Title: National By-Products, Inc. v. City of Little Rock

State: arkansas

Issuer: Arkansas Supreme Court

Document:

NATIONAL BY-PRODUCTS, INC. v. CITY of LITTLE
ROCK, by and through the Little Rock Regional
Airport Commission

95-807                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered March 11, 1996


1.   Motions -- review of order granting motion to dismiss -- how
     treated. -- When reviewing an order granting a motion to
     dismiss to determine whether dismissal was proper, the court
     treats the allegations in the pleading as true and views those
     allegations in a light most favorable to the appellant. 

2.   Property -- taking of property by municipality -- when
     compensation is required. -- Article 2, section 22, of the
     Arkansas Constitution which provides that "the right of
     property is before and higher than any constitutional
     sanction; and private property shall not be taken,
     appropriated or damaged for public use, without just
     compensation therefor", has been interpreted to require
     compensation for a taking when a municipality acts in a manner
     which substantially diminishes the value of a landowner's
     land, and its actions are shown to be intentional.

3.   Property -- law of inverse condemnation discussed. -- As
     originally conceived and developed, the concept of inverse
     condemnation was a remedy for physical taking of private
     property without following eminent domain procedures, "fault"
     has nothing to do with eminent domain, and it is not bare
     trespass or negligence which results in inverse condemnation
     but something which amounts to a de facto or common law
     "taking"; inverse condemnation is thus a cause of action
     against a governmental defendant to recover the value of
     property which has been taken in fact by a governmental entity
     although not through eminent domain procedures. 

4.   Property -- condemnation -- when taking occurs. -- A taking
     occurs when a condemnor acts in a manner which substantially
     diminishes the value of a landowner's land, and a continuing
     trespass or nuisance can ripen into inverse condemnation; a
     taking does not require permanency nor an irrevocable injury. 

5.   Property -- condemnation -- when taking occurs. -- The context
     of condemnation proceedings, a taking does not occur until
     compensation is determined and paid; a reduction or increase
     in the value of property may occur by reason of legislation
     for or the beginning or completion of a project, such changes
     in value are incidents of ownership; they cannot be considered
     as a `taking' in the constitutional sense.


6.   Property -- condemnation -- no damages allowed for mere
     "threat to condemn." -- No damages are allowable for a mere
     "threat to condemn." 

7.   Property -- condemnation -- planning in anticipation of
     improvement does not constitute taking. -- The general rule is
     that mere plotting or planning in anticipation of an
     improvement does not constitute a taking or damaging of the
     property affected where the government has not imposed a
     restraint on the use of the property. 

8.   Property -- continued adherence to general rule supported by
     public policy considerations -- government cannot incur
     inverse condemnation liability merely by announcing plans to
     condemn property in future. -- Construction of public-works
     projects would be severely impeded if the government could
     incur inverse condemnation liability merely by announcing
     plans to condemn property in the future; such a rule would
     encourage the government to maintain the secrecy of proposed
     projects as long as possible, hindering public debate and
     increasing waste and inefficiency; after announcing a project,
     the government would be under pressure to acquire the needed
     property as quickly as possible to avoid or minimize
     liability; this likewise would limit public input, and
     forestall any meaningful review of the project's environmental
     consequences; the government would also be reluctant to
     publicly suggest alternative locations, for fear that it might
     incur inverse condemnation liability to multiple landowners
     arising out of a single proposed project; failing to consider
     available alternatives is not only inefficient, but is at odds
     with proper environmental review.

9.   Property -- condemnation -- property continued to be used for
     its traditional purpose -- appellee's actions did not
     constitute taking of appellant's property. -- Where the
     property in question continued to be used for its traditional
     purpose as a rendering plant, neither the City nor the
     Commission placed any direct restraint on that use, and there
     was no allegation that the City or the Commission acted in bad
     faith in its dealings with the landowner, it was clear that,
     on these facts, any damages sustained by appellant were
     insufficient to support an action for inverse condemnation;
     when viewing the allegations in the amended complaint in a
     light most favorable to appellant, it could not be said that
     the appellee's actions constituted a taking of appellant's
     property.


     Appeal from Pulaski Circuit Court, Fifth Division; Morris W.
Thompson, Judge; affirmed.
     Skokos, Bequette, & Smith, by:  Michael G. Smith, for
appellant.
     Jerome Green & Associates, for appellee.

     Bradley D. Jesson, Chief Justice.
     March 11, 1996   *ADVREP1*







NATIONAL BY-PRODUCTS, INC.,
                    APPELLANT,

V.

CITY OF LITTLE ROCK, by and
through the LITTLE ROCK
REGIONAL AIRPORT COMMISSION,
                    APPELLEE,





95-807


APPEAL FROM THE PULASKI COUNTY
CIRCUIT COURT, FIFTH DIVISION
(94-10751)


HONORABLE MORRIS W. THOMPSON
CIRCUIT JUDGE




AFFIRMED.


