Paragon Properties Co. v. City of Novi

550 N.W.2d 772, 452 Mich. 568

• Court: Michigan Supreme Court
• Decided: July 23, 1996
• Docket: 100064, Calendar No. 4
• Status: Published

Opinions

Weaver, J.

Plaintiff Paragon Properties Company claims that the Novi zoning ordinance as applied to Paragon’s property effected an unconstitutional taking. This claim requires examination of whether the Novi City Council’s denial of Paragon’s request to rezone its property was a final decision appealable to the circuit court. We find it was not, and that Paragon’s constitutional claim is not ripe for review. The Court of Appeals is affirmed.

i

Paragon Properties purchased a seventy-five acre parcel in 1980 for $150,000. The property was vacant, unimproved, and not served by city water or sewer. The property was zoned for large-lot, single-family residential use.

Paragon’s property is located in the northwest corner of the City of Novi at the intersection of Napier and Twelve Mile Roads. Across Napier Road and to the west of Paragon’s parcel in Lyon Township is an active gravel pit operation. The property to the north across Twelve Mile Road, located in the City of Wixom, is zoned for industrial use. The property to the east and south of Paragon’s parcel is located in the City of Novi. The property immediately to the east of Paragon’s is undeveloped, but zoned for residential use, and the property to the south is zoned and developed for mobile home use.

In May 1984, Paragon submitted a request to the Planning Board of the City of Novi to rezone the property from a single-family residential zone to a mobile home district zone. The planning board held a public hearing in August 1984 and recommended that the rezoning request be denied. At a subsequent public hearing, the Novi City Council denied Paragon’s request.

Paragon filed its initial complaint in Oakland Circuit Court in 1985. That case was dismissed without prejudice in February 1989. In June 1989, Paragon again filed a complaint in Oakland Circuit Court alleging that the property had no economic potential for development as zoned because of adjacent industrial uses and poor drainage conditions; the highest and best use of the property would be for mobile home development; as applied to the property, the zoning ordinance was unreasonable, confiscatory, discriminatory; and the ordinance unconstitutionally deprived Paragon of its property in violation of the Due Process Clauses of the Michigan and federal constitutions.

Novi moved for summary disposition, arguing that the case should be dismissed because Paragon had failed to seek a use variance from the Novi Zoning Board of Appeals and, therefore, had not obtained a final decision regarding the potential uses of the property. The circuit court denied Novi’s motion, holding that the finality argument had not been timely raised¹ and that, because this was a zoning case and not a variance case, Paragon had exhausted its administrative remedies.

The case proceeded to trial in July 1990. The circuit court held that the zoning ordinance as applied to Paragon’s property effected an unconstitutional taking and entered a judgment against Novi for $198,930 plus attorney fees. Novi moved unsuccessfully for a judgment notwithstanding the verdict and a new trial. Now then filed its appeal with the Court of Appeals. The Court of Appeals reversed the circuit court on the grounds that Paragon’s constitutional claim was not ripe for review because Paragon had not sought a variance from the zoning board of appeals and had not brought a state inverse condemnation action. 206 Mich App 74; 520 NW2d 344 (1994).

n

The zoning of land is a reasonable exercise of government police power. Village of Euclid, Ohio v Ambler Realty Co, 272 US 365; 47 S Ct 114; 71 L Ed 303 (1926). Euclid upheld the enforcement of a zoning ordinance, reasoning that modern pressures on land use have created sufficient public interest in the segregation of incompatible land uses to justify a diminution in property values. Id. at 386-390. The Michigan zoning enabling act, MCL 125.581 et seq.; MSA 5.2931 et seq., establishes procedures for the enactment, amendment, and administration of zoning ordinances.

Because zones established by ordinance will not always reflect the realities of all land controlled by a zoning ordinance, the enabling act provides for administrative relief from the application of an ordinance. The discretionary authority to enact a zoning ordinance and to adopt a zoning map rests with the legislative body of a city or village. MCL 125.584(4); MSA 5.2934(4). The legislative body may amend a zoning ordinance by a text change or alter a zoning map through a rezoning. Id. The legislative body of a city or village may also have the discretionary authority to temper the effect of a zoning ordinance through special land use permits, MCL 125.584a; MSA 5.2934(1), or planned unit development, MCL 125.584b; MSA 5.2934(2). Further, the zoning board of appeals may grant administrative relief from the strict application of the ordinance in the form of land use variances. MCL 125.585(9); MSA 5.2935(9).

