Clay County Realty Co. v. City of Gladstone

• Citation: 254 S.W.3d 859
• Decision Date: 10 June 2008
• Docket Number: No. SC 88924.,SC 88924.
• Parties: CLAY COUNTY REALTY COMPANY and Edith Investment Company, Appellants, v. CITY OF GLADSTONE, Respondent.
• Court: United States State Supreme Court of Missouri

254 S.W.3d 859

CLAY COUNTY REALTY COMPANY and Edith Investment Company, Appellants, v. CITY OF GLADSTONE, Respondent.

No. SC 88924.

Supreme Court of Missouri, En Banc.

June 10, 2008.

Michael J. Abrams, R. Kent Sellers, Lathrop & Gage, L.C., Kansas City, for Appellants.

Robert O. Jester, Samuel G. MacRoberts, Kansas City, for Respondent.

MARY R. RUSSELL, Judge.

The issue presented in this appeal is whether Missouri recognizes a cause of action for precondemnation damages when the condemning authority is alleged to have caused undue delay and committed untoward acts in implementing condemnation proceedings.

Clay County Realty Company and Edith Investment Company ("Property Owners") brought suit against the City of Gladstone ("the City"), alleging that the City had unlawfully taken their property without just compensation. Property Owners appeal after the trial court found there were no genuine issues of material fact in dispute and summary judgment was entered against them. This Court has jurisdiction pursuant to Missouri Constitution article V, section 10, as the case was taken on transfer after disposition by the court of appeals. The judgment is reversed, and the case is remanded.

I. Background

Property Owners own a retail building, Gladstone Plaza Shopping Center ("property"). The property was declared blighted by the City in May 2003 under the provisions of chapter 353, RSMo 2000, and where amended RSMo Supp.2007.¹ In May 2004, the City entered a redevelopment agreement with a developer, but by August 2005 it had withdrawn its designation of the developer and cancelled the agreement. Starting in August 2005, the City also began to solicit tax increment financing ("TIF") proposals for the property pursuant to the provisions of Missouri's Real Property Tax Increment Allocation Redevelopment Act ("TIF Act"), sections 99.800 to 99.865, RSMo 2000, and where amended RSMo Supp.2007. The City, in October 2005, adopted another ordinance designating the property as blighted under the TIF Act and approved a TIF plan² for the property. The approved TIF plan provides for the use of eminent domain for economic development. To date, however, the City has never adopted an ordinance approving a TIF project³ specifying the redevelopment to occur at the property.

Section 99.810.1(3) provides in pertinent part:

[N]o ordinance approving a redevelopment project shall be adopted later than ten years from the adoption of the ordinance approving the redevelopment plan under which such project is authorized and provided that no property for a redevelopment project shall be acquired by eminent domain later than five years from the adoption of the ordinance approving such redevelopment project.⁴

The City has never completed formal condemnation proceedings against the property, but Property Owners admit that, because the City has not approved a TIF project ordinance for the property, the City is not yet under the five-year time limitation for acquiring the property established by section 99.810.1(3).

Although there are no allegations in this case that the City has violated the applicable statutory time provisions, Property Owners contend that the City has engaged in undue delay and untoward activity in implementing condemnation proceedings against the property. They allege that the City has failed to timely proceed with redevelopment and failed to find an adequately capitalized developer. They allege that, as a consequence of the City's actions, numerous retail tenants have not renewed leases at the property. They also argue that the City has harassed them with inspections and code violations and interfered with their ability to attract new tenants.

Property Owners brought suit against the City, alleging a violation of Missouri Constitution article I, section 26, because the City's actions caused "significant diminution of the value of the [p]roperty, and the City has thereby taken the [p]roperty for public use or purpose." Their suit also alleges that the City's actions have caused them consequential damages for increased operating costs and for lost rental and lease income due to their inability to secure new tenants or to renew or extend existing leases. They contend that their consequential damages are ongoing.

The City moved for summary judgment, alleging that Property Owners' suit was not ripe and had failed to state a claim for an unconstitutional "taking." Judgment was entered in the City's favor, and Property Owners appeal.

