Department of Transportation v. Gilling
Department of Transportation v. Gilling
Opinion of the Court
These consolidated appeals arise out of a condemnation proceeding brought by plaintiff, the Michigan Department of Transportation (MDOT), to acquire a multiacre parcel located on highway M-24 (also known as Lapeer Road) in Lapeer County as part of a road-widening project. In Docket No. 285369, MDOT appeals the trial court’s judgment on the juxy verdict in favor of defendants, Lawrence E Gilling, Margaret Gilling, Stephen L. Gilling, Donna Gilling, Robert L. Gilling, Connie Gilling, Gilling’s Nursery & Landscaping, Inc., and Gilling’s Ar
I. CONDEMNATION: MOVING AND RELOCATION EXPENSES
The trial court ruled that business-interruption damages include moving and relocation expenses. The trial court further held that the statutorily authorized administrative-reimbursement proceedings constitute a supplementary scheme for the recovery of moving and relocation expenses not otherwise fully compensable under state condemnation law. See MCL 252.143; MCL 213.328(1); MCL 213.355. We agree in part. First, we hold that claims for business-interruption damages do not allow for lost profits, but permit recovery of moving and relocation expenses. However, although moving and relocation expenses can include expenses for moving trade fixtures, we hold that the trial court erred by classifying defendants’ nursery stock as trade fixtures. We also hold that the trial court abused its discretion when it excluded key expert testimony that supported MDOT’s position that Gilling was unreasonable in moving to an interim location before moving to its final destination. Finally, we hold that administrative-recovery schemes supplement rather than supplant a property owner’s constitutional right to recover just compensation for moving and relocation expenses as part of a business interruption. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.
II. FACTS AND PROCEEDINGS
In September 2005, MDOT filed a complaint under the Uniform Condemnation Procedures Act (UCPA),
In September 2005, Gilling relocated its businesses to a leased property site that Gilling found unsuitable as a permanent location. In January 2006, Gilling submitted to MDOT its claims for compensable items. Under MCL 213.55(3), if the property owner believes the good-faith written offer made for the property by MDOT under MCL 213.55(1) is inadequate, the owner may submit a written claim to MDOT that details the nature and substance of property damage caused by the taking apart from the value of the property taken and not described in the good-faith written offer. An underlying premise of Gilling’s claim is its assertion that its businesses had to be relocated to an alternate site because the partial taking left only a “small, inadequate remainder[.]” MDOT reimbursed Gilling approximately $147,000 for moving and relocation expenses for the move to the interim site pursuant to this administrative proceeding.
In September 2007, Gilling purchased another site that was better suited to its purpose and relocated to the new, permanent location. In the condemnation proceedings before the trial court, Gilling claimed that it was entitled to compensation for its business-interruption damages, including the costs and expenses of relocating its businesses from the interim site to the permanent site. During Gilling’s subsequent motion to exclude MDOT’s business-valuation expert witness
In response, Gilling asserted that MDOT’s prior administrative payment was “totally irrelevant to MDOT’s duty to appraise, and pay, [Gilling’s] constitutional business interruption damages.” In other words, Gilling contended that any statutory moving and relocation allowances did not limit a landowner’s constitutional business-interruption damages. It asserted that “an owner’s statutory moving allowance, and constitutional business interruption damages, are distinct.” According to Gilling, under the UCEA, “any amounts that MDOT already paid in statutory moving costs are subtracted from the just compensation estimate for business interruption.” Gilling pointed out that its business-interruption appraisal had already made an adjustment for the prior payment. Therefore, according to Gilling, it was not seeking a double payment. After reviewing the facts and proceedings, the trial court denied Gilling’s motion to exclude MDOT’s expert. The trial court agreed with MDOT that “relocation costs are compensable under MCL 252.143 and are not part of the condemnation proceedings,” but concluded that “business interruption damages are part of these proceedings so long as they do not duplicate the relocation costs.”
