Chuuk State Government v Mailo [2012] FMCSC 6; 18 FSM Intrm. 456 (Chk. S. Ct. Tr. 2012) (18 December 2012)

CHUUK STATE SUPREME COURT TRIAL DIVISION

CSSC EMA NO. 001-2012

In the matter of the Condemnation of Land Lot No. 029-A-47 and Lot No. 029-A-48
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CHUUK STATE GOVERNMENT,
Petitioner-Counterdefendant,

vs.

MARK MAILO,
Respondent-Counterclaimant.
__________________________________________

MEMORANDUM OF DECISION ABOUT THE GRANT OF PARTIAL SUMMARY JUDGMENT

Dennis K. Yamase
Special Trial Division Justice

Hearing: December 12, 2012
Decided: December 12, 2012
Memorandum Entered: December 18, 2012

APPEARANCES:

For the Petitioner: Sabino S. Asor, Esq.

Attorney General

Charleston L. Bravo

Assistant Attorney General

Office of the Chuuk Attorney General

P.O. Box 1050

Weno, Chuuk FM 96942

For the Respondent: Stephen V. Finnen, Esq.

P.O. Box 1450

Kolonia, Pohnpei FM 96941

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HEADNOTES

Constitutional Law - Chuuk - Taking of Property; Property - Eminent Domain
In an eminent domain case, just compensation must be fully tendered before a taking may occur and the Chuuk government must deposit in court, for the benefit of the landowners entitled thereto, the amount of just compensation stated in the declaration. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 458 (Chk. S. Ct. Tr. 2012).

Statutes - Construction
Statutes are presumed constitutional. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 458 (Chk. S. Ct. Tr. 2012).

Property - Eminent Domain
The statutory provision adopting the Asian Development Bank Valuation System in the Governor's Executive Order 04-2007 and recognizing it as the prevailing land valuation system for all government land transactions only applied to land values without regard to any permanent structures that the landowner may also own on the condemned property. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 459 (Chk. S. Ct. Tr. 2012).

Property - Eminent Domain
The Chuuk eminent domain statute and its provision allowing the court to increase (or decrease) a land's valuation by 10% applies only to the taking of the land and the land valuation and it does not apply to permanent structures erected on the land that the state is taking. The 10% increase possible for any other reasonable factor could include such improvements to the land itself such as the installation of a drainage system, or leveling the land in preparation for building, or adding retaining walls or lateral support. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 459 (Chk. S. Ct. Tr. 2012).

Constitutional Law - Chuuk - Taking of Property; Property - Eminent Domain
Even if the Trust Territory statute requiring payment for the improvements on land taken by eminent domain, 67 TTC 453 and 454, has been repealed by implication (it was not expressly repealed), the constitutional provision requiring just compensation for property taken would require compensation for a permanent structure on the land at its fair market value. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 459 (Chk. S. Ct. Tr. 2012).

Property - Eminent Domain; Statutes - Construction; Transition of Authority
Since, under the Transition Clause, a statute in force in the State of Chuuk on the effective date of the Chuuk Constitution continues in effect to the extent it is consistent with the Chuuk Constitution or until it is amended or repealed, both 67 TTC 453 and 454 remain as Chuuk state law until amended or repealed since both are consistent with the Chuuk Constitution which requires "just compensation," and since they have not been repealed by implication because they occupy gaps in the recently enacted Chuuk eminent domain statute. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 459 (Chk. S. Ct. Tr. 2012).

Property - Eminent Domain
An award of reasonable relocation or business interruption expenses may be the better view since such damages could be calculated with greater certainty than "lost profits," which would be too speculative. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 460 (Chk. S. Ct. Tr. 2012).

Property - Eminent Domain; Settlement
When the parties, by their settlement agreement, have liquidated all damages and compensation claims between them including the respondent's lost profits claim, the issue of whether the respondent in an eminent domain action can obtain damages for lost profits is moot. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 460 (Chk. S. Ct. Tr. 2012).

