“So, what’s going to be different if we dismiss this case and they start over, besides delay?”

Justice DeWine, to counsel for the County Club

“So, what is the remedy if the state didn’t comply, didn’t make a good faith offer?”

Justice DeWine, to the Deputy Solicitor General

On April 13, 2021, the Supreme Court of Ohio heard oral argument in State ex rel. Ohio History Connection v. The Moundbuilders Country Club Company and Park National Bank, 2020-0191. At issue in this case is what constitutes a “good faith offer” in the context of eminent domain and whether a court may weigh competing public interests in determining the necessity of an appropriation.

Case Background

The Ohio History Connection (“History Connection”) owns the Octagon Earthworks, a property containing ancient Native American earthworks, which it leases to the Moundbuilders Country Club Company (“County Club”) for use as a private golf course and country club. The History Connection, which is legislatively authorized to use the power of eminent domain, sought to buy out the remaining term of the County Club’s lease, which expires in 2078, in order to transform the property into a public park. This would make the Earthworks eligible for designation as a World Heritage Site. Under a 2003 agreement between the History Connection and the County Club, the public’s access to the site is extremely limited.

The History Connection obtained two appraisals of the property. The first appraisal (“the Weiler Appraisal”), valued the leasehold interest at $1,750,000 and the second appraisal (“the Koon Appraisal”) valued the leasehold interest at $800,000. The History Connection sent the Country Club a written offer to purchase the remaining term of the Country Club’s lease for $800,000. The History Connection provided the Country Club with a copy of the Koon Appraisal but not the Weiler Appraisal. The Country Club rejected the History Connection’s offer.

Subsequently, the History Connection’s Board of Trustees passed a resolution declaring that the History Connection’s appropriation of the Country Club’s leasehold estate was necessary to transform the property into a public park. The History Connection filed a petition to appropriate the property, which was granted by the trial court after a 4-day hearing.  The trial court found the appropriation was necessary to achieve a public purpose. The trial court also found that the existence of a higher offer did not make the History Connection’s  initial offer a bad faith offer and that there was no evidence the Country Club would have accepted the higher offer had it been made.

The Country Club appealed, arguing that the trial court erred in concluding that the History Connection had negotiated in good faith and had established that the taking was necessary.

The Appeal

In a unanimous decision, the Fifth District Court of Appeals affirmed the trial court’s judgment.

The Fifth District concluded that the trial court did not err in finding that the History Connection negotiated in good faith because there was relevant, competent, and credible evidence on which to base its judgment. Additionally, noting its limited standard review on the question of necessity, the appeals court found that the trial court did not err in concluding that the History Connection’s taking was necessary because there was extensive and adequate evidence and testimony to support its conclusion that the present agreement between the History Connection and the Country Club needs to give way “to full public access to these geographic remnants left by the prehistoric Native American inhabitants of this region.”

Read the oral argument preview of the case here.

Key Statutes and Precedent

*R.C. 149.30 (Ohio History Connection is a non-profit corporation and may perform public functions as prescribed by law, including creating, supervising, operating, protecting, maintaining, and promoting state memorials, acquiring historic or archaeological sites, and reconstructing, protecting, or restoring earthworks and monuments in its care.) 

*R.C. 163.01(H)(2) (A public park is presumed to be a public use.)

*R.C. 163.01(J) (“Good faith offer” means the written offer that an agency appropriating property must make to the owner of the property pursuant to division (B) of section 163.04 of the Revised Code before commencing an appropriation proceeding.)

*R.C. 163.04(B) (The appropriating agency, at least 30 days before filing a petition for appropriation, shall provide an owner with a written good-faith offer to purchase the property.)

*R.C. 163.041 (The notice an agency is required to provide to each property owner before initiating an appropriation action shall be substantially in the form set forth in this section.) 

*R.C. 163.05 (An agency that has met the requirements of sections 163.04 and 163.041 of the Revised Code, may commence proceedings in a proper court by filing a petition for appropriation of each parcel or contiguous parcels in a single common ownership, or interest or right therein. The petition of a private agency shall be verified as in a civil action.)

