E-470 Public Highway Authority v. Revenig

Justice KOURLIS

dissenting.

Article II, Section 15 of the Colorado Constitution demands that a landowner whose property is condemned receive “just compensation” for that property. Deducting from that payment some amount attributable to intangible benefits that may inure to a separate piece of property violates that guarantee of just compensation. Accordingly, in my view, section 38—1—114(2)(d), 10 C.R.S. (2003), is unconstitutional on its face and as applied in this case. Therefore, I respectfully dissent from the majority opinion.

I. Under Colorado Law, the Statute is Unconstitutional

The issue we confront today is a matter of state law, uniquely shaped and mandated by the language of Colorado’s own constitution. Our constitution requires that “[pjrivate property shall not be taken or damaged, for public or private use, without just compensation”. Colo. Const. art. II, § 15. Interpreting that constitutional provision, this court has consistently held that just compensation means monetary payment. See Swift v. Smith, 119 Colo. 126, 201 P.2d 609, 615 (1949); Leadville Water Co. v. Parkville Water Dist., 164 Colo. 362, 436 P.2d 659, 660 (1967). Prior to the passage of section 38-1-114(2)(d) and its specific provisions related to highway acquisition, there was no question in Colorado but that special benefits could be set off against damages only, but not against the value of the land taken. Boxberger v. State Highway Comm’n, 126 Colo. 526, 251 P.2d 920, 925 (1953); Denver Joint Stock Land Bank v. Bd. of County Comm’rs, 105 Colo. 366, 98 P.2d 283, 286 (1940). The landowner was entitled to the full value, in monetary form, of the land actually taken. Indeed, we have even specifically held that a landowner need not accept substitute benefits in lieu of compensation for property taken. Great W. Ry. Co. v. Ackroyd, 44 Colo. 454, 98 P. 726, 727 (1908); Burlington & C.R. Co. v. Schweikart, 10 Colo. 178, 14 P. 329, 332 (1887).

Hence, we have a constitution in Colorado that guarantees just compensation to the *1047owner of property taken without his consent, and a history of case law that “jealously guard[s]” that right. Lamborn v. Bell, 18 Colo. 346, 32 P. 989, 991-92 (1893).

Despite the majority’s assertions that this court has endorsed non-monetary just compensation in the past, maj. op. at 1042, no case has ever held that just compensation for property physically taken could be computed other than by dollars paid. In fact, as recently as 2001,'this court held that just compensation requires that “the owner must be put in as good position pecuniarily as if the property had not been taken.” Fowler Irrevocable Trust 1992-1 v. City of Boulder, 17 P.3d 797, 802 (Colo.2001) (quoting U.S. v. General Motors Corp., 323 U.S. 373, 379, 65 S.Ct. 357, 89 L.Ed. 311 (1945)) (emphasis added). The plain meaning of the term pecuniary, as well as its dictionary definition, equates to monetary compensation, not some intangible form of special benefits. See The Concise Oxford Dictionary 1006 (9th ed.1995) (pecuniary means “of, concerning, or consisting of, money.”). The cases to which the majority cites stand for the proposition that benefits may be offset against damages as to residual property — a completely different concept than the one the majority addresses today.

It-is, of course, indisputable that this court must defer to the General Assembly and must hold a statute constitutional unless the petitioners are able to demonstrate that it is unconstitutional beyond a reasonable doubt. Maj. op. at 1041. Hence, my inquiry is simply whether this is, as the majority suggests, a matter appropriately conferred to the legislature’s discretion in prescribing the terms, conditions and methods for the evaluation of just compensation, or whether it is a matter that cuts to the heart of just compensation in violation of the constitution. In my view, it is the latter.1

For that conclusion, I rely upon three precepts: A) landowners are entitled to monetary compensation in Colorado and special benefits do not constitute money; B) section 38-l-114(2)(d) creates disparate and unfair results in measuring compensation; and C) section 38-l-114(2)(d) is arbitrary in that-it applies only to highway projects, not to other takings, and it arbitrarily reduces the value of the land taken by up to fifty percent, but not more.

A.

Just compensation means the reasonable market value of the property taken — the price it would bring if sold in the open market. Goldstein v. Denver Urban Renewal Auth., 192 Colo. 422, 560 P.2d 80, 82-83 (1977). Section 38-1-114(2)(d) directs that the monetary condemnation award payable to a landowner whose property is condemned must be reduced by any special benefits attributable to remainder property, up to fifty percent of the total award. The undeniable impact of that statute is to create a situation in which a landowner may receive only one-half of the 'monetary value of the condemned property. The majority concludes otherwise, relying on cases such as Bauman v. Ross, 167 U.S. 548, 17 S.Ct. 966, 42 L.Ed. 270 (1897), for the proposition that just compensation need not be monetary, and that, therefore, the increase in value to the landowner’s remaining property may properly be calculated into the total award for purposes of reaching “just” compensation.

