Clem v. Christole, Inc.

548 N.E.2d 1180, 1990 Ind. App. LEXIS 32, 1990 WL 3436

• Court: Indiana Court of Appeals
• Decided: January 17, 1990
• Docket: 53A04-8712-CV-393
• Status: Published

Opinions

CONOVER, Judge.

This is a consolidated appeal.¹ Plaintiffs-Appellants, property owners in Fair-wood Terrace subdivision in Monroe County, Indiana, and Mustin Manor subdivision in Madison County, Indiana, (Residents), appeal their trial courts’ grant of summary judgments in favor of Defendants-Appel-lees Christole, Inc. (Christole) and Hopewell Center, Inc. (Hopewell) (collectively, developers). Those judgments permit developers to operate group homes for developmentally disabled persons in the residents’ single family residential subdivisions.

We reverse.

The residents present several issues for our review which we restate as one, namely, whether the 1988 amendment of a statute authorizing the location of group homes for developmentally disabled and mentally ill persons in single family residential subdivisions constitutes a valid retroactive exercise of the state’s police power.

Before 1988, developer Christole purchased a single family residence in Fair-wood Terrace subdivision for use as a group home for the care of five unrelated developmentally disabled autistic children to be supervised by thirteen full and part-time staff members. All these developmentally disabled persons’ immediate families live elsewhere.

In 1988, Hopewell purchased a single family residence in Mustin Manor subdivision in which it proposed to care for unrelated developmentally disabled persons who also would be supervised by full and part-time staff members. The residents filed a petition for injunctive relief alleging these group homes violated restrictive covenants applicable to the lots in their subdivisions.

The residents of Fairwood Terrace assert Christole’s group home violates the following restrictive covenants applicable to their subdivision:

USE: No building, or any part thereof, erected or maintained in this subdivision shall be used for business or commercial purposes of any kind ...

BUILDINGS: Only one (1) single family dwelling may be erected or maintained on each lot in this addition ...

The residents of Mustin Manor maintain Hopewell’s group house violates two of their subdivision’s restrictive covenants, as follows:

1. LAND USE AND BUILDING TYPE. No lot shall be used except for residential purposes. No building shall be erected, altered, placed or permitted to remain on any lot, other than one detached single family dwelling not to exceed two (2) stories in height and a private attached garage for not more than two (2) cars. No building unattached to dwelling shall be permitted. No lot shall be replatted or subdivided.

5. NUISANCES. No offensive or noxious activity shall be carried on upon any lot nor shall anything be done thereon which may be or may become an annoyance or nuisance to the neighbor-hood_

The trial court enjoined Christole from violating the applicable covenants. An injunction was not issued against Hopewell because an agreement was reached between Hopewell and the residents providing the subject building would not be modified to accommodate developmentally disabled residents until the lawsuit was heard on its merits.

Thereafter, at its 1988 session, the Indiana legislature amended I.C. 16-13-21-14 and created a new section, 16-13-21-14.-1. The legislature’s 1988 amendment to Sec. 14 reads:

Sec. 14. (a) This section applies to each restriction, reservation, condition, exception, or covenant that is created before April 1, 1988, in any subdivision plat, deed, or other instrument of, or pertaining to, the transfer, sale, lease, or use of property.

(b) A restriction, reservation, condition, exception, or covenant in a subdivision plat, deed, or other instrument of, or pertaining to, the transfer, sale, lease, or use of property that would permit the residential use of property but prohibit the use of that property as a residential facility for developmentally disabled or mentally ill persons:

(2) on the ground that the persons residing in the residential facility are not related; or

(3) for any other reason;

is, to the extent of the prohibition, void as against the public policy of the state.

Although Christole had already filed an appeal, we ordered the case remanded to the trial court for further consideration in light of these amendments as a matter of judicial economy. After considering the 1988 amendment to I.C. 16-13-21-14, the trial court vacated its former judgment and entered summary judgment for Christole.

In the Mustin Manor case, Hopewell filed a motion and the residents a cross-motion for summary judgment. The trial court granted.Hopewell’s motion and denied the residents’ cross-motion. It found under amended Sec. 14, the covenants were void as against public policy. In Christole, the trial court opined the 1988 amendment of 1.C. 16-13-21-14 and new section 16-13-21-14.1² were directed at the holding in Adult Group Properties, Ltd. v. Imler (1987), Ind.App., 505 N.E.2d 459, and it no longer stated the law. The trial court entered summary judgment for Christole.

The residents appeal.

