Centene Plaza Redevelopment Corporation, Plaintiff/Respondent v. Mint Properties, Inc., et al., Defendants/Appellants.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Eastern District Case Style: Centene Plaza Redevelopment Corporation, Plaintiff/Respondent v. Mint Properties, Inc., et al., Defendants/Appellants. Case Number: ED89275 Handdown Date: 04/24/2007 Appeal From: Circuit Court of St. Louis County, Hon. James R. Hartenbach Counsel for Appellant: Gerard T. Carmody Counsel for Respondent: Thomas B. Weaver Opinion Summary: Mint Properties and several other defendants, who consist of numerous named entities and individual parties with interests in certain properties on Forsyth Boulevard (collectively referred to as "defendants"), appeal the trial court's judgment of condemnation. Defendants argue that the court erroneously held that the City of Clayton's blighting ordinance was supported by substantial evidence. TRANSFERRED TO THE SUPREME COURT OF MISSOURI Division One Holds: There was no evidence to support a conclusion that the proposed redevelopment area was a social liability, and therefore qualified as blighted, under either the previous common law standard of review, or the more recent standard set forth by section 523.261, RSMo. Therefore, we would hold that the trial court's judgment condemning defendants' properties was erroneous. However, because of the general interest and importance of the issues presented in this case concerning the applicable standard of review for a legislative determination of blight, and the consideration of social liability in the context of such a determination, we transfer the case to the Supreme Court of Missouri.

Citation: Opinion Author: PER CURIAM Opinion Vote: TRANSFERRED TO THE MISSOURI SUPREME COURT. Ahrens, P.J., Hoff, J., and Baker, J. Opinion: Mint Properties and several other defendants, who consist of numerous named entities and individual parties with interests in certain properties on Forsyth Boulevard (collectively referred to herein as "defendants"), appeal the trial court's judgment of condemnation. Defendants argue that the court erroneously held that the City of Clayton's ("Clayton") blighting ordinance was supported by substantial evidence. We transfer this case to the Missouri Supreme Court. Centene Plaza Redevelopment Corporation ("Centene") purchased property located at 7700 Forsyth, and 21 Hanley (collectively referred to as "the Library Limited property") in 2004, with the intent to expand their current office and parking space. The property had formerly been the site of a store called Library Limited, and it contained a parking garage as well. Centene also sought to purchase a garage owned by Clayton adjacent to their current office building. During their discussion about the purchase of the garage, Centene discovered that Clayton was seeking redevelopment of the area. Clayton subsequently issued a general request seeking proposals from developers to redevelop the entire block of Forsyth, bordered by South Bemiston Avenue, Hanley Road, and Carondelet Avenue ("the area"). Centene submitted the only response to the request for proposals. Centene proposed a three-phase project, which included redevelopment of its own properties, as well as five properties located on Forsyth. Centene proposed the formation of a redevelopment corporation pursuant to Chapter 353 of the Revised Statutes of Missouri and sought tax abatement and the power of eminent domain as instruments to acquire certain properties and implement its project. After Clayton reviewed Centene's response, it commissioned Peckham, Guyton, Albers, & Viets ("PGAV") to conduct an analysis of the area to determine whether it qualified as a blighted area under Chapter 353. PGAV's analysis ultimately concluded that the property qualified as a blighted area. Clayton subsequently passed Ordinance Number 5911, declaring the area to be blighted and approving the redevelopment agreement which had been entered into between Centene and Clayton(FN1). The area included defendants' properties located at 7730 Forsyth, 7732 Forsyth and 7734 Forsyth, and 7716 and 7718 Forsyth (collectively referred to herein as "defendants' properties"). After allegedly making offers to purchase the properties in