Pursuant to the enabling act, Novi’s zoning ordinance reserves the power to rezone land within Novi to the Novi City Council.² Also pursuant to the enabling act, Novi’s zoning ordinance authorizes the Novi Zoning Board of Appeals to grant a land use variance where “it is clearly shown that the land cannot be used for a zoned use . . . Novi Zoning Ordinance, § 3104(1). A land use variance essentially is a license to use property in a way not permitted under an ordinance.³ The zoning board of appeals has the authority to allow a use in a zoning district that would not otherwise be allowed.⁴ See, e.g., Novi Zoning Ordinance, § 3104(1). However, variances should be sparingly granted so that the grant of one variance in an area where many parcels are similarly situated does not result in a material change to the zoning district. Puritan-Greenfield Ass’n v Leo, 7 Mich App 659, 671; 153 NW2d 162 (1967). Although, the grant of a land use variance cannot change the zoning district classification or amend the zoning ordinance, the effect of a land use variance is similar to rezoning because variances typically run with the land. 2 Cameron, Michigan Real Property (2d ed), § 23.12, p 1070.

Zoning ordinances, combined with mechanisms like land use variances, enable local governments to more adeptly manage land within their jurisdictions.⁵ Land use variances, when properly utilized, function interdependently with other zoning ordinance provisions to ensure that the “spirit of the ordinance shall be observed, public safety secured, and substantial justice done.” MCL 125.585(9); MSA 5.2935(9).

in

Although the police power allows the government to regulate land use, the Fifth Amendment requires that compensation be paid if a government regulation unreasonably shifts social costs to an individual or individuals. Village of Euclid, supra at 387. A claim for compensation may allege that an ordinance is confiscatory “as applied” or “on its face.” A facial challenge alleges that the mere existence and threatened enforcement of the ordinance materially and adversely affects values and curtails opportunities of all property regulated in the market. Id. at 395. An “as applied” challenge alleges a present infringement or denial of a specific right or of a particular injury in process of actual execution. Id.

A challenge to the validity of a zoning ordinance “as applied,” whether analyzed under 42 USC 1983 as a denial of equal protection, as a deprivation of due process under the Fourteenth Amendment, or as a taking under the Just Compensation Clause of the Fifth Amendment, is subject to the rule of finality. Lake Angelo Associates v White Lake Twp, 198 Mich App 65, 70; 498 NW2d 1 (1993), citing Williamson Co Regional Planning Comm v Hamilton Bank of Johnson City, 473 US 172, 186; 105 S Ct 3108; 87 L Ed 2d 126 (1985).⁶

[T]he finality requirement is concerned with whether the initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury . . . 7

Finality is not required for facial challenges because such challenges attack the very existence or enactment of an ordinance. Beacon Hill Farm Associates v Loudoun Co Bd of Supervisors, 875 F2d 1081 (CA 4, 1989).

Williamson articulated the need for finality in the context of land use regulation. In Williamson, a property owner obtained preliminary approval of a residential subdivision plat from the planning commission. The planning commission later amended its ordinance, reducing the allowable density permitted on the land, and, therefore, disapproved the property owner’s subsequent plats. The property owner sued in federal district court, alleging that the ordinance effected an unconstitutional taking as applied to his property.⁸ However, because the property owner in Williamson failed to seek alternative relief, in the form of variances, available under the zoning ordinance, the Court concluded that the property owner’s claim was not ripe for review.⁹

Williamson further requires that a landowner challenging the constitutionality of a zoning ordinance as applied to pursue a state inverse condemnation claim before the claim will mature. Williamson, supra at 192-197.¹⁰ This Court expressly adopted the Williamson finality requirements in Electro-Tech, Inc v H F Campbell Co, 433 Mich 57, 81-91; 445 NW2d 61 (1989).

In Electro-Tech, a landowner claimed that the City of Westland had taken his property without just compensation or due process of law when it imposed several conditions on his development. The landowner later failed to submit a final site plan for approval. The Court held: “[U]ntil . . . the council’s objections . . . are addressed and finally resolved ... it is impossible to accurately determine the extent to which the plaintiff’s land retained any reasonable beneficial use or the extent to which the plaintiff’s expectation interest had been destroyed.” Id. at 85.

The finality requirement aids in the determination whether a taking has occurred by addressing the actual economic effect of a regulation on the property owner’s investment-backed expectations.¹¹ As noted in Williamson, factors affecting a property owner’s investment-backed expectations “simply cannot be evaluated until the administrative agency has arrived at a final, definitive position regarding how it will apply the regulations at issue to the particular land in question.”¹² Investment-backed expectations are distinguishable from mere financial speculation.¹³

Paragon claims that the Novi City Council’s decision to deny Paragon’s rezoning request was a final decision as contemplated by Electro-Tech because the city council is the initial decisionmaker regarding rezoning requests. For further support, Paragon attempts to distinguish the city council’s “unconditional” denial of rezoning from the “conditional” approval of the site plan in Electro-Tech, which this Court held was not a final decision. However Paragon’s attempt to distinguish Electro-Tech oversimplifies the legal finality issue and ignores a requisite inquiry into finality: whether the decision, conditional or unconditional, inflicted “an actual, concrete injury.” Williamson, supra at 193.

