Pro-Eco, Inc. v. Board of Com'rs of Jay County, Ind.

• Decision Date: 06 June 1995
• Docket Number: INC,PRO-EC,No. 93-3566,93-3566
• Citation: 57 F.3d 505
• Parties: 26 Envtl. L. Rep. 20,445 , Plaintiff-Appellant, v. BOARD OF COMMISSIONERS OF JAY COUNTY, INDIANA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 505

57 F.3d 505

26 Envtl. L. Rep. 20,445

PRO-ECO, INC., Plaintiff-Appellant, v. BOARD OF COMMISSIONERS OF JAY COUNTY, INDIANA, Defendant-Appellee.

No. 93-3566.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 14, 1995.

Decided June 6, 1995.

David V. Miller (argued), F. Wesley Bowers, George C. Barnett, Jr., Cedric Hustace, Bowers, Harrison, Kent & Miller, Evansville, IN, for plaintiff-appellant Pro-Eco, Inc.

David R. Warshauer, Robert D. MacGill, Peter J. Rusthoven (argued), Barnes & Thornburg, Indianapolis, IN, Bradley K. Burkett, Whiteman, Shappell & Burkett, Portland, IN, Rosemary G. Spalding, Price & Barker, Indianapolis, IN, for defendant-appellee Bd. of Com'rs of Jay County, Ind.

Before WOOD, Jr., COFFEY, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Pro-Eco seeks damages against the Jay County Board of Commissioners ("the Board") that allegedly stem from an illegal landfill moratorium ordinance ("ordinance" or "moratorium") which the Board passed in 1989 to prevent Pro-Eco from building a landfill in Jay County. Pro-Eco obtained a declaratory judgment under 28 U.S.C. Sec. 2201 invalidating the ordinance, and we affirmed that judgment on appeal. Pro-Eco v. Board of Comm'rs of Jay County, Ind., 956 F.2d 635 (7th Cir.1992) ("Pro-Eco I ").

Pro-Eco now seeks further relief under 28 U.S.C. Sec. 2202. It alleges under 42 U.S.C. Sec. 1983 that, in enacting the ordinance barring landfills in Jay County, the Board took Pro-Eco's property without paying compensation and violated Pro-Eco's constitutional rights to due process and equal protection. Pro-Eco also alleges that the Board violated its rights under Indiana tort law by interfering with its "right to do business." The district court denied Pro-Eco's petition for further relief, concluding that Pro-Eco's claims were not "based on" the earlier declaratory judgment, as Sec. 2202 requires. The district court also concluded that Pro-Eco is precluded from obtaining the damages it seeks because it did not have a protected interest in the land it wanted to use for a landfill when the Board passed the ordinance. Pro-Eco appeals.

In reviewing the district court's denial of Pro-Eco's petition for further relief, we assume familiarity with the background facts as set forth in Pro-Eco I, fleshing out additional facts as they become necessary.

I. Standard of Review

The parties not only disagree on whether further relief ought to be available to Pro-Eco, they also disagree about the standard through which we should review the district court's action. Pro-Eco suggests we review the district court de novo. The Board argues for the more deferential abuse of discretion standard.

Section 2202, under which Pro-Eco brings this claim, provides as follows:

Further necessary and proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment.

The statute's use of the term "may be granted" suggests that courts have some discretion in awarding further relief. Section 2201, the provision creating the right to bring a declaratory judgment action, uses similar discretionary language ("any court of the United States may declare the rights ..." 28 U.S.C. Sec. 2201). Our circuit decided, after a period of inconsistency, that the discretion afforded by Sec. 2201 lies with the court of appeals, not the district court. See Tempco Elec. Heater Corp. v. Omega Eng'g, 819 F.2d 746, 747 (7th Cir.1987). Recognizing that "whether to allow a declaratory judgment action to proceed ... calls for 'discretion hardened by experience into rule,' " that is, it calls for a uniform standard in the circuit, we review de novo decisions of the district courts under 28 U.S.C. Sec. 2201. Id. at 749.

In this case, we review the district court's denial of Pro-Eco's motion for further relief, a motion brought under 28 U.S.C. Sec. 2202, not Sec. 2201. The district court denied Pro-Eco's motion because it did not believe Pro-Eco's claims were "based on" the original declaratory judgment, as Sec. 2202 requires, and because Pro-Eco could not demonstrate a constitutionally protected property interest. In light of this posture, with the district court deciding the case on pure questions of law, and in light of our circuit's decision to guard jealously the discretion afforded under the Declaratory Judgment Act, we will review the district court's denial of Pro-Eco's motion de novo. ¹ Additionally, because we conclude that Pro-Eco has not alleged facts that would entitle it to relief on any of its stated theories of recovery, we do not examine whether its claim is based on the original declaratory judgment act.