*R.C. 163.09(B)(1)(a) (A resolution or ordinance of the governing or controlling body, council, or board of the agency declaring the necessity for the appropriation creates a rebuttable presumption of the necessity for the appropriation if the agency is not appropriating the property because it is a blighted parcel or part of a blighted area or slum.)

*R.C. 163.52(A) (The failure of an acquiring agency to satisfy a requirement of section 163.59 of the Revised Code does not affect the validity of any property acquisition by purchase or condemnation.)

*R.C. 163.59(C) (Real property to be acquired shall be appraised before the initiation of negotiations, and the owner or the owner’s designated representative shall be given a reasonable opportunity to accompany the appraiser during the appraiser’s inspection of the property. If the appraised value of the property is more than $10,000, the head of the acquiring agency concerned shall make every reasonable effort to provide a copy of the appraisal to the owner.)

*R.C. 1743.07 (Certain historical preservation associations or societies may acquire necessary real estate in accordance with R.C. 163.01 to 163.22.)

Pokorny v. Local 310, Inter. Hod Carriers, Bldg. Common Laborers Union, 35 Ohio App.2d 178 (8th Dist. 1973) (For cases involving the taking of property for public welfare, a leasehold interest is considered private property.)

Willard v. City of Columbus, 1979 WL 208913 (10th Dist. 1979) (Statutes conferring the power of eminent domain are strictly construed against the governmental agency.)

*Kalain v. Smith, 25 Ohio St.3d 157 (1986) (A party may have “failed to make a good faith effort to settle” under R.C. 1343.03(C) even when he has not acted in bad faith. To determine whether a party has made a good faith effort to settle, a court should consider whether the party has: (1) fully cooperated in discovery; (2) rationally evaluated the risks and potential liability; (3) not attempted to unnecessarily delay any of the proceedings; and (4) made a good faith monetary settlement offer or responded in good faith to an offer by the other party.) 

 *Worth v. Huntington Bancshares, 43 Ohio St. 3d 192 (1989) (To determine whether a party has made a good faith determination, a court should consider not only the party’s subjective reasoning but also the facts and circumstances surrounding the determination. A good faith determination must at least to some extent be informed by the surrounding circumstances relevant to that decision.) 

Neary v. Board of Zoning Appeals, 1999 WL 960777 (2d Dist. 1999) (When land is leased, the lessee acquires the lessor’s right to the enjoyment and use of the land and becomes the owner of the land for all practical purposes so long as the lease is in force.)

City of Bucyrus v. Strauch, 2000-Ohio-1678 (3rd Dist.) (The Ohio Rules of Civil Procedure are generally considered applicable in appropriation proceedings unless there is a specific procedural conflict.)

City of Huron v. Hanson, 2000 WL 1033034 (6th Dist. 2000) (“The Ohio and United States Constitutions both require that the power of eminent domain be exercised for a public purpose.”)

City of Springdale v. Burns, 2001 WL 1386184 (1st Dist. 2001) (“The purpose of an appropriation award is to compensate the leaseholder for the value of his appropriated interest.”)

Frank v. Nationwide Mut. Ins. Co., 2003-Ohio-4684 (10th Dist.) (Under Ohio law, good faith and bad faith are presented as opposites to each other.)

Willoughby Hills v. Andolsek, 2003-Ohio-323 (11th Dist.) (A trial court’s finding that appropriation is necessary is subjected on appeal to a limited standard of review.)

RMW Ventures, L.L.C. v. Stover Family Invest., L.L.C., 2005-Ohio-3226 (3rd Dist.) (The power to appropriate property for public use is encompassed under the law of eminent domain, and the power is inherent in the state.)

*Norwood v. Horney, 2006-Ohio-3799 (Heightened scrutiny must be applied in reviewing any statutes which regulate the use of eminent domain powers.)

Wadsworth v. Yannerilla, 2006-Ohio-6477 (9th Dist.) (The Constitution does not require that a taking be immediately necessary, only that the taking is necessary for a public purpose.)

Dublin v. Beatley, 2016-Ohio-5606 (5th Dist.) (The appropriation of property is a special statutory proceeding governed by R.C. 163 et seq.)

