Housing & Redevelopment Authority ex rel. City of Richfield v. Wren

699 N.W.2d 758, 2005 Minn. LEXIS 419

• Court: Supreme Court of Minnesota
• Decided: July 28, 2005
• Docket: No. A04-207
• Status: Published

Opinions

OPINION

HANSON, Justice.

Appellant Richfield Housing and Redevelopment Authority (HRA) appeals from an administrative order directing it to pay relocation benefits to respondent Kenneth Wren pursuant to the Minnesota Uniform Relocation Act (MURA), Minn.Stat. §§ 117.50-117.56 (2002). The HRA contends that it should not be liable to pay the benefits because it contracted with a private developer to negotiate with Wren for the purchase of his home. The Administrative Law Judge concluded that the HRA had “undertaken acquisition” of Wren’s property within the meaning of MURA and held that Wren was entitled to relocation benefits. The court of appeals affirmed. In re Wren, 685 N.W.2d 721, 725 (Minn.App.2004). We affirm the decision of the court of appeals.

In 1993, the City of Richfield through its HRA began efforts to redevelop a “blighted and substandard” area on the 7600 blocks of Lyndale, Aldrich, and Garfield Avenues South. The redevelopment project eventually became known as “Lyndale Gateway West.” In January 1999, the HRA contracted with CSM Properties, Inc. to redevelop the area with a mixture of residential, retail, and office structures. By letter, the HRA informed area property owners about the contract and that there would be a process to address property-owner inquiries about “the purchase of their home.”

In November 1999, Wren purchased a residence at 7627 Aldrich Avenue South for $116,900, without actual knowledge that the property was within the redevelopment boundaries. Shortly after moving in, Wren received a postcard about a city council meeting where the redevelopment plans were to be discussed. He attended the meeting and later received “general information” about the time line for the project.

The HRA terminated its contract with CSM Properties in May 2001 and sought another developer. In August 2002, the HRA approved a contract with Cornerstone Group, which in turn created Lyn-dale Gateway, LLC, to acquire property for the project. The “Contract for Private Development” between the HRA and Lyn-dale Gateway specified that Lyndale Gateway was to “diligently pursue” property acquisitions through negotiation. If those negotiations failed, Lyndale Gateway could ask the HRA to “undertake condemnation” and HRA agreed that it would “in good faith, * * * undertake the steps necessary to acquire fee simple title to the portions of the Property to which the request relates.” All properties acquired by the HRA through condemnation would be conveyed to Lyndale Gateway. Lyndale Gateway was “responsible for all acquisition costs and the cost of relocation benefits and assistance provided to any party displaced as a result of the development.”

In 2002, the City of Richfield established a Tax Increment Financing (TIF) district to finance the project.¹ In July 2002, a real estate broker hired by Cornerstone Group contacted Wren to discuss the purchase of his property. Ultimately, the broker mailed a purchase agreement to Wren for the purchase of Wren’s home by Lyndale Gateway for $170,000. The purchase agreement gave notice that there was a “dual agency” arrangement and, pursuant to Minn.Stat. § 82.197, subd. 2 (2004), disclosed that the broker owed fiduciary duties to both the buyer and seller. The purchase agreement’s addendum specified that the seller was waiving any claim to relocation benefits.²

Wren negotiated a $10,000 increase to the purchase price. The broker testified at an administrative hearing that “Mr. Wren felt that he should be getting more money in order to move.” Ultimately, the parties signed the purchase agreement and addendum, with a sale price of $180,000. Wren closed on the sale of his property on June 5, 2008, and moved the same day. Shortly thereafter, he claimed relocation benefits from the HRA.

The HRA sought an administrative hearing pursuant to Minn.Stat. § 14.55 (2004)³ to challenge its liability to pay the benefits, and Lyndale Gateway’s petition to intervene was granted. The administrative law judge ruled that Wren was entitled to relocation benefits because (1) he was a “displaced person” within the meaning of the statute, (2) the city had “undertaken” acquisition of Wren’s property because “the record demonstrates a significant element of involvement and control by the HRA in this redevelopment effort,” and (3) Wren’s waiver of relocation benefits was ineffective because the HRA failed to meet its statutory duty to provide Wren with information on the benefits. See MinmStat. § 117.521, subd. 1 (2004). In his memorandum, the AL J concluded:

Where an HRA selects a private developer to engage in direct negotiations with property owners it should not be relieved of the requirements of the statute where it remains the moving force behind redevelopment, that is, where it “undertakes” the acquisition of property for redevelopment. To do so would frustrate the beneficial purpose, including the specific notice requirements, set out in MURA and the federal law.

The ALJ also denied the HRA’s petition for reconsideration.

