Source: https://law.justia.com/cases/federal/appellate-courts/F2/729/402/313869/
Timestamp: 2019-04-19 17:09:14+00:00

Document:
G.T. Nebel, argued, Bass, Berry & Sims, Nashville, Tenn., for plaintiff-appellant.
Robert L. Estes, Thomas M. Donnell, Jr., M. Milton Sweeney, argued, Stewart, Estes & Donnell, Nashville, Tenn., for defendants-appellees.
Before KEITH, KENNEDY and WELLFORD, Circuit Judges.
Hamilton Bank of Johnson City appeals from a judgment that as a matter of law it is not entitled to damages for a temporary taking of its property under the fifth and fourteenth amendments. Hamilton's claims arise from appellee Williamson County Regional Planning Commission's refusal to allow Hamilton to complete construction of a residential subdivision.
* Hamilton is the successor in interest of the developers of a tract of land in Williamson County, Tennessee. In 1973, Williamson County changed its zoning ordinances to permit cluster residential developments. Under cluster development houses may be built on smaller lots than would otherwise be allowed, upon the condition that sufficient land within the development be left as "open space." In 1973 the planning commission approved a preliminary plat for a proposed cluster development covering 676 acres, to be known as Temple Hills Country Club Estates. A notation on the approved plat indicated that the total number of allowable dwelling units on the tract was 736. However, lot lines were only drawn in for 469 units; the areas in which the remaining 267 units were to be placed were left blank and bore the notation "this parcel not to be developed until approved by the planning commission." The planning commission minutes reflect that the plat was approved after considerable discussion of whether the plat complied with density requirements. The plat was apparently in compliance under one interpretation of the zoning regulations, but not under an alternate interpretation. There was also some disagreement over the method to be used in calculating slopes in order to determine whether the development would violate the requirement that lots not be placed on slopes greater than 25%. The total number of units approved by the planning commission is in dispute. Hamilton introduced at trial a letter signed by six members (a majority) of the 1973 planning commission stating that 736 units had been approved.
Development of the project began. The developers dedicated an easement of open space to the county covering about 245 acres, most of which was to be used as a golf course, they built roads, and they installed sufficient utility lines to accommodate the entire development. Before construction was actually commenced on any particular section, a final plat for that section was submitted for approval by the planning commission. Between 1973 and 1979, the commission approved final plats for several sections. The preliminary plat was also reapproved several times between 1973 and 1979. A witness for Hamilton testified that the developers spent three to five million dollars for improvements to the property during this time.
In 1977, the zoning regulations were changed. The planning commission continued to apply the 1973 regulations to Temple Hills, however, since the project had originally been approved under those standards. This policy changed in 1979, when the planning commission decided to consider plats submitted for renewal under the regulations then in effect rather than those in effect when initial approval had been given. On August 16, 1979, the plat was renewed under the 1979 regulations.
In October 1980, the plat was again submitted to the planning commission for approval. This time the plat was disapproved, for two reasons: non-compliance with density requirements, and lots placed on slopes greater than 25%. In November 1980, Hamilton through foreclosure acquired the property that had not yet been developed and sold. Hamilton submitted a preliminary plat, which apparently included plans for development of the 258 remaining undeveloped acres by building 476 dwelling units to bring the development's total to 688. The planning commission disapproved this plat on June 18, 1981, listing eight objections.
Hamilton then brought this action against the planning commission under five theories: (1) taking without just compensation; (2) violation of procedural due process; (3) violation of substantive due process; (4) denial of equal protection; and (5) estoppel under state law from not allowing the project to proceed.
After a trial, the District Court granted the planning commission's motion for a directed verdict on the substantive due process and equal protection claims. The case was submitted to the jury on the remaining theories. The jury returned a verdict with answers to special interrogatories to the effect that Hamilton had not been denied procedural due process, but had been denied economically viable use of its property in violation of the just compensation clause of the fifth amendment, and that the planning commission was estopped under state law from requiring Hamilton to comply with the present zoning regulations as opposed to the 1973 regulations. The jury assessed damages against the planning commission in the amount of $350,000 for the temporary taking of Hamilton's property for the period from the disapproval of the plat to the time of trial.
