Tag: Takings

Plaintiffs’ inverse condemnation claim survives summary judgment on allegations that state control of water levels behind private dam that collapsed constitutes public use

Gary Taylor

by Gary Taylor

David Krieger, et al., v. Department of Environment, Great Lakes, and Energy

Michigan Court of Appeals, September 7, 2023

In this 37-page opinion, 20 pages of which were dedicated to simply listing all the litigants, the Michigan Court of Appeals addressed the question of whether plaintiffs’ adequately stated a claim in their pleadings for inverse condemnation against the Michigan Department of Environment, Great Lakes, and Energy (DEGLE) for the failure of the Edenville Dam in 2020. Plaintiffs’ alleged that the actions of DEGLE in the years prior contributed to the failure. The court’s opinion simply dealt with the adequacy of plaintiffs’ pleadings, but provides

The Edenville dam was built in 1924 to hold back water from the Tittabawassee and Tobacco Rivers for hydroelectric power. Boyce Hydro Power, LLC (Boyce) purchased the dam in 2004 and acquired a license from the Federal Energy Regulatory Commission (FERC) to operate the dam to generate hydroelectric power. FERC made repeated requests of Boyce to ubgrade the dam because it was not structurally adequate and its spillway capacity was inadequate in the event of a “Probable Maximum Flood,” defined as the flood that may be expected from the most severe combination of critical meteorologic and hydrologic conditions reasonably possible in the drainage basin in question. After years of unaddressed regulatory violations, FERC revoked Boyce’s federal license in September 2018, at which point the dam fell under the oversight of DEGLE and the Michigan Department of Natural Resources (DNR). Within days experts conducted a cursory inspection and found the Edenville dam to be in fair structural condition, but that inspection was not intended to determine whether the dam met safety standards. A group called Four Lakes Task Force petitioned the circuit court to establish a legal water level for the lake formed by the dam (Wixom Lake), and the court set the lake level at that previously required by FERC. Despite the establishment of this level, and the rejection by DEGLE of a request by Boyce to draw down the lake level, Boyce lowered the lake level anyway. in April 2020, DEGLE issued Boyce a permit to restore the lake to its previous level, and conditioned the permit on Boyce maintaining high water levels even though, as plaintiffs’ alleged, Michigan regulators knew about the dam’s inadequate spillway, overall deterioration, and need for repairs. Then on May 19, 2020 the Edenville dam failed, resulting in the failure of the Sanford dam and damage to two other dams, forcing the evacuation of thousands of residents, and resulting in devastating flooding and property damage to nearby residents.

We will jump straight to the discussion concerning inverse condemnation. Citing previous precedent, the Court of Appeals stated that “a plaintiff alleging a de facto taking or inverse condemnation must establish (1) that the government’s actions were a substantial cause of the decline of the property’s value, and (2) that the government abused its powers in affirmative actions directly aimed at the property.” Although the state departments challenged element (1) on summary disposition, they did not renew that argument on appeal.

Affirmative actions directed at plaintiffs’ properties. The court looked at several past cases to determine what constitutes “affirmative actions” in this context. Common among these cases was a holding that “inaction and omissions by the state” could not sustain a takings claim. For example, the court in 2004 found the state did not take “affirmative action” when a fire that spread from an abandoned house that the state acquired through tax delinquency proceedings damaged a neighboring property. “At most, the state failed to abate a fire-hazard nuisance.” The court concluded, however, that in the present case the plaintiffs’ sufficiently pleaded affirmative actions taken by the state that were aimed directly at plaintiffs’ properties. First, plaintiffs’ alleged that the state knew about the dams inability to withstand significant rainfall and that its deteriorated condition posed a danger to downstream owners. Second, plaintiffs’ alleged that the state actively prevented repair efforts and threatened enforcement action if the lake levels were drawn down. Finally plaintiffs’ claimed that the state concealed risks posed by the dam and acted to raised the lake to dangerous levels in disregard of those risks in order to improve environmental conditions in the lake. If proven at trial, these allegations would constitute affirmative actions; they would demonstrate “more than mere regulatory actions such as issuing or denying a permit.” Contrary to the state’s assertion that Boyce was responsible for raising lake levels, the court found that the state’s action in authorizing and requiring Boyce to raise lake levels was, if proven true, sufficient affirmative action to sustain a taking claim.

