EXTRUSIONS DIV V CITY OF GRAND RAPIDS
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STATE OF MICHIGAN
COURT OF APPEALS
SILVER CREEK DRAIN DISTRICT,
FOR PUBLICATION
May 4, 2001
9:00 a.m.
Plaintiff-Appellee,
v
No. 216182
Kent Circuit Court
LC No. 94-002550-CC
EXTRUSIONS DIVISION, INC.,
Defendant-Appellant,
and
AZZAR STORE EQUIPMENT, INC,
Defendant.
EXTRUSIONS DIVISION, INC.,
Plaintiff-Appellant,
v
CITY OF GRAND RAPIDS and KENT COUNTY
DRAIN COMMISSIONER,
No. 216644
Kent Circuit Court
LC No. 92-078727-CZ
Updated Copy
June 22, 2001
Defendants-Appellees.
Before: Smolenski, P.J., and Zahra and Collins, JJ.
ZAHRA, J.
In these consolidated cases, appellant Extrusions Division, Inc. (Extrusions), appeals by
leave granted, challenging the trial court's finding of just compensation for a parcel of real
property subject to a taking by Silver Creek Drain District (the drain district). We reverse and
remand for further proceedings consistent with this opinion.
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I. FACTS
The land at issue is located in Grand Rapids and is referred to by the parties as "Old
South Field." Extrusions purchased Old South Field in 1982, intending to use it for future
expansion of its North Complex, which is adjacent to Old South Field.1 Extrusions built a fence
around Old South Field following its purchase, but otherwise left the property vacant and
unimproved. In 1990, the drain district began evaluating options for alleviating flooding in the
area. Through a series of public meetings it was disclosed that Old South Field was an excellent
location for construction of a storm water detention pond.
In January 1992, Extrusions applied for a permit from the city of Grand Rapids to
construct a warehouse on Old South Field. The city refused to grant the permit. On October 2,
1992, Extrusions filed an inverse condemnation action against the city and the Kent County
Drain Commissioner. Extrusions claimed the city's refusal to grant the building permit, and the
failure of the drain commissioner to "pursue a purchase" of Old South Field, constituted an
unconstitutional taking of private property without just compensation.
On March 7, 1994, the drain district provided Extrusions a "just compensation" offer for
Old South Field in the amount of $211,300. The drain district stated within its offer that it
reserved its right to bring a federal or state cost recovery action regarding the release of
hazardous substances on the property. The parties stipulated below that "some alleged hazardous
substances were disposed of or placed on the Old South Field" by the party that owned the
property before Extrusions. On May 26, 1994, the drain district executed a "Declaration of
Taking," declaring that Old South Field was being taken to effect a necessary public
improvement. The declaration of taking was recorded with the Kent County Register of Deeds
on June 6, 1994. On June 21, 1994, the county treasurer executed an affidavit attesting to the
deposit of $211,300, the amount estimated as just compensation for Old South Field. On June
29, 1994, the drain district filed its condemnation action.2 In its complaint, the drain district
again reserved its right to bring a federal or state cost recovery action regarding the release of
hazardous substances on the property.
On February 20, 1995, pursuant to stipulation of the parties, the trial court ordered Old
South Field conveyed to the drain district and ordered the drain district to pay Extrusions
$211,300 for the taking. Despite the February 20 stipulation, on April 21, 1995, the drain district
brought a motion requesting that the funds remain in escrow as security for remediation costs
associated with environmental contamination of Old South Field. The drain district estimated
the total environmental remediation cost to be $467,100. Extrusions argued for release of the
escrow funds, claiming it was not liable for remediation costs of any environmental
1
Extrusions' owner, James Azzar, also operates Azzar Store Equipment from the North Complex
site. Azzar Store Equipment was dismissed from the suit below and is not a party to this appeal.
2
On May 10, 1995, the Kent Circuit Court consolidated Extrusions' inverse condemnation action
and the drain district's condemnation action.
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contamination on the property.3 On November 3, 1995, pursuant to stipulation of the parties, the
trial court ordered the drain district to remove from escrow and pay Extrusions the $211,300
offered as just compensation together with interest from the date of conveyance.4 The drain
district complied with that order and paid those sums.5
A bench trial commenced almost two years later on the issue of valuation of Old South
Field. On November 6, 1997, the trial court issued an opinion, finding that the value of Old
South Field at the time of the taking, without consideration of environmental cleanup costs, was
$278,800. The court then found:
At the time of the taking, Old South Field was an environmentally
contaminated site, with respect to which a reasonably prudent purchaser would
have required, at a minimum, a formal Type-C Closure from the DNR as a
condition precedent to closing.
