Opinion
No. A04-82.
Filed November 9, 2004.
Appeal from the District Court, Anoka County, File No. C3-01-5977.
Thomas Gunther, Gunther Law Office, P.A., (for appellants).
Pierre Regnier, Jessica Schwie, Jardine, Logan, and O'Brien, Pllp, (for respondent).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
After appellants were denied a variance from local regulations that would have allowed them to build a single-family residence on their property, appellants brought an inverse condemnation action against respondent, alleging, in relevant part, that respondent's passage of land use regulations in 1994 amounted to a categorical taking of their property. The district court concluded that appellants were barred by the Statute of Frauds from asserting ownership of the property prior to 1996, and that no taking had occurred because the property was unbuildable prior to appellants' purchase. On appeal, appellants argue (1) the ruling that appellant Richard Wolens lacked standing to seek recovery is inconsistent with caselaw; (2) the ruling that appellants lacked an interest in the land prior to 1996 is not supported by the record and is a result of the district court's misapplication of the partial-performance exception to the Statute of Frauds; and (3) respondent's adoption of its Shore Land and Flood Plain Ordinances, along with Zoning and Subdivision Regulations constituted a categorical taking of appellants' property under Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S. Ct. 2886 (1992). We affirm.
FACTS
Appellant Richard Wolens is the father of Troy Wolens and appellant Randi Wolens-Miskowiec. Appellant Mark Miskowiec is married to appellant Randi Wolens-Miskowiec (hereinafter referred to together as the Miskowiecs). Richard and Troy Wolens originally became interested in the subject property in January 1994, as a possible home-site for Troy Wolens and his family.
The subject property consists of approximately 22 acres of land — a portion of which abuts Lake George. Approximately one acre of the property is "up-land," upon which appellants contend that a single-family dwelling could be constructed. The remaining acreage (approximately 21 acres) consists of land classified as "lowlands/wetlands."
In January 1994, Richard and Troy Wolens began discussions with Arnie Martinson, the owner of the subject property, regarding the purchase of the subject property. At trial, a cashed check, dated January 19, 1994 and addressed to Burnet Realty in the amount of $500, was introduced by appellants as evidence of their entry into an informal purchase agreement with Mr. Martinson for the subject property. Appellants did not produce a purchase agreement or contract for deed documenting this purchase at trial. But Richard Wolens testified that he had signed a purchase agreement for the subject property, and that he had reviewed the ordinances that applied to the subject property before doing so.
After entering into the alleged purchase agreement, Troy Wolens then met with Oak Grove city officials, who instructed him to submit the necessary permit applications to Anoka County for approval. In order to obtain a building permit for the subject property, Wolens first needed to apply for a variance to install a septic system on the property. At the Anoka County hearing regarding Wolens' variance application, officials from respondent City of Oak Grove objected to the application on behalf of respondent. Anoka County denied Troy Wolens' original application for a variance in March 1994.
On May 23, 1994, the City of Oak Grove adopted its own Shore Land Ordinance. Oak Grove's Shore Land Ordinance classified the wetlands on and near the subject property as a natural environment lake. The Shore Land Ordinance also provided that any structure must be set back at least 150 feet from a natural environment lake.
On May 27, 1994, Anoka County granted a building and septic permit to Richard Wolens pursuant to a subsequent, revised application. John Christensen, the Anoka County official who granted the permits, testified at trial that Anoka County administered all shore land management issues for respondent Oak Grove until June 1, 1994, when Oak Grove began managing its own shore land areas pursuant to Oak Grove's newly-enacted Shore Land Ordinance. Mr. Christensen also testified that, by issuing these permits, Anoka County had approved construction on the subject property under its own shore land and flood plain ordinances, with the understanding that appellants would have to get further approval from the City of Oak Grove.
On June 27, 1994, the Oak Grove City Council adopted a temporary moratorium on construction in the 100-year floodplain. Appellants' property is within the floodplain, and was subject to the moratorium.
In his trial testimony, Troy Wolens did not remember submitting a formal application for a building permit to the City of Oak Grove. But a letter from David Thompson, an Oak Grove building official, to Troy Wolens indicates that he did submit an application for such a permit to the City of Oak Grove. The letter, dated July 19, 1994, states that "there is a moratorium on development in the floodplain areas. . . . [t]herefore the City of Oak Grove Building Department is returning your submittals." Thompson also testified at trial that, if he had evaluated the permit application on its merits, he would have rejected it because it was not in compliance with Rule 7080 (setting forth requirements for septic systems) and because it had no existing access to a public street.
At some point in May or June 1994, Troy Wolens decided that he no longer wanted to be involved with the subject property, and appellant Richard Wolens took over sole responsibility for obtaining approval to build on the property. Richard Wolens testified at trial that, after his son Troy lost interest, he hoped the Miskowiecs (his daughter and son-in-law) would build a home on the subject property.
On August 29, 1994, the Oak Grove Flood Plain Ordinance became effective, and on April 10, 1995, Oak Grove adopted its Zoning and Subdivision Regulations, which established minimum setbacks, road frontages, and separations of soil.
