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Michigan Court of Appeals Holds that Trial Courts Lack Subject Matter Jurisdiction When Owners of Property Are Not Provided a Good Faith Written Offer Prior to Instituting a Condemnation Action

The Michigan Court of Appeals recently issued a published opinion in Board of County Road Commissioners for the County of Washtenaw v Shankle, which will significantly impact utilities in Michigan, increasing both the cost of acquiring property rights and the risk of owners successfully challenging condemnation actions.

In Shankle, the Washtenaw County Road Commission wanted to reconstruct Textile Road in Pittsfield Township but needed highway easements and temporary grading permits to do so.  The Road Commission was able to obtain the necessary property rights in all of the properties except for the four properties owned by the defendants.  The Road Commission submitted Good Faith Offers (“GFOs”) to only the fee owner defendants of the properties, but not to any other parties that had ownership interests in the properties.  When the Road Commission did not receive a response to the GFOs, it filed a condemnation action naming only the fee owners as defendants.

In response to the complaint, the defendants filed a motion to review necessity arguing that the court lacked subject matter jurisdiction because the Road Commission did not send GFOs to all of the entities that had ownership interests in the properties.  The defendants’ motion was accompanied by an affidavit from a title attorney who identified the examples of additional parties with interests in the properties: (1) Mortgage Electronic Registration System (“MERS”), which held a mortgage; (2) Michigan Bell, which had a utility easement; (3) the State of Michigan Department of Agriculture, which had a Development Rights Agreement; and (4) Pittsfield Charter Township, which also held an easement.

In response, the Road Commission argued that a GFO did not need to be made to the four identified non-parties because their property interests were not affected by the easements and grading permits.  The trial court agreed with the Road Commission and determined that the defendants failed to establish grounds for dismissal of the complaint.

On appeal, the Court of Appeals reversed, holding the trial court lacked subject matter jurisdiction.  The court held that condemning agencies are required to “strictly comply” with the requirements of the Uniform Condemnation Procedures Act.  The court then reiterated that the tendering of a GFO to the “owners” of a “property” is a necessary condition precedent to invoking the jurisdiction of the circuit court.  The court recognized that the Uniform Condemnation Procedures Act broadly defines both “property” and “owner,” and, after reading the definitions together, determined that an “‘owner’ is a person or entity having an interest in the property sought to be condemned, and ‘property’ includes land and other property rights.”

The court thus held that the Road Commission was required to provide a GFO to all entities with an interest in the properties, including MERS, Michigan Bell, the State of Michigan Department of Agriculture, and Pittsfield Township.  Because the Road Commission failed to do so, the trial court lacked subject matter jurisdiction.  The court rejected the Road Commission’s argument that those entities did not need to be named because their interests were not affected by the taking, holding that “whether and to what extent the interest of those owners may (or may not) be affected is a matter that may properly be considered by the trial court, but only after the trial court’s jurisdiction is properly invoked.”

This case will significantly impact condemning authorities moving forward as they will be required to provide a GFO to every owner of the property at issue. For more information, or if you have any questions regarding this topic, please contact any of our eminent domain attorneys.

Author: Alex M. Petrik

Alex M. Petrik

Alex Petrik employs his superior research, investigative, and written advocacy talents as an associate in the firm’s Business & Commercial Litigation and Eminent Domain groups.

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