MDOT then moved in limine to exclude all evidence of Gibing’s moving and relocation expenses. It argued that MCL 252.143 specifically excludes such expenses from condemnation actions. MDOT recognized that there can be business-interruption expenses that do not involve moving or relocation, which would be compensable as just compensation in a condemnation action. But MDOT contended that any moving and relocation expenses were not compensable in that same manner. MDOT asserted that if Gibing believed that the original administrative payment was insufficient to reimburse it for the move to the interim site, then Gibing could have administratively appealed that decision. Likewise, MDOT stated that Gibing could seek administrative
In a written opinion, the trial court addressed both Gilling’s motion in limine to prohibit MDOT from presenting issues of law to the jury and MDOT’s motion in limine to exclude all evidence of Gilling’s moving and relocation expenses. According to the trial court, the primary question before it was whether Michigan’s administrative procedures for claiming moving and relocation expenses were a property owner’s exclusive means of obtaining reimbursement for such costs, or whether those procedures were optional and in addition to the statutory-condemnation and common-law remedies. The trial court observed that the answer to this question required interpretation of MCL 252.143, which states: “Relocation and financial assistance allowed under this act are independent of and in addition to compensation for land, buildings or property rights and shall not be the subject of consideration in condemnation proceedings.”
The trial court noted that the parties agreed that a property owner could not claim damages in a condemnation proceeding that duplicated his or her administrative claims. And the trial court acknowledged that Michigan caselaw made clear that business-interruption damages are compensable in condemnation proceedings, separate from administrative proceedings, provided that damages could be proved with a reasonable degree of certainty. Therefore, according to the trial court, the issue boiled down to whether moving and relocation expenses could legitimately be part of business-interruption damages.
Noting a lack of Michigan precedent on point, the trial court examined caselaw from other jurisdictions. The trial court determined that the case that appeared most directly on point was State ex rel Dep’t of Transp v Little,
The parties agreed on the record to a just-compensation award in the amount of approximately $736,000 for the building, fixtures, and other site improvements on the property. Therefore, the jury was only required to determine the just compensation for the land and, in keeping with the trial court’s ruling, the amount to be awarded for the moving and relocation expenses. The jury awarded Gilling a total of $1,104,550: $585,000 in compensation for Gilling’s land and an additional $519,550, which included compensation for Gilling’s “printed materials at original location,” “time and costs,” “first move costs,” “interim costs,” “second move costs,” “reestablishment costs,” and “property taxes increase[.]” MDOT now appeals the trial court’s judgment on the verdict.
A. STANDARD OF REVIEW
MDOT does not challenge the $736,000 awarded as just compensation for the building, fixtures, and other site improvements on the property. Indeed, MDOT has already paid that amount to Gilling. Further, MDOT does not challenge the jury’s award of $585,000 as compensation for Gilling’s land. MDOT contends, however, that the trial court erred by allowing the jury to award $519,550 in moving and relocation expenses as just compensation. According to MDOT, caselaw has authorized recovery of business-interruption damages as part of just compensation. But, according to MDOT, except for detach-and-reattach expenses for fixtures, business-interruption damages do not include incidental expenses for moving personal property and other relocation expenses. MDOT argues that evidence of the indirect expenses of the taking of a business is nothing more than an attempt to recover lost profits, which Michigan courts have made clear are explicitly excluded from just compensation. MDOT states that recovery of moving and relocation expenses is statutorily provided as an administrative remedy, separate from just compensation. We review de novo questions of statutory and constitutional interpretation. Dep’t of Transp v Tomkins, 481 Mich 184, 190; 749 NW2d 716 (2008); Cardinal Mooney High Sch v Mich High Sch Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991).
B. CONSTITUTIONAL JUST-COMPENSATION PRINCIPLES
1. OVERVIEW
“Private property shall not be taken for public use without just compensation therefor being first made or
Gilling cites four primary cases in support of its argument that a business owner may receive business-interruption damages, including moving and relocation expenses, as constitutional just compensation. They are Grand Rapids & I R Co v Weiden, 70 Mich 390; 38 NW 294 (1888), Grand Haven Hwy, 357 Mich 20, Detroit v Hamtramck Community Fed Credit Union, 146 Mich App 155; 379 NW2d 405 (1985), and State Hwy Comm v Great Lakes Express Co, 50 Mich App 170; 213 NW2d 239 (1973). MDOT attempts to distinguish and discount these cases and argues that, except for expenses related to fixtures, incidental expenses for moving and relocation are not part of constitutionally required just compensation. Although we conclude that caselaw, including the cases on which Gilling relies, establishes that a property owner is allowed to recover moving and relocation expenses as business-interruption damages, the trial court erred by ordering MDOT to compensate Gilling for the cost of relocating nursery stock, as these expenses are properly classified as lost profits resulting from the interruption of business and not expenses caused by a business interruption.
