Leon S. DeCook, et al., Appellants, vs. Rochester International Airport Joint Zoning Board, Respondent.

Leon S. DeCook, et al., Appellants, vs. Rochester International Airport Joint Zoning Board, Respondent. A06-2170, Court of Appeals Unpublished, July 31, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-2170

 

Leon S. DeCook, et al.,
Appellants,
 
vs.
 
Rochester International Airport Joint Zoning Board,
Respondent.

 

Filed July 31, 2007

Reversed and remanded

Peterson, Judge

 

Olmsted County District Court

File No. 55-CV-06-3803

 

Steven M. Corson, Corson Law Offices, 206 Centertown Plaza, Stewartville, MN  55976 (for appellants)

 

Monte A. Mills, Clifford M. Green, Greene Espel, P.L.L.P., 200 South Sixth Street, Suite 1200, Minneapolis, MN  55402 (for respondent)

 

            Considered and decided by Peterson, Presiding Judge; Lansing, Judge; and Harten, Judge.*

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

            This appeal is from a summary judgment dismissing appellant-landowner's regulatory-taking claim.  We reverse and remand.

FACTS

            Appellants, Leon S. DeCook, et al., own 240 acres of land just north of the Rochester International Airport.  More than half of the land is used for the Oak Summit Golf Course; 80 acres are undeveloped.  Appellants acquired the 240 acres in two purchases; the first 217 acres on July 11, 1989, for $120,000, and the other 23 acres on December 22, 1989, for $39,600.    

            The property is subject to the zoning regulations of Olmsted County, the City of Rochester, and respondent Rochester International Airport Joint Zoning Board (the board).  Under the City of Rochester zoning ordinance, the property is zoned M-1, which allows mixed commercial/industrial development.  In September 2002, the board enacted Rochester International Airport Zoning Ordinance No. 4, which expanded the area of safety-zone A.  Land within safety-zone A is subject to height restrictions set forth in Ordinance No. 4 and may "contain no buildings, temporary structures, exposed transmission lines, or other similar above-ground land use structural hazards, and shall be restricted to those uses which will not create, attract, or bring together an assembly of persons thereon."  Rochester, Minn., Int'l Airport Zoning Ordinance, Ordinance No. 4, § V(B)2 (Sept. 18, 2002).  Permitted land uses within safety-zone A include "agriculture (seasonal crops), horticulture, animal husbandry, raising of livestock, wildlife habitat, lighted outdoor recreation (non-spectator), cemeteries, and automobile parking."  Id.  Residential dwellings are prohibited.  Id.  Expanding safety-zone A widens the approach zone for an airport runway and allows the runway to be used as a precision-instrument runway, which requires a wider approach zone than a non-instrument runway.  Under Ordinance No. 4, almost 47 acres of appellants' property are in the expanded safety-zone A.  Sixteen of these acres were previously in the original safety-zone A.  

            Appellants brought an action against the board alleging that Ordinance No. 4 amounts to a regulatory taking of their property.  The complaint asked the district court to either enjoin enforcement of the ordinance or order the board to initiate condemnation proceedings.  The district court granted the board's motion for summary judgment and dismissed appellants' complaint.  This appeal follows.

D E C I S I O N

            On appeal from summary judgment, we consider (1) whether there are any genuine issues of material fact for trial and (2) whether the district court erred in applying  the law.  Bank Midwest, Minn., Iowa, N.A. v. Lipetzky, 674 N.W.2d 176, 179 (Minn. 2004).  "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

            The Minnesota Constitution requires that "[p]rivate property shall not be taken, destroyed or damaged for public use without just compensation therefore, first paid or secured."  Minn. Const. art. I, § 13.  This requirement is intended to "ensure that the government cannot force ‘some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.'"  Zeman v. City of Minneapolis, 552 N.W.2d 548, 552 (Minn. 1996) (quoting Armstrong v. United States, 364 U.S. 40, 49, 80 S. Ct. 1563, 1569 (1960)).  Whether a taking has occurred is a question of law, which this court reviews de novo.  Thompson v. City of Red Wing, 455 N.W.2d 512, 516 (Minn. App. 1990) (citing Alevizos v. Metro. Airports Comm'n, 298 Minn. 471, 484, 216 N.W.2d 651, 660-61 (1974), 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. v. City of New Brighton, 425 N.W.2d 585, 591 (Minn. App. 1988), review denied (Minn. July 28, 1988). 