Initially, I would observe that Bauman, in 1897, looked to an “overwhelming number of decisions in the courts of the several states ... [that] support this view....” Id. at 977. In reality, most of the states upon which the Court relied for that proposition have since reversed course.2 More importantly, in re*1048cent times, the Supreme Court itself has specifically equated just compensation to monetary compensation. U.S. v. Miller, 317 U.S. 369, 373, 63 S.Ct. 276, 87 L.Ed. 336 (1943) (Just compensation means “the full and perfect equivalent in money of the property taken.”) (emphasis added); U.S. v. Reynolds, 397 U.S. 14, 16, 90 S.Ct. 803, 25 L.Ed.2d 12 (1970) (stating that '“just compensation means the full monetary equivalent of the property taken”); Phillips v. Washington Legal Found., 524 U.S. 156, 177, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998) (same). The majority’s position today does not conform to this modern trend. Thus, I cannot agree that “federal law and a substantial minority of states allow compensation for property taken to be reduced by the amount of special benefits to the remaining property.” Maj. op. at 1044.

Special benefits3 to remainder property have no place in the just compensation calculus for property actually taken. There is and can be no special benefit that accrues to the parcel of property being condemned.4 That property provides no benefit at all to the landowner — indeed, the landowner will no longer own it at the conclusion of the condemnation proceeding. Because of that simple proposition, the condemning authority has traditionally only beqn entitled to introduce evidence regarding benefits if the landowner is claiming damage to remainder property. Julius L. Sackman, Nichols on Eminent Domain § 8A.02[5] (3d ed.2003). The focus is on the damage and benefit to the remainder property' — -not on how those damages or benefits impact the property being condemned.

It is for that reason that the majority of states around the nation follow the rule that special benefits may be set off against, or deducted from, damages to the remainder property but not to offset compensation due for the property taken. Sackman, supra, § 8A.02[6]. Most of those states have statutes to that effect, and the courts have therefore not needed to evaluate the constitutionality of a statute that provides otherwise. See e.g., Utah Code Ann. § 78-34-10 (2003); Wyo. Stat. Ann. § 1-26-706 (Michie 2003).

However, a number of other state courts around the nation have directly held that it would be unconstitutional to permit the payment of something less than the market value of the land actually taken.5 The courts reason that imposing upon landowners the deduction associated with uninvited and perhaps never-realized benefits is inconsistent with principles of just compensation.

Under the majority’s construction, a landowner is not only required to give up the condemned portion of his property, but would also be forced to sell the remainder property in order to be made whole. Specifically, the landowner recognizes no gain on the remainder property unless or until he sells it. That gain may be illusory; it may *1049be over-stated; it may be under-stated. In any event, it does not relate to the property taken, for which the condemning entity owes that landowner just and fair value.

B.

Second, the statute creates unfair outcomes. In a hypothetical situation, three landowners could border the new highway construction project and could experience completely different economic outcomes. If all of landowner A’s property is necessary to the project, he will receive the fair market value of that property free of any deductions. If none of landowner B’s property is necessary to the project, but he will receive a special benefit attributable to the project in the form of an access outlet, he will enjoy the full advantage of that benefit without any negative economic consequences. It is only landowner C, who both has property being taken and also remainder property, who will be forced to pay for the benefit to his remaining property by way of deduction from the fair market value of the property condemned. That outcome, in the words of a New York appellate court, would result in an “unconstitutionally discriminate exercise of taxing power in favor of a neighboring owner who suffers no loss of land, but benefits by the public improvement which led to the taking.” Chiesa v. State, 43 A.D.2d 359, 351 N.Y.S.2d 735, 737 (N.Y.App.Div.1974).

C.

Lastly, the statute is inherently arbitrary. It reduces the compensation due to a landowner whose property is being taken for highway construction purposes, while preserving just compensation for other eon-demnees. The statute begins by providing in pertinent part that:

In estimating the value of all property actually taken, the true and actual value at such time shall be allowed and awarded. No deduction therefrom shall be allowed for any benefit to the residue of said property.. In estimating damages occasioned to other portions of the claimant’s property or any part thereof other than that actually. taken, the value of the benefits, if any, may be deducted therefrom. In all cases the owner shall receive the full and actual value of all property actually taken. In ease the benefit to the property not actually taken exceeds the damages sustained by the owner to the property not actually taken, the owner shall not be required to pay or allow credit for such excess.

§ 38-1-114(1).

The statute goes on, then, to create a series of special exceptions applicable only to highway acquisitions. Only in such context may compensation for the property taken and damages to the residue of the property be diminished by the amount of special benefits attributable to the project. § 38-1-114(2).

Nowhere in the constitution do I find an article that creates exceptions for highway acquisition. Just compensation is due to a landowner irrespective of' the identity of the condemnor or nature of the purpose for which condemnation is being undertaken. It is not susceptible to different definitions in different contexts, or to an arbitrary floor or ceiling.

