Clay County Realty Company and Edith Investment Company, Appellants, v. City of Gladstone, Respondent.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Western District Case Style: Clay County Realty Company and Edith Investment Company, Appellants, v. City of Gladstone, Respondent. Case Number: WD67534 Handdown Date: 09/11/2007 Appeal From: Circuit Court of Clay County, Hon. A. Rex Gabbert Counsel for Appellant: Michael Abrams and Robert Sellers Counsel for Respondent: Robert O. Jester and Steve Majors Opinion Summary: Clay County Realty Company and Edith Investment Company appeal the circuit court's summary judgment for the City of Gladstone. The companies charged Gladstone with unlawful taking of their property without just compensation. REMANDED WITH DIRECTIONS TO DISMISS. Division holds: We remand the case to the circuit court for it to dismiss the action because it lacked jurisdiction. We do not reach the merits of the companies' appeal because the circuit court did not have jurisdiction to enter judgment on their petition and should have dismissed it. The part of their petition that sought damages for an unlawful taking did not state a claim for which relief could be granted. The circuit court, therefore, did not have jurisdiction to consider the claim and should have dismissed it. Although the petition did state a cause of action in tort for pre-condemnation damages, that claim was not yet ripe for adjudication because Gladstone had not yet authorized the condemnation of the property or abandoned the project. Citation: Opinion Author: Paul M. Spinden, Judge

Opinion Vote: DISMISSED. Newton, P.J., and Holliger, J., concur. Opinion: Clay County Realty Company and Edith Investment Company appeal the circuit court's summary judgment for the City of Gladstone in this lawsuit in which Clay County Realty and Edith Investment charged Gladstone with unlawful taking of their property without just compensation. We remand the case to the circuit court for it to dismiss the action on the ground that it lacked jurisdiction. The dispute between Gladstone and Clay County Realty and Edith Investment involved Gladstone Plaza Shopping Center, consisting of three retail buildings, in Gladstone. On May 12, 2003, Gladstone enacted an ordinance declaring the property to be blighted and in need of redevelopment. Gladstone spent the next two years soliciting proposals for a tax increment-financing (TIF) plan. Gladstone has not approved a TIF plan and no formal condemnation proceedings have been instituted. In this lawsuit, Clay County Realty and Edith Investment alleged that Gladstone had engaged in undue delay in instituting official condemnation proceedings, resulting in numerous tenants refusing to renew leases. They also averred that they were unable to attract other tenants. Alleging that Gladstone's actions resulted in a taking of its property without just compensation in violation of Mo. Const. art. I, Section 26, Clay County Realty and Edith Investment prayed for consequential damages from the loss of rental income and the increase in operating expenses. After filing its answer, on March 15, 2006, Gladstone filed a motion for summary judgment, which the circuit court granted on November 2, 2006. This appeal followed. Before we can proceed with a review of an appeal's merits, we must determine first whether or not the circuit court had jurisdiction. Brock v. Blackwood, 143 S.W.3d 47, 55 (Mo. App. 2004). "If the trial court lacked jurisdiction to enter the judgment on which review is sought, then the appellate court lacks jurisdiction to review it on the merits." Id. We do not reach the merits of Clay County Realty's and Edith Investment's appeal because the circuit court did not have jurisdiction to enter judgment on their petition and should have dismissed it. The part of their petition that sought damages for an unlawful taking did not state a claim for which relief could be granted. Gardner v. City of Cape Girardeau, 880 S.W.2d 652, 654 (Mo. App. 1994). Although the petition did state a cause of action in tort for pre-condemnation

