Archive for the ‘News’ Category

Jury Awards Nearly $3M in Damages For Loss of Access Caused by Light Rail

Posted by zeitlin

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In October 2016, Dale Zeitlin tried to a Maricopa County jury the issue of whether the taking of access from a property located in downtown Phoenix damaged the property.

 

The property was a rectangular shaped property located in downtown Phoenix across from the Phoenix Sun’s arena. The property consisted of about 35,000 square feet.

 

In 2007, the City of Phoenix constructed the light rail line in front of the Garretson property. The light rail was constructed entirely within the City of Phoenix right of way for Jefferson Street. The construction of the light rail did not take any portion of  Garretson’s property, but had the effect of blocking access to Jefferson Street. Garretson continued to have access along two other roads, First Street and Madison Street.

 

In 2009, the City of Phoenix filed a motion for summary judgment arguing that because there had been no taking of land and because Garretson’s property continued to have access to other streets, the fact that the light rail blocked Jefferson Street access was not a compensable taking of a property right. The trial court agreed with the City and held that the only property right was one to the street system and not a particular street. Garretson appealed the ruling to the Arizona Court of Appeals, which reversed the trial court’s decision. The Supreme Court of Arizona then accepted a petition for review because the issue of the taking of access was an issue of state wide concern. The State of Arizona Department of Transportation (ADOT) filed a brief that argued Mr. Garretson should not be paid for the elimination of access.

 

The Supreme Court agreed with Garretson that the elimination of access to Jefferson Street was a taking of a property right and a compensable interest. The Supreme Court remanded the case to the trial court, with instructions that a jury should determine the amount of damages, if any, the property suffered as a result of the loss of Jefferson Street access.

 

At trial, the City argued that the property did not suffer damages because, according to the City’s experts, the property had the same value with Jefferson Street access as without it. The jury rejected the City’s case, and found that Garretsons’ property had decreased in value in the amount of nearly $3M due solely to the loss of Jefferson Street access. The jury found Garretson’s architectural and appraisal evidence compelling. Under Arizona law, prejudgment interest is tacked on to the judgment, so that Garretson will receive nearly $4M as total just compensation.

 

The case is important as it requires a government (state, county, municipal) to pay a landowner for the loss of access. This means that in every eminent domain and condemnation case that results in a change of access, a property owner should look at whether the loss of access has reduced the value of his property

 

See article in the Arizona Republic here.

 

Supreme Court to Consider Eminent Domain Implications of Exactions Sought for Development Permit

Posted by zeitlin

The Supreme Court has agreed to hear a case brought by a Florida landowner who, in exchange for issuance of a dredge and fill permit on land he owned in a habitat protection zone, was required to perform mitigation on government land. The government’s land was miles away from the landowner’s and the mitigation requirement bore no connection to the landowner’s project’s impacts on the habitat protection zone in which landowner’s property was located. The Florida Supreme Court, in reversing the holdings of the lower courts in the inverse condemnation case filed by the landowner, held that the mitigation requirement was not a taking because the U. S. Supreme Court’s holdings in prior cases that addressed eminent domain issues in the context of government exactions, Nollan v. California Coastal Commission and Dolan v. Tigard, apply only to forced dedications by a landowner of property or interests in property, and the cases do not apply where the government denies a permit, but only when a government issues a permit with conditions attached to it.

The Supreme Court’s holding in St. Johns River Water Management District v. Koontz should clarify the extent to which limitations imposed by the Constitution’s taking clause, as set forth in prior Supreme Court cases, apply to landowners upon whom governments are imposing coercive property exactions.

Required Public Purpose Likely Lacking for Condemnation of Underwater Mortgages

Posted by zeitlin

The use of eminent domain to seize underwater mortgages, a proposal being considered by San Bernardino County and two cities located in the county, would require expansion of the “public use” requirement of the U. S. Constitution. Although the “public use” requirement of the Fifth Amendment has been expanded by the Supreme Court’s interpretation of the idea as encompassing “public purpose”, the use of the power to condemn performing mortgages in order to accomplish the public purpose of curing malaise in the housing market, would likely fail the public purpose test. The stated purpose is both nebulous and would be difficult to prove with any certainty that the benefit would be achieved.

 

Reproduced with permission from Daily Report for Executives, 140 DER C-1 (July 23, 2012). Copyright 2012 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
If you would like a PDF copy of the article with the reprints language, please contact Jerry Walsh at 703-341-3286, jwalsh@bna.com, for PDF pricing and fulfillment.
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Financial Industry Highly Critical of Plan To Seize Mortgages by Eminent Domain

By Stephen Joyce | July 20, 2012 08:54PM ET

July 23 (BNA – Banking Daily) — NEW YORK—A novel approach to ameliorate housing-market duress involving municipalities’ use of eminent domain authority to seize mortgages, not houses, is worrying the financial industry, which says the concept is flawed public policy, as well as unconstitutional.

San Francisco-based Mortgage Resolution Partners LLC is promoting a plan under which municipalities seize mortgages from existing securitized trusts using their eminent domain authority, refinance the loans with the assistance of government programs and a new infusion of private money, and repackage the newly originated mortgages into new securitization trusts. MRP and its affiliates would keep the difference—potentially billions of dollars—between the price of seized mortgages and the refinanced mortgages.

While proponents of the strategy claim it could help arrest foreclosures and their associated community blight, investors and their advocates say the seizures would violate state and federal law. Opponents also claim the program does nothing to address housing problems and instead enriches a select few by transferring private property from one group of private investors in a securitized trust to another.

“I think it’s bad policy and legally unconstitutional,” American Securitization Forum Executive Director Tom Deutsch told BNA July 19.

Law Professor Sees Win-Win in Brain Child

The overarching purpose of the program, as described in a June 2012 paper written by Cornell Law School Professor Robert C. Hockett, is to reverse the “remarkable toll in family and neighborhood suffering, ongoing and self-worsening value and revenue loss, and consequent blight that rolling foreclosures are now actively bringing in their wake.”

“Essentially it’s a way of enabling the bondholders [of the existing securitized trusts] and the homeowners to do a workout that ends up being good for both in a way that can’t be done now” because many securitization trusts prohibit modification of trust assets, even when such modifications would benefit the bondholders, Hockett told BNA July 20.

Three California jurisdictions—San Bernardino County, and the cities of Fontana and Ontario—joined to create a Joint Powers Authority, which is currently contemplating whether to implement a plan embracing the tenets of the envisioned Mortgage Resolution Partners program.

Hockett said that JPA may decide to issue a request for proposals to implement the strategy as early as August. A San Bernardino official did not immediately respond to a request for comment.

Other U.S. municipalities are also contemplating use of the strategy, said Hockett, who has written on the topic for years and has advised various entities on the strategy. “There are specific counties that are doing more than chattering, that are going to do this,” he said.

Structure of Transaction

Under the plan, municipalities seize by eminent domain so-called “underwater” residential mortgages, or those mortgages whose outstanding principal loan amount exceeds the value of the mortgaged home, from existing pools of mortgages held by securitization trusts.

In the San Bernardino instance, the municipality would use a so-called “quick take” eminent domain process, which would allow it to seize a mortgage quickly and provide “just compensation” to the securitization trust in an amount the municipality determined to be fair—an amount that could later be challenged in court. That just compensation would be funded by the new investors.

The Mortgage Resolution Partners concept contemplates paying out 70-80 percent of a property’s appraised value to the securitization pool as just compensation, specialists analyzing the deal told BNA.

The seized mortgages would then be modified, which would include decreasing the principal owed to the property’s current appraised value, and refinanced into a Federal Housing Administration loan and securitized by the Government National Mortgage Association, or Ginnie Mae, at up to 97.75 percent of the current appraised value—the current cap for FHA loan refinancings.

