McDowell v. Avondale

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE ) ) ) ) ) ) ) Plaintiffs/Appellants, ) ) ) v. ) ) CITY OF AVONDALE, ) ) Defendant/Appellee. _______________________________________ ) MCDOWELL RESIDENTIAL PROPERTIES, L.L.C., an Arizona limited liability company; 120TH AVENUE AND MCDOWELL INVESTMENTS, L.L.C., an Arizona limited liability company; and MARK DOERFLEIN, DIVISION ONE FILED: 06-29-2010 PHILIP G. URRY,CLERK BY: GH 1 CA-CV 09-0301 DEPARTMENT B MEMORANDUM DECISION (Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2008-024173 The Honorable Robert H. Oberbillig, Judge REVERSED AND REMANDED Jennings Strouss & Salmon PLC By Douglas G. Zimmerman and Ronald D. Roach Attorneys for Plaintiffs/Appellants Phoenix Gust Rosenfeld, PLC By Wendy N. Weigand and David A. Pennartz and Andrew J. McGuire Attorneys for Defendant/Appellee Phoenix N O R R I S, Judge ¶1 The issue in this appeal is whether McDowell Residential Properties and the other appellants (collectively, MRP ) have standing to assert an inverse condemnation claim against the City of Avondale when, at the time of the alleged taking, it owned the property, but then sold it to a third party. FACTS AND PROCEDURAL BACKGROUND ¶2 On October 31, 2006, MRP entered into an agreement to sell the property to P.B. Bell Commercial Acquisitions, LLC. Bell intended to construct an apartment complex on the property. On December 17, 2007, the Avondale City Council approved the final plat for Bell s apartment project, 1 but conditioned its approval on the dedication of an additional ten feet of the property to an existing 65 foot right-of-way on the south side of McDowell Road and the movement of a utility tower owned by Salt River Project located on the property (collectively, the required dedications ). MRP s sale of the property to Bell closed on or about January 18, 2008. ¶3 Subsequently, Condemnation - Unlawful MRP sued Exaction the and City contended for the Inverse required dedications constituted a taking under Article 2, Section 17, of 1 In its briefing in the superior court and on appeal, the City described the Council s action in different terms -- as approving a rezoning request with conditions. 2 the Arizona Constitution, compensation. thereby entitling it to just In making this claim, MRP also alleged that under its sale agreement with Bell, it had assumed the costs for the City s dedication, including the lands to be dedicated and the costs for relocating the SRP tower. ¶4 The City moved to dismiss MRP s complaint for failure to state a claim under Arizona Rule of Civil Procedure 12(b)(6). Because MRP no longer owned the property, a fact it had acknowledged in its complaint, the City argued MRP did not have standing to raise claims under Arizona Revised Statutes ( A.R.S. ) sections 12-1134 (Supp. 2009) and 9-500.12 (2008). As we explain below, § 12-1134 allows a real property owner to recover just compensation under certain circumstances if a land use law reduces the fair market value of the property, see infra ¶¶ 17-19, and § 9-500.12 creates an administrative appeal process whereby a property owner may appeal certain municipal actions relating to the owner s property, see infra ¶ 20. The City also essentially argued, even if MRP had standing to assert claims under these statutes, it had lost its right to do so because it had failed to exhaust its administrative remedies. ¶5 The Interpret[ing] superior the court statutes granted literally, 3 the the City s court motion. ruled MRP lack[ed] standing to pursue [its] claims for relief, because it was not the owner of the property. the City s exhaustion argument. The court did not address MRP timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003). DISCUSSION I. Motion to Dismiss ¶6 The court dispositive properly issue dismissed here MRP s is state condemnation claim for lack of standing. question of law we review de novo, whether the constitutional superior inverse Although standing is a Strawberry Water Co. v. Paulsen, 220 Ariz. 401, 405, ¶ 7, 207 P.3d 654, 658 (App. 2008), in reviewing a grant of a motion to dismiss a complaint, we assume the facts alleged in the complaint to be true and give plaintiffs facts. the benefit of all inferences arising from those Capitol Indem. Corp. v. Fleming, 203 Ariz. 589, 590, ¶ 2, 58 P.3d 965, 966 (App. 2002). We will uphold the dismissal only if the plaintiff is not entitled to relief under any facts susceptible of proof under the claims stated. Id. (quoting Linder v. Brown & Herrick, 189 Ariz. 398, 402, 943 P.2d 758, 762 (App. 1997) (internal citation omitted). A. ¶7 MRP s Claim Under the Arizona Constitution, property shall not be taken or damaged without just compensation. 