Public use. The state agencies also argued that plaintiffs’ inverse condemnation claims fail because the state did not put plaintiffs’ property to a public use. In contrast, plaintiffs alleged that defendants exercised control over the Edenville Dam so much so that their use of the dam constituted a public use. The court determined the relevant question to be “whether defendants took plaintiffs’ property by controlling the operation of the dam for a public use, not whether plaintiffs’ property—once taken—would be put to a public use.” If proven to be true at trial, by pressuring Boyce to keep water levels high to protect aquatic life, prioritizing that interest at the expense of the safety of people and property, the state agencies through their operational control of the dam, put the dam to a public use in their pursuit of environmental protection. When allegations are made that the government—acting along with a privately owned dam operator—took affirmative steps that caused the dam to fail and damaged downstream property owners, Michigan’s takings clause provides a remedy.

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Seizure of proceeds of tax sale in excess of taxes owed constitutes a taking

Gary Taylor

by Gary Taylor

Tyler v. Hennepin County, Minnesota

United States Supreme Court, May 25, 2023

Ninety-four-year old Geraldine Tyler owned a condominium in Hennepin County, Minnesota, that accumulated $15,000 in unpaid real estate taxes, interest and penalties. Under Minnesota state law, the the County was allowed to seize the condo after three years because of the unpaid taxes. Hennepin County sold the condo for $40,000, and under Minn. Stat. sec. 282.08 the proceeds in excess of the tax debt and the costs of the sale ($25,000) were allowed to be kept by the county and split between the county, the town and the school district. Tyler filed suit, alleging that the County had unconstitutionally retained the excess value of her home above her tax debt in violation of the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment. The District Court dismissed the suit for failure to state a claim, and the Eighth Circuit affirmed. She appealed to the United States Supreme Court.

Standing to sue. The County alleged that Tyler lacked standing to bring the claim because she did not “disclaim the existence of other debts or encumbrances” on her home, namely, a $49,000 mortgage and a lean of $12,000 for unpaid homeowners’ association dues. The County argued that these encumbrances exceeded $25,000 and therefore she had no interest in, and suffered no real financial harm form the sale by the County. The Supreme Court disagreed, observing that in Minnesota a tax sale extinguishes all other liens on a property, so Tyler could have retained the excess and used it to reduce any such remaining liabilities.

Taking. Whether Tyler could claim a taking hinges on whether she had a property interest in the excess value of the condo. To answer this question the Court draws on “existing rules or understandings” about property rights, which includes state law, “traditional property law principles,” “historical practice” and Courts’ precedents. The County reasoned that Tyler had no property interest protected by the Takings Clause because in 1935, the State purported to extinguish that property interest by enacting a law providing that an owner forfeits her interest in her home when she falls behind on her property taxes. However, citing an 1884 Minnesota Supreme Court case, the Court noted that prior to 1935 Minnesota recognized that a homeowner whose property has been sold to satisfy delinquent property taxes had an interest in the excess value of her home above the debt owed. “Though state law is an important source of property rights, it cannot be the only one because otherwise a State could ‘sidestep the Takings Clause by disavowing traditional property interests’ in assets it wishes to appropriate.”

The Court went all the way back to the Magna Carta for “the principle that a government may not take from a taxpayer more than she owes.” “From the founding, the new Government of the United States could seize and sell only ‘so much of [a] tract of land . . . as may be necessary to satisfy the taxes due thereon.’” The Court noted that Minnesota was in the minority in seizing excess tax sale proceeds; most states and the federal government require excess value to be returned to the taxpayer whose property is sold to satisfy outstanding tax debt. The Court also noted that Minnesota law recognizes in many other contexts that a property owner is entitled to the surplus in excess of her debt, citing bank foreclosure on a mortgage and the collection of past due taxes on income or personal property as two examples.

