Citation:

York City Redevelopment Authority v. Ohio Blenders, Inc., 956 A.2d 1052 (Pa. Cmwlth. 2008).

Summary:
A municipality satisfies the security requirements of the Eminent Domain Code when the security is readily accessible and is sufficient to satisfy the condemnation damages.
Case Details:

The York City Redevelopment Authority (the “RDA”) identified a certain area of land as blighted.  Ohio Blenders, Inc. (“Ohio”) owned property within the blighted area.  The RDA offered to pay Ohio $2 million for the property.  Ohio countered with an offer for $2.6 million.  The RDA rejected such offer and reduced their offer to $2.3 million; the RDA subsequently withdrew its original $2 million offer.  The RDA then filed a Declaration of Taking by eminent domain.  Ohio filed preliminary objections.  The RDA filed an Amended Declaration of Taking to cure a defect and this Declaration was accompanied by a bond which provided security for the payment of the damages to be determined for the condemnation.

Ohio argued that the RDA failed to provide adequate security for the taking prior to September 1, 2006, the effective date of the new Eminent Domain Code because the “open bond” was not guaranteed by a surety.  Therefore, Ohio argued that the RDA did not “exercise the power of eminent domain” on or before the effective date of the new Eminent Domain Code.  Ohio also argued that the Blight Certification was in bad faith.  The trial court overruled Ohio’s preliminary objections.  The trial court found that the condemnation was effected by the filing of the Amended Declaration of Taking on August 30, 2006, prior to the date of the Eminent Domain Code.  The trial court did find that the open bond did not provide adequate security and directed the RDA to reserve $1.2 million of grant funds to be dedicated to taking of Ohio’s property and directed that an additional bond backed by a third party in the amount of $1.8 million be established. The RDA provided the trial court and Ohio with a copy of a $1.8 million excess surety bond.  The trial court found that the RDA had complied with their order.

Ohio appealed to the Commonwealth Court arguing that the RDA failed to “exercise the power of eminent domain” on or before September 1, 2006 because the RDA did not post the required security.  Ohio also argued that they met their burden of proving a prima facie case of bad faith and that the burden should have then shifted to the RDA to support the Blight Certification.

The new Eminent Domain Code provides that it shall apply to the exercise of power of eminent domain on or after the effective date of September 1, 2006.  Ohio claims that the RDA did not exercise the power prior to the date because the RDA did not post adequate security.  The Commonwealth Court looked at the Black’s Law Dictionary definition of exercise which means “to put into action.”  Therefore, the Commonwealth Court found that the RDA did exercise the power of eminent domain by filing the Amended Declaration of Taking because this initiated the condemnation.

Ohio next asserted that the $1.2 million Line of Credit was insufficient because it was merely a promise to draw down a line of credit, and that Ohio would not be able to access the $1.8 million surety bond unless it successfully drew down the $1.2 million line of credit.  The Commonwealth Court found that the test for determining whether the security posted is sufficient is whether the security is readily accessible and whether the security is sufficient to satisfy the condemnation damages.  The Commonwealth Court found that Ohio’s challenge was to the form of the security, not the sufficiency.  The Commonwealth Court found that there was no prohibition to the RDA accessing the $1.2 million Line of Credit and that the excess surety bond was an entirely acceptable form of security.

Next, the Commonwealth Court addressed Ohio’s argument that they had made out a prima facie case of bad faith. Bad faith must be described by clear averments of facts.  Ohio claimed that there were inconsistent explanations for why the area was being certified as blighted.  The Commonwealth Court found that the variations in the drafts did not establish fraud because the drafts were just preliminary documents subject to revision.  Therefore, the Commonwealth Court found that Ohio offered nothing more than pure speculation that RDA acted in bad faith. The Commonwealth Court affirmed the trial court’s dismissal of Ohio’s preliminary objections.

Date of Decision: 9/8/08

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