Posted by: Patricia Salkin | March 21, 2014

MI Appeals Court Finds No Taking and No Due Process Violations For Rezoned Property

Plaintiffs, the Lelands, owned property in Northfield Township, Michigan. The property had been zoned Agricultural (“AR”), and had been farmed that way for over 100 years. Plaintiff Grand/Sakwa executed an agreement to purchase the property and paid a nonrefundable deposit. Plaintiffs applied to rezone the property to SR–1 single-family residential (“SR–1”). SR–1 allowed up to four dwellings per acre with sewer service, or one per acre without sewer service. The township board approved the rezoning. After a referendum, which overruled the board’s decision, the property remained AR. The Zoning Board of Appeals denied plaintiffs’ requests for use or dimensional zoning variances.

Plaintiffs commenced an action alleging that any zoning classification more restrictive than SR–1 constituted a regulatory taking. Shortly thereafter, a new township board took office and amended the zoning ordinances, rezoning the property to LR low-density residential (“LR”), which allowed only one home per two acres. Therefore, at the time of the bench trial, the property was zoned LR. Plaintiffs argued that whether a regulatory taking existed should be determined by evaluating the AR zoning that existed at the time the lawsuit was filed. The township argued it should be determined based upon the LR zoning that existed at the time of the bench trial. The trial court ruled that the relevant zoning ordinance was LR and no constitutional violation had occurred.

On appeal plaintiffs first argued that the trial court erred by ruling that their challenge went to LR zoning. The court disagreed stating that the law to be applied was that which was in effect at the time of decision by the trial court. The general rule was subject to an exception. A court will not apply an amendment to a zoning ordinance where the amendment was enacted in bad faith and with unjustified delay. Here, the exception applied only if the trial court found that the newer classification was enacted for the purpose of manufacturing a defense to plaintiff’s suit. Here, the development sought by plaintiffs was never within the zoning classification, and the ordinance they sought to exclude from consideration was one that granted development rights.

The court agreed with the plaintiff that the trial court wrongly characterized the relevant test as requiring application of the newer zoning ordinance unless its adoption was done solely to improve the municipality’s litigation posture. However, they rejected the notion that if improving the municipality’s litigation position played any role in the decision to adopt the new ordinance; bad faith has been sufficiently established. Accordingly, they would not void a municipality’s action simply because it served to strengthen its litigation position. The factual determination that must control was whether the predominant motivation for the ordinance change was improvement of the municipality’s litigation position.

The trial court concluded the rezoning to LR was not done solely as an attempt to improve the Defendant’s position at trial. The board made a decision to allow residential development that maintained a rural character. The trial court also noted that the zoning board had previously granted plaintiffs’ request to rezone the property SR–1. However, the court stated that this could be read as demonstrating recognition by both boards that development was in order, though they disagreed on the degree of that development. Plaintiffs suggested that the township was opposed to all development and only adopted the LR zoning as a litigation strategy. However, plaintiffs concede that, after the old board adopted the SR–1 zoning, it was not possible to propose a referendum to void the SR–1 zoning and institute LR zoning in its place. The only mechanism for the residents to challenge the SR–1 zoning in a referendum was to put it to an up or down vote. Therefore, the trial court did not clearly err by applying LR zoning.

Plaintiffs next argued that the LR zoning constituted an unconstitutional governmental taking under the Penn Central Test. The court disagreed stating that Penn Central calls for the court to consider three factors: the character of the government’s action, the economic effect of the regulation on the property, and the extent by which the regulation has interfered with distinct, investment-backed expectations.

Plaintiffs maintained that the LR zoning created a loss of the value. Here, the LR zoning classification allowed a much more valuable use of the property than did AR zoning. No rights existing under AR zoning were denied under the LR zoning. In fact the LR zoning substantially expanded plaintiffs’ land use rights, allowing residential development to occur. Plaintiffs also argued that the trial court made several errors in its decision to admit or exclude certain evidence regarding the value of the property. First, plaintiffs contended that the trial court should not have admitted evidence of a 1998 sale of 77 acres by the Lelands for $10,000 per acre. Second, plaintiffs objected to the consideration of a 1996 appraisal that valued 120 acres of the property at $3,500 per acre. Third, plaintiffs asserted that the trial court should not have considered evidence that a local church was interested in purchasing 15 acres of the property for as much as $43,000 per acre. The court concluded that each of these challenges were properly addressed to the weight given to the evidence.

Plaintiffs similarly asserted that the trial court should have excluded the testimony of defendant’s expert witness, who testified to the economic viability of the property under the LR and AR zoning classifications. The trial court heard this testimony, and appropriately held that it went to the weight of the evidence, rather than its admissibility.

Plaintiffs next argued that the trial court erred by excluding testimony from lay witnesses regarding the value of the property under SR–1 zoning. The trial court held that this evidence was only relevant to damages and deferred the testimony pending a ruling on the cause of action. The court agreed with plaintiff that the trial court should have taken the testimony, given that the balancing test requires at least a comparison of the value removed with the value that remains. However, the court could not conclude that the trial court’s ruling constituted an abuse of discretion, given that the township conceded that the property would have greater value if zoned SR–1.

Further, a claimant who purchases land that is subject to zoning limitations with the intent to seek a modification of those limitations accepts the business risk that the limitations will remain in place or be only partially modified. Here, when plaintiffs entered into the purchase agreement, they were aware that the property was zoned AR. Plaintiffs argued that they had a reasonable expectation that the zoning classification would change, but they did not produce any evidence. However, plaintiffs conceded they understood that the zoning modification adopted by the board remained subject to a timely referendum challenge. Thus, plaintiffs’ suggestion that the property was for some time subject to the SR–1 zoning and that the SR–1 classification was taken away from them, after they spent money on the project, failed due to the fundamental fact that the property was never actually zoned SR–1.

Accordingly, because each of the Penn Central factors weighed in the township’s favor, the court found that the trial court did not err by finding that the rezoning of the property LR did not constitute an unconstitutional regulatory taking.

Lastly, plaintiffs argued that rezoning the property violated their due process and equal protection rights because it rendered the property not economically viable. The court disagreed stating that to show a violation of substantive due process, a plaintiff must prove (1) that there is no reasonable governmental interest being advanced by the present zoning classification, or (2) that the ordinance was unreasonable because of a purely arbitrary, capricious and unfounded exclusion of other types of legitimate land use from the area under consideration. The court stated that the trial court did not clearly err when it found that this was not the case. Accepting the trial court’s finding on that point, plaintiffs cannot show that it was a due process violation for the township to zone the property LR.

Regarding the equal protection clause, it was true that the rezoning to LR impacted only plaintiffs’ property. However, it was not the case that the rest of the AR land in the township was rezoned to SR–1, with only plaintiffs’ left behind. Rather, after the referendum, the township acted to give plaintiffs at least some of the relief they sought. It was appropriate to rezone only plaintiffs’ property where it was the only property for which a change in zoning was sought. Moreover, the amendments to the LR zoning classification itself affected all LR-zoned properties, not just plaintiffs’. The township’s goals of controlling growth and maintaining open space were legitimate, the method chosen was not arbitrary or capricious, and plaintiffs’ property was not improperly singled out under the circumstances. Accordingly, the court found that the trial court did not err by ruling for the township on plaintiffs’ due process and equal protection claims. Therefore, they affirmed.

Grand/Sakwa of Northfield, LLC, v. Township of Northfield, 2014 WL 436736 (MI 2/4/2014)

The opinion can be accessed at: http://caselaw.findlaw.com/mi-court-of-appeals/1656574.html


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