Opinion ID: 2680443
Heading Depth: 2
Heading Rank: 1

Heading: The Doctrine of Diminishing Assets

Text: [¶33] American Jurisprudence aptly explains the policy underlying the doctrine of diminishing assets. Application of the general rule that a nonconforming use may not be extended to land not so used prior to the enactment of a restrictive zoning ordinance may work a singular hardship where the use in question involves the removal of natural products from the earth. For example, quarries are particularly vulnerable because, by their very nature, they begin on one spot and spread to additional ground as the mineral reserve is exhausted. Such diminishingasset enterprises “use” all of the land contained in a particular asset, and as a practical matter, such use must begin at one spot and continue from there to the boundary of the land. Courts, therefore, have respected the unique character of such diminishing-asset uses by permitting them to expand onto adjacent land. 83 Am. Jur. 2d Zoning and Planning § 569 (2014) (footnotes omitted); see also Stephan & Sons, Inc. v. Mun. of Anchorage Zoning Bd. of Exam’rs and Appeals, 685 P.2d 98, 101-02 (Alaska 1984) (citing 6 R. Powell, The Law of Real Property, ¶ 871[iii] at 79C178 to -179 (Rohan rev. ed. 1979) (“[A]n owner of a nonconforming use may sometimes be found to have a vested right to use an entire tract even though only a portion of the tract was used when the restrictive ordinance was enacted.”). Another underlying policy that we find significant is that a business by nature expands and grows over time as demand increases. See Hansen Bros. Enter., Inc. v. Bd. of Supervisors of Nevada Cnty., 907 P.2d 1324, 1349 (Cal. 1996) (recognizing “that the natural and reasonable expansion of a quarry business to meet increased demand is not an impermissible enlargement or change in the use of the property”). [¶34] There appears to be a growing consensus among jurisdictions that apply the doctrine of diminishing assets to use the following three-prong test: First, [the land owner] must prove that excavation activities were actively being pursued when the [Ordinance] became effective; second, [the land owner] must prove that the area that he desires to excavate was clearly intended to be excavated, as measured by objective manifestations and not 14 by subjective intent; and, third, [the land owner] must prove that the continued operations do not, and/or will not, have a substantially different and adverse impact on the neighborhood. Romero v. Rio Arriba County Comm’rs, 140 NM 848, ¶ 25, 149 P.3d 945, 951 (N.M. App. 2006) (quoting Town of Wolfeboro (Planning Bd.) v. Smith, 556 A.2d 755, 759 (N.H. 1989)) (modifications in original); Town of West Greenwich v. A. Cardi Realty Assocs., 786 A.2d 354, 363 (R.I. 2001) (adopting Smith’s three-prong test); see also 83 Am. Jur. 2d Zoning and Planning, supra, § 569. The Board only applied the second prong of this test, but the district court applied the entire test, finding that we would likely adopt it. Both parties propose that we adopt this test but dispute its application. We review the adoption of the doctrine of diminishing assets regardless of form de novo and its application under the substantial evidence standard. Where applicable, we also apply the arbitrary and capricious standard. [¶35] Because the above quoted pronouncement of the doctrine of diminishing assets provides a reasonable and objective means of quantifying “land” as used in the first sentence of § 18-5-207, furthers important policies, and considers the impact of expansion on the neighborhood, adopting this test seems to be the best way to resolve the ambiguity of § 18-5-207 in a manner consistent with legislative intent. Therefore, we hold that to define the geographic extent of a protected, nonconforming land use involving a diminishing asset under § 18-5-207, we will require that the land owner or user prove each prong of the three-prong test quoted above. In so holding, we recognize that this test is highly fact dependent and will vary from case to case, especially for the second prong. Moore v. Bridgewater Twp., 173 A.2d 430, 437 (N.J. Super. App. Div. 1961) (“It is difficult, and also dangerous, to attempt to fix standards applicable in all cases; each case must be decided on its own facts.”). Regarding the second prong, we do note “that excavation cannot occur simultaneously on the whole of the land.” Crumbaker v. Hunt Midwest Mining, Inc., 69 P.3d 601, 609 (Kan. 2003); Elmhurst-Chicago Stone Co., 165 N.E.2d at 313 (noting that gravel extraction businesses “cannot operate over an entire tract at once”). Thus, “if there were evidence of an intent to expand excavation to any other portion of the land at the time the zoning laws had been implemented, expanded excavation is not considered an unlawful nonconforming use.” Crumbaker, 69 P.3d at 609. [¶36] The County does not dispute that RST has proved the first