The Court rejected the County’s argument that Tyler had no property interest in the surplus because she constructively abandoned her home by failing to pay her taxes. The Court stated that no precedent exists for concluding that a failure to pay taxes is itself sufficient to prove abandonment. “Abandonment requires the ‘surrender or relinquishment or disclaimer of’ all rights in the property.” “It is the owner’s failure to make any use of the property—and for a lengthy period of time—that causes the lapse of the property right…..The County cannot frame [the failure to pay property taxes] as abandonment to avoid the demands of the Takings Clause.”

The Court concluded that history and precedent dictate that, while the County had the power to sell Tyler’s home to recover the unpaid property taxes, it could not use the tax debt to confiscate more property than was due. Doing so effected a “classic taking in which the government directly appropriates private property for its own use.”

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Condemnation and demolition of historic Keokuk church not a taking. 657A not the sole procedure for abating a dangerous building

Gary Taylor

by Gary Taylor

Christ Vision, Inc., v. City Keokuk

Iowa Court of Appeals, January 25, 2023

Built in 1876, the former Unitarian Church in Keokuk had fallen into serious disrepair by 2005. That year the city sent a letter to the church’s owner – Christ Vision – asking the owner to address deteriorating brick and falling moldings. Christ Vision took no action for three years, so the city delcared the building unsafe to occupy in 2008, informing Christ Vision that “no person shall remain in or enter any building that has been so posted except to enter for repair or demolish….” Christ Vision representatives spoke with city officials numerous times, and presented (unfunded) plans for rehabilitation, but by December 2016 Christ Vision still had made no repairs. By then the church had gaping holes in the roof, fallen plaster and bricks, depressions in the floor, water in the basement, and other serious deficiencies. The city filed for a declaration of nuisance, and after a hearing the district court found in December 2016 that the church’s hazardous condition constituted a nuisance and ordered abatement. The court told Christ Vision that, at a minimum, the roof would need to be replaced and “any hazardous conditions with the structure that make it unsafe to occupy” would need to be fixed. Otherwise, the building would need to be demolished or deeded to the city. The court ordered Christ Vision to create a written abatement plan with a timeline by March 2017, but when that did not happen, and had not happened even by October 2017, the city approved a contract for the church’s demolition. Christ Vision applied for a temporary injunction, but (and i am skipping some irrelevant facts here) the city began demolition before the hearing on the injunction. Two years later Christ Vision filed this lawsuit, alleging a taking, trespass, and conversion of personal property.

Taking. Christ Vision alleged that the city’s nuisance action amounted to an illegal taking; however, the Court of Appeals noted that in City of Eagle Grove v. Cahalan, 904 N.W.2d 552, 561 (Iowa 2017) the Iowa Supreme Court held that the state’s exercise of its related police powers over abandoned property did not constitute a taking, even though Eagle Grove’s action denied the owner of “all economically beneficial or productive” use of the property. The Court of Appeals confirmed that a landowner has no vested property right in a nuisance, and so in demolishing the church in compliance with an unchallenged court order (the December 2016 order) the city did not take anything. “Bottom line, Keokuk could enforce its nuisance law without compensating Christ Vision for its losses stemming from that enforcement.”

Due Process. Christ Vision did not did not contest contest the procedural history of the December 2016 order, but rather insisted that the order did not automatically authorize demolition of the church once the March 2017 deadline was missed. It argued that the city then needed to Follow Chapter 657A before it could demolish the building. The Court of Appeals disagreed, noting that Iowa Code 657A.11(2) states “This chapter does not prevent a person from using other remedies or procedures to enforce building or housing ordinances or to correct or remove public nuisances.” The city followed its own nuisance ordinance and state law. The fact that the city demolished the church prior to the hearing on the temporary injunction was of no effect because there was not yet an injunction in place, meaning it was still lawful for the city to proceed under the December 2016 order.

