SF 447 limits nuisance damages against animal feeding operations

Senate File 447, signed into law on March 29th by Governor Branstad, limits the damages that can be awarded to property owners impacted by agricultural operations. This legislation is likely in response to the 2016 Iowa Supreme Court decision in McIlraith v. Prestage Farms, which held that animal feeding operations are not necessarily protected from nuisance suits based on Iowa Code 657.11(2) (Iowa’s right-to-farm legislation). In that case, the jury awarded damages of more than $500,000 for loss of past enjoyment, diminution in property value, and loss future enjoyment of the McIlraiths’ property.

Under SF 447, any nuisances caused by animal operations, which includes both confined and open feed lots, are presumed to be permanent nuisances. This means that plaintiffs cannot file future suits for continued nuisance.

Plaintiffs’ damages in nuisance suits are also limited to combined the total of:

  1. Permanent loss in property value
  2. Medical costs directly caused by the nuisance
  3. Special damages (annoyance and loss of enjoyment) not to exceed one and a half times the total of 1 plus 2

For more information about SF 447 and its passage see this article from the Des Moines Register.

 

 

Missouri Heritage Value statute declared constitutional; family awarded $2 million in eminent domain proceeding

by Gary Taylor

St. Louis County v. River Bend Estates HOA
(Missouri Supreme Court, September 10, 2013)

The Missouri Heritage Value statute (statute) was adopted by the Missouri legislature in 2006.  It provides for additional compensation for the exercise of eminent domain over homesteads, and properties held within the same family for 50 or more years.  If a property has been owned within the same family for 50 or more years, “just compensation” is determined by statute to be fair market value plus an additional 50 percent (“heritage value”), thus equaling 150 percent of fair market value.

St. Louis County condemned 15 acres of property for a highway extension project.  The property was deeded to Arthur Novel in 1904, who farmed it with his wife until their deaths in 1968.  It stayed in the family and was owned by the Novels’ descendents until the condemnation proceedings.  The condemnation court awarded the descendents $320,000 for acquisition of the property, and an additional $160,000 for heritage value, resulting in a total award of $480,000.  The descendents appealed, and at trial the jury awarded them $1.3 million, to which the court added $650,000 for heritage value for a total award of approximately $2 million (including interest).  The county appealed.  Because the challenge was to the constitutionality of the statute the appeal went directly to the Missouri Supreme Court.

The bulk of the opinion addressed numerous evidentiary and procedural issues, but the Court did eventually address the County’s  three constitutional challenges: (1) the statute impermissibly altered the judicial definition of “just compensation” by permitting the addition of heritage value to fair market value; (2) the statute requires condemning authorities (in this case, the County) to expend public funds without a public purpose in violation of the Missouri Constitution; and (3) the statutory requirement that a judge compute heritage value invades the province of the jury to determine just compensation – also in violation of the Missouri Constitution.

Definition of “just compensation.”  The Missouri Constitution declares that “private property shall not be taken or damaged for public use without just compensation.” The US Supreme Court has interpreted “just compensation” to mean the fair market value of the property at the time of the taking.  The County argued that constitutional interpretation is the province of the judiciary, not the legislature.  The Court did not disagree; noting, however, that the statute does not alter the definition of “just compensation,” but rather “provid[es] additional benefits to certain property owners whose real property is taken for public use.” It cited US Supreme Court cases that “support the proposition that a legislature may compensate losses and damages beyond those traditionally included in its interpretation of ‘just compensation.'”  “‘Just compensation’ is a minimum measure that must be paid, not a maximum one.”

Expenditure of public funds.  Missouri Constitution Article III, Section 38(a) states that the legislature “shall have no power to grant public money or property …to any private person, association or corporation….”  The County asserted that compensation payments beyond the constitutional minimum serve no public purpose and are therefore unconstitutional.  To determine whether there is sufficient public purpose behind a grant of public money the Missouri courts have employed the “primary effect” test.  This test allows expenditures whose primary object is to serve a public purpose, even if it involves as an incident an expense which, standing alone, would not be lawful.  The Court determined that the primary purpose of the expenditure was to acquire property for a public purpose, and that the payment for heritage value is merely incident to that public purpose.

Computation by judge of heritage value.  Missouri Constitution Article I, Section 26 requires that just compensation “be ascertained by a jury.”  The Court quickly dismissed this argument by noting its previous declaration that heritage value is a payment in addition to “just compensation” – not part of the just compensation calculation.

The Court upheld the roughly $2 million jury award.