II. Whether Pro-Eco Has Stated Viable Theories of Recovery

A. The Takings Clause

Pro-Eco alleges that, when the Board invalidly enacted the ordinance prohibiting the operation of a landfill in Jay County, the Board took Pro-Eco's property within the meaning of the Fifth Amendment's Takings Clause and that the Board must now pay Pro-Eco compensation for the property. But when the Board acted, Pro-Eco did not own the land it intended to buy for the landfill. Instead, Pro-Eco had only an option to buy the property. Pro-Eco argues that, even if it did not have a compensable property interest in the land itself, its option to buy the land amounted to a compensable property interest.

Pro-Eco analogizes its posture to that of the plaintiffs in Nollan v. California Coastal Comm'n, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987), where the Nollans, lessees with an option to purchase land, wanted to build on the land in order to satisfy their obligation under the option so they could buy the land. The California Coastal Commission conditioned a building permit on the Nollans' grant of an easement across a strip of the land to afford the public a better view of, and better access to, the beach. The Nollans protested the condition and began the arduous journey of appeals, writs, hearings, etc. either to have the condition struck or to make the government pay compensation. Eventually, a California Superior Court granted the Nollans' writ of mandamus and ordered that the condition be struck from the permit. The commission appealed to the California Court of Appeal, but, in the meantime, the Nollans built their house, thereby satisfying their obligation on the option, and purchased the land. The Court of Appeal reversed the Superior Court and also found that no taking had occurred because the easement would not deprive the Nollans of all reasonable use of their property. The U.S. Supreme Court reversed the California Court of Appeal and found a taking. Id., 483 U.S. at 841, 107 S.Ct. at 3151.

Pro-Eco argues that, because it exercised its option to buy the land at issue at an earlier time in the litigation process than did the Nollans, we should conclude that Pro-Eco has an even stronger property interest than the Nollans had. The relevant inquiry for takings, however, is not whether a claimant acquires property early enough in the litigation process. It is whether the claimant had a recognized property interest at the time the government entity acted. When evaluating takings claims, courts look to the law of the state wherein the taking allegedly occurred to find whether what was allegedly taken was compensable property. Ruckelshaus v. Monsanto, 467 U.S. 986, 1001, 104 S.Ct. 2862, 2872, 81 L.Ed.2d 815 (1984). The Nollans had a lease and an option when the California Coastal Commission acted. California recognizes a compensable property right in unexercised options to purchase real estate. San Diego County v. Miller, 13 Cal.3d 684, 693, 532 P.2d 139, 144, 119 Cal.Rptr. 491, 496 (Cal.1975). Indiana, apparently, does not.

Indiana courts have explicitly stated that an option to buy real estate "does not create in the ... optionee an interest in the property upon which recovery may be had after the same has been taken by eminent domain." Haney v. Denny, 135 Ind.App. 317, 335, 193 N.E.2d 648, 654 (Ind.Ct.App.1963); see also Coons v. Baird, 148 Ind.App. 250, 255, 265 N.E.2d 727, 731 (Ind.Ct.App.1970); Butsch v. Swallow, 78 Ind.App. 101, 106, 134 N.E. 877, 878 (Ind.Ct.App.1922).

Pro-Eco proposes no difference, and we conceive of none, between an option to purchase real estate that is frustrated by eminent domain proceedings and an option to buy land that is frustrated by a zoning regulation. Therefore, we conclude that, under Indiana law as indicated by Haney, Coons, and Butsch, Pro-Eco had no interest in the land at the time the ordinance passed.

But what about the option contract itself, apart from the real estate with which it is concerned: is it property in itself for which the owner must be compensated if its value is destroyed by a zoning regulation that goes too far? In Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247 (7th Cir.1983), cert. denied, 467 U.S. 1259, 104 S.Ct. 3554, 82 L.Ed.2d 855 (1984), we denied the takings claims of parties to a multiemployer pension fund who challenged portions of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) which required the employers, when they withdrew from the pension fund, to pay more into the fund than they had agreed among themselves to pay. In denying their takings claim, we relied on a Supreme Court statement in United States v. Security Indus. Bank, 459 U.S. 70, 75, 103 S.Ct. 407, 411-12, 74 L.Ed.2d 235 (1982), that, in the context of denying the takings claims of creditors whose liens were impaired by the Bankruptcy Reform Act of 1978, the property right of a secured party to collateral is "quite different in legal contemplation" from the creditor's contract right to repayment of the debt. Collateral affords something closer to the bundle of rights we normally associate with property protected under the Takings Clause than a contract to be repaid. Peick, 724 F.2d at 1276. Accordingly, we...