The District Court issued a permanent injunction which required the planning commission to apply the 1973 regulations to Temple Hills consistently with its prior decisions, to approve the plat submitted in 1981, and to comply with ten specific requirements governing its future actions toward Temple Hills.
Any damages which plaintiff suffered resulted from an attempt by the local government to apply regulations in a manner impermissible under state law. Because the state law itself prevents continued application of those regulations, there can be no taking of property prohibited by the Just Compensation Clause of the Fifth Amendment.
The District Court also modified its permanent injunction to merely enjoin the planning commission from applying post-1973 regulations to Temple Hills, and denied Hamilton's motion for attorney fees.
Hamilton appeals from the judgment notwithstanding the verdict and asks this Court to order judgment based on the jury's damage award. Alternatively, Hamilton argues that the directed verdict on the substantive due process and equal protection claims was in error and requests a remand for trial on those issues. Hamilton also argues that it is entitled to its attorney fees.
On a motion for judgment n.o.v. as on a motion for a directed verdict, the district court must determine whether there was sufficient evidence presented to raise a material issue of fact for the jury.... Furthermore, the standard remains the same when the trial court's decision is reviewed on appeal.
O'Neill v. Kiledjian, 511 F.2d 511, 513 (6th Cir. 1975). We must view the evidence in the light most favorable to Hamilton, drawing from that evidence all reasonable inferences in Hamilton's favor. Pike v. Benchmaster Mfg. Co., 696 F.2d 38, 40 (6th Cir. 1982); National Polymer Prods. v. Borg-Warner Corp., 660 F.2d 171, 178 (6th Cir. 1981). The District Court's judgment on the taking issue must, therefore, be reversed if the evidence supports an award for a taking of Hamilton's property without just compensation within the meaning of the fifth amendment. We thus turn to that question.
The Supreme Court has not set forth a clear standard by which to determine whether particular conduct amounts to a "taking" under the fifth amendment."1 Resolving this question generally requires an ad hoc, factual inquiry. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164, 3171, 73 L. Ed. 2d 868 (1982); Kaiser Aetna v. United States, 444 U.S. 164, 174-175, 100 S. Ct. 383, 389-390, 62 L. Ed. 2d 332 (1979); Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 98 S. Ct. 2646, 2659, 57 L. Ed. 2d 631 (1978).
A taking does not require an actual physical occupation of the property or formal condemnation proceedings. Amen v. City of Dearborn, 718 F.2d 789 (6th Cir. 1983). The Supreme Court established in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43 S. Ct. 158, 67 L. Ed. 322 (1922), that governmental regulation affecting an owner's use of his property may constitute a taking.2 In Pennsylvania Coal, a statute prohibited mining coal in such a way as to cause a residence to subside, where the owner of the underground mining rights was not the owner of the surface habitation rights. The Court employed a practical economic analysis to determine that application of the statute effected a taking, saying: "What makes the right to mine coal valuable is that it can be exercised with profit. To make it commercially impracticable to mine certain coal has very nearly the same effect for constitutional purposes as appropriating or destroying it." 260 U.S. at 414, 43 S. Ct. at 160.
The application of a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests, see Nectow v. Cambridge, 277 U.S. 183, 188 [48 S. Ct. 447, 448, 72 L. Ed. 842] (1928), or denies an owner economically viable use of his land, see Penn Central Transp. Co. v. New York City, 438 U.S. 104, 138 n. 36 [98 S. Ct. 2646, 2666 n. 36, 57 L. Ed. 2d 631] (1978).
447 U.S. at 260, 100 S. Ct. at 2141. The Court in Agins also held that restricting the spread of urbanization was a legitimate governmental purpose. Since this purpose was served by the planning commission's actions now in dispute,3 our inquiry must focus upon whether Hamilton has been denied economically viable use of its land.
