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Va. Supreme Court ruling may affect compensation in condemnations

The Virginian-Pilot
June 27, 2011
By Josh Brown

A recent decision by the Virginia Supreme Court could affect how businesses are compensated when government agencies condemn property using eminent domain.

The case centered on whether a government entity condemning a property should pay a business for equipment inside the building, even if those items can be moved.

A Taco Bell restaurant in Fairfax County had been condemned in 2008 by the commonwealth transportation commissioner for road improvement to a highway. In addition to being paid for the real estate, Taco Bell of America Inc. argued that the commissioner should pay for scores of items inside the restaurant, such as ovens, refrigerators and cash registers. The company claimed those items were business fixtures.

A Fairfax County Circuit Court judge disagreed and instructed a jury not to take those items into consideration when deciding how much the fast-food company must be paid for its property.

However, a June 9 state Supreme Court ruling reverses that decision. The court ruled that a jury – not a judge – must decide whether Taco Bell should be compensated for those items.

Attorneys in Hampton Roads were divided on how much impact the ruling will have on future cases.

Joe Waldo, who represented the restaurant chain when the case first went to trial, said it will be a blow to the Virginia Department of Transportation and housing authorities in Hampton Roads.

“It’s going to be very difficult for them to say in the future that equipment that the owner said was there for business can just be moved,” Waldo said.

Don Schultz, who has represented the Norfolk Redevelopment and Housing Authority in eminent domain cases, said the Supreme Court ruling was preliminary.

“The court didn’t make a decision as to whether those items were fixtures or weren’t,” he said. “It just stated that the lower court didn’t apply the right test.”

Courts in Virginia are required to weigh several factors when deciding whether a piece of property is considered a fixture. The test involves deciding whether a piece of property can be moved, whether it is integral to the function of the property, and whether the owner intended for the item to be a permanent addition.

The jury originally awarded $1.2 million to Taco Bell for the property and $480,000 in damages. Since Taco Bell won the appeal, the case will go to trial again.

Schultz and Waldo said that in years past judges typically have decided what items the jury should take into consideration when coming up with compensation.

“I don’t know why, but in my opinion, the process has been abused,” Waldo said.

As a result, he said it has been common practice for government entities to refuse to pay for anything that could be moved, arguing that it could be reused or sold.

“When you pull the stuff out and try to sell it,” Waldo said, “you get pennies on the dollar.”