Court Condemns Land Deal

Call it a MRF, call it a junkyard. Either way, a government agency cannot take property from an unwilling seller by eminent domain and convey it to a private developer who can put the property to a more productive use, according to an Illinois appeals court. [Southwestern Illinois Development Authority v. National City Environmental, L.L.C., et al., No. 5-98-0263, Ill. App. Dist. 5, Apr. 29, 1999].

National City Environmental (NCE) has operated a metal recycling facility near East St. Louis, Ill., since 1975 and has 80 to 100 full-time employees. Its factory shreds cars and appliances, and separates the reusable metals. Non-recyclable byproducts go into NCE's landfill, which adjoins its recycling plant. When this landfill reaches capacity, NCE plans to expand onto an adjacent 150-acre tract that it owns.

In 1987, Illinois lawmakers created the Southwestern Illinois Development Authority (SWIDA) to promote industrial, commercial, transportation and recreational facilities in the greater East St. Louis area, and gave SWIDA the power to take land by condemnation.

In 1996, SWIDA issued $21.5 million in revenue bonds and loaned the proceeds to the California-based Grand Prix Association of Long Beach, which then bought a motor sports racetrack next to NCE, intending to enlarge it to host major stock-car races.

Two years later, after unsuccessfully trying to buy NCE's land for a parking lot expansion, the racetrack convinced SWIDA to condemn the 150-acre parcel. A trial court fixed the value of the land at $900,000 and conveyed it to SWIDA, which promptly turned it over to the racetrack.

On appeal, NCE conceded that SWIDA has the right to take its property, but insisted that any condemnation proceedings must serve a public purpose and not promote private gain. The appellate court agreed, rejecting the condemnation for its "taking of private property from one private party and the immediate transfer of it to another private party, whose interest in the property is solely to earn greater profits."

Illinois courts have upheld the use of eminent domain power for a variety of public purposes, including private redevelopment of blighted and slum areas, where the use affected a community and not an individual, the title did not vest in a person or corporation as private property, and the public benefited from public possession and use, subject to local government control.

"[T]he public is likened to a third-party beneficiary ... who reaps the benefit of the bargain," said the appeals court. "The expansion of [racetrack] parking is a private use, rather than a public use," the court concluded.

SWIDA's case was hurt by the racetrack's general manager, who testified that the company could afford to build a parking garage, but that it was cheaper if SWIDA first acquired the property. The appeals court noted that no precedent existed for a governmental agency transferring property from an unwilling seller to a business that has the resources to accomplish its purposes, but simply chooses not to do so.

The Illinois Supreme Court is expected to decide this month on whether to hear a further appeal.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected]