Thomas W. Garland, Inc. v. City of St. Louis

• Decision Date: 15 May 1979
• Docket Number: No. 78-1554,78-1554
• Citation: 596 F.2d 784
• Parties: THOMAS W. GARLAND, INC., Appellant, v. The CITY OF ST. LOUIS and Manley Investment Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 784

596 F.2d 784

THOMAS W. GARLAND, INC., Appellant, v. The CITY OF ST. LOUIS and Manley Investment Company, Appellees.

No. 78-1554.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 15, 1978.

Decided Feb. 28, 1979.

As Amended on Denial of Rehearing and Rehearing En Banc May 15, 1979.

Allen A. Yoder of Rassieur, Long, Yawitz & Schneider, St. Louis, Mo., argued and on brief, for appellant.

Joseph R. Niemann, Asst. City Counselor, St. Louis, Mo. (argued), and Jack L. Koehr, City Counselor, St. Louis, Mo., on brief, for appellee, City of St. Louis.

Charles A. Newman, Thompson & Mitchell, St. Louis, Mo. (argued), Donald J. Stohr and Robert S. Bogard, St. Louis, Mo., on brief, for appellee, Manley Investment Co.

Before HEANEY and ROSS, Circuit Judges, and TALBOT SMITH, Senior District Judge. ^*

ROSS, Circuit Judge.

Plaintiff, Thomas W. Garland, Inc. (Garland), operates a retail clothing store on leased premises in the downtown business area of St. Louis, Missouri. In its complaint, filed January 30, 1978, Garland alleges that condemnation proceedings originating in April 1973 by the city of St. Louis have effected a de facto taking of plaintiff's leasehold for which plaintiff seeks just compensation under the fifth and fourteenth amendments to the Constitution. Garland joined Manley Investment Company (Manley) as a defendant in this action, as owner of the fee interest in the leased property, and alleges that the lease has become frustrated or impossible to perform and should be cancelled because of the city's de facto condemnation of the leasehold.

In May 1978 the district court ¹ sustained the motions of both defendants to dismiss the complaint for failure to state a claim for relief, Fed.R.Civ.P. 12(b)(6). We reverse and remand for additional proceedings.

I.

The complaint alleges that in June 1971, the city's Board of Aldermen passed Ordinance 55952 declaring an area of the city including plaintiff's leased premises blighted, and redevelopment of the area necessary. In April 1973, Ordinance 56476 was passed, designating Mercantile Center Redevelopment Corporation (Mercantile) as developer, approving a redevelopment plan submitted by Mercantile, incorporating a contract between the city and Mercantile and delegating to Mercantile the power of eminent domain for the purpose of carrying out the contract. The development agreement also provided for vacation of a street which had served as the only entrance to Garland's shipping and receiving dock behind the leased building.

Garland further alleges that in March 1973, agents for Mercantile ordered Garland to vacate its premises by September 1974 and that relying on this statement and public announcements concerning the redevelopment project, Garland leased other premises for its administrative offices, fur storage and shipping and receiving functions, as well as additional properties to be used as retail stores, all of such accommodations made at considerable expense.

Between 1973 and 1975 defendant Manley, as Mercantile's agent, acquired the fee interest in plaintiff's leased property and others in the area. Surrounding buildings were demolished by use of a "headache ball." Part of the two-block area surrounding plaintiff's premises has been converted to a parking lot, and part now consists of vacant buildings. Plaintiff asserts that the two-block area has been stripped of its business and commercial character, rendering plaintiff's leasehold useless.

In June 1978, plaintiff was denied leave to file an amended complaint. The proposed amendment sets forth greater detail concerning the impact on plaintiff's operations resulting from the acts of Manley, Mercantile and the city, alleging that the "headache ball" has caused structural damage to plaintiff's building. Debris from the demolition of surrounding buildings has blocked the entrance to plaintiff's loading dock, clogged its air conditioning system and covered its merchandise with dust. Doorways and sidewalks in the vicinity are not cleared of snow, ice and garbage, and pedestrians no longer frequent plaintiff's area.