Attorneys' Fees - Court-Awarded - Private Attorney General; Property - Eminent Domain
A respondent in an eminent domain action cannot recover attorney's fees under a private attorney general theory since the court's ruling monetarily benefits only him. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 460 (Chk. S. Ct. Tr. 2012).

Attorneys' Fees - Court-Awarded - Statutory; Civil Rights; Property - Eminent Domain
Attorney's fees and expenses are not recoverable under 11 F.S.M.C. 701(3) in an eminent domain case filed by the petitioner state since it is not a civil rights case and the respondent is receiving the process due him under the Chuuk statute and Constitution and thus his civil rights have not been violated In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 460 (Chk. S. Ct. Tr. 2012).

Attorneys' Fees - Court-Awarded; Costs; Property - Eminent Domain
Since the Chuuk eminent domain statute specifically prohibits an award for the expenses of litigation for either side in an eminent domain case, no attorney's fees or other costs of litigation can be awarded in an eminent domain case. In re Lot No. 029-A-47[2012] FMCSC 6; , 18 FSM Intrm. 456, 460 (Chk. S. Ct. Tr. 2012).

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COURT'S OPINION

DENNIS K. YAMASE, Special Trial Division Justice:

On December 12, 2012, the court heard Respondent- Counterclaimant Mark Mailo's Motion for Partial Summary Judgment, filed on October 23, 2012. It granted the motion in part from the bench. It also issued a short order listing its conclusions of law. This memorandum more fully explains the court's reasoning behind the December 12, 2012 Order Ruling on Summary Judgment Motion.

I. Background

This is an eminent domain case. On August 31, 2012, the state filed this action to condemn Lot No. 029-A-47 and Lot No. 029-A-48 and, pursuant to Chuuk Constitution Article XI, § 2st compensation shall be f be fully tendered before a taking may occur") and Chuuk State Law No. 10-10-18, § 2(3) ("thernmeall deposit isit in the court, for the benefit of the landowners entitled thereto, the, the amount of just compensation stated i declaration"), tendered $39,560 to the court as the just compensation for the 1,978 squarequare meters contained in those two lots. Mailo then answered and counterclaimed for additional compensation for the permanent building on the land and because he would have to relocate an existing business in the building.

II. Claims for Improvements

Mailo, in his partial summary judgment motion, contended that either the land valuations arrived at by the Asian Development Bank ("ADB") Valuation System and adopted by Governor Simina's Executive Order No. 04-2007, and enacted into statute by reference applied only to unimproved land and did not apply to his land with an office building on it or the eminent domain statute was unconstitutional. The court concluded that the Chuuk eminent domain statute, Chk. S.L. No. 10-10-18 as amended by Chk. S.L. No. 10-10-37, was not unconstitutional. Statutes are presumed constitutional. Doone v. Simina, [2009] FMCSC 12; 16 FSM Intrm. 487, 490 (Chk. S. Ct. Tr. 2009); see alsoUrusemal v. Capelle, [2004] FMSC 44; 12 FSM Intrm. 577, 586 (App. 2004); FSM v. Masis, [2007] FMSC 31; 15 FSM Intrm. 172, 175 (Chk. 2007); Estate of Mori v. Chuuk, [2003] FMSC 22; 11 FSM Intrm. 535, 541 (Chk. 2003) (statutes are presumed to be constitutional and if there is any other way of disposing of an issue other than on a constitutional ground, then the court should decide the issue in that manner).

Mailo contended that the ADB land valuation system applied only to undeveloped or unimproved land and that the 10% increase or decrease in the ADB value permitted by Chuuk State Law No. 10-10-37, § 8 was not meant ply to the the permanent building on his land. The state contended that compensation for improvements was included in section 8[a]ny other reasonable factors determined by the court." Id.§ 8(c). Mailo ailo arguet if t if that were true the statute must be unconstitutional since the Chuuk Constitution guarantees "just compensation" for any taking, Chk. Const. art. XI, & 2, and often the permanent structures erected on land land are worth more than the land itself.