In Weiden, 70 Mich at 395, the Michigan Supreme Court observed that the appellant property owners were “using their property in lucrative business, in which the locality and its surroundings had some bearing on its value.” Therefore, the Court concluded that the appellants were entitled to compensation for their losses that resulted from the interruption of their business in addition to the value of the property itself:
Apart from the money value of the property itself, they were entitled to be compensated so as to lose nothing by the interruption of their business and its damage by the change. A business stand is of some value to the owner of the business, whether he owns the fee of the land or not, and a diminution of business facilities may lead to serious results. There may be cases when the loss of a particular location may destroy business altogether, for want of access to any other that is suitable for it. Whatever damage is suffered, must be compensated. Appellants are not legally bound to suffer for [the railroad’s] benefit. [The railroad] can only be authorized to oust them from their possessions by making up to them the whole of their losses. [Id. (emphasis added).2 ]
The Court then reversed the jury’s verdict because it failed to adequately compensate for business damages; addressing the claims of one of the appellants, the Court stated:
*231 It appeared affirmatively, and without contradiction, that the actual expenses of moving [the] business reached within a few dollars of all that [the jury] awarded for those purposes and for his buildings and improvements. The testimony shows that the buildings and improvements were of considerable value. The verdict is not only grossly unfair, but given without any reference to uncontradicted testimony. Juries have no right to disregard facts, and follow their own caprices. There is no reasonable ground on which the verdict... can be sustained. [Id. (emphasis added).]
Therefore, Weiden made clear that the appellant could be compensated for the “actual expenses of moving his business,” in addition to compensation for his buildings and improvements. Id.
3. In re GRAND HAVEN HWY
In Grand Haven Hwy, 357 Mich at 24, the appellee corporation sought damages for expenses occasioned by business interruption and the expense of relocating its machinery and equipment when the state took its manufacturing property, thereby “forcing [the corporation] to move its entire productive facility to a new location.” The state highway department, however, argued that recent cases had denied recovery of losses resulting from interruption of business, thereby repudiating former cases, like Weiden, that had allowed such damages. Id. at 31, citing In re Condemnation of Lands for Battle Creek Park Purposes, 341 Mich 412, 422; 67 NW2d 49 (1954), In re Slum Clearance, 332 Mich 485, 496; 52 NW2d 195 (1952), In re Edward J Jeffries Homes Housing Project, 306 Mich 638; 11 NW2d 272 (1943), and In re Park Site on Private Claim 16, Detroit, 247 Mich 1, 3, 4; 225 NW 498 (1929). The Court then explicitly held that the cases cited by the state were
An examination of the ... cases cited by [the state] discloses that this Court held that the property owner could not recover loss of profits because of damages caused by business interruption, but did not repudiate Moesta or Weiden in regards to expenses incurred by business interruption. To eliminate any doubt of this Court’s position, we hold that the evidence introduced in this condemnation proceeding showing expenses occasioned by business interruption was properly introduced for consideration as to value and weight by the commissioners making the award. [Grand Haven Hwy, 357 Mich at 31-32.]