On appeal by writ of certiorari, the court of appeals affirmed, holding that the HRA’s “significant role” in the project supported the ALJ’s conclusion that the HRA had “undertaken” acquisition of the property. In re Wren, 685 N.W.2d at 725. Because the HRA did not challenge the ALJ’s ruling that Wren’s waiver of relocation benefits was ineffective, the court of appeals did not address that issue. We granted the HRA’s petition for review of the issue of whether the acquisition of Wren’s property had been “undertaken” by the HRA, within the meaning of MURA.

I.

Statutory interpretation is a question of law reviewed de novo without deference to an administrative decision. In re Denial of Eller Media Co.'s Applications for Outdoor Advertising Device Permits, 664 N.W.2d 1, 7 (Minn.2003). When reviewing an administrative law judge’s findings of fact, we determine whether they are “[ujnsupported by substantial evidence in view of the entire record as submitted.” Minn.Stat. § 14.69(e) (2004).

The MURA provision for relocation benefits reads in relevant part:

In all acquisitions undertaken by any acquiring authority and in all voluntary rehabilitation carried out by a person pursuant to acquisition or as a consequence thereof, * * * the acquiring authority, as a cost of acquisition, shall provide all relocation assistance, services, payments and benefits required by the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 * * *.

Minn.Stat. § 117.52, subd. 1 (2004).⁴ MURA specifies that “acquisition” includes “(a) acquisition by eminent domain; (b) acquisition by negotiation; (c) programs of area wide systematic housing code enforcement; and (d) demolition.” Minn.Stat. § 117.50, subd. 4 (2004). MURA does not specify how an acquisition is “undertaken.” An “acquiring authority” includes “(a) the state and every public and private body and agency thereof which has the power of eminent domain; and (b) any acquiring authority carrying out an areawide systematic housing code enforcement program.” Minn.Stat. § 117.50, subd. 5 (2004).

We have addressed the meaning of “acquisition” under MURA once before. In Gilliland v. Port Authority of St. Paul, we held that no “acquisition” had taken place when a hotel owner sought and received revenue bond financing from the Port Authority even though the owner conveyed fee simple title of the hotel to the Port Authority, which contemporaneously leased the property back to the owner. 270 N.W.2d 743, 746-47 (Minn.1978). Because the Port Authority had “no power to possess the hotel or to use it for its own purposes,” and because title to the property reverted to the redeveloper upon the expiration of the lease, we held that the Port Authority had not “acquired” the hotel and thus was not liable to pay relocation benefits to displaced tenants. Id. at 747. We characterized the sale-leaseback arrangement as “purely a financing arrangement.” Id.

The HRA contends that Gilliland controls our analysis, arguing that both that project and the Lyndale Gateway redevelopment were private efforts and that the only municipal involvement regarded funding. The HRA argues that Wren’s claim is even weaker than the claim in Gilliland because the HRA never took legal title to Wren’s home. But in Gilliland the project was initiated by the hotel owner, not the Port Authority, and the Port Authority did not select the developer or control by contract the developer’s actions, did not encourage the tenants to negotiate with the hotel owner, and was not contractually bound to acquire the property by eminent domain. In fact, neither party in Gilliland made an “acquisition.” The development project involved the rehabilitation of property by its present owner.⁵ The private developer already owned the hotel and did not need to acquire it. The only question in Gilliland was whether the transfer of bare legal title to the Port Authority, as part of a financing mechanism, constituted an “acquisition” by the Port Authority from the developer, within the contemplation of MURA. We held that it did not.

Here, by contrast, neither the HRA nor the developer owned the property that was to be redeveloped and thus the redevelopment project could not proceed unless the property was acquired from third-party owners, either by the developer, the HRA, or the two jointly. Because Gilliland did not involve any acquisition, and the Lyn-dale Gateway project was premised on the successful completion of several acquisitions, we conclude that Gilliland does not control our analysis. There is no question that private property was. acquired in this case; the question is by whom the acquisition was “undertaken.”

n.

The term “undertaken” is not defined by MURA. The AL J and court • of appeals cited dictionary definitions of the word, as to “take upon oneself,” “commit oneself,” or “begin.” In re Wren, 685 N.W.2d at 724; see also Minn.Stat. § 645.08(1) (2004) (stating that statutory nontechnical words and phrases are to be construed according to “common and approved usage”). The ALJ held that the HRA had undertaken acquisition of Wren’s property because the agency had exercised “a significant element of involvement and control,” and was the “moving force behind redevelopment.” Similarly, the court of appeals held that the HRA had a “significant role” in the project by initiating, fostering, and financing the redevelopment, by communicating with property owners and renters, and by agreeing to use its power of eminent domain if necessary. In re Wren, 685 N.W.2d at 725.

