The Midwest Planning BLUZ

by Melanie Thwing and Gary Taylor

City of North Oaks v. Sarpal
(Minnesota Supreme Court, May 11 2011)

Dr. Rajbir and Dr. Carol Sarpal own a home in the City of North Oaks, Minnesota. The property is subject to two different restrictions. The first is a fifteen foot easement by the North Oaks Company over the northern and western edges of the property for a future trail. The second is the city’s zoning setback regulation that states no building can be within thirty feet of the property line.

In 2006 the Sarpals wanted to build a shed on their property. The Architectural Supervisory Committee (ASC) required the plans for the building before they could apply for a building permit. The ASC also required a “as-built survey” with the specific location of the shed. A City employee provided a survey and told the Sarpals that was the document they needed. This survey shows the “proposed house” and does not encroach on either restriction.

The ASC approved the shed and the Sarpals signed and submitted an application to the City for a building permit that was granted. As the Sarpals started construction they measured from the house as it was built on the property.

After the foundation was laid and the frame was constructed the City inspector approved the construction. However, one year after construction the Sarpals received a letter from the City stating that the shed encroached on the trail easement. It was at this point that the Sarpals noticed the survey obtained from the City was not an “as-built” survey but rather for a “proposed house.”

The Sarpals applied for a variance, which was denied. They then requested an extension of time because concrete foundations poured during winter run a higher risk of cracking. This City approved this request.

After the Sarpals failed to move the shed later in the year the City filed an action in district court requesting an order for the Sarpals to remove it. After a bench trial the court found that the City was equitably estopped from enforcement of the zoning ordinance because they provided the survey. The City appealed to the Court of Appeals, which affirmed.

The City then petitioned for review with the Minnesota Supreme Court. The City argues that the district court abused discretion when it equitably estopped the city from enforcing the zoning ordinance.

For an equitable estoppel claim there must be: 1.) Wrongful conduct on the part of the government, 2.)  the party must have reasonably relied on the wrongful conduct, 3.) The party must have incurred a unique expenditure in reliance on the wrongful conduct,  and 4.) The balance of the equities must weigh in favor of the estoppel.

The City argues that the mistake with the survey does not constitute “wrongful conduct,” because government action that is erroneous does not automatically constitute “wrongful” action, nor is it established by a simple mistake or imperfect conduct. The Supreme Court agreed.  In this case the government action was nothing more than a simple mistake. This does not fulfill the first element necessary for a equitable estoppel.

The district court had also found that the City acted wrongfully when granting a permit based on the plans. However, the City is entitled to rely on the accuracy of the documents provided by landowners. The Sarpals certified the information in the application packet was correct. There is no reason why the City should have noticed or corrected the error in regards to the survey. The district court abused its discretion when it dismissed the City’s claims against the Sarpals. The Minnesota Supreme Court reversed the Court of Appeals decision and remanded the case for further proceedings.

Minnesota courts, Zoning enforcement equitable estoppel, Minnesota Supreme Court, Zoning enforcement

by Melanie Thwing

DeCook v. Rochester International Airport Zoning Board
(Minnesota Supreme Court, March 30, 2011)

“Where land use regulations, such as the airport zoning ordinance here, are designed to benefit a specific public or governmental enterprise, there must be compensation to landowners whose property has suffered a substantial and measurable decline in market value as a result of the regulations” McShane v. City of Faribault. 292 N.W.2d at 258-59

Leon and Judith DeCook purchased 240 acres of land for $159,600 just north of the Rochester International Airport in Minnesota in 1989. 19 acres of this land fell within Safety Zone A (the most restrictive zone) for the airport. Ordinance No. 3 which allowed for agriculture, commercial or industrial sites controlled this land. No dwellings were allowed in the zone as well as any use that brought more than 10 people to any acre or more than 50 people to a commercial industrial site.

