Mentzel v. City of Oshkosh

• Decision Date: 12 October 1988
• Docket Number: No. 87-1607,87-1607
• Citation: 146 Wis.2d 804,432 N.W.2d 609
• Parties: Donald MENTZEL, Petitioner-Respondent, v. CITY OF OSHKOSH, Appellant.
• Court: Wisconsin Court of Appeals

Page 609

432 N.W.2d 609

146 Wis.2d 804

Donald MENTZEL, Petitioner-Respondent, v. CITY OF OSHKOSH, Appellant.

No. 87-1607.

Court of Appeals of Wisconsin.

Argued Aug. 24, 1988.

Opinion Released Oct. 12, 1988.

Opinion Filed Oct. 12, 1988.

John W. Pence, City Atty., Oshkosh, for appellant.

Eugene A. Bartman, of Curtis-Wilde Law Offices, Oshkosh, for petitioner-respondent.

Before SCOTT, C.J., BROWN, P.J., and NETTESHEIM, J.

BROWN, Presiding Judge.

This is a review of a trial court's conclusion that an inverse condemnation occurred. The city of Oshkosh claims that it did not "take" Donald Mentzel's property, and that the trial court misread the law in deciding otherwise. We hold that the trial court's findings of fact are not clearly erroneous and that the court correctly applied the law. We affirm the trial court's finding of inverse condemnation and assessment of attorney fees.

Pursuant to this court's order, the trial court on remand set forth detailed findings of fact and conclusions of law. Such findings are of particular importance in cases involving a taking. Burrows v. City of Keene, 121 N.H. 590, 432 A.2d 15, 20 (1981). We therefore reproduce them in some detail.

Mentzel owns a building in the 100 block of North Main Street in downtown Oshkosh. At least from the mid-fifties, the property had been operated as a tavern. However, Mentzel himself never held a liquor license; he rented out the property to a series of tenants who obtained licenses and operated the premises as a tavern. In 1985, the city notified Mentzel that his property was in a designated redevelopment area. At that time, Mentzel received information from the city related to his property, including his rights as a landowner under condemnation proceedings.

In April of 1986, Mentzel was told by the city that he should repair a wall on his property. City officials also discussed with him the purchase of his property. No deal was struck.

In the summer of 1986, Mentzel received a raze or repair order from the city, which cited the dilapidated wall. At about the same time, the city negotiated with Mentzel's tenants a surrender of the liquor license in exchange for an agreement not to prosecute a complaint against the tenants. Mentzel was advised by the tenants that they had been offered relocation payments by the city before the license was surrendered.

On the same day that the license was surrendered, Mentzel applied for a license. He was unsuccessful. He subsequently reapplied and was again denied. Never before had a liquor license been denied to the owner or operator of this particular property. City council members informed Mentzel that the license was denied because the city planned to acquire the property.

Expert testimony established that denial of a liquor license rendered the property economically worthless, especially given the historical use of the property as a tavern. Hence, it was economically not feasible for Mentzel to repair the wall; he would have no way to recoup his investment.

The city has acquired other properties in the North Main Street area. Its intent to acquire property in the redevelopment area is a matter of public record. The trial court's final finding of fact was that the city's actions as to Mentzel's property were taken for the purpose of affecting the relative bargaining positions of Mentzel and the city. As a matter of law, it concluded that the city's actions constituted a taking by the city of Mentzel's property.

We address first the proper standard of review. An inverse condemnation action may be pursued when the condemnor's actions amount to a taking even though the condemnor has failed to exercise its condemnation powers. Maxey v. Redevelopment Auth. of Racine, 94 Wis.2d 375, 387, 288 N.W.2d 794, 799 (1980). These actions must be in the form of a legal restraint imposed by the condemning authority. Howell Plaza, Inc. v. State Highway Comm'n, 92 Wis.2d 74, 88, 284 N.W.2d 887, 893 (1979). The legal restriction must practically or substantially render the land useless for all reasonable purposes. Id. at 85, 284 N.W.2d at 892.

Whether a property owner has been deprived of substantially all of the beneficial use of the property is a question of law. Id. at 80, 284 N.W.2d at 889. When reviewing questions of law, we owe no deference to the trial court. Katze v. Randolph & Scott Mut. Fire Ins. Co., 111 Wis.2d 326, 330, 330 N.W.2d 232, 234 (Ct.App.1983), rev'd on other grounds, 116 Wis.2d 206, 341 N.W.2d 689 (1984).

