Bagford v. Ephraim City, 940155

• Decision Date: 11 October 1995
• Docket Number: No. 940155,940155
• Citation: 904 P.2d 1095
• Parties: John M. BAGFORD and Fae H. Bagford, Plaintiffs and Appellants, v. EPHRAIM CITY, a municipal corporation, Defendant and Appellee.
• Court: Utah Supreme Court

Page 1095

904 P.2d 1095

John M. BAGFORD and Fae H. Bagford, Plaintiffs and Appellants, v. EPHRAIM CITY, a municipal corporation, Defendant and Appellee.

No. 940155.

Supreme Court of Utah.

Oct. 11, 1995.

Marcus Taylor, Richfield, for plaintiffs.

Jody K. Burnett, Salt Lake City, for Ephraim City.

David L. Church, Salt Lake City, for amicus Utah League of Cities & Towns.

STEWART, Associate Chief Justice:

Plaintiffs John M. Bagford and Fae H. Bagford, proprietors of a garbage collection business, appeal a district court judgment holding that an Ephraim City garbage collection ordinance does not result in a taking of the Bagfords' private garbage collection business. The ordinance provides for municipal garbage collection and requires all city residents to pay a fee for the city's garbage collection, whether or not the residents are using the city's facilities. The Bagfords assert that the district court erred in ruling that their loss of business from residential customers in Ephraim City because of competition with the city was not property within the meaning of article I, section 22 of the Utah Constitution. We affirm.

The Bagfords own and operate Sanpete Valley Disposal and Landfill, a garbage collection and disposal business located in Sanpete County, Utah. From 1984 until August or September 1989, the Bagfords provided garbage collection services to residential and commercial customers in Ephraim City and other municipalities and unincorporated areas in Sanpete County. The Bagfords competed with other garbage collection businesses in Sanpete County. The Bagfords used informal, oral agreements with customers pursuant to which the Bagfords provided their garbage collection services. They offered garbage collection to their customers on a weekly basis, fifty-two weeks each year, and charged their customers for each pickup the customers actually required. If a customer did not require weekly pickup or left town for vacation or an extended period of time and did not use the Bagfords' services, the customer was not required to pay. Whenever the residents put the garbage out, the Bagfords picked it up.

In 1989, Ephraim City decided to develop a municipal garbage collection system to bring the city into compliance with federal and state health and safety regulations. Ephraim City formed a citizens ad hoc committee to study the issue and eventually accepted the committee's recommendation to contract with a private company to provide regular garbage collection services for residents within the city.

In May and June 1989, Ephraim City accepted bids for garbage collection services and subsequently awarded a residential service contract to the successful bidder. The Bagfords were among several competitors that bid unsuccessfully for the contract. In October 1989, Ephraim City adopted Ordinance 10-412, which provides:

All residences to include trailers, one, two, three, and multiple family dwellings, who are charged residential electrical service rates, will have garbage collection as arranged by Ephraim City.

Ephraim City, Utah, Rev.Ordinances ch. 10-400, part 10-412. At the time the ordinance was enacted, the Bagfords provided garbage collection services to 176 residential customers in Ephraim City and to a number of commercial enterprises. The latter were not affected by Ephraim's change in policy.

Ephraim City also adopted monthly garbage collection charges to be assessed against each residence. The charges are included on the monthly billing for municipal electrical services sent to each residence and must be paid even if the resident does not use the garbage collection services provided by the city. As a result, the Bagfords' 176 residential customers terminated their agreements with the Bagfords and began using the garbage collection services provided by Ephraim City to avoid having to pay double for garbage collection. The Bagfords continue to provide weekly garbage collection services to approximately thirty-two commercial customers.

The Bagfords then brought this action for inverse condemnation against Ephraim City, alleging that the enactment and implementation of the ordinance resulted in a taking of property within the meaning of article I, section 22 of the Utah Constitution and asserting that they were entitled to damages for that taking. ¹ Following a bench trial, the district court ruled that the Bagfords had failed to establish the elements of a taking because the loss of business from the city's competition did not rise to the level of a protected property interest within the meaning of article I, section 22 and because Ephraim City did not directly prohibit the Bagfords from competing for the business of Ephraim City residents.