II. Standard of Review

Appellate review of summary judgment is de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Summary judgment is appropriate where the moving party has demonstrated, on the basis of facts as to which there is no genuine dispute, a right to judgment as a matter of law. Id. A "genuine issue" that will prevent summary judgment exists where the record shows two plausible, but contradictory, accounts of the essential facts and the "genuine issue" is real, not merely argumentative, imaginary, or frivolous. Id. at 382. This Court reviews the record in the light most favorable to the party against whom judgment was entered. Id. at 376. The movant bears the burden of establishing a legal right to judgment and the absence of any genuine issue of material fact required to support the claimed right to judgment. Id. at 376-81.

III. Actions for "takings" and related damages

Property Owners' claims include that the City's actions and inactions following its blight declaration for the property resulted in a de facto taking that violates Missouri Constitution article I, section 26, which provides that "private property shall not be taken or damaged for public use without just compensation." "While the mere declaration of blight and other initial steps authorizing condemnation, even if they result in a decline in property values, do not constitute a taking requiring compensation to the property owner ... governmental action short of acquisition or occupancy may constitute a constructive or de facto taking." Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784, 787 (8th Cir.1979) (internal citations and quotations omitted) (discussing a takings claim alleging property damages and lost rental income suffered after a blight declaration; finding that "physical invasion or appropriation of the property" is not essential to a claim of de facto condemnation; stating that "[t]o constitute a taking ... it is sufficient if the action by the government involves a direct interference with or disturbance of property rights").

"When a taking occurs, the owner `is entitled to be put in as good a position pecuniarily as if his property had not been taken.'" Akers v. City of Oak Grove, 246 S.W.3d 916, 919 (Mo. banc 2008) (quoting Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 78 L.Ed. 1236 (1934)). "This concept encompasses both direct takings, wherein the government formally takes land for public use via eminent domain, and inverse takings, where the government takes or damages land, sometimes unintentionally, without going through an official process." Id.⁵

Traditionally, actions for inverse condemnation provide a landowner a remedy when a condemnor physically accomplishes a taking or damaging of private property without completing the procedural or compensatory requirements of a regular eminent domain action. State ex rel. Chiavola v. Vill. of Oakwood, 931 S.W.2d 819, 824 (Mo.App.1996) (discussing a claim by plaintiffs that they suffered inverse condemnation because they were deprived of all economically viable use of their property and deprived of reasonable, investment-backed expectations). Inverse condemnation does not require the landowner to show a physical taking where an invasion or appropriation of a valuable property right that caused an injury can be shown. Id. (noting that police power actions that limit use of private property can sometimes constitute a de facto exercise of eminent domain; and citing Roth v. State Highway Comm'n, 688 S.W.2d 775, 778 (Mo.App.1984), wherein a claim for inverse condemnation was based on alleged aggravated delay by the condemnor coupled with a conditional offer).

"[I]t is not uncommon for a lengthy period of time to elapse between the time when the area is declared blighted by the legislative body and the time when the property is taken for condemnation purposes[, and] [b]etween the time of blighting and the time of taking, the property frequently has substantially deteriorated in value at great loss to the landowner." State ex rel. Washington Univ. Med. Ctr. Redevelopment Corp. v. Gaertner, 626 S.W.2d 373, 375-76 (Mo. banc 1982). The damages suffered when a "cloud of condemnation" hangs over a property and an actual taking is never effectuated or is long-delayed have been labeled as "condemnation blight." Dale A. Whitman, Eminent Domain Reform In Missouri: A Legislative Memoir, 71 Mo. L.REV. 721, 757 (2006). Condemnation blight can be marked by departure of rental tenants, unmarketability, and declines in rentability, capital values, and profits. Id.

The first Missouri case discussing the concept of condemnation blight was Land Clearance for Redevelopment Authority of Kansas City v. Massood, 526 S.W.2d 354, 356-58 (Mo.App.1975) (rejecting property owners' complaints about how their condemnation damages were calculated, but stating in dicta that adoption of the doctrine of condemnation blight could aid in providing just compensation in condemnation actions).⁶ Massood discussed the court's "growing awareness that the debilitating effect of threatened condemnation is a recurring problem" because "[i]n a given situation a premature announcement of condemnation may well cast a devastating pall over property in a given area with the end result that by the time a de jure taking occurs the fair market value of the property has become noticeably depressed." Id. at 357.

Several...