Then in 2002 the Board enacted Ordinance No. 4 which allowed for fewer land uses in Safety Zone A than previously allowed. Ordinance No. 4 also brought another 28 acres of the DeCook’s land into the zone.

In 2005 the DeCooks filed an action in district court arguing that there was a substantial decline in market value of the property that benefited a public or governmental enterprise. They argued this constituted “a constitutional compensable taking under the principles of McShane v. City of Faribault.” Summary judgment was granted for the Board and the DeCooks’ appealed to the Minnesota Court of Appeals.  The Court of Appeals held that the DeCooks’ must be compensated if their property had a substantial decline in value and remanded to the district court. A jury found that the property diminished in value by $170,000; however, the district court found that the diminution did not constitute a compensable taking as a matter of law. The court sited that the ordinance did not affect the “primary use” of the DeCook property.

The DeCooks appealed and the Court of Appeals reversed and remanded in favor of the DeCooks. The Airport Zoning Board sought review with the Minnesota Supreme Court. The DeCooks argued that the ruling in McShane controls regulatory taking claims from airport safety-zone ordinances. The Board argued that a more flexible ruling from Penn Central should control the case.  The Minnesota Supreme Court determined that the language in Minn. Const. art. I, § 13, which states that, ‘[p]rivate property shall not be taken, destroyed or damaged for public use without just compensation [emphasis added],” is broader than the takings clause in the United States Constitution’s, and because of  this McShane controls.

McShane found that whenever a governmental enterprise is benefited and there is a substantial decline in market value there must be compensation to land owners. Whether that diminution is substantial is a question of law. In this case the Supreme Court found that the $170,000 is substantial, in that the damages exceed the purchase price of the 240-acre parcel before the enactment of Ordinance No. 4, which ultimately caused the diminution.

A regulatory taking did occur under the Minnesota Constitution. The Court of Appeals decision was affirmed and the case is remanded to the district court for judgment in favor of the DeCooks.

Minnesota courts, Takings airport regulations, Minnesota Supreme Court, regulatory takings

by Melanie Thwing

Johnson v. Cook County
(Minnesota Supreme Court, July 29 2010)

Minnesota Statute § 15.99 subd. 2:

Except as otherwise provided in this section and notwithstanding any other law to the contrary, an agency must approve or deny within 60 days a written request relating to zoning…. Failure of an agency to deny a request within 60 days is approval of the request. If an agency denies the request, it must state in writing the reasons for the denial at the time that it denies the request.

Lance Johnson owns two parcels of land in Cook County, Minnesota. Parcel A is zoned residential and Parcel B is zoned half residential and half commercial. Despite that parcel A is zoned residential, Johnson had a storage shed that was commercially used. On May 15^th, 2001 Johnson filed an application to rezone parcel A and half of parcel B to general commercial use.

The county’s planning committee looked at the application during a public meeting in June and recommended to deny the request. In September the Board of Commissioners reviewed the application at a public hearing. After hearing testimony from the public and Johnson the request was denied.  The Board did not state in writing any reasons for the denial.

Then in 2005 Rita’s Grandview Ridge submitted an application to rezone a portion of its property from commercial to residential and for a conditional use permit to build a planned unit development. Both applications were granted. In 2006 Johnson brought a declary judgment action arguing that the commission erroneously denied his application and erroneously approved Rita’s. He also argued the denial constituted a taking of property, all under Minnesota Statute § 15.99, subd. 2.

Summary judgment was granted for the county in district court, stating that the denial was “reasonable.” Later, the Court of Appeals reversed the decision in an unpublished decision, stating that the application was automatically approved under § 15.99 because the county failed to state any written reasons for the denial.

The county then appealed to the Supreme Court, arguing that automatic approval is given only when the application is not acted on within the 60 days. They further argue that the written reasoning is a discretionary function of the statute. Johnson argues that the statute mandates action in writing within 60 days.

