Court Opinion

ID: 9540620
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:18:23.151649+00
Date Added: 2024-06-11T15:00:04.948488
License: Public Domain

COMPTON, Justice,
dissenting.
The superior court found that the conduct of the Municipality of Anchorage (municipality) resulted in a diminution of SD & R’s rights and attributes of ownership.1 The court stated that the municipality’s conduct made “the development of plaintiffs’ property economically infeasible,” and that it resulted “in denial to the minority property owners the economic viable use of their land.”2 (Emphasis added).
*562Thus, this is not a case in which the property owner claims that he or she would have made more but for the government’s action, and asks to be compensated for the difference. Nor is there any argument over what would be the fair market value of the property depending on the highest and best use to which it could be put. The property no longer has any economically viable use.
I agree that the municipality has a legitimate governmental interest in maintaining its own financial stability. In fact, the municipality not only has the authority to avoid the consequences of its own poor planning, it has a duty to do so. It is thus understandable that the municipality declined to participate in the improvement districts, because these improvements were not necessary for park use and might have constituted a waste of municipal resources. But this conclusion is only the beginning of a takings analysis.
The Takings Clause of the Fifth Amendment to the United States Constitution is “ ‘designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’ ” Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 123, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978) (quoting Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct. 1563, 1569, 4 L.Ed.2d 1554 (1960)).
Whether traced to a principle that society simply should not exploit individuals in order to achieve its goals, or to an idea that such exploitation causes too much dissatisfaction from a strictly utilitarian point of view unless it is brought under control, the just compensation requirement appears to express a limit on government’s power to isolate particular individuals for sacrifice to the general good.
Laurence H. Tribe, American Constitutional Law § 9-6, at 605 (2d ed. 1988).
The United States Supreme Court treats legitimate government action which denies all economically beneficial or productive use of land as a per se taking. Lucas v. South Carolina Coastal Council, — U.S. —, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). In Lucas the Court stated:
Surely, at least, in the extraordinary circumstance when no productive or economically beneficial use of land is permitted, it is less realistic to indulge our usual assumption that the legislature is simply “adjusting the benefits and burdens of economic life” in a manner that secures an “average reciprocity of advantage” to everyone concerned. And the functional basis for permitting the government, by regulation, to affect property values without compensation — that “Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law,” — does not apply to the relatively rare situations where the government has deprived a landowner of all economically beneficial uses.
Id., at -, 112 S.Ct. at 2894 (citations omitted).
The court recognizes the rule of Lucas and accepts that it is economically infeasible for SD & R to develop its property. Nevertheless, the court declines, for no stated reason, to explain why the Lucas per se rule does not apply.3 In my view, *563the Lucas rule applies to this ease, and requires the municipality to compensate SD & R for the deprivation of the economically beneficial use of SD & R’s land. Because of this conclusion, I would find it unnecessary to reach the issue of the “broader protection” afforded by article I, section 18 of the Alaska Constitution. State v. Hammer, 550 P.2d 820, 824 (Alaska 1976).
However, since the court finds it necessary to analyze this case under the Alaska Constitution, which until today has afforded property owners broader protection than that conferred by the Fifth Amendment to the United States Constitution, I am compelled to respond. In my view, the court misapplies the “ad hoc” fact-based standard of State, Dep’t of Natural Resources v. Arctic Slope Regional Gorp., 834 P.2d 134, 138 (Alaska 1991).
In Arctic Slope we identified three factors which should be considered in determining whether governmental action constitutes a taking: (1) the character of the governmental action, (2) its economic impact, and (3) its interference with reasonable investment-backed expectations. Id., at 139 (citing Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005, 104 S.Ct. 2862, 2874, 81 L.Ed.2d 815 (1984)).
The character of government action is relevant because:
A “taking” may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.
Penn Central, 438 U.S. at 124, 98 S.Ct. at 2659. In this case the interference resulted from the municipality’s program of acquiring park land and its efforts to minimize costs associated with the acquisitions. The municipality’s actions were intended to adjust the benefits and burdens of economic life to promote the common good.4 *564Thus, while a taking might be less readily-found than had the municipality physically interfered with the property, absence of physical interference does not preclude finding an unconstitutional taking.
