SCOTUS to decide major takings case in 2017

The National Constitution Center has listed Murr v. Wisconsin as one of the ten most important US Supreme Court cases to be decided in 2017.  If you attended the Planning Law session at the APA-Iowa Annual Conference in Burlington you heard me discuss the nuances of the “parcel as a whole” rule as it pertains to this case.  The National Constitution Center gives its take on what the case is about here (you’ll need to scroll about halfway down the page).

Constitutional law and history geeks will want to explore the Center’s website generally.  A lot of fascinating reading.

SCOTUS accepts takings case from Wisconsin

Last Friday the United States Supreme Court agreed to take a case from Wisconsin that has implications for takings jurisprudence.  The case is Murr v. State of Wisconsin, and the question certified for the Court is “Whether in a regulatory takings case, the ‘parcel as a whole’ concept as described in Penn Central Transportation Company v City of New York, establishes a rule that two legally distinct but commonly owned contiguous parcels must be combined for takings analysis purposes.”

Owner of fourplex forfeited right to continue as nonconforming use when two apartments remained unoccupied for more than one year

by Rachel Greifenkamp and Gary Taylor

Rodehorst Brothers v. City of Norfolk Board of Adjustment

(Nebraska Supreme Court, March 28, 2014)

The City of Norfolk, Nebraska zoning code includes the following provision with regard to nonconforming uses:

In the event that a nonconforming use is discontinued, or its normal operation stopped, for a period of one year, the use of the same shall thereafter conform to the uses permitted in the district in which it is located.

The Rodehorst Brothers partnerships owns a fourplex in Norfolk an area zoned R-2 for one and two family use. The fourplex is a legal, nonconforming use. In 2010 and 2011 Rodehorst applied for building permits to replace a roof, fix some electrical issues, and remodel the apartments in the building. The first two were granted by the building inspector but the third (apartment remodels) was denied because the inspector concluded that Rodehorst had forfeited its right to continue its nonconforming use of a fourplex because several of the apartments in the building had been unoccupied for more than one year.

Rodehorst appealed the denial of the permit to the City of Norfolk Board of Adjustment (Board), and also requested that they grant a use variance to allow the building to continue operating as a fourplex. Rodehorst argued that simply failing to rent out the apartments did not cause a forfeiture of the right to operate as a fourplex, and that it had been trying to “fix up” the building for years.  Rodehorst also argued that it would suffer an undue hardship without the use variance.  The City argued that the right to operate the building as a fourplex was forfeited because the apartments were unoccupied for more than one year.  The City further argued that the Board did not have authority to grant a use variance because the zoning code defines “variance” as “relief from or variation of the provisions of [the zoning code], other than use regulations, as applied to a specific piece of property, as distinct from rezoning.” The Board agreed with the City on both arguments, and Rodehorst appealed the decision to the district court.

At the district court Rodehorst employed the same arguments but went on to say that the Board’s ruling was an unconstitutional taking. The district court, however, affirmed the Board’s ruling in all respects.

Rodehorst appealed the decision of the District Court to the Nebraska State Supreme Court using the same three arguments as when it appealed to the District Court.

Right to continue nonconforming use.  Nebraska Revised Statutes provides that, with regard to nonconforming uses for cities of the first class, “if a nonconforming use is in fact discontinued for a period of twelve months, such right to the nonconforming use shall be forfeited and any future use of the building and premises shall conform to the regulation.”  The Supreme Court first noted that the choice of the word “discontinued,” as opposed to “abandoned,” is important.  Abandonment requires not only a cessation of the nonconforming use, but also an intent by the user to abandon the nonconforming use.  Where a legislature or other zoning authority has used the word “discontinued”…instead of “abandoned” their purpose is ‘to do away with the need to proved intent to abandon.'”  This squares with the plain, ordinary meaning of the term “discontinue,”  and is consistent with the notion that nonconforming uses are disfavored because they reduce the effectiveness of the zoning ordinance, depress property values, and contribute to the growth of urban blight.

Rodehorst argued that the nature and characteristics of the building control; in other words, that the building is and always was divided into four separate living units.  The Court disagreed. After reviewing cases from several other jurisdictions, the Court concluded that

The degree of occupancy is the critical factor in determining whether a multifamily dwelling nonconforming use remains in effect, while the existing characteristics of the building (such as separate units and features) generally go to whether the user intended to abandon the nonconforming use.  As noted earlier, intent to abandon is not relevant because [Nebraska] zoning laws speak in terms of discontinuance….Thus, the degree of occupancy of the building is the central inquiry.

Noting that “this is not a situation where the discontinuance was involuntary” but rather that no effort had been made to rent the apartments for a number of years, the Court ruled that “a discontinuance period will run where the landlord did not really try to rent the premises.” Thus, the Court affirmed the district court on this argument.