On March 27, 1996, the Miskowiecs, through their contractor R.K.O., submitted an application to the City of Oak Grove for a building permit. On April 3, 1996, David Thompson, an Oak Grove building official, met with R.K.O. to explain the state and city regulations that applied to the subject property. After this meeting, R.K.O. withdrew the permit applications.
On May 8, 1996, the subject property was transferred by warranty deed from Arnie Martinson to Richard Wolens. On May 25, 1996, Richard Wolens executed a quitclaim deed for the subject property, transferring ownership to the Miskowiecs. This deed was never recorded.
In February 1999, the Miskowiecs applied for a variance and submitted all of the materials requested by the respondent, City of Oak Grove, in order to obtain a building permit. Respondent denied the variance application in April 1999.
On June 4, 1999, appellants brought suit in Anoka County District Court challenging respondent's denial of a variance and alleging respondent's actions constituted an unconstitutional taking of their property. The district court bifurcated appellants' claims, and tried the variance issue (Count I) in July and August 2002. The district court affirmed respondent's denial of variance in its October 1, 2002 opinion on Count I of appellants' original complaint. Appellants did not appeal that ruling.
The district court tried the takings claims (Count II) in September 2003, and issued its opinion denying all of appellants' claims on November 19, 2003. The court found that appellant Richard Wolens did not have standing to pursue a claim in this matter, and that appellants were barred by the Statute of Frauds from asserting ownership of the property prior to 1996. The court also found that a categorical taking had not occurred because the property was unbuildable prior to appellants' purchase. On December 22, 2003, the district court issued a final Order for Judgment regarding its November 19, 2003 opinion. This appeal followed.
DECISION
Both the federal and state constitution forbid the taking of private property for public use without just compensation. U.S. Const. 5th Amend.; Minn. Const. art. I, § 3. While the takings clause originally applied only to physical appropriations of property, the U.S. Supreme Court recognized that regulations on property may also be considered takings if the regulation goes "too far." Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S. Ct. 158, 160 (1922).
In determining whether a regulation goes "too far," the U.S. Supreme Court has recognized two distinct classes of regulatory takings: (1) categorical takings, in which the regulation "denies all economically beneficial or productive use of land," under Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015, 112 S. Ct. 2886, 2893 (1992); and (2) case-specific takings, which involve consideration of the economic impact of the regulation, the interference with reasonable investment-backed expectations, and the character of the regulation. Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124, 98 S. Ct. 2646, 2659 (1978); see also Agins v. City of Tiburon, 447 U.S. 255, 261-62, 100 S. Ct. 2138, 2141-42 (1980).
In Minnesota, landowners seeking to compel inverse condemnation have the burden of proving a taking has occurred. Vern Reynolds Constr., Inc. v. City of Champlin, 539 N.W.2d 614, 617 (Minn. App. 1995), review denied (Minn. Dec. 20, 1995). Whether a municipality has taken property without just compensation is a question of law, which this court may review de novo. Thompson v. City of Red Wing, 455 N.W.2d 512, 516 (Minn.App. 1990), review denied (Minn. June 6, 1990). But the district court's findings of fact with regard to a takings claim will be upheld unless clearly erroneous and unsupported by the record. Parranto Bros., Inc. v. City of New Brighton, 425 N.W.2d 585, 591 (Minn. App. 1988), review denied (Minn. July 28, 1988).
1. Standing to Bring Takings Claim
Before turning to appellants' categorical takings claim, we will first address appellants' arguments regarding Richard Wolens' standing, and the district court's application of the Statute of Frauds in this case. In deciding both issues, the district court should have looked to the U.S. Supreme Court's decision in Palazzolo v. Rhode Island, 533 U.S. 606, 121 S. Ct. 2448 (2001), for guidance.
The record in the instant case indicates that Mr. Martinson, the previous owner of the subject property, attempted to obtain a building permit in 1986, but his application was denied. There is no evidence that Mr. Martinson ever applied for a variance, or pursued his application further.
In 1994, Richard and Troy Wolens also tried to obtain the necessary permits to build a home on the subject property. Their application was eventually denied by respondent because of a moratorium on building in the 100-year floodplain. Neither Richard nor Troy Wolens pursued the application any further at this time.
The district court, based on credible evidence, found that the Miskowiecs owned the property as of May 25, 1996. And in February 1999, the Miskowiecs applied for a variance from respondent, City of Oak Grove, in order to obtain a building permit. Respondent denied the variance application in April 1999.
It is clear under Palazzolo that the Miskowiecs have a right to bring a takings claim for their property, because "[i]t would be illogical, and unfair, to bar a regulatory takings claim because of the post-enactment transfer of ownership where the steps necessary to make the claim ripe were not taken, or could not have been taken, by a previous owner." 533 U.S. at 628, 121 S. Ct. at 2463; see also Brooks Investment Co. v. City of Bloomington, 232 N.W.2d 911, 919 (Minn. 1975) (stating that "it would certainly be bizarre to hold that there were two different `takings' of the same property, with some incidents of the taking determined as of one date and some as of the other") (quoting U.S. v. Dow, 357 U.S. 17, 24, 78 S. Ct. 1039, 1045 (1958)).
