Susan G. Montgomery
Thomas M. McDonald
Jennifer L. Lloyd
Bloomington, Indiana ATTORNEYS FOR APPELLEES
Diane J. Walker
Susan G. Montgomery
Thomas M. McDonald
Although important individual property rights are at stake, we conclude that the zoning
ordinance at issue served an important public purpose and did not effect an unconstitutional
taking. The Court of Appeals concluded that a different result was required by our opinion
in Ailes v. Decatur County Area Planning Comm'n, 448 N.E.2d 1057 (Ind. 1983), in which
we held that provisions for amortizing a nonconforming use are unconstitutional regardless
of the period of amortization. We reconsider that opinion and overrule its holding that
amortization provisions are per se unconstitutional.
owners were not given mailed notice of the zoning change. Whether for that reason or
otherwise, they did not register the nonconforming use.
Jack and Barbara Leisz purchased the properties in 1989. In 1993, the City of Bloomington notified the Leiszs that their properties were in violation of the 1985 zoning ordinance. The Leiszs requested an administrative ruling that their properties were exempt from the ordinance as pre-existing lawful nonconforming uses. This request was denied by the planning director, and the Leiszs appealed to the Board of Zoning Appeals (BZA), which affirmed. The Leiszs sought review in the trial court, which initially affirmed BZA's decision, but then reversed that decision in ruling on the Leiszs' motion to correct error. The Court of Appeals affirmed the trial court. Board of Zoning Appeals v. Leisz, 686 N.E.2d 935 (Ind. Ct. App. 1997). We granted BZA's petition to transfer.
(1979)). Due process is a term found in both the Fifth and Fourteenth Amendments to the
federal constitution. It does not appear in the Indiana Constitution.See footnote
In addition to the
provisions found in both the Fifth and Fourteenth Amendments prohibiting depriving a
person of property without due process of law, the Fifth Amendment includes a prohibition
against taking private property for public use without just compensation. See U.S. Const.
amends. 14 & 5. This in turn has been held applicable to the states by reason of the
Fourteenth Amendment. Chicago, B. & Q.R. Co. v. Chicago, 166 U.S. 226, 239, 17 S. Ct.
581, 41 L. Ed. 979 (1897); see also Dolan v. City of Tigard, 512 U.S. 374, 383-84, 114 S.
Ct. 2309, 129 L. Ed. 2d 304 (1994). We conclude that the claims presented turn on whether
the forfeiture of the Leiszs' nonconforming use due to the failure to register it violated these
provisions of the federal constitution.
A. The federal Takings Clause
[W]hile property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S. Ct. 158, 67 L. Ed. 322 (1922). Mahon is generally regarded as the seed from which all modern regulatory taking cases have grown. Department of Natural Resources v. Indiana Coal Council, 542 N.E.2d 1000, 1003 (Ind. 1989). Seventy years after Mahon, however, the Supreme Court acknowledged that the decision offered little insight into when, and under
what circumstances, a given regulation would be seen as going 'too far' for purposes of the
Fifth Amendment. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015, 112 S.
Ct. 2886, 120 L. Ed. 2d 798 (1992). Indeed, the Court has generally eschewed any set
formula for determining how far is too far, preferring to engag[e] in . . . essentially ad hoc,
factual inquiries. Id. (internal quotation marks and citations omitted). Although no precise
rule determines when property has been taken, the question necessarily requires a weighing
of private and public interests. Agins v. City of Tiburon, 447 U.S. 255, 260-61, 100 S. Ct.
2138, 65 L. Ed. 2d 106 (1980) (citation omitted). As an overarching concern, the Court has
stated that the Takings Clause is designed to bar Government from forcing some people
alone to bear public burdens which, in all fairness and justice, should be borne by the public
as a whole[.] Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 123, 98 S. Ct.
2646, 57 L. Ed. 2d 631 (1978) (quoting Armstrong v. United States, 364 U.S. 40, 49, 80 S.
Ct. 1563, 4 L. Ed. 2d 1554 (1960)).
The Court has identified two discrete categories of regulations that violate the Takings Clause regardless of the legitimate state interest advanced. See generally Randall T. Shepard, Land Use Regulation in the Rehnquist Court: The Fifth Amendment and Judicial Intervention, 38 Cath. U. L. Rev. 847 (1989). The first consists of regulations that compel a property owner to suffer a physical invasion, no matter how minute, of his property. Lucas, 505 U.S. at 1015; see, e.g., Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164, 73 L. Ed. 2d 868 (1982) (law requiring landlords to allow cable companies to place cable facilities -- occupying at most 1½ cubic feet of the landlord's
property -- in their apartment buildings constituted a taking). The second category concerns
regulations that deny all economically beneficial or productive use of the land. Lucas, 505
U.S. at 1015.See footnote
A zoning ordinance that provides for the forfeiture of unregistered nonconforming uses does not fall into either of these prohibited categories. The forfeiture involved no physical invasion of the Leiszs' property. It merely limits the use of their rental property to three unrelated adults instead of four, five or more. Second, the ordinance does not deny the Leiszs all economically beneficial or productive use of their land. Rather, it denies them at most 25% to 40% of the rental income that they might otherwise receive.See footnote 3
1. Legitimate state interest
Even if there is no per se taking, the Fifth Amendment is violated when a land-use regulation does not substantially advance legitimate state interests[.] Id. at 1016 (quoting Agins, 447 U.S. at 260). Prior Supreme Court cases have not elaborated on the standards for determining what constitutes a 'legitimate state interest,' but have upheld a broad range of governmental purposes and regulations, including scenic zoning, landmark preservation, and residential zoning. Nollan v. California Coastal Comm'n, 483 U.S. 825, 834-35, 107 S. Ct. 3141, 97 L. Ed. 2d 677 (1987).
Board of Adjustment of San Antonio v. Nelson, 577 S.W.2d 783, 785 (Tex. Civ. App. 1979),
aff'd on other grounds, 584 S.W.2d 701 (Tex. 1979). In discussing a registration
requirement in Maryland, the court observed its purpose
clearly is to bring about conformance, through the zoning process, of nonconforming uses as speedily as possible. To accomplish this, the County Commissioners needed to know where the applicable nonconforming uses were located; thus, the required certification of the nonconforming uses within a specified time. In addition, the County Commissioners sought to prevent unlawful expansion of such uses; hence the requirement that information concerning the exact nature and extent of the
nonconforming use was required to be furnished. Moreover, the County
Commissioners provided a sanction for a landowner's failure to comply with the
certification requirement -- the discontinuance of the nonconforming use.
County Comm'rs of Carroll County v. Uhler, 552 A.2d 942, 946 (Md. Ct. Spec. App. 1989)
(ordinance required only the registration of used car lots, service garages or junk yards).
The very real problem associated with proving the existence of a nonconforming use several years in the past is highlighted by this