question, Centene filed three separate petitions seeking condemnation of defendants' properties. The petitions were consolidated into one action, and the trial court granted a judgment of condemnation in favor of Centene. Defendants now appeal(FN2). Our review of a court-tried case is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Riverside- Quindaro Bend Levee Dist., Platte County, Missouri v. Missouri American Water Co., 117 S.W.3d 140, 146 (Mo. App. 2003). We will affirm the trial court's judgment unless it is not supported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Id. The trial court held that Ordinance Number 5911 was supported by substantial evidence and was not arbitrary and capricious. Defendants argue the trial court's judgment was erroneous for several reasons. At the heart of each of defendants' arguments on appeal is whether the 2006 legislation concerning eminent domain, specifically section 523.261, applies to the present case. Section 353.020(2) RSMo (Cum. Supp. 2004) sets forth the definition of "blighted area." A blighted area consists of those portions of the city which the city determines "that by reason of age, obsolescence, inadequate or outmoded design or physical deterioration have become economic and social liabilities, and that such conditions are conducive to ill health, transmission of disease, crime or inability to pay reasonable taxes...." After the area in question was declared blighted by Ordinance Number 5911, Centene pursued actions for condemnation of the properties. The legislature enacted section 523.261 in 2006, after the filing of the condemnation actions. The statute states that with regard to condemnation actions, "any legislative determination that an area is blighted, substandard, or unsanitary shall not be arbitrary or capricious or induced by fraud, collusion, or bad faith and shall be supported by substantial evidence." Prior to section 523.261, the standard of review of the legislative determination was that it must not be arbitrary or induced by fraud, collusion or bad faith. Crestwood Commons Redevelopment Corp. v. 66 Drive-In, 812 S.W.2d 903, 910 (Mo. App. 1991). If the action of the legislative body was "reasonably doubtful or even fairly debatable," the court could not substitute its judgment for that of the legislative body. Id. Based upon section 523.261, even though it was not in effect at the time Centene filed its actions for condemnation, defendants argue that the trial court had a duty to review Clayton's blight determination and reverse it if it

was not supported by substantial evidence because the statute applies retroactively. Article I, section 13 of the Missouri Constitution provides that "no ex post facto law, nor law ... retrospective in its operation ... can be enacted." Based upon this constitutional provision, statutes are generally presumed to operate prospectively. Pierce v. State Dept. of Social Services, 969 S.W.2d 814, 822 (Mo. App. 1998). There are two exceptions to this general rule. Id. These are where the legislature expressly states that the statute be applied retroactively and where the statute is procedural in nature and the substantive rights of the parties are not affected. Id. Defendants assert that the change effected by section 523.261 was merely one to the standard of review, which is a procedural matter. Block Financial Corp. v. America Online, Inc., 148 S.W.3d 878, 884 (Mo. App. 2004). In response to defendants' argument, Centene claims the change was not to the standard of review, but instead was a change to the standard under which the blighting ordinance was enacted. Ordinance Number 5911 was enacted prior to section 523.261, and therefore, Centene argues that the statute cannot apply retroactively to action already taken by Clayton. Here, the trial court concluded that Clayton's determination was "not arbitrary or capricious or induced by fraud, collusion, or bad faith," and was "amply supported by substantial evidence." The court noted that as a result, if section 523.261 did apply, "it would not aid defendants." The court essentially reviewed Clayton's determination of blight under both standards and found that each standard was met. However, here we need not consider whether section 523.261 applies retroactively because we would conclude that Clayton's determination of blight failed to meet either standard. In each of their points, defendants argue that the trial court's conclusion regarding Clayton's determination of blight was not supported by substantial evidence. As previously noted, pursuant to section 353.020(2), a "blighted area" is defined as one which is determined by reason of age, obsolescence, or inadequate or outmoded design or physical deterioration to have become an economic and social liability. In their first point on appeal, defendants claim the court erred because there was no evidence that their properties were a "social liability," to qualify as a blighted area under section 353.020. In their remaining points, defendants argue that there was no substantial evidence to show that the area had become an economic liability, that there was a reasonable inability to pay taxes, nor was there evidence that the properties in question were necessary for the redevelopment. Because we conclude that the social liability issue is dispositive, we do not consider the arguments concerning the remaining factors.

