Missouri Enters the 20th Century

“This case involves a problem which has plagued the judiciary of this state for some time without satisfactory resolution,” said the Missouri Supreme Court.  It was nice to hear that at long last the court recognized “the problem” and decided to do something about it, but their Lordships still don’t appear to understand that the problem is not theirs — it’s a problem of the affected — or more accurately, afflicted — property owners, and that it should have been addressed decades ago. 

Condemnation blight — what happens to city areas that have been designated for government acquisition, has been with us for a long time, and has historically been plaguing the affected property owners. When the government designates an area for acquisition, tenants depart, leaving behind vacant structures, and no new tenants can be secured since few people are willing to move into an area from which they are about to be evicted. This goes in spades for businesses whose owners realize that in the coming condemnation action they won’t be compensated for their business losses. As a result, vacancies rise, maintenance levels decline and the municipal designation of blight becomes a self-fulfilling prophecy. Some structures are abandoned, and others are sold to the cities which have been known to leave them unoccupied, making them a magnet for transients and vandals. To make things worse, some cities have harassed the owners in targeted areas with a rash of inspections and charges of building code violations, some going so far as to deny buildng permits, so that the hapless property owners would be charged with building code violations but rendered unable to make the needed repairs. Back in the 1960s, in the Midwest, there were even cases in which cities withheld trash pickup and police protection from the targeted areas. Then, if and when the cities finally got around to condemning those properties, they sought to acquire them at their municipally-depressed values. To the courts’ everlasting shame, at times this was permitted.

It all came to a head in 1964 in Detroit where, in the celebrated Foster cases (see Foster v. Herley, 330 F.2d 87 (6th Cir. 1964)), the federal courts said “Enough!” and created a right of action for de facto takings that can result from such municipal activities. Other jurisdictions followed suit but there were a few holdouts, Missouri among them. Now, it appears that the Missouri Supreme Court, usually a court that is not hospitable to the plight of condemnees, has entered the fray and for once has come down on the side of the abused property owners.  It’s about time.

In Clay County Realty Co. v. City of Gladstone, Mo. Supreme Ct. Docket No. SC88924, decided on June 10, 2008, the court joined the growing trend and held that the abused property owners do have a cause of action for just compensation against the city for its blighting activities. It this case the city declared the subject area blighted in 2003, but failed to make a deal with a redeveloper. So it tried again in 2005 when it again declared the area blighted, but never approved a Tax Increment Financing (TIF) project and never completed the condemnation of the “blighted” properties. Unsurprisingly, this resulted in a departure of tenants from the subject property (a shopping center), and a loss of rents. And oh yes, it was also alleged that the city harassed the owners with charges of code violations and interfered with their ability to attract new tenants. Where have we heard that one before?

When the owners sued, the Missouri Supreme Court, in a somewhat grudging opinion, conceded that what it called “aggravated delay” in acquisition of properties declared to be blighted, or other “untoward activity” in instituting the condemnation proceedings, can give rise to an action in inverse condemnation by the affected owners. These owners need not wait until the filing of condemnation proceedings to make their claim, but can take the initiative and sue when the proscribed municipal activities reach the level of unreasonableness.

The bottom line of it all is that the cost of uncertainties and delays in municipal acquisition of property have to fall somewhere, and though in the nature of things, some of them — but only some — may have to fall on the affected owners, when they reach a certain point they should properly fall on the city which is the party that (a) is responsible for them, (b) stands to gain from them, and (c) has the ability to spread the cost on the community that is said to benefit form them. It’s an old maxim of jurisprudence that he who takes the benefit should bear the burden. That shouldn’t be such a big deal, should it?

So here is our message to the Missouri Supreme Court: Welcome to the 20th century, guys. What took you so long?

Two postscripts. First, this case contains a comprehensive collection of case law dealing with this problem, which should be handy for practitioners. Second, if you want to read up on the legal principles underlying the problem of blight, we recommend Gideon Kanner, Condemnation Blight: Just How Just Is Just Compensation? 48 Notre Dame Law Review 765 (1973). It’s an oldie but goodie.