Daniels v. Area Plan Com'n of Allen County, 01-1158.

Decision Date11 September 2002
Docket NumberNo. 01-1158.,01-1158.
Citation306 F.3d 445
PartiesWilliam DANIELS and Judy Daniels, Plaintiffs-Appellees, v. THE AREA PLAN COMMISSION OF ALLEN COUNTY, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

John C. Theisen, Matthew M. Hohman (argued), Barnes & Thornburg, Fort Wayne, IN, for Plaintiffs-Appellees.

Matthew J. Elliott (argued), Beckman Lawson, Fort Wayne, IN, for Defendant-Appellant.

Before FLAUM, Chief Judge, MANION and KANNE, Circuit Judges.

MANION, Circuit Judge.

I.

On April 13, 2000, William and Judy Daniels filed a complaint, under 42 U.S.C. § 1983, in the United States District Court for the Northern District of Indiana, seeking a declaratory judgment that the Area Plan Commission of Allen County violated the Fifth and Fourteenth Amendments to the U.S. Constitution, as well the Indiana Constitution, when it vacated a restrictive covenant attached to their property that was designed to preserve the residential character of the surrounding neighborhood. On cross-motions for summary judgment, the district court concluded that the Plan Commission violated the Daniels' Fifth Amendment right by vacating the restrictive covenant without a public purpose. The court entered a permanent injunction ordering the Plan Commission to reverse its removal of the covenant and prohibiting the Plan Commission from further removal of the covenants for any private purpose. The court also found that Indiana Code § 36-7-3-11, under which the Plan Commission had vacated the covenant, was unconstitutional because it does not require the Commission to follow the procedures set forth in the state's eminent domain statute for determining public use. We affirm in part and reverse in part.

II.

William and Judy Daniels ("the Daniels") are the current owners and residents of the property located at 1735 Broadmoor Avenue in Fort Wayne, Indiana. The Daniels' property is in a subdivision commonly known as the Broadmoor Addition ("Broadmoor"). Broadmoor was surveyed and platted for 80 lots in 1940 and the Daniels own lot 10. The plat of the Broadmoor Addition has had a restrictive covenant limiting lots to residential use since the subdivision was platted. Specifically, the plat's restrictive covenant states: "No building other than a single family dwelling and a private garage shall be built on any one lot."

The Broadmoor lots numbered three through five (collectively referred to as "Lots"), located in the 8800 block on the west side of Lima Road, are the subject of the current litigation. Along with lots one and two, these properties form the eastern perimeter of Broadmoor along Lima Road. Lima Road is a north-south corridor into Fort Wayne, Indiana, where each day over thirty thousand cars travel. In October 1999, HNS Enterprises, LLC and LST, LLC (collectively "HNS"), as the owners of the Lots, submitted a rezoning petition and application for primary development to the Area Plan Commission of Allen County ("Plan Commission"). As part of the application, HNS requested that the Plan Commission vacate their Lots and the associated restrictive covenants from the Broadmoor plat pursuant to Indiana Code § 36-7-3-11.1 HNS also petitioned the Commission to rezone the Lots to C-2A/Neighborhood Shopping Center and approve a primary development plan for the Lots consisting of a 12,000 square foot shopping center which contained five stores within a single story building (the "Broadmoor Shops"). At the time, each of the Lots contained an uninhabited residence.

On December 9, 1999, the Plan Commission held a public hearing on the petitions and numerous residents of Broadmoor objected to the granting of any of HNS' petitions. Also at the hearing, the Daniels' counsel appeared and argued that the Plan Commission did not have the authority to remove the restrictive covenants requiring that all structures built within Broadmoor be single-family residential homes. The Daniels' counsel further argued that the vacation and rezoning of lots three through five of Broadmoor would constitute an unconstitutional taking of private property for a private use. HNS filed a statement of reasons for the proposed vacation along with its petition to the Plan Commission. In their statement of reasons, HNS claimed that the conditions relating to the Lots had changed so as to defeat the purpose of the plat. HNS also contended that vacating the covenant would be in the public interest because without the residential restriction, HNS could develop the property with commercial uses which would serve as a buffer between Lima Road and the remaining residences. Finally, HNS claimed that the covenant vacation would not diminish the value of the remaining single-family homes in the plat and could in fact increase their value due to the run-down nature of the uninhabited houses currently on the Lots.