The court determined that the reasonable cost of securing such a formal Type-C clearance was
$237,768. Subtracting that amount from the value of the property without consideration of
environmental cleanup costs, the court arrived at the sum of $41,032, which it concluded was the
net fair market value of the property and constituted just compensation on the date of the taking.
On January 6, 1998, the court issued a final order, stating Extrusions is "entitled to keep all
amounts previously paid to it [by the drain district]" and dismissing all other claims.6
3
Extrusions cited the newly amended Natural Resources and Environmental Protection Act
(NREPA), MCL 324.20102 and 324.20126, in claiming it was not liable.
4
In its brief on appeal, the drain district explains that it viewed the amendments of the NREPA
as allowing only cause-based liability for environmental contamination and, "not wanting to
incur the cost of trying to meet [the burden of proving that Extrusions caused the environmental
contamination on the property], entered into a stipulation and order releasing the escrow."
5
In it reply brief on appeal, Extrusions argues the drain district waived its right to pursue any
cost recovery action against Extrusions and, therefore, should not be allowed to recover, by way
of a just compensation trial, what it refused to pursue through the procedures established by the
Uniform Condemnation Procedures Act, MCL 213.51 et seq. Extrusions notes that, in addition
to stipulating the release of the escrow funds, the drain district's counsel made clear below that
the drain district did not intend to pursue a remediation claim against Extrusions. The drain
district's counsel stated during a motion hearing "we will never sue them for cleanup costs."
As will be discussed in detail, our holding that the trial court erred in determining the
amount of just compensation for the taking of Old South Field is based on the plain language of
the Uniform Condemnation Procedures Act. Whether the drain district waived its right to bring
separate cost recovery actions is not dispositive of this case. That issue would arise if and when
the drain district brings such an action. We make no determination with respect to whether the
drain district, in fact, waived any future cost recovery action.
6
We note the apparent inconsistency of the trial court's final order allowing Extrusions to keep
the amount previously paid to it (apparently $211,300 plus interest from the date of conveyance)
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On appeal, Extrusions presents three arguments to support the conclusion the trial court
erred in determining the amount of just compensation for the taking of Old South Field.7 First,
Extrusions argues the trial court should not have considered the environmental contamination
and potential cleanup costs when it calculated just compensation for the property. Second,
Extrusions argues the trial court erred in its determination that the fair market value of Old South
Field, without regard to environmental cleanup costs, was $278,800. Third, Extrusions claims
the trial court erred in failing to consider and award damages caused to the North Complex as a
consequence of the condemnation of Old South Field. Each issue is addressed separately.
II. ANALYSIS
A. Can environmental contamination and cleanup costs be considered in determining just
compensation in a condemnation action?
Our federal and state constitutions prohibit the taking of private property without just
compensation. US Const, Am V; Const 1963, art 10, § 2. Just compensation is the full monetary
equivalent of the property taken. Dep't of Transportation v VanElslander, 460 Mich 127, 129;
594 NW2d 841 (1999), quoting K&K Constr, Inc v Dep't of Natural Resources, 217 Mich App
56, 72-73; 551 NW2d 413 (1996), rev'd on other grounds 456 Mich 570; 575 NW2d 531 (1998).
The purpose of just compensation is to put a property owner in as good a position as it would
have been if the taking had not occurred. Wayne Co v Britton Trust, 454 Mich 608, 622; 563
NW2d 674 (1997).
Michigan has adopted the Uniform Condemnation Procedures Act (UCPA), MCL 213.51
et seq., which provides procedures for the condemnation, acquisition, or exercise of eminent
domain of real property by public agencies. We review de novo issues arising from the
interpretation and application of statutes. Oakland Co Bd of Co Rd Comm'rs v Michigan
Property & Casualty Guaranty Ass'n, 456 Mich 590, 610; 575 NW2d 751 (1998). The primary
goal of judicial interpretation of statutes is to ascertain and give effect to the Legislature's intent.