                 CHIEF JUSTICE BRADLEY D. JESSON



     The appellant, National By-Products, Inc. ("National"), filed
a suit for inverse condemnation against the appellee, City of
Little Rock, acting through the Little Rock Regional Airport
Commission ("Commission").  National owns property near the airport
on which it operates an animal by-products rendering plant.  In its
complaint and amended complaint, National claimed that the
Commission's plans to expand a runway through its property amounted
to a "taking" in violation of the Fifth Amendment to the United
States Constitution and Ark. Const. art. 2,  22.  National appeals
from the trial court's dismissal of its case for failure to state
facts upon which relief could be granted.  We affirm.
     The facts as set out in National's complaint and amended
complaint are as follows.  National operates its plant at 4300 East
9th Street in Little Rock, and also owns an adjacent vacant parcel. 
Both the plant and the vacant parcel are located between the north
end of the airport's runway and the south bank of the Arkansas
River.  According to National, its property was identified in a
1985 study as a necessary acquisition for noise mitigation
purposes.                
     In 1991, the Commission acquired substantial property at the
north end of Runway 4L-22R as a part of a noise mitigation and
runway protection zone.  National attached a map to its complaint
showing these acquisitions.  According to National, its property
was the only non-residential improvement in this area.   While
Federal Aviation Administration (FAA) funds for the project were
approved, the grant was not large enough to enable the Commission
to acquire National's property.  
     The Commission announced its decision to proceed with the
acquisition project in August of 1992 and had National's property
appraised.  It acquired the residential properties in the area and
removed the improvements therefrom.  According to National, the
effect of these surrounding acquisitions left its property an
"island," as it became the sole property in the immediate vicinity
that had not been acquired by the Commission.  
     According to National, the acquisition of its property
remained a high priority for the Commission, as it is practically
impossible to extend the runway to the south.  The Commission's
pre-application for funds for the acquisition of National's
property remains on file with the FAA.  National attached a copy of
an official Commission map showing the intended runway extension,
which, in addition to mitigating noise, is necessary for reducing
current weight restrictions on aircraft, increasing capabilities of
non-stop flights, and installing specialized landing and lighting
systems.
     Between late 1993 and early 1994, the Commission prepared a
Capital Improvement Plan for the years 1995 through 1997.  The two
priority items in the plan were the extension of the runway and the
installation of the landing and lighting systems.  According to
National, the Commission has publicly announced, through the news
media, the filing and recording of maps, and the adoption of
resolutions, its plans to install the landing and lighting systems
in the vicinity of National's property.  As part of this plan, the
Commission applied to the FAA for permission to impose a $3.00 per
passenger facility charge, the proceeds of which would be used to
retire revenue bonds to fund the project.  An approved layout plan
is on file with the FAA.
     According to National, its business is capital intensive and
requires frequent maintenance to keep equipment in good working
order.  National alleges that substantial expenditures, including
the purchase and installation of new equipment, would be made at
great risk due to the uncertainty as to whether these costs could
be recovered in subsequent litigation or by agreement with the
Commission.  
     In 1989, National's competitors approached National's
suppliers and informed them of newspaper articles about the
proposed runway extension.  As the suppliers are required by law to
dispose of inedible animal by-products promptly, National's
competitors were able to convince a number of National's customers
to change rendering services.  According to National, prospective
purchasers of National's business, once informed of the proposed
airport expansion, have immediately lost interest in buying the
company.  Additionally, National has had extreme difficulty in
retaining its management and employees. 
     In sum, National alleges it has suffered material harm to its
operations to the extent that it has been substantially deprived of
the use and enjoyment of its property.  As a result of the
Commission's actions, which have "effectively frozen [its]
operation and have depressed land values," National claims that its
property has been rendered unfit for its highest and best
commercial use.  National further claims that the Commission's
actions have resulted in permanent and substantial interference and
deprivation amounting to an actual or constructive taking in
violation of the Fifth Amendment to the United States Constitution
and Ark. Const. art, 2,  22.  National has asked for the fair
market value of its property from the date the taking was
effective.  In its original complaint, National claimed that this
amount is in excess of the $559,600.00 appraisal figure obtained by
the Commission.     
     The Commission filed a motion to dismiss, asserting that
National had failed to assert facts constituting actual trespass or
a physical taking under Arkansas law, and that National had made no
showing of total diminution in the value of its property.  National
filed a response to the motion, claiming that it need only
demonstrate that the Commission acted in a manner that
substantially diminished the value of its property.  The trial
court heard arguments from counsel at a hearing on the motion, but
no evidence or witness testimony was presented.  At the conclusion
of the hearing, the trial court ruled that the adverse impact on
the commercial use of National's property appeared to be caused by
its competitors rather than the direct result of the Commission's
actions.  In determining that National's complaint did not state a
cause of action, the trial court further observed that the law in
Arkansas on inverse condemnation has historically involved some
type of invasion or trespass where governmental activities
interfere substantially with the quiet enjoyment of the subject
property or diminish its commercial use.  The trial court
subsequently entered a judgment of dismissal pursuant to Ark. R.
Civ. P. 12(b)(6), from which National takes this appeal.  
     When reviewing an order granting a motion to dismiss to
determine whether dismissal was proper, we treat the allegations in
the pleading as true and view those allegations in a light most
favorable to the appellant. Mann v. Orrell, 322 Ark. 701,