City of Duluth v. State

• Decision Date: 01 August 1986
• Docket Number: No. C4-86-984,C4-86-984
• Citation: 390 N.W.2d 757
• Parties: CITY OF DULUTH, Petitioner, Respondent, Lake Superior Paper Industries, Intervenor, Respondent, v. STATE of Minnesota, County of St. Louis, et al., Lower Court Respondents, Jeno F. Paulucci, et al., Appellants.
• Court: Minnesota Supreme Court

Page 757

390 N.W.2d 757

CITY OF DULUTH, Petitioner, Respondent, Lake Superior Paper Industries, Intervenor, Respondent, v. STATE of Minnesota, County of St. Louis, et al., Lower Court Respondents Jeno F. Paulucci, et al., Appellants.

No. C4-86-984.

Supreme Court of Minnesota.

Aug. 1, 1986.

Syllabus by the Court

1. There was a "public use" served by the condemnation of Pauluccis' property, thus satisfying the requirements of the Fifth Amendment to the United States Constitution and Minn. Const. art. 1, § 13.

2. The city's condemnation of the land in this case was "necessary" for its papermill project.

3. The City of Duluth substantially complied with the condemnation procedures of Minn.Stat. chs. 458, 472A (1984).

Frank R. Benman, Scott G. Harris, James E. Kelly, Minneapolis, for appellants.

David P. Sullivan, Jerome Agnew, Duluth, for City of Duluth.

Harold Frederick, Duluth, for Lake Superior Paper.

Heard, considered and decided by the court en banc.

YETKA, Justice.

This case comes to this court on a petition for accelerated review from the judgment of the Sixth Judicial District Court, St. Louis County, granting the City of Duluth's petition of condemnation and awarding Duluth title and possession of certain property. The property at issue is owned by Jeno and Lois Paulucci both directly and by companies they control and is located in West Duluth. We affirm the decision of the district court.

The issues raised in this appeal are:

1. Is there a "public use" for the taking of Pauluccis' property under the Fifth Amendment to the United States Constitution and Minn. Const. art. 1, § 13?

2. Was the city's condemnation of land in this case "necessary" for the papermill project?

3. Did the city comply with the condemnation procedures of Minn.Stat. chs. 458 and 472A (1984)?

To decide properly the above issues, it is necessary to set out rather lengthy facts as follows:

Over the past 9 years, the City of Duluth has attempted to persuade several paper companies to construct a papermill on a 72-acre site in West Duluth that includes Pauluccis' property. Duluth wished to revitalize the land because of abandoned and tax-forfeit property in the area. The area was thought to be appropriate for a papermill in part because of the nearby Hibbard Plant, an abandoned electric generating facility owned by Minnesota Power whose boilers could be retrofitted to provide steam and electricity to a mill. The person in charge of this effort was Jack LaVoy, special projects administrator for Duluth. To increase the attractiveness of the area to potential investors, the city sought and obtained border city enterprise zone status in 1983. A target area of 400 acres, including most of the papermill site, was specifically designated an enterprise zone. Duluth never considered any other land acceptable for development by a papermill and never showed any site other than the West Duluth area to interested paper companies. Duluth contacted several paper companies, but those attempts to attract a papermill were unsuccessful until the spring of 1984 when Pentair, Inc., expressed an interest in the proposed site. After some study, Pentair told Duluth it would require a partner before proceeding with the papermill since the cost of a new papermill would tax the resources of Pentair by itself. Duluth located a possible partner, Minnesota Power & Light, and arranged a meeting between the two companies. In May 1985, Pentair and Minnesota Power formed a joint venture to study the feasibility of a papermill at the West Duluth site. At approximately the same time, April 22, Jack LaVoy resigned his position and David Sebok, LaVoy's supervisor, took charge of the project for the city. In May, LaVoy was hired as a consultant to the joint venture.

The 72-acre site offered by the city for study included small businesses, homes and the approximately 18 acres of land owned by the appellant, Jeno Paulucci. Some of the Paulucci property is vacant, but in the northeast corner of the site stands the Chun King building used for Oriental food processing until the 1970's. At the time of the joint venture study, the Chun King building was mostly unused though two businesses, a tire-capping company and Grandma's, Inc., were renting space. However, Paulucci indicated that he was planning a reopening of the Chun King plant as a processor of Oriental Foods.