Schaad v. Buckeye Valley Local School Dist. Bd. of Edn., 2016-Ohio-569 (5th Dist.) (“Bad faith” generally implies or involves “actual or constructive fraud, or a design to mislead or deceive another . . . not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive.”)

Sunoco Pipeline L.P. v. Teter, 2016-Ohio-7073 (7th Dist.) (In the context of eminent domain, “[n]ecessity means reasonably convenient or useful to the public; it is not limited to an absolute physical necessity.”)

*Cited by counsel at oral argument

Country Club’s First Proposition of Law Accepted for Review

In an appropriation action, the condemning authority does not meet its burden of making a “good-faith offer” by presenting evidence that it did not act in bad faith in making the offer to purchase. Rather it must show that it acted in good faith, which is more than the absence of bad faith.

Country Club’s Second Proposition of Law Accepted for Review

In order for a condemning authority to show that a taking is necessary for a public purpose, it must show not only that the purpose for which the property is taken is a public one, but it must also show that the taking is necessary for the public purpose by weighing all considerations that impact the public. To do so, the Court may weigh competing public interests.

At Oral Argument

Arguing Counsel

Joshua M. Fraley, Mitchell Pencheff Fraley Catalano & Boda Co., LPA, Columbus for Appellant Moundbuilders Country Club Company

Samuel C. Peterson, Deputy Solicitor General, Columbus, for Appellee Ohio History Connection

Country Club’s Argument

The question before this court is how much power the government has to claim ownership over private property. The General Assembly has adopted an eminent domain system which is designed to ensure that Ohio landowners are treated fairly. The intention of the General Assembly in this context is set forth in R.C. 163.59. It is to encourage and expedite the acquisition of property by agreement, to avoid litigation, to encourage consistent treatment for landowners, and to promote public confidence in the acquisition practices. None of these stated policies were adhered to by the History Connection in this case.

The basis of jurisdiction in this case is the requirement of a written good faith offer to the property owner. The lower courts defined good faith as being merely the absence of bad faith. They further discussed engaging in a conscious wrongdoing or a dishonest purpose. But both the lower courts applied the wrong standard. The term “bad faith” is not found in the statute, and the lower courts failed to support any of their rulings with cases that discuss good faith within the context of the statutory definition. In this context, the courts are bound by this statutory definition. But here, the trial court decided that good faith was achieved in the absence of bad faith.

In Kalain v. Smith, this court promulgated a four-part test for good faith. Part two of that test, which requires a rational evaluation of the risk and potential liability, is especially pertinent here. Worth v. Huntington Bancshares goes even further. It basically indicates that although in some cases a lack of good faith is synonymous with bad faith, in all cases a good faith determination must be informed.  Applying this precedent to the case at hand, the CEO of the History Connection testified that he was not an appraiser, and he did not know what a lease fee value was or even to what that referred. He admitted that he never sought the advice of counsel or any other expert to help him understand the appraisals he was reviewing. Therefore, it is fair to say he did not rationally evaluate the appraisals, nor was he reasonably informed of the appraisals. He did not make an informed rational decision.

Before the court can proceed, it must answer the jurisdiction question. Jurisdiction is based on a written good faith offer. If this court finds that the History Connection did not make a good faith offer, the trial court lacked jurisdiction to hear anything after that. R.C. 163.05 states that “an agency that has met the requirements of 163.04 and 163.041 may commence proceedings in a court by filing a petition of appropriation.” That jurisdictional piece is necessary to access the court system, and vests by virtue of making the statutorily required good faith offer. Jurisdiction fails if there is a finding that there was no good faith offer made. Here, the appeals court parroted the wrong standard for good faith, ruling that a lack of bad faith equated to good faith.

If the History Connection had only the Koon appraisal for $800,000, and had made that offer, that would have been a good faith offer. The statute is written in the singular—“an” appraisal. By any definition grammatically, “an” refers to one. Multiple appraisals defeat the legislative intent of avoiding litigation, promoting public confidence in eminent domain takings, and being fair to the landowner. Also, the fact that the County Club did its own appraisal does not speak to whether a good faith offer was made. Additionally, if litigation had not ensued the Country Club would not have known there was another appraisal.