As for the second factor, the economic impact of the government’s action, the court concedes, as it must, that because of the municipality’s actions “it has now become economically infeasible for SD & R to develop its land_” Opinion at 559. The municipality’s actions denied SD & R all viable economic use of the property.
I agree that under the court’s analysis the “real question presented by this case is whether SD & R’s expectations concerning its development plans were reasonable and whether those expectations should be afforded constitutional protection.” Opinion at 559. However, I disagree with the court’s understanding of the reasonableness standard, and with its conclusion that SD & R’s expectations were not reasonable in this case.
First, the court confuses the reasonableness of a property owner's expectations with the scope of the owner’s vested rights. It is true there are no “vested” rights in sewer lines, but that does not answer the question whether SD & R had reasonable investment-backed expectations in the development of its property.5 In Lucas, the property owner had no “vested” rights in the zoning laws, yet the court found a per se taking when the state’s actions denied Lucas the viable economic use of his land. It makes no sense to require expectations to become vested in order to be protected. Once an expectation is vested it becomes a right and is no longer an expectation at all.
Second, the court misinterprets our decision in Arctic Slope when it states that, to find a compensable taking, “we would have to conclude that the Assembly’s approval of the water and sewer districts constituted some kind of ‘guarantee’ or ‘express promise’ that the road improvement district providing access to SD & R’s property would eventually be approved and constructed.” Opinion at 559. Arctic Slope requires that a property owner’s expectations be reasonable and investment-backed, not that the law “guarantee” those expectations.6
*565In fact, the record does not support the court’s characterization of SD & R’s development expectations as “never progress[ing] beyond the planning stage” or a “business gamble.” The superior court found that the “Plaintiffs purchased the lots for purposes of development and resale.” 7 SD & R’s development progressed beyond the planning stage as they actually invested in the property. As in City of Los Angeles v. Tilem, 142 Cal.App.3d 694, 191 Cal.Rptr. 229, 235 (1983), SD & R’s property was not vacant real estate owned and held as a speculative business venture, but land that was intended to be developed from the time it was purchased.8 Compare the activities of SD & R, purchasing property, petitioning and gaining improvement districts, purchasing more property and re-subdividing to form uniform lots for development, with the activity of plaintiff in Habersham at Northridge v. Fulton County, Georgia, 632 F.Supp. 815, 823-24 (N.D.Ga.1985):
Plaintiff put up $237,000 for property which the Fulton County Board of Commissioners had twice refused to rezone and which, by its own expert’s account, was worth no more than $50,000 at the time of the purchase. If the property was rezoned as sought, the gamble would pay off because the plaintiff, after putting up an additional $2,000,000 [$2 million dollars as part of the original purchase price would only be paid if the property was rezoned], would own property worth $6,800,000. If, however, the property was not rezoned, the plaintiff could simply walk away from the deal, losing little more than what it cost to place its bet.
By characterizing SD & R’s development of its property as a business gamble,9 similar to that of the plaintiff in Habersham and unworthy of protection as part of a property owner’s bundle of rights, the court casts doubt on any business investment which is not a 100% certainty.10 SD & R’s purchase of property for the purpose of development can be only fairly called an investment.
The reasonableness of SD & R’s investment-backed plans to develop its property is based in part on the improvement districts. The Anchorage Municipal Code allows re-balloting of a previously approved improvement district only if the costs rise by more than 10% between the time of Assembly approval and eventual construction. AMC 19.30.070. This requirement, which Judge Gonzalez found the municipal*566ity had failed to meet, allows investors to rely on the improvement districts without fear of having an improvement district dissolved simply because of a change of plans by neighboring landowners.
Municipal Executive Directive 8 further protects private landowners from the possibility of differing priorities between public and private interest in assessment balloting by requiring the municipality to follow a special procedure whenever it votes in opposition to the majority of private landowners in assessment balloting.11 It is undisputed that the municipality did not follow this procedure when it voted to abolish the approved water and sewer districts and decided not to support the road improvement district. It is reasonable for private property owners to assume the municipality will follow its own regulations and directives.
SD & R made the type of reasonable investment that should be protected by the Takings Clause. While the municipality has the right and the duty to minimize waste of municipal resources, in this case “in all fairness and justice, [the cost] should be borne by the public as a whole.” Penn Central, 438 U.S. at 123, 98 S.Ct. at 2659. SD & R established that there are no disputed issues of material fact and that they are entitled to judgment as a matter of law. Because I would affirm the superi- or court’s grant of summary judgment, I dissent.

