Daily Development for
Friday, July 19, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

EMINENT DOMAIN; INVERSE CONDEMNATION; SUBSTANTIVE DUE PROCESS: In an alleged inverse condemnation case involving a temporary deprivation, the court must apply the three-factor Penn Central inquiry to determine the takings issue, and not restrict its analysis to whether "all economically viable use" has been taken. Zeman v. City of Minneapolis, 540 N.W.2d 532 (Minn. App. 1995).

The plaintiff held a provisional rental dwelling license for his building. The city council revoked his license for violation of a "disorderly use" ordinance and the plaintiff sued alleging that the revocation was a taking of his property without compensation in violation of the state and federal constitutions. The trial court had concluded that plaintiff had not been deprived of all beneficial use of the property, and granted summary judgment to the city.

On appeal: reversed and remanded: More evidence is needed on a variety of issues. Summary judgment was not appropriate on the current state of the record.

The court recognized the United States Supreme Court evolutionary jurisprudence on the takings question, noting that city ordinances that regulate property may be takings if they "go too far." In evaluating the city's action, the court viewed it as necessary to determine whether the trial court should apply the case specific inquiry of Penn Central as opposed to the categorical rules of physical invasion and denial of all economically beneficial or productive use of land recognized by the Lucas decision.

The court noted that the plaintiff's rental license had been reinstated, thus clearly indicating that any taking of his property was temporary. This, it concluded, precluded the application of the Lucas test, which it viewed as applying only when a permanent deprivation is involved. The court reasoned that in order to determine if an alleged temporary "taking" is compensable it is necessary to make a factual inquiry into (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with distinct investment-backed expectations, and (3) the character of the government regulation. Here, it decided that more evidence was required.

The property owner also alleged that there had been a breach of substantive due process. The court stated that there is a violation of substantive due process when there has been a deprivation of a protectable property interest and that deprivation results from an abuse of government power sufficient to state a constitutional violation. An abuse of government power constitutes a constitutional violation when it is so egregious and irrational that the action exceeds standards of inadvertence and mere errors of law. It commented that it was unaware of a property regulation case that had involved facts so egregious as to amount to a breach of substantive due process except where the government has been morivated by "personal or political animus." In fact, there was some evidence here to support claims of this type, and the case was remanded on that ground as well.

Comment 1: Although the court appears to see the issues clearly, its analysis gets a bit hazy due to some unfortunate local precedent with which it must deal. Indeed, where there is an operating business on the property that has been shut down permanently, it would always be appropriate, even under Lucas, to see whether investment backed expectations have been frustrated, even when there is some viable use of the property remaining. Lucas and Penn Central are not mutually exclusive. The court here properly remanded to the trial court for application of the Penn Central case.

The court also relies upon earlier authority that a temporary taking is not compensable even where all viable use has been taken for a substantial - but not permanent - period of time, since the deprivation was only temporary. Quare whether this conclusion is consistent with Miller v. Lutheran Camp. It would seem that where the property is rendered totally useless, then we have, ipso facto, a frustration of investment backed expectation for the relevant period. If the justification for such taking is "anti-nuisance," then there's no taking. If not, then the only question is whether there are significant damages. Where a landlord's apartment building has been closed down, it would seem that damages would be an easy calculation.

Comment 2: The landlord is probably going to lose when we get down to the question of whether the government action is "anti-nuisance." The government's evidence was that there were three separate instances of drug-related criminal conduct occurring on the premises. One of them was a "buy" in a government "sting" operation. As discussions of the forfeiture laws in this forum have indicated, property on which drug crimes occur is a "nuisance" in modern parlance. The landlord indeed is fortunate that the only thing that has been lost is his renting license, and that only temporarily. In some states, the government could forfeit the property entirely without recognizing the "innocent owner defense" recognized in federal forfeiture law. And even the "innocent owner" defense gets dicey after three incidents. The landlord had better hunker down and shut up!!

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