As discussed above, to qualify as a "blighted area," the portion of the city must be an economic and a social liability. Defendants argue that the plain language of the statute requires a finding that the portion of the city must have become both an economic and a social liability. In its brief, Centene acknowledges that Chapter 353 requires social liability as a prerequisite to blight. However, the term social liability has not been specifically defined by statute or in case law. It has been noted that the transformation of our country from primarily agricultural to a predominantly industrial society resulted in significant growth in our cities. Tax Increment Financing Com'n of Kansas City v. J.E. Dunn Const. Co., Inc., 781 S.W.2d 70, 78 (Mo. banc 1989); (citing Annbar Associates v. West Side Redevelopment Corp., 397 S.W.2d 635, 639 (Mo. banc 1965)). One result of this growth was blighted areas which constituted a "menace injurious to the public health, safety, morals and welfare" of the residents. Id. The blighted areas also presented economic concerns. Id. The need to eliminate these conditions as a "breeding ground for juvenile delinquency, infant mortality, crime and disease," prompted a movement toward redevelopment. Id. A review of this historical context in which determinations of blight and redevelopment appear to have emerged would lead us to believe the definition of social liability focuses upon the health, safety, and welfare of the public. Based upon this standard, we conclude that in this case, there was insufficient evidence before Clayton or in the record before us to support a conclusion that the area in question, including defendants' properties, was a social liability. Michael Schoedel, the city manager for Clayton, testified that he requested information from the Clayton fire and police departments regarding the calls in the area. A memo from Mark Thorp, the fire chief, indicated that from 2001 to 2006, there were no fire calls and no emergency services ("EMS") calls for most of the properties in the redevelopment area. Collectively, there were only four fire calls and two EMS responses for eight properties in the area over the course of five years. Tom Burn, the chief of police, also submitted a memo to Schoedel, indicating the number of police calls to the properties in the redevelopment area dating back to 1999. There were a total of 143 calls for five properties(FN3) over approximately seven years. This was less than half the number of calls for a single property located across the street during that time frame. Although Schoedel expressed some potential concerns regarding safety, crime, fire hazards, and vandalism due to vacancies in the area, the information he received from the fire and police departments did not validate these concerns. Moreover, this evidence does not support a finding that the welfare and safety of the public was in jeopardy, resulting in a social liability. In addition, there was no evidence presented regarding any public health concerns resulting from the condition of the area.

Additional evidence considered by Clayton also failed to support a finding of social liability, particularly the blighting study commissioned by Clayton. According to Schoedel, the PGAV blighting study commissioned by Clayton was a critical component in Clayton's determination of blight. However, while the PGAV study did conclude that the area was an economic liability because of the age, obsolescence, inadequate or outmoded design, and physical deterioration of some of the properties, it did not make any conclusions regarding the social liability of the area. Moreover, the PGAV study did not find that any of such conditions were injurious to the public health or safety. In fact, John Brancaglione, an employee of PGAV(FN4), testified that the factors existent in the area did not constitute a social liability in the way he "understood that to be applicable to these situations." Instead, Brancaglione testified that the area was a social liability to the extent that it constituted an economic liability because of its inability to pay reasonable taxes. Centene argues that this is sufficient; however, we disagree. If evidence to support a finding of economic liability could also constitute evidence to support a finding of social liability, the plain language of section 353.020(2) would be defeated. In construing a statute, we attempt to give effect to the legislature's intent by applying the plain and ordinary meaning of statutory terms. BHA Group Holding, Inc. v. Pendergast, 173 S.W.3d 373, 377 (Mo. App. 2005). Section 353.020(2) plainly states that a blighted area is one which is determined, by reason of age, obsolescence, inadequate or outmoded design or physical deterioration to have become "economic and social liabilities...." As defendants note, in this statute, the legislature specifically used the term "and" when discussing the resultant liabilities of the area. Had the legislature intended to require only evidence to support a finding of one liability to meet the definition of blighted area, it could have used the disjunctive term "or," indicating that there could be two possible, alternative liabilities required. See In re B.J.K., 197 S.W.3d 237, 244-45 (Mo. App. 2006). Here, giving the language of section 353.020(2) its plain and ordinary meaning, it appears that the legislature intended, by the use of the term "and," to require a conclusion that the area in question be both an economic liability and a social liability, and not simply one encompassing the other. Centene argues that the blighting study prepared by PGAV was not the only factor in Clayton's determination of blight. However, Schoedel specifically testified that the PGAV study was a critical component in the determination of blight. Schoedel also acknowledged that Clayton considered other factors. As discussed above, the additional evidence before Clayton concerning fire, police, and EMS reports did not support a conclusion of social liability.