prong—that he was actively conducting a gravel operation at the time the County’s LDRs became effective. The parties do dispute whether RST proved the second and third prongs. RST contends that the Board misinterpreted and misapplied the doctrine by restricting the size of his gravel operation to the acreage actually in use when the County’s LDRs became effective in 1978. RST further contends that he presented sufficient objective evidence to establish 15 an intent to expand his operation to its natural limits and that the Board based its decision on improper findings of fact. [¶37] Although the County agrees that we should adopt and apply the three-prong test, it stresses that we should do so cautiously since expansion of nonconforming uses is disfavored. The County agrees with the Board’s conclusion that RST did not present sufficient objective evidence manifesting an intent to expand his gravel operation when the County’s LDRs became effective in 1978. Furthermore, the County maintains that RST did not present evidence on the third prong and that the evidence in the record on this prong actually goes against RST. [¶38] Starting with the second prong, we conclude that substantial evidence does not support the Board’s conclusion that RST did not manifest intent to expand beyond three acres. To the contrary, the record contains sufficient objective evidence to demonstrate that RST did intend to expand. In their decisions, the hearing officer and the Board overemphasized the relative size of RST’s operation at the time the LDRs went into effect and its determination that an expansion constitutes a change in use. This emphasis ignores the nature of a business, especially a business that utilizes a diminishing asset, to expand and grow over time as demand increases. See Hansen Bros., 907 P.2d 1324, 1349 (recognizing “that the natural and reasonable expansion of a quarry business to meet increased demand is not an impermissible enlargement or change in the use of the property”). The hearing officer and the Board also relied almost exclusively on a finding that RST did not prepare, designate, or cordon off areas he intended to excavate, which, they contend, he should have done to manifest intent to expand. In essence, the Board found that because RST did not “cordon off” additional land on his ranch as designated expansion area, he necessarily did not intend to expand. Nevertheless, the hearing officer and the Board cite no authority for this conclusion nor do they point to some evidence in the record that this is common practice within the gravel extraction industry.5 Thus, the Board’s conclusion on this issue lacks a reasonable or sustainable basis to uphold it under the substantial evidence standard. Furthermore, the Board’s conclusion not only fails to satisfy the substantial evidence standard, it also fails to satisfy the arbitrary and capricious standard because it lacks adequate findings of fact and conclusions of law. Dale ¶ 23, 188 P.3d 561. [¶39] Another reason to reject the imposition of a requirement to prepare or cordon off future areas of expansion is that it discourages the productive use of land, which is 5 One court did consider a fence as one factor (but not the sole basis) that showed objective intent, but that case involved very different circumstances that made the fence significant. Moore v. Bridgewater Twp., 173 A.2d 430, 432 (N.J. Super. App. Div. 1961). In that case, the fence surrounded the perimeter of the property. Id. The fence was significant because the parcel at issue straddled the border of two jurisdictions and the majority of the quarrying activity took place on one side of that border. Id. Thus, the fence helped to demonstrate that quarrying was intended throughout the whole parcel in not just one but both jurisdictions. 16 contrary to Wyoming public policy. See Hulse v. First American Title Co. of Crook Cnty., 2001 WY 95, ¶ 34, 33 P.3d 122, 133 (Wyo. 2001) (recognizing the public policy of furthering productive use of land as one of the public policies supporting the establishment of private roads); see also Ferguson Ranch, Inc. v. Murray, 811 P.2d 287, 289 (Wyo. 1991). “It is in the very nature of [gravel extraction] business that reserve areas be maintained which are left vacant or devoted to incidental uses until they are needed.” Elmhurst-Chicago Stone Co., 165 N.E.2d at 313. For practical and economical reasons [a gravel operator] must begin operations at one given point and continue from there to a point on his lands where his natural resource ends or at his boundary line. For the same reasons, it is not feasible for him to quarry at different locations at the same time. Township of Fairfield v. Likanchuk’s, Inc., 644 A.2d 120, 124 (N.J. Super. Ct. App. Div. 1994). The evidence shows that RST has used the rest of the parcel for grazing cattle and has gradually extracted the areas near his current extraction sites as