The joint venture began its feasibility study on July 1. On July 8, shortly after the joint venture began the feasibility study, it decided to ask for another 20 acres of land, expanding the area of the proposed development to 92 acres. The additional 20 acres would be gained by moving the westerly boundary from 53rd Avenue West to Central Avenue. Different reasons for the additional acreage were adduced by various members of the joint venture. David Beal, an employee of Pentair, stated that environmental concerns over the noise, dust, and heavy traffic affecting The feasibility study continued throughout the summer of 1985 and was concluded in October with a recommendation that the papermill proceed. The results of the study were published in the Duluth press in October. The stories noted or implied that the Chun King building would be replaced by the proposed papermill. At some point in October or November, Pentair and Minnesota Power formally agreed to a joint venture for the purpose of constructing a papermill in West Duluth. The name of the new company was Lake Superior Paper Industries (LSPI).

                residents in the "pocket" between the 72-acre site and Central Avenue necessitated the expansion.   Ronald Kelly, vice president in charge of corporate development at Pentair;  Jack LaVoy, joint venture consultant;  and Jack Rowe, chairman of the Board of Directors, all stated that the land was primarily needed for expansion of the papermill from one to two or possibly three machines, but that environmental concerns were also a factor.   At a meeting between Jack LaVoy and David Sebok, Duluth's city planner, LaVoy asked for 20 more acres to accommodate a third machine.   Sebok agreed to the request during the meeting
                

On October 29, Duluth Mayor John Fedo sent a letter to landowners in the West Duluth site notifying them of a meeting to discuss the proposed papermill and its impact on affected landowners. A map was attached to the letter showing the Chun King building to be part of the papermill site. Copies of the letter were sent to Pauluccis' personal address and the address of his corporation, Jeno's, Inc. Neither Paulucci nor his employee, Ronald Scinocca, recall reading the letter.

On November 1, 1985, notice of a public hearing on November 12 to discuss the creation of an industrial park in the West Duluth area was published in Duluth's News-Tribune & Herald. The hearing was held before the Duluth City Council and concerned the creation of Development District No. 6.

At its regular meeting on November 18, 1986, the city council authorized a development agreement between LSPI and Duluth, calling for the construction of the papermill and obligating the city to use its best efforts in obtaining the required property by eminent domain. Also on November 18, Duluth adopted a resolution, pursuant to Minn.Stat. chs. 273 and 472A, creating Development District No. 6 and adopting a tax increment financing plan for the district. The development district is 156 acres, encompassing all of the 92-acre site proposed for the papermill. On December 2, the city council created an advisory board for Development District No. 6 and appointed the seven members.

Pursuant to a notice published in the News-Tribune & Herald on December 6, the city council held a public hearing on December 16, 1985, and created Industrial Development District No. 1 pursuant to Minn.Stat. § 458.191. The boundaries were co-terminous with Development District No. 6. On the advice of its attorney, the council made findings at this time that the lands within the industrial district were "marginal."

At some point in December 1985 or January 1986, Jeno Paulucci admitted he was aware that the papermill project would entail the destruction of his Chun King plant. In an interview with the News-Tribune & Herald of December 15, 1985, Paulucci was quoted as saying it was more important that the papermill be built than that the Chun King building be preserved. On February 20, 1986, Paulucci reviewed a layout of the plant site and decided there was room for both the Chun King building and the papermill. On February 21, Paulucci wrote to Mayor Fedo of Duluth, outlining a proposal for the co-existence of the two businesses. Mayor Fedo referred the matter to Dave Sebok, who, in turn, contacted Ronald Kelly, who, since January 1, 1986, has been president of LSPI. Kelly contacted Rust Engineering, the engineering design firm used by LSPI for the papermill, about the possibility of building the papermill without using any Paulucci property. Rust Engineering reported on February 28 The case was tried in the District Court of the Sixth Judicial District between May 6 and May 23, 1986. Title to the appellants' property was to transfer on June 10. The decision was immediately appealed. The petition for accelerated review was granted on June 26, 1986.

                that the plant could not be built under those conditions.   On March 1, Kelly wrote to Sebok relaying this message, which was also relayed to Paulucci.   Legal proceedings began on March 7, 1986, when the City of Duluth filed with the St. Louis County District Court its petition in condemnation and deposited $618,378, the city's appraised value of the Paulucci interests property, with the court.   On March 11, 1986, Jeno Paulucci, Lois Paulucci and PFL, Inc., a Minnesota corporation with interests in the land being condemned, were mailed notice of the city's intention to utilize the "quick-take" procedures of Minn.Stat. § 117.042.   On March 18, 1986, PFL, Inc., was served with an amended notice of

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