I. The Police Power.

The state has the inherent power to enact laws, within constitutional limits, which promote order, safety, health, morals and the general welfare of society. Zahm v. Peare (1985), Ind.App., 502 N.E.2d 490, 494. This power is known as the state’s police power. Legislation will be sustained as within the authority of the legislature if it is a proper exercise thereof. Johnson v. St. Vincent Hospital, Inc. (1980), 273 Ind. 374, 404 N.E.2d 585, 599; Steup v. Indiana Housing Finance Authority (1980), 273 Ind. 72, 402 N.E.2d 1215, 1217, 1220-1221. It has been said

The police power of a State is recognized by the courts to be one of wide sweep. It is exercised by the state in order to promote the health, safety, comfort, morals, and welfare of the public. The right to exercise this power is said to be inherent in the people of every free government. It is not a grant, derived from or under any written constitution. It is not, however, without limitation, and it cannot be invoked so as to invade the fundamental rights of a citizen. (Emphasis supplied).

State v. Gerhardt (1896), 145 Ind. 439, 44 N.E. 469, 473. See also Blue v. Beach (1900), 155 Ind. 121, 56 N.E. 89, 92. Although it is the legislature’s prerogative to determine when the state’s police power should be invoked, it is the judiciary’s duty to determine in specific cases whether the police power has been invoked upon a subject which is subordinate to it. Blue, 56 N.E. at 92; Gerhardt, 44 N.E. at 473. The fundamental issue in such cases is whether the statute in question has a tendency to promote either the order, safety, health, morals or general welfare of society. Bruck v. State ex rel. Money (1950), 228 Ind. 189, 91 N.E.2d 349.

A statute is accorded every reasonable presumption supporting is validity and constitutionality. Miller v. State (1987), Ind., 517 N.E.2d 64, 71; Imler, supra, at 464. The burden is upon the challenger to rebut this presumption. Miller, supra. The challenger’s burden is to clearly and convincingly demonstrate the unconstitutionality of the statute. A court cannot question the wisdom or desirability of the legislation and substitute its judgment or opinion on the matter for that of the legislature. Dague v. Piper Aircraft Corp. (1981), 275 Ind. 520, 418 N.E.2d 207, 212. When a statute may be construed so as to support its constitutionality, we must adopt such a construction. Imler, supra, at 464.

II. Property Owners’ Rights.

While property rights are not absolute and may be restricted by government action which constitutes a proper exercise of police power, Dept. of Financial Institutions v. Holt (1952), 231 Ind. 293, 108 N.E.2d 629, 633; Zahm, 502 N.E.2d at 494, property cannot arbitrarily be taken or confiscated under the guise of the police power. Holt, supra, 108 N.E.2d at 634; School Town of Andrews v. Heiney (1912), 178 Ind. 1, 7, 98 N.E. 628, 630. Property is more than the physical object a person owns. It includes the right to acquire, possess, use and dispose of it without control or diminution. Holt, supra, 108 N.E.2d at 634. Therefore, any law restricting such rights must not be arbitrary, unreasonable, or beyond the necessities of the case. Holt, supra, 108 N.E.2d at 634; City of Muncie v. Pizza Hut of Muncie, Inc. (1976), 171 Ind.App. 397, 357 N.E.2d 735, 737. The legislature may not, under the guise of protecting public interests, impose unnecessary restrictions upon lawful occupations or arbitrarily interfere with private rights. Holt, supra, 108 N.E.2d at 634. If the law prohibits something harmless, is unreasonable and purely arbitrary, or does not promote the health, safety, morality, comfort or welfare of society in general, it is an unauthorized exercise of police power. Id. Government action constitutes a proper exercise of police power when the collective benefit to the general public outweighs the restraint imposed. Zahm, supra, 502 N.E.2d at 494.

Christole contends I.C. 16-13-22-1 et seq., of which amended Sec. 14 is a part, reflects the legislature’s determination that integrating, or “mainstreaming”, the developmentally disabled into normal residential surroundings is an important purpose which provides qualified residents of group homes a measure of independent living in traditional homes as opposed to institutionalization and continued dependency. Hopewell argues whatever “impairment” of the subdivision residents’ constitutional rights is involved here, the same is absolutely necessary to achieve this important state purpose. Enforcement of such covenants would effectively prevent the establishment of group homes in virtually any private housing subdivision in this state and render meaningless rights otherwise granted our disabled citizens, it concludes.

Conversely, the residents claim amended Sec. 14 violates their constitutionally-protected right against deprivation of property without due process of law, and impairs the contract rights vested in them by their subdivisions’ covenants which proscribe multi-family housing and commercial operations in their subdivisions. Further, the residents in Mustin Manor subdivision argue the Sec. 14 amendment constitutes an invalid legislative attempt to grant the group house promoters a special privilege not available to the public generally, in violation of their constitutional right against class legislation.

Because we reverse, we need discuss only one issue.