4 Ariz. Const. art. 2, § 17. In inverse condemnation cases, Arizona law has only recognized a taking of property where the government either assumes actual restraint possession upon the of property the property that or places substantially a legal diminishes or destroys the owner s right to, and use and enjoyment of, the property. State v. Mabery Ranch, Co., 216 Ariz. 233, 242, ¶ 35, 165 P.3d 211, 220 (App. 2007) (quoting DUWA, Inc. v. City of Tempe, 203 Ariz. 181, 184, ¶ 16, 52 P.3d 213, 216 (App. 2002)). Our supreme court has described Article 2, Section 17, as self-executing. Calmat of Ariz. v. State ex rel. Miller, 176 Ariz. 190, 192, 859 P.2d 1323, 1325 (1993) (injured party must therefore be compensated, even though no specific statutory procedure governs this recovery ). ¶8 In its complaint, consistent with these authorities, MRP plead a constitutional claim for inverse condemnation. identified described the the property City s underlying actions it the required asserted gave It dedications, rise to the alleged taking, and specified the legal basis for its claim -the taking of property pursuant to Article 2, Section 17 of the Arizona Constitution. B. ¶9 See Ariz. R. Civ. P. 8(a). Standing Having asserted a constitutional inverse condemnation claim, MRP argues it has standing to assert this claim despite 5 its subsequent sale of the property to Bell, and therefore the superior court should not have dismissed its claim. On this record, we agree. ¶10 In Arizona and other jurisdictions, it is well settled that in a direct condemnation action, the right of damages is personal to the owner at the time of the taking and does not pass with a deed to a subsequent owner absent express provisions to the contrary. Boyd v. Atchinson, T. & S. F. Ry., 39 Ariz. 154, 158-59, 4 P.2d 670, 671 (1931); see also Kindred v. Union Pac. R. Co., 225 U.S. 582, 596-97, 32 S. Ct. 780, 782, 56 L. Ed. 1216 (1912); see generally Nichols on Eminent Domain § 5.02[3], at 58-60 (Matthew Bender, 3rd Ed. 2006) (citing cases; if parcel of land is sold after taken/injured, right to compensation does not run with land but remains a personal claim in hands of vendor unless assigned by special assignment or provision in deed). ¶11 rule Although we have found no Arizona case applying this in an inverse condemnation action, applied this principle in such cases. other courts have See State ex rel. City of Blue Springs v. Nixon, 250 S.W.3d 365, 370 (Mo. 2008) (one must own property at time property damage became ascertainable to have standing for inverse condemnation claim); see also Ex parte Simpson, __ So.3d __, 2009 WL 3335899 at *6 (Ala. 2009) (citing 6 City of Blue Springs); City of Los Angeles v. Ricards, 515 P.2d 585, 587 (Cal. 1973) (inverse condemnation action; right to recover remains in the person who owned the property at the time of the taking or damaging, regardless of whether the property is subsequently transferred to another ); Brooks Inv. Co. v. City of Bloomington, 232 N.W.2d 911, 918 (Minn. 1975) (when government interferes with person s right to possess and enjoy property to such an extent to create a taking in the constitutional sense, right to compensation vests in person owning the property at the time of such interference); Dep t of Forests, Parks & Recreation v. Town of Ludlow Zoning Bd., 869 A.2d 603, 607 (Vt. 2004) (inverse condemnation action; citing cases and authorities for proposition it is well-settled law that right to recover damages belongs to person owning or having an interest in land at time of the taking and damage claim does not run with the land ) (internal citation omitted). ¶12 In Brooks, the Minnesota Supreme Court described the rationale for applying this rule in inverse condemnation cases as simple and logical. It explained: When the government interferes with a person s right to possession and enjoyment of his property to such an extent so as to create a taking in the constitutional sense, a right to compensation vests in the person owning the property at the time of such interference. This right has the status of property, is personal to the 7 owner, and does not run with the land if he should subsequently transfer it without an assignment of such right. The theory is that where the government interferes with a person s property to such a substantial extent, the owner has lost a part of his interest in the real property. Substituted for the property loss is the right to compensation. When the original owner conveys what remains of the realty, he does not transfer the right to compensation for the portion he has lost without a separate assignment of such right. If the rule were otherwise, the original owner of damaged property would suffer a loss and the purchaser of that property would receive a windfall. Presumably, the purchaser will pay the seller only for the real property interest that the seller possesses at the time of the sale and can transfer. 