damages, that claim was not yet ripe for adjudication. Because we are considering whether or not Clay County Realty's and Edith Investment's petition stated a claim for which the circuit court could grant relief, we deem all facts properly pleaded in the petition to be true. Id. A petition states a cause of action when "'its averments invoke principles of substantive law which may entitle the plaintiff to relief.'" Id. (citations omitted). Clay County Realty and Edith Investment sued pursuant to Mo. Const. art. I, Section 26, that guarantees that "private property shall not be taken or damaged for public use without just compensation." "'This provision is 'self-enforcing' and an action may be brought 'directly thereunder.'" Roth v. State Highway Commission of Missouri, 688 S.W.2d 775, 777 (Mo. App. 1984) (citation omitted). Gladstone and other municipalities have the power to declare an area blighted and in need of redevelopment. Mo. Const. art. VI, Section 21. In Section 353.130, RSMo 2000, the General Assembly granted the organization or agency that has the right to redevelop the area the power of eminent domain to acquire the property through a direct condemnation proceeding as authorized in Chapter 523, RSMo. A direct condemnation proceeding involves a two-step process in which the circuit court first determines whether the condemnation is authorized by law and, if so, determines the damages resulting from the taking. City of Wentzville v. Dodson, 133 S.W.3d 543, 548 (Mo. App. 2004). If, however, the municipality acts indirectly to take property, depriving the property owner of the safeguards of Chapter 523, the owner still can seek compensation for the taking in an action for inverse condemnation. Wyper v. Camden County, 160 S.W.3d 850, 852-853 (Mo. App. 2005). An inverse condemnation action was developed to provide the landowner a remedy when a condemnor physically accomplished a taking or damaging of private property but did not institute a formal condemnation proceeding. Id. In direct condemnation and in inverse condemnation, "[t]he injury is the same; the damage is the same; and the compensation should be the same." Stewart v. City of Marshfield, 431 S.W.2d 819, 822 (Mo.App.1968) (citation omitted). Clay County Realty and Edith Investment alleged in their petition that (1) Gladstone had declared their property blighted; (2) Gladstone harassed Clay County Realty and Edith Investment with repeated building inspections and municipal building code violations in an attempt to drive its tenants away, (3) Gladstone did not enforce any plan for the property's condemnation; and (4) it refused to proceed with the property's effective redevelopment by finding an organization or agency to redevelop the land. Clay County Realty and Edith Investment further alleged:

1. [Gladstone's] actions . . . resulted in a significant diminution of the value of the Property, and [Gladstone] has

thereby taken the Property for public use or purpose. Despite demand, [Gladstone] has failed and refused to pay [Clay County Realty and Edith Investment] just compensation for the Property taken.

1. [Clay County Realty and Edith Investment] are damaged by the actions of [Gladstone] in an amount equal to the

difference in value as to the current fair market value of the Property and the fair market value at the time [Gladstone] took the Property for public use or purpose, said difference being in excess of $5,000,000.

1. In addition, [Clay County Realty and Edith Investment] have suffered consequential damages, loss of rental/lease

income from the inability to secure new tenants or to renew or extend existing leases, and increased operating costs for insurance, taxes, utilities, repair, maintenance and general upkeep of the Property, after the date of [Gladstone's] de facto taking of the Property, in the aggregate of not less than $1,500,000 to date. Such damages are continuing. Clay County Realty and Edith Investment alleged, in essence, that Gladstone's delay in proceeding with the property's effective redevelopment, which would result in an organization's or agency's officially condemning the property through a direct condemnation proceeding, constituted an actual taking of their property in violation of Art. I, Section 26. In other words, they claimed that Gladstone's delay constituted an inverse condemnation. Elapse of much time between an area's being declared blighted and commencement of direct condemnation proceedings is common. Missouri Highway and Transportation Commission v. Edelen, 872 S.W.2d 551, 558 (Mo. App. 1994). Property values during these times typically decrease. Id. When rental property is declared blighted, tenants often vacate the premises without other tenants moving in, sometimes at the redevelopment authority's urging. Washington University Medical Center Redevelopment Corporation v. Gaertner, 626 S.W.2d 373, 375 (Mo. banc 1982). When this occurs, "the property depreciates and deteriorates, the neighborhood declines, vandalism and destruction of the property occurs, and the landowner, anticipating the eventual taking of the property, does not expend money to improve his unproductive asset." Id. The law, however, does not provide a procedure for compensating a property owner