Even though we are ultimately dealing with a question of law, we note that the parties dispute certain facts and the inferences drawn from the facts. That being the case, we observe that we are really dealing with a mixed question of fact and law--requiring findings as to what happened and a conclusion as to the legal significance of those facts. Findings of fact made by a trial court sitting without a jury shall not be set aside unless they are clearly erroneous. Sec. 805.17(2), Stats. When more than one inference can be drawn from the credible evidence, the reviewing court must accept the inference drawn by the trier of fact. Cogswell v. Robertshaw Controls Co., 87 Wis.2d 243, 250, 274 N.W.2d 647, 650 (1979). The appellate court will search the record for evidence to support the trial court's findings of fact. In re Estate of Becker, 76 Wis.2d 336, 347, 251 N.W.2d 431, 435 (1977).

The trial court found that inverse condemnation had taken place because of the effect of actions taken by the city upon the property. These actions consisted of denial of a liquor license to Mentzel and a raze or repair order on the property. The trial court accepted the testimony of Mentzel's expert witness and determined that Mentzel's property had only one reasonable use--as a tavern. Such testimony is credible in view of the record as a whole. The inside of the building was modeled as a tavern. The building could be remodeled to fit another purpose only at great expense to Mentzel. Even if remodeled to suit another purpose, it could only be used to house a small retail store like a shoe store, a store selling specialty clothes, or something similar. The building had only 1200 to 1300 square feet of usable space. Yet, downtown Oshkosh has many vacancies for small retail operations. Because the supply of available space far outstrips the demand for such space, the rents for these small stores are low. Therefore, the cost of remodeling would be much greater than the rental obtained. The result would be an economic disaster for Mentzel were he to remodel the building. The trial court's conclusion that the only reasonable use would be as a tavern is sustained.

The trial court then concluded that denial of the liquor license and issuing the raze or repair order, considered within the totality of the circumstances, "demonstrate that the city's actions were taken for the purpose of affecting the relative bargaining positions of the parties." The totality considered also included: appraisal of the property, notification to Mentzel of his condemnation rights, attempts to negotiate a purchase from Mentzel of the property, and negotiating the surrender by Mentzel's tenants of the liquor license.

The city disputes the conclusion, arguing that "intent" is irrelevant to the analysis of what constitutes a taking. The city asserts that the licensing denial and the raze or repair order are exercises of the police power that rest within the government's discretion. The city then asserts that the denial of the license and the issuance of the raze or repair order had nothing whatsoever to do with the redevelopment project and that the latter is separate from and coincidental to the city orders of which Mentzel complains.

Intent to use a legal restriction to effectuate a taking is not a prerequisite for finding that a taking has occurred. In Zinn v. State, 112 Wis.2d 417, 430, 334 N.W.2d 67, 73 (1983), our supreme court quoted the United States Supreme Court with approval. It wrote:

It is well established that " 'the constitution measures a taking of property not by what a state says, or by what it intends, but by what it does.' " San Diego [Gas & Electric Co. v. City of San Diego], 450 U.S. at 652-53 [101 S.Ct. 1287, 1304, 67 L.Ed.2d 551 (1981) ] (Brennan, J. dissenting), quoting Hughes v. Washington, 389 U.S. 290, 298 [88 S.Ct. 438, 443, 19 L.Ed.2d 530] (1967) (Stewart, J., concurring). It is the effect of the state's action that triggers the Just Compensation Clause, not the intent of the government in taking the action which led to the deprivation of private property rights. If government action has the effect of taking private property for public use, just compensation must be made. Decisions of this court make it clear that the intent of the government has never been the test, rather we look to whether the impact on the property owner was to deprive him or her of substantially all beneficial use of the property or render the land useless for all reasonable purposes. [Emphasis in original.]

But while intent does not determine a taking absent the necessary impact, the purpose of governmental action is a relevant subject of inquiry. See, e.g., State v. Herwig, 17 Wis.2d 442, 450, 117 N.W.2d 335, 339-40 (1962) ("Both the purpose and the effect of Rule, sec. WCD 11.06(6)(a), 1 Wis.Adm.Code, were to utilize the defendant's farmland for the support of wildfowl as well as to protect the wildfowl from hunting. In the stipulation of facts, the purpose of the closed-area device is described as including a place where the wildfowl will 'stop for awhile and rest and feed.' ") (emphasis added); see also Burrows, 432 A.2d at 20 ("The purpose of the regulation is an element to be considered.").

Here, the trial court found that the purpose of the city's actions in negotiating the license surrender with Mentzel's tenants, denying Mentzel a license, and issuing the raze or repair order, was to manipulate the market value...