While the United States Constitution provides that private property shall not be "taken" without just compensation, the Minnesota Constitution ensures that just compensation must be paid not only when private property is taken, but also when it is "destroyed or damaged." The Minnesota Supreme Court has earlier held that the state's constitutional protection extends further than that afforded by the federal constitution, but in its most recent regulatory taking decision in 2007, Wensmann Realty, Inc. v. City of Eagan, it refused to decide the state law issue because it had not been raised by the plaintiff landowner. Now, the Minnesota Court of Appeals has expressly addressed the breadth of Minnesota's protection of private property rights, particularly in light of the Wensmann decision, and confirmed that the state's guarantee exceeds that offered by the United States constitution.
Interstate v. City of Bloomington
Gordon Galarneau and Penny Galarneau separately own two
Bloomington parcels of property, both of which were impacted by the
construction of a new runway at the Minneapolis-St. Paul
International Airport. Interstate Cos., Inc. v. City of
Bloomington, 790 N.W.2d 409 (Minn. App. 2010). Interstate
leases the properties, paying $62,000 and $34,000 per month to Mr.
Galarneau and Ms. Galarneau, respectively. Interstate distributes
parts, and services, repairs, and sells diesel engines from the
properties.
Metropolitan Airports Commission built a new runway about 2,500
feet from buildings on the properties. Noise from this runway
disrupted Interstate's business, but even after the runway
opened, Interstate's profits, and its rent payments to the
Galarneaus, increased. Moreover, MAC's Joint Airport Zoning
Board adopted an amended ordinance in connection with the new
runway. While the properties had been regulated under the former
ordinance, the amended ordinance placed the properties in a more
restrictive zone. The new regulations permitted the present use of
the properties, but it limited structure heights, resulting in a
denial of the Galarneaus' application to build a hotel.
The new runway and the amended ordinance caused the combined value
of the properties to plummet from $10.8 million to $5.035 million,
according to the owners' expert. Interstate and the Galarneaus
sued MAC and Bloomington alleging, among other claims, that the
amended ordinance constituted a regulatory taking of their property
and that the business disruptions caused an inverse condemnation.
The trial court granted summary judgment to the government,
dismissing these claims.
Minnesota's Constitutional Guarantee
The Court of Appeals reversed the trial court, finding that it
had not adequately analyzed the Minnesota constitution and
improperly resolved factual issues. Under both the federal and
state constitutions, courts recognize that although property rights
must yield to valid exercises of government power, when regulation
of private property "goes too far," the government must
compensate the owner. Some regulations unfairly burden a few
landowners while benefitting the public generally and, in those
select situations, both constitutions require that the owners
receive compensation. To determine whether a regulation effects a
taking of private property under either constitution, courts
consider several factors, including the regulation's (a)
economic impact on the landowner; (b) interference with distinct
investment-backed expectations; and (c) character. Generally, if
the government decision or regulation maintains the status quo of
the property and any reasonable, economically-viable use of the
property remains, then courts deny that a regulatory taking has
occurred. This is the usual, though not exclusive, outcome of
disputes concerning historic preservation laws as well as
ordinances implementing a comprehensive plan. The trial court in
Interstate analyzed the facts under these standards. It
rejected the appraisal showing the 50% drop in the value of the
property, deciding that the properties had not been taken and that
the owners were not entitled to compensation.
Pursuant to Minnesota's constitution, however, a property owner
may also prove a taking in an alternative manner, under a
less-difficult standard. If an owner can establish that a
regulatory action benefits a specific public or governmental
enterprise and caused its property's market value to
substantially and measurably decline, then it is entitled to
compensation. Minnesota law recognizes airport ordinances in this
"enterprise" category, and a regulation designed to
maintain a few parcels of private property as parkland or green
space would likely also qualify as benefitting a public enterprise.
The Minnesota Supreme Court refused to decide the impact of this
line of decisions in Wensmann, leaving courts since then
struggling with whether Minnesota's constitution continues to
ensure that owners receive compensation for regulations benefitting
public enterprises that reduce the burdened property's value
while nonetheless allowing reasonable uses. Consistent with
Minnesota's guarantee, however, the Courts of Appeals in
Interstate held that, even though the amended ordinance
permitted the properties to be reasonably used, evidence showing
that the government's actions reduced the value of the
properties by 50% may be sufficient to prove a regulatory
taking.
Conclusion
When a government regulation or decision impacts a property's value or interferes with an owner's reasonable, investment-backed expectations, both the state and federal constitutions may entitle the owner to compensation. Because the courts refuse to identify hard and fast rules for taking claims, every regulatory taking dispute depends on its unique facts. But if the government's action maintains the status quo and allows an economically-viable use of the property, courts usually decline to find a taking. Under Minnesota's constitution, however, a regulation benefitting a public or government enterprise and causing a substantial and measurable decline in value requires the government to compensate the owner even if a reasonable use of the property remains.
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