A careful review of the Asian Development Bank Valuation System reveals that it concerned only land values and did not attempt to value permanent structures on the land. The Governor's Executive Order adopting it did not alter this. And when "the finalized Chuuk State Valuation Zone Table as adopted pursuant to Executive Order No. 04-2007" was statutorily "recognized as the prevailing land valuation system for all government land transactions," Chk. S.L. No. 10-10-18, § 18, this statutory tion pron provision thus only applied to land values without regard to any permanent structures that the landowner may also own on the condemned property.

The court therefore concluded that the Chuuk eminent doma domain statute and its provision allowing the court to increase (or decrease) a land's valuation by 10%, Chk. S.L. No. 10-10-37, § 8, applies only to the taking of the land and the land valuation and that it does not apply to permanent structures erected on the land that the state is taking. The 10% increase possible any other reasonable factor[]," id.§ 8(c),8(c), coullude such imch improvements to the land itself such as the installation of a drainage system, or leveling the land in preparation for building, or adding retaining walls or lateral support. Valuation Technical Assl Assistance Report Chuuk State Appendix B, at 7 (Apr. 27, 2006).

Mailo contended that since Chuuk State Law No. 10-10-18, as amended by Chuuk State Law No. 10-10-37, did not apply to the taking or condemnation of permanent structures, then the Trust Territory statutes about the payment for improvements, 67 TTC 453 and 454, would apply. The state contended that these statutes had been repealed by implication either when the state first enacted its own eminent domain statute, Truk S.L. No. 2-1, or when it repealed that statute and enacted the current eminent domain statute, Chk. S.L. No. 10-10-18. The court concluded that 67 TTC 453 and 454 have not been expressly repealed and that even if they had been repealed by implication, the constitutional provision requiring just compensation for property taken, Chk. Const. art. XI, § 2, would requirt Mailo be c be compensated for his permanent structure at its fair market value. The court, however, considers that the beview at 67 TTC 453 and 454 remain in effect. Under the Transition Clause, Chk. Const.&nst. #160;art. #167; 9, "[a, "[a] statute in fonce in the State of Chuuk on the effective date of this Constitution continues in effect to the extent it is consistent wits Contion, or until it is amended or repealed." Both 6oth 67 TTC 453 and 454 remain as Chuuk stak state law until amended or repealed since both are consistent with the Chuuk Constitution which requires "just compensation," Chk. Const. art. XI, § 2, anc sioth have not been been repealed by implication because they occupy gaps in the recently enacted Chuuk eminent domain statut> III. Claims for Consequential Damages