The City of Novi’s denial of Paragon’s rezoning request is not a final decision because, absent a request for a variance, there is no information regarding the potential uses of the property that might have been permitted, nor, therefore, is there information regarding the extent of the injury Paragon may have suffered as a result of the ordinance.¹⁴ While, the city council’s denial of rezoning is certainly a decision, it is not a final decision under Electro-Tech because had Paragon petitioned for a land use variance, Paragon might have been eligible for alternative relief from the provisions of the ordinance.¹⁵

While Paragon correctly characterizes Novi’s rezoning denial as a legislative act rather than an administrative decision, this distinction does not resolve the finality issue. Requiring Paragon to seek a variance from the zoning board of appeals after the city council’s rezoning denial does not result in an invasion of the legislative authority of the city council to enact and amend zoning ordinances. That the zoning board of appeals does not have the statutory authority to amend a zoning ordinance does not render it incapable of offering an alternative form of relief to Paragon.¹⁶

The Legislature specifically intended that the zoning board of appeals have the administrative authority to permit uses that would otherwise not be permitted under a zoning ordinance.

If there axe practical difficulties or unnecessary hardship in the way of carrying out the strict letter of the ordinance, the board of appeals may in passing upon appeals vary or modify any of its rules or provisions relating to . . . the use of land ... so that the spirit of the ordinance shall be observed, public safety secured, and substantial justice done)¹⁷1

The decision of the city council on the rezoning request in no way diminished the zoning board of appeals’ authority to grant a variance if Paragon pursued that alternative form of relief. Were the zoning board of appeals to deny Paragon’s request, relief in the form of an appeal to the circuit court is authorized by statute. MCL 125.585(11); MSA 5.2935(11).

Finally, Paragon asserts that it would have been futile to seek a use variance from Novi’s Zoning Board of Appeals because the issues associated with its property affect other properties in the neighborhood.¹⁸ The zoning enabling act allows for variances only when the ordinance as applied creates “practical difficulties or unnecessary hardship.” MCL 125.585(9); MSA 5.2935(9). Paragon relies on Puritan-Greenfield, supra at 671, which construed the hardship requirement of MCL 125.585(9); MSA 5.2935(9) in conjunction with the general principle that variances should be sparingly granted, and concluded that the hardship must be “unique or peculiar to the property for which the variance is sought.”

The principle that variances should be sparingly granted is based on the possibility that granting a variance to a single landowner suffering a plight common to neighboring property could undermine the broad goals of a zoning ordinance by precipitating a series of variance requests. However, the statute does not require that “only a single ownership parcel of land be affected by the unique circumstances in the neighborhood in order to qualify for relief . . . .” Beatrice Block Club Ass’n v Facen, 40 Mich App 372, 381; 198 NW2d 828 (1972). The zones created by ordinance cannot be expected to conform exactly to the physical boundaries of “problems” associated with land. It would be inappropriate and an undue limitation of the available statutory relief to strictly apply Puritan-Greenfield’s uniqueness concept in this case.¹⁹ Thus we reject Paragon’s futility argument.

conclusion

Because Paragon failed to obtain a final decision from which an actual or concrete injury can be determined, its constitutional claim is not ripe for review. The judgment of the Court of Appeals is affirmed.

Brickley, C.J., and Boyle, Riley, and Mallett, JJ., concurred with Weaver, J.

1 The circuit court later permitted Novi to amend its pleading to include the ripeness issue, finding that the amendment would not prejudice Paragon. Order entered June 20, 1990.

2 MCL 125.581(1); MSA 5.2931(1) states:

The legislative body of a city or village may regulate and restrict the use of land and structures; to meet the needs of the state’s residents for food, fiber, energy and other natural resources, places of residence, recreation, industry, trade, service, and other uses of land; to insure that uses of the land shall be situated in appropriate locations and relationships; to limit the inappropriate overcrowding of land and congestion of population and transportation systems and other public facilities; to facilitate adequate and efficient provision for transportation systems, sewage disposal, water, energy, education, recreation, and other public service and facility needs; and to promote public health, safety, and welfare ....

3 2 Cameron, Michigan Real Property (2d ed), § 23.12, p 1069. See also Nat’l Boatload, Inc v Farmington Hills Zoning Bd of Appeals, 146 Mich App 380, 387; 380 NW2d 472 (1985) (defining a use variance as permitting a use of land that the zoning ordinance would otherwise proscribe).