Turning to the necessity issue, the trial court determined that as long the property was for a public use, that part of the statute was met. But in Norwood, this court held that public use must be a flexible doctrine. The Country Club believes the public interest must be weighed, as was contemplated in Norwood. The History Connection believes that R.C. 149.30 gives them the right to create a public park. It does not. There is nothing in that statute that indicates that they have the right to create a public park. This matter is and always has been about getting into the World Heritage Foundation. But Norwood instructs that is speculative. In the last rounds of the Foundation only 3 out of 5 nominations in the U.S. have been accepted. The History Connection says this taking is for use as a public park and therefore the necessity requirement is met without any analysis.

A reversal in this case would start with a clean slate, with everybody knowing what the appraisals are. If a good faith offer is submitted, then it gives the Country Club every right the statute allows.

Ohio History Connection’s Argument

This case is not about whether the Country Club is owed compensation or the amount of compensation the Country Club is owed. It is about whether the History Connection properly initiated the eminent domain process and whether the appropriation at issue in this case is necessary for a public purpose.

 The History Connection did everything it was required to do under the statute, and more.  As for the jurisdictional issue, no one disputes that the trial court in this case had the power to hear this eminent domain proceeding. Various provisions in Chapter 163, specifically R.C. 163.52 and RC 163.12(c), confirm that the General Assembly did not intend for the eminent domain procedures set forth to be jurisdictional, at least in the way the County Club suggests. The General Assembly also contemplated in the statute that errors in invoking the eminent domain process are not fatal to an eminent domain proceeding. If the state fails to make a good faith offer, the remedy is having to make a new offer. Additionally, in this case the state has never heard from the Country Club as to how it has been harmed by the History Connection’s offer, nor has the Country Club ever asserted it would have accepted a higher offer.

The statutory definition of good faith may appear superficially circular. But what R.C. 163.04 (B) actually says is that the good faith offer must be based on an appraisal, the appraisal must be attached to the offer, and it must be provided at least 30 days prior to initiating eminent domain proceedings. That provision sets out a process and then R.C. 163.041 provides a form that implements the requirements of R.C. 163.04. If an offer is in the form proscribed by R.C. 163.041 that is a per se good faith offer.

The necessity question should be affirmed for three reasons—the statute, the Country Club’s answer and the findings made by the trial court which should be reviewed for an abuse of discretion.

First, R.C. 163.01(H)(2) states that a public park is a per se public use, and R.C. 163.09(B)(1)(a) entitles the History Connection to a presumption of necessity if they adopt a resolution declaring the necessity. That resolution is in the record.

R.C. 1743.07 gives the History Connection power to acquire property through eminent domain, and specifically refers to Earthworks and any prehistoric mound. R.C. 149.30 sets out the duties of the History Connection which are to acquire and maintain Earthworks. It is undisputed that the History Connection has the power to acquire property. They already own the property at issue here. What is at issue is a leasehold interest.  All that the Country Club is entitled to is to operate a golf course. It is undisputed that the History Connection has the authority to operate a park on this property. The History Connection operates parks and historic sites throughout the state. In fact, there is another nearby park, the Great Circle, and no one has disputed that the History Connection also has the authority to operate that park.

As for the necessity argument, the Country Club incorrectly relies on Norwood, which actually compels the opposite result from its argument.  Imagine if the shoe were on the other foot, the state was arguing it needed to acquire private property to create a private country club, and argued this was a public use justifying an eminent domain taking because of all the economic benefits that would flow from it.  The court would rightfully reject that argument on the basis of Norwood which said that private benefits don’t rise to the level of public use in terms of taking. But that analysis is unnecessary here because R.C. 163.09(B)(1)(a) entitles the History Connection to a presumption of necessity if they adopt a resolution declaring the necessity. That resolution is in the record.

As a legal matter, no court has ever held that absolute necessity is required. In eminent domain proceedings necessity must be reasonably convenient to the public use. Here there was ample testimony that the Country Club’s proposed sharing of the property doesn’t counteract the necessity. And no matter who bears the burden of necessity, the History Connection has more than carried its burden that this appropriation was necessary for the creation of a public park.