Frankenmuth Mut Ins Co v Marlette Homes, Inc, 456 Mich 511, 515; 573 NW2d 611 (1998). If
the plain and ordinary meaning of a statute is clear, judicial construction is neither necessary nor
permitted. Cherry Growers, Inc v Agricultural Marketing & Bargaining Bd, 240 Mich App 153,
166; 610 NW2d 613 (2000). We may not speculate regarding the probable intent of the
Legislature beyond the words expressed in the statute. In re Schnell, 214 Mich App 304, 310;
543 NW2d 11 (1995). When reasonable minds may differ with respect to the meaning of a
statute, the courts must look to the object of the statute, the harm it is designed to remedy, and
given its finding of just compensation in the amount of $41,032. We further note that Extrusions'
issues on appeal are not moot in light of the trial court's order allowing it to keep the amounts
paid out of escrow because Extrusions claims it is entitled to a greater amount as just
compensation than was paid by the drain district.
7
Six of the seven issues on appeal identified by Extrusions relate to the single issue whether the
trial court properly considered environmental contamination and potential cleanup costs when
determining just compensation.
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apply a reasonable construction that best accomplishes the purpose of the statute. Marquis v
Hartford Accident & Indemnity (After Remand), 444 Mich 638, 644; 513 NW2d 799 (1994).
Section 5 of the UCPA provides that a condemnation complaint "shall ask that the court
ascertain and determine just compensation to be made for the acquisition of the [condemned]
property." MCL 213.55(1). However, the UCPA provides very little guidance regarding the
factors a court should consider when called on to determine just compensation. See MCL 213.70
and 213.73.8 Courts have generally been constrained only by the requirement that the property
owner be placed in as good a condition as the owner would have been had no taking occurred.
Britton Trust, supra.
Whether environmental contamination and cleanup costs associated with such
contamination can be considered in determining just compensation in a condemnation
proceeding is an issue of first impression in Michigan. When the UCPA was enacted in 1980, it
was silent with respect to the prospect that property acquired through the exercise of eminent
domain could be affected by environmental contamination. Since the enactment of the UCPA,
courts throughout Michigan and across the country have been inundated with litigation arising
from state and federal legislation addressing environmental contamination and recovery of costs
associated with environmental cleanup. The Michigan Legislature amended the UCPA in 1993
to incorporate procedures addressing the potential of liability arising from cleanup costs of
property subject to acquisition through the exercise of eminent domain.
Section 5 was amended to require the condemning agency to either "reserve[ ] or waive[ ]
its rights to bring federal or state cost recovery actions against the present owner of the property
arising out of a release of hazardous substances at the property . . . ." MCL 213.55(1), as
amended by 1993 PA 308. Section 8 was amended to provide:
[I]f the agency reserves its rights to bring a state or federal cost recovery
claim against an owner, under circumstances that the court considers just, the
court may allow any portion of the money deposited pursuant to section 5 to
remain in escrow as security for remediation costs of environmental
contamination on the condemned parcel.
[MCL 213.58(1), as amended by 1993 PA 308.]9
8
MCL 213.70 directs that any change in fair market value before the filing of a complaint that
was due to the general knowledge of the imminence of acquisition by the agency must be
disregarded. MCL 213.73 directs that enhancements to remaining portions of a condemned tract
must be considered in determining just compensation. Neither circumstance is at issue in the
present case.
9
In 1996, this provision was amended further. This case is governed by the pre-1996
amendments. We note, however, that the 1996 amendment did not substantially change the
provisions at issue in this case. See MCL 213.58(2), as amended by 1996 PA 474.
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We conclude the UCPA does not vest courts with the authority to account for estimated
remediation costs of contaminated property when calculating the amount of just compensation
due a property owner. This conclusion is premised on the plain language of the amendments of
the UCPA. The amendment of § 5 requires the condemning agency to either waive or reserve its
"rights to bring federal or state cost recovery actions . . . ." The amendment of § 8 vests the court
with the authority to protect the condemning agency should it prevail in a cost recovery action by
allowing "any portion of the money deposited . . . to remain in escrow as security . . . ." This
language supports the conclusion that any form of cost recovery arising from environmental
contamination is to be pursued in a separate cause of action. There would be no purpose to these
amendments if a court, in the process of determining just compensation, could simply deduct
remediation costs from the fair market value of the condemned property.
