No. 81-36 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1981 

EARLE AND HAZEL KNIGHT, et al., 

Plaintiffs and Appellants, 

THE CITY OF BILLINGS, a 

municipal corporation, 

Defendant and Respondent. 

Appeal from: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone 

Honorable Robert Wilson, Judge presiding. 

Counsel of Record: 

For Appellants: 

Pedersen, Herndon, Harper, Munro & Hartman, Billings, 

Montana 

Rodney Hartman argued, Billings, Montana 

For Respondent: 

Peterson Law Offices, Billings, Montana 

K. D. Peterson argued, Billings, Montana 

Submitted: November 30, 1981 

Decided: February 25, 1982 
Mr. Justice John C. Sheehy delivered the Opinion of the Court. 

This is an appeal from a judgment by the District 

Court, Thirteenth Judicial District, Yellowstone County, 

finding no inverse condemnation by the City of Billings of 

residential properties owned by the plaintiffs. 

Plaintiffs are individual homeowners who own residences 

on the west side of 24th Street West between Lewis and 

Broadwater Avenues in Billings. They purchased their properties 

in the years between 1954 and 1976. 

Twenty-fourth Street West is a major arterial street in 

Billings. It provides substantial "desire-line" access from 

a large portion of the Billings environs to a substantial 

mall, high school, church, and commercial area, located 

south of these residences. A part of the commercial area 

extends along 24th Street West itself. 

The residences are all located within the Lillis Subdivision which was created in 1954. Lillis Subdivision was 

not in the City of Billings at the time of its creation. 

The land in Lillis Subdivision is subject to private deed 

restrictions which allow only single family dwellings until 

the year 2000. The portion of 24th Street West involved in 

this case was annexed to the City in 1959. Before that, in 

1953, Yellowstone County had restricted the speed limit on 

24th Street West to 35 miles per hour, and had installed stop 

signs for traffic entering the street from the east and west 

at intersections. Until 1972, 24th Street West was a two 

lane roadway with on-street parking. The first traffic lights 

on the street were installed at the intersection of Grand 

Avenue in 1970. The second followed in 1971 and there are 

at least four traffic lights now in existence at intersections 

along 24th Street West. 
In 1972, 24th Street West was widened to provide four 

lanes of traffic and the residences here involved lost their 

on-street parking rights or privileges. 

Rimrock Mall, now Montana's largest shopping center, 

was opened in 1975 on 24th Street West, south of plaintiffs' 

properties. There are also along the street two large 

discount stores, a supermarket, a hardware store, a minimall, two conveniem stores, and several office buildings. 

Another supermarket is presently under construction on 24th 

Street West near plaintiffs' properties. The arterial also 

provides access to an interstate highway from the city 

proper. 

Traffic development, as shown by traffic counts on 24th 

Street West indicates: in April 1966, an average daily 

vehicular traffic flow of 6,330 vehicles; in August 1970, 

9,684 vehicles; on July 15, 1975, a traffic count of 17,040; 

and in 1979, an average daily traffic count of 18,018. Projections for the year 2000 range from 23,350 to 36,850 

average daily vehicles. 

In 1976, the City of Billings held public meetings concerning a possible condemnation procedure on 24th Street 

West, and thereafter, widened the arterial by condemning 

real property exclusively on the east side. No real property 

was taken from the west side of 24th Street West, where the 

plaintiffs have their properties. 

The District Court found that no changes on 24th 

Street West were undertaken by the City until conditions 

existed which indicated that an adjustment was necessary to 

handle the traffic already there. 

Plaintiffs ' proper&s a subject to a zoning ordinance 

which was adopted in 1972. The zoning ordinance followed 
extensive public hearings and an election. The properties 

on which plaintiffs have their residences were zoned R-7200, 

which zoning classification still applies to plaintiffs' 

properties. An R-7200 classification permits single family 

dwellings, and also duplexes if the lots involved encompass 

more than 9,600 square feet. None of the lots owned by 

plaintiffs meet the area specification necessary for duplex 

properties. All of the plaintiffs' properties here involved 

are single family dwellings and have been during all of the 

time that the plaintiffs have occupied the same, through the 

events that are being recounted here. 

