Apparent authority doctrine determines jurisdiction dispute

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The Court of Appeals applied the agency doctrine of apparent authority when deciding whether the property owners in an eminent domain case had obtained jurisdiction over the governmental entity that condemned their property.

Jon Hass and Kenneth Herro disputed the idea that they had been given just compensation for their property when it was taken by eminent domain. In the case of Haas v. City of Oconomowoc, they sued the city of Oconomowoc.

But the city contended that the Community Development Authority was the actual condemnor of the property under the eminent domain statutes and should have been named as the defendant in place of the city. Therefore, the court lacked personal jurisdiction over the CDA and the case should be dismissed.

Former Waukesha County Circuit Judge Linda Van de Water agreed with the city and dismissed the case after having found that the CDA, rather than the city, was the condemnor.

Haas and Herro appealed the dismissal.

Court of Appeals

In an opinion attributed to Judge Mark Gundrum of the District 2 Court of Appeals, Van de Water’s decision was reversed.

The court first examined the process underlying the taking of the plaintiffs’ property by eminent domain.

Factual record

It noted that, initially, the city and the property owners had each obtained appraisals of the property. These appraisals estimated the property’s value at between $250,000 and $515,000.

The city and the owners negotiated for the possible purchase of the property over the next 2-1/2 years. The negotiations were ultimately unsuccessful, though.

In a meeting, the CDA observed that “the owners and City staff have been unable to reach an agreement on the purchase price” and resolved that the property should be acquired through condemnation proceedings.

That same day, the city’s Common Council met and was apprised that local officials had offered to pay what they considered the fair market value of the property. They also learned of the owners’ rejection of that offer. The council voted “to approve eminent domain” for the property.

The following day, on city letterhead, the city’s economic development director noted that “at their meeting … the City of Oconomowoc through its Community Development Authority” made the decision to acquire the property by eminent domain.

The CDA proffered a “Jurisdictional Offer of the Community Development Authority of the City of Oconomowoc.” Thereafter, a lis pendens was filed indicating that “the City of Oconomowoc, through its Community Development Authority” had issued and served a jurisdictional offer upon the owners.

A month later the owners rejected the “Jurisdictional Offer of the Community Development Authority of the City of Oconomowoc.” CDA then issued an “award of compensation/damages” in the amount of $305,000, identifying CDA as the condemnor.

Appellate analysis

The court labeled the city’s argument “nonsensical.”

Under the eminent domain statutes, there are five steps a condemnor must perform: 1) Obtain at least one appraisal; 2) Negotiate with the property owner for purchase of the property; 3) Make a jurisdictional offer; 4) File a lis pendens of the jurisdictional offer; and 5) Make an award of damages if the owner does not accept the jurisdictional offer.

The court easily determined using the factual record that the city had completed the first two steps directly and the CDA had completed the third and fifth steps directly. The fourth step — the lis pendens — specifically stated “the City … through its Community Development Authority” served the jurisdictional offer.

Thus, eminent domain was effectuated even though two governmental entities performed the condemnor steps. That is because one entity, the CDA, had apparent authority to act on behalf of the other entity, the city. This is a classic agency relationship in which the city is the principal and the CDA is the agent.

Carefully citing the factual record, the court found that the three elements for apparent authority liability had been met. There were acts by the CDA and the city justifying the belief in the fact of the agency, knowledge thereof by the city, and reliance thereon by the plaintiffs.

The court concluded that “the City condemned the property and was properly named as the defendant in this case, and the City’s challenge on jurisdictional grounds is meritless.”

Commentary

After seeing the factual record the court had relied on, readers will be hard-pressed not to agree with the court that the city’s argument was “nonsensical.” The record is replete with indicia of apparent authority.

It is not often that we see a case about the apparent authority doctrine. This case provides an excellent application of this doctrine in the unusual context of eminent domain. The case is wisely recommended for publication.