needed to grow his business. Additionally, in his 2010 mine permit application to the Wyoming Department of Environmental Quality, RST indicated that, to help control weeds, he would intentionally leave future extraction areas unexcavated until needed. This evidence demonstrates that RST intended to expand his gravel operation. [¶40] Another reason to confine a gravel operation to a smaller area for small operations like RST’s is that the Wyoming Environmental Quality Act imposes a fifteen-acre limit (formerly ten-acre limit) on operations that wish to operate under the limited mining operation exemption. Wyo. Stat. Ann. § 35-11-401(e) (LexisNexis 2013). With this limited amount of acreage to work with, it makes little sense economically or practically for a gravel mine operator to have several one or two acre sites distributed throughout a larger parcel when a larger site is feasible. Similarly, confining an operation to a smaller, compact area reduces the number of roads that the operator must maintain and minimizes dust problems. Furthermore, RST’s neighbors have received aesthetic benefits by the confinement of the gravel operation to certain portions of the property rather than an operation that is sprawled throughout the property. As one court has explained, “It is quite obvious that an owner intending to carry on a quarrying operation acquires more land than he thinks he will need so that he will not be a source of nuisance to his neighbors.” Township of Fairfield, 644 A.2d at 124. Consequently, if RST’s gravel operation is to occupy just a small fraction of the total parcel, it benefits himself, his land, his neighbors, and the environment to confine the operation to a smaller area rather than operating on a patchwork of work sites scattered throughout the property. [¶41] We also note that some cases have raised the concern that a gravel operation may try to expand without truly have intending to expand at the time the operation became a 17 nonconforming use. See, e.g., Fred McDowell, Inc. v. Bd. of Adjustment of the Twp. of Wall, 757 A.2d 822 (N.J. Super. Ct. App. Div. 2000); Township of Fairfield, 644 A.2d at 124-25; Stephan & Sons, 685 P.2d 98. Many of these cases, however, address situations where an operation expanded or sought to expand to an adjacent parcel. Since this type of situation is not before us in this case, we will not address it. Aside from those cases, the concern of unwarranted expansion, while a valid one, is resolved by requiring objective evidence to establish the intent to expand. [¶42] We also recognize the inherent tension between the general rule of disfavoring the expansion of nonconforming uses, Snake River Brewing Co. ¶ 11, 39 P.3d. 404, and the expansion of certain nonconforming uses permitted by the doctrine of diminishing assets. Because of the unique nature of uses involving diminishing assets, however, the very presence of an extraction operation on a parcel inherently, but not dispositively, suggests an intention to expand on that particular parcel. The Illinois Supreme Court has gone so far as to hold that “in 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.” Elmhurst-Chicago Stone Co., 165 N.E.2d at 313. Although this position is not entirely consistent with the test we adopt today, it underscores our recognition of the practice of gravel operations to leave undisturbed areas they intend to excavate later. [¶43] In addition to critiquing the Board’s rationale, we also examined the record to see if RST did in fact carry his burden to present sufficient objective evidence manifesting his intent to expand at the time the zoning regulation went into effect. Our examination reveals that RST presented uncontroverted evidence that the Board’s decision addressed inadequately. First, RST presented evidence that he began the operation with two initial excavation sites. Claudette Higgins, RST’s ex-wife, and Bill Moyer both testified about the location of those two sites on different parts of the property. The 1978 aerial photograph of RST’s land shows that these two sites are separated by at least several hundred feet. The separation of the sites and the distance between them points objectively toward an intent to expand throughout the parcel. [¶44] Second, RST presented evidence that the location of his main operation is in an open area conducive to safe expansion. The aerial photos show the gravel extraction site is surrounded by open agricultural land. RST’s 2010 mine application also states that the area where he conducts his gravel operation is at least 300 feet away from any neighboring properties. Initially, one of the sites was near RST’s border with the Melody Ranch property. Once RST’s neighbors started construction on the Melody Ranch housing development near his border, however, RST moved his operations away from that border. These facts also objectively indicate an intent to expand. [¶45] Third, RST presented