Norfolk Housing v. C and C Real Estate

Present: All the Justices

NORFOLK REDEVELOPMENT AND
HOUSING AUTHORITY

v. Record No. 051708 OPINION BY JUSTICE ELIZABETH B. LACY
June 8, 2006
C AND C REAL ESTATE, INC.

FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
John C. Morrison, Jr., Judge

This appeal pertains to the dismissal of a housing

authority's petition to acquire property by condemnation

pursuant to the authority's conservation plan.

Code § 36-49.1 authorizes localities to prepare, adopt,

and execute conservation plans to identify and rehabilitate

"slum, blighted, deteriorated or deteriorating areas" within

the locality. Pursuant to this authority, the Norfolk City

Council adopted a resolution in 1987 commissioning the Norfolk

Redevelopment and Housing Authority (the Authority) to examine

blighted and deteriorating land in the North Church Street

area of Norfolk to determine whether conservation was

possible. The following year, after a public hearing, the

City Council adopted the conservation plan (the Plan)

recommended by the Authority. See Code § 36-49.1(8).

The Plan allowed the Authority to acquire property

included in the conservation area by exercising the power of

eminent domain. The Property Acquisition section of the Plan

sets out the procedure for acquiring properties through
eminent domain and references a "Boundary and Land Acquisition

Map" that identifies properties to be acquired.

The Plan stated that there were "two large junk yards in

the area which add to the blighted condition of the district."

The Boundary and Land Acquisition Map identified those two

parcels as property "To Be Acquired" under the plan. C and C

Real Estate, Inc. (C&C) owns one of the parcels identified in

the Plan. C&C purchased this property (the Property) in 1997

and leased it to Downtown Used Auto Parts for use as an

automobile salvage yard. Downtown Used Auto Parts originally

leased the Property in 1992 from the former owner, who had

also operated a salvage yard on the Property.

In 1990, the Authority sent a notice to correct the

conditions considered as deficiencies to the owner of the

second junkyard identified in the Plan; however, it sent no

such notice to the owner of the Property now owned by C&C.

The Authority did notify C&C of its intent to acquire the

Property by letter dated December 1, 1999. During this time

period, the Mid-Atlantic Coca-Cola Bottling Company (Coca-

Cola) began discussions with the Authority about the

possibility of an expansion of its operations in the Mid-Town

area. Coca-Cola suggested that the City convert the Property

into a parking lot that could be used by Coca-Cola's

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employees. No action was taken on Coca-Cola's suggestions at

that time.

By letter dated August 16, 2000, the Authority offered to

purchase the Property for $400,000. C&C did not reply to the

offer for over two years. During the interim, the owner of a

neighboring property successfully petitioned the City to close

a part of Armistead Avenue in an area adjacent to the

Property. C&C acquired part of the closed street from the

City during the first half of 2002 and, in November of that

year, rejected the Authority's purchase offer and asked that

the Authority "proceed to file the Petition in Condemnation."

The following year, on July 22, 2003, the Authority sent

another letter offering to buy the Property for $560,000. C&C

again refused the offer. On October 27, 2003, the Authority

passed a resolution authorizing the condemnation of the

Property. The petition for condemnation was filed in the

Circuit Court of the City of Norfolk on November 25, 2003.

Following an ore tenus hearing, the circuit court issued

a letter opinion concluding that the Authority's condemnation

petition should be dismissed because: (1) that part of the

Plan purporting to authorize condemnation of property solely

on a finding of blight or a blighting influence was invalid;

(2) C&C did not receive a one-year notice to correct

deficiencies to which it was entitled under the Plan; and (3)

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the Authority's 15-year delay in filing the condemnation

proceeding raised due process concerns. The circuit court

also held that Code § 36-49.2 does not prevent the Authority

from using its condemnation power to acquire property

designated as blighted pursuant to a conservation plan even if

the property will be used for industrial purposes after

rehabilitation. Following further briefing and argument of

counsel, the circuit court entered a final order on May 12,

2005, incorporating its letter opinion and dismissing the

Authority's condemnation petition. The Authority timely filed

this appeal.

On appeal, the Authority raises eight assignments of

error. Four of these challenge the findings made by the

circuit court in conjunction with its conclusion that the

Authority's condemnation action violated C&C's due process

rights. Three assignments of error relate to the circuit

court's interpretation and application of the Plan. Finally,

the Authority challenges the admission of certain expert

testimony. Additionally, C&C assigns cross-error to the

circuit court's holding that Code § 36-49.2 did not prohibit

the Authority from using its eminent domain powers for

acquiring property that will be used for industrial purposes.