Authority to grant use variance.  Citing the relevant provision of Nebraska Revised Statutes, which allows for the grant of a variance “when by reason of exceptional narrowness, shallowness, or shape of a specific piece of property…or exceptional topographic conditions” the Court denied Rodehorst’s argument for a use variance because the request was based on its desire to continue using its building as a fourplex, not because of any physical characteristic of its property.

Taking.  While acknowledging that discontinuance provisions may work a taking in some cases, the Court denied that such a claim could be sustained in this case.  Using the three-factor test from Penn Central, the Court concluded that (1) even assuming a 50 percent diminution of value, that level of loss generally does not equate to a regulatory taking; (2) Rodehorst bought the property when it was already a nonconforming use, and thus his reasonable investment-backed expectations should have been that he could continue it as a fourplex only so long as its use as such was not discontinued for a period of one year; and (3) the character of the governmental action – to gradually eliminate nonconforming uses over time – is a recognized good.

County’s actions did not constitute a taking: The continuing saga of Francis v. Bremer County

by Gary Taylor

J.D. Francis, Inc. v. Bremer County Board of Supervisors
(Iowa Court of Appeals, January 9, 2013)

Prior history of this case was discussed in this blog here.  The present case includes some interesting facts about the dispute not disclosed in the prior opinion from 2009, namely:

On June 20, 2006, Anhalt and Francis requested the land be rezoned to “R-1” single-family residential. The 34.5 acres had an average corn suitability rating (CSR) of 53.60, a rating that classified it as “prime” agricultural land that should be preserved for agricultural use under the Comprehensive Land Use Plan (CLUP). Following a public hearing, the Bremer County Planning and Zoning Commission unanimously recommended denial of the rezoning request….[and] the board of supervisors voted unanimously to deny the request, finding “that good agricultural farm land not be taken out of production and because of many other environmental concerns….The following day, Francis and Anhalt submitted a revised rezoning request, which excluded approximately four acres of productive farmland included in the original request. Excluding those acres dropped the CSR of the remaining 30.75 acres to 49.5. However, approximately half—or 15.46 acres—of that parcel had a CSR of fifty or higher….[On this request] the commission voted four to one to deny [and the] board of supervisors voted unanimously to deny.

More background.  In December 2009, after the Iowa Court of Appeals issued the decision linked above, the board of supervisors amended its CLUP to exclude planned residential developments on certain designated land. Francis’s property was included in this redesignation. Francis filed an action in the United States District Court for the Northern District of Iowa, alleging the board’s 2006 rezoning denials were an unconstitutional taking. He later amended his complaint to allege the December 2009 CLUP amendment was also an unconstitutional taking. The complaint was dismissed in March 2011 because the issue was not ripe for consideration; the court noted Francis had failed to seek compensation through state procedures by instituting an inverse condemnation action.

Present case.  On December 9, 2011, Francis filed the present case for inverse condemnation in state district court, alleging that the board’s denials of the rezoning request was arbitrary, and further that the CLUP amendment resulted in a taking of at least half of the value of the property in question without adequate compensation.  The court found the board was entitled to judgment as a matter of law because the board’s actions did not constitute a taking that requires compensation. Francis appealed.

The Court of Appeals first ruled that the doctrine of res judicata prevents J.D. Francis, Inc. from relitigating the issue of whether the board acted arbitrarily in denying its rezoning requests. The question of whether the board’s denial was arbitrary was litigated and decided by the district court when it granted summary judgment in favor of the board on Francis and Anhalt’s 2006 action. That ruling was later affirmed by the Court of Appeals.

As for the takings claim, the Court of Appeals observed that, unlike cases cited by Francis as supporting his claim, there was no rezoning that led to a diminution of value; rather, the board simply refused to rezone the land to increase its economic viability. Furthermore, the plaintiff purchased the land after the board denied both rezoning requests. Even the CLUP amendment, which occurred after purchase and limits the likelihood that the land will be rezoned to residential, does not amount to a taking. The property remains economically viable as agricultural land, just as it did prior to the plaintiff’s purchase. Under these circumstances, the Court of Appeals agreed with the district court’s finding that the board’s actions did not constitute a taking.

Indianola fence ordinance not a taking

by Gary Taylor

Iowa Assurance Corporation v. City of Indianola
(Federal 8th Circuit Court of Appeals, August 16, 2011)

Vinton Watson races figure eight cars, and owns seven to eight cars at any one time. In March 2006 Watson began leasing a shop and adjacent parking lot from Ron Inman to store his cars. Inman’s property is located in Indianola and is zoned for commercial use. The shop that Watson leases consists of half of one building and amounts to “a little over 900 square feet.” The parking lot included in the lease is located immediately adjacent of the building and is twenty-seven by thirty-four-feet. Watson can store up to three cars in the shop, although it is difficult to store more than two cars when repairing vehicles inside the shop. Additionally, Watson stores up to three cars in the parking lot, although cars are not always stored there.