It is well established that there is no taking merely because the owner's best or most profitable use of the property has been denied. Penn Central Transp. Co. v. New York City, 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978). It is similarly true that diminution in property value alone does not constitute a taking. Penn Central, supra; Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S. Ct. 114, 71 L. Ed. 303 (1926); Hadacheck v. Sebastian, 239 U.S. 394, 36 S. Ct. 143, 60 L. Ed. 348 (1915). The District Court instructed the jury concerning these points, and also told the jury that "there can be no impermissible taking within the meaning of the Fifth Amendment if the regulations as applied permit economically viable use of the property." Tr. at 2015. See Penn Central, supra.
The planning commission's primary contention on appeal, however, is not that the property retains an economically viable use but rather that Hamilton has never submitted a plat that complies with either the 1973 or the 1977 regulations, and thus never acquired rights in developing the property that could have been taken away by the commission.
[I]f you find that [Hamilton] in good faith made a substantial change in position or incurred extensive obligations and expenses in reliance upon the previous approval of the Temple Hills project by the [planning commission] so that it would be inequitable and unjust to destroy the right to develop Temple Hills which [Hamilton] had acquired, then you should ... find that the [planning commission was] estopped or prevented from exercising [its] regulatory powers in such a way as to deprive [Hamilton] the right to develop the Temple Hills project.
The jury returned a verdict in favor of Hamilton on the estoppel issue. It must, therefore, have found that Hamilton had acquired a right to develop Temple Hills according to the plats that had been submitted. There is sufficient evidence in the record to support such a finding. The planning commission approved plans for the development on numerous occasions, and there is considerable evidence that the planning commission intended to and did approve a maximum of 736 units.
Even if Hamilton had not had a vested right under state law to finish the development, its claim that a taking occurred would not necessarily be foreclosed. Instead of looking to see whether "rights" have been destroyed, the Supreme Court in zoning cases has engaged in an economic analysis of the degree of interference with "investment-backed expectations." "The economic impact of the regulation, especially the degree of interference with investment-backed expectations, is of particular significance." Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164, 3171, 73 L. Ed. 2d 868 (1982). See also Penn Central Transp. Co. v. New York City, 438 U.S. 104, 130 & n. 27, 98 S. Ct. 2646, 2662 & n. 27, 57 L. Ed. 2d 631 (1978). The jury was entitled to find that Hamilton and its predecessor in interest had a reasonable expectation that the development could be completed, in light of the evidence that the commission approved the preliminary plats on numerous occasions with the knowledge that a total of 736 units were intended. This was the developers' "primary expectation concerning the use of the parcel," Penn Central, 438 U.S. at 130, 98 S. Ct. at 2662, and was backed by considerable investment in land and improvements.
The District Court found that there had been a "significant" interference with investment-backed expectations, but nevertheless held that the evidence did not support a taking because it considered the taking verdict inconsistent with the estoppel verdict. In its memorandum opinion the court discussed two reasons for finding the jury's taking verdict unsupported. First, the court reasoned that the estoppel verdict made the denial of property only a temporary one, which could not constitute a fifth amendment taking. A temporary deprivation of property, however, can be a taking and "should be analyzed according to the same framework applied to permanent irreversible 'takings.' " San Diego Gas & Electric Co. v. City of San Diego, 450 U.S. 621, 657, 101 S. Ct. 1287, 1307, 67 L. Ed. 2d 551 (1981) (Brennan, J., dissenting). See also Kimball Laundry Co. v. United States, 338 U.S. 1, 69 S. Ct. 1434, 93 L. Ed. 1765 (1949); United States v. Causby, 328 U.S. 256, 66 S. Ct. 1062, 90 L. Ed. 1206 (1946); United States v. Petty Motor Co., 327 U.S. 372, 66 S. Ct. 596, 90 L. Ed. 729 (1946); United States v. General Motors Corp., 323 U.S. 373, 65 S. Ct. 357, 89 L. Ed. 311 (1945).
