Daily Development for Friday, November 15, 2002

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

CONSTITUTIONAL LAW; DUE PROCESS; TAKINGS; REGULATORY TAKINGS: City ordinance prohibiting use of existing sign is not a taking because (a) there is no constitutional right to continue a pre-existing use; (b) a regulation that diminishes the value of property, but leaves it with substantial value, does not constitute a taking; and (3) amortization period five year amortization period prior to the required removal of the sign is "reasonable."

Red Roof Inns, Inc. v. City of Ridgeland, 797 So.2d 898 (Miss. 2001).

Plaintiff contested an order for removal of its on-premises sign pursuant to a public ordinance that outlawed such signs but allowed a five year "amortization period." At the time of challenge, the five years had run and the sign was ordered removed.

Although decisions all over the country have authorized abolition of existing signs subject to a allowance for "reasonable amortization," this case is worth considering because of a number of special features.

First, the court's analysis, at least on first blush, does not appear to turn on the existence of the amortization provisions at all. The court discusses the fact that a sign ordinance is a simple "regulation" that merely restricts an owner in the use and enjoyment of property, and is not compensable so long as it is not arbitrary or unreasonable and (citing a 1951 Mississippi decision unfortunately named Palazzola) "the right to continue a non-conforming use may be lost even where significant value remains in the prior use."

The court's discussion is very difficult to follow. The court points to a series of decisions in other jurisdictions that have upheld sign ordinances that provided for amortization periods. But nowhere does the court state specifically that a regulation of the sort before it would be Constitutionally invalid if there were no amortization allowance.

Mississippi also has a statute providing that amortization will not be viewed as just compensation when a public agency requires the removal of an "outdoor advertising sign lawfully erected." The plaintiff, of course, raised this statute in its complaint, but the court noted that the statute by its terms does not apply to any on premises sign ordinance adopted by an agency prior to May of 1992, such as this ordinance was.

Another interesting note was sounded by the two dissenting judges, who commented that although many states have upheld sign regulations that provide for an amortization period, some decisions have held such ordinances to be takings, citing cases in New York, Texas, Ohio and South Carolina. (All these cited cases are 1955 or earlier.)

The judges also argued that the policy of the state articulated in the statute was that just compensation must be awarded to property interests that are regulated away, and that amortization is not "just compensation."

Comment 1: The dissenting judges were reacting in part to the tone of the majority opinion, which also gives the editor some pause - to the effect that an ordinance ordering removal of a sign might not be regarded as a taking if there is some value left in the property. If the court was arguing that the value remaining overall in the plaintiff's property satisfied the test, then the court missed the point that here we have "investment backed expectations" that are completely destroyed when the sign is ordered removed. Under U.S. Supreme Court decisions, the editor believes that compensation is required.

It may be that the majority was contending that the amortization period need not provide complete compensation because the provision for amortization provides "some value" remained in the plaintiff following the taking. To the editor, this appears to conflate the question of whether a taking has occurred with the requirement to pay for the taking. It would justify undercompensating for any taking, even a 100% taking by regulation. The editor does not believe that this is what the Supreme Court has had in mind, perhaps just because it hasn't thought of it.

Comment 2: Another way to rationalize the case, of course, is to conclude that a reasonable amortization period does provide "just compensation" even though a taking of investment backed expectations has occurred. The editor believes that most of the billboard cases approach the problem from this perspective, and state simply that there is some latitude in what is "reasonable" so long as the agency makes a good faith effort to provide just compensation.

Comment 3: Note that, on the general point of pre-existing nonconforming uses, many states protect such uses regardless of whether they are Constitutionally compelled to do so by the Fifth Amendment, either through interpretation of the state's own constitution, by statute or ordinance, or by common law interpretation of the zoning enabling power.

Comment 4: The editor asked a frequent commentator on takings jurisprudence, Steven Eagle of the George Mason Law School, to comment on the case. Here are Steve's views:

"While the Mississippi constitution gives owners protection from "damage" as well as from takings, the court does not read that literally. It simply says that an amortization period crafted to take into account the cost of construction of various signs and providing a period of sufficient length is sufficient and that it won't second-guess the municipal decision. That's what the majority of jurisdictions do.

"Amortization was conceived to circumvent the question of whether non-conforming uses can be eliminated. Certainly after Euclid (1926) it wasn't clear that states had the power to flat-out abolish them, and, in any event, that wouldn't have been tolerated politically. At best, those owners whose uses are subject to amortization might be thought of as compensated in kind by being permitted the enjoyment of a temporary monopoly through the prohibition of new entrants competing during the amortization period. My own view is that the Pennsylvania decision cited by the Mississippi court, although that is a minority position. The Pennsylvania case said:

""If government desires to interfere with the owner's use, where the use is lawful and is not a nuisance nor is it abandoned, it must compensate the owner for the resulting loss. A gradual phasing out of nonconforming uses which occurs when an ordinance only restricts future uses differs in significant measure from an amortization provision which restricts future uses and extinguishes a lawful nonconforming use on a timetable which is not of the property owner's choosing. . . . Thus, we hold that the amortization and discontinuance of a lawful pre- existing nonconforming use is per se confiscatory and violative of the Pennsylvania Constitution." 584 A.2d 1372, 1376.

For another DD addressing the validity of amortization as a "cure" for a regulatory taking claim, see: AVR, Inc. v. City of St. Louis Park, 585 N.W.2d 411 (Minn. App. 1998), the DD for 5/5/99 (pre-existing readymix concrete plant.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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