            The Minnesota Supreme Court has recognized that a taking may occur when the government adopts a land-use regulation designed to benefit a specific public or governmental enterprise.  McShane v. City of Faribault, 292 N.W.2d 253, 258-59 (Minn. 1980).  McShane involved factual circumstances similar to the facts of the present case.  In McShane, the plaintiffs were the owners of 64.86 acres of land adjacent to the Faribault Municipal Airport and used for agricultural purposes.  Id. at 255.  When the property was divided by two highways, it became more valuable for commercial and industrial use.  Id.  A small portion of the property was zoned commercial, some was zoned industrial, and a large portion was zoned for urban expansion, which meant that it was agricultural, but future rezoning was contemplated.  Id. 

            The Faribault-Rice County Joint Airport Zoning Board adopted an ordinance that created two safety zones on property near the airport.  Id.  The ordinance proscribed above-ground structural uses in one zone and restricted the height of structures in the other zone and prohibited uses in both zones that involved assemblies of people.[1]  Id. at 255-56.  All parties conceded that the ordinance caused a substantial diminution in the value of the landowners' property.  Id. at 256. 

            In determining whether the ordinance effected a taking of the plaintiffs' property without just compensation, the Minnesota Supreme Court explained that in Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 98 S. Ct. 2646 (1978), the United States Supreme Court had recognized a distinction between "arbitration" regulations, which are designed to effect a comprehensive plan, and "enterprise" regulations, which are related to a specific governmental enterprise.  McShane, 292 N.W.2d at 257-58.  The supreme court determined that "the ordinance was not an ‘arbitration' of competing land uses but a regulation for the sole benefit of a governmental enterprise the Faribault Municipal Airport."  Id. at 258.  The supreme court then held "that where land use regulations, such as the airport zoning ordinance here, are designed to benefit a specific public or governmental enterprise, there must be compensation to landowners whose property has suffered a substantial and measurable decline in market value as a result of the regulations."  Id. at 258-59.

            In granting summary judgment to the board in the present case, the district court agreed with respondent that doubt has been cast on the continuing vitality of McShane concerning substantive regulatory-taking law, but the district court applied McShane and concluded that there was no taking as a matter of law.  In reaching this conclusion, the district court reasoned that because Ordinance No. 4 states that its purposes are "the protection of the public health, safety, order, convenience, prosperity, and general welfare," and "to prevent creation, establishment, or maintenance of airport hazards," and there is no factual dispute that the ordinance was designed to safeguard both users of the airport and occupants near the airport, the ordinance fulfills an arbitration function, which should be analyzed under the Penn Central test, and appellants failed to show how the McShane test for analyzing enterprise regulations applies.  Rochester, Minn., Int'l Airport Zoning Ordinance, Ordinance No. 4, § I(C) (Sept. 18, 2002).  We disagree.

            Because Penn Central was decided two years before McShane, and the supreme court cited Penn Central in McShane and concluded that "the ordinance was not an ‘arbitration' of competing land uses but a regulation for the sole benefit of a governmental enterprise," McShane, 292 N.W.2d at 258, and because the ordinance at issue in McShane was virtually identical with the ordinance in the present case, we see no basis for concluding that appellants failed to show how the McShane test for analyzing enterprise regulations applies.  With respect to the purposes and effect of Ordinance No. 4, we see no basis for distinguishing it from the ordinance in McShane.  In both cases, enacting the ordinance permitted specific activity to occur at an airport, and although the ordinances addressed potential conflicting land uses, they did so by subordinating the use of non-airport property to activity at the airport.

            Respondent argues that "it is likely that the Minnesota Supreme Court would now discard the distinct theoretical framework described by McShane."  But this court is "not in position to overturn established supreme court precedent."  State v. Ward, 580 N.W.2d 67, 74(Minn. App. 1998).  In McShane, the supreme court considered the application of Penn Central to facts strikingly similar to the present case, and we are not persuaded that the supreme court would certainly reach a different conclusion in this case.[2] The cases that respondent cites to support its argument that McShane stands on dubious ground are cases in which the supreme court applied the Penn Central test, but the cases did not involve a government enterprise, such as an airport, and the supreme court did not overrule McShane.  Consequently, we will not disregard McShane, and we conclude that as in McShane, the ordinance here was designed to benefit the Rochester International Airport, and appellants must be compensated if their property has suffered a substantial and measurable decline in market value as a result of the ordinance.

