Pater v. the City of Casper

• Decision Date: 25 July 2011
• Docket Number: No. 09–8084.,09–8084.
• Citation: 646 F.3d 1290
• Parties: Charles PATER, Wyoming Resident, and Barry Gasdek, Wyoming Resident, Plaintiffs–Appellants,v.The CITY OF CASPER, a Wyoming Governmental Entity, Defendant–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

646 F.3d 1290

Charles PATER, Wyoming Resident, and Barry Gasdek, Wyoming Resident, Plaintiffs–Appellants,

v.The CITY OF CASPER, a Wyoming Governmental Entity, Defendant–Appellee.

No. 09–8084.

United States Court of Appeals, Tenth Circuit.

July 25, 2011.

Robert Todd Ingram (Larry R. Clapp with him on the briefs) Clapp, Ingram & Olheiser, P.C., Casper, Wyoming, for Appellants.Judith A. Studer, Schwartz, Bon, Walker & Studer, LLC, Casper, Wyoming, for Appellee.Before HARTZ, O'BRIEN, and TYMKOVICH, Circuit Judges.TYMKOVICH, Circuit Judge.

This case arises out of a contract dispute between two landowners and the City of Casper regarding whether the landowners are obligated to reimburse the City for certain street improvements. When the landowners did not comply with the City's demands for payment, the City recorded deficiency notices in the local property records for their lots. With this burden on the landowners' titles, the City expected prompt payment of the assessment.

Instead, the landowners sued the City, claiming the notices violated their right to due process and equal protection. The district court granted summary judgment in favor of the City on the ground that the landowners had not shown the existence of a protected property interest, and in any case that the deficiency notices did not constitute a deprivation of any right. We reverse, concluding the landowners have demonstrated a disputed issue of fact as to whether the City harmed their property interests, and we remand for consideration of whether this deprivation violated the Due Process Clause. But we also find the district court did not abuse its discretion in dismissing the equal protection claim.

Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we REVERSE and REMAND in part and AFFIRM in part.

I. Background

Plaintiffs Charles Pater and Barry Gasdek each own several residential lots in the Cottonwood Addition subdivision in Casper, Wyoming. As successors in interest to the original developer, plaintiffs are parties to the Cottonwood Addition Subdivision Agreement.

The Subdivision Agreement is a contract with the City of Casper, which provides that, “Upon demand of the City Council, the owners, at their sole cost and expense, shall do or cause to be done” the construction of Trevett Lane in accordance with the technical specifications of the City Engineer. R., Vol. I at 45–46.

The Subdivision Agreement allows the City to undertake improvements if the owners refuse to do so, and seek reimbursement for the cost:

In the event the owner fails to do, or cause to be done, any of the requirements set forth in this contract in an expeditious manner, the City may at its option do any or all of the following:

A. Refuse to issue any building permits....

B. After written notice ... and failing cure by owner within reasonable period of time, the City may complete any and all of the public improvements required by this contract by itself or by contracting with a third party to do the same. In the event the City elects to complete said improvements or contract with a third party to do so, the owners agree to pay any and all costs resulting therefrom upon demand by the City.

The Remedies provided in this paragraph are in addition to any other remedies specifically provided for in this contract, or which the City might otherwise have at law or in equity, and are not a limitation upon the same.

Id. at 51 (emphasis added).

In addition to the agreement with plaintiffs, the City entered into a similar agreement with the developer of a neighboring subdivision. This agreement required the developer to construct Trevett Lane and committed the City to securing partial reimbursement from other property owners. Between 2004 and 2006, in accordance with this agreement, the developer constructed Trevett Lane. Prior to construction, the City did not contact plaintiffs about Trevett Lane, either to request that they do the work themselves or to notify them that a third party had been contracted to do the work.

After the project was completed, the Casper City Council sought contribution from plaintiffs for the cost of the street improvements, pursuant to the Subdivision Agreement. First, the City Council enacted a resolution—again, after the fact—that “ordered, demanded, approved, and authorized” the street improvements that had already been made. R., Vol. III at 616 (Resolution No. 06–306). With the resolution in hand, the City's attorneys then sent plaintiffs a letter requiring payment for their pro rata share of the construction of Trevett Lane.