. The Municipality’s actions resulted in SD & R’s property becoming an "island.” It is surrounded on three sides by municipal park land and on the fourth by a separate subdivision, of which SDR’s property cannot become a part. Thus the property is isolated from any other improvement district, destroying its economic viability by making its development economically infeasible.

. The court trivializes Superior Court Judge Rene Gonzalez’s unchallenged findings when it states only that the superior court "found that the municipality's actions had an adverse impact on the value of SD & R’s property." Opinion at 5. The superior court made detailed findings, including that the actions of the Municipality left "the plaintiffs as the only private land owners in the area having to pay the full costs for sewer, water and road improvements.” As a result of these actions, SD & R’s development costs "would far exceed the fair market value of the lots as improved. The per lot development cost would exceed $100,000.00 on lots that would have a fair market value as improved of approximately $50,000.00."
These findings are consistent with the evidence, which put the development costs at $89,-*562182, $110,966, or $121,146 per lot, depending on whether all costs (sewer, water and road) or some costs were to be included, and the date costs were to be determined. The average purchase price per lot was $27,500. Thus the cost of an improved lot ranged from $116,682 to $148,746. The assessed valuation of an unimproved lot was $20,300 in 1986. The assessed valuation of a comparable improved lot was $45,000. It was $37,000 in 1987, the date the average cost per lot was highest.

. The court's “conclusion” that the per se categories of Lucas have no application to this case "because the municipality neither sought to appropriate SD & R's property nor enacted a regulation constraining SD & R’s use of its property in any way,” Opinion at 557, n. 7, ignores the superior court’s findings that the Municipality's actions "resulted in making the development of plaintiffs’ property economically infeasible.” The Lucas court stated:
We think, in short, that there are good reasons for our frequently expressed belief that when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good. *563that is, to leave his property economically idle, he has suffered a taking.
Lucas, — U.S. at-, 112 S.Ct. at 2895.

. The court doubts even this assertion, suggesting that the municipality acted primarily as a private landowner. The court notes that the case does not involve "an exercise of regulatory authority by the municipality. Rather, it primarily entails action by the municipality as an owner of neighboring property voting to repeal an improvement district." Opinion at 558, n. 8. The court goes on to state: “Where a governmental agency merely takes action which is substantially similar to that which could be taken by a private landowner, it seems highly doubtful that a colorable taking claim can be established.”
This is not a case in which the government is acting as a private landowner. This case is about a municipal government acquiring land for a city park. Private landowners do not acquire land to create city parks. Private landowners do not (and, in fact, cannot) create or abolish improvement districts, only the Municipal Assembly can do so. Anchorage Municipal Code 19.20.130 (After the public hearing is closed, the Assembly shall adopt an ordinance determining either to proceed or not to proceed with the proposed improvement.). The acquisition of land and the creation of a city park is "primarily” and solely an exercise of municipal authority.
Furthermore, the court’s statement that a taking claim cannot be established when the government acts like a private landowner is contrary to our precedents. In Bakke v. State, 744 P.2d 655 (Alaska 1987), a state logging operation was at issue.
[I]t is clear that if the State’s 1964 logging operation was a proximate cause of the Bakkes’ injury, the State has deprived them of the economic benefits of ownership even though it may not have intended to do so, and even though its 1964 logging operation did not directly and immediately affect the Bakkes’ land. First, it is not disputed that the logging operation was for a public purpose. Second, the Bakkes suffered injury and thus were denied the economic benefits of ownership.
Id., at 657. We stated that we were persuaded by the approach taken in Albers v. County of Los Angeles, 62 Cal.2d 250, 42 Cal.Rptr. 89, 398 P.2d 129 (1965), which found an inverse condemnation for property damaged by construction which caused a land slide "[a]lthough it was conceded that the road was not negligently built.” Bakke, 744 P.2d at 657. In State v. Doyle, 735 P.2d 733 (Alaska 1987), we affirmed a finding of inverse condemnation brought by landowners for a decrease in the appreciation of their property values caused by noise attributable to the operation of a new airport runway. Id., at 738. We did so despite the fact that the landowners also sued the government for trespass and nuisance, actions typically taken against private landowners. Id., at 741.
While property owners can only recover from a private landowner on theories of trespass or nuisance, the government is held to a different *564standard. The Alaska Constitution provides that "Private property shall not be taken or damaged for public use without just compensation.” Alaska Const, art. I, § 18. This clause is liberally interpreted in favor of the property owner, Alsop v. State, 586 P.2d 1236, 1239 & n. 7 (Alaska 1978), and protects the individual from being forced to bear the burden of a public project.
"The tendency under our system is too often to sacrifice the individual to the community; and it seems very difficult in reason to show why the State should not pay for property which it destroys or impairs the value, as well as for what it physically takes.”
Bakke, 744 P.2d at 657 (quoting Albers, 42 Cal. Rptr. at 97, 398 P.2d at 137).