Similarly, the statute, without any explanation or rationale, provides that the deduction may not exceed fifty percent of the total condemnation award. § 38 — 1—114(2)(d). Presuming that the purpose of that section is to save tax dollars by reducing highway expenditures or in the alternative to prevent landowners from receiving a windfall, limiting the deduction to fifty percent is not logically related to the achievement of either of these goals. For example, if fifty acres of a 100-aere ranch (with a fair market value of $100,000) was condemned and the other fifty acres remained, but received special benefits in the amount of $100,000, under the majority’s analysis, the landowner is entitled to zero dollars in just compensation “and nothing more.” Maj. op. at 1041. However, when the fifty percent deduction rule is applied, the landowner would still receive $50,000 in compensation. Clearly if just compensation can consist of benefits and not dollars, then the landowner should, under the majority approach, receive nothing. The $50,000 would be a windfall. Hence, the arbitrary fifty percent limitation on deduc-. tions itself undermines any logical under*1050standing of the purpose and application of the statute.

II. Conclusion

I read section 38 — 1—114(2)(d) as a direct affront to Article II, Section 15 of the Colorado Constitution. It redefines just compensation under the constitution in such a way as to allow non-monetary compensation for a taking, which contravenes decades of this court’s precedent. It further applies that new definition only to landowners whose property is being taken for highway construction, and then creates an artificial maximum amount of the deduction against the condemnation award.

Contrary to the majority’s assertion, there is nothing in the constitution that suggests a condemnation award should balance the interests of the individual landowner whose property is taken against the interests of the taxpaying public. Maj. op. at 1043. Just compensation is not a sliding scale, dependent upon whether the landowner is a “speculator” or a third generation owner, or dependent upon whether the State has ample revenue or not. Any balancing of interests should be conducted by the condemning entity prior to deciding whether to condemn a private individual’s land for a public purpose — not after the decision has been made and the economic consequences of that decision are brought to bear. Just compensation is an absolute. Landowners are not charged with the duty to contribute their property for the public good. Rather, private property rights are protected, such that if the public entity requires the use of the landowner’s property, that landowner will receive the full value of the property — just as if it had been sold in an arms-length transaction. That protection is a quintessential aspect of our system of public and private interface, and I view the statute as an impermissible attempt to shift part of the costs of highway construction onto private landowners.

For all of those reasons, I respectfully dissent. I would reverse the trial court and remand this case for recalculation of the condemnation award applying the dollar amount of any benefit as a credit only against damage to the remainder.

. I would not accept the E-470 Authority’s invitation to struggle with the question of whether the right to compensation is a fundamental one or not. I would merely find that just compensation for property taken means monetary compensation, and as such, the statute violates that constitutional mandate. See Keller v. Miller, 63 Colo. 304, 165 P. 774 (1917), for a case in which this court reached the conclusion that a statute purporting to deny a landowner his costs similarly violated constitutional requirements of just compensation without any need to define the particular level of constitutional scrutiny.

. The Court relied upon Kansas, Massachusetts, New York, New Jersey, Ohio, and Pennsylvania law. Massachusetts, New York, New Jersey, Ohio and Pennsylvania now allow the setoff of special benefits against damages to the remainder only and not against the value of the property *1048taken. Julius L. Sackman, Nichols on Eminent Domain §§ 8A.03[24], [33], [35], [38], [41] (3d ed.2003).

.Parenthetically, the statute invites confusion regarding the differences between special benefits and general benefits. A general benefit is one that is common to all lands in the vicinity of the condemnee’s property, and a special benefit is one that accrues directly to the particular land remaining after a partial taking. Mack v. Bd. of County Comm'rs, 152 Colo. 300, 381 P.2d 987, 991 (1963); Julius L. Sackman, Nichols on Eminent Domain § 8A.02[4](3d ed.2003). Although the question of whether the benefits attributable to the remainder property in this case were truly "special” has not been raised here, it is embedded in the calculation that the statute permits. Particularly when addressed in the context of a highway construction project, the distinction between special and general benefits will beleaguer the courts.

. Indeed, if the property being taken were valued after the installation of the improvements rather than before, it too might be worth more. However, under the majority's reasoning, the landowner does not realize any special benefit increase in value in the land taken, but must pay for it in special benefits attributable to the remainder and debited against the property taken.

. Commonwealth v. Powell, 258 Ky. 131, 79 S.W.2d 411, (1935); Chiesa v. State, 43 A.D.2d 359, 351 N.Y.S.2d 735 (N.Y.App.Div.1974); Williams Natural Gas Co. v. Perkins, 952 P.2d 483, 487 (Okla.1997); State Highway Comm’n v. Hooper, 259 Or. 555, 488 P.2d 421 (1971); Capital Properties, Inc. v. State, 636 A.2d 319 (R.I.1994); State v. Enterprise Co., 728 S.W.2d 812 (Tex.App.1986); and State v. Smith, 25 Wash.2d 540, 171 P.2d 853 (1946).