Opponents of the plan said they envision the municipalities would only seek to seize loans whose borrowers have made consistent, timely payments on those loans, but Hockett said municipalities would consider seizing any loan that could be improved through a refinancing.

Winners and Losers

The strategy would benefit borrowers because they no longer would be underwater on their mortgages. Plan facilitators such as Mortgage Resolution Partners and the new set of investors would benefit because they bought mortgages at perhaps 75 percent of a property’s original appraised value and would sell them to FHA at as much as 97.75 percent of appraised value, ASF’s Deutsch said.

The original investors in the securitized trust, however, would lose the difference between the current principal amount of the loan and the lower newly appraised value of the home, Deutsch said.

Hockett disputed that all investors would suffer losses, saying that investors in existing securitization pools would be the first invitees to participate in the resecuritized pools populated by the refinanced mortgages and thus could be in a position to realize an appreciation in the true value of their investment.

The current value of the bonds held by investors are really worth the principal loan amount of the mortgages minus the risk of default, which equals the current appraised value of the mortgaged properties—“the discounted expected cash flow that a particular mortgage loan offers given a particular default risk,” Hockett argued.

Eminent Domain Authority Challenged

A July 16 legal memorandum prepared for the Securities Industry and Financial Markets Association by O’Melveny & Myers LLP partner Walter Dellinger and others said the plan is subject to several legal challenges.

Existing investors, for example, could challenge the municipality’s use of eminent domain, arguing that seizing the mortgages fails to satisfy “public use” statutory requirements. The memorandum quoted from a U.S. Supreme Court case, Kelo v. City of New London, which held that “the sovereign may not take the property of A for the sole purpose of transferring it to another private B, even though A is paid just compensation,” the memorandum said.

The memorandum dismissed the argument the seizures could be utilized as an attempt to prevent future blight by arguing the only mortgages that would qualify for seizure would be those that are performing.

The memorandum also argued the plan is not an integrated urban planning program that would create widespread public benefit, but rather would create a benefit for a set of private investors possibly residing outside of the county.

“In our view, no matter how well intentioned this proposal may be, it is very unlikely to be a solution to the housing problem … because of the number of serious legal defects in the proposals,” Dellinger told reporters July 17.

U.S. Constitution Arguments Cited

The plan may also violate the U.S. Constitution’s commerce and contracts clauses, the memorandum said.

The plan could be interpreted as interfering with interstate commerce because the plan “would seize notes currently held outside California and integral to a complex nationwide market,” the memorandum said.

And while the U.S. Supreme Court has ruled states can alter contractual debts in certain circumstances, “the Court has never authorized states to abrogate debts outright and transfer them to another creditor,” the memorandum said.

The plan may also violate a San Bernardino County law that prevents the use of eminent domain to take property from one private party, without consent, for the purpose of conveying that property to another party, the O’Melveny & Myers memorandum said.

Proper Use of Eminent Domain?

A June 2012 Jones Day memorandum on the subject also asserted a “property seizure program” such as the one being contemplated by the three California municipalities violates the Fifth Amendment’s Takings Clause because it would neither be conducted for a legitimate “public use” nor provide “just compensation” for the owner of the mortgage.

“The proposed used of eminent domain in this case is a terrible idea. It does more harm than good for several reasons,” SIFMA Managing Director Timothy W. Cameron told reporters July 17.

Hockett disputed the notion the strategy would abuse eminent domain authority. “The prevention of blight or the arrest and reversal of urban blight is one of the most compelling of public purposes,” he said.

The O’Melveny & Myers memorandum noted the plan’s legal structure would potentially expose the county, participating municipalities, and municipal taxpayers to “enormous liability to existing note holders if courts recognize—as they likely will—the correct market value of performing loans.”

Hockett, again, disputed the conclusion that municipalities face litigation exposure, saying any litigation disputing “just compensation” amounts offered to trusts would be among the investors in the trust, not the government seizing the loans.