It is also clear that a regulatory taking does not occur, by definition of the U.S. Supreme Court, until the landowner has exhausted their administrative remedies and identified the extent to which their property has been taken. Palazzolo, 533 U.S. at 620-21, 121 S. Ct. at 2459; see also Thompson, 455 N.W.2d at 515-16 ("[w]here a land owner has not yet obtained a final decision regarding application of a land regulation to the particular property in question, the claim is not ripe for review").
The exact language of Palazzolo is as follows:
A landowner may not establish a taking before a land-use authority has the opportunity, using its own reasonable procedures, to decide and explain the reach of a challenged regulation. Under our ripeness rules a takings claim based on a law or regulation which is alleged to go too far in burdening property depends upon the landowner's first having followed reasonable and necessary steps to allow regulatory agencies to exercise their full discretion in considering development plans for the property, including the opportunity to grant any variances or waivers allowed by law. As a general rule, until these ordinary processes have been followed the extent of the restriction on property is not known and a regulatory taking has not yet been established.
533 U.S. at 620-21, 121 S. Ct. at 2459.
We therefore hold that the Miskowiecs were the owners of the property when the extent of the government's interference was determined, and the right to compensation for that interference, if any, should vest solely with them.
2. The District Court's Application of the Statute of Frauds
Appellants also argue the district court's conclusion that appellants had no legally recognizable property interest prior to the May 8, 1996 warranty deed was in error. The district court based its conclusion on a finding that "the Statute of Frauds bars all oral testimony and documentary evidence relating to the purchase of the subject property, except for the May 8, 1996 Warranty Deed, and the May 25, 1996 Quitclaim Deed." This finding on the part of the district court was in error, as application of the Statute of Frauds in this situation was inappropriate.
Again, the U.S. Supreme Court's decision in Palazzolo is instructive. In Palazzolo, the Court held that "[j]ust as a prospective enactment . . . can limit the value of land without effecting a taking because it can be understood as reasonable by all concerned, other enactments are unreasonable and do not become less so through passage of time or title." Palazzolo, 533 U.S. at 627, 121 S. Ct. at 2462 (emphasis added). Further, the Court stated that "[a] blanket rule that purchasers with notice have no compensation right when a claim becomes ripe is too blunt an instrument to accord with the duty to compensate for what is taken." Id. at 627, 121 S. Ct. at 2463. Based on this language, it is clear that a takings claim can pass with the property's title, even where the subsequent owner had notice of existing restrictions on the property.
Accordingly, appellants claim should stand whether they obtained ownership of the subject property in 1994 or 1996, regardless of the applicability of the Statute of Frauds.
3. Categorical Takings Claim
Appellants claim a categorical taking of their property occurred when respondent City of Oak Grove adopted its Shore Land and Flood Plain Ordinances in 1994, along with its Zoning and Subdivision Regulations in 1995.
In Lucas v. South Carolina Coastal Council, the U.S. Supreme Court held that a regulation that "denies all economically beneficial or productive use of the land" is compensable under the Fifth Amendment without case-specific inquiry into the public interest advanced by the regulation. 505 U.S. at 1015-16, 112 S. Ct. at 2893.
The facts of Lucas, at first blush, are similar to those at issue here. Lucas purchased two beachfront lots with residential zoning for $975,000. Id. at 1006-07, 112 S. Ct. at 2889. After his purchase, South Carolina passed the Beachfront Management Act prohibiting construction on beachfront lots such as those Lucas had purchased. Id. Lucas sued and the South Carolina trial court ruled in his favor, finding that the Beachfront Management Act deprived him of any reasonable economic use of his property and rendered the lots valueless. Id. The U.S. Supreme Court agreed that if the regulation deprived Lucas of all economically beneficial use of the land, it constituted a categorical taking, but remanded to determine whether, as a matter of state law, the restrictions on the land were already prohibited in the title. Id. at 2901, 112 S. Ct. at 1031.
While factually comparable, appellants' economic circumstances, with regard to the subject property, are distinguishable from those described in Lucas. The district court's findings indicate that the property has several productive uses. Appellants have not demonstrated that these permitted uses of their property, including recreational, lake access, and general open spaces uses, have no economically beneficial value. More importantly, the district court found that instead of a decline in value, the property actually appreciated in value since appellants purchased it. See Parranto Bros., 425 N.W.2d at 592 (holding that "the fact that the property remained economically viable after the rezoning weighs against finding a taking"). There is evidence in the record to support these findings, including testimony from Richard Wolens that the subject property was purchased for $25,000 and its value increased "exponentially . . . [b]eyond comprehension."
Finally, the district court found that in January 1994, prior to respondent's enactment of the regulations upon which appellants base their categorical takings claim, the subject property was unbuildable. While the subsequent ordinances passed by respondent made it even tougher for appellants to obtain a building variance, respondent did not make the subject property unbuildable. We conclude the subject property started that way.
Appellants have not established that respondent's actions have deprived them of "all economically beneficial or productive use" of their property. See Lucas, 505 U.S. at 1015-16, 112 S. Ct. at 2893.