We will consider these issues in order.

THE AUTHORITY'S APPEAL

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 1. Due Process

The circuit court's conclusion that the Authority's

attempt to take C&C's Property violated due process was based

on the 15-year delay from the time the Authority made its

finding of blight until it attempted to correct the blighted

condition of the Property by filing the condemnation petition.1

This delay, according to the circuit court, "argues strongly

against" a finding that the elimination of blight was the

"real reason" the Authority sought to acquire the Property.

The circuit court further found that this delay gave rise to a

"reasonable expectation" that the Authority would not take the

Property and that the delay allowed C&C to expand its business

while the Authority was insulated from paying for the "value

of the ongoing business" in a condemnation proceeding. The

Authority challenges each ground relied upon by the circuit

court, arguing that the condemnation did not offend principles

of due process because the passage of 15 years did not alter

the reason for the taking, did not violate any limitations

period, and would not result in unfair compensation for the

Property to be taken. For the following reasons we agree with

the Authority.

1
Although the condemnation proceeding was not filed until
2003, C&C was aware of the Authority's interest in acquiring
the Property based on letters exchanged beginning in 1999,
some of which contained offers to purchase the Property.

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 The due process clauses of the Constitutions of the

United States and of the Commonwealth of Virginia prohibit the

government from taking private property unless such property

is taken for public use and the property owner receives just

compensation for the property taken. U.S. Const. amend. V;

Va. Const. art. 1, § 11; Kelo v. City of New London, ___ U.S.

___, ___ n.1, 125 S.Ct. 2655, 2658 n.1 (2005); State Highway &

Transp. Com. v. Linsly, 223 Va. 437, 443, 290 S.E.2d 834, 838

(1982).

Taking private property to stem blighting and

deteriorating conditions is a public purpose. Mumpower v.

Housing Authority, 176 Va. 426, 437, 11 S.E.2d 732, 735

(1940). A locality's determination pursuant to a conservation

plan that property is blighted and subject to acquisition is a

legislative act which, on review, is entitled to a strong

presumption of validity. Runnels v. Staunton Redevelopment &

Housing Authority, 207 Va. 407, 410, 149 S.E.2d 882, 884

(1966). The locality's determination may be set aside by a

circuit court only on a showing that the locality acted

arbitrarily. The burden is on the challenger to establish

that the decision was invalid by clear and convincing proof.

Id. In this case, C&C failed to carry that burden of proof.

As the circuit court noted, in 1988 the Authority

determined that the Property was a blight and exerted a

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blighting influence on the area.2 The owner of the Property at

the time did not challenge that decision. The question before

us then is whether a challenge to that determination arising

many years later but before property has been acquired is

resolved by examining the condition of the property at the

time of the initial designation or at the time of acquisition.

This is an issue of first impression for this Court. We

conclude that while the original determination retains the

strong presumption of validity attached to such legislative

acts, the current status of the property must be considered

when determining whether the original purpose of the

acquisition remains viable at the time the condemnation

occurs. This standard is dictated by the statutes governing

conservation plans which allow the use of eminent domain only

2
The Authority made the following finding:
There are significant environmental
problems which are contributing to the
deterioration of the project area. Trash,
litter, and debris are found throughout
the area. Vacant lots are covered with
weeds and, in several cases, the partial
foundations of demolished buildings.
There are two large junk yards in the area
which add to the blighted condition of the
district. Derelict, abandoned motor
vehicles were identified throughout the
proposed project area prior to a concerted
effort to rid the area of this problem.
Although a number of vehicles have been
removed, the underlying conditions have
not changed and others will probably take
their place.

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for the specific public purposes of eliminating deteriorating

properties or arresting the blighting influence. If a

property no longer meets that criteria, acquisition by

condemnation pursuant to a conservation plan would no longer

be authorized. See Code §§ 36-49.1, -50.1. Therefore, in

this case, to rebut the presumption of validity, C&C bore the

burden to show by clear and convincing evidence that the

Property no longer was a blight or no longer exerted a

blighting influence on the surrounding area.

The evidence relied upon by the circuit court to

show a change in acquisition purpose included the

Authority's discussions with Coca-Cola and improvements

to the Property, including adding water and sewer

service, cleaning up trash, painting and otherwise fixing

one building while demolishing another, and erecting a

fence limiting the visibility of the interior. The

evidence of discussions between Coca-Cola and the

Authority regarding use of the Property as a parking lot

does not address the condition of the Property and

therefore is not relevant rebuttal of the presumption

that the finding of blight remains valid. Furthermore,

the purpose of a conservation plan is to identify and

acquire blighted property so that the property may be

rehabilitated. Because properly designated and acquired

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"blighted" property may eventually be made available to

and used by private enterprise, Code § 36-49.1, such

ultimate use does not alter the original acquisition

purpose of eliminating blight.