The abuse of discretion standard also applies to the good faith question. While an agency could go out and get multiple appraisals, there are reasons why that is unlikely to occur and reasons why agencies would not want to do that. The question is whether an offer is being made for fair market value. Appraisers are regulated, licensed entities who answer to a higher body. They are not going to go out and do a bad job, because their license is on the line. So as long as there is a qualified appraisal, saying this is fair market value, then that is a good faith offer. That’s why there are valuation proceedings and that’s why those are presented to a jury. No matter what appraisal an agency uses, the agency must defend that appraisal at an appropriation proceeding. If the agency gets 10 appraisals and 9 of them are high and one is a low outlier and the agency chooses to rely on the outlier, the agency is taking a risk that it won’t be able to defend that in an appropriation proceeding. Additionally, if the jury awards a significantly higher amount the agency would face attorney fees and costs. So, while there’s nothing in the law that precludes multiple appraisals there are practical consequences in doing so.

There were two appraisals here, both of which were conducted by qualified appraisers. Only the Koon appraisal valued the leasehold interest to be acquired. The Weiler appraisal valued both the value of the fee simple and the fee as encumbered by the lease. So while the History Connection admittedly made a mistake about what the Weiler appraisal was valuing, they actually offered what they thought was the higher amount. The trial court looked at the appraisals and found the testimony persuasive that the History Connection was acting in good faith on this point.

There was no abuse of discretion in the findings of the trial court, and the legal standards the trial court applied with respect to necessity are correct. If anything, the question of good faith is a bright line rule or at least a statutory presumption that as long as an agency makes an offer for fair market value as determined by a qualified appraiser, that is good faith. The good faith offer is just the beginning of the process.  Requiring the type of inquiry the Country Club suggests at the beginning of every process would extend every eminent domain proceeding, essentially turning it into a double valuation hearing.  That is not what is intended. The appraisal offer is intended to kick off the process, say this is what we think it’s worth, and begin a negotiation. Negotiations have been going on with the County Club for quite some time.

Here, the court below applied the proper standard, the History Connection made a good faith offer based on an appraised value conducted by a qualified appraiser, necessity was clearly established, and both factually and legally the courts below correctly determined both questions. The Court should affirm and remand so a jury can determine the appropriate valuation and what compensation is due to the Country Club.

What Was On Their Minds

Jurisdiction/Good Faith

Isn’t good faith defined in the statute, asked Justice Fischer? Are we bound by that definition? Isn’t that statutory definition rather circular?

If the Court were to find there was not a good faith offer, then what happens, asked Justice Stewart?

Is this a jurisdictional requirement or a requirement to appropriate the property, asked Justice DeWine? Doesn’t jurisdiction go to the power of the court? If the History Connection did not appropriately initiate the process, what does that mean?  Is that jurisdictional? What is the remedy if the state didn’t comply, didn’t make a good faith offer? Does the Country Club have the burden of demonstrating they are prejudiced by that? Could an agency go out and get 50 appraisals until they found one they liked? Maybe they shop around until they find an appraisal that they like and that’s the only one they have to disclose. That doesn’t seem like good faith, he added.

Here you have an individual who says he’s not an expert, not an appraiser, and who admits he didn’t know what he was looking at. And instead of asking someone to get advice, he just chooses one appraisal to go with, and another is higher. How is that good faith in the individual or due diligence by the person who’s handling this on behalf of the seeker of eminent domain, asked Justice Kennedy?

Particulars of the Appraisals

If the History Connection only had the Koon appraisal for the $800,000 and they made that offer, would that have been a good faith offer, asked Justice Donnelly?

Wasn’t the amount in one of the two appraisals misunderstood by the CEO of the History Connection asked Chief Justice O’Connor? She added that the statute doesn’t require taking the highest appraisal, because it anticipates only one appraisal. Is there any dispute over the qualifications of the entity that did the appraisal? Isn’t the court the forum for determining the accuracy of the appraisal? You can take that to the court, you can show that the appraisal was inadequate, or undervalued, you can then dispute that and present evidence in court and a determination on the appraisal will be made.  Didn’t the Country Club also do an appraisal themselves?

 What is it the Country Club is asking the Court to write, asked Justice Kennedy? When a government entity is engaged in an eminent domain matter and has more than one appraisal, then what?