232 N.W.2d at 918. ¶13 We agree with the rationale given by the Minnesota Supreme Court for applying this rule in inverse condemnation cases. Applying the rule recognized by that court and the other authorities cited above, we hold MRP has standing to assert an inverse condemnation claim against the City. ¶14 before We this nevertheless court the acknowledge City that contended it at had oral not argument taken any property belonging to MRP by simply conditioning approval of the final plat on the required dedications; according to the City, a taking in the constitutional sense 8 could not have occurred unless the required dedications had been satisfied. We decline to consider this argument. 2 ¶15 First, the City failed to raise this argument in the superior court 3 and in its briefing on appeal, 4 thus depriving MRP of a fair opportunity to address it. ¶16 Second, implicit in the City s argument is the factual assertion the required dedications have never been satisfied. The record before us, however, contains no information regarding 2 In making this argument, the City relied on Palazzolo v. Rhode Island, 533 U.S. 606, 121 S. Ct. 2448, 150 L. Ed. 2d 592 (2001), a case involving a land-use regulatory takings claim, in contrast to the type of takings claim alleged by MRP here. In Palazzolo, the Supreme Court held the landowner could bring his regulatory takings claim even though he had acquired the property after the regulation had taken effect. 533 U.S. at 616, 121 S. Ct. at 2457. In so holding, the Court rejected the State s argument the property owner could not have had reasonable investment-backed expectations simply because he had acquired the property after enactment of the regulation. Id. 3 In its reply in support of its motion, the City argued there had not been a taking because the SRP tower had not yet been moved, and it was possible SRP would decide to bear the moving costs. Putting aside the City s failure to provide the superior court with any factual support for these assertions, we fail to see how these assertions preserved the City s argument the required dedications had to be satisfied for there to be a taking. Airfreight Express Ltd. v. Evergreen Air Ctr., Inc., 215 Ariz. 103, 109-10, ¶ 17, 158 P.3d 232, 238-39 (App. 2007). 4 In its answering brief the City argued MRP presented no facts to support an inverse condemnation claim. The City neither made this argument in the superior court, nor does this argument signal it intended to argue MRP had to have satisfied the required dedications to have standing to assert its inverse condemnation claim. 9 the details of the required dedications and whether the required dedications have been satisfied. Accordingly, we express no opinion on whether MRP s inverse condemnation claim is dependent on the satisfaction of the required dedications, as the City argues. II. The City s Statutory Arguments ¶17 Although, as we have discussed, the owner of property as of the time of the taking has standing to assert an inverse condemnation claim, here, as in the superior court, the City challenges MRP s standing by recasting its claim to allege causes of action . . . based on A.R.S. § 12-1134 and A.R.S. § 9-500.12, even though statutes in its complaint. City essentially argues MRP made no references to these Although not stated explicitly, the these statutes constitutional inverse condemnation claim. supplant MRP s The City also argues the plain language of the statutes creates a cause of action only for the current owner of the property; thus, because MRP is no longer the owner of the property, it did not have standing to pursue its claim against the City. these statutes do not supplant MRP s On their face, however, constitutional inverse condemnation claim. ¶18 Sections 12-1131 to -1138 of Arizona Revised Statutes are based on Proposition 207 ( Prop. 207 ), a private property 10 rights initiative A.R.S. §§ approved 12-1131 to by -1138 Arizona voters (Supp. 2009) in 2006. See (Historical and Statutory Notes); see generally Jeffrey L. Sparks, Note, Land Use Regulation Protection in Act, Arizona 51 Ariz. implications of Prop. 207). After L. the Rev. Private 211 Property (2009) Rights (discussing Prop. 207 was drafted in response to unpopular attempted and successful public takings 5 and was intended to ensure that Arizona citizens do not lose their home or property [or its value] without just compensation, and to provide an efficient mechanism to recover compensation in light of judicial processes . . . [that] are burdensome, costly and