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Haas v. City of Oconomowoc

Court of Appeals of Wisconsin, District II

January 25, 2017

Jon Haas and Kenneth Herro, Plaintiffs-Appellants,
v.
The City of Oconomowoc, Defendant-Respondent.

         APPEALS from orders of the circuit court for Waukesha County No. 2015CV461: LINDA M. VAN DE WATER and MARIA S. LAZAR, Judges. Order reversed and cause remanded for further proceedings.

          Before Neubauer, C.J., Gundrum and Hagedorn, JJ.

          GUNDRUM, J.

         ¶1 Jon Haas and Kenneth Herro (appellants) appeal from an order dismissing their complaint against the City of Oconomowoc (City) for just compensation for their property (the property) which was taken by eminent domain and also appeal from an order denying their motion for reconsideration.[1]Appellants argue the circuit court erred when it dismissed the action on the basis the City's community development authority (CDA) was the condemnor of the property and appellants "should have … named" it as a defendant. Asserting the doctrine of apparent authority applies in this case, appellants contend the City, not the CDA, condemned the property by performing all the necessary steps for condemnation either directly or through the CDA acting as the City's agent. The City counters that the CDA was the condemnor of the property and the court lacked personal jurisdiction over the CDA because appellants did not name it as the defendant.

         ¶2 We agree with appellants that the City, not the CDA, condemned the property; thus appellants properly named the City as the condemnor-defendant, and the circuit court erred in dismissing this action. In response to the City's assertion that the court lacked personal jurisdiction over the CDA, we also point out that appellants have never named, sought redress from, or advocated for jurisdiction over the CDA, and thus the City's contention the court lacked jurisdiction over the CDA goes nowhere. We reverse and remand for further proceedings.

         BACKGROUND

         ¶3 In June 2010, the City requested permission from appellants to conduct an appraisal of the property. Advanced Appraisal, Ltd., completed the appraisal report in August 2010 and opined that the market value of the property was $300, 000. In November 2011, appellants and the City discussed the prospect of the City purchasing the property. Between December 2011 and March 2012, the City submitted to appellants three offers to purchase. During that time period, appellants requested that another company, Lauenstein & Associates Commercial Real Estate Appraisers, appraise the property. The City and appellants agreed to split the cost of that appraisal, which was completed in October 2012 and opined the value of the property was $515, 000. Southern Wisconsin Appraisal also provided the City with an additional appraisal, in September 2012, which appraisal opined the value of the property was $250, 000. In November 2012, appellants met with Oconomowoc Mayor James Daley regarding the Southern Wisconsin appraisal.

         ¶4 On January 15, 2013, the CDA approved a resolution recognizing that "the Common Council of the City … is supportive of [the CDA's blight designation to facilitate downtown revitalization] and has determined it to be feasible and in the best interests of the public"; "the City and owners [appellants] have negotiated informally for the purchase of the 'Property'"; and "the owners and City staff have been unable to reach an agreement on the purchase price and the 'Property' must be acquired through condemnation proceedings pursuant to [W . S . ch.] 32 [2015-16]." The resolution resolved that "the City Attorney IS TAT [2] and the Executive Director are authorized to commence proceedings pursuant to [Wis. Stat. §] 32.05 including, without limitation, issuing a Jurisdictional Offer for the … property"; "the City Attorney and Executive Director are authorized to perform such other acts as necessary to acquire title to the 'Property' according to the terms of [ch.] 32"; and "in the event the Jurisdictional Offer is accepted, the City Attorney shall be requested to close the sale."

         ¶5 That same day, the City held a regular common council meeting during which the council discussed exercising eminent domain over the property. Minutes from that meeting state in relevant part:

         New Business:

A. Consider/act on Binding Arbitration Agreement for [the property]: Daley stated that this item is off the agenda because there is no agreement to consider.
B. Consider/act on Eminent Domain for [the property]: [City Clerk Diane] Coenen passed out two resolutions that were adopted by the [CDA] earlier this evening; 1) Approving Declaration of Public Necessity and Relocation Order for [the property] and 2) Authorizing Service of a Jurisdictional Offer and making an Award of Damages for the property…. Duffy gave a Power Point presentation outlining the timeline of events that had taken place in the City's attempts to negotiate a purchase price for the property. Chapman outlined the steps taken to try to negotiate a binding arbitration agreement with the owners…. The benefit of [the arbitration] process would have been that we would have closed immediately on the property, fewer fees for attorneys and it would have avoided eminent domain. Daley stepped down from his chair … [and] discussed that the meaning of eminent domain is for public use of property and that an offer to purchase must be fair market value, which the City offered. The owners have always been willing to transfer the property, but we are at an impasse on value. Daley returned to his chair…. Council had questions and comments regarding any other property that the City took through eminent domain, the necessity of eminent domain, the timeline, consistency by the City in our offers to purchase, building being vacant, legal fees for both sides and responsibility for those fees, there is still opportunity for an agreement, appraisal gap, public benefit, budgeted purchase and strength of [the] City's position. Motion by [Alderman] Nold to approve eminent domain for [the property]; second by [Alderman] Allen. Motion carried 4-3….
Reports and comments from the Mayor-Daley stated he understands that eminent domain is a hard subject to decide … but the City has no other option. (Emphasis added.)

         ¶6 The next day, January 16, 2013, the City[3] sent a letter on its letterhead to one of the appellants stating in relevant part:

The City has attempted in good faith to negotiate the purchase of the property .... At their January 15th 2013 meeting the City of Oconomowoc through its Community Development Authority made the determination to acquire the property … pursuant to eminent domain as provided in [Wis. Stat. ch.] 32.
In connection with our discussions, the City had obtained an appraisal through Advanced Appraisal, Ltd to begin our dialogue and a copy is enclosed. In addition, at your request the City obtained a second appraisal prepared by Southern Wisconsin Appraisal, a copy of which is enclosed. This second appraisal … will be used as the basis for the acquisition process (and the jurisdictional offer, if necessary) as we proceed pursuant to [Wis. Stat. §] 32.05. The City has received your appraisal prepared by Lauenstein & Associates, which is a right provided to you in the process by [§] 32.05(2)(b). Please submit the invoice for that appraisal to the City for payment, pursuant to [§] 32.05(2)(b).

         The letter closes with: "Sincerely, " followed by "City of Oconomowoc, " followed by the signature and then typed name of "Robert K. Duffy, " followed by the title "Economic Development Director."

         ¶7 Enclosed with the letter, the City sent the Advanced and Southern Wisconsin appraisals, each of which had a cover sheet and letter indicating it was being provided for and as requested by Duffy as Economic Development Director for the City. The Advanced appraisal cover letter states that the intended use of the report is for "possible City of Oconomowoc purchase." The Southern Wisconsin appraisal cover letter states that the appraisal is "intended to assist the City of Oconomowoc with negotiations regarding acquisition of the property in conjunction with [the] planned municipal improvement project…. In keeping with your instructions this report was completed as a narrative appraisal report." (Emphasis added.) Under "Intended Use of the Appraisal" on page one, the appraisal states:

The purpose of this appraisal is to estimate compensation due the owner for the acquisition of real property and property rights as indicated above in accordance with the provisions of [Wis. Stat. ยง] 32.09, which states that compensation shall be based on fair market value. The appraisal is intended for use by employees of the City of ...

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