The Grand Haven Hwy Court stated that the proof of business interruptions “must not be speculative and must possess a reasonable degree of certainty.” Id. at 32. The Court then examined the corporation’s evidence regarding the costs that it incurred by having to move to a new site. Id. at 32-33. The Court disagreed with the state that the corporation’s evidence was speculative, noting that the state’s own expert had testified that the corporation’s management had spent nearly a year engaging “ ‘in a large-scale project to appraise various means of developing the new plant required by the loss of land to the State,’ ” and that it had “ ‘carefully undertaken a program of projecting out-of-pocket costs ... for making’ ” the move. Id. at 33. The Court then quoted a letter written by the accounting firm hired by the corporation to review its plans for moving its operations: “ ‘[The] accompanying summary of estimated costs of relocating the productive facilities of [the corporation] constitutes a reasonable estimate of such costs on the basis of the various assumptions made ....’” Id. at 34 (emphasis added). By upholding an award based on estimated relocation costs, the Grand Haven Hwy Court made clear that a business
4. DETROIT v HAMTRAMCK COMMUNITY FED CREDIT UNION
In Hamtramck Community Fed Credit Union, 146 Mich App at 157, the city of Detroit condemned the defendant credit union’s land, and a jury awarded the credit union $122,000 in business-interruption damages. On appeal, the city argued that the evidence supporting those damages was too speculative and conjectural. Id. Citing Weiden and Grand Haven Hwy, this Court noted that “[i]t has long been held that damages resulting from business interruption are compensable in condemnation cases provided the damages can he proven with a reasonable degree of certainty.” Id. at 158. The Court then ruled that the proofs introduced to support the credit union’s claim for business-interruption damages were not too speculative and conjectural. Id. More specifically, this Court explained that the credit union’s proofs regarding their business-interruption costs included evidence that it was required to make two moves to relocate the business: once to move to a temporary trailer while a new building was being constructed and then again when it moved into the new building. Id. at 159-160. The manager of the credit union testified that “as a result of the double move, the credit union spent substantial sums to relocate to the trailer and then to its new permanent location. These expenses made up the bulk of the claims for business interruption damages.” Id. at 160. This Court found “no error in the trial court’s refusal to strike [the credit union’s] claim for business interruption damages.” Id. at 162-163. Therefore, by acknowledging that the credit union’s moving and relocation expenses made up the bulk of its claims for business-interruption damages, this Court
5. STATE HWY COMM v GREAT LAKES EXPRESS CO
In Great Lakes Express, 50 Mich App at 178, the defendant trucking company sought business-interruption damages (as distinct from its claims for fixture damages), arguing that the state’s partial taking frustrated a needed expansion of its terminal facilities to such an extent that it was necessary for the defendant to relocate its entire business. This Court did not resolve the issue, but simply held that “[i]t was for the jury to decide whether relocation was necessary in this situation where none of defendant’s facilities had been physically damaged by the taking.” Id. at 178-179. Therefore, this Court again impliedly recognized that moving and relocation expenses fall under the category of business-interruption damages.
6. In re SLUM CLEARANCE
Despite these cases, MDOT submits that in Slum Clearance, the Michigan Supreme Court “answered the question whether the jury should have been allowed to consider as business interruption damages, business losses arising from expenses due to efforts to relocate.” MDOT contends that any attempt to seek indirect or consequential damages in the form of moving and relocation expenses is merely a disguised attempt to seek prohibited lost profits. See Slum Clearance, 332 Mich at 496 (concluding that the lower court “was not in error in refusing to allow the jury to consider loss of profits as the ‘interruption of business’ in determining compensation. Loss of profits is speculative, and not a proper element of pecuniary loss or outlay.”).
7. In re ACQUISITION OF LAND FOR CIVIC CTR AND In re CONDEMNATION OF LANDS FOR BATTLE CREEK PARK PURPOSES
MDOT also relies on In re Acquisition of Land For Civic Ctr, 335 Mich 528; 56 NW2d 375 (1953), and
In Slum Clearance, the appellant electroplating business sought to recover for the cost of moving certain chemical solutions and molten metal as “part of the expense of moving its trade fixtures.” Id. at 490. The Court acknowledged that the chemical solutions and molten metal were not actually annexed or affixed to the real property and that such attachment was “[o]bviously... not... possible.” Id. at 493. But, the Court stated, such actual physical annexation is not a prerequisite to considering the removal of properly in determining damages as trade fixtures. Id. The Court explained that removal of the chemical solutions and molten metal was essential to the appellant’s electroplating business, and, therefore, “they must be considered as trade fixtures, constructively annexed to the real estate.” Id.
The Slum Clearance Court went on to point out that, in other cases, items “ ‘specially adapted to the full enjoyment of the realty’ ” were considered as fixtures. Id., quoting Detroit Trust Co v Detroit City Serv Co, 262 Mich 14, 30; 247 NW 76 (1933). We note that in Detroit
[t]hese articles could not be removed from the building or transported from place to place without impairing their value as well as the value of the building. This building was erected for the purpose of renting stores and offices to the public and in order to be rentable must have various articles or accessories such as those listed above. [Id.]
