A Milwaukee veterans group is homeless and $300,000 poorer after a Wisconsin Supreme Court decision simplified eminent domain for state and local governments.
The July 17 decision ended a lawsuit between the City of Milwaukee Post No. 2874 Veterans of Foreign Wars of the U.S. and the Redevelopment Authority of the City of Milwaukee. The veterans sued the city for more money after Milwaukee in 2001 used eminent domain to acquire a former hotel on Wisconsin Avenue. The VFW had a long-term lease in the hotel.
The Supreme Court’s 4-3 decision sided with the city and Wisconsin Department of Transportation, which joined the city in the lawsuit. The court also wiped away the $300,000 the VFW was to receive for losing its lease on the property.
“When I heard the news, it’s like taking a knife and putting it in your back and twisting the knife and turning it because it’s such a blow to all of the members because here we fought in all of the wars,” said Robert Drakos, commander of the VFW post.
The case stretches back nearly 50 years to when the VFW post owned the property on Wisconsin Avenue. The post sold the land to Towne Metropolitan Inc., one of Milwaukee developer Joseph Zilber’s firms, in exchange for a 99-year, $99 lease for 5,250 square feet of the hotel Towne built there.
The city evicted the VFW in 2003 and tore down the hotel the same year. The property is still vacant.
The decision takes away the VFW’s last chance to benefit from the lease.
But for the Milwaukee redevelopment authority and WisDOT, the decision irons out legal uncertainties.
It gives government more security when using eminent domain to acquire run-down buildings, said Charles Graupner, who was the redevelopment authority’s trial counsel when the case was in circuit court.
“Taxpayers and governments can breathe a sigh of relief that, when they have to take property, they’re going to pay the fair market value of the property but not more,” said Graupner, a partner at Michael Best & Friedrich LLP, Milwaukee.
The legal question before the Supreme Court was: How do governments determine the value of a property to compensate property owners who lose land through eminent domain?
The VFW argued Milwaukee should have considered the value of the VFW’s lease when paying for the land. In this case, the VFW’s 99-year lease was more valuable than the hotel and property, which the court said were worth nothing when Milwaukee acquired them in 2001.
WisDOT joined the case because it acquires more than 1,000 properties a year, but parcels often have multiple tenants, said Jim Thiel, WisDOT counsel. In 2007, for example, WisDOT acquired 1,136 properties with 2,450 owners and tenants.
“There would be no end in trying to unravel separate ownership status,” Thiel said.
The Supreme Court reversed an appeals court decision that would have opened the door for abuse, Thiel said. Property owners could inflate the value of leases to get more money if government must pay based on leases instead of land, he said.
“I could sign a lease with you for 50 years,” Thiel said, “and you would have to do this and have to do this, and it would only cost you a dollar.”
If tenants are owed money for leases on condemned properties, they can work with the landlord to collect a share of the eminent domain compensation, Graupner said.
For the VFW, the decision means members will continue to meet in the American Red Cross building on Wisconsin Avenue in Milwaukee where they are gathering until a more permanent home is found, Drakos said. The post might not get a new building, he said.
“That was taking a right cross and a left cross and almost knocking us down to the ground,” Drakos said of the decision. “But we’re known for standing back up on our feet, and I don’t know where the fight will go from here, if you can call it a fight.”
The case is City of Milwaukee Post No. 2874 VFW v. Redevelopment Authority of the City of Milwaukee, 2006AP2866.
![[Print]](http://wislawjournal.com/wp-content/plugins/tdc-sociable-toolbar/print.png)
![[Email]](http://wislawjournal.com/wp-content/plugins/tdc-sociable-toolbar/email_2.png)
July 23rd, 2009 at 10:47 pm
Another victory for government over the people. Who do the people think they are anyway? Why are they insisting their rights mean anything when the government wants to steamroller them? A 99-year lease is “worthless?” Mr. Thiel mocks the taxpayers of this state. His preference is that citizens get out of the way of the ever-increasing power of the state to do whatever it wants to. He mocks the people’s right to contract and basically, he would prefer the public have no rights at all. Today, the state is everything, the people nothing. Whose government is this anyway, the people’s or those who work for the State? Obviously, this government exists solely to serve it’s own interests and the public be damned.
July 24th, 2009 at 10:17 am
This isn’t an article about a legal ruling; it’s a bit of cheerleading on behalf of the government.
The court dealt with the so-called “undivided fee” rule under which a property being condemned is first valued as if owned by one person, and the resulting award is then divided among owners of the various interests in the properrty (e.g., leases, easements, etc.). Usually that poses no problem. But there are cases — and this is one of them — where a partial interest in the property is worth more than what the property would bring if owned and sold by a single owner — i.e., that the valuable interest in question does not exist. When that happens, the courts that have analyzed the problem recognize that the “undivided fee” rule conflicts with the constitutional just compensation mandate and has to give way to it because each owner of each property interest that is taken is entitled to be compensated for it. See e.g., People v. Lynbar, Inc., 62 Cal.Rptr. 320 (Cal.App. 1967).
The US Supreme Court has held even more strongly (in the Boston Chamber of Commerce v. Boston [1910] case) that the constitution does not require that in valuing property the state of title be deemed to be other than what it actually is. It further held that the question is what has the owner lost? Not, what has the taker gained?
In this case, the result is manifestly absurd — a concededly valuable property interest (a leasehold) has been taken but its owner has not been compensated. How can this be reconciled with the constituional requirement that private property not be taken for public use without just compensation?
July 25th, 2009 at 2:01 am
Justice Prosser, joined by Justices Crooks and Roggensack got it exactly right! It’s shocking that Justices Ziegler and Gableman, who both claim to be judicial conservatives would be so cavalier in disregarding private property rights; such can be expected from Justices Abrahamson and Bradley. Strange breakdown!
July 27th, 2009 at 10:57 am
“Judicial Conservatives” always base their decisions on allocating power and money to the groups they support. They rarely base a decision on a philosophy, like freedom or personal property. They rail against government encroachment to get elected and then support an ever-growing, all-powerful government when in power.
July 30th, 2009 at 10:39 am
I submit that a primary question in this case is this: what if the
VFW had NOT sold the building and just continued to occupy it? Would
it STILL then NOT be able to obtain “just compensation” for the loss
of its headquarters? Could the Court then still allow a government
agency to declare it worthless and demolish it without compensation
while it still has very substantial value to the VFW? This question
also relates to Wisconsin’s “razing” statute, Wis.Stat. 66.0413,
which unlike most states, allows bureaucrats to declare a private
citizen’s buildings worthless by inspection, and then issue a
razing order. The razing statute does NOT consider the value of
the property to the owner however, as in this case, and there is
NO compensation. Wisconsin’s laws are extremely harsh and unfair
in many ways, and this decision appears to be just an extension of
this razing statute – except that with eminent domain there is a
constitutional requirement of “just compensation”.
Since the VFW could have renewed its 99-year lease for another
99 years at the end of the term, this in effect represents virtual,
if not legal, ownership of its headquarters, which should entitle it
to “just compensation” in a rational world. I submit that a rule
such as the “unit rule”, regardless of how good it may be generally,
cannot lawfully take precedence over the Constitutional requirement
of just compensation. This decision simply does not pass the “smell
test”, and could have a chilling effect on future sale-and-leaseback
agreements. I submit that the Court should reconsider this unfair
decision for the sake of justice and our judicial system itself.
Owen S. Durigan