In 1978, after the condemnation of the property from 

the east side of 24th Street West, the street was widened by 

the addition of a fifth lane situated in the middle of the 

other four lanes, to provide for left-hand turns from 24th 

Street West. Also in 1978, the City created a lighting 

maintenance district to provide lighting for the arterial. 

The lights used were of a higher intensity than normally 

found on a residential street. Several of the plaintiffs 

protested the proposal for the lighting district, but their 

protest was denied as insufficient when numbered against all 

of the properties that were included in the lighting maintenance 

district. 

Also in 1978, the plaintiffs petitioned the City Council 

of Billings for a zoning change which would permit plaintiffs' 

properties to be reclassified residential professional. 

However, a protest from the remaining property owners in 

Lillis Subdivision, located on streets other than 24th 

Street West, triggered the application of section 76-2-305, 

MCA. Section 76-2-305 provides that a proposed zoning change 

that is protested shall not become effective except by a 
favorable vote of three-fourths of all the members of the 

city council. In this case, the proposed zoning change was 

defeated because only six of the ten council members, not 

the required three-fourths, voted in favor of the change. In 

consequence, plaintiffs' properties remain zoned R-7200 for 

residential purposes only. 

After the failure of their petition for a zoning change, 

the plaintiffs filed this action against the City of Billings 

charging inverse condemnation of their properties. 

At trial, plaintiffs' witnesses characterized the 

changes that had occurred on 24th Street West. Formerly it 

was relatively quiet, and had but two traffic lanes. The 

front yards of the residences were suitable for family or 

social gatherings. Residents or their guests could park 

their cars on the street. There was no difficulty getting 

in and out of driveways. Sidewalks were safe from passing 

traffic. Noise and pollutant levels were low and not distracting 

or harmful. There was no undue refuse. Family pets were 

safe. There was no noticeable vibration from passing traffic 

and the area was quiet at night. 

After the 1976-78 condemnation project on 24th Street 

West was completed, conditions changed. There is now no free 

access into driveways, but instead long waits in the fifth 

lane for passing traffic. Free access to and from the 

driveways is nearly impossible. There have been traffic 

accidents in front of the residential properties, and sometimes 

upon their properties. Children and pets are not safe in 

the front yards and pedestrian traffic along the sidewalks a 

few feet from passing vehicular traffic is dangerous. Average 

traffic flows at 22 miles per hour past their houses. Rocks 

and rubbish from passing traffic are thrown upon their lawns 
and into their houses. The sidewalks are constantly filthy, 

especially in winter. The noise from the passing traffic is 

so loud that front doors must be closed for conversation to 

be heard inside. Traffic noise is loud and aggravating at 

night. The houses cannot be ventilated from the east side 

because of dust and exhaust fumes. The houses and contents 

are constantly subject to vibrations. One of the residents 

testified that she had to tape her windows to avoid the 

bright light from the high intensity sodium vapor lighting 

that was installed. 

There appears to be general agreement that the houses 

are unsuitable for residential living. A local realtor 

testified that it was "inappropriate" that the properties be 

zoned single family residential. The former city engineer, 

though testifying for the City, stated that he would "not 

want to live in one of those houses." The City Planning Department representative testified that he does not consider it 

appropriate to have residential housing along that section 

of 24th Street West. The City Zoning Commission in fact 

recommended the zoning change which was denied by the City 

Council. The District Court said: 

"By reason of changed conditions on 24th Street 

West, said properties are no longer desirable 

for residential use and cannot be put to the 

highest and best use without a change in zoning 

restrictions and regulations." 

The District Court, however, found that the conditions 

on 24th Street West were not caused by the City but by persons 

using business establishments situated on 24th Street West; 

that the widening project of 1978 merely accomodated the 

existing traffic in a "more efficient, more safe, less noisy 

manner and with less pollution potential;" that the deed 

restrictions were more restrictive than the R-7200 zoning; 
that the plaintiffs' real properties were less valuable in 

their present situs than they would be in a different neighborhood, 

but that nevertheless the value of their real properties had 

not been sufficiently lessened to constitute a taking by the 

City of Billings; that the actions of the City of Billings 

were within the proper exercise of the City's police power. 

