Zimmer, Duncan & Cole

When the Guv'ment Wants Your Land, the Guv'ment Gets Your Land

Few things better illustrate the breadth of our government's powers than its right to take away our land. This is called the power of "eminent domain", and it can be used to take private land for any public purpose at any time.
When the State needs land, it is often able to informally negotiate an agreeable price without actually using its power of condemnation. However, if the State and the owner can't agree, the State initiates a lawsuit, and a jury decides the owner's compensation.
That's the setting for this week's case, State of South Dakota v. Philip G. Clark and Hansen Manufacturing Corp. (2011 S.D. 19).
Philip Clark owned property on West 12th Street in Sioux Falls, South Dakota, which he leased to Hansen Manufacturing. Hansen makes large, agricultural and industrial conveyer belt systems. You've probably seen some of their products without realizing it: the long, horizontal steel structures connecting the tops of elevator grain silos.
In 2005, the Department of Transportation began moving forward with a plan to widen 12th Street and install a median. In order to obtain the necessary land, the State followed its usual procedure-sending letters to adjoining landowners and proposing a price.
Mr. Clark responded with a counter-offer. After continued negotiating, he and the State reached an impasse. Although all of his neighbors had accepted the State's proposed prices, Mr. Clark refused the State's final offer of $277,550.00.
However, when the State wants to build a road, it doesn't take "no" for an answer.
The State starts a condemnation proceeding by filing a petition at the county courthouse that announces that it is taking the land and requests a jury trial to figure out the right price.
If the State wants to begin using the land immediately, it is required to deposit with the court the amount of its final offer.
From that moment on, the State can begin construction. In exchange, the State can't back out of the process...it is legally committed to purchase the property for the amount selected by the jury.
This procedure is called a "quick take", and it greatly simplifies and speeds up public projects like widening a road.
The right of eminent domain is older than our republic. It traces its roots to the monarchies of long ago, when kings and feudal lords could take the land they wanted or needed, without question, and often without paying for it. Even in colonial times, compensation was not always the norm.
The drafters of our Constitution were careful to avoid this. The Bill of Rights requires "just compensation" when "private property is taken for public use".
The level of this compensation is determined by a jury trial. Both sides call expert witnesses who give opinions. The jury is allowed to visit the property. And the jury is allowed to consider the benefits that result from the State's improvements.
If the jury's award exceeds the amount already deposited with the court, the trial judge adds interest to the difference.
Most importantly, if the total judgment is more than 20% larger than the State's "final offer", the State has to pay the landowner's attorney fees and the costs of its expert witnesses. This penalty encourages the State to always make fair and reasonable settlement offers.
At trial, the jury determined that Mr. Clark was entitled to $320,000.00 as just compensation for his land. This was only about 13% more than the State's final offer. However, Mr. Clark was also entitled to prejudgment interest of $21,074.91.
Since the total of these two numbers was more than 20% greater than the State's final offer, the trial judge awarded Mr. Clark his attorney's fees ($51,940.00) and the costs of his expert witnesses ($17,732.85). All told, this cost the State an extra $112,000.00 more than its original, final offer.
The State appealed the trial judge's decision to award attorney's fees and costs. The State believed that prejudgment interest should be excluded from the "greater than 20%" calculation.
The Supreme Court disagreed. It read the statutes involved and determined that the trial judge properly included interest in the 20% calculation. The Court explained that it was because of the State's decision to file a lawsuit that interest was necessary in the first place. This result will continue to encourage the State to make fair offers from the beginning and avoid litigation in the future.
Daniel K. Brendtro is a trial attorney from Sioux Falls. His firm, Zimmer, Duncan & Cole, LLP, has represented clients statewide since 1948 on all types of cases, including injuries, accidents, criminal defense, and business lawsuits.