control improvements in the condominium units. We review the trial court's factual findings for clear error, and we review de novo the trial court's conclusions of law. City of Novi v. Robert Adell Children's Funded Trust, 473 Mich. 242, 249, 701 N.W.2d 144 (2005).
We agree with the trial court that defendant's property interests derive from the master deed and bylaws. We disagree, however, with the court's conclusion that defendant retained unlimited control over the easement for extension of the water and sewer lines at issue. Instead, we find that the master deed and bylaws granted defendant a limited property interest in the easement, subject to approval by Lyon Township. The plain terms of the master deed and bylaws circumscribed defendant's control over improvements and the location of utilities. Both the master deed and the bylaws, as quoted above,
Plaintiff contends that the bylaws specifically grant coowners
Plaintiff also argues that because defendant's interest in improvements and utilities is subject to plaintiff's approval, the interest is not cognizable in an eminent-domain action. We disagree. In our view, the limitation on defendant's interest is a factor to be considered in assessing the value, if any, of the interest taken. That value in turn depends on whether the interest is in the part of the parcel that was acquired in the eminent-domain action, as discussed in the following section of this opinion.
The UCPA defines a "parcel" as "an identifiable unit of land, whether physically contiguous or not, having substantially common beneficial ownership, all or part of which is being acquired, and treated as separate for valuation purposes." MCL 213.51(g). The trial court found that "Lyon Towne Centers [sic] and Lyon Crossings [sic] make up Lyon Centers which is the parcel of land that was allegedly damaged." Specifically, the court determined that because the Lyon Towne Center and the Lyon Crossing are owned by related companies that have common beneficial ownership, and because the damage sustained from the taking of the easement affected both the Lyon Towne Center and the Lyon Crossing, the two developments constitute a "parcel" under the UCPA. Plaintiff challenges this finding and argues that Lyon Crossing is not part of the parcel at issue. We agree.
To constitute a parcel under the UCPA, the property at issue must meet all four aspects of the definition of a parcel: (1) an identifiable unit of land; (2) having common beneficial ownership; (3) at least part of which is being acquired; and (4) that can be separately valued. For the purposes of this opinion, we assume, without deciding, that the first two aspects of the definition were present, i.e., that the Lyon Towne Center and the Lyon Crossing constitute Lyon Centers, and that Lyon Centers is an identifiable unit of land having common ownership. Even with this assumption, however, the record does not support the finding that Lyon Centers is the parcel to be valued in this condemnation action, because the record does not indicate that the easement was part of the commonly owned parcel.
In order for the McDonald's subsurface utility easement to be part of the parcel at issue, the easement must be part of the land that is subject to common ownership. We find nothing in the record to establish that the specific easement was subject to common ownership. As noted in part II(A) above, any property rights in the easement derive from the Lyon Towne Center Master Deed and Bylaws. The
Given that the easement acquired was not part of the land subject to common beneficial ownership, the parcel for valuation under the UCPA in this case includes only property in which the Lyon Towne Center Master Deed grants an interest to defendant. That parcel consists of, at most, the Lyon Towne Center development, or, at a minimum, the McDonald's unit. We need not decide whether the parcel was the entire Lyon Towne Center or was solely the McDonald's unit, because, as discussed below, the record demonstrates that the taking of the easement did not affect the value of any interest defendant may have retained in either property.
Defendant's limited right to control improvements in the property pertained only to Lyon Towne Center, not to Lyon Crossing. Accordingly, the trial court erred by considering the effect of the easement, if any, on Lyon Crossing. Absent the alleged loss in value attributable to Lyon Crossing, the record contains no indication that the acquisition of the easement resulted in a loss to defendant. Defendant's expert acknowledged that Lyon Towne Center was almost fully developed as of the date of his valuation, and that his appraisal did not include a change in value for Lyon Towne Center.
The trial court and the parties attribute considerable significance to this Court's
We note that nothing in Bald Mountain stands for the proposition that just compensation requires an award for a loss in competitive advantage. Rather, the Bald Mountain panel quoted the standard propositions regarding just compensation:
Plaintiff maintains that Bald Mountain is distinguishable from the present case and contends that defendant should not be allowed to prevent competition by obtaining a condemnation windfall. Plaintiff also challenges the trial court's factual finding that defendant's difficulty in marketing Lyon Crossing was attributable to the Saks dealership's decision to locate on the north side of I-96. In response, defendant argues that the devaluation of defendant's property is compensable in condemnation, both under Bald Mountain and under traditional condemnation law.
The brief of amicus curiae Michigan Townships Association labels the compensation award a "new theory of compensation" and warns that affirming the award would seriously hinder future economic growth, particularly in commercial and industrial markets. We agree.
In identifying the issues in the case and in formulating its decision, the trial court relied significantly on Bald Mountain. Citing Bald Mountain, the trial court identified one of the issues as "whether Defendant Milford Road East was outpositioned in the marketplace by the placement
We cannot locate the quoted provision in the Bald Mountain opinion. Moreover, Bald Mountain does not support the trial court's holding. As noted previously in part III(A), the Bald Mountain opinion does not recognize "outpositioning" as a measure of damages.
The trial court's alternative ground for its ruling appears to be the court's conclusion that Saks should compensate defendant for some of the original cost of installing the utility lines. The court wrote:
These statements do not justify the exponential enrichment the trial court's compensation award granted to defendant. The award placed defendant well above the amount necessary to put defendant in the position defendant would have been had the water and sewer easement not been taken. The award essentially erased the risk of market competition.
To allow an award for lost competitive advantage would be to allow the first developer in a geographic area to monopolize real estate by placing unreasonably high cost barriers for competitors to tap into public utility lines. One would not expect every person that legally accesses existing sewer lines to reimburse the original developer of the lines for the construction costs of the lines, or to pay the developer for every reduction in the developer's competitive position. Here, similarly, it was incorrect to require that defendant be compensated for a change in the real estate market.
We conclude that the trial court erred when it determined that Lyon Centers was the "parcel" at issue in the present case. We also conclude that Lyon Crossing does not have a property interest in the easement located on the McDonald's unit. We further conclude that, under the present set of facts, Michigan law does not recognize "outpositioning" or "loss of market advantage" as an element of damages under the UCPA.
Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.
SAAD, J., concurred with O'CONNELL, P.J.
BECKERING, J. (concurring in part).
I concur in parts I and II, excepting footnote 4, of the majority opinion. I agree that defendant Milford Road East Development Associates, L.L.C. (Milford Road East), retained a compensable, albeit limited, property interest in easements for the water and sewer lines at issue in the Lyon Towne Center property, which was
Having reached this conclusion, I find there to be no need to determine the nature or extent of the property interest retained by Milford Road East in the Lyon Towne Center property, nor whether Milford Road East would be entitled to recover damages for any loss caused by "outpositioning" in the marketplace or similar market-value loss suffered by Lyon Crossing. While these determinations would have been required had we instead concluded that Lyon Crossing was part of the "parcel" being valued under the UCPA, because we conclude otherwise, any discussion of these issues is unnecessary and hence, constitutes mere dicta. Thus, I respectfully decline to join in footnote 4 or in part III of the majority opinion.