Issues raised by the plaintiffs are that (1) the District 

Court erred in holding there was no inverse condemnation; 

(2) the District Court erred in holding that the City of 

Billings acted within its police power and that it was not 

liable for damages; (3) the District Court erred in failing 

to take judicial notice of its own files and decisions in 

two civil causes involving restrictions on nearby properties; 

and (4) the District Court erred in holding that the private 

deed restrictions precluded any claim for damages for inverse 

condemnation. 

The City contends that the only issues on this appeal 

are whether the City caused the plaintiffs' real properties to 

be inversely condemned because of changes in the conditions 

of 24th Street West or by failure to grant a zone change or 

both. 

We turn first to a consideration of whether under the 

facts of this case, an inverse condemnation of plaintiffs' 

propertksoccurred. The City vigorously contends, and the 

District Court agreed, that the actions of the City were in 

response to the burgeoning development of commercial and 

other enterprises along 24th Street West. The City further 

contends, and the District Court agreed, that the City, in responding 

to those burgeoning pressures, validly exercised its police 

power in widening the street, installing high intensity 

lights, and providing traffic signals to facilitate a greater 
flow of traffic past plaintiffs' properties. In essence, 

the City is claiming, and the District Court agreed, that it 

did not create the business growth, it merely adapted to it. 

It is probable that there are few, if any, cases of 

inverse condemnation in which the same argument could not be 

made. In that area of law where inverse condemnation has 

most notably expanded--where airports have been constructed 

in populated areas and the resultant low-flying landing and 

take-off of jets has disturbed residential properties-- 

it is certainly true that the airport authorities have 

merely adapted to changing transportation patterns from land 

traffic to air traffic in providing airports. Yet the cases 

recognize that inverse condemnation has occurred, and recovery 

is allowed on the principle that an "air easement" has 

been taken, Griggs v. County of Allegheny, Pennsylvania 

(1962), 369 U.S. 84, 82 S.Ct. 531, 7 L.Ed.2d 585; United States 

v. Causby (1946), 328 U.S. 256, 66 S.Ct. 1062, 90 L.Ed. 1206; 

or upon the theory of nuisance, Thornburg v. Port of Portland 

(1962), 233 Or. 178, 376 P.2d 100. It is not, however, a 

complete defense to an inverse condemnation suit that the 

authority was exercising police power. There is no question 

that here the City of Billings was validly exercising its 

police power. That fact, however, standing alone, does not 

prevent an inverse condemnation suit. 

In Mattoon v. City of Norman (Okla. 1980), 617 P.2d 

1347, the plaintiff commenced a class action for inverse condemnation against the City because of the adoption of a 

flood plain ordinance which operated to take plaintiff's 

property without due process of law. The city claimed it was 

validly exercising its police power. The Oklahoma court 

said: 
"The defendant claims that the Ordinance 

is a valid exercise of its police power through 

zoning and cannot constitute a governmental 'takinge 

of property. This is not the test in Oklahoma. 

We have never held that a finding that the exercise 

of police power is valid absolutely precludes 

compensation for property taken or damaged by such 

exercise. In EClting cases], we said: 

"'It is a universal principle that wherever an 

individual' s right of ownership of property 

is recognized in a free government, other rights 

become worthless if the government possesses uncontrollable power over the property of the individual. 

The constitutional guaranty of the right to own and 

use property is unquestioned. Thus the claim that 

particular action is taken under the police power 

cannot justify disregard of constitutional inhibitions.'" 

