Opinion ID: 1043940
Heading Depth: 2
Heading Rank: 5

Heading: Diminishing Assets Doctrine

Text: -18- When analyzing whether a particular “industrial, commercial or business establishment [is] in operation,” Tenn. Code Ann. § 13-7-208(b), the nature of the business and industry cannot be disregarded. Smith Cnty., 304 S.W.3d at 318-19 (holding that, despite moving mobile homes onto the property, a mobile home park was not “in operation” since regulations required permits to operate such a park, and the property owner had not applied for such permits); Hansen Bros. Enters. v. Bd. of Supervisors, 907 P.2d 1324, 133637 (Cal. 1996) (considering the “nature and use” of the mineral extraction business in determining the scope of a pre-existing use); Cnty. of Du Page v. Elmhurst-Chicago Stone Co., 165 N.E.2d 310, 313 (Ill. 1960) (holding that “the ordinary concept of use, as applied in determining the existence of a nonconforming use, must yield to the realities of the business in question and the nature of its operations”). Our courts have recognized that principle in consideration of the grandfather clause in Tennessee Code Annotated section 13- 7-208. See, e.g., Lamar Adver. Co., 1986 WL 2639, at  (holding that a company had not abandoned billboards because the nature of the industry requires varying levels of outdoor advertising at different times, thereby justifying several periods of non-use). The diminishing assets doctrine, however, goes further, based upon the principle that mining and quarrying involve a unique use of land. Unlike other non-conforming uses where the land is incidental to the business operations, the mining and quarrying industry is comprised of the excavation and sale of the very natural resources that make up the property. Weise, 414 N.E.2d at 654-55. In Weise, New York’s highest court recognized that areas are left in reserve, un-excavated for long periods of time, until their resources are actually needed and that many jurisdictions have adopted the diminishing assets doctrine to settle land use disputes related to that industry. Id. The doctrine provides that reserves yet to be mined, quarried, or excavated are nonetheless pre-existing uses in the event of a more restrictive zoning change: “an owner of a nonconforming use may sometimes . . . have a . . . right to use an entire tract even though only a portion of the tract was used when the restrictive ordinance was enacted.” Stephan & Sons, Inc. v. Municipality of Anchorage, 685 P.2d 98, 101-02 (Alaska 1984) (quotation omitted). In Du Page, the Illinois Supreme Court, while ruling that the holding of property in reserves for future mining uses was sufficient to permit the continuation and expansion of operations despite inconsistent zoning, explained the rationale for the doctrine: In a quarrying business the land itself is a material or resource. It constitutes a diminishing asset and is consumed in the very process of use. . . . [I]n cases of a diminishing asset the enterprise is “using” all that land which contains the particular asset and which constitutes an integral part of the operation, notwithstanding the fact that a particular portion may not yet be under actual excavation. It is in the very nature of such business that reserve areas be -19- maintained which are left vacant or devoted to incidental uses until they are needed. Du Page, 165 N.E.2d at 313. A majority of the courts have adopted the doctrine under circumstances similar to the case before us. See Hansen Bros. Enters., 907 P.2d at 1337 (explaining that the “rule [of diminishing assets] is generally applicable in those states in which the question has arisen”); City of Univ. Place v. McGuire, 30 P.3d 453, 458 (Wash. 2001) (“Most courts that have considered the proper scope of a legal nonconforming mining activity have adopted the diminishing asset doctrine.”). In Legrand v. Ewbank, 284 S.W.3d 142, 143-45 (Ky. Ct. App. 2008), a portion of a 227-acre tract had been pitted for sand and gravel extraction at the time of a re-zoning. The Kentucky Court of Appeals, adopting the rule in DuPage, held that the diminishing assets doctrine entitled the owner to mine the parcel. While emphasizing that the issue was fact-intensive, the Kentucky court held that the diminishing assets doctrine was not without limitation: Were we to hold that mere ownership of property with the intent of mining its resources is sufficient to establish a nonconforming use, mining could be expanded indefinitely under the auspices of a nonconforming use. We believe, therefore, that such uses are not without limitation. Although we do not impose the impractical limitation that the property be actively mined prior to the enactment of the ordinance, it must have been demonstrably dedicated to that use. Id. at 146. Recognizing that ownership of the property with the intent to mine was an important factor, but not the exclusive factor, the Kentucky Court of Appeals ruled that the limited activities which had taken place before the zoning were sufficiently established. Id.20 20 Other jurisdictions, without adopting or rejecting the doctrine, have held the doctrine inapplicable on the facts. In Crumbaker v. Hunt Midwest Mining, Inc., 69 P.3d 601, 609 (Kan. 2003), the Kansas Supreme Court acknowledged the doctrine but held that it did not apply because the operations had been approved through a conditional use permit which the court distinguished from a prior, non-conforming use. In Town of Levant v. Seymour, 855 A.2d 1159, 1166-67 (Me. 2004), Maine’s Supreme Court avoided deciding whether to adopt the diminishing assets doctrine after determining that the property owner failed to express any intention to expand excavation. Only a few jurisdictions have limited the land subject to preexisting use treatment to those portions of land that were actually being excavated or physically utilized in mining or quarrying operations. See Town of Billerica v. Quinn, 71 N.E.2d 235, 236 (Mass. 1947) (requiring “actual occupation of the land in a manner physically appropriating it” to the operations before extending pre-existing use status); Torok v. Rubber City Sand & Gravel Co., C.A. No. 9136, 1979 WL 207680, at  (Ohio Ct. App. June 13, 1979) (adopting the doctrine of diminishing assets, in reliance upon Du Page, 165 N.E.2d at 313). But see Suffield Twp. Bd. of Trustees v. Rufener, 2011-Ohio-3294, No. 2010-P-0061, 2011 WL 2638195, at  (Ct. App. June 30, 2011) (stating that the “doctrine of diminishing assets has generally (continued...) -20- While the treatment of the diminishing assets doctrine has variations, most of the cases from other jurisdictions demonstrate that courts have, under appropriate circumstances, permitted mining and quarrying companies not only to continue, but to expand operations after a zoning change which would have otherwise prohibited their activities.