Although an unlawful application of zoning regulations can constitute a taking, the question remains whether damages are an appropriate remedy. This question was presented to the Supreme Court in San Diego Gas & Electric Co. v. City of San Diego, 450 U.S. 621, 101 S. Ct. 1287, 67 L. Ed. 2d 551 (1981). There the Court was asked to rule that a state must provide damages to a landowner who has suffered a regulatory taking. The California court had held that only injunctive relief was available. Although this question was not answered by the majority of the Court, which held the case non-justiciable for lack of a final order, it was discussed by Justice Brennan in his dissent. The dissent was joined in by four justices. Justice Rehnquist, concurring with the majority, said specifically that he "would have little difficulty agreeing with much of what is said in the dissenting opinion of Justice Brennan," 450 U.S. at 633-34, 101 S. Ct. at 1294-95; and the majority opinion itself noted that the constitutional merits of the claim were "not to be cast aside lightly," id. at 633, 101 S. Ct. at 1294.
Invalidation unaccompanied by payment of damages would hardly compensate the landowner for any economic loss suffered during the time his property was taken.
Moreover, mere invalidation would fall far short of fulfilling the fundamental purpose of the Just Compensation Clause. That guarantee was designed to bar the government from forcing some individuals to bear burdens which, in all fairness, should be borne by the public as a whole.... If the regulation denies the private property owner the use and enjoyment of his land and is found to effect a "taking," it is only fair that the public bear the cost of benefits received during the interim period between application of the regulation and the government entity's recission of it. The payment of just compensation serves to place the landowner in the same position monetarily as he would have occupied if his property had not been taken.
[O]nce a court establishes that there was a regulatory "taking," the Constitution demands that the government entity pay just compensation for the period commencing on the date the regulation first effected the "taking," and ending on the date the government entity chooses to rescind or otherwise amend the regulation.
450 U.S. at 653, 101 S. Ct. at 1305 (footnotes deleted). We agree with Justice Brennan's reasoning and hold that compensation must be paid for a temporary regulatory taking.
The jury's finding that the planning commission effected a taking of Hamilton's property was therefore supported by the evidence, and judgment notwithstanding the verdict was improper. The jury was correctly instructed on the question of damages under the theory of a temporary taking and awarded $350,000 in damages. This amount is supported by expert testimony, so Hamilton is entitled to the jury's verdict and judgment should be entered in its favor for $350,000.
The District Court granted directed verdicts in favor of the planning commission on Hamilton's substantive due process and equal protection claims. On appeal, Hamilton now argues that these rulings were in error. However, Hamilton presents these arguments as an alternative to its taking claim and asks for no relief beyond that requested under the taking claim. In light of our decision on the taking question, therefore, we need not reach these issues.
Hamilton also appeals the District Court's denial of attorney fees under 42 U.S.C. § 1988. That statute by its terms provides that an award of attorney fees is a matter for the discretion of the court. We must, therefore, remand the case so that the District Court may exercise its discretion in determining whether Hamilton is now entitled to attorney fees.
Accordingly, the judgment of the District Court is reversed and remanded for proceedings consistent with this opinion.
I would agree with the majority's conclusion that "the Supreme Court has not set forth a clear standard by which to determine whether particular conduct amounts to a 'taking' under the fifth amendment."1 I would also agree with its conclusion that "the purpose served by the Planning Commission's actions now in dispute ... [is] ... a legitimate public purpose." It seems clear that depriving the owner of the most profitable use of land and the fact that governmental planning or zoning action substantially diminishes the value of land does not amount to a taking. Penn Central Transp. Co. v. New York City, 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978); Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S. Ct. 114, 71 L. Ed. 303 (1926).