unfair. See Historical and Statutory Notes preceding A.R.S. §§ 12-1131 to -1138 (Prop. 207, § 2(A)(4), (6), (B)). ¶19 remedy The plain text of A.R.S. § 12-1134(H) states, [t]he created by this section is in addition to any other remedy that is provided by the laws and constitution of this state or the United States and is not intended to modify or replace any other remedy. Thus, Prop. 207 and its constituent statutes augment, rather than supplant, other remedies available under Arizona law. These other remedies include, of course, an inverse condemnation claim under Article 2, Section 17, of the 5 See, e.g., Kelo v. City of New London, 545 U.S. 469, 125 S. Ct. 2655, 162 L. Ed. 2d 439 (2005); Bailey v. Myers, 206 Ariz. 224, 76 P.3d 898 (App. 2003); DUWA, Inc., 203 Ariz. 181, 52 P.3d 213. 11 Arizona Constitution. Whether MRP is an owner under § 12-1134 is irrelevant to its inverse condemnation claim, and we need not decide whether Prop. 207 applies only to current owners. ¶20 The plain text of A.R.S. § 9-500.12 establishes an administrative appeals process whereby an owner may appeal certain actions relating to the owner s property by a city or town, town. or an administrative agency or official of a city or It was originally enacted, in part, to prescribe a process by which private property owners may appeal dedication or exaction requirements on approvals of the use, improvement or development of real property. House Fact Sheet for H.B. 2229, 42nd Leg., 1st Reg. Sess. (1995). The statute does not create a cause of action, and it does not therefore restrict or limit MRP s standing to pursue its inverse condemnation claim against the City. 6 6 The City also argues MRP waived its inverse condemnation claim when it decided to close the sale to Bell because, by doing so, it relinquished its right to sue the City for inverse condemnation. We disagree. As discussed above, MRP s right to sue the City for inverse condemnation came into existence at the time of the alleged taking and at that time it owned the property. Its subsequent sale of the property to Bell did not strip it of its pre-sale right to sue the City for inverse condemnation and, accordingly, its subsequent sale could not, in and by itself, constitute a waiver. 12 III. Exhaustion ¶21 Although the superior court did not base its dismissal of MRP s claim on the City s failure to exhaust administrative remedies argument, the City argues we should affirm the court s dismissal on that basis. As we understand its argument, the City contends MRP was required to exhaust the administrative appeals process established by A.R.S. § 9-500.12. As relevant here, that statute establishes an administrative process whereby a property owner may appeal the requirement by a city or town of a dedication or exaction as a condition of granting approval for the use, improvement or development of real property to, first, a hearing officer, and then if aggrieved by the hearing officer s decision, to the superior court. A.R.S. § 9- 500.12(A)(1), (C), (G). ¶22 Even if we were to assume this statute could apply to MRP s constitutional inverse condemnation claim, an issue we need not and do not decide, 7 this administrative appeals process is inapplicable to a dedication or exaction required in a legislative act by the governing body of a city or town that 7 MRP argues exhaustion under A.R.S. § 9-500.12 is not required because, first, nothing in that statute requires exhaustion as a condition precedent to filing a lawsuit pursuant to Article 2, Section 17; second, exhaustion under the statute is permissive because it states a property owner may appeal ; and third, exhaustion would have been futile. We express no opinion on any of these arguments. 13 does not give discretion to the administrative agency or official to determine the nature or extent of the dedication or exaction. A.R.S. § 9-500.12(A)(1). The record is insufficiently developed for us to determine whether the City Council s decision falls within this statutory carve-out. Accordingly, on the record before us, we cannot say MRP was required to exhaust the administrative appeals process established by § 9-500.12. CONCLUSION ¶23 For the foregoing reasons, we hold MRP has standing to pursue its inverse condemnation claim under Article 2, Section 17, of the Arizona Constitution against the City. We therefore reverse the superior court s judgment dismissing MRP s claim and remand for further proceedings consistent with this decision. /s/ ___________________________________ PATRICIA K. NORRIS, Presiding Judge CONCURRING: /s/ _________________________ DANIEL A. BARKER, Judge /s/ _________________________ PETER B. SWANN, Judge 14

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