At the December mber 12, 212, 2012 hearing, Mailo also sought compensation for "lost profits." The court ruled that no court could determine with certainty the amount of lost profits, if any, for a reasonable time to relocate a business operating on the condemned property until after the relocation has been completed and so declined to rule whether Mailo was entitled to lost profits. Since the parties, by their settlement agreement, have liquidated all damages and compensation claims between them including Mailo's lost profits claim, the issue is moot. The court is not in a position to determine whether this is a case in which lost profits or business relocation damages could properly be part of an award for just compensation or whether it would amount to excessive compensation. The court also notes that while some jurisdictions interpret "just compensation" to include lost profits under certain circumstances, e.g., Primetime Hospitality, Inc. v. City of Albuquerque, 206 P.3d 112, 122-23 (N.M. 2009) (lost profits are a direct measure of a hotel's damages during a temporary taking); State v. Hammer, 550 P.2d 820, 827 (Alaska 1976) (burden of proof on condemnee to prove amount of lost profits that was direct result of state's taking); Bowers v. Fulton County, 146 S.E.2d 884, 889, 891, 20 A.L.R.3d 1066, 1073, 1075 (Ga. 1966) (constitutional provision requiring compensation for taking or damaging private property required that damages caused to business by its forced relocation should be compensated); Canada West, Ltd. v. City of Atlanta, 315 S.E.2d 442, 446 (Ga. Ct. App. 1984) (either lost profits or change of actual land value or combination thereof), others deny any recovery for a lost profits claim since those damages are too speculative, e.g., City of Englewood v. Denver Waste Transfer, L.L.C., 55 P.3d 191, 199 (Colo. Ct. App. 2002); Schloss Outdoor Advertising Co. V. City of Charlotte, 272 S.E.2d 920, 923 (N.C. Ct. App. 1980) ("lost profits are not properly compensable in an action for just compensation"); Department of Transp. v. Gilling, 796 N.W.2d 476, 484-85 (Mich. Ct. App. 2010) (caselaw distinguishes noncompensable loss of profits resulting from damages caused by business interruption from compensable expenses incurred by business interruption); Department of Transp. v. Dondero, 430 N.W.2d 785, 788 (Mich. Ct. App. 1984); see alsoBehm v. Division of Admin., 383 So. 2d 216, 219 (Fla. 1980) (right to loss profits and business damage are intangibles that do not constitute "property" in the constitutional sense but are awardable only as a matter of legislative grace, not constitutional imperative), but do allow recovery for the reasonable relocation expenses of an existing business, e.g.Detroit/Wayne County Stadium Auth. v. Drinkwater, Taylor & Merrill, Inc., 705 N.W.2d 549, 570 (Mich. Ct. App. 2005) (business interruption damages are compensable if can be proven with reasonable certainty but lost profits are not recoverable in a business interruption case). An award of reasonable relocation or business interruption expenses may be the better view. Such damages could be calculated with greater certainty than "lost profits." Lost profits would be speculative and involve a judicial determination of a business's revenues, less a business's operating and capital expenses, and less depreciation and does not take into account that a relocated business may be more profitable in its new location. Mailo had a copying business in the building on his land. Moving it might not cost him any lost business or lost customers but he would have had (perhaps minimal) relocation expenses.

Mailo further contended that he should be awarded attorney's fees based on a private attorney general theory as enunciated in Udot Municipality v. FSM, [2001] FMSC 29; 10 FSM Intrm. 354, 361 (Chk. 2001), because he has vindicated and enforced an important public right which in the future may benefit similarly situated landowners. At argument on December 12, 2012, Mailo also asserted that he also had the right to an award of attorney's fees and costs under the national civil rights statute, 11 F.S.M.C. 701(3) because his due process rights have been violated.

The court concluded that Mailo could not recover attorney's fees under a private attorney general theory because the court's ruling monetarily benefited only him. SeeM/V Kyowa Violet v. People of Rull ex rel. Mafel, [2008] FMSC 53; 16 FSM Intrm. 49, 65 (App. 2008). Nor were his attorney's fees and expenses recoverable under 11 F.S.M.C. 701(3) as this is not a civil rights case. This is an eminent domain case filed by the petitioner state. Respondent Mailo is receiving the process due him under the Chuuk statute and Constitution. His civil rights have thus not been violated. Furthermore, the Chuuk eminent domain statute specifically prohibits an award for the expenses of litigation for either side in an eminent domain case: "The costs of litigation shall not be assessed against any party." Chk. S.L. No. 10-10-18, § 6See alsoIn re Lot NLot No. 029-A-16[2012] FMCSC 4; , 18 FSM Intrm. 422, 424 (Chk. S. Ct. Tr. 2012) (counterclaim for attorney's fees and costs not allowed). Thereforattorney's fees or other costs of litigation can be awardedarded Mailo.

IV. Conclusion

Accordingly, the court concluded that the motion should be granted in part because Mailo was entitled to compensation for the permanent structure he owned on the land being condemned by eminent domain. Once the court made its ruling, the parties settled and agreed that $81,560 was just compensation for all of Mailo's interests affected by the state's eminent domain taking. The court approved the settlement and further ordered that the Chuuk Land Commission was not to transfer title to and issue a certificate of title showing the state as the landowner until a court order to that effect has been issued. Once full payment by the state has been deposited with the court, the order will issue.

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