In Hans Hagen Homes, Inc v. City of Minnetrista the Supreme Court found that “denial is complete when a city votes to deny the application and adopts a written statement of its reasons for denial, whether or not the city provides notice to the applicant.” Johnson argued that the ruling in Hans Hagen Homes means that denial is not complete until the reasons for denial are provided in writing.

The Court refused to follow Johnson’s reasoning, pointing to a footnote in Hans Hagen Homes that explicitly left the necessity of providing written reasons within 60 days as an open question.  The Court affirmed previous cases that held “a statute may contain a requirement but provide no consequence for noncompliance, in which case we regard the statue as directory, not mandatory.” The Court concluded that the “state in writing the reasons for denial” language in § 15.99 is directory because no consequence for failure to comply is provided in the same sentence (i.e., that the 60-day deadline is in the previous sentence, implying that it only applies to the decision itself). The Supreme Court reversed the decision of the Court of Appeals.

Minnesota courts, Procedural Issues, Rezoning denial in writing requirement, Minn Stat. 15.99, Minnesota Supreme Court

GT NOTE:  This is an interesting case for Iowa planners and board of adjustment members because the Minnesota Supreme Court is interpreting variance language in the Minnesota statutes that is identical to that found in the Iowa Code.  They reach the same conclusions as previous Iowa court cases.

by Melanie Thwing

Krummenacher v. City of Minnetonka
(Supreme Court of Minnesota, June 24, 2010)

JoAnne Liebeler owns property in Minnetonka, MN. There is a detached garage on the property, which sits 17 ft from the property line. Minnetonka City Code §300.10 states that a detached garage must be set at least 50 feet from the property line, but the structure was built before this ordinance and thus grandfathered in. In March 2008, a variance was filed by Liebeler, which is required by Minnesota Stat. to add a living space above the nonconforming garage.

A public hearing occurred in March where her neighbor, Krummenacher, spoke against the variance. He argued that this addition obstructed his view. The request was ultimately approved with the planning commission stating: 1.) an undue hardship would occur without it, 2.) a unique circumstance of nonconformity,  3.) compliance with the intent of the ordinance, and 4.) the variance would not alter the neighborhood character.

Krummenacher challenged the Commissions decision with the City Council, who ultimately sided with the Commission. Krummenacher then filed an appeal in district court, which affirmed, and the Court of Appeals, which also affirmed. Finally he appealed to the Supreme Court of Minnesota.

He argued that 1.) Minnesota Stat. § 462.357 does not allow the City to grant a variance that would expand a nonconforming use, 2.) the approval was arbitrary and 3.) the district court erred because they did not require the City to produce additional documents.

Krummenacher first argues that Minnesota Stat. § 462.357 1(e) does not allow the expansion of a nonconforming use. The statute itself states in part A. that any nonconforming use in place before the statute may continue to be used but not expanded. However, part B. states that they may permit expansion to, “prevent, and abate nuisances and to protect the public health, welfare, or safety.” Section B. also grants cities discretion to issue permits.

The Supreme Court looks at Minnetonka City Code § 300.29(g)(1) which allows for expansion as long as a variance is obtained. Because the State entrusted the power within the city to issue permits, and because Liebeler did this, the City was within its authority to consider a variance for a nonconforming use.

Next, Krummenacher argues that the decision was arbitrary because the correct standard to define “undue hardship” was not applied. He argues that the standard in Minnesota Stat. § 462.357 subd. 6., requires proof of the property not being usable, that the landowner is in a difficult spot because the structure was in place before the property was bought, and the essential character of the neighborhood would not be altered.