4 Cases in which variances for uses other than those permitted in a zoning district include: O’Keefe v ZBA of City of East Grand Rapids, 35 Mich App 583; 192 NW2d 509 (1971) (a medical office building variance was granted in residential zone); Beatrice Block Club Ass’n v Facen, 40 Mich App 372; 198 NW2d 828 (1972) (an electrical contractor’s shop and building was allowed in residential zone); Reilly v Marion Twp, 113 Mich App 584; 317 NW2d 693 (1982) (a trucking business was allowed in an agricultural/residential zone through a special use exception granted by the zoning board of appeals).

5 The enabling act also provides for possible relief from the application of an ordinance by appeal to the circuit court from a variety of decisions under a zoning ordinance. The enabling act specifically anticipates appeals to the circuit court from decisions of the legislative body of a city regarding nonconforming uses under MCL 125.583a; MSA 5.2933(1), and for appeals from decisions of the zoning board of appeals under MCL 125.585(11); MSA 5.2935(11).

6 Additional cases relying on Williamson’s finality requirements include: MacDonald, Sommer & Frates v Yolo Co, 477 US 340; 106 S Ct 2561; 91 L Ed 2d 285 (1986); Kinzli v Santa Cruz, 818 F2d 1449 (CA 9, 1987); Unity Ventures v Lake Co, 841 F2d 770 (CA 7, 1988).

7 Williamson, supra at 193.

8 Id. at 186.

9 Id. at 193-194 stated:

The Commission’s refusal to approve the preliminary plat does not determine that issue; it prevents respondent from developing its subdivision without obtaining the necessary variances, but leaves open the possibility that respondent may develop the subdivision according to its plat after obtaining variances. In short, the Commission’s denial of approval does not conclusively determine whether respondent will be denied all reasonable beneficial use of its property, and therefore is not a final, reviewable decision.

10 We need not address the issue whether Paragon has pursued an inverse condemnation claim because we find that Paragon failed to obtain a final decision regarding the full effect of Novi’s zoning ordinance on the use of Paragon’s land.

¹¹

12 Id. at 191. See also Herrington v Sonoma Co, 834 F2d 1488, 1494 (CA 9, 1987), which stated:

In land use challenges, the doctrine of ripeness is intended to avoid premature adjudication or review of administrative action. It rests upon the idea that courts should not decide the impact of regulation until the full extent of the regulation has been finally fixed and the harm caused by it is measurable.

13 The Taking Clause does not guarantee property owners an economic profit from the use of their land. See, e.g., Sun Oil Co v Madison Heights, 41 Mich App 47, 56; 199 NW2d 525 (1972). Indeed, courts are not especially competent to engage in profit prediction for land speculators, thus “[t]he interest in anticipated gains has traditionally been viewed as less compelling than other property-related interests.” Andrus v Allard, 444 US 51, 66; 100 S Ct 318; 62 L Ed 2d 210 (1979). Furthermore, the mere diminution of property value by application of regulations without more does not amount to an unconstitutional taking. Penn Central Transportation Co v City of New York, 438 US 104; 98 S Ct 2646; 57 L Ed 2d 631 (1978). See also Lamb v City of Monroe, 358 Mich 136, 144; 99 NW2d 566 (1959).

14 This is not a case in which all development of the land was physically impossible by application of the ordinance. See, e.g., Robyns v City of Dearborn, 341 Mich 495; 67 NW2d 718 (1954). Nor is this a case involving exclusionary zoning. See, e.g., English v Augusta Twp, 204 Mich App 33; 514 NW2d 172 (1994), and MCL 125.592; MSA 5.2942.

15 Moreover, neither a city council’s decision to rezone land nor a zoning board of appeals’ decision to grant a variance is relevant to the constitutionality or unconstitutionality of an ordinance’s provisions. However, such decisions do enlighten a court’s review when a question of constitutional proportion is properly raised.

16 The United States Court of Appeals for the Sixth Circuit rejected a similar argument in Sequin v Sterling Heights, 968 F2d 584, 588 (CA 6, 1992). Landowners challenged the finality requirement, claiming that the zoning board of appeals was “impotent” to grant a variance because that would amount to amending the zoning ordinance. The court responded:

Their argument that the Board of Zoning Appeals is “impotent” to grant variances runs directly counter to . . . the Sterling Heights Zoning Ordinance, which specifically provides that the Board can grant a variance under certain circumstances.

17 MCL 125.585(9); MSA 5.2935(9).

18 Paragon claimed that its property and the surrounding properties suffered poor drainage, making the development of large-lot, single-family residences financially infeasible. While there is some evidence in the record to support the contention that there are drainage issues at the site and surrounding sites, there is no information regarding how the land might be developed in light of the alleged limitations.

19 This opinion is not intended to decide the appropriateness of a land use variance in this case, nor to modify in any way the standards to be applied by zoning boards of appeal in their variance request decisions.