Synopsis of 'City of Milwaukee Post No. 2874 v. Redevelopment Authority of the City of Milwaukee'

The Wisconsin Supreme Court on September 8, 2008 granted the petition to review the Court of Appeals decision, 2008 WI APP 24, in this case (2006AP2866), see Review granted in 'City of Milwaukee Post No. 2874 v. Redevelopment Authority of the City of Milwaukee'.

This extensively litigated case arises from the condemnation of an abandoned 11-story building at 2601 West Wisconsin Ave. in Milwaukee and the application of the “unit rule” to value the property. The unit rule requires that real estate be valued in respect to its gross value as a single entity as if there was only one owner. (4-13 Nichols, Eminent Domain § 13.01[16] § 13-28).

Some background: Briefly, in 1942, the VFW owned the building located on the property and used it as its post headquarters. In 1961, the VFW conveyed the land and improvements to Towne Metropolitan, Inc., which constructed an 11-story hotel. In exchange for the conveyance, the VFW obtained a 99-year lease, with the option to renew for another 99 years. Under the leasehold, the VFW paid $1.00 annually and the lessor would pay all real estate taxes, all utilities, and cover maintenance on the property.

The property operated as a Hilton Hotel and then as a Holiday Inn. In 1986, Towne sold the property to Marquette University, which used it as a dormitory. In 1994, the property was sold to the Maharishi Vedic University for $600,000. Both sales required the new owners to assume the responsibility to comply with the VFW’s lease. The Maharishi never occupied the building after its acquisition.

The Redevelopment Authority of the City of Milwaukee (RACM) eventually condemned the abandoned building. As compensation, RACM offered Maharishi and the VFW $440,000 for the property. In December 2001, a circuit court divided the $440,000, allocating $300,000 to the VFW for the value of its leasehold interest. The VFW appealed the adequacy of this award to the Condemnation Commission, which requested instruction from the trial court as to how to value the property. The trial court instructed the Commission to value the property using the unit rule. The VFW petitioned for leave to appeal this determination. The Court of Appeals granted this request and ruled that the unit rule should be used but declined to address questions concerning the constitutionality of the application of the rule. See City of Milwaukee Redev. Auth. v. Veterans of Foreign Wars Post 2874, 2003 WI App 225, 267 Wis. 2d 960, 671 N.W.2d 717, unpublished slip op. (Sept. 30, 2003).

In December 2004, the Condemnation Commission found the value of the property to be $15,000 less than the initial award. The VFW appealed this conclusion and asked the trial court to declare the application of the unit rule in this case unconstitutional. The trial court denied the motion and the case was tried to a jury on the question of the value of the property. The jury returned a verdict that the hotel building at 2601 West Wisconsin Avenue had no value. Judgment was then entered against the VFW in the amount of $387,348.24, which included the $300,000 it had already been paid, plus accumulated interest and costs.

VFW challenged the constitutionality of this decision. The circuit court dismissed the claim, ruling that the decision was consistent with the application of the unit rule. VFW appealed. The Court of Appeals reversed in a published decision, ruling that the application of the unit rule under the unique circumstances presented in this case was unconstitutional.

The RACM seeks Supreme Court review of this decision. RACM asserts that the Court of Appeals’ decision violates its due process rights insofar as RACM complied with what the court had previously directed them to do and that the circuit court order was consistent with earlier litigation involving this property. RACM describes the court of appeals’ decision as creating a “new doctrine – a first-ever leasehold exception to the unit rule.” RACM also VFW should have been precluded from challenging the unit rule’s constitutionality at this stage in the litigation.

VFW opposes review, primarily on the grounds that this is an unusual fact scenario unlikely to recur. Several non-party amicus briefs have been filed advocating Supreme Court review. The State of Wisconsin asserts that the published Court of Appeals’ decision “improperly expands” the concept of “just compensation” and contends that the decision affects “all Wisconsin condemnors, every associated public project, and all tenants with long-term leases in their path.” From Milwaukee County.