Arizona Court of Appeals Division One Holds That the Statutory Valuation Date for Condemned Property Under A.R.S. § 12-1123 Does Not Always Represent the Date of the Taking for Purposes of Determining Just Compensation Under the Fifth Amendment.

On January 13, 2003, the City of Scottsdale (“Scottsdale”) filed a summons and complaint to condemn an undeveloped parcel of land owned by CGP-Aberdeen, L.L.C. (“CGP”).  The trial court entered an order for immediate possession onJuly 15, 2004, more than 18 months later.  During this time, the value of the CGP property had increased substantially.  Scottsdale paid CGP an amount equal to its estimated value for the property on the date the complaint was filed.  CGP moved to requireScottsdale to pay the value of the property on the date of the order of immediate possession.  The trial court denied CGP’s motion, and the parties entered into a stipulated agreement preserving CGP’s arguments regarding the constitutionality of the compensation.  CGP then brought an inverse condemnation action claim in Scottsdale had taken its property without just compensation.  The trial court dismissed CGP’s inverse condemnation action, and CGP timely appealed.

The Arizona Appeals Court reversed and remanded for a determination of the date of the taking and the value of the property as of that date.  In so holding, the Court rejectedScottsdale’s position that the date of the summons and complaint serves as the date of the taking for just compensation purposes.  First, Scottsdale argued that A.R.S. § 12-1123, which provides that condemned property is to be valued as of the date of the summons, establishes the summons date as the taking date as a matter of Arizona law.  The Court rejected that argument, explaining that although the statute establishes a valuation date for the typical condemnation proceeding, the text of the statute does not envision that the mere institution of a condemnation proceeding constitutes a taking for purposes of complying with the constitutional requirement of just compensation.  See Kirby Forest Indus., Inc. v. United States, 467 U.S. 1 (1984), (“No matter how reasonable or pragmatic it is to select a precise statutory valuation date, just compensation requires the payment of the fair market value possessed by the property on the date of the taking.”).

Second, the Court rejected Scottsdale’s argument that the Arizona Supreme Court established the initiation date of a condemnation proceeding as the taking date in Calmat of Arizona v. State ex rel. Miller, 176 Ariz. 190, 859 P.2d 1323 (1993).  Although Calmat indicated that the value of the condemned property on the statutory valuation date may often be presumed to represent its value on the date of the taking due to the close proximity of those dates, it also held that when the date on which the government actually takes possession of the property becomes too distant from the valuation date, the trial court must determine the actual date of the taking and the value of the property on that date.

Finally, the Court rejectedScottsdale’s assertion, that the mere institution of a condemnation proceeding sufficiently damages the property value to constitute a taking on the date the proceeding was initiated.  While such an argument might prove true in some cases, here, there was no evidence that CGP could not use, develop or sell its land after the condemnation proceeding had been initiated, nor any evidence that CGP had been relieved of the burdens of ownership.  In fact, the evidence appeared to indicate that the property increased in value during this time.  Thus, the Court of Appeals remanded to the trial court to hear evidence on when the taking actually occurred and the property’s value on that date.

Judge Snow authored the opinion; Presiding Judge Ehrlich and Judge Hall concurred.