The HRA contends that “nothing in MURA or its legislative history” supports the conclusion that relocation benefits should depend on .whether an acquiring authority was “significantly involved” in a given acquisition. The HRA argues that MURA and Gilliland create, a bright-line standard whereby the words “acquisition undertaken by” apply only where the acquiring authority “(a) comes into possession or control of private property; (b) has the power of disposal over private property; or (c) treats property as its own.” But, again, this argument relies on an interpretation of the word “acquisition” that has no application here, and also fails to give meaning to the word “undertaken.”

We do not find the legislative history of MURA to be particularly informative on the meaning of the word “undertaken.” We do note that MURA, when enacted in 1973, made some changes in the law concerning relocation benefits, but those changes were minor and represent a slight broadening, not narrowing, of 'the benefits.⁶ We also note that the Minnesota legislature did not adopt the even broader changes made to the federal URA in 1987. The federal URA now provides for benefits “[wjhenever a program or project to be undertaken by a displacing agency will result in the displacement of any person.” Pub.L. No. 100-17, § 405(a)(1); 42 U.S.C. § 4622(a) (2003) (emphasis added).⁷ But the Minnesota legislature’s failure to adopt the federal language is equivocal at best. We have no way of determining whether that failure should be interpreted as a rejection of the broader federal rule, as the HRA argues; or as a determination that the federal changes were unnecessary as superfluous.⁸

Both parties refer us to the decision of the federal Court of Appeals for the Eighth Circuit in Young v. Harris, 599 F.2d 870 (8th Cir.1979). Although that decision was made under the federal URA and is not binding on our interpretation of MURA, we find it useful in developing a standard for determining when a city has undertaken an acquisition even though the acquisition is more directly accomplished by the city’s developer. The court in Young considered whether activities of the private developer and the city were “sufficiently intertwined” to characterize them as a joint undertaking. 599 F.2d at 877. We conclude that this is the appropriate standard because it focuses on the substance and not just the form of the acquisitions and is consistent with the remedial purposes of MURA. This standard is perhaps similar to the “significant involvement” standard that the court of appeals used, but it more directly focuses on the quality, not just quantity, of the respective activities of the city and its developer, and how essential the activities of each are to the successful acquisition of the property to be redeveloped.

III.

Young is also instructive when we examine its application to the facts there presented. Some of those facts are similar to the facts here — the city identified an area for redevelopment; the city approved a development plan, selected a private developer and made a contract with the developer; the city agreed to provide municipal services to the development project; and the private developer undertook direct negotiations with the property owners. Id. at 873-75. But, unlike our facts, the city did not provide financial assistance and the city did not obligate itself to use its eminent domain power to acquire property that the developer could not acquire by negotiation.⁹ Also, the opinion in Young does not suggest that the city actively contacted property owners or used its influence to encourage property owners to deal with the developer.

The most important factor in the analysis of our facts is the HRA’s contractual obligation to use its eminent domain powers to acquire Wren’s property should private negotiations have failed. The HRA argues that, despite the contract, the HRA could have elected not to initiate condemnation proceedings should Lyndale Gateway’s negotiations with Wren have been unsuccessful. The HRA argues that it has never used its eminent domain power to condemn a single-family residence. But this argument is not supported by the HRA’s contract -with the developer, which provides no exception for single-family residences. Thus, if Wren’s property had not been acquired through negotiation and the developer had satisfied all other conditions, the HRA would have been required to either undertake condemnation proceedings or breach its contract obligation to “in good faith, * * * undertake the steps necessary to acquire fee simple title.”¹⁰

Moreover, we cannot ignore the effect that the HRA’s promise to condemn necessarily had on the developer’s negotiations with Wren. The HRA’s frequent and direct communications with property owners made it clear that the developer was acting under contract with the HRA to acquire property within a development district that the HRA had identified and established. The HRA further encouraged property owners to deal with the developer. Property owners could fairly conclude that they could not refuse to sell, and that if they did not agree to a negotiated price, that price would be determined through a condemnation proceeding. Thus, the HRA’s power to condemn inevitably influenced Wren’s negotiations with the developer.

Further, the HRA actively used its position of trust with property owners to encourage their dealings with the developer. By initiating the project, controlling the developer, encouraging property owners to negotiate with the developer, providing financing to make the purchase possible and, most importantly, assuring the developer that the HRA’s power of condemnation was available to impose limits on the private negotiations, the HRA became an important “partner” in the acquisition, which in a real sense was jointly “undertaken” by the HRA and the developer. In other words, the fact that the developer had undertaken the acquisition does not exclude the HRA from the joint undertaking. Instead, the activities that were considered at the outset to be important to a successful redevelopment project were divided between the HRA and Lyndale Gateway, and each was bound to the other to perform its activity for the benefit of the project. Unlike in Young, the HRA did not delegate all important activities to the private developer, but retained responsibility for activities that were important to the ultimate success of the project. This division of roles presented a sufficient intertwining of activities to conclude that the acquisition of Wren’s property was jointly undertaken by the HRA and Lyndale Gateway.