the testimony of Mr. Moyer, who testified that RST tested excavation methods in various places. Mr. Moyer also testified that from the beginning, 18 RST had aspirations of becoming competitive with and as big as the other gravel pits in the area. This testimony further demonstrates objectively an intent to expand. [¶46] Finally, RST presented evidence that the income from his gravel business in the 1970s provided more of his total income than any of his other businesses. Both Ms. Higgins and RST testified that the majority of their income came from the gravel business, even before the 1978 LDRs became effective. Ms. Higgins further testified that their income from the ranching business was “skimpy” and “not good enough.” She also testified that she and RST intended to make a living from the gravel business income. This intention was supported by her testimony that although the operation began small, it grew rapidly, even in the 1970s, due to increased demand. Moreover, RST increasingly spent more of his time on the gravel business than he did his other businesses. All of this evidence also supports an intent to remain in the gravel business, which would necessitate expansion. Because more than three decades have elapsed since the enactment of the County’s LDRs, we recognize that RST had particular difficulty in coming forward with any other evidence on this prong.6 [¶47] We also highlight that the Board ratified the hearing officer’s findings that the witnesses who presented this evidence were credible and that the testimony of Ms. Higgins in particular was “entitled to considerable weight.” Since the burdened party’s uncontested testimony that the hearing officer deems credible is sufficient to satisfy the burden of proof, the Board’s disregard of this evidence in reaching its decision is troubling. Ikenberry, 5 P.3d at 803. Under these circumstances, we find that RST presented sufficient evidence regarding the second-prong to carry his burden by a preponderance of the evidence and that the Board’s findings of fact and conclusions of law were against the great weight of that evidence. [¶48] Finally, we consider the third prong—whether RST proved that continued operation of his gravel business does not and will not have a substantially different and adverse impact on his neighborhood. Neither the hearing officer nor the Board addressed this prong, but they also did not apply the three-prong test. Finding that we would likely adopt the proposed three-prong test, the district court concluded that there was no evidence that a continued use would not have a substantially different and adverse impact on the neighborhood. Although RST did not adequately address the third prong in his arguments, an examination of the record reveals that there is evidence regarding this prong. [¶49] The County argues that expansion of RST’s gravel operation resulted in numerous complaints, citing a 1998 DEQ inspection report and the testimony of the County’s code 6 We also note that, regardless of the reason, the County did not begin investigating a potential violation of its LDR’s until 1995, nearly two decades after the LDR’s became effective. 19 compliance officer Jennifer Anderson. The DEQ inspection report merely states that the “inspection was conducted in response to several calls from concerned citizens in the Jackson area who expressed concern over recent expansion of the mining operation and increased activity.” The report, however, is of little value for two reasons: (1) it is nearly sixteen years old and (2) it does not explain the nature of those concerns. Ms. Anderson testified that she had received only about six calls regarding noise from RST’s crusher from 2006 to 2011—an average of one call per year.7 [¶50] In support of RST, an internal County memo dated October 12, 1995, states that RST was willing to move his processing site to a different part of his property to help mitigate any disturbance of his neighbors and that he was willing to use some noise mitigation if necessary. RST testified that, when the Melody Ranch property—the property on his eastern border—began to be developed for residential use, he voluntarily moved his gravel crusher away from its former location near the eastern border to, in his words, “take the pressure off the Melody.” When asked, RST could not recall what year development began. From our examination of the aerial photographs in the record, it appears that the portion of the Melody Ranch along RST’s property did not undergo development until sometime between 2001 and 2003. This is significant in that it shows that the developers proceeded with the development even though RST had been running a gravel operation on the neighboring property for more than two decades prior. At some point, RST erected a berm between his operation and the eastern border of his property. Later, RST also erected berms around his pit and processing site to