Although the evidence showed that improvements were made

to the condition of the Property, there is also evidence that

the Property remains a blight or has a blighting effect on

surrounding property. The Authority introduced pictures of

the Property from 1988 through the time of trial along with

the testimony of Karen Wilds, who qualified as an expert for

the Authority in the field of land planning. Wilds testified

that based on her observation of the current state of the

Property and the pictures of it, the Property remained

infeasible of rehabilitation and its condition was not

consistent with the objectives of the Plan.

This record does not contain clear and convincing

evidence sufficient to rebut the presumption that the

Authority's designation of the Property as blighted or

exerting a blighting influence remained valid. Accordingly,

the Authority did not acquire the Property for a non-public

purpose in violation of the federal and state due process

clauses.

In addition to limiting the government from taking

private property unless the taking is for a public use and the

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landowner is justly compensated, constitutional procedural due

process mandates that the government provide a landowner

"notice and a reasonable opportunity to be heard" before

affecting that individual's property rights pursuant to a

binding court decree. Doe v. Brown, 203 Va. 508, 512, 125

S.E.2d 159, 163 (1962). However, our case law establishes

that the legislature may prescribe the manner in which that

notice will be provided, so long as its provisions afford the

individual a reasonable opportunity to be heard. Id.;

Williamson v. Hopewell Redevelopment & Housing Authority, 203

Va. 653, 655, 125 S.E.2d 849, 850-51 (1962).

In this case, the circuit court did not find, and C&C

does not assert, that the Authority failed to afford C&C

proper procedural due process under the notice provisions of

the eminent domain statutes. Code §§ 25.1-205 through –222;

see also Williamson, 203 Va. at 656, 125 S.E.2d at 851

(finding eminent domain hearing notice provisions under former

Code § 25-13 constitutional). To the extent the circuit court

and C&C maintain the Authority violated C&C's procedural due

process rights, they rely upon the 15-year delay between the

Authority's adoption of the Plan and filing the condemnation

proceeding. This delay, according to the circuit court, gave

C&C a "reasonable expectation that their property would not be

condemned . . . especially since the City of Norfolk conveyed

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additional property to [C&C] in 2002 when part of Armistead

Avenue was closed" and allowed C&C to improve its business,

although the Authority would not be liable for "the value of

the ongoing business." We find, however, that these factors

do not implicate any procedural due process considerations in

the context of this case.

First, there is no limitations period defined by statute

for acquiring property under a conservation plan. Contra Code

§ 36-51(c)(five year limitation on acquiring property pursuant

to redevelopment plan commencing on date of plan approval).

Code § 36-51.1(7). Code § 36-51.1 allows an authority to

place such a limitation on conservation project activities,

but the Authority did not do so in this case. The Plan states

that "[i]t is the intent of the Authority to proceed

diligently to achieve completion of project activities" and

that "[t]he Project Area Committee has requested that the

project activities be completed by the end of 1997 and this

has been selected as the target date;" however, the Plan does

not preclude further acquisitions of properties within the

project area beyond 1997.

The absence of a limitations period for conservation

plans is reasonable because conservation projects are by

nature long-term undertakings. Nevertheless, when a delay in

pursuing condemnation proceedings becomes unreasonable, the

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Authority is subject to Code § 36-27, which allows a court to

instruct the commissioners in such proceedings to allow

damages incurred by the landowner because of the delay.

Finally, neither the circuit court nor C&C have provided

any legal support for the proposition that a viable due

process claim in this case can be based on a "reasonable

expectation" that the Property will not be taken, regardless

of whether such expectation stems from the passage of time or

the acquisition of additional property prior to condemnation.

In the same vein, there is no basis for a constitutional

procedural due process challenge simply because the Authority

"is not required to pay for the value of the ongoing business"

in a condemnation proceeding. The measure of just

compensation for a governmental taking of property is the

"fair market value of the land as it stands today, in view of

all the purposes to which it is reasonably and naturally

adapted." Fonticello Mineral Springs Co. v. City of Richmond,

147 Va. 355, 361, 137 S.E. 458, 460 (1927). Paying for the

value of an ongoing business enterprise is not

constitutionally required. See id.

Accordingly, for these reasons, we conclude that the

circuit court erred in holding that the Authority's

condemnation proceeding violated principles of due process.