III. Deprivation of Property Rights in Covenants.

The residents’ property rights are derived from both the United States and Indiana Constitutions. The Fifth Amendment to the United States Constitution, made applicable to the states by the Fourteenth Amendment, provides, in pertinent part:

... nor shall any person ... be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

The due process clause of the Fourteenth Amendment further states:

... nor shall any State deprive any person of life, liberty, or property, without due process of law; ...

Of equal import, the Indiana Constitution provides, in Article I, § 21:

... No man’s property shall be taken by law, without just compensation; nor, except in case of the State, without such compensation first assessed and tendered.

In Pulos v. James (1973), 261 Ind. 279, 302 N.E.2d 768, our supreme court interpreted 'these constitutional provisions to prohibit the taking of private property, i.e., private rights granted by subdivision covenants, for private use. Citing several Massachusetts cases with approval, it said

... [Restrictive covenants] are real estate. They are part and parcel of the land to which they are attached and with which they pass by conveyance....

... [I]t is beyond the legislative power to take against his will, the property of one and give it to another for what the court deems private uses, even though full compensation for the taking is required. ... If the statute is merely for the benefit of individual property owners, the purpose does not justify the taking of a right in land against the will of the owner.

Pulos, 302 N.E.2d at 773-774. Thus, a property owner “is secure under the Constitution in his right to keep what is his own, even though another wants it for private uses ...” Id. Pulos also said even if such legislation was premised on benefit-ting the public good, it was still unconstitutional because no attempt was made to compensate the owners:

... It was for [the property owners’] benefit that the restrictive covenants were imposed. Their right to have them enforced is a property right and may not be taken from them without just compensation. Thus, even if it were maintained that the vacation of the restrictions was for the public good, we would run afoul of sections 21 and 23 of Article I of our state constitution and the due process clause of the Fourteenth Amendment to the Constitution of the United States.

Id., 302 N.E.2d at 774.³

In a final comment, the Pulos court discussed the prohibition of contracts which are against public policy. The court conceded the legislature may prohibit such contracts. However, it concluded the legislature may not impair previously legal contracts where the rights therein granted have already vested. Id. at 775. See also Supreme Council Catholic Knights of America v. Logsdon, et al. (1915), 183 Ind. 183, 108 N.E. 587, 592; Imler, supra.

In such cases, our authority on review is clear:

... courts may look to the character and reasonableness of the limitation for the purpose of determining whether or not it reaches beyond the scope of necessary protection and prevention.

Pizza Hut of Muncie, Inc., 357 N.E.2d at 737. See also Department of Insurance v. Schoonover (1947), 225 Ind. 187, 72 N.E.2d 747; Weisenberger v. State (1931), 202 Ind. 424, 175 N.E. 238.

Recently, our Indiana Supreme Court laid down a two-pronged test to be used in determining whether a statute or regulation constitutes a taking under the U.S. Constitution’s Fifth Amendment: whether or not the regulation (a) substantially advances a legitimate state interest, and (b) deprives the owner of the economically viable use of his property. Justice DeBruler, speaking for the court, said

The essence of the first prong of the test is whether government had the right to exercise its police power in the manner it did, regardless of the burden to property owners. Or, in other words, it asks the question: has government regulated where it should not have done so? If the regulation does not bear a substantial relation to the legitimate ends sought to be achieved, either through a failure of the statute as a whole to serve those ends or as applied to a particular piece of property, then the exercise of the police power is deemed to be unreasonable.

... [T]he essence of the second prong of the test is whether government has regulated to a greater extent than it should have so that a land owner has been effectively deprived of productive use of his property.

Dept. of Natural Resources v. Indiana Coal Council, Inc. (1989), Ind., 542 N.E.2d 1000, 1002-1003, citing Nollan v. Calif. Coastal Comm’n. (1987), 483 U.S. 825, 834, 107 S.Ct. 3141, 3146, 97 L.Ed.2d 677, 687.

A proper exercise of the state’s police power must benefit the general public, not merely a small group of its citizens. The police power should not be used for the benefit of a small group in the guise of benefitting the public. Pizza Hut of Muncie, Inc., supra, 357 N.E.2d at 737, and Holt, supra, 108 N.E.2d at 637.

After careful consideration of the above precedent, we have determined amended Sec. 14 is not a valid exercise of the state’s police power because it (a) violates the residents’ Fifth and Fourteenth Amendment rights under the U.S. Constitution, and their rights under Article I, § 21 of the Indiana Constitution, and (b) fails the first prong of the Indiana Coal test.

