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Eminent Domain: Condemnation Damages Waiver in Subdivision Plat Binds Successor in Title

The Virginia Supreme Court handed down a unanimous decision on April 28, 2016, in the case of City of Chesapeake v. Dominion Securityplus Self Storage, L.L.C., No. 150328, 2016 Va. LEXIS 56. (Justice Jane Marum Roush participated in the appellate hearing, but not the Court’s six-member decision.) Justice Cleo E. Powell authored the Court’s opinion, and employed traditional contract interpretation principles to decide the case. The decision reversed the Chesapeake Circuit Court’s award of damages to a landowner following the City of Chesapeake’s (“the City”) taking of land for highway improvements.

In 2001, the predecessors in title to Dominion Securityplus Self Storage, L.L.C. (“Dominion”), subdivided their six-acre land parcel along Dominion Boulevard in Chesapeake. The subdivision facilitated Dominion’s purchase and development of a 4.5-acre sub-parcel, for which the City granted a zoning variance. The variance enabled Dominion to construct a self storage facility on the sub-parcel. Under applicable zoning provisions, without the variance, the sub-parcel lacked sufficient road frontage for the intended development.

In requiring the subdivision as a condition of site plan approval, the City required “that the subdivision plat reserve a 50-foot right of way in favor of the City for purposes of future expansion of Dominion Boulevard.” As approved by the City’s Planning Commission, the subdivision plat reserved the right-of-way and, at its Note 7, further stated:

The purchase value of said area is to be based on the fair market value as of the date the City exercises its right to purchase the area designated as reserved with no compensation for any improvements placed within the area. The owners agree that it shall not make or have any claims for damage to the said improvements or damages to the residue [of] the owners' property by reason of the said purchase.

[Clarification in original].

Dominion’s predecessors in title (“the Eures”) recorded the subdivision plat in December 2001. In January 2002, the Eures conveyed the 4.5-acre sub-parcel to Dominion. The deed, as recorded, made the sub-parcel’s conveyance “subject to all of the terms, conditions, rights, obligations, restrictions, easements and reservations set forth in the duly record[ed] deeds, plats, declarations and other instruments constituting constructive notice in the chain of title to the property." [Clarification in original].

In 2011, the Chesapeake City Council authorized a project to widen and improve Dominion Boulevard. The project included replacement of a drawbridge over the Elizabeth River with a fixed bridge, rising “to 95 feet at its apex.” The project anticipated the City’s acquisition of the 50-foot right-of-way reserved in Dominion’s 4.5 acres, and, an additional (i) 1,631 square feet of Dominion’s property for a permanent utility easement, and (ii) 537 square feet for a temporary construction easement. No part of the widened Dominion Boulevard would include Dominion’s property. Yet, the project involved raising the grade of Dominion Boulevard some 30 feet above Dominion’s property, eliminating Dominion’s road frontage, and anticipating the City’s construction of an access road to its property.

The City, as required by law, attempted to purchase from Dominion the 50-foot right-of-way and the additional easement-related square footages. Dominion refused to sell. In March 2012, the City filed “a certificate of take in the amount of “$39,310.” In May 2012, it filed a petition for condemnation seeking “a determination of just compensation for the property taken and damages to the residue.” Dominion answered, contending that it the 50-foot right-of-way reservation did not bind it. It termed the reservation “an unlawful exaction of property” and therefore beyond the City’s authority. Dominion further contended that the taking resulted in a reduction in the residue’s market value “due to loss of reasonable access, visibility, and other causes.”

Prior to trial, the City filed three motions in limine. In the first, and based on Note 7, it sought to exclude evidence of any damage to the residue of Dominion’s property. The trial court recognized Note 7 as a valid contract between the City and the Eures, and ruled that it bound Dominion. Thus, Dominion had waived “any damages to the residue caused by the purchase or take of the land in the reservation.” Yet, in significant part, the trial court rejected the City’s position. It ruled that the “only foreseeable damage was the existence of the residue without the reserved area.” Thus, Dominion could seek damages to the residue not foreseen in 2001. It also held that “the 2,168 square feet outside the reservation…were not subject to Note 7.”

In the second motion in limine, the City moved to exclude “Dominion's evidence of damage to the residue caused by the loss of visibility of Dominion's self-storage facility and signage from Dominion Boulevard.” It argued that Virginia law did not recognize “loss of visibility as a compensable item of damage in a partial taking case.” The City also contended that the visibility loss resulted from the elevation of Dominion Boulevard, not from any taking of Dominion’s property. The trial court, deeming the visibility loss to arise from “the project as a whole,” denied the motion.