2. Interpretation and Application of the Plan

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 The Authority next challenges the circuit court's

determination that Paragraph 1 of the Acquisition section of

the Plan exceeded the authorization contained in Code § 36-

50.1(4), and that under the Plan, C&C was entitled to a notice

allowing it the opportunity to cure the blighted conditions

consistent with Code § 36-50.1(2). The pertinent language in

the Acquisition section of the Plan states:

The Boundary and Land Acquisition Map, Exhibit
One, identifies properties to be acquired
because they appear infeasible of
rehabilitation or their land use is
inconsistent with the purposes and objectives
of the Conservation Plan.

Properties within the Project Area will be
inspected to determine whether or not they
comply with the provisions of the Conservation
Plan Rehabilitation Standards . . . . The
owners of property which does not comply with
the Standards will be notified in writing of
observed deficiencies [and if] the property has
not been made to comply with the Standards
within one year after receiving a written
request for such compliance, then the Authority
may proceed to acquire the property by deed or
condemnation.

The relevant portions of Code § 36-50.1 are subsections

(2) and (4) which provide that in connection with a

conservation plan, an authority cannot exercise powers of

eminent domain except to acquire

(2) properties which are determined by the authority to
be in violation of the standards for design,
construction, maintenance and use of property set out in
the conservation plan . . . and which have not been made
to comply with such standards within one year after a

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 written request to rehabilitate to project standards is
given to the owner by the authority; or

. . .

(4) properties which are infeasible of rehabilitation or
. . . exert a blighting influence on adjacent properties
or prevent proper development of land so as to inhibit or
prevent accomplishment of the purposes of the
conservation plan.

The Authority argues that Paragraph 1 of the Acquisition

section complies with Subsection (4) of Code § 36-50.1 and

allows the Authority to acquire properties under that

paragraph without providing any notice to the landowner. A

comparison of the language in the Plan and in the statute,

however, demonstrates a difference in the conditions under

which property may be acquired. Subsection (4) of Code § 36-

50.1 allows acquisition without such notice if the properties

"are infeasible of rehabilitation . . . so as to inhibit or

prevent accomplishment of the purposes" of the plan.

(Emphasis added.) Paragraph 1 of the Acquisition section,

however, refers to properties that "appear infeasible of

rehabilitation or their land use is inconsistent with the

purposes and objectives of the Conservation Plan." (Emphasis

added.)

The Authority argues that despite this deviation in

language, the phrases used are synonymous; thus, it contends

that this portion of the Plan is not overbroad. The Authority

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also argues that a reviewing court should not strictly

construe the terms of a conservation plan because as defined

by Code § 36-51.1, the conservation plan is merely "an outline

for the conservation, development or redevelopment of an

area," and need only be "sufficiently complete to indicate"

the conservation activities that will take place within the

project area. We disagree.

The Plan's phrase "appear infeasible" is more

encompassing than the Section's "are infeasible," as the

former would allow a taking of property that can "be taken

as," "look[s]," or "seem[s]" infeasible of rehabilitation,

Webster's Third New International Dictionary 103 (1993), while

the latter mandates that, to be taken, the property must be

infeasible of rehabilitation. Also, the definition of

"inconsistent" is "lacking consistency" or "incompatible,"

while the meaning of "inhibit" is to "prohibit from doing

something." Id. at 1144, 1163. A land use that lacks

consistency with the goals of a plan does not necessarily

prohibit an authority from achieving those goals. Thus, we

reject the Authority's argument that the language in Paragraph

1 of the Plan is synonymous with and no broader than that

language in Code § 36-50.1(4).

We also reject the Authority's argument that the Plan was

only an outline and any discrepancies were immaterial because

15
the statute would ultimately control. Although the statutes

authorize the creation and implementation of a conservation

plan, an authority's ability to undertake actions allowed by

statute arises by virtue of a duly adopted conservation plan.

The plan must be consistent with the grant of authority set

out in the statutes and, if the plan contains authorization

for acts beyond those delegated, such authorization is

invalid. City Council of Alexandria v. Lindsey Trusts, 258

Va. 424, 427, 520 S.E.2d 181, 182-83 (1999) (citing City of

Chesapeake v. Gardner Enterprises, Inc., 253 Va. 243, 246, 482

S.E.2d 812, 814 (1997)). Furthermore, distinguishing

properties to be acquired under Paragraph 1 or Paragraph 2 on

the Boundary and Land Acquisition Map does not cure the

infirmities in Paragraph 1 of the Plan. Thus, we hold that

the circuit court did not err in determining that the language

of Paragraph 1 is broader than that found in Code § 36-50.1(4)

and, therefore, cannot be utilized as a basis for the exercise

of eminent domain as authorized by that Code section.