The City urged that the “reasonable manner” standard set forth in the Minnesota Court of Appeals case of Rowell v. Board of Adjustment of Moorhead. was used, and is an appropriate interpretation of state law.  It claimed the variance was a reasonable request because of the overall topography of the land. The Minnesota Supreme Court, however, declined to follow the lead of the Court of Appeals in Rowell.  It pointed out that the plain language states that the property must show that it cannot be put to “reasonable use” without the variance.  The Supreme Court looked to a decision in Stadsvold where they defined the difference between “undue hardship” which applies to Minnesota municipalities, and “practical difficulties” which applies to area variances in Minnesota counties. This distinction does not leave any room for the “reasonable manner” standard from Rowell. Instead the precedent from Curry v. Young is the correct to use, which establishes a more rigorous standard for “undue hardship.”  Thus the “reasonable manner” standard used by the City, although it has been used for over 20 years, cannot continue to be used.  The Court explained:

We recognize that the Rowell “reasonable manner” standard represents a longstanding interpretation of the undue hardship standard in Minn. Stat. § 462.357, subd. 6, and that Minnesota municipalities have been granting variances under the “reasonable manner” standard for many years. We also recognize that our decision will result in a restriction on a municipality’s authority to grant variances as compared with the “reasonable manner” standard. But whatever value we may find in a more flexible standard, particularly with regard to area variances, we cannot ignore the plain language of the statute. See State v. Peck, 773 N.W.2d 768, 773 (Minn. 2009) (“We have no opportunity to ignore part of the legislature’s definition.”). We are unable to interpret the statutory language to mean anything other than what the text clearly says—that to obtain a municipal variance, an applicant must establish that “the property in question cannot be put to a reasonable use if used under conditions allowed by the official controls.” Minn. Stat. § 462.357, subd. 6. Therefore, unless and until the legislature takes action to provide a more flexible variance standard for municipalities, we are constrained by the language of the statute to hold that a municipality does not have the authority to grant a variance unless the applicant can show that her property cannot be put to a reasonable use without the variance.

Minnesota courts, Variances Minnesota Supreme Court, Unnecessary hardship standard, Variances

by Gary Taylor

Pawn America Minnesota, LLC v. City of St. Louis Park
(Minnesota Supreme Court, August 26, 2010) 

In 2007 a prospective pawnbroker was required to submit a zoning application, and an application for a pawnbroker’s license in order to operate a pawnshop in St. Louis Park, Minnesota (city).  In June of that year Pawn America submitted just such a zoning application.  The assistant city zoning administrator issued a zoning verification letter confirming that the intended use of the property complied with the City’s zoning code. Because of public concerns about the proliferation of pawnshops, the city council brought forward for consideration a moratorium on new pawnshops and a proposal to initiate a study in order to decide whether any additional conditions or restrictions on pawnshops should be adopted. Upon learning of the city council’s intent to vote on the moratorium Pawn America immediately entered into a lease agreement and submitted to the city a signed certificate of occupancy and land use registration application, and requested immediate issuance of a pawnbroker license. The city refused, and soon thereafter adopted the moratorium that temporarily prohibited new pawn-shops, and stopped any further processing of pending pawn-shop licenses. The zoning study was completed two months after the moratorium went into effect, and as a result of the study the city amended the zoning code to make pawnshops conditional uses which included a distance separation requirement between pawnshops, gun shops, liquor stores, and certain other business from being located within 350 feet of residentially zoned property.  The separation requirement precluded Pawn America from opening its pawnshop at the proposed location.                                                                  �
Pawn America asked the district court to declare the interim ordinance invalid because it was adopted for the improper purpose of delaying or preventing Pawn America from opening a pawnshop. The city moved to dismiss the claims. The district court dismissed Pawn America’s claims because the moratorium was not arbitrary or capricious.  The court affirmed previous caselaw stating that moratoria to preserve the status quo pending further study of zoning  are permissible. The court went further saying the mere adoption of an interim ordinance after learning of a particular proposed use of property does not, in itself, mean that enactment of an ordinance is arbitrarily enacted to delay or prevent the project. The Minnesota court of Appeals affirmed the district court, and Pawn America appealed to the Minnesota Supreme Court.�
The court examined the case in light of Minn. Stat. § 462.355(4)(a) which gives authority to a municipality, under certain conditions, to adopt a moratorium “for the purpose of protecting the planning process and the health, safety and welfare of its citizens.”  It determined that the city enacted the moratorium to give it time to study the situation and make informed decisions for the long-term welfare of the city.  While the court was cognizant of the hostility surrounding the location of a pawnshop at Pawn America’s proposed site, nothing in the statute precluded the city from adopting the moratorium when the city knew that it would affect only one particular entity, or that it was adopted in response Pawn America’s pending application. The court concluded that the city was acting to protect the planning process and the health, safety and welfare of its citizens and that the moratorium was not unreasonable, arbitrary, or capricious.