Trespass and conversion. Because Christ Vision did not challenge the court’s authority to permit the city to demolish the building once the owner missed the abatement deadline the city was within its rights to enter the premises. “[C]onduct otherwise a trespass is often justifiable by reason of authority vested in the person who does the act.” Nothing in the December 2016 order imposed on the city a duty to help preserve the church; to the contrary, the onus was on Christ Vision to take action. As for the claim of conversion, Christ Vision claimed the city interfered with its right to personal property by demolishing the church with the property still inside. There was no evidence, however, that Christ Vision requested access to the church to remove personal property once it knew demolition was imminent or any time prior.

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Into the weeds of the National Trails System Act. (That rail trail you like to ride may have a long legal history)

Gary Taylor

by Gary Taylor

Memmer v. United States

United States Court of Appeals for the Federal Circuit, September 28, 2022

This case originated in the United States Court of Federal Claims (Why?  Read this) when Jeffrey Memmer and eleven other Indiana landowners (landowners) brought suit seeking compensation for an alleged taking arising from the application of the National Trails System Act (NTSA) to the abandonment of railway easements by Indiana Southwestern Railway Company.  Landowners claimed they held reversionary interests in the property which were “taken” under the NTSA.  It’s complicated.  Bear with me.

The Surface Transportation Board (STB) has authority to regulate the construction, operation, and abandonment of most rail lines in the United States.  A rail carrier must either file an application with, or seek exemption from, the STB if it intends to abandon or discontinue a rail line.  At the same time, the NTSA allows a rail carrier to instead negotiate an agreement with a locality or a private trail sponsor to convert the railroad’s right-of-way into a recreational trail.  If a rail carrier agrees to negotiate an agreement with a trail sponsor, the STB will issue a Notice of Interim Trail Use or Abandonment (NITU). The NITU provides for a negotiation period during which the railroad can discontinue service on the rail line and salvage track and materials.   If no agreement is reached with a locality or trail sponsor during the negotiation period the railroad may file a notice of consummation of abandonment with the STB, thus abandoning the line.  If an agreement is reached, however, trail use of the right-of-way is authorized and abandonment by the railroad is blocked indefinitely, subject to restoration of the right-of-way for railway purposes.  Because it is possible to again put the right-of-way to use as a railway, the NTSA process is known as “railbanking.”

Another possibility is that after an application for abandonment is filed with the STB another party may make an Offer of Financial Assistance (OFA) to subsidize the operation of the rail line to keep it open.  This could be a local government, for example, or an entity such as a grain elevator that makes consistent use of the line.  If an OFA is proffered those negotiations take precedence over any proposed or ongoing negotiations with a trail sponsor.

It is possible that the railbanking process and conversion of property to use as a recreational trail can result in a takings claim.  It depends on state property law of the state in which the line is situated.  A taking occurs when state law reversionary property interests that would otherwise vest in the adjacent landowners are blocked from so vesting by the NTSA.  In other words, state property law in some states is interpreted to automatically revert the right-of-way to adjacent landowners, while in other states no such reversionary right exists. 

In the present case, Indiana Southwestern submitted a notice of exemption from abandonment proceedings on October 25, 2010, stating that it would consummate abandonment of its rail lines on or after January 15, 2011. In response, the STB published a notice on November 12, 2010 stating that the deadline for railbanking requests was ten days later, on November 22, 2010, and that absent third party intervention, Indiana Southwestern could abandon the lines on December 14, 2010.  The notice indicated that Indiana Southwestern was given until November 12, 2011, to file a notice of consummation of abandonment, if it chose to do so.  A few days after the STB’s notice was published, the Indiana Trails Fund (Fund) submitted a request for the Board to issue a NITU for the rail corridor to permit negotiations with Indiana Southwestern about railbanking. The STB also received notice from the Town of Poseyville, Indiana of its intent to file an OFA, which took precedence over the Fund’s request.  After several months of negotiations with the Town, the Town’s offer fell through.  An NITU was then issued that became effective May 23, 2011, and the Fund and Indiana Southwestern proceeded to negotiate.  Ultimately they failed to execute a trail-use agreement, even after four extensions of the NITU.  The final NITU deadline lapsed on November 8, 2013; however, Indiana Southwestern chose not to consummate the abandonment of the rail line at that time. In the meantime while the NITU was pending, Indiana Southwestern executed a contract with A&K Materials (A&K) to purchase and remove the rails on the rail line except those in rail crossings and move the ties from the center of the rail line. A&K completed its work by early February of 2012.