Centene also claims that the determination of blight was supported by substantial evidence by citing the increase in jobs the redevelopment would provide, and the "vibrant," pedestrian-friendly atmosphere that would result from the redevelopment. However, substantial evidence is competent evidence that has probative force on the issues. Barnes Hosp. v. Missouri Comm'n on Human Rights, 661 S.W.2d 534, 537 (Mo. banc 1983). The evidence cited by Centene focuses upon only the prospective benefits of redevelopment, and not the current state of the properties themselves. Additionally, Centene's argument in this regard is based upon evidence largely submitted from Clayton itself in the form of its master plan(FN5). We conclude that Clayton's ultimate goals for the area cannot serve as probative evidence of social liability in light of the lack of evidence concerning the public health, safety, and welfare in the record before us. While we note that pursuant to section 353.020(1), an "area" may include buildings that are not themselves blighted, but which are deemed necessary for the redevelopment, there is a lack of evidence of social liability as to any portion of the area. The area, therefore, failed to meet the statutory definition of blighted. As discussed above, there was insufficient evidence to support a conclusion that the area in question was a social liability, and therefore blighted, under either the prior common law standard, or the more recent standard set forth in section 523.261. Therefore, we would hold that the trial court's judgment condemning defendants' properties was in error. Because our conclusion regarding the lack of evidence of social liability would be dispositive, we would not consider defendants' remaining points concerning the findings of economic liability, inability to pay reasonable taxes, and necessity of the properties for redevelopment. We would reverse the judgment of the trial court as discussed above; however, because of the general interest and importance of the issues presented in this case concerning the applicable standard of review for a legislative determination of blight, and the consideration of social liability in the context of such a determination, we transfer the case to the Missouri Supreme Court pursuant to Rule 83.02. Footnotes: FN1.Clayton also passed Ordinance Number 5914, which amended certain typographical errors in section 4 of Ordinance Number 5911. However, we refer to the relevant ordinance as Ordinance Number 5911 throughout this opinion.

FN2.Condemnation actions involve a two-step process. City of Wentzville v. Dodson, 133 S.W.3d 543, 548 (Mo. App. 2004). The trial court first determines whether the condemnation is authorized by law. Id. After this determination, commissioners are appointed to assess the damages resulting from the taking. Id. In the present case, the trial court only completed the first step of the process; however, section 523.261 RSMo (Cum. Supp. 2006) authorizes an interlocutory appeal of the trial court's judgment regarding the determination of the legislative body. FN3.There were no calls listed for the remaining three properties that were included in the memo concerning fire and EMS calls. FN4.The study was conducted primarily by Carol Waggoner; however, she was unavailable to testify due to illness. Brancaglione accompanied Waggoner on part of the study. FN5.We note that Centene cites a portion of the PGAV blighting study as describing the "absence" of a "vibrant" city center and the need for a "quality environment" and "walkable community;" however, the conclusions contained in PGAV's analysis were also based on Clayton's goals. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.