Liquidated damages not a “tax” for purposes of determining priority of lien in mortgage foreclosure

by Victoria Heldt

Baylake Bank v. Fairway Properties of Wisconsin, LLC
(Wisconsin Court of Appeals, September 15, 2011)

Fairway Properties of Wisconsin, LLC (Fairway) planned to develop a single-family housing complex on a piece of property located in the City of Waupaca.  The property was in a “tax increment district,” which is a mechanism used to allow municipalities to fund public improvement projects by diverting the property taxes to pay for those improvements.  The company entered into a mortgage agreement with Baylake Bank to procure financing for the development.

Fairway also signed a development agreement with the City, in which it agreed to meet certain goals each year for eleven years to ultimately build a housing complex with a minimum value of $4,500,000.  In exchange, the City agreed to provide improvements to the property such as sidewalks, wells, and driveway approaches.  The contract contained a clause that required Fairway to pay a “liquidated damages penalty” if it did not meet the specified goal each year.  The fine amounted to the difference between the actual property tax levied for the year and the property tax that would have been levied had the project goal been met (increasing the value of the property.)  This clause ensured that the City would be reimbursed for the funds it used in making the improvements.

Fairway eventually defaulted on its mortgage, prompting the Bank to bring a foreclosure action into district court naming Fairway and the City in the case.  The City answered, alleging Fairway owed over $150,000 in delinquent property taxes and over $80,000 in fines resulting from the violation of the liquidated damages clause.  The Bank agreed that the delinquent taxes took priority over the Bank’s mortgage interests, however claimed the charges under the development agreement’s liquidated damages provision were subordinate to the Bank’s interests.

The issue hinges on whether or not the liquidated damages penalty is considered a tax which, therefore, takes priority over the Bank’s position as mortgagee in a foreclosure action.  In a summary judgment, the district court concluded the damages were “real estate taxes,” relying on the language of the contract which read:  “the payment due is a special charge which may be entered in the tax roll as a charge against the real property identified in Exhibit A then owned by the developer and collected in the same manner as real estate taxes.  The amount due is a lien upon the property superior to all other liens.”  Since the court classified the damages as a tax, they ruled that the Bank’s interests as mortgagee were subordinated to the City’s interests.  The bank appealed.

The Court of Appeals noted that cities have no inherent power to tax and that it may only tax in such cases where statutory or constitutional language authorizes a tax for that specific purpose.  In this case, the court relied solely on language in a contract for the authority to tax.  This is insufficient to give the City the right to classify fines from the liquidated damages clause as a tax.

Next the Court addressed whether the City provided any alternative basis for authority to classify the damages as a tax.  The City relied on the tax increment law (Wis. Stat. §66.1105) for authority to levy the tax.  The language of the law grants the power to create tax incremental districts, prepare projects in the districts, and enter into contracts necessary to proceed with the plan.  The statute is silent, however, regarding a city’s authority to impose taxes on the entities in the district.

The Court concluded that the development agreement’s liquidated damages do not have priority as a property tax.  The district court decision was reversed.

Chelsea’s (MI) failure to provide water to development violated PUD agreement

by Gary Taylor

Chelsea Inv. Group, LLC v. City of Chelsea
Michigan Court of Appeals (April 27, 2010)

Chelsea Investment Group (CIG) acquired 157 acres of undeveloped real property located in Chelsea by land contract, for which it paid $5,000,000. CIG then filed a petition to rezone the property to PUD, which the City approved contingent upon CIG meeting all terms in a PUD agreement negotiated between the city and CIG.  The agreement provided, among other things, that the development would contain 352 single-family condos. Under the agreement the city was to provide CIG with access to water for the development in a timely fashion.

CIG made an agreement with Pulte Land Company for the sale and construction of the residential units.  Pulte bought the home sites for $23,000 per lot. The development was to occur in three phases. Pulte’s purchase of the sites was conditioned on governmental approval for each phase.

Eventually, the process ran into a snag when the City determined there was not sufficient water capacity for the project.  When the resulting delays prevented Pulte from proceeding with the project Pulte exercised its option to terminate its contract with CIG.  Pulte also requested a full refund of its $250,000 deposit.

Plaintiff-CIG sued the City alleging breach of the PUD Agreement.  The trial court held that plaintiff had established a breach of the PUD Agreement, but that its damages were limited to Pulte phase two of the development.  It awarded plaintiff costs, attorney fees, and interest.  The Court of Appeals affirmed, finding that the city breached the Planned Unit Development (PUD) Agreement by not timely providing CIG (and Pulte Land Company) access to water for the development.  The damages CIG requested for inability to develop phase two were not too speculative; however, CIG was not entitled to damages as to the lost profits on phase three because development of phase three was too uncertain. The Court of Appeals found that the trial court properly dismissed CIG’s claim against the city manager personally, because his conduct was not grossly negligent, which is the standard a plaintiff is required to prove to overcome a governmental immunity defense.

Thanks to Kurt Schindler, Michigan State University Extension, for this case information. You can visit Kurt’s Land Use page here.

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