 Indiana Southwestern did eventually submit a new notice of exemption to start the process over in 2021.  No potential trail sponsors came forward, and no NITU issued, so Indiana Southwestern consummated the abandonment of the line on August 31, 2021.  As a result, the landowners’ fee simple interests became unencumbered by any railway easements on that date. 

While all this was going on, litigation ensued (which presumably why you are still reading this post).  The landowners claimed that a permanent categorical taking occurred with the issuance of the first NITU, because the evidence was that Indiana Southwestern would have abandoned the line absent the NSTA-mandated NITU; that evidence being that no rail traffic had moved over the line for at least two years and that they hired A&K to remove the rails regardless of the outcome of negotiations.  The federal government countered by arguing that there was no government action resulting in a change to the landowners property interests “when a railroad requests abandonment authority (from the STB) and then chooses not to exercise that authority.” 

The Federal Circuit Court of Appeals disagreed with the government that a physical taking cannot occur when a NITU ends without either a trail-use agreement or the consummation of the railroad’s abandonment:

The NITU in this case, as in similar cases, was a government action that compelled continuation of an easement for a time; it did so intentionally and with specific identification of the land at issue; and it did so solely for the purpose of seeking to arrange, without the landowner’s consent, to continue the easement for still longer, indeed indefinitely, by an actual trail conversion….Thus, once initiated, a NITU can effect a “mandated continuation” of an easement by the STB that  provides a right of occupation by someone other than the landowner.

Memmer v. US, slip opinion p. 15

The Court then addressed the duration of the physical taking.  The Landowners argued that the temporary taking lasted from May 23, 2011 (the issuance of the first NITU) until August 31, 2021 (when the rail line was finally abandoned) because the requirements for abandonment under Indiana law were satisfied when the railroad removed the rails, yet their reversionary rights were still blocked until the railroad consummated the abandonment.  The government argued that the taking ended upon expiration of the NITU (and its extensions) on November 8, 2013 because it was on that date that the United States was no longer responsible for mandating the continuation of the easement.

The Court agreed with the government’s position because, from November 8, 2013 forward the decision rested solely in the hands of Indiana Southwestern.  “A takings claim must be predicated on actions undertaken by the United States….It is always the railroad’s choice that ultimately impacts the duration of the taking….Moreover, acceptance of [landowners’] argument would effectively contradict the STB’s authority to regulate abandonment which Congress granted over one hundred years ago.”

The Court remanded the case to the Court of Federal Claims for a determination of the compensation and interest due to the landowners as a result of the temporary taking of their property from May 23, 2011 to November 8, 2013. 

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Court of Appeals finds $25,000 award reasonable for sewer easement

ejchr

by Eric Christianson

City of North Liberty v. Gary Weinman
(Iowa Court of Appeals, April 5, 2017)

In 2014 North Liberty was in the process of developing what would become Iowa City Liberty High School to alleviate overcrowding in the Iowa City School District. However, the site selected did not have access to sanitary sewer. To service the area, the City of North Liberty explored several options before selecting its ultimate path in 2014. This path crosses the private property of 13 individuals. The city was able to secure temporary easements (for construction) and permanent easements (for ongoing maintenance) from 12 of the 13. The final holdout was Dr. Gary Weinman who first sought through a pair of lawsuits to force the city to stop construction and reconsider other routes. Those suits failed.

Easements are always considered takings and therefore Weinman was entitled to just compensation under the Fifth Amendment. A compensation commission decided that Weinman was entitled to $75,000. This included a temporary easement for construction (1.1 acres for four months) and a permanent easement (.75 acres). The city appealed claiming that amount was excessive. Weinman requested a jury trial so the matter was tried de novo to the jury. The jury set the compensation amount at $25,000 relying largely on the testimony of an expert assessor brought by the city.