help mitigate any disturbance of his neighbors. [¶51] As we consider this prong, we also note that the Wyoming Environmental Quality Act (“EQA”) contains provisions to help prevent a gravel operation from having a substantially different or adverse impact on its neighborhood. For instance, a mining operation must be setback a minimum of 300 feet from “any existing occupied dwelling, home, public building, school, church, community or institutional building, park or cemetery unless the landowner’s consent has been obtained.” Wyo. Stat. Ann. §§ 35-11401(e)(vi)(A), 35-11-406(m)(viii) (LexisNexis 2013). Furthermore, RST’s operation currently occupies the maximum acreage allowed under the former limits of the EQA’s limited mining exception, precluding further expansion without permission from the DEQ.8 § 35-11-401. The permitting process requires RST to notify his neighbors and the local community of his expansion plans. § 35-11-406(g)(j). An interested person can potentially trigger a contested case hearing by objecting to the proposed expansion. 7 We note, however, that RST and Mr. Moyer testified undisputedly that a screener makes more noise than a crusher. 8 In 2013 the legislature amended this section to permit limited mining operations to occupy up to fifteen acres of disturbed land. The issue of whether RST may now expand up to fifteen acres under the limited mining exception is not before us. 20 Thus, the EQA provides a mechanism for determining whether an expanded gravel operation will have a substantially different and adverse impact on the neighborhood. [¶52] Taking all of this into consideration, the expansion of RST’s operation has not had a substantially different and adverse impact on his neighborhood. This is particularly true for most of RST’s neighbors, since they did not become his neighbors until years after RST had established and expanded his operation. Therefore, we find that RST has carried his burden on the third prong of the test by a preponderance of the evidence. [¶53] Having examined the record, the Board’s decision, and the applicable law, we hold that the Board’s decision regarding the application of the doctrine of diminishing assets lacks substantial evidence to support it and is arbitrary and capricious. We further hold that RST carried his burden by a preponderance of the evidence by demonstrating: (1) that he objectively manifested an intent to expand his gravel operation on his 300-acre parcel at the time the County’s LDRs became effective in 1978, and (2) that continued operation of his gravel business will not have a substantially different and adverse effect on his neighborhood. Therefore, under § 18-5-207 RST has a vested right to expand his gravel operation on the 300-acre parcel on which the operation is located without unauthorized regulatory interference from the County, provided that he complies with other applicable laws, such as the EQA and the DEQ’s regulations. Accordingly, we hold invalid the portions of the Board’s Order that require RST to reduce the size of his operation to three acres and that limit his extraction volume to not more than 15,000 cubic yards or 17,000 tons per year. I. The DEQ’s and the County’s Roles in Regulating Gravel Mining Operations [¶54] The next issue for our consideration is determining to what extent, if any, that counties may regulate gravel mining operations that are already subject to DEQ regulation under the EQA. RST asserts that the Board’s order is an improper exercise of authority that conflicts with DEQ’s regulatory authority over his operation under the EQA. In support, he maintains that, since counties are political subdivisions of the state, they only have the powers that the state grants them. Next, he details the EQA’s requirements that apply to his gravel operation and contends that they are comprehensive, precluding the County from regulating bonding, reclamation, or expansion. [¶55] The County argues that, consistent with our holding in River Springs, the EQA permits counties to regulate mining operations as long as the county’s regulation does not prohibit all mining and does not conflict with DEQ regulations. The County further contends that the EQA also permits counties to exercise their regulatory role to advise the DEQ of the scope and nature of any applicable grandfathered rights. Because it relies on the Board’s and district court’s holdings regarding the construction of the zoning statutes and the application of the doctrine of diminishing assets, the County contends that both 21 itself and the DEQ have separate regulatory authority over different acres and different aspects of RST’s gravel operation. [¶56] This is a question of law that we review de novo. Because we held that the size restriction and the limits on extraction volume of the Board’s order are invalid, the reclamation and bonding requirements are the only remaining aspects of the Board’s Order that RST contests. [¶57] We have addressed this issue before. In River Springs, we noted that the State has granted both DEQ and the County authority to regulate gravel mines through their respective statutory provisions. 