Like the Detroit Trust Court, the Colton Court went on to clarify that detached equipment and “unused supplies consisting of such articles as paper towels, soap, paint,. . . electric light bulbs,. .. pails, mops, vacuum
This body of caselaw distinguishes loss of profits resulting from damages caused by business interruption from expenses incurred by business interruption. Grand Haven Hwy, 357 Mich at 31-32; Slum Clearance, 332 Mich at 495-497. Only the latter expenses are compensable. The cost of moving trade fixtures constitutes an expense incurred as a result business interruption.
At issue here is whether the trees, bushes, and the like that make up the inventory of a nursery business are trade fixtures. We hold that they are not. A nursery might successfully argue that unattached water pumps, chemical fertilizers, and fertilizing equipment are trade fixtures because they are used to produce or maintain the products of the business, or it might establish that, in operating the business, flower display racks and freestanding counters designed for the space are trade fixtures. Those items, while not necessarily attached to the land or building, could be considered “constructively annexed” to the property because they are intended to be permanent, they would lose value if removed from the building, and they enable and are essential to the business of keeping and selling plant material. Slum Clearance, 332 Mich at 493-494. In contrast, Gilling’s inventory of trees and bushes are the products of the business, they are specifically intended to be sold and removed from the property, and their removal does not impair their value or the value of the property. See Detroit Trust, 262 Mich at 30. This moveable inventory does not fall within the definition of a “trade fixture” under any of the aforementioned cases and, because it is more akin to personal property, Gilling was not entitled to recover for the expense of moving inventory.
As discussed later, we remand for a new trial in which MDOT will have the opportunity to present expert testimony concerning the necessity of Gilling’s temporary relocation to the interim site before moving to its permanent site in 2007. On remand, the trial court should exclude evidence of the cost of moving the nursery products that made up Gilling’s inventory.
C. SUPPLEMENTAL ADMINISTRATIVE-RECOVERY PROVISIONS
MDOT argues that state and federal statutes exclusively govern recovery for moving and relocation expenses. But our reading of the statutory language, taken in light of the numerous condemnation cases we have previously analyzed, leads us to the conclusion that the administrative-recovery provisions supplement, rather than supplant, a property owner’s constitutional right to receive just compensation for moving and relocation expenses as the result of a business interruption.
The act concerning relocation assistance for persons displaced by acquisition of property for highways pro
A business owner’s right to engage in and continue his or her business has long been recognized as a property right.
Indeed, as the trial court explained, cases from other jurisdictions interpreting similar administrative-
we find nothing in the [federal Uniform Relocation Assistance and Real Property Acquisition Act (FURA), 42 USC 4601 et seq.] to indicate that the administrative scheme it creates was designed to precede resort to the courts.... The federal regulations implementing the FURA recognize that compensation made under traditional eminent-domain principles of state law may precede the filing of a FURA claim and, when read in conjunction with [42 USC 4631(b)], implicitly acknowledge that state law condemnation compensation may include items that would also be compensable under the provisions of the FURA. [Emphasis added.]
Courts in Florida
We acknowledge that the administrative-reimbursement provisions state that statutory relocation and mov
Accordingly, we conclude that the trial court did not err by finding that the administrative schemes are not the exclusive remedy for a business owner to recover moving and relocation expenses necessitated by a taking. Michigan cases have repeatedly authorized a business owner to receive business-interruption damages, including moving and relocation expenses, as constitutional just compensation.
IV EVIDENCE REGARDING PERMANENT SITE
A. STANDARD OF REVIEW
MDOT argues that even if the moving and relocation expenses were properly considered as part of just compensation, it was entitled to have just compensation
We review for an abuse of discretion a trial court’s decision to admit or exclude evidence. Barrett v Kirtland Community College, 245 Mich App 306, 325; 628 NW2d 63 (2001). An abuse of discretion occurs when the trial court’s decision results in an outcome falling outside the range of principled outcomes. Woodard v Custer, 476 Mich 545, 557; 719 NW2d 842 (2006).