Weinman appealed this decision to the Iowa Court of Appeals. The Court of Appeals does not  generally reverse compensation awards provided that they are not “wholly unfair or unreasonable.” In this case, because the jury’s decision was reasonable based on the evidence, the award of $25,000 was affirmed.

 

Condemnation, Easements, Iowa Court of Appeals, Iowa District Courts, Public sewer and/or water services, Takings , ,
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SCOTUS to decide major takings case in 2017

Gary Taylor

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.

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Creek stabilization plan went beyond scope of original drainage easement

hdankbar

by Hannah Dankbar and Gary Taylor

Hamner v City of Bettendorf
Iowa Court of Appeals, October 12, 2016

Property owners in the Rolling Meadows subdivision complained that the City of Bettendorf overstepped their powers when they used a 25-foot “utility and drainage easement” established in 1968 for a stream bank stabilization project in 2015. Property owners claimed that the use of the 25-foot easement for stream bank stabilization constituted a taking and argued that they should be compensated for the land. The City did not offer any compensation for the removal of trees, change in land elevation, or the regrading of the property owners’ land.

The City argued that it was in the public interest to stabilize the creek, and that the easements granted in 1968 contemplated the type of work conducted by the City in 2015; thus the landowners were not entitled to compensation.

The district court ruled in favor of the landowners because the 1968 easement was granted to maintain the sanitary sewer, storm sewer, Stafford Creek drainage, and utility poles. The court determined that stabilizing the creek overstepped the City’s powers.  The City appealed.

On appeal, the Iowa Court of Appeals used a three-part test to evaluate the scope of the easement: 1) the physical character of past use compared to the proposed use; 2) the purpose of the easement compared to the purpose of the proposed use; and 3) the additional burden imposed on the servient land by the proposed use.

Physical character of past use compared to the proposed use. The City planned to remove all trees and foliage, install a retaining wall on one side of the creek, and place twenty-five tons of rocks along both sides.  The court concluded that this work would substantially change the physical character of the past use of the properties.

Purpose of the easement compared to the purpose of the proposed use.  The court found that while the proposed work did pertain to drainage in a general sense…the purpose of the project was to reshape Stafford Creek and the surrounding creek bed to cure past erosion and prevent future erosion.

Additional burden imposed on the servient land by the proposed use. The landowners presented estimates from a consultant of the loss of value of their properties ranging from $27,500 to $30,250.  This suggested a burden way beyond that contemplated by the original easement

The court determined that the original grantors of the easements did not “contemplate the expansive use of the easement now sought” by the City, and that the radical changes to the land demanded compensation to the landowners under Article I, Section 18 of the Iowa Constitution (the Takings Clause).

 

 

 

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Wisconsin’s bright line “building permit rule” precludes takings claim

hdankbar

by Hannah Dankbar

McKee Family, LLC and JD McCormick Company, LLC v City of Fitchburg
Wisconsin Court of Appeals, November 5, 2015

The City of Fitchburg rezoned property owned by McKee before McKee was able to apply for a building permit. The rezoning reclassified the property from Planned Development District (PDD), which allows high-density and mixed-use development, to Residential-Medium (R-M) district, which permits lower-density development. McKee argued that McKee had a vested right in the preexisting zoning designation and that the rezoning constituted a taking. The lower court concluded that McKee did not have a vested right in the preexisting zoning classification, and McKee appealed.

In Fitchburg, before a property owner can develop land under a PDD classification they have to go through multiple steps including: submitting a proposed general implementation plan to be approved by the City’s Plan Commission and the Fitchburg Common Council; if approved the property owner submits a specific implementation plan before applying for a building permit.  Fitchburg approved the lots in question in 1994 when the McKee’s predecessor owned the lots. In 2008 JD McCormick, working with McKee, submitted the specific implementation plan while two Fitchburg alders petitioned the City to rezone the property. After public hearings, and before reviewing the specific implementation plan, the Council rezoned the property. THe rezoning took effect before any commission review of the specific implementation plan.  The Council concluded that the rezoning was “in the best interest of maintaining a stable surrounding neighborhood to reduce the lots.”  The primary issue was whether McKee had obtained a vested right in the preexisting zoning designation, despite not being eligible for and not applying for a building permit.