The error in deducting environmental cleanup costs when determining just compensation
is evident given that the amendments of the UCPA direct that liability for such costs be
determined by way of a separate cause of action. The UCPA simply does not provide a basis for
recovering remediation costs. The UCPA only provides the procedures by which an agency may
reserve its rights to a cost recovery action and procedures by which a trial court may withhold
funds pending resolution of such an action. An agency must bring a separate cause of action
under state or federal law to establish liability for remediation costs. By deducting estimated
cleanup costs from a parcel's value in determining just compensation for a taking, a court
circumvents any defense a landowner might have to liability for such costs. As in this case
where the parties stipulated that the environmental contamination was present on Old South Field
when Extrusions purchased the land, the inequity of deducting such costs before any
determination of the landowner's liability is clear.10 See W R Associates of Norwalk v Comm'r of
Transportation, 46 Conn Supp 355, 360; 751 A2d 859 (1999); Northeast Economic Alliance, Inc
v ATC Partnership, 1998 WL 197632, * 6-7 (Conn Super, April 16, 1998); Dep't of
Transportation v Parr, 259 Ill App 3d 602, 606-607; 633 NE2d 19 (1994).
Our holding is not affected by the fact that the 1993 amendment of subsection 8(1) of the
UCPA also provides "[n]othing contained in this subsection is intended to limit or expand an
owner's or agency's rights to bring federal or state cost recovery claims." MCL 213.58(1), as
amended by 1993 PA 308.11 By its express terms, this limitation relates only to subsection 8(1),
which addresses the court's ability to maintain in escrow estimated remediation costs. The
above-quoted language does not apply to § 5, which expressly requires the condemning agency to
either reserve or waive its rights to pursue cost recovery litigation in a separate proceeding.
Moreover, this provision preserves the litigants' right to pursue separate cost recovery actions.
Thus, it is consistent with our overall interpretation of the UCPA.
10
The inequity is especially evident in this case where the drain district admits it chose not to
incur the cost of attempting to prove Extrusions' liability for the contamination and unequivocally
stated it did not intend to bring a cost recovery action against Extrusions. See n 4 and 5, supra.
11
See n 9, supra.
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Precluding the consideration of remediation costs when determining just compensation is
also consistent with the traditional notion that the landowner should be placed in as good a
condition as it would have been had the taking not occurred. Britton Trust, supra. The "normal
method for determining a condemnation award is to use the market value of the property." Hwy
Comm v Gaffield, 108 Mich App 88, 93; 310 NW2d 281 (1981), citing In re Grand Haven Hwy,
357 Mich 20; 97 NW2d 748 (1959). The mere fact that a property is contaminated provides no
significant assistance in determining its fair market value. While the fear of liability arising from
environmental contamination may render a property nontransferable, it certainly does not render
it valueless. Contaminated properties are like snowflakes; no two are alike. Thus, it is virtually
impossible to find a comparable parcel of property on which to base an estimation of value. For
this very reason, the Iowa Supreme Court found it appropriate to separate just compensation
proceedings from environmental liability determinations. Alladin, Inc v Black Hawk Co, 562
NW2d 608, 616 (Iowa, 1997); see also Parr, supra at 605.
Determining fair market value of a contaminated property is not as simple as deducting
the estimated costs of remediation. The cost of cleanup relates in large part to the extent of the
contamination and the future use of the property. The cost to make the property suitable for
service as a storm water detention pond may exponentially exceed the cost of cleanup to use the
property for other purposes. This fact is recognized in the UCPA, which pursuant to § 8 only
allows the court the authority to hold in escrow the "likely costs of remediation if the property
were used for its highest and best use." MCL 213.58(2), as amended by 1996 PA 474; MCL
213.58(1), as amended by 1993 PA 308. Thus, it is clear that the only proper method of arriving
at just compensation is to separate the question of just compensation from the question of
liability for environmental cleanup.12 This approach is consistent with the Uniform Standards of
Professional Appraisal Practice, which rely on the notion that "value of an interest in impacted or
contaminated real estate may not be measured by simply deducting the remediation or
compliance cost estimate from the estimated value as if unaffected . . . ." See Northeast
Economic, supra * 11, quoting Advisory Opinion AO-9 on which the Uniform Standards of
Professional Appraisal Practice are, in part, based.
12
There is a split of authority among courts from other states that have addressed this question.
