Opinion
C.A. No. 00C-06-101
Date Submitted: October 19, 2000
Date Decided: January 11, 2001
MEMORANDUM OPINION
Upon consideration of BMR Associate's challenge to the Order of Possession filed by the State and briefing submitted by the parties on the issue of standing, this is the Court's decision:
FACTS
On April 14, 1999 the State entered into an agreement to purchase property from Al-Zar, Ltd. ("Al-Zar") purported for use as a recreational area and state parklands for public benefit. Pursuant to the agreement, the State was to purchase three parcels of land, collectively referred to as the Rock Manor property, for $3.1 million. The Rock Manor property was clouded by a us pendens notice filed by BMR Associates ("BMR") claiming that BMR held an exclusive unexercised option to purchase by way of a 1983 Option Contract as modified by a 1995 Agreement of Sale extending the option if the agreement of sale terminated. Upon discovery of the clouded title the State instituted this condemnation proceeding to acquire the property from Al-Zar with clear title.
On June 30, 2000 the State filed a Notice of Intent to Take Possession of the Property. Al-Zar consents to the entry of the Order of Possession and the amount deposited as just compensation. BMR filed an Answer to the State's Complaint claiming to have an equitable ownership interest in the Rock Manor property because of the unexercised option. Al-Zar, in its Answer, disputed BMR's purported standing. After hearing oral arguments on the State's order of Possession this Court ordered briefing on the single issue of BMR's standing to oppose and/or participate in the condemnation proceeding.
DISCUSSION
BMR argues it has an equitable interest in the Rock Manor Property and is therefore a proper party in the condemnation action. BMR argues that it is an owner of the Rock Manor property because the Real Property Acquisition Act set forth in 29 Del. C. § 9501 et seq., "which applies to all property acquisitions, explicitly defines "owner' as the owner of any right, title or interest in such real property."' Both the State and AI-Zar vigorously argue that BMR has no standing to oppose nor participate in the condemnation because its option was never exercised thus, it has no interest in the Rock Manor property, equitable or otherwise.
Standing refers to "the right of a party to invoke the jurisdiction of a court to enforce a claim or redress a grievance." "It is only concerned with the question of who is entitled to mount a legal challenge and not with the merits of the subject matter of the controversy. Appropriately, the Court will disregard any arguments pertaining to the merits.
Stuart Kingston, Inc. v. Robinson, Del. Supr., 596 A.2d 1378, 1382 (1991) (citing 59 Am. Jur.2d Parties § 30 (1989)).
Id. (citations omitted) (additional emphasis added).
In Delaware, Eddington v. Turner is still the seminal decision regarding equitable conversion. Equitable conversion takes place upon the execution of a contract for sale of property. Delaware law has continuously upheld this principle. With specific regard to an option to purchase, Eddington held that an equitable conversion does not take effect until the holder of the option to purchase land exercises the option. "Until the option is exercised and the resulting contract arises, the option does not give the prospective purchaser any rights in the property itself other than the right to accept the seller's offer to sell the property. . . ." Accordingly, the Court finds that BMR is not an equitable owner of the Rock Manor property.
Eddington v. Turner, Del. Supr., 38 A.2d 738 (1944).
See hi Matter of Beaty, Del. Ch.., C.A. No. 6402, Balick, V.C. (Sept. 30, 1996) (Order at 5).
Eddington, 38 A.2d at 740.
See Schineusser v. Schmeusser, Del. Supr., 559 A.2d 1294, 1298 (1989); In re Matter of Beaty at 5; Vaughan v. Creekside Homes, Inc., Del. Ch., C.A. No. 1043, Kieger, M. (Jun. 17, 1994; In Matter of Siebold, Del. Ch., C.A. No. 106876, Allen, C. (May 20, 1996); Salt Pond inv. Co. v. Wilgus, Del. Ch., C.A. No. 1205, Hartnett, V.C. (Nov. 16, 1987).
Eddington, 38 A.2d at 740.
14 Richard R. Powell on Real Property § 81.O1[2][b] at 81-12 (1987).
In a condemnation action pursuant to 10 Del. C. § 6107 "any defendant" may raise an objection or defense to a taking of property. However, the statute does not bestow standing. The Court must still determine if the defendant raising the objection has the right to invoke the jurisdiction of the Court to mount such challenge. With specific regard to the order of possession Superior Court Civil Rule 71.1 provides in part that "an order of possession of the property to be taken shall be entered forthwith, . . ., unless the property owner . . . shall show good cause why such order should not be entered forthwith." Rule 71.1 further provides that in a condemnation proceeding "the burden shall be upon the property owner to overcome the presumption of regularity and the prima facie case of necessity for a public use presented by the institution in such proceeding" Rule 71.1 provides the means for the property owner to challenge the order of possession.
Many jurisdictions that have decided the issue have held that an unexercised option to purchase property is not an interest in property and therefore is not compensable. Additionally, if there is no interest in the property there cannot be standing to challenge condemnation of the property.
85 A.L.R. 2d 588 § 2 (1962) (included in the later case service is State v. New Jersey Zinc Co., 193 A.2d 244, 253 (1963)).
See New Jersey Zinc Co., 193 A.2d at 252.
In the case sub judice the 1995 Agreement for sale was not effectuated and therefore expired in 1997. BMR contends that upon expiration of the 1995 Agreement for Sale it was left with a valid option to purchase. Whether the option is valid need not be addressed by the Court since BMR has never exercised its option to purchase the Rock Manor property. Therefore, BMR is neither the legal nor equitable owner of the property in question. Accordingly, the Court finds that BMR has no standing to challenge nor participate in the condemnation proceeding.