617 P.2d at 1349. 

Nor is it important that an actual physical taking of 

the plaintiffs' properties has not occurred. Montana has a 

constitutional provision, Art. 11, 5 29, which states: 

"Eminent Domain,. Private property shall not 

be taken or damaged for public use without 

just compensation to the full extent of the 

loss having been first made to or paid into 

court for the owner. In the event of litigation, 

just compensation shall include necessary 

expenses of litigation to be awarded by the court 

when the private property owner prevails." (Emphasis 

added. ) 

This court recognized inverse condemnation without 

physical invasion of the property in Less v. City of Butte 

(1903), 28 Mont. 27, 72 P. 140. There the court recognized 

the words "or damaged" in the then existing constitution and 

said: 

"It seems very clear to us that this 

section was drafted in the broad language 

stated for the express purpose of preventing 

an unjust or arbitrary exercise of the power 

of eminent domain. It overturns the doctrine 

that one owning city or town property must 

continually live in dread of the changing whims 

of successive boards of aldermen. Constitutions 

which provide that 'private property shall 

not be taken for public use without just 

compensation' are but declaratory of the common 

law, and contemplate the physical taking of 

property only. Under constitutions which provide 

that property shall not be 'taken or damaged' it 
is universally held that 'it is not necessary that 

there be any physical invasion of the individual's 

property for public use to entitle him to compensation." 72 P. at 141. 

The respected former chief judge of the Court of Appeals 

for the Tenth Circuit, the Hon. Alfred Murrah, proposed this 

test, though writing in a dissent, for inverse condemnation: 

"As I reason, the constitutional test in each 

case is first, whether the asserted interest 

is one which the law will protect; if so, 

whether the interference is sufficiently 

direct, sufficiently peculiar, and of sufficient 

magnitude to cause us to conclude that fairness 

and justice, as between the State and the 

citizen, requires the burden imposed to be 

borne by the public and not by the individual 

alone." Batten v. United States (10th Cir. 

1962), 306 F. 2d 580, 587, cert.den., 371 U.S. 

955, 83 S.Ct. 506, 9 L.Ed.2d 502. 

Here the asserted interest of the property owners is 

one which the law will protect. Certainly the right to the 

peaceful possession of residential property is the basis of 

such cases as Causby and Griggs, supra. The interference 

with plaintiffs' properties has been direct; it is peculiar 

in the sense that the facts here are unique; and the interference is of sufficient constitutional magnitude since the 

proof in this case showed that there had been a 20 to 30 

percent reduction in the value of the individual residential 

properties, and that the value of each "as is" is $10,000 to 

$15,000 less than their values if the area were zoned residential 

professional. Though no physical taking has occurred, the 

result of the City's actions has been to impose a servitude, 

a limitation upon the use and marketability of plaintiffs' 

properties as residential. 

Not to be forgotten is the condemnation by the City of 

property from one side of the street, and not from the 

other side where the plaintiffs reside, in the 1976-78 widening 
of 24th Street West. The owners on the east side of the 

street were compensated either in eminent domain proceedings, 

or by agreement with the City. The singling out of one 

group as against another to bear a burden weighed heavily in 

Branning v. United States .(Ct. C1. 1981) , 654 F. 2d 88. In 

that case, trainees at a United States Marine Corps Air 

Station, in practicing for landings on carrier decks, were 

required to hold their jet airplanes with noses up and tails 

down, and with near maximum power and noise associated with 

low speed. This exercise was conducted over the plaintiff's 

land. The Air Corps could have performed this exercise 

elsewhere but selected air space over the plaintiff's land 

for it because alternative locations were deemed more objectionable. The Court of Claims said: 

"Thus, plaintiff was consciously singled 

out or selected to bear a burden which defendant 

also consciously elected not to impose on others, 

even others otherwise s imilarly situated. This 

is a classic statement of a taking situation." 

654' F.2d at 90. 

We therefore hold and conclude that under the unique 

facts of this case, the City of Billings, although exercising 

its police power validly, and validly refusing to amend its 

zoning ordinance on plaintiffs' petition, nonetheless thereby 

interfered with the private property interests of the plaintiff 

so as to constitute a "taking" by inverse condemnation. 

We caution that this holding is limited to the situation here, 

where a physical taking across the street occurred. 

We turn now to consider whether the declaration of 

restrictions of Lillis Subdivision limiting the use of 

plaintiffs' lots to residential purposes until the year 2000 

prevents recovery through inverse condemnation. 