We also conclude that the circuit court correctly

determined that, as written, the Acquisition section complies

with subsection (2) of Code § 36-50.1, which allows an

authority to identify properties not in compliance with its

standards and acquire them by eminent domain if a landowner

does not, within one year of written notice, remedy the

16
violations identified. The language of Paragraph 2 in the

Plan's Acquisition section is entirely consistent with Code

§ 36-50.1(2). The evidence is undisputed that C&C did not

receive the required notice to correct the deficiencies on the

Property from the Authority. Accordingly, the circuit court

did not err in holding that because the Authority failed to

provide such notice and because condemnation was not available

without notice pursuant to Paragraph 1 of the Plan, the

Authority could not maintain its condemnation petition against

C&C's Property in this case.

3. Expert Testimony

Finally, the Authority assigns error to the admission of

certain testimony of Timothy E. Barrow who qualified as an

expert in land planning. Much of Barrow's testimony involved

his interpretation and the Authority's application of the Plan

as they related to the Authority's determination of blight or

blighting influence and the operation of the Plan regarding

the need to provide a property owner with notice and an

opportunity to cure deficiencies. Because the issues in this

appeal can be and have been resolved without reference to

Barrow's testimony, we need not consider whether Barrow's

testimony was properly admitted.

C&C'S ASSIGNMENT OF CROSS-ERROR

17
 We now turn to C&C's assignment of cross-error. C&C

asserts that Code § 36-49.2 bars the Authority from using its

power of eminent domain to acquire and redevelop properties in

the conservation project area for industrial use. The circuit

court held that Code § 36-49.2 "merely expands the means by

which property may be acquired by the housing authority."

Because the circuit court's interpretation of the statute is

correct, we will affirm the circuit court's judgment.

Code § 36-49.2 provides:

In addition to the other powers to acquire real
property by purchase or lease, an authority is
specifically empowered to purchase or lease real
property for immediate or future use, without the
exercise of the power of eminent domain, for
improvement and development for sale, lease, or
sublease as industrial sites, scientific research
laboratory sites, educational institution sites or
sites for housing persons displaced from other lands
of the authority.

The language of this statute does not specifically prohibit

the use of condemnation proceedings for acquisition of land

which will be used as an industrial site. The phrase upon

which C&C relies, "without the exercise of the power of

eminent domain," taken in context is consistent with a grant

of power to acquire property by lease or purchase for certain

uses, while restricting the use of eminent domain to those

circumstances in which a property satisfies one of the

criteria set out in Code § 36-50.1.

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 Adopting C&C's interpretation would create a conflict

with other statutory provisions that authorize an authority to

make land acquired pursuant to a conservation plan available

for use by private entities. See Code §§ 36-49.1, -51.1.

Such property may be acquired by purchase, lease, or eminent

domain, but if by eminent domain, compliance with Code § 36-

50.1 is required. As the circuit court concluded, the power

conferred by Code § 36-49.2 expands the means by which

property may be acquired and the purposes for which such

property may be used by the Authority. It does not prohibit

the use of condemnation by an authority for acquisition of

property that may subsequently be used for industrial sites or

purposes.3 Accordingly, we reject C&C's assignment of cross-

error.

CONCLUSION

In summary, although the circuit court erred in

concluding that the condemnation proceeding violated

principles of due process, the circuit court did not err in

3
On appeal, C&C also challenges this Plan in its entirety
on the ground that its purpose was "an industrial development
plan that takes property for industrial reuse," and it was
never designed to eradicate blight or address any other
condition enumerated in Code § 36-50.1. We reject this
argument for two reasons. First, C&C specifically waived this
challenge to the Plan at trial, Rule 5:25, and second, the
first stated objective of the Plan is "the arrest of
deterioration and the removal of blight, obsolescence and
incompatible land uses."

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holding (1) that Code § 36-49.2 does not prohibit the use of

eminent domain for the acquisition of property which may be

used for industrial purposes pursuant to a conservation plan,

(2) that because the language of Paragraph 1 of the

Acquisition Section of the Plan was overbroad, it did not

allow acquisition of property as authorized by Code § 36-

50.1(4), and (3) that the Plan required the Authority to

provide C&C notice and an opportunity to correct deficiencies.

Because the Authority did not comply with the Plan by

providing C&C with the required notice, there was no error in

the dismissal of the condemnation proceeding.

Accordingly, for the reasons expressed in this opinion,

we will affirm the judgment of the circuit court.

Affirmed.

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