Necessity

What alternatives are available to preclude the taking, asked Chief Justice O’Connor? What about the authority even to create a public park? Were there alternatives that could have accomplished what the History Connection wanted, which would be some sort of public access to the mounds? Is that kind of negotiation required?

Standard of Review

Is the good faith finding subject to abuse of discretion, asked Justice Brunner? How is the court of appeals in error in not finding an abuse of discretion? What kind of de novo review could the appeals court  have done based on what’s in the trial court record?

Effect of a Dismissal

Assume the Court agrees with the Country Club and says the History Connection didn’t initiate this process, said Justice DeWine. So then the whole process has to be started over, the History Connection comes back and offers $1.75 million. The Country Club says no. Don’t we just end up back in the same place? Is anything different than it is today? What would be different? What is going to change?  He asked this question several different ways during the Country Club’s rebuttal.

The heart of this question is, will this make any difference, asked Justice Kennedy? Is the Country Club really going to look at that other number? Is there an opportunity to resolve the case?

Why not just go to the jury and let them figure out what it’s worth, asked Chief Justice O’Connor, noting that was the bottom line here.

How it Looks from the Bleachers

To Professor Emerita Bettman

Like a win for the History Connection.  I wonder if the Court is sorry it agreed to hear this case, since as Justice DeWine asked very insistently, if the case is dismissed and started anew, the History Connection would make the higher offer and the Country Club would just refuse that one as well, so why not just cut to the chase and go straight to the valuation phase, as the Chief suggested.

For the Country Club Mr. Fraley kept trying to grab the high ground mostly based on the History Connection’s CEO’s misunderstanding about the appraisals and his failure to seek advice about this.  But given the limited standard of review here, the justices seemed satisfied with the trial court’s finding that the existence of a higher offer did not make the History Connection’s initial offer a bad faith offer, plus there was no evidence the Country Club would have accepted the higher offer had it been made.

One last thing. I’m sure this shows my ignorance, but why are people playing golf around these Earthworks?

To Student Contributor Madeline Pinto

I think the Court will likely rule in favor of the History Connection. Chief Justice O’Connor was most clearly in the History Connection’s camp. She seemed convinced that the History Connection acted in good faith when it made the Country Club an offer based on a qualified appraisal that the History Connection’s CEO mistakenly believed to be the higher appraisal. Additionally, Chief Justice O’Connor poked holes in the Country Club’s necessity argument by pointedly asking the Deputy Solicitor General whether the necessity inquiry requires the Court to consider potential compromises that would have allowed the History Connection’s purposes to be accomplished without appropriating the property. Quick to recognize a friendly question from the Bench, Mr. Peterson promptly answered no.

The other Justices were more difficult to read. However, I think Justices Brunner, DeWine, and Kennedy also seemed to lean in favor of the History Connection.  Justice Brunner seemed dissatisfied with the Country Club’s argument that the Fifth District erred in concluding that the trial court did not abuse its discretion in finding good faith. Justice Brunner pointed out that it is generally within the sound discretion of the trial court to make good faith determinations.

Neither Justice Kennedy nor Justice DeWine appeared completely convinced by the History Connection’s good faith argument. Justice Kennedy questioned how the History Connection’s CEO’s choice of appraisal could have been in good faith when the CEO had no knowledge of appraisals and failed to seek out any help. Justice DeWine expressed concern that the History Connection’s good faith argument would permit an agency to “shop around” for a number of appraisals and only disclose its preferred appraisal to the other party. To Justice DeWine, this did not seem like good faith. However, Justices Kennedy and DeWine both seemed troubled that ruling in favor of the Country Club would likely do nothing but cause delay. Chief Justice O’Connor shared in their concern. This line of questioning was the most heated of the oral argument and the Justices were clearly frustrated with Mr. Fraley’s repeated attempts to avoid answering Justice DeWine’s initial question—if the Court rules in favor of the Country Club and the History Connection re-initiates the eminent domain process with an offer of $1.75 million, what is going to change? Despite their doubts about the History Connection’s good faith argument, I think this issue will push Justices Kennedy and DeWine to side with the History Connection, particularly given Mr. Fraley’s admission on behalf of the Country Club  that a ruling in its favor “may not make a difference.”