Some courts have concluded that evidence of contamination should not be considered in just
compensation proceedings. W R Associates, supra; Northeast Economic, supra; Alladin, supra
at 615-616; Parr, supra at 607-608. Other courts have concluded that evidence of contamination
is relevant to market value in eminent domain proceedings. Finklestein v Dep't of
Transportation, 656 So 2d 921, 922 (Fla, 1995); Stafford v Bryan Co Bd of Ed, 219 Ga App 750,
752; 466 SE2d 637 (1995), rev'd on other grounds 267 Ga 274; 476 SE2d 727 (1996); Tennessee
ex rel Dep't of Transportation v Brandon, 898 SW2d 224, 227 (Tenn, 1994); Olathe v Stott, 253
Kan 687, 689-690; 861 P2d 1287 (1993); Redevelopment Agency of Pomona v Thrifty Oil Co, 4
Cal App 4th 469, 474; 5 Cal Rptr 2d 687 (1992); Dep't of Health v Hecla Mining Co, 781 P2d
122, 126 (Colo App, 1989). Significantly, none of these jurisdictions' condemnation statutes
contain provisions that may be construed to preclude consideration of environmental remediation
costs in determining just compensation. As discussed earlier, the 1993 amendments of
Michigan's UCPA establish that liability for remediation costs is to be determined in separate
cost recovery proceedings.
-7-
Given that the UCPA does not vest courts with the authority to account for estimated
remediation costs when calculating just compensation, the trial court erred in the present case in
deducting estimated cleanup costs to arrive at a fair market value and just compensation amount.
Accordingly, we reverse the trial court's ruling that $41,032 constitutes just compensation for the
property.
B. Did the trial court err in its determination of fair market value without regard to
environmental cleanup costs?
Extrusions argues the trial court erred in finding that the value of Old South Field without
consideration of environmental contamination was $278,800. A trial court's findings of fact may
not be set aside unless they are clearly erroneous. MCR 2.613(C). A finding is clearly erroneous
when although there is evidence to support it, the reviewing court is left with the definite and
firm conviction that a mistake has been made. Meek v Dep't of Transportation, 240 Mich App
105, 115; 610 NW2d 250 (2000).
The drain district's expert appraiser opined that the value of Old South Field on the date
of the taking was $211,300. An appraiser employed by Extrusions concluded the value was
$346,300. The trial court averaged those appraisals and found the value of the land at the time of
the taking without consideration of cleanup costs was $278,800. The court noted that amount
was relatively consistent with the 1993 assessed value of the land, which rendered an actual cash
value of $264,600. On appeal, Extrusions claims the court clearly erred in determining the value
of the property because the taking occurred in 1994 and the 1993 assessed value was not an
accurate indication of value. From the percent increase of the actual cash value of the property
from 1991 to 1993, Extrusions extrapolates that the actual cash value of the property in 1994 was
no less than $309,497. Assuming, without deciding, that the value of the property in 1994 was
$309,497, we find no error. The court did not use the 1993 value in its calculation of value, but
instead merely compared it to the average of the two appraisals. The parties presented evidence
supporting their appraisers' determinations and the amount that the court determined to be the
value of the property falls between the 1993 actual cash value and Extrusions' calculation of the
1994 cash value. Under these circumstances, we cannot say the court clearly erred in finding that
the value of Old South Field at the time of the taking without consideration of environmental
cleanup costs was $278,800.
C. Did the trial court err in failing to consider the effect of the condemnation of the Old South
Field on the North Complex?
Extrusions also argues that the trial court clearly erred in finding that the taking did not
cause damage to its North Complex. Extrusions claims it could have used Old South Field to
build additional warehouse facilities or to add parking spaces.
Our Supreme Court has stated that the when a partial taking occurs
[t]he measure of damages is the injury done to the fair market value of the entire
tract by the taking of only a part. In other words the owner is entitled to recover
the difference between the market value of the entire tract before the taking and
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the market value of what is left after the taking. [State Hwy Comm'r v Walma,
369 Mich 687, 690; 120 NW2d 833 (1963).]
The evidence presented at trial established that at the time of the taking, Old South Field was an
environmentally contaminated, vacant plot that was not properly graded for construction.
Evidence suggested Extrusions was operating with sufficient warehouse and parking facilities on
or near the North Complex. Extrusions does not contest the trial court's finding that its business
operations on the North Complex have been unaffected by the taking of Old South Field. Under
these circumstances, we cannot say the trial court clearly erred in finding the fair market value of
the North Complex was not affected by the taking of Old South Field.
III. CONCLUSION
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ Brian K. Zahra
/s/ Michael R. Smolenski
/s/ Jeffrey G. Collins
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