The final motion in limine sought “to prevent Dominion from presenting evidence of damages to the residue resulting from loss of direct access to Dominion Boulevard. The City maintained that in return for the grant of a variance from frontage requirements, the Eures stipulated that the property's access to Dominion Boulevard might be closed in the future.” In part, Dominion asserted that “the Planning Commission had no authority to impose any conditions on the variance as to the frontage requirements.” The trial court denied the City’s motion, finding the Eures’ 2001 stipulation “not valid.”

In its analysis, the Court first noted the applicable standard of review: “We review issues of contract interpretation de novo.”

The Court then reviewed Note 7, and noted two of Dominion’s contentions: (1) that Note 7 did not apply because the City did not purchase the property, but instead, condemned it; and (2) that because the City took more than the 50-foot reservation, “the trial court had no choice but to allow the landowner to present evidence of residue damage.” The Court rejected both arguments.

The trial court recognized that Note 7 bound Dominion, and the Court agreed. Turning to the trial court’s “foreseeability” ruling, the Court stated that:

We construe [a contract] as written, without adding terms that were not included by the parties. When the terms in a contract are clear and unambiguous, the contract is construed according to its plain meaning. Words that the parties used are normally given their usual, ordinary, and popular meaning.

[Clarification in original].

In deciding the issue, the Court noted that in Note 7, the Eures waived “any claim” for damages to the residue resulting from the City’s purchase of the land within the reservation. Because the “parties to the contract did not impose a term of foreseeability on the landowner's waiver of damages to the residue, therefore, it was error for the circuit court to insert such a term into Note 7…In this case, having waived ‘any claim for damages’ the landowner's waiver was broad enough to include the damages to the residue sought by Dominion at trial, including loss of visibility and loss of direct access to Dominion Boulevard.”

Moreover, the Court found no support for Dominion’s effort to distinguish between a “purchase” and a taking by condemnation. The City unsuccessfully attempted to purchase the property: “In light of the fact that the City's attempts to purchase the property were rebuffed by Dominion, we conclude that Note 7 was applicable to the City's acquisition of the property within the reserved area by means of eminent domain.”

Likewise, the Court rejected Dominion’s contention that the City’s acquisition of square footage outside of the reservation served to void Note 7. It agreed with the trial court’s conclusion that “Note 7 did not apply to any take outside the reserved area.” But it disagreed with the trial court’s award of damages:

Dominion failed to present any evidence by which any of over $2,100,000 in damages that the circuit court awarded could be apportioned to the City's take of a utility easement and a temporary construction easement outside of the area of reservation. Because of this failure of proof, the entire judgment for damage to the residue must be reversed.

Having resolved these issues contrary to Dominion’s position, the Court held that “we will reverse the judgment of the circuit court awarding Dominion damages to the residue in the amount of $2,156,789.18, which consisted of compensation for loss of visibility and loss of direct access, and enter final judgment in favor of the City on that claim.” The Court further stated that it would “reserve for another day the substantive questions raised by the parties as to whether and to what extent loss of visibility is a compensable damage to the residue in a condemnation proceeding in Virginia.”

An appellate court typically will decide a case on the narrowest possible grounds, as the Supreme Court did in this case. For example, a court must enforce a valid and unambiguous contract according to its stated terms. The contract’s words’ plain and ordinary meaning govern their interpretation. Neither the parties nor a court may add terms to a contract. Nor will matters falling outside the scope of a contract serve to void the parties’ agreement as to matters within its scope.

Yet here, the Court also declined to distinguish between the contract’s word, “purchase,” and a taking of land by condemnation. The Court reasoned through the issue. To do so, it referred to the City’s rebuffed effort to purchase the publicly needed portions of Dominion’s property. But does a “purchase” really include a taking by condemnation? The Court did not outright draw that conclusion. Instead, it appeared to infer it under the facts of this case. Does that ruling conform to the traditional contract principles relied upon to decide the case? I invite your feedback on this issue.

Should Dominion have attempted to “compartmentalize” its damages evidence, so as to apportion between (a) damages to the residue from the loss of the 2,168 square feet taken from outside of the reservation, and (b) damages to the residue from the loss of the land within the reservation? Perhaps no expert could do so. If Dominion had done so, would the Court have been required to decide whether “loss of visibility is a compensable damage to the residue in a condemnation proceeding in Virginia?”

What about the “loss of visibility” compensability issue? The Supreme Court made clear its non-decision on the matter. Based on the Court’s decisional bases, further comment would have constituted dictum. Does the decision give any hint that the Court may decide the issue favorably to landowners in the future, or, to condemning authorities? Does it possibly denote a lack of consensus among the justices on the issue?

Without a doubt, in future cases, eminent domain counsel will further pursue the issue of “loss of visibility” compensability.

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Mr. Thomas serves appellate clients from throughout the Commonwealth of Virginia in Virginia's appellate tribunals, the State Corporation Commission, and the U.S. Court of Appeals for the Fourth Circuit. 

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