On appeal, the Bagfords claim that the district court erred in ruling that their oral agreements were not private property within the meaning of article I, section 22 and that no taking had occurred with respect to their residential garbage collection business in Ephraim City. These issues present questions of law which we review for correctness, granting no deference to the trial court's legal conclusions. Reliance Ins. v. Utah Dep't of Transp., 858 P.2d 1363, 1366 (Utah 1993); Ong Int'l (U.S.A.) v. 11th Ave. Corp., 850 P.2d 447, 452 (Utah 1993).

Article I, section 22 of the Utah Constitution provides, "Private property shall not be taken or damaged for public use without just compensation." This provision is broader in its language than the similar provision in the Fifth Amendment of the United States Constitution. To recover under article I, section 22, a claimant must possess a protectable interest in property that is taken or damaged for a public use. See Farmers New World Life Ins. v. Bountiful City, 803 P.2d 1241, 1243-44 (Utah 1990); Colman v. Utah State Land Bd., 795 P.2d 622, 625 (Utah 1990). In Colman, we observed:

Many statutes and ordinances regulate what a property owner can do with and on the owner's property. Those regulations may have a significant impact on the utility or value of property, yet they generally do not require compensation under article I, section 22. Only when a governmental action rises to the level of a taking or damage under article I, section 22 is the State required to pay compensation.

Id. at 627.

The Bagfords assert that article I, section 22 makes no distinction between personal and real property, that a "taking" of both tangible and intangible property interests is compensable under that provision, and that the law recognizes that both the power of eminent domain and an action for inverse condemnation extend to personal, intangible, and incorporeal property rights such as contracts. The city and the amicus argue that the only property that is protected by article I, section 22 is real property or rights associated with real property.

While contract rights are also a form of "private property," not all contract rights rise to the level of a property interest cognizable under article I, section 22. Article I, section 22 also protects all types of private property that are protected by the Fifth Amendment of the United States Constitution. This Court has stated, " 'The kinds of property subject to the [eminent domain] right ... [are] practically unlimited.' " Farmers, 803 P.2d at 1244 (quoting Lund v. Salt Lake County, 58 Utah 546, 200 P. 510, 512 (1921)). Under general principles of eminent domain, property is not limited to land or improvements thereon, id., but " '[e]very species of property which the public needs may require, ... [including] legal and equitable rights of every description--[is] liable to be thus appropriated.' " Lund, 58 Utah at 552, 200 P. at 512 (quoting Cooley, Constitutional Limitations 646 (6th ed.)).

The United States Supreme Court has also long held that the term "property" in the Fifth Amendment Takings Clause includes not only real property, but also incorporeal rights such as franchises. In West River Bridge Co. v. Dix, 47 U.S. 507, 533-34, 12 L.Ed. 535 (1848), the Court stated:

A distinction has been attempted, in argument, between the power of a government to appropriate for public uses property which is corporeal, ... and the like power in the government to resume or extinguish a franchise. The distinction thus attempted we regard as a refinement which has no foundation in reason.... A franchise is property and nothing more; it is incorporeal property....

A century after West River Bridge Co., the Court reaffirmed the principle that the intangible character of property alone does not preclude compensation for it. The Court held in Kimball Laundry Co. v. United States, 338 U.S. 1, 11, 15-16, 69 S.Ct. 1434, 1442-43, 93 L.Ed. 1765 (1948), that a governmental taking of a laundry's intangible "trade routes," meaning customer lists and continued patronage, required just compensation. And in Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04, 104 S.Ct. 2862, 2872-73, 81 L.Ed.2d 815 (1984), the Court held that trade secrets are a form of intangible property protected by the Takings Clause of the Fifth Amendment.

Respected treatises also make clear that for purposes of eminent domain, the term "property" is not limited to real property. "The power of eminent domain extends to real estate, improvements on land, all kinds of personal property, and even intangible or incorporeal rights." 29A C.J.S. Eminent Domain § 56 (1992). Thus, "[i]ntangible property, such as choses in action, patent rights, franchises, charters or any other form of contract, are within the scope of [eminent domain] ... as fully as land or other tangible property." 1 Julius L. Sackman & Patrick J. Rohan, Nichols' The Law of Eminent Domain § 2.1 (rev. 3d ed. 1995).

Some kinds of contractual rights may also be "property" that can be "taken" for a public use. In Long Island Water Supply Co. v. City of Brooklyn, 166 U.S. 685, 690, 17 S.Ct. 718, 720, 41 L.Ed. 1165 (1897), the Court held that "a contract is property, and like...