Program Seen Spooking Mortgage Lenders

If implemented, the strategy would result in restricting mortgage borrowing in jurisdictions implementing the eminent-domain strategy because lenders would be cautious, even reluctant, about underwriting loans on houses that may be subject to eminent-domain seizure in the future, opponents of the strategy said.

This wariness on the part of lenders could result in tightening lending standards, such as demands for larger down payments and higher potential-borrower creditworthiness scores, they said.

Further, an implemented seizure program could make potential investors in asset-backed securities whose underlying asset is a securitization of pooled mortgages hesitant to purchase the instruments, which could restrict consumer credit, at a time when the national economy is sluggish and the securitization industry is struggling to recover from its 2008 collapse, they said.

For More Information

The Hockett document is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2038029.

A Mortgage Resolution Partners presentation explaining its program is available at http://op.bna.com/der.nsf/r?Open=sfre-8wdqld and an FAQ presentation prepared for the firm is available at http://mortgageresolutionpartners.com/faqs.

SIFMA’s “eminent domain resource center” is available at http://www.sifma.org/issues/capital-markets/securitization/eminent-domain/overview/.

An ASF letter to the San Bernardino County Board of Supervisors containing its interpretation of plan details and explaining its opposition to the plan is available at http://www.americansecuritization.com/uploadedFiles/ASF_Eminent_Domain_Letter_7_13_12.pdf.

The O’Melveny & Myers LLP memorandum is available at http://tinyurl.com/c3p6kyu . The Jones Day memorandum is available at http://tinyurl.com/cccphkv.

Supreme Court Rules Unanimously in Favor of Fifth Amendment Rights in Wetlands Case

Posted by zeitlin

Admonishing Congress for the well recognized and continuing obtuseness of the Clean Water Act, the Supreme Court came down firmly on the side of the Fifth Amendment’s due process guarantees for ordinary citizens and unanimously rejected the federal government’s assertion that the property rights of ordinary Americans can be placed entirely at the mercy of a regulatory agency. In Sackett v. Environmental Protection Agency, the owners of a residential lot in Idaho filed suit challenging an EPA order issued under the Clean Water Act finding that their land was subject to the Act and that they had violated the Act. Unchallenged, the EPA order would have resulted in fines of $75,000 per day. The landowners sued, asserting that the EPA’s order violated the Fifth Amendment because it deprived them of “life, liberty, or property without due process of law.” The Court found that the only adequate remedy the landowners had to contest the EPA’s order was judicial review, and that the Clean Water Act and EPA cannot preclude that review. The Court stated that the act providing for judicial review of regulatory actions rejects efficiency of regulation as a principle that overrides other rights. The Court admonished: “[T]here is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review – even judicial review of the question whether the regulated party is within the EPA’s jurisdiction.”

Utility Fails to Establish Public Use and Necessity Resulting in Dismissal of Condemnation Case

Posted by zeitlin

On March 15, 2012, the Yavapai County Superior Court ruled in favor of a landowner represented by Dale Zeitlin against APS in a condemnation case where APS sought to condemn a right of way easement over private property to be used “to furnish the public with electricity”. Zeitlin argued that APS had failed to establish it had the required public use and necessity to take the property and asked the court to dismiss APS’s lawsuit. The court agreed that APS did not have a reasonably forseeable need for the property and dismissed the case. The court’s holding is the first case in Arizona where a public utility has been found to have acted arbiltrarily and capriciously in condemning private property. The court stated: “. . . there is a difference between APS not having plans to immediately build and not having immediate plans to build.” In the case, APS had no plans to construct on the easement it sought. Acknowledging that a utility company is entitled to pursue easements that allow for the utility’s reasonably forseeable future need to provide electricity, the court stated that “there needs to be a discernable differnece between that and the mere condemnation and acquisition of property and the stockpiling of property interests during difficut economic times and at a highly favorable reduced price in anticipation that the property condemned lies between two points on a map through which a power line might someday serve their purposes.” The court concluded that condemnation for reasonable forseeable future needs is a legitimate baisis for condemnation, but stockpiling property at prices and times advantageous to the utility without demonstrative future need is arbitrary and capricious.

