Wild Rice River Estates v. City of Fargo

• Decision Date: 14 November 2005
• Docket Number: No. 20050074.,20050074.
• Citation: 2005 ND 193,705 N.W.2d 850
• Parties: WILD RICE RIVER ESTATES, INC., Plaintiff and Appellant v. CITY OF FARGO, a municipal corporation, Defendant and Appellee.
• Court: North Dakota Supreme Court

Page 850

705 N.W.2d 850

2005 ND 193

WILD RICE RIVER ESTATES, INC., Plaintiff and Appellant v. CITY OF FARGO, a municipal corporation, Defendant and Appellee.

No. 20050074.

Supreme Court of North Dakota.

November 14, 2005.

COPYRIGHT MATERIAL OMITTED

Jonathan T. Garaas, Garaas Law Firm, Fargo, ND, for plaintiff and appellant.

Patricia A. Roscoe (argued) and Garylle B. Stewart (appeared), Solberg, Stewart, Miller & Tjon, Fargo, ND, for defendant and appellee.

VANDE WALLE, Chief Justice.

[¶ 1] Wild Rice River Estates, Inc. ("Wild Rice"), appealed from a judgment dismissing its inverse condemnation action against the city of Fargo and from an order denying its post-trial motions. We conclude the trial court correctly ruled that Fargo's 21-month moratorium on building permits did not constitute a taking of Wild Rice's property in violation of the federal and state constitutions, and we affirm.

I

[¶ 2] Wild Rice is the owner and developer of a rural residential subdivision along the banks of the Wild Rice River located about three miles south of Fargo. Wild Rice was owned by Anton Rutten, who acquired the farmland in 1947. Rutten anticipated that the property would one day become a part of Fargo, and he hoped to develop a subdivision on the property when the city grew. The subdivision was platted in 1993 with 38 lots, and 16 of those lots are located on an oxbow of the river. Wild Rice was incorporated in 1994 for the purpose of developing the subdivision. Because of county and township regulations, Wild Rice was required to construct at its expense a connection to the local sanitary sewer system operated by Southeast Cass Water Resource District. Fargo and Wild Rice entered into a 10-year agreement for the city to treat the sewage collected from the development, and Wild Rice installed sewer and water services for 14 of the lots. At the time of the platting, the required flood elevation for lots in Wild Rice was one foot above base floor elevation. Wild Rice sold the first lot in the development in 1994 for $24,000 and Rutten purchased a lot in 1996 or 1997. In the meantime, Wild Rice invested approximately $500,000 to develop and promote the subdivision.

[¶ 3] The Red River Valley, including the Wild Rice River, has a long and significant history of flooding. A bridge that once connected a road to the oxbow of the Wild Rice River where lots are currently located was removed in 1989 because of flood damage. During the April 1997 flood, all undeveloped lots in Wild Rice were under water. The homes then existing at the subdivision were not under water, but the partially constructed Rutten home was damaged by water and "muck."

[¶ 4] After the 1997 flood, Fargo began working with the Federal Emergency Management Agency ("FEMA") to plan for future floods, and on August 1, 1997, Fargo brought the Wild Rice subdivision into its extraterritorial jurisdiction. On June 15, 1998, FEMA developed a preliminary flood insurance rate-map for the area and several Wild Rice lots were located within the preliminary floodway. The Wild Rice River did not have a mapped floodway before this time, and city officials believed the FEMA designation for the river would be formalized in about 18 months. On August 10, 1998, the Fargo City Commission decided that a "moratorium be placed on the issuance of all building permits for new construction in the floodway within the City of Fargo and its four-mile extraterritorial zone effective August 10, 1998 for a period until the Fargo City Ordinances have been passed and FEMA has made a final determination on their flood plain map." Although several of Wild Rice's lots were affected by the moratorium, others were not affected. During the approximately 21-month period the moratorium was in effect, Fargo city officials participated in many meetings with local, state and federal officials concerning flood plan mitigation issues.

[¶ 5] In May 1999, Anton Rutten's daughter, Bonnie Rutten, applied for a building permit to construct a home on one of the lots in Wild Rice, but the permit was denied because the lot was located within the area identified by FEMA in the preliminary designated floodway covered by the moratorium. During the moratorium, some buyers showed interest in purchasing Wild Rice lots and several people contacted Wild Rice for information. One potential buyer signed two purchase agreements and another signed a lot-hold agreement, but no lots were sold. Wild Rice repeatedly attempted to persuade Fargo to lift the moratorium and issue permits for construction, but the city refused.