Accordingly, the HRA is liable to pay relocation benefits to Wren.¹¹

Affirmed.

1 . The record does not specify the precise nature of this TIF funding, but indicates that the city reimbursed the redeveloper for some of its costs.

2 . The pertinent portion of the paragraph read:

Seller acknowledges that this is a voluntary and arm’s length transaction between Buyer and Seller, and that the purchase price has been established through negotiation and represents the total amount that will be due and payable to Seller by reason of this transaction. Seller specifically acknowledges and agrees that neither Buyer nor the City of Richfield shall have any obligation to pay or provide to Seller, any relocation assistance, services, payments or benefits. Additionally, Seller expressly waives any claim to relocation assistance, services, benefits or payments.

3 . Section 14.55 authorizes a political subdivision to contract with the state's chief administrative law judge to hear such matters.

4 . Minnesota Statutes § 117.52, subd. 1, applies when, as here, federal relocation assistance under the Uniform Relocation Assistance and Real Property Acquisition Policies Act, 42 U.S.C. §§ 4601-4655 (2003) (URA), is not available because there is no federal financial 'participation. MURA incorporates URA standards as to the types of benefits that an acquiring authority must provide. Benefits generally include actual moving expenses, compensation for property losses, and expenses related to finding replacement business property. See 42 U.S.C. § 4622(a) (2003). The 2002 version of MURA applies to this case.

5 . See, e.g., Young v. Harris, 599 F.2d 870, 876 n. 9 (8th Cir.1979) (concluding that displacements caused by rehabilitation of property by its present owner are not covered by the federal Uniform Relocation Assistance and Real Property Acquisition Act of 1970 because they did not result from an acquisition).

6 . The predecessor statute referred to acquisitions "instituted'' instead of acquisitions "undertaken” and limited liability for relocation benefits to acquisitions "by eminent domain or by negotiation.” Minn.Stat. § 117.095 (1971). MURA expanded relocation benefits to acquisition by "demolition” and “programs of areawide systematic housing code enforcement.” Minn.Stat. § 117.50, subd. 4(c)-(d). This broadening of MURA weakens the HRA’s argument that liability for relocation benefits arises only when the authority "has the power of disposal over private property” or "treats property as its own,” since the authority would attain no such rights through housing-code enforcement.

7 . Several states have statutes identical or similar to the federal URA. Cal. Gov.Code § 7262(a) (2004); Colo.Rev.Stat. Ann. § 24- . 56-103(1) (2004); Mo.Rev.Stat. § 305.603 (2004); Neb.Rev.Stat. .§ 76-1228 (2004); N.H.Rev.Stat. Ann. § 124-A:3(I) (2004); N.D.Cent.Code 54-01.1-03 (2004); Tenn.Code Ann. 13-11-105(a) (2004); Wash. Rev.Code.Ann. 8.26.035(1) (2004). Minnesota’s statute appears to be unique.

8 . The HRA also argues that the legislature's reaction to the court of appeals' decision in James Brothers signals a general intent for MURA to mirror URA. See In re Relocation Benefits of James Bros. Furniture, Inc., 642 N.W.2d 91, 99 (Minn.App.2002). In 2003, the legislature amended the state definition of "displaced person" to "correspond to federal law,” in apparent response to a court of appeals decision that concluded that the term "should be construed to be broader than the federal act's definition." Act of May 23, 2003, ch. 117, § 1, 2003 Minn. Laws 688, 688-89 (codified at Minn.Stat. § 117.50, subd. 3 (2004)); James Bros., 642 N.W.2d at 99. Had the legislature intended for MURA to more broadly mirror URA, presumably the legislature would have taken steps to accomplish this.

9 . Under the Missouri Urban Redevelopment Corporation Law, the city was authorized to grant the powers of eminent domain to the developer. Young, 599 F.2d at 873-74.

10 . That the HRA was bound only to act in “good faith” is of little consequence because "[ujnder Minnesota law, every contract includes an implied covenant of good faith and fair dealing requiring that one party not 'unjustifiably hinder’ the other party's performance of the contract.” In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502 (Minn.1995).

11 . The HRA argues that Wren, as part of an “arm’s length” transaction, negotiated a price $10,000 higher than the initial offer to compensate him for his moving expenses. We are unwilling to characterize the transaction as one at "arm’s length” because of the "dual agency” arrangement. There is no indication that the broker satisfied his fiduciary duty of informing Wren about the type and amounts of relocation benefits that might be available. Further, the HRA has not challenged the ALJ’s determination that Wren’s waiver of relocation benefits was ineffective. Under Minn.Stat. § 117.521, subd. 1 (2004), a party may voluntarily waive relocation assistance by signing a waiver "specifically describing” the types and amounts of assistance available and "stating that the agreement is voluntary and not made under any threat of acquisition by eminent domain.”