Zeitlin & Zeitlin Settles Suit Against City of Goodyear on Behalf of Wood Family

Posted by zeitlin

The Wood Family, represented by Dale Zeitlin, will receive $1.2 million in settlement of its claims for unjust enrichment against the City of Goodyear.  The lawsuit arose out of the Wood Family’s agreements to construct infrastructure improvements for a baseball park and spring training fields for the Cleveland Indians and Cincinnati Reds.  The Wood Family filed suit to recover for the value of benefits the City received that it allegedly did not pay for.  Zeitlin filed the lawsuit in an attempt to recover for the Wood Family, which through a series of events, found itself obligated for the construction of tens of millions of dollars of improvements without compensation by the City.

For the Republic/AZCentral article, click here.

News from Zeitlin & Zeitlin

Posted by admin

Maricopa County Superior Court entered an order on March 26, 2012, in a case where Dale Zeitlin represented a party from whom a bank was seeking a deficiency judgment following trustee’s sale. The court found that the fair market value of the collateral was greater than the sale price at the trustee’s sale and held that the bank was not entitled to a deficiency judgment.

 

  • Dale Zeitlin represents a group of investors against Mortgages Ltd.
  • In 2011, Dale Zeitlin became a charter member of the Stanford Real Estate Council created by SPIRE (Stanford Professionals in Real Estate) and attended the Council’s inaugural conference at the new Knight Graduate School of Business at Stanford University
  • In 2010, Dale Zeitlin was named one of Arizona’s top Eminent Domain and Condemnation lawyers by Arizona’s Best Lawyers (2010 Edition)
  • In 2011, Dawn Zeitlin represented purchaser in the purchase and financing of Midvale Plaza in Tucson, Arizona, which was a $17,463,000 transaction
  • Heard from Maryland – Sliding Scale Zoning
  • The Unnecessary Battle of Knob Hill
  • City reaches settlement with slots site developer
  • Developer to Pay for City’s Lawsuit Costs
  • Proposed APS Power Line Route in Peoria
  • Maricopa County Colleges Consider Tax Hike
  • Arizona Water Law Targets Renters
  • Macerich Gains AZ Centers for $75M Plus Property Swap
  • Fenced Out?
  • New Use for an Old Law: Arizona’s Open Meeting Law
  • We are now on Twitter!

Appeals Court Decision Changes Arizona Law

Posted by admin

On March 6, 2007, the Arizona Court of Appeals issued a lengthy opinion in favor of Zeitlin & Zeitlin’s client, which changed Arizona statutory and constitutional law. The Court of Appeals held that the date value is determined in a condemnation case is the date a condemning authority takes possession of property where there is a gap between the time a case is filed and the time possession is taken.

Read the full story | www.eastvalleytribune.com/story/111121

Verdict Reached in Toll Brothers Seizure

Posted by admin

January 26, 2008

On January 25, 2008, a jury in Scottsdale returned a verdict of $81.9 million in City of Scottsdale v. Toll Brothers, after a two and a half week trial. Dale Zeitlin successfully obtained a verdict that was $48 million more than the City’s appraisal.

383 Acres Being Condemned by City of Scottsdale

Posted by admin

January 8, 2008

Trial in Largest Condemnation Case in Arizona History Began on January 8, 2008

Dale Zeitlin Representing Toll Brothers: 383 Acres Being Condemned by

City of Scottsdale

On January 8, 2008, the trial in City of Scottsdale v. Toll Brothers began. Dale represents Toll Brothers, from whom the City of Scottsdale has taken 383 acres of a 783-acre parcel of pristine desert land in North Scottsdale. Toll values the land taken at $107 million and the City of Scottsdale values it at $34 million. The trial is expected to last several weeks.

East Valley Tribune Story | Link: http://www.eastvalleytribune.com/story/106225/