[¶ 6] Wild Rice brought this inverse condemnation and tortious interference action on March 30, 2000, and Fargo filed its answer on April 21, 2000. On April 27, 2000, the Fargo city engineer wrote to the city commissioners and recommended that the building permit moratorium be lifted and the city adopt FEMA's June 15, 1998 preliminary flood insurance rate-map panel as the governing panel for all flood-prone areas. Following a public hearing, the city commission voted to lift the moratorium on May 1, 2000.

[¶ 7] After the moratorium was lifted, Wild Rice sold five lots. The party who signed a purchase agreement during the moratorium purchased a lot in May 2000 for $32,900. Lots were also purchased in March 2002 for $39,000, in November 2002 for $39,000, in July 2003 for $55,900, and in April 2004 for $59,900. Other sales were pending at the time of these proceedings.

[¶ 8] Following a bench trial, the trial court ruled in favor of Fargo, concluding there had been no "taking" of Wild Rice's property and no malicious interference with third-party contract rights. The court also denied Wild Rice's post-trial motions.

II

[¶ 9] Wild Rice does not challenge the trial court's dismissal of its claim for malicious interference with third-party contract rights, but asserts the court erred in dismissing its claim for inverse condemnation because Fargo's 21-month moratorium constituted a "taking" of its property.

[¶ 10] Whether there has been a taking of private property for public use is a question of law which is fully reviewable on appeal, Braunagel v. City of Devils Lake, 2001 ND 118, ¶ 16, 629 N.W.2d 567, but we will not set aside a trial court's findings of fact on a takings claim unless they are clearly erroneous under N.D.R.Civ.P. 52(a). Minch v. City of Fargo, 332 N.W.2d 71, 73 (N.D.1983). A finding of fact is clearly erroneous when, although there is some evidence to support it, the reviewing court is left with a definite and firm conviction a mistake has been made. Buri v. Ramsey, 2005 ND 65, ¶ 13, 693 N.W.2d 619.

[¶ 11] Because Wild Rice challenges the moratorium as a taking of its property under both the federal and state constitutions, it is appropriate to outline takings jurisprudence under the respective constitutional provisions.

A

[¶ 12] The Fifth Amendment to the United States Constitution guarantees that private property shall not "be taken for public use, without just compensation." U.S. Const. Amend. V. The takings clause of the Fifth Amendment is made applicable to the states through the Fourteenth Amendment. See Rippley v. City of Lincoln, 330 N.W.2d 505, 507 n. 1 (N.D.1983).

[¶ 13] In Lingle v. Chevron U.S.A. Inc., ___ U.S. ___, ___, 125 S.Ct. 2074, 2082, 161 L.Ed.2d 876 (2005), the United States Supreme Court recently disavowed the "stand-alone" regulatory takings test announced in Agins v. City of Tiburon, 447 U.S. 255, 260, 100 S.Ct. 2138, 65 L.Ed.2d 106 (1980), that "`[t]he application of a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests.'" In doing so, the Court summarized the remaining valid rules that govern its takings clause jurisprudence. The Court identified two categories of regulatory action that generally will be deemed per se takings: "First, where government requires an owner to suffer a permanent physical invasion of her property — however minor — it must provide just compensation." Id. at 2081. Compensation is required for physical takings, "however minimal the economic costs [they] entail[ ]," because they "eviscerate[ ] the owner's right to exclude others from entering and using her property — perhaps the most fundamental of all property interests." Id. at 2082. "A second categorical rule applies to regulations that completely deprive an owner of `all economically beneficial us[e]' of her property." Id. at 2081 (quoting Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992)). The complete elimination of a property's value is the determinative factor in this category because the total deprivation of beneficial use is, from the landowner's point of view, the equivalent of a physical appropriation. Lingle, 125 S.Ct. at 2082. "Outside these two relatively narrow categories," regulatory taking challenges are governed by the standards set forth in Penn Central Transp. Co. v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978). Lingle, 125 S.Ct. at 2081. These standards are "designed to allow `careful examination and weighing of all the relevant circumstances.'" Tahoe-Sierra Preservation Council, Inc. v. Tahoe Reg'l Planning Agency, 535 U.S. 302, 322, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002) (quoting Palazzolo v. Rhode Island, 533 U.S. 606, 636, 121 S.Ct. 2448, 150 L.Ed.2d 592 (2001) (O'Connor, J. concurring)). The primary Penn Central factors are "`[t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations,'" and the "`character of the governmental action' — for instance whether it amounts to a physical invasion or instead merely affects property interests through `some public program adjusting the benefits and burdens of economic life to promote the common good.'" Lingle, 125 S.Ct. at 2081-82 (quoting Penn Central...