The testimony of the Bank's expert, Hunt, in this case was that if the Planning Commission's actions, as interpreted by the Bank's employee (Ragsdale) would admit only 67 additional building sites on the contested property, and would eliminate 409 potential building sites from the development plan, there would be a loss in excess of $1,000,000 to the developer. Hunt was of the opinion, based on this assumption, that the property would have no significant market value "other than that which someone would pay for open space." Examination of the record before us, however, indicates that it was virtually conceded that even applying 1979 standards a total 548 units would be approved on the property. Thus, the elimination of 409 potential units would leave a substantial number yet to be developed. There was no evidence of a formal request by appellant for a variance to permit as many as 267 additional allowable dwelling units for future development as set out on the original 1973 preliminary plat and approved by the Planning Commission on later occasions; rather, appellant insisted that it had vested rights to develop 409 (or more) potential units. In sum, evidence in the case does not clearly indicate to me that economically viable use of the property was denied.
Even if the jury verdict in this case did establish a temporary deprivation and a denial of economically viable use of a part of the property, as apparently the district judge concluded that it did, I would agree with his ultimate holding that "... the temporary interference with the plaintiff's development backed expectations and any temporary diminution in value of the property, whether styled as a 'temporary taking' or otherwise, ... is essentially a question of law." He concluded that under the circumstances plaintiff was not entitled to damages as a matter of law since it could proceed under 1973 zoning regulations by reason of estoppel. Defendants, moreover, have insisted all along that plaintiff has never been in compliance with the 1973 zoning laws and regulations pertaining to allowable slope (building on a lot in excess of 25 degree slope not permitted) and with respect to some reduction of allowable units on the property because of elimination of some of the acreage by reason of its acquisition by a public authority for other purposes.
This case is really a quarrel over to what extent a "cluster" development of residential units is permitted on a parcel of land. The zoning ordinances or regulations on their face do not amount to a taking of the Bank property, which was acquired with notice of the application of these ordinances and regulations made by defendants. Agins v. City of Tiburon, 447 U.S. 255, 100 S. Ct. 2138, 65 L. Ed. 2d 106 (1980). I agree with the trial judge's conclusion that there has not been any taking requiring judgment under the Fifth Amendment.
Even if the appellants' ability to sell their property was limited during the pendency of the condemnation proceeding, the appellants were free to sell or develop their property when the proceedings ended. Mere fluctuations in value during the process of governmental decision-making, absent extraordinary delay, are "incidents of ownership. They cannot be considered as a 'taking' in the constitutional sense." Danforth v. United States, 308 U.S. 271, 285 [60 S. Ct. 231, 236, 84 L. Ed. 240] (1939). See Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784, 787 (CA 8), cert. denied, 444 U.S. 899 [100 S. Ct. 208, 62 L. Ed. 2d 135] (1979); Reservation Eleven Associates v. District of Columbia, 136 U.S.App.D.C. 311, 315-316, 420 F.2d 153, 157-158 (1969); Virgin Islands v. 50.05 Acres of Land, 185 F. Supp. 495, 498 (V.I.1960); 2 J. Sackman & P. Rohan, Nichols' Law of Eminent Domain Sec. 6.13 (3d ed. 1979).
Agins, n. 9 at 263, n. 9 100 S. Ct. at 2143.
The judgment of the California Supreme Court in Agins that the sole remedies available in an inverse condemnation claim, arising out of zoning activity similar to that made by the Bank here, were mandamus and declaratory judgment, was not disturbed by the United States Supreme Court.
There has been no physical invasion by defendants of plaintiff's property, either temporary or permanent. A "taking" of the property can be less readily found under these circumstances. Penn Central Transp., 438 U.S. at 124, 98 S. Ct. at 2659; Loretto v. Teleprompter, supra.
Penn Central Transp. Co., at 125, 98 S. Ct. at 2659.
102 S. Ct. at 3174.
The Supreme Court seems to imply that in a temporary taking where there is no invasion, physical occupation, or "seizure and direction" by the state of the landowner's property, no compensation is mandated. Central Eureka is cited, as apparently still good law in Teleprompter, 102 S. Ct. at 3174. In Hadacheck v. Sebastian, 239 U.S. 394, 36 S. Ct. 143, 60 L. Ed. 348 (1915), where 87 1/2% of value was taken by an ordinance precluding existing use, no compensation was found due.