Minnesota courts, Moratoria Minnesota Supreme Court, pawnshops, zoning moratoria

by Gary Taylor

Moorhead Economic Development Authority v. Anda
(Minnesota Supreme Court, September 2, 2010)

In March 2001 the Moorhead Economic Development Authority (MEDA) exercised its condemnation power to take Roger Anda’s commercial property as part of a redevelopment project. MEDA used the “quick-take” eminent domain procedure allowed in Minnesota law.  Under the quick-take procedure the government entity is allowed to take title and possession of the property prior to the valuation of the property by the condemnation commission (in contrast to the traditional procedure, through which the valuation is set first, then title is transferred).  After taking title to and possession of Anda’s property through the quick-take procedure, MEDA and the property’s developer, Moorhead Holiday Associates (MHA), discovered fuel-oil contaminated soil on Anda’s property and two adjoining properties. Under contractual time pressure to deliver Anda’s property and the adjoining properties to a franchise developer, MHA acted quickly to remediate the contaminated properties. The remediation process for the three properties took approximately one week to complete and cost $1,599,568.

In the condemnation commissioners subsequently awarded Anda $488,750 as compensation for the taking of his property. Both Anda and MEDA appealed the commissioners’ award. MEDA also commenced a separate action against Anda to recover damages for the cost of remediating the contamination discovered on the two adjoining properties, which MEDA alleged was a result of fuel oil leaking from Anda’s property. The parties agreed to consolidate the actions. At trial, the jury found Anda’s property was worth $455,000 “had it not been impaired by fuel oil contamination” and $0 “taking into account the fuel oil contamination.” The jury also found Anda liable for the contamination of the two adjoining parcels in the amount of $474,512. The court then concluded that Anda was not entitled to damages for the taking of his property because the cost of remediating Anda’s property exceeded the property’s fair market value. Both parties appealed.

The issue of valuation of contaminated, condemned property was one of first impression for the Minnesota Supreme Court.  The threshold question the court addressed was the date upon which the property value was to be determined.  The court held that in a quick-take eminent domain proceeding, the date of valuation is the date when title and possession of the condemned property are transferred from the owner to the condemning authority, not the date of valuation by the compensation commission.  The court then found that when the government condemns property that is contaminated at the time of the taking, the property should be valued “as remediated” rather than as contaminated or as “clean” (never contaminated).  This being the case, the actual costs of remediation are not admissible, except to the extent necessary to determine the value of the property “as remediated”-namely, if there is any loss of value to the property due to the stigma of the contamination.  It is appropriate for the condemnation commission to take into account conditions that exist at the time of the taking even if those conditions are discovered subsequent to the taking.  In the context of environmental contamination conditions, the condition can be taken into account only to determine any impact stigma may have on the value of the property.

With these issues clarified, the court determined that Anda was entitled to a new condemnation commission trial because evidence of remediation costs was admitted at his trial and used to determine the amount he was awarded as damages for the taking. A new trial is also necessary because although the jury valued his property both “as clean” and “as contaminated,” the jury did not value the property as remediated. At a new trial, the fact finder can consider the past fuel-oil contamination, but only to determine whether the stigma of that former contamination affects the fair market value of the remediated property.

Condemnation, Minnesota courts contaminated property, eminent domain, Minnesota Supreme Court, valuation