Neighbors have complained to the Indianola city council on numerous occasions about the appearance and noise of Watson’s cars.  As a result, the city council passed an ordinance in 2007, amended in 2009, requiring figure eight cars and other race cars to be inclosed by a fence in all outdoor areas where two or more vehicles are present.  Watson sued the city, specifically alleging that the ordinance creates an uncompensated regulatory taking by requiring him to install a fence and by reducing the overall value of the property.  The suit was brought in state court but the city had the case removed to federal court.  The Federal District Court for the Southern District of Iowa found in favor of the city and Watson appealed.

The 8th Circuit noted that regulatory takings claims come in four types:

The first type is a regulation which requires an owner to suffer a permanent physical invasion of her property. The second type is a regulation that completely deprive[s] an owner of all economically beneficial use of her property. The third type is a governmental requirement that, without sufficient justification, requires an owner to dedicate a portion of his property in exchange for a building permit. The fourth type is any other regulation which, after considering its economic impact upon the plaintiff and its essential character, is functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain.

Watson claimed that the city’s action violated the first and third types: physical invasions and land-use exactions.  The Court rejected both of Watson’s claims.  It rejected the physical invasion claim because the ordinance does not require Watson to permit either the city or any third party to enter his property to install a fence, and consequently does not erode his right to exclude others from his property.  It rejected the land use exaction claim because in those cases the government is demanding that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a development permit, or other type of license.   The Indianola ordinance does not require Watson to dedicate any portion of his property to either the City’s or the public’s use as a condition of anything.

Takings clause of Minnesota Constitution provides greater landowner protections than U.S. Constitution

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.

Rezoning in compliance with court order not a taking

by Melanie Thwing

Bettendorf v. St. Croix County
(Federal 7th Circuit Court of Appeals, January 20, 2011)

John Bettendorf owns property in St. Croix County, WI. Although the property was originally zoned agricultural-residential in 1972 he began to run a carpet business out of his basement. Then in 1974 he began to run an excavating company from the property. In 1984 Bettendorf applied to the County to re-zone a portion of his land to commercial.  The the application was approved with the stipulation that the rezoning was not transferable to any subsequent landowner, and upon such a transfer, or Bettendorf’s death,  the zoning classification of the property will revert to agricultural-residential. Bettendorf used the property in a commercial manner after the ordinance was enacted, but fully knowing that the language of the permit would not allow him to regain any commercial investment when he went to sell the property Bettendorf petitioned to make the re-zoning permanent. In 2004, Bettendorf filed an action in the Circuit Court for St. Croix County seeking a declaratory judgment that the conditional language was void and should be stricken from the ordinance. The circuit court found in favor of Bettendorf, but on appeal the Wisconsin Court of Appeals held the ordinance void in its entirety. In July 2007, the circuit court entered a revised judgment and order rescinding the commercial zoning of the disputed parcel in accordance with the Court of Appeals’ decision. The County complied with the order by rescinding the commercial zoning designation.  Bettendorf then sued in federal court.

Bettendorf argued that the County’s rescission of the commercial zoning designation following the court’s decision constituted a taking. He also argued that he was not given appropriate substantive and procedural due process protections. The Federal 7th Circuit observes that to prove a regulatory taking the government action must deprive the landowner of “all or substantially all practical uses of the property.” Bettendorf argued that the court did not adequately consider his anticipated and distinct investment opportunities. The court disagreed, stating that Bettendorf made improvements to his property with full knowledge that the commercial zoning classification was not going to be permanent.  When he began litigation he fully assumed the risk that the scope of the ordinance could be reinterpreted. Bettendorf still maintains full use of his property for agricultural and residential purposes, which simply restores the land to its original use.

Bettendorf argued he was “denied the protection of the substantive legal standards that would have been applied to a change in zoning….” The court found this argument to be without merit. The County’s decision to remove the commercial zoning designation was simply in accordance with the Court of Appeals decision. Therefore it could not be “conscious-shocking or arbitrary,” the showing needed to prove a substantive due process claim. 

As for Bettendorf’s procedural due process claim, Bettendorf was afforded the the opportunity to avail himself of due process protections through the state court system, yet he chose to bypass the state court appeals process. This seriously “undermines his argument that the state court process was deficient.” The Seventh Circuit ruled for the County on all claims.

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