At a second meeting held on January 20, 2000, the Plan Commission adopted a "do pass" recommendation approving HNS' rezoning petition. The Plan Commission also granted conditional approval to the vacation of the Lots from the plat of the Broadmoor Addition and for the primary development plan for the Broadmoor Shops. The Plan Commission specifically found that it was in the public interest to vacate the Lots and covenants from the Broadmoor plat because:

it would allow the site to be redeveloped with commercial uses which could be a more appropriate use for the property and could be a benefit to the immediate neighborhood. The uninhabited and deteriorating residential structures would be removed from the site.

In addition the Plan Commission found that the value of the other lots in Broadmoor would not be diminished by the vacation because:

redevelopment of the site for commercial uses will require development plan review by the plan commission. This review will address land use compatibility issues resulting from commercial use of the property, and will preserve property values in the remainder of the subdivision. The uninhabited and deteriorating residential structures would be removed from the site.

The Plan Commission also imposed several conditions designed to limit the impact of the development of the "Broadmoor Shops" on Broadmoor's residential character. The conditions impose frontage, transportation and state agency approval requirements. The Plan Commission apparently also added limitations on the future commercial uses of the Lots, although those conditions are not in the record.

On April 13, 2000, before HNS began to develop the Lots,2 the Daniels filed suit under 42 U.S.C. § 1983 for declaratory relief and a permanent injunction in the United States District Court for the Northern District of Indiana. Under Ind. Code § 36-7-3-11, the Daniels could have challenged the Plan Commission's action in state court by filing of a writ of certiorari to the circuit or superior court of Allen County. See Ind.Code § 36-7-4-1016 & § 36-7-4-1004. However, the Daniels did not file the petition to state court and instead proceeded directly to federal court. The Daniels' federal complaint alleged that the Plan Commission's actions violated their constitutional rights by taking the Daniels' property for private use in violation of the Fifth and Fourteenth Amendments of the United States Constitution and the Indiana Constitution. The Plan Commission filed a motion to dismiss, arguing that the district court lacked subject matter jurisdiction because the Daniels failed to exhaust their administrative remedies and thus their claim was not ripe, or alternatively because the Daniels failed to allege damages. The district court denied the Plan Commission's motion to dismiss, finding that exhaustion of administrative remedies was not required under Patsy v. Board of Regents of Florida, 457 U.S. 496, 516, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982). Both parties then filed motions for summary judgment on the Daniels' claim that the property was taken for private use. In their motion for summary judgment, the Daniels also claimed that Indiana Code § 36-7-3-11 was facially unconstitutional because it permitted takings for private purpose.

The district court granted the Daniels' summary judgment motion. Daniels v. Area Plan Comm'n of Allen County, 125 F.Supp.2d 338 (N.D.Ind.2000). The court noted that under Indiana common law, "a restrictive covenant in a plat is a covenant running with the land, and that a state that takes a restrictive covenant for a private purpose violates both the Federal and Indiana Constitutions." Id. at 348. (citing Pulos v. James, 261 Ind. 279, 302 N.E.2d 768, 771 (1973)). The court concluded that the Plan Commission unconstitutionally took the Daniels' property for private use by removing the restrictive covenants and authorizing another individual to commercially develop property. Id. at 353. The court further concluded that because Indiana Code § 36-7-3-11 authorized private takings, it was facially invalid. Id. at 353-54. The court issued a declaratory judgment finding that the Plan Commission had committed a violation under § 1983 by depriving the Daniels of their constitutional rights by removing the restrictive covenants from lots 3-5 of Broadmoor. Id. The court also entered a declaratory judgment voiding the acts of the Plan Commission purporting to vacate the restrictive covenant on the Lots, and stating that the covenant remains in full force and effect. Id. Finally, the court issued a permanent injunction ordering the Plan Commission to reverse the HNS petition and prohibiting the Plan Commission from removing the restrictive covenants in the plat of Broadmoor for any private purpose. Id. at 357. The Plan Commission appeals.

III.

On appeal the Plan Commission maintains that because the Daniels' claims were not ripe for review the district court erred in concluding that it had subject matter jurisdictio...

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