Plaintiff contends that after destroying the economic value of the district, leaving plaintiff under a "cloud of condemnation" for five years and rendering plaintiff's leasehold useless, the city and Mercantile ceased redevelopment plans because the entire project had been inadequately financed. The city had failed to secure a detailed financing plan from Mercantile as required by Section 29.080(15), Revised Code of St. Louis. Furthermore, although it was required under provisions of the City Charter to begin condemnation proceedings within six months after the effective date of the redevelopment ordinances and although its agents told plaintiff to vacate the premises, the city has failed to commence official condemnation of plaintiff's leasehold.

II.

We review the dismissal of plaintiff's complaint in light of the following standards:

(A) complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

(A) complaint should not be dismissed merely because a plaintiff's allegations do not support the particular legal theory he advances, for the court is under a duty to examine the complaint to determine if the allegations provide for relief on any possible theory. Nor should a complaint be dismissed that does not state with precision all elements that give rise to a legal basis for recovery. Finally, a complaint should not be dismissed merely because the court doubts that a plaintiff will prevail in the action. That determination is properly made on the basis of proof and not merely on the pleadings.

The question, therefore, is whether in the light most favorable to the plaintiff, the complaint states any valid claim for relief. Thus, as a practical matter, a dismissal under Rule 12(b)(6) is likely to be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief.

Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th Cir.) (citations omitted), Petition for cert. filed, 47 U.S.L.W. 3278 (U.S. Oct. 24, 1978) (No. 75-585).

The district court dismissed the complaint because plaintiff had failed to allege any physical invasion or appropriation of the property, stating:

It is clear that plaintiff has failed to state a claim herein. Plaintiff does not allege that there has been any Physical entry or Legal interference with its use or disposition of the property. All that plaintiff asserts is the threat of condemnation, its impact upon the area, and its impact upon the business activities of plaintiff. While such facts may affect the date determined for the valuation of the property in any subsequent condemnation proceedings, such assertion is insufficient to state a claim herein.

(Emphasis added.) We do not agree with the district court that physical invasion or appropriation of the property is essential to a claim of de facto condemnation.

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, Danforth v. United States, 308 U.S. 271, 286, 60 S.Ct. 231, 84 L.Ed. 240 (1939), governmental action short of acquisition or occupancy may constitute a constructive or de facto taking "if its effects are so complete as to deprive the owner of all or most of his interest in the subject matter." United States v. General Motors Corp., 323 U.S. 373, 378, 65 S.Ct. 357, 359, 89 L.Ed. 311 (1945). See also Richmond Elks Hall Ass'n v. Richmond Redev. Agency, 561 F.2d 1327 (9th Cir. 1977):

When a public entity acting in furtherance of a public project directly and substantially interferes with property rights and thereby significantly impairs the value of the property, the result is a taking in the constitutional sense and compensation must be paid.

"(T)o constitute a taking under the Fifth Amendment it is not necessary that property be absolutely 'taken' in the narrow sense of that word to come within the protection of this constitutional provision; it is sufficient if the action by the government involves a direct interference with or disturbance of property rights. * * * Nor need the government directly appropriate the title, possession or use of the properties . . . ."

Id. at 1330 (citations omitted).

In Richmond, the claimant's property was located within the area declared blighted by the city and designated for redevelopment. The redevelopment project was given wide publicity; a schedule for purchase of the subject properties was established, and the city's redevelopment agency began acquisition and demolition in the project area. As a result, property insurance and loan funds for improvements on the subject properties became unavailable. The claimant suffered damage to its building and a serious decline in rental income. After redevelopment ceased for lack of funds, the Ninth Circuit found that a compensable taking of the claimant's property had occurred because the actions of the city and its agency had rendered the property unsaleable in the open market and "its use for its intended purposes * * * severely limited." Id. at 1330. ²

In Foster v. Herley, 330 F.2d 87 (6th Cir. 1964), the Sixth Circuit faced similar facts and reversed the lower court's dismissal of the complaint for failure to state a claim. The district court in the present action noted the Foster decision but considered it overruled or substantially restricted by two subsequent Sixth Circuit cases, Sayre v. City of Cleveland, 493 F.2d 64 (6th Cir.), Cert. denied, 419 U.S. 837, 95 S.Ct. 65, 42 L.Ed.2d 64 (1974) and Woodland Market Realty Co. v. City of Cleveland, 426 F.2d 955 (6th Cir. 1970).

The district court cited...