. Contrary to the court’s suggestions, this case is not about whether there was a taking of SD & R’s interest (or lack thereof) in approved water and sewer districts. Rather, it is about the deprivation of one of the most essential aspects of property ownership — the right to use and develop land in an economically beneficial manner. The term "property
as used in the Takings Clause includes the entire "group of rights inhering in the citizen's [ownership].” It is not used in the "vulgar and untechnical sense of the physical thing with respect to which the citizen exercises rights recognized by law. [Instead, it] denote[s] the group of rights inhering in the citizen’s relation to the physical thing, as the right to possess, use and dispose of it.... The constitutional provision is addressed to every sort of interest the citizen may possess.”
PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 82 n. 6, 100 S.Ct. 2035, 2041 n. 6, 64 L.Ed.2d 741 (1980) (quoting United States v. General Motors Corp., 323 U.S. 373, 377-78, 65 S.Ct. 357, 359, 89 L.Ed. 311 (1945)). In Lucas the Supreme Court recognized the importance of the right to productive and economically beneficial use of land: ”‘[F]or what is the land but the profits thereof?”’ Lucas,-U.S. at-, 112 S.Ct. at 2894 (quoting 1 E. Coke, Institutes ch. 1, § 1 (1st Am. ed. 1812)).

. In Arctic Slope we examined the reasonableness of Chevron’s assumptions that the Department of Natural Resources would not use well data for internal departmental purposes. We noted that (1) neither Alaska's oil conservation act nor its regulations contained any guarantee that the data would not be used, and (2) “companies were ‘on notice’ that DNR in fact used confidential data ... in its decision making on state oil and gas leasing.” Arctic Slope, 834 P.2d at 140. We also stated that ”[n]o matter how reasonable or unreasonable the companies’ expectations may have been, we are not persuaded that they were ‘investment-backed.’" Id., at 141.

. See infra note 8.

. The court’s attempt to distinguish Tilem because use of the Tilem property became “feasible” is unpersuasive. The development in Tilem became "feasible” for Tilem when he found a suitable building to move onto the property. The court’s assertion that "SD & R still could not have feasibly developed its property unless the municipality also participated in the road improvement district” is simply untrue. SD & R purchased unimproved lots between 1981 and 1983. SD & R petitioned for and created, with the approval of the Anchorage Municipal Assembly, water and sewer improvement districts in May 1984. At the suggestion of the Municipality, SD & R postponed its petition for a road improvement district in an attempt to secure partial state funding. In March 1985 neighboring property owners petitioned and received from the Municipality preliminary approval to subdivide their parcel into approximately 87 lots. During the summer of 1985, SD & R purchased five additional lots and applied for and received preliminary approval for the re-subdivision of its property. In May 1986, upon learning that no state funds were available for the road improvement, SD & R petitioned for a road improvement district. During this entire period, ongoing development of SD & R’s property was not only feasible, it was a reasonable investment which SD & R was actively pursuing. Development of SD & R’s property remained reasonable and feasible, without municipal participation, up until the summer of 1986. At that time the Municipality undertook the extension of the Gladys Wood Memorial Park, purchased the 12-acre parcel, and left SD & R as the only private property owner in the improvement districts.

. The court never identifies just what activities on SD & R’s part it has chosen to denominate as a ‘business gamble.”

. The court accuses the dissent of "skat[ing]” over the fact that SD & R’s investment was not 100% certain. However, the court fails to address the questions presented, first, whether SD & R's expectations went beyond the planning stage and became investment-backed, and second, whether its investment was reasonable. Until today there has been no requirement that investment-backed expectations also be 100% guaranteed to warrant protection.

. Unlike a private property owner, Executive Directive 8 "intends” that the Municipality will vote with the majority of private landowners, and only oppose the majority preference in "special circumstances.”
2. Petition Process and Voting Procedures for Municipal Property:
A. Petitions of special interest to private property owners: When petitions are circulated to benefit private property owners it is intended that the majority preference of the owners, less the share for any Municipal property, shall determine the outcome of the petition....
B. Contingency for special circumstances: If a petition is circulated and there exist special circumstances that would require the Municipality to oppose the majority preference of the owners of private property, the Department will submit an Assembly Memorandum to the Mayor, describing the special circumstances and recommending that the administration be authorized to sign the petition in accord with the special circumstances....
Executive Directive 8 (emphasis added).