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143342 - Charter Township of Lyon v McDonald's USA

Charter Township of Lyon,
 
Nancy Vayda Dembinski
 
Plaintiff-Appellee,
Matthew C. Quinn
v
(Appeal from Ct of Appeals)
 
 
(Oakland-Kumar, S.)
 
McDonald’s USA, L.L.C.,
 
 
 
Defendant,
 
and
 
 
Milford Road East Development
 
Robert M. Carson
Associates, L.L.C.,
Intervening Defendant-Appellant.
 
 
 
 


Summary

In 2002, Lyon Township and Milford Road East Development Associates, L.L.C. entered into an agreement for the development of Lyon Towne Center; the township also contracted with MREDA’s related company, Milford Road West Development Associates, L.L.C., for the development of a nearby site called Lyon Crossing. MREDA and MRWDA have the same owners.
 
Lyon Crossing and Lyon Towne Center are located south of I-96; Milford Road runs between them, but the properties are connected by a ring road and have common utilities and infrastructure. When the Towne Center was constructed, MREDA paid about $10 million to run water and sewer lines to the property. MREDA sold condominium units in the Towne Center to retail businesses, including McDonald’s.
 
Between 2004 and 2006, another developer, Republic West, sought to develop property for Bob Saks GM dealership north of I-96. The Saks dealership and another auto dealership had previously been under contract to be developed at Lyon Crossing, but both were diverted north of I-96 after the township withheld approval. The proposed Saks site was not served by water and sewer lines, and tests indicated that the property was not suitable for a septic system. After negotiations with Saks, the township agreed to extend the water and sewer lines from Towne Center to the dealership site. It is undisputed that Saks agreed to indemnify the township for all costs of exercising eminent domain and extending the public utilities from Lyon Towne Center under I-96 to the new Saks location north of I-96.
 
After MREDA refused to grant an easement to extend the water and sewer lines, the township filed a condemnation suit against McDonald’s, asserting eminent domain and seeking a permanent subsurface water and sewer utility easement under the McDonald’s unit.
 
The trial court granted the township’s request for a permanent easement, but awarded McDonald’s $50,000 in compensation for the taking. Meanwhile, MREDA had joined the lawsuit as intervening defendant, seeking damages for the taking. While the township contended that its condemnation proceeding affected only McDonald’s property interest, MREDA’s expert witness testified that the township had also taken a property interest from MREDA, making MREDA’s property less marketable and desirable. Because Lyon Towne Center and Lyon Crossing had essentially the same owners and were being developed under a common plan, they should be considered as a single parcel – Lyon Centers – for the purposes of the Uniform Condemnation Procedures Act, the expert said. MREDA was “outpositioned in the marketplace” because, with the location of the Saks dealership on the other side of I-96, it would now be more difficult for Lyon Crossing to attract other car dealerships as tenants – for example, because GM does not allow its dealerships to locate less than six miles of each other, the expert said. The fair market value of the property before the taking was $15,035,200, but $12,028,040 afterwards, the expert opined; he concluded that MREDA was owed $3,007,040.
 
The trial court agreed with many of the expert’s conclusions, finding that the properties should be considered as a single parcel. Under the master deed and bylaws for the properties, MREDA had the right to control improvements in the condominium units, the judge noted, so MREDA retained a property interest in the McDonald’s unit. The judge said that the township’s taking of the water and sewer easement under that unit made the Lyons properties “less desirable from a competitive standpoint” and had reduced “the value of the Lyon Centers Parcel” by $1,503,520.
 
But in a published decision, with a concurrence from one judge, the Court of Appeals reversed and vacated the trial court’s award to MREDA. Both the Fifth Amendment of the U.S. Constitution and art 10, § 2 of the Michigan Constitution prohibit government from taking private property for public use without just compensation, the appellate court noted. “In this action, there is no dispute that plaintiff took property for the easement from McDonald’s by eminent domain,” the majority wrote. “The disputed issue is whether that taking affected any compensable property interest retained by defendant.”
 
The majority rejected the trial court’s conclusion that the two Lyons properties constituted a “parcel” under the Uniform Condemnation Procedures Act. “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,” the majority said. The majority said it would assume, for the purposes of the opinion, that the properties met the first two criteria, “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.” But, said the majority, “we find nothing in the record” to show that the easement under McDonald’s was “part of the commonly owned parcel.” Moreover, “[d]efendant’s limited right to control improvements in the property pertained only to Lyon Towne Center, not to Lyon Crossing,” so the trial court should not have considered any effect the easement had on Lyon Crossing, the majority said. The majority also noted that MREDA’s expert had admitted that the taking of the easement did not affect the value of any interest MREDA may have retained in either the McDonald’s unit or the entire Lyon Towne Center. In addition, the UCPA does not recognize loss of competitive advantage or “outpositioning” as an element of damages, the majority said.
 
In a separate concurrence, the other judge agreed with the majority’s conclusions, except as to its ruling that MREDA would not be entitled to damages for loss of market advantage. It was not necessary for the majority to reach that issue, the concurring judge said, because the appellate court had already concluded, based on MREDA’s expert’s admission, that Lyon Towne Center had not suffered any loss in value. “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,” the judge wrote. “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.”
 
MREDA appealed; in a March 23, 2012 order, the Supreme Court granted leave to appeal.