Eminent domain lessons: Orange County (CA) Register, 6/23/06

Santa Ana case shows that even if appropriate, property-taking can unfairly burden owners

In February 2005, the [Orange County Register's] Editorial Page detailed the plight of two brothers, Mohammed Ali and Mohammed Querashi, who had operated a warehouse, retail facility and mosque at 720 N. Fairview St. in Santa Ana since 1989. They sold used engines and transmissions there until 2003, when the Santa Ana Unified School District decided to take the property by eminent domain and, together with a neighboring property, build a school on the site.

The issue is enlightening because it shows the degree to which eminent domain imposes burdens on property owners – even when the government agency is trying to be fair, and even when the taking is for a legitimate public purpose.

It's almost a year and a half since we first wrote about it, and the school district and the brothers are still fighting in court over payment of "business goodwill" (the value of the particular location) and the value of the inventory that was sold off in a virtual fire sale. About a year ago, the district did pay the brothers for the real property, at a price that was about 95 percent of the price determined by the brothers' appraiser.

Although that might seem fair, the figure was based on 2003 prices, when the district filed its action. Since then, Santa Ana real estate prices have escalated, and considering that the brothers didn't want to sell in the first place, they missed out on the real estate upside. Ouch. And, Messrs. Ali and Querashi will have to pay attorney fees, so they will not be made whole by the eminent-domain process. The school district's attorney, Mike D'Angelo, correctly pointed out that those problems are not the fault of the district, but are the result of state law.

Precisely. Although many governments do abuse property owners and treat them unfairly in the eminent-domain process, even those that do operate fairly place difficult burdens on owners because the law is tilted in favor of the government.

We have long argued against eminent domain for nonpublic uses – e.g., the common practice of taking property from one owner and giving it to a major developer, who promises more benefits to the city by his development. But even for public uses, the property owners should be made whole. "Eminent domain is not supposed to be something inhumane," said Mr. Ali. "I have not committed a crime." Mr. Ali said he has been out of business for nearly three years. And "the loss of the mosque is very difficult to count in terms of dollars and cents," he added.

When the city took over the facility, there was no place to put the inventory of automobile parts, so the district eventually auctioned it off. Mr. D'Angelo strongly disputes the dollar figure placed on the inventory by the brothers, pointing out that a good bit of the inventory was purchased as salvage and saying that the brothers want retail prices as compensation. The district also says that the business's proven earnings don't justify the amount demanded by the brothers for goodwill.

We can't know the right amount of compensation for any business owner who has lost his property to eminent domain. But we do know that laws need to be changed to make sure that eminent domain is used only for public uses and that owners are made whole at the end of the process.

Orange County Register: http://www.ocregister.com