Grill Them About Their Promises: Only Binding Contractual Promises Avoid the One Recovery Rule

In homage to the upcoming season, I am writing the 12 Days of Condemnation, highlighting a dozen of my favorite eminent domain decisions.  Fifth, a 1977 Michigan case illustrates the negative consequences of relying upon non-contractual promises by a condemning authority about how property will be used and why, in partial takings, it is assumed that the rights acquired by an agency will be fully used.

Biff's Grills, Inc v Michigan State Hwy Comm, 75 Mich App 154 (1977) was filed after a condemnation acquisition had been completed. About 12 years before this lawsuit was filed, a prior owner of the property had conveyed three acres of property for the construction of an expressway. It did not know that there was a potential that a median could be installed that would restrict access to only right in/right out. When filing the case, the new owner “allege[d] that its thriving restaurant business at the intersection of Orchard Lake Road and I-696 was effectively destroyed in 1973, when a median strip was installed in Orchard Lake Road. The median prevents northbound traffic from turning left into the plaintiff's establishment which is located on the west side of Orchard Lake Road, just north of I-696.” 

I observed that the construction of the median had a significant adverse impact on the property. I have lived in the area of this property, frequented many restaurants within a few hundred feet of it, but never this one. Why? Access was too much of a pain. The restaurant is now vacant and has been for years.

However, the property owner lost and in doing so illustrated the one recovery rule. The state enjoyed the right to use the right of way that it purchased to install a median unless it promised to refrain from doing so through a binding contract. The cases requiring additional compensation “involved express agreements by the grantee (usually the government in the exercise of its eminent domain powers) to either do or refrain from doing something to the condemned (or purchased) property. When, sometime after the acquisition, the grantee began using the property in a manner prohibited by the original agreement, the courts acted to protect the interest of successor owners of whatever property was left after the original taking. Usually, the relief was granted on a breach of contract theory.” In Biff’s Grill, the owner “failed to allege the express contractual promise which was the key” in another “decision” that ruled in favor of the owner.  “At most, there is an allegation that the defendant showed plaintiff's landlord's predecessor in title a set of I-696 plans which did not show a median in Orchard Lake Road.”

Biff’s Grill supports the requirement in the Mi CIV JI 90.15 regarding partial takings. It requires that the determination of just compensation be based “upon the assumption that the newly acquired property rights will be exercised by the agency to the fullest extent allowed by law.” That instruction is necessary because there is only one chance for a property owner to receive just compensation for a taking, as demonstrated by Biff’s Grill. Therefore, unless an agency will constrain its right to use the acquired property with a binding contract, it must be assumed that the agency will use all of the rights acquired, even if there is no present intention to do so. Agencies frequently acquire rights and then claim that they won’t actually be used. Biff’s Grill demonstrates why that would be unfair.