The court concluded that there is no vested right based on Wisconsin’s bright-line “building permit rule.”  Wisconsin focuses on building permits and applications for permits to define the point at which a property owner develops a vested interest in the property. Neither McCormick nor McKee ever applied for or received a building permit. McKee argued that Wis. Stat. § 62.23(7) creates private contractual rights for developers, but the Court did not interpret the statute that way. There is nothing in the statute that obligates a municipality to maintain a specified zoning designation. To the contrary the statute authorizes municipalities to amend or repeal zoning designations as long as they follow specific procedures (§62.23(7)(d)(2) and (3)).  McKee argued that they made multiple investments in the property without applying for the permit and these investments demonstrate a vested right and a contract with the City. The court rejected this argument in a prior Wisconsin Supreme Court case, and likewise rejected it here.  The trial court determination was upheld.

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Value of railroad corridor for just compensation purposes must include remnants of railroad’s use

hdankbar

by Hannah Dankbar and Gary Taylor

Rasmuson, et al v. United States
U.S. Court of Appeals for the Federal Circuit, October 5, 2015

Rasmuson and others own land adjacent to three railway corridors in Central Iowa. Pursuant to the National Trail System Act Amendments of 1982, the Surface Transportation Board issued Notices of Interim Trail Use (NITUs) for the corridors. NITUs “preserve established railroad rights-of-ways for future reactivation of rail service” and permit the railroad operator to cease operation without abandoning any “rights-of-way for railroad purposes.” The trial court found that “but for issuance of the NITUs, under Iowa law the railway easements would have reverted back to plaintiff adjacent landowners upon cessation of railroad operations, and plaintiffs would have enjoyed land unencumbered by any easement.”  The trial court thus found that a taking occurred, then held a bench trial to determine just compensation.  The trial court determined just compensation to be the value of the land as raw land (without any of the railroad’s improvements), and the United States appealed.

A landowner subject to a taking is entitled “to be put in as good a position … as if his property had not been taken.” In the case of an easement, the conventional method of valuation is the difference between the value of the property before and after the government’s easement was imposed.  The issue before the Court was a narrow one: Whether, as the government argued, the “before” condition was the property with the physical remnants of the railway’s use (with tracks, ties, earthen embankments, poor soil conditions) or, as the plaintiffs argued, without such physical remnants (raw land pre-railroad development).

The Court concluded that the fair market value of the land “before” the taking was the value including the physical remains of the railway.  The “before” condition was the property “before” the issuance of the NITUs.  Without the NITUs the land would have returned to the landowners with the physical remains of the railway since the railroad was under no legal obligation to remove the physical remnants of railroad use, and no evidence was introduced that the railroad would have done so on its own.  An appraisal of the land to determine just compensation must therefore take into account the remnants of the railway.

The trial court’s decision was vacated and remanded.

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Missouri Right-to-Farm statute upheld by Missouri Supreme Court

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by Hannah Dankbar and Gary Taylor

Labrayere v. Bohr Farms
Missouri Supreme Court, April 14, 2015

Multiple landowners filed suit against Cargill Pork LLC and Bohr Farms alleging damages for temporary nuisance, negligence and conspiracy due to odors coming from a concentrated feeding animal operation (CAFO) owned and operated by Bohr Farms. The landowners who filed the complaint claimed that they lost the use and enjoyment of their property.  Neither rental value nor medical conditions were issues raised by the landowners in this case. The circuit court found that Bohr Farms was not responsible for paying damages.

In 2011 section 537.296 went into effect. This statute supersedes common law related to actions that result in an alleged nuisance coming from a property that is used primarily for crop or animal production. This statute prohibits non-economic damage recovery for items such as loss of use and enjoyment of property, inconvenience or discomfort that the agricultural nuisance caused, and allows recovery only for a diminished market value of property and documented medical costs.  Only a few days after the statute was passed Bohr Farms began their CAFO operation that can feed 4,000 hogs. Bohr owns and operates the CAFO and Cargill owns the hogs. The CAFO includes an on-site sewage disposal system as well as a system for composting deceased hogs. The plaintiffs raised seven constitutional issues. Appellants claimed that section 537.296 is unconstitutional for seven reasons.