899 P.2d at 1335-36; Wyo. Stat. Ann. §§ 18-5-201 through 208; 35-11-401 et seq. (LexisNexis 2013). Accordingly, “our task is to harmonize the several statutory provisions and endeavor to afford legitimate effect to all of them,” leaving us with “no occasion to invoke the doctrine of preemption.” River Springs, 899 P.2d at 1335. The County’s regulatory authority is limited by the authority granted to the DEQ because counties have “no sovereign power other than that granted by the legislature.” River Springs, 899 P.2d at 1335-36. Thus, the County may only regulate in a manner that does not conflict with or duplicate DEQ regulations properly promulgated under the EQA. Id. at 1336. As we discussed above, the County’s regulatory authority is further limited to regulations that “promote the public health, safety, morals and general welfare of the county.” § 18-5-201. Moreover, the County may not regulate in a manner inconsistent with § 18-5-207 such that the nonconforming use can no longer continue. Snake River Brewing Co., ¶ 10, 39 P.3d 403. [¶58] Although the EQA generally requires a mining operation to obtain a permit from the DEQ, the limited mining exception of the EQA exempts qualifying mining operations from the permit requirement if they comply with certain other requirements. Wyo. Stat. Ann. § 35-11-401(e)(vi)(k) (LexisNexis 2013). For nearly twenty years, RST has operated his gravel business under the limited mining exception. Thus, to resolve this issue as it currently stands, we need only consider the portions of the EQA that set forth the limited mining exception. The limited mining exception’s ongoing regulations can be summarized as requiring an operator to comply with setback requirements, bonding requirements, reclamation requirements, and annual reporting requirements. Id. Clearly, the requirements of the Board’s Order pertaining to bonding and reclamation duplicate and conflict with the DEQ’s regulatory authority. Because of our decision regarding expansion, the County’s argument that it has regulatory authority over different acres and different aspects of RST’s gravel operation fails. Thus, the County has no basis for imposing bonding and reclamation requirements on RST’s gravel operation. River Springs, 899 P.2d at 1336; see also Ahearn v. Town of Wheatland, 2002 WY 12, ¶ 14, 39 P.3d 409, 415 (Wyo. 2002) (holding that “the general grant of power to municipalities to adopt zoning laws in the interest of public welfare does not permit the local governing 22 bodies to override the state law and the policies supporting it”). Accordingly, we hold that the bonding and reclamation requirements of the Board’s Order are void.9 II. Laches [¶59] The final issue that RST raises is whether the County’s enforcement action is barred by laches. RST contends that the County should be barred from enforcing its LDRs against him because they failed to do so for nearly twenty years after the 1978 LDRs became effective. He claims that the evidence in the record demonstrates that his operation was clearly visible from a major county road and that the County had bought gravel from him. Consequently, RST argues that the County’s actions and failure to enforce its LDRs induced him to believe that his operation was legal and that he could expand his operation. The County asserts that laches is not applicable to a governmental entity when it is enforcing a public or governmental right. Furthermore, the County notes that the Board found the evidence insufficient to establish that the County had bought gravel from RST. Accordingly, the County maintains that RST failed to establish that the County committed an affirmative act of misconduct. [¶60] The standard of review for the defense of laches is abuse of discretion. Cathcart v. Meyer, 2004 WY 49, ¶ 13, 88 P.3d 1050, 1058 (Wyo. 2004). “Laches is defined as such delay in enforcing one’s rights that it works to the disadvantage of another.” Thompson v. Bd. of Cnty. Comm’rs of the Cnty. of Sublette, 2001 WY 108, ¶ 17, 34 P.3d 278, 282 (Wyo. 2001). A party asserting laches must establish two elements: (1) inexcusable delay and (2) injury, prejudice, or disadvantage to the defendants or others. Id. [¶61] The second element is dispositive. RST has not established that he has suffered injury, prejudice, or disadvantage. This is particularly true since we hold in his favor on the preceding two issues. Even if we had not, however, RST has been able to conduct his business for nearly twenty years without interference from the County. Since the County began investigating his gravel operation, he has been able to continue to operate up until now. Therefore, we find that RST has failed to establish the defense of laches.