            Appellants submitted an appraisal to the district court that showed that the value of the 80-acre parcel that contains the land affected by Ordinance No. 4 decreased from $1,320,000 to $860,000.  Comparing this case with McShane, in which there was evidence that the ordinance caused a 67% diminution in property value, 292 N.W.2d at 256, the district court determined that the approximately 35% decrease in the value of appellants' 80 acres was not substantial.  But because all parties in McShane conceded that the ordinance caused a substantial diminution in the value of the landowners' property, McShane did not address whether the ordinance caused a substantial and measurable decline in value, and, therefore, the 67% diminution shown by the evidence in McShane should not be regarded as a minimum diminution that must be shown before a change in property value can be considered to be substantial.  See McShane, 292 N.W.2d at 256-57 (noting that parties conceded diminution in value was substantial and that appellants did not challenge finding that ordinance caused substantial diminution in value).

            Instead, the McShane court explained that property owners cannot be paid for the undesirable effects created by conveniences such as an airport "‘unless those effects adversely affect their property so directly and so substantially that it is manifestly unfair to require them to sustain a measurable loss in market value which the property-owning public in general does not suffer.'"  Id. at 259 (quoting Alevizos, 298 Minn. at 487, 216 N.W.2d at 662); see also Thomsen v. State by Head, 284 Minn. 468, 473, 170 N.W.2d 575, 579 (1969) (explaining that in order for property owner to force condemnation to recover for consequential damage to property caused by traffic on newly constructed highway, damage must be direct, substantial, and peculiar to property owner in that it differs markedly from damage suffered by public at large as a result of constructing highway).  Whether a diminution in value has occurred and the extent of the diminution are questions of fact, but whether the diminution is substantial is a legal question.  Keenan v. Int'l Falls-Koochiching County Airport Zoning Bd., 357 N.W.2d 397, 400 (Minn. App. 1984).  Therefore, in considering the summary-judgment motion, the district court should have determined whether there was a genuine issue of material fact as to assertions that Ordinance No. 4 directly caused so great a reduction in the value of appellants' property that it would be manifestly unfair to require appellants to sustain a loss in market value that the general property-owning public did not suffer.      

            The district court also noted that the fact that appellants had realized a 28% annual return on their investment in their land supported the conclusion that appellants did not suffer a substantial diminution in property value.  But it appears that the district court determined this rate of return based on the change in property value during the entire period that appellants owned the property.  Considering the entire ownership period fails to address whether Ordinance No. 4 caused a reduction in property value because the ordinance could only have caused a reduction in value during the period that it existed.  Therefore, the district court should only have considered changes in value that occurred after the ordinance was adopted.

            When determining whether there was a substantial decline in the market value of appellants' property, the district court considered the change in value of only 80 of the 240 acres that appellants own.  Respondent argues that the "parcel-as-a-whole" rule required the district court to consider the value of the entire 240 acres.  But respondent did not file a notice of review to preserve this issue for appeal as required under Minn. R. Civ. App. P. 106.  Furthermore, although the district court considered the change in value of only 80 acres of appellants' land, it stated in its memorandum that it agreed with respondent that the parcel-as-a-whole rule applied in this case, and it chose not to address the issue because its conclusion would be the same whether it considered the 80-acre parcel or the entire 240 acres.  See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that reviewing court must limit itself to consideration of only issues that record shows were presented and considered by district court in deciding matter before it).

            We reverse the district court's order granting summary judgment and remand for further proceedings consistent with this opinion.

            Reversed and remanded.

*   Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

 

[1] The ordinance appears to be virtually identical with the ordinance adopted by the board in the present case.

 

 

[2] In an opinion released after oral argument in this appeal, the supreme court stated that it did

not view the McShane analysis as different from or inconsistent with the flexible approach to takings adopted by the Supreme Court in Penn Central.  Any unfairly unequal distribution of the regulatory burden may be considered in appropriate cases under the character factor of the Penn Central approach and then balanced along with the other relevant factors.

Wensmann Realty, Inc. v. City of Eagan, ___ N.W.2d ___, ___, 2007 WL 2003396 ___, at *15, n.14 (Minn. July 12, 2007).