 

Constitutional Claims

  1. Section 537.296 impermissibly authorized an unconstitutional private taking.  Plaintiffs argued that the statute, “effectively provide[s] the right of eminent domain to private companies.” The Court stated that, “The fact that private parties benefit from a taking does not eliminate the public character of the taking so long as there is some benefit to any considerable number of the public.”  A use is public if it reasonably likely to create some advantage or benefit for the public.  The Court noted that the statute did not authorize any private party to create a nuisance.
  2. Section 537.296 authorized a taking without requiring just compensation. Under the statute all nuisance claims following the initial temporary nuisance claim are to be considered a permanent nuisance. The plaintiffs claimed that this essentially grants an easement for the respondent to interfere with the full use and enjoyment of their land. The court found this argument was not ripe because the appellants were only seeking relief for a temporary nuisance in this case. The court noted that the statute specifically allowed the recovery of damages for loss in rental value of impacted property when a temporary nuisance was present.  That satisfied the constitutionally required just compensation when a temporary nuisance amounts to a temporary taking.
  3. Section 537.296 violated the plaintiffs’ constitutional right of equal protection. The plaintiffs claimed that the statute creates a suspect class of “rural landowners and residents” and therefore the statute should have to withstand strict scrutiny. Historically, rural landowners have not been oppressed and the statute benefits rural landowners who use their land for agricultural purposes, so there is no suspect class. The argument related to the fundamental right to property conflicts with the established right of the state to confiscate property to “substantially advance a legitimate state interest.” Therefore, the statute only has to withstand the rational basis test. The Court presumes the state has a rational basis for this statute and the appellants had to demonstrate a “clear showing of arbitrariness and irrationality” before the statute can be declared unconstitutional.
  4. Section 237.296 violates due process. This argument relied on a finding that a fundamental right had been violated, but the Court already determined there was no fundamental right violated.
  5. Section 537.296 violates separation of powers. The appellants claimed that the statue requiring a person to have “ownership interest” in order to have standing is a judicial decision that the legislature did not have the power to make. Nobody in this case was denied standing because of this, and none of the plaintiffs were injured as a result of this part of the statute. The court will not rule on hypothetical questions of standing.
  6. Section 537.296 violates the open courts clause. Article I, section 14 of the Missouri Constitution guarantees “the right to pursue in the courts the causes of actions the substantive law recognizes.” The plaintiffs’ asserted that the statute denied access to the court to “lawful possessors and occupiers of land”; however, the plaintiffs did not claim that the statute restricts access to the courts, so they did not have an argument to support this claim.
  7. Section 537.296 is an unconstitutional special law. Finally, plaintiffs argued that this statute “benefits only the corporate farming industry.” Article III, section 40 of the Missouri Constitution does not allow the legislature to enact “special laws” when a general law will work. Special laws, “includes less than all who are similarly situated… but a law is not a special if it applies to all of the given class alike and the classification is make on a reasonable basis.” The court said that the landowners that can take advantage of the statute could change, as could the land uses.  The open-ended classification, the Court noted, was reasonable because it advanced the legitimate state purpose of promoting the agricultural economy.

Plaintiffs argued that, according to a negligence or conspiracy cause of action, they should receive “use and enjoyment” recovery. They also argued that there are not enough facts to demonstrate that Cargill was not vicariously liable for Bohr’s alleged negligence. The statute allows people to recover non-economic “use and enjoyment” damages only if their negligence and conspiracy claims are “independent of a claim of nuisance.” The court found that Appellants’ negligence, conspiracy and vicarious liability claims were not “independent of a claim of nuisance” because those claims were dependent on the nuisance claims.

The ruling of the circuit court was upheld.

Missouri Courts, Nuisance, Takings , , , ,
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