IV. Fifth Amendment Violation.

In Nollan, supra, the progenitor of Indiana Coal, seacost landowners wanted to build a permanent home to replace a cottage located on their land. The California Coastal Commission conditioned the issuance of its permit to do so upon the Nollans’ granting the public an easement to pass across their beach, which was located between two public beaches. The Nol-lans were to receive no compensation therefor, only the permit. The Commission argued its requirement was not a “taking” under the Fifth Amendment, it was merely a restriction upon the use of the Nollans’ property, i.e., a legitimate exercise of its police power. The Court rejected that argument, saying

... Perhaps because the point is so obvious, we have never been confronted with a controversy that required us to rule upon it, but our cases’ analysis of the effect of other governmental action leads to the same conclusion. We have repeatedly held that, as to property reserved by its owner for private use, “the right to exclude [others is] ‘one of the most essential sticks in the bundle of rights that are commonly characterized as property.’ ” Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 3174, 73 L.Ed.2d 868 (1982), quoting Kaiser Aetna v. United States, 444 U.S. 164, 176, 100 S.Ct. 383, 391, 62 L.Ed.2d 332 (1979). In Loretto we observed that where governmental action results in “[a] permanent physical occupation” of the property, by the government itself or by others, see 458 U.S., at 432-433 n. 9, 102 S.Ct., at 3174-3175, n. 9, “our cases uniformly have found a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner,” id., at 434-435, 102 S.Ct., at 3175-3176. We think a “permanent physical occupation” has occurred, for purposes of that rule, where individuals are given a permanent and' continuous right to pass to and fro, so that the real property may continuously be traversed, even though no particular individual is permitted to station himself permanently upon the premises.

Nollan, 107 S.Ct. at 3145.

The Commission also argued the easement there requested was simply one part of a comprehensive program to provide continuous public access to the beach as the lots undergo development or redevelopment. In answer to that proposition, the Supreme Court said

That is simply an expression of the Commission’s belief that the public interest will be served by a continuous strip of publicly accessible beach along the coast. The Commission may well be right that it is a good idea, but that does not establish that the Nollans (and other coastal residents) alone can be compelled to contribute to its realization. Rather, California is free to advance its “comprehensive program,” if it wishes, by using its power of eminent domain for this “public purpose,” see U.S. Const.Amdt. V; but if it wants an easement across the Nollans’ property, it must pay for it.

Nollan, 107 S.Ct. at 3150.

Likewise here. Each proposed group house will be a permanent structure in the subdivision where each developer proposes to locate them, no mere easement is involved. Under Nollan, a “permanent physical occupation” will occur by a commercial structure which will be a multi-person, not a single family residence. Both these conditions violate each subdivision’s covenants. Thus, the residents’ Fifth Amendment rights would be violated if such occupation was to occur or continue unabated.

Patently, such “permanent physical occupation” is substantially more than a mere restriction upon the use of the residents’ property. Even if the state was the moving party here, it would have to “pay for it”, as was the case in Nollan. Because the statute makes no provision for payment, and private parties cannot condemn the property interests of other private property owners, amended Sec. 14 constitutes an invalid exercise of the state’s police power, Nollan, supra; Indiana Coal, supra; Pulos, supra, both as to the U.S. Constitution’s Fifth Amendment and the Indiana Constitution’s Article I, § 21. Fountain Park Co. v. Hensler (1927), 199 Ind. 95, 155 N.E. 465, 469.

Amicus briefs were filed in the Christole case by the Indiana Department of Mental Health and Community Residential Facilities Council and by the Association for Retarded Citizens of Indiana, Inc. The Department’s brief raises an issue not raised by the parties herein, namely, whether recent amendments to the Federal Fair Housing Act, 42 U.S.C. 3601, et seq. have preempted this field vis-a-vis state legislation. We decline to address that issue because (a) the issue was not raised by the parties to this appeal, and (b) the parties have not been afforded an opportunity to brief it.

Reversed and remanded for further proceedings consistent with this opinion.

BUCHANAN, J., concurs. MILLER, J., dissents with separate opinion.

1 . Clem v. Christole, Inc., No. 53A04-8712-CV-393 in this Court, an appeal from Monroe Superior court No. III, and Richards v. Hopewell Center, Inc., No. 48A02-8906-CV-268 here, an appeal from Madison Superior Court No. II, involve common questions of law and fact. Thus, they were ordered consolidated for consideration on appeal, cf. Ind. Rules of Procedure, Appellate Rule 5(B).

2 . New section 14.1 voids as against public policy all such covenantial restrictions "created after April 1, 1988[.]" Because this appeal concerns covenants lawfully operative prior to April 1, 1988, we express no opinion as to the effectiveness of new section 14.1, a factual posture not present in these cases.

3 . Pulos does not specifically refer to the term "police power.” However, it relies on the concepts involving the proper and improper exercise of police power. The determination of whether the legislature acted outside the constitutional proscriptions which limit the exercise of that power is inherent in its discussion of the issues there presented. Thus, we rely on it in our resolution of these cases, believing Pulos sets forth the standards which must be met before an attempted exercise of police power as it relates to the taking of private property is valid.