The letter informed plaintiffs of the amount of their obligation and their duty to pay the assessed amounts in one lump sum or over a ten year period at eight percent interest. For example, the letter to Gasdek stated:

Pursuant to the Subdivision Agreement for your subdivision, your real property is assessable for the pro rata share of the public improvement costs based upon the lineal footage of your property which abuts Trevett Lane. In this regard, the assessment for all of your property for the street improvements is the total sum of $143,709.12.

R., Vol. I at 125. The letter to Pater was identical, except that the sum demanded was $118,549.16. Id. at 122.

A few weeks later, before plaintiffs responded to the letters and without further notice, the City Council passed another resolution finding the City's assessment of costs was “fair and equitable” and “the proper method for the apportionment” of construction costs. Id. at 131–32 (Resolution No. 07–136). The City then recorded a “Notice of Apportionment and Assessment” (Notice of Assessment) with the County Clerk against each of plaintiffs' properties.

The Notices of Assessment provided:

[T]he pro-rata share of the Trevett Lane public improvements apportioned and assessable to this real property is the total sum of [the parcel-specific assessment], said sum being due and owing to the City of Casper until paid in full....

UPON THE PAYMENT OF THE TOTAL SUM DUE THE CITY OF CASPER UNDER THIS NOTICE, THE CITY SHALL FILE IN THE REAL ESTATE RECORDS OF NATRONA COUNTY, WYOMING A RELEASE AND SATISFACTION SHOWING THAT ALL SUMS DUE AND OWING HEREUNDER HAVE BEEN PAID IN FULL.

Id. at 134.

Plaintiffs believed they did not owe the claimed sum under the terms of the Subdivision Agreement because the City had never made a written demand for the construction of Trevett Lane, as the Agreement required, until after the street had already been built. They also claimed the Notices placed a cloud on their property title. Accordingly, they filed a complaint in state court asserting claims for declaratory judgment, a breach of the duty of good faith and fair dealing, and a violation of plaintiffs' due process rights under 42 U.S.C. § 1983. The City removed the case to federal court, and made counterclaims alleging breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, and unjust enrichment.

In response to cross motions for summary judgment, the district court dismissed plaintiffs' § 1983 claims and remanded the remaining claims to state court.

II. Discussion

Plaintiffs contend the district court erred in dismissing their § 1983 claims, asserting violations of their right to procedural due process and equal protection. For the reasons discussed below, we agree the district court erred in dismissing the due process claim. But we find no abuse of discretion in the court's treatment of the equal protection claim.

A. Due Process

Plaintiffs' first argument is that the City's Notices of Assessment deprived them of a property interest without due process. Specifically, they claim they were not obligated to reimburse the City for the street improvements under the terms of the Subdivision Agreement. If the City disagreed, they contend, its proper recourse was an action in breach of contract. Plaintiffs assert the City's in terrorem attempt to enforce its understanding of the contract by recording the Notices of Assessment against their property, without giving plaintiffs notice or an opportunity to object, violated their right to procedural due process.

The Fourteenth Amendment prohibits the government from depriving an individual of property “without due process of law.” U.S. Const. amend. XIV, § 1. Under the Due Process Clause's requirements, “procedural due process ensures the state will not deprive a party of property without engaging fair procedures to reach a decision, while substantive due process ensures the state will not deprive a party of property for an arbitrary reason.” Hyde Park Co. v. Santa Fe City Council, 226 F.3d 1207, 1210 (10th Cir.2000).

In evaluating a procedural due process claim, we undertake a two-step inquiry. First, we ask whether the City's actions deprived plaintiffs of a constitutionally protected property interest. Id. If plaintiffs can satisfy this requirement, we then consider whether they were afforded the appropriate level of process. Farthing v. City of Shawnee, 39 F.3d 1131, 1135 (10th Cir.1994).

1. Step One: Deprivation of a Property Interest

The first inquiry turns on whether plaintiffs' claim implicates a protected property interest, and the scope of that interest. Property interests “are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.” Hulen v. Yates, 322 F.3d 1229, 1240 (10th Cir.2003) (quotation omitted). “[C]onstitutionally protected property interests are created and defined by statute, ordinance, contract, implied contract and rules and understandings developed by state officials.” Id. Thus, for example, courts have identified property interests arising from state zoning regulations, see Jordan–Arapahoe, LLP v. Bd. of County Comm'rs, 633 F.3d 1022, 1026 (10th Cir.2011), state employment contracts, see Yates, 322 F.3d at 1241, and restrictive covenants between government agencies and private parties, see Juarez v....