Even if the trial judge reached his decision that compensatory damages were not allowable on the rationale that the zoning regulations were being applied in a manner inconsistent with Tennessee law, I would conclude that he, nevertheless, reached the right decision. Properly considered, there was questionable evidence in this case, at best, that all economically viable uses of the property had been even temporarily taken, or that reasonable "investment-backed expectations" had been arbitrarily eliminated. Plaintiff succeeded, moreover, in obtaining a declaratory judgment and injunction requiring that 1973 ordinances and regulations apply to future development of its property. I would not disturb the district court's decision in that respect.
In summary, I would conclude that the effects of defendants' actions did not "completely deprive the owner of all or most of [its] interest in the property." San Diego, 450 U.S. at 653, 101 S. Ct. at 1304. See, Goldblatt v. Town of Hempstead, 369 U.S. 590, 82 S. Ct. 987, 8 L. Ed. 2d 130 (1962). I would conclude further that even a temporary deprivation of the Bank's "investments-backed expectations" under the circumstances here does not establish an entitlement to compensatory damages. I do not agree that Justice Brennan's dissent in San Diego represents the views of a majority of the Supreme Court on this issue. The majority has not cited a single case allowing compensatory damages in a case where there has been a temporary interference with a landowner's right to develop his property in some economically viable fashion by reason of zoning actions, not involving an invasion of the property, occupation of it, or temporary seizure and possession of it.
However, in cases such as the one before us, where the application of a general zoning ordinance to a particular person's property does not initially deny the owner an economically viable use of his land, but thereafter does come to a result in such a denial due to changing circumstances, or where a zoning classification initially denies a property owner an economically viable use of his land, but the owner delays or fails to timely seek relief from such a classification, [by petitioning for rezoning, or contesting the initial general zoning regulation prior to its passage] we conclude that a "taking" does not occur until the municipality's governing body is given a realistic opportunity and reasonable time within which to review its zoning legislation vis-a-vis the particular property and to correct the inequity.
During the pendency of such proceedings to review and correct a zoning classification that denies an owner any economically viable use of his property, " [m]ere fluctuations in value during the process of governmental decisionmaking, absent extraordinary delay, are 'incidents of ownership. They cannot be considered as a "taking" in the constitutional sense.' " Agins v. City of Tiburon, 447 U.S. at 262-63 n. 9, 100 S. Ct. at 2142-43 n. 9 (quoting Danforth v. United States, 308 U.S. 271, 285, 60 S. Ct. 231, 236, 84 L. Ed. 240 (1939). Accord, Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784, 787 (8th Cir.), cert. denied, 444 U.S. 899, 100 S. Ct. 208, 62 L. Ed. 2d 135 (1979); Reservation Eleven Associates v. District of Columbia, 420 F.2d 153, 157 (D.C. Cir. 1969).
643 F.2d 1188 (5th Cir. 1981), cert. denied, 455 U.S. 907, 102 S. Ct. 1251, 71 L. Ed. 2d 444 (1982), aff'd after remand, 699 F.2d 734 (1983).
We believe that such a rule is consistent with the "weight of authority ... that in order to constitute a taking, the condemnor must have an intention to appropriate ...." Porter v. United States, 473 F.2d 1329, 1336 (5th Cir. 1973). Accord, J.J. Henry Co. v. City State [188 Ct. Cl. 39], 411 F.2d 1246, 1249 (1969). The City of Lafayette under the circumstances of this case would lack an intention to deny plaintiff an economically viable use of his property until it was put on notice that its zoning regulations were effecting such a denial. But see San Diego Gas & Electric Co. v. City of San Diego, 450 U.S. 621, 657 [101 S. Ct. 1287, 1307, 67 L. Ed. 2d 551] (1981) (Brennan, J., dissenting).
Thus, for the reasons stated, I respectfully dissent from the opinion of the majority and would affirm the decision of the district judge.

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