On analysis one must concede, it seems to us, that the 

presence of the private deed restrictions in Lillis Subdivison 
is a non sequitur as a defense to inverse condemnation here. 

The restrictions contemplate the use of plaintiffs' residences 

for residential purposes. It is not the restrictions that 

are damaging plaintiffs' properties; it is the action of the 

City in making the improvements that is making their properties 

nearly unusable and unmarketable for residential purposes. 

Under section 76-2-305, MCA, the City Council validly refused 

to amend the zoning ordinance for plaintiffs' properties to 

reclassify to residential professional, which would have 

substantially mitigated the plaintiffs' losses. The valid 

refusal of a zoning amendment, which nailed down the servitude 

imposed on plaintiffs' properties, stands on no higher 

ground, insofar as inverse condemnation is concerned, than 

a valid exercise of police power. What remains, above all, 

after the City has acted, validly or invalidly, is that 

plaintiffs' properties, through the actions of the City, 

have become unsuitable for residential use, and the plaintiffs' 

right to use their properties as contemplated by the deed 

restrictions is limited to a degree of constitutional magnitude. 

In this connection, plaintiffs asked during the trial 

that the District Court take judicial notice of two of its 

own files, wherein the same District Court had held that 

similar restrictions on nearby properties were void and 

unenforceable by reason of the changed conditions on and 

near 24th Street West. While the files were certainly relevant 

under the view taken by the District Court that the deed 

restrictions prevented plaintiffs' recovery in inverse 

condemnation, ik is our view that the deed restrictions only 

contemplate a residential use which cannot now be obtained 

by the plaintiffs. It is therefore immaterial to our decision 

that the District Court did not take judicial notice of the 

offered civil files, because the presence of the deed 
restrictions is not a bar to plaintiffs' action for inverse 

condemnation. 

The finding of the District Court that the improvement 

of 24th Street West "accomodates the existing traffic in a 

more efficient, more safe, less noisy manner and with less 

pollution potential" is clearly erroneous. Rule 52(a), 

M.R.Civ.P. The plaintiffs here testified in detail as to 

the effect of the improvements and the conditions which severely 

limited the use of their properties for residential purposes. 

The testimony of the city engineer, on which the District 

Court apparently relied, was taken from national studies and 

national guides for improvements, not directly related to 

plaintiffs' properties. No attempt was made by the City to 

rebut the testimony of the property owners as to noise, 

traffic and pollution. 

The District Court, in its findings, set forth the 

purchase prices paid by the plaintiffs for their residences 

as compared to their "as is" values after the 1976-78 improvements 

to 24th Street West. In each instance the price paid for 

the property is less than the "as is" value. Thus, the 

District Court apparently found no damages suffered by 

plaintiffs. In effect, the District Court gave the City the 

advantage of inflation, which has affected the value not only 

of property on 24th Street West, but of all real property in 

Billings. However, the measure of damages in an inverse 

condemnation case is the difference between the fair market 

value of the property before and after the condemnation. The 

relevant values in this case are the fair market value as 

residential property before the condemnation, and the fair 

market value by reason of the depreciation as residential 

property (see section 70-30-302, MCA), where the property 

not taken has been injuriously affected. 
In case it is important after remand, the right to an 

inverse condemnation remedy does not pass to subsequent 

purchasers after the inverse condemnation. Williams v. City 

of Valdez (Alaska 1981), 624 P.2d 820. 

We therefore remand this cause to the District Court 

with directions to enter an order therein that the residential 

properties of the plaintiffs have been inversely condemned 

by the City of Billings in making the improvements to 24th 

Street West in 1976-78, which order shall serve the office 

of a preliminary condemnation order as provided in section 

70-30-206(2), MCA; and thereupon to take such further nroceedings 

under the statutes relating to eminent domain as shall 

determine the damages, if any, sustained by the plaintiffs. 

/1 

We Concur: 

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L J-6L2--4--hLLk;$ &---- ,J Justice 

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chief Justice,