for such a decline in property value. Id. at 376. [The] declaration of blight [and the problems accompanying it are] treated much the same as the threat of condemnation proceedings, the initiation of condemnation proceedings, and negotiation by the condemnor with property owners for the purchase of their property, all of which are considered neither taking nor damaging within the meaning of Mo.Const. art. I, Section 26. Id. (emphasis in original). Hence, Clay County Realty and Edith Investment did not state a cause of action for inverse condemnation under Art. I, Section 26. The circuit court should have dismissed that portion of their petition for failing to state a cause of action for which relief could be granted. Gardner, 880 S.W.2d at 654. The issue that emerges is whether or not Clay County Realty and Edith Investment stated a cause of action under any other theory. The Supreme Court has held that a property owner has a cause of action in tort for pre-condemnation damages, including loss of rental income. Washington University, 626 S.W.2d at 377. This cause of action lies in tort because the plaintiff's damages do not involve any damages to the property itself. Id. at 377-78; 66, Inc. v. Crestwood Commons Redevelopment Corporation, 998 S.W.2d 32, 39 (Mo. banc 1999). The courts have admonished, however, that "some delay prior to and during the pendency of condemnation proceedings is unavoidable and that, where it is a natural consequence of the proper exercise of the right of eminent domain, it does not give rise to a cause of action[.]" Roth, 688 S.W.2d at 777. A property owner can maintain a cause of action in tort for pre-condemnation damages only when the defendant has caused "aggravated delay or untoward activity" in instituting or continuing condemnation proceedings. Id. Clay County Realty and Edith Investment, therefore, could maintain a cause of action in tort against Gladstone for pre-condemnation damages. Their petition stated a cause of action in tort for pre-condemnation damages, which it alleged included loss of rental income and increased operating costs for insurance, taxes, utilities, repair, maintenance, and general upkeep. We are aware that the Roth court upheld the grant of a new trial on the plaintiff's petition, which asserted an inverse condemnation claim on the basis that the defendant's action in condemning his property constituted "aggravated delay"

and "untoward activity." Id. at 777-78. In stating that this was a recognizable cause of action under Art. I, Section 26, the Roth court relied on Washington University without acknowledging that the case stated that this type of action must be brought in tort and not under Art. I, Section 26. Washington University, 626 S.W.2d at 377-78. The Roth court's reliance on Washington University, therefore, was misplaced. Moreover, we are bound to follow the latest Supreme Court opinion, State v. Burgin, 203 S.W.3d 713, 717 (Mo. App. 2006), and in Crestwood and Washington University, the Supreme Court held that these damages are personal damages, which must be brought in tort. Crestwood, 998 S.W.2d at 39; Washington, 626 S.W.2d at 377-78. Although Clay County Realty and Edith Investment could maintain a cause of action in tort against Gladstone, the issue arises whether or not the circuit court should have dismissed the petition on the basis that it was not yet ripe for adjudication. In considering "ripeness," we determine whether or not a controversy is ready for judicial review--that is, whether or not the dispute is developed sufficiently to allow us to make an accurate determination of the facts and to resolve a present conflict--or whether or not we would simply be rendering an advisory opinion. Levinson v. State, 104 S.W.3d 409, 411-12 (Mo. banc 2003); Local 781 International Association of Fire Fighters, AFL-CIO v. City of Independence, 947 S.W.2d 456, 461 (Mo. App. 1997). It is an issue that we can consider sua sponte. Missouri Soybean Association v. Missouri Clean Water Commission, 102 S.W.3d 10, 26, 31 (Mo. App. 2003). Clay County Realty and Edith Investment concede that formal condemnation proceedings have not begun, and their petition avers that the "damages are continuing." That the damages are continuing renders their cause of action not ripe for adjudication. Regardless of the disposition of this petition, seeking pre-condemnation damages for May 2003 to November 2005, Clay County Realty and Edith Investment could file immediately a new petition seeking damages for Gladstone's action occurring after November 2005. To maintain a ripe cause of action for pre-condemnation damages, Clay County Realty and Edith Investment either must wait until Gladstone grants an organization or agency the right to redevelop the land and it condemns the lands and officially takes it, or abandons the project. Tierney v. Planned Industrial Expansion Authority of Kansas City, 742 S.W.2d 146,155-56 (Mo. banc 1988). Only then will the pre-condemnation damages stop accumulating and permit the circuit court to grant specific relief of a conclusive character. The circuit court, therefore, should have dismissed Clay County Realty's and Edith Investment's petition. For these reasons, the circuit court's summary judgment is reversed. We remand the case to the circuit court for it to vacate its judgment and to dismiss Clay County Realty's and Edith Investment's petition.

Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.