B. THE BOWMAN TESTIMONY
MDOT asserts that the trial court abused its discretion by precluding the testimony and exhibits of Robert Bowman, a licensed real estate broker and sales agent, who was prepared to testify that Gilling’s “permanent” site was available for sale before, during, and after Gilling’s move to its interim site. We agree. The trial court’s decision to exclude evidence about the availability of the permanent site constituted an abuse of discretion, and MDOT is entitled to a new trial on this basis.
The question whether the permanent site was available when Gilling moved to its interim site was central to the issue of just compensation. Gilling sought expenses for both the interim move and the move to the permanent site. If the permanent site was available at the time that Gilling moved to the interim site, serious doubt would be cast on the reasonableness of Gilling’s
The trial court’s exclusion of Bowman’s evidence substantially prejudiced MDOT’s ability to present its case and to present a valid defense to the jury and, thus, undermined the jury’s verdict. The trial court’s exclusion of MDOT’s proposed expert testimony on this vital issue was an abuse of discretion because it unjustifiably robbed MDOT of its most pertinent evidence on a key question of the trial. See Novi v Robert Adell Children’s Funded Trust, 473 Mich 242, 254; 701 NW2d 144 (2005). Therefore, failure to grant a new trial would be inconsistent with substantial justice. MCR 2.613(A). Accordingly, we reverse and remand for a new trial to
Affirmed in part, reversed in part, and remanded to the trial court for further proceedings consistent with this opinion. We do not retain jurisdiction.
Docket No. 285369.
See also In re Slum Clearance, 332 Mich 485, 497; 52 NW2d 195 (1952), quoting In re Park Site on Private Claim 16, Detroit, 247 Mich 1, 3; 225 NW 498 (1929) (stating that “the owner of property taken may recover for interruption of business”); Moesta, 91 Mich at 154 (stating that in condemnation cases the remedy afforded is similar to an action in tort “in which property rights have been interfered with without the owner’s assent” and that “[i]n such cases damages for the interruption of the owner’s business are allowed”).
See Detroit/Wayne Co Stadium Auth v Drinkwater, Taylor & Merrill, Inc, 267 Mich App 625, 658; 705 NW2d 549 (2005), stating:
Damages resulting from business interruption are compensable in condemnation cases, provided the damages can be proven with a reasonable degree of certainty. But damages related to lost profits are not recoverable in a business interruption case. The stadium authority does not dispute that relocation costs are proper business interruption damages. [Emphasis added; citations omitted.]
See also Detroit v Larned Assoc, 199 Mich App 36, 42; 501 NW2d 189 (1993), stating:
We hold only that to the extent this case is retried on a business-interruption theory, damages for lost profits will not be allowed. With respect to the remainder of [the] testimony (e.g., that concerning rental expenses, advertising expenses, and the like), the jury was free to either accept or reject it. [Citation omitted.]
See Grand Haven Hwy, 357 Mich at 32; Detroit/Wayne Co Stadium, 267 Mich App at 658.
See, e.g., People v Bennett (After Remand), 442 Mich 316, 329 n 17; 501 NW2d 106 (1993) (referring to “private institutions’ property rights in conducting their businesses”); Bay City v State Bd of Tax Admin, 292 Mich 241, 259; 290 NW 395 (1940) (“The Constitution vests in every citizen the right to engage in business. Such right is a property right and is protected by the Constitution of 1908, art. 2, § 16.”); Glover v Malloska, 238 Mich 216, 220; 213 NW 107 (1927) (“It would astound the business world to hold that an established business is barren of property rights of a pecuniary nature.”).
Malone, 438 So 2d at 861 (stating that the FURA “was intended only as a supplementary measure enabling recovery by displaced condemnees of expenses not otherwise compensable under traditional eminent domain principles of state law”).
Rives, 271 So 2d at 728 (stating that the “legislative intent as expressed in [the Relocation Assistance Program Act], when considered in its entirety, was that the Act would provide compensation for items not previously provable or recoverable as damages in an eminent domain proceeding”).
In Docket No. 287552, MDOT challenges the trial court’s postjudgment award of attorney fees. Our holding in Docket No. 285369 obviates the need to address MDOT’s argument regarding the trial court’s award of attorney fees.
Reference
- Full Case Name
- DEPARTMENT OF TRANSPORTATION v. GILLING
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- Published