Saturday, September 22, 2012

Hillcrest Investment Co., LLC v. UDOT, 2012 UT App 256 (Sept. 13, 2012)



In 2001, UDOT condemned some property located in Centerville, Utah, as part of the project to construct Legacy Parkway.  The owners of the property had  planned to develop a portion of their property into a business park, and they had already gone to the trouble of changing the zoning and obtaining city approval of their development plans prior to the condemnation.  However, the portion of the property designated for development could only be accessed one way - using a road that circumvented wetlands also located on the property.

The owners discovered that the UDOT condemnation included the area where the access road was located, but UDOT represented that Legacy Parkway would include a frontage road that would allow access to the portion of the property designed for the business park.  The appraisal obtained by UDOT concluded that were would be no severance damages because UDOT would construct the access road at its own expense.  In the condemnation action that commenced in September 2001, UDOT submitted a map showing the proposed location of the frontage road and in subsequent negotiations, UDOT continued to represent that it would build the frontage road.  Based upon these representations, the property owners entered into a Right of Way Contract with UDOT, selling a portion of their property to UDOT, including the portion where the access road was located. 

The property owners entered into a Real Estate Purchase Contract (“REPC”) with Hillcrest Investment Co., LLC (“Hillcrest”) and conveyed their interest in the Centerville property to Hillcrest, in late 2005 and early 2006.  While the REPC specifically identified the property conveyed to Hillcrest, it made no mention of assigning contractual rights to Hillcrest.  At about the same time, Hillcrest was informed that UDOT would not construct the frontage road to access the business park.  Ultimately, Hillcrest sued UDOT for breach of contract and unjust enrichment in December 2008, and asked for an injunction requiring UDOT to construct the frontage road.  UDOT argued that Hillcrest did not have standing to enforce any contract and there was no contract requiring UDOT to build the frontage road.  The district court agreed and granted summary judgment to UDOT, dismissing Hillcrest’s claims.

The problem for Hillcrest is that the REPC did not expressly assign the contract right to Hillcrest when it bought the property from the previous owners.  Nor did Hillcrest obtain a separate assignment of the contract between UDOT and the sellers.  Hillcrest tried to argue that according to the terms of the REPC, the sellers held fee title to “property rights,” that the contractual rights for construction of the frontage road was one of these property rights, and that the property rights constituted a portion of the real estate conveyed to Hillcrest.  

The Utah Court of Appeals concluded that Hillcrest did not have standing to bring claims against UDOT as a party or assignee under any contract.  It also concluded that “property rights,” as that term was used in the REPC did not include the contract rights Hillcrest was trying to enforce.  

However, the Utah Court of Appeals did not completely eliminate Hillcrest’s hopes.  Hillcrest had also argued before the district court that it had standing to enforce the contract with UDOT because it was a beneficiary of a trust that was a party to the contract with UDOT.  One of the original owners of the property that contracted with UDOT for the sale of the condemned property was the SVC Horman Family Trust.  Hillcrest was a beneficiary of the SVC Horman Family Trust.  Hillcrest argued that the SVC Horman Family Trust (and the other trusts that had constituted the original owners and contracting parties with UDOT) had been liquidated by the trustees and that through this liquidation, Hillcrest gained equitable and beneficial title the trust’s property including the contract rights.  The Utah Court of Appeals considered whether Hillcrest had presented sufficient evidence to support this complicated argument to stop summary judgment.  It determined that there was not sufficient evidence to definitively determine whether Hillcrest could enforce the contract as a beneficiary of the SVC Horman Family Trust.  But there were sufficient facts presented to create a dispute of material facts that required reversal of the district court’s decision to grant summary judgment.  

Because of this decision, Hillcrest gets one more chance to argue that it has standing to enforce the contract with UDOT.  If it can establish standing, a dispute remains whether the contract between UDOT and the previous owners required to construction of the frontage road.  However, had Hillcrest and the previous property owners simply prepared an assignment of the contract with UDOT, the whole question of standing could have been completely avoided.  When you  are buying or selling real property, you need to be aware of other contract rights related to the real property but that will not be conveyed through a real estate purchase contract or a deed.  If you want these contractual rights to transfer with the property, you must make sure that the proper documentation is prepared to expressly assure this transfer of title.  Otherwise, you may find yourself in Hillcrest’s unenviable position.

Saturday, June 23, 2012

Abraham & Assocs. Trust v. Park, 2012 UT App 173 (June 21, 2012)

The essential issue of this case was whether one property owner could establish an easement over a neighbor’s property to provide access to property. The Abraham & Associates Trust (“Abraham”) claimed an easement by necessity across property owned by James and Lori Park to provide access landlocked property owned by Abraham in Kane County Utah.

An easement by necessity is an equitable theory allowing a property owner to claim an easement across the property of another to provide access from a public road to a landlocked, and otherwise inaccessible, parcel of land. In Tschaggeny v. Union Pacific Land Resources Corp., the Utah Supreme Court identified the following four elements necessary to establish an easement by necessity:

1. Unity of title followed by severance;
2. That at the time of the severance, the servitude was apparent, obvious, and visible;
3. That the easement is reasonably necessary to the enjoyment of the dominant estate; and
4. It must usually be continuous and self-acting, as distinguished from one used only from time to time when occasion arises.

Park, 2012 UT App 173, ¶12 (quoting Tschaggeny, 555 P.2d 277, 280 (Utah 1976)).

To meet the “unity of title” requirement, both the landlocked property and the property to be burdened with the easement must have been owned by a single person “who then ‘divides it into two tracts and conveys away one tract.’” Id. at ¶15 (quoting Tschaggeny, 555 P.2d at 280 (further citation omitted). The relevant severance for purposes of the “unity of title” requirement then is the severance that created the landlocked parcel, and the easement by necessity may only be established over the other parcel created when the landlocked parcel was created. Id.

In the case before the Utah Court of Appeals, the property owned by the Parks was at one time also owned by the same person who previously had owned the property owned by Abraham. However, when the Parks’ property was severed from other property that included the Abraham parcel, that severance did not landlock the Abraham parcel. Id. at ¶16. The severance that “landlocked” the Abraham parcel occurred at a later time. Therefore, Abraham was prohibited from establishing an easement by necessity over the property owned by the Parks.

The Utah Court of Appeals then looked at whether Abraham had other means to access a public road, noting that “an expressly stated means by which otherwise landlocked property owners are intended to access the outside world typically precludes the imposition of an easement by necessity.” Id. at ¶17. Because a right-of-way was expressly reserved across a different parcel adjacent to the property owned by Abraham and arguably benefited the property owned by Abraham, the Court of Appeals held that Abraham had to seek an easement over this other parcel.  Id. at ¶18.

If you own property that is landlocked, you may be able to establish an easement by necessity over neighboring property that will give you access to the outside world, but you must look to the severance that created the landlocked parcel when you seek to establish the four Tschaggeny requirements.

Friday, June 1, 2012

Daines v. Logan City, 2012 UT App 108 (April 12, 2012)

A landowner sought approval of a non-conforming use so that his house could be used as a “boarding-rooming triplex with unlimited occupancy.” Daines, 2012 UT App 108 at ¶ 1. The Logan City Board of Adjustment denied this request for a non-conforming use, concluding that the landowner could not show that the property had ever legally been used “as anything more than a duplex.” Id.  

While the landowner had several arguments, a key principle to take from this case is that if you are arguing a non-conforming use, you need to be aware of your burden of proof. In this case, the Logan Administrative Enforcement Code specified that a nonconforming right was a defense and that the burden of proof for a defense is “upon the party raising any such defense.” Id. at ¶4. The landowner tried to place the burden on Logan City to prove that prior nonconforming uses of his property were illegal. However, in reality the burden was on the landowner to demonstrate that prior nonconforming uses were “legally established.” Id. at ¶11. Ultimately, because the landowner did not carry his burden of proof, his application for approval of a nonconforming use was denied.

Cahoon v. Hinckley Town Appeal Authority, 2012 UT App 94 (March 29, 2012)

When a question arises about how to interpret the language of a land use ordinance, all parties should remember that “ordinance terms should be interpreted and applied according to their commonly accepted meaning unless the ordinary meaning of the term results in an application that is either unreasonably confused, inoperable, or in blatant contradiction of the express purpose of the ordinance.” Cahoon, 2012 UT App 94 at ¶4. (further citations omitted).

In this case, the appellant, a landowner in Hinckley, Utah, applied for a building permit for a fence, and his application was denied. Hinckley Town’s zoning ordinance required front yards in the Residential Zone to have at least a thirty-foot setback. The landowner argued that the setback requirement should be measured from his property line and that his property line extended to the middle of the road. The Hinckley Town Appeal Authority concluded that the measurement for a front yard setback “does not include portions of the street.” The Utah Court of Appeals agreed, determining that the “plain and ordinary meaning of ‘front yard’ does not include a street or a road.” Id. at ¶5.  

Thus, the general lesson principle can be taken from this decision is that when measuring a front yard setback, one cannot include any portion of property that extends into a road or street, but must commence measuring from the edge of the street according to the Utah Court of Appeals interpretation of the plain and ordinary meaning of “front yard.”

Monday, May 14, 2012

B.A.M. Development, L.L.C. v. Salt Lake County (B.A.M. III), 2012 UT 26

In 1997. B.A.M. Development, L.L.C. (“B.A.M.”) applied for a permit to develop a 15-acre residential housing development. Because of a change in recommendations from the Wasatch Front Regional Council and UDOT, the Salt Lake County Planning Commission required B.A.M. to dedicate a 53-foot right-of-way along Highway 171, instead of the 40-foot right-of-way specified in County road-width standards. B.A.M. challenged the additional 13 foot requirement as an unconstitutional taking of property. After two trips to the Utah Supreme Court, a third trial on B.A.M.’s claims was held in 2010, and once again B.A.M. lost. The district court held that “B.A.M.’s cost was significantly less than the government’s cost, and that [Salt Lake] County’s exaction thus did not violate the Dolan [v. City of Tigard, 512 U.S. 374 (1994)] rough-proportionality standard.” B.A.M. Development, L.L.C. v. Salt Lake County, 2012 UT 26, ¶6.

B.A.M. appealed this decision, arguing that the district court erroneously applied the rough-proportionality standard. It has long been established that government may require contributions of property as a conditional obtaining development approval. However, such exactions constitute a taking of private property, which is protected by the Fifth Amendment. The United States Supreme Court has identified standards to determine whether a particular development exaction meets constitutional muster. 

In Nollan v. California Coastal Commission, 483 U.S. 825 (1987), the United States Supreme Court held that there must be a nexus “between a condition imposed on a developer and the development’s predicted impact on the community.” B.A.M. Development, 2012 UT 26 at ¶17. In B.A.M. Development, the Utah Supreme Court held that “the relationship between the government’s need or purpose for the exaction, and the nature of the exaction is critical.” Id. at ¶18.

In Dolan, the Supreme Court held that “the Takings Clause requires that the extent of a development exaction be roughly proportional to the projected impact of the proposed development.” Id. at ¶19 (internal quotations and modifications omitted, citing Dolan, 512 U.S. at 388, 391). Interpreting this requirement as applied to right-of-way exactions, the Utah Supreme Court had previously instructed courts “to compare the market value of the exacted property with the cost to the government of alleviating the development’s projected increase in traffic volume.” Id. at ¶20 (citing to B.A.M. Dev. L.L.C. v. Salt Lake County (B.A.M. II), 2008 UT 74, ¶11, 196 P.3d 601).

In this latest appeal, B.A.M. asserted that when conducting the rough-proportionality analysis, the trial court should compare only the direct costs to governmental entity requiring the exaction caused by the development’s impact on traffic volume to the cost of the exaction. Id. at ¶22. The Utah Supreme Court rejected this argument and clarified that the “property rough-proportionality analysis must . . . consider the exaction’s purpose to define the scope of the relevant government costs.” Id. at ¶27. This consideration may include not only the costs incurred by the governmental entity requiring the exaction, but also “costs to the broader community or coordinate government entities.” Id. 

Thus, when conducting the rough-proportionality analysis to determine whether an exaction violates the Takings Clause, developers must be aware that Nollan and Dolan cases, as interpreted by the Utah Supreme Court, will require “an inquiry into government purpose, which may include alleviating development impacts to the broader governmental community.” Id.at 29.

Saturday, February 25, 2012

Eminent Domain Law Amendments in 2012 Legislature

To address the result of the Utah Supreme Court’s decision in Marion Energy, Inc. v. KFJ Ranch Partnership, 2011 UT 50, 267 P.3d 863, a bill is being considered by, and is likely to pass, the Utah State Legislature in the 2012 Legislative Session. Section 78B-6-501(6)(a) presently authorizes public and private entities to exercise the powers of eminent domain to create “roads . . . to access or facilitate . . . the working of mines, quarries, coal mines, or mineral deposits including minerals in solution.” In Marion Energy, the Utah Supreme Court unanimously held that the term “mineral deposits” was subject to various definitions and that Section 78B-6-501(6)(a) was ambiguous. However, the Court did not unanimously decide what the term “mineral deposits” meant. The majority of the Court strictly construed the ambiguity against Marion, and held that the term “mineral deposits” in Section 78B-6-501(6)(a) does not include oil and gas.

Substitute House Bill 74 (“H.B. 74”) amends the language of Section 78B-6-501(6)(a) to allow the exercise of eminent domain powers to create roads to access “mineral deposits including oil, gas, and minerals in solution.” This change will clarify that roads to access oil and gas deposits can be obtained through eminent domain powers and will effectively abrogate the Marion Energy decision if adopted. As of this date, H.B. 74 has passed the Utah House of Representatives and is presently before the Utah Senate.

In addition, H.B. 74 also clarifies the steps that must be taken by individuals or entities other than political subdivisions that are exercising eminent domain powers prior to filing an eminent domain action in court. The amendment requires private entities exercising eminent domain powers to “make reasonable efforts to negotiate with the property owner for purchase of the property” and provide certain disclosures, which include providing information about the property rights ombudsman, no later than fourteen days “before the day on which the person files an eminent domain action.” These proposed amendments affect Section 78B-6-504(2)(a). Although it was arguable that private entities were required to follow these same requirements before, the pre-amendment version of the statute only expressly referred to governmental entities. The amendments to Section 78B-6-504(2)(a) will help both political subdivisions and private entities understand the actions they each must take to be authorized to exercise eminent domain powers.

Saturday, December 17, 2011

L.C. Canyon Partners, L.L.C. v. Salt Lake County, 2011 UT 63 (October 18, 2011)

This case addresses whether Salt Lake County could rescind a rezoning ordinance before it became effective and whether such action constitutes a takings claim. An application was filed to rezone a portion of a 15-acre parcel near the mouth of Little Cottonwood Canyon to allow the construction of a residence. The Salt Lake County Council (“County Council”) voted to approve the rezoning application. Utah law specifies that an ordinance takes effect fifteen days after passage and publication in a Salt Lake County newspaper. See Utah Code Ann. § 17-53-208(2)-(3).

One week after the County Council approved the rezoning application, a council member sought reconsideration of the decision. The County Council reconsidered the decision at its next meeting – one day before the ordinance became effective. At the meeting, the County Council voted to rescind the approval. The property owner then sought a variance, but its application was denied.

The property owner sought relief in court, asserting due process and takings claims regarding the decision to rescind the approval of the rezoning application, but it did not appeal the denial of the variance. In its opinion, the Utah Supreme Court upheld the rationality of the County Council’s application of its zoning rules, noting that a “zoning authority acts well within the limits of its constitutional discretion when it opts for general zoning rules and eschews discretionary zoning standards.” 2010 UT 63 at ¶12. The Court further noted that the property owner failed to pursue an appeal of the denial of its variance application.

The Utah Supreme Court also held that the County Council had authority to rescind its initial approval of the rezoning application when it acted before the initial approval became effective. Specifically, the Court held that under Robert’s Rules, the procedural rules governing the County Council’s actions, the County Council retained and properly exercised the power to rescind the rezoning ordinance. Because the County Council had the authority to rescind the rezoning ordinance before it became effective, the property owner “had at most a unilateral hope that the Council would rezone the property.” Id. at ¶ 26. To prevail on a takings claim, a property owner must “prove that at the time of the alleged taking, it had an established property interest . . . not merely a unilateral hope or expectation that it would one day acquire such an interest in that property.” Id. at ¶27. Since the property owner could not demonstrate that it had a vested right in the rezoning application approval, its takings claim failed as a matter of law.

There are two lessons to learn from this opinion. First, by failing to pursue its administrative appeal rights to challenge the denial of its application for a variance, the property owner lost out on an opportunity for review of the County’s refusal to grant an exception to the application of its zoning rules. A property owner should always be wary of waiving its administrative appeal rights. Second, to maintain a takings claim, a property owner must be able to demonstrate that it has a “vested, legally enforceable interest.” Id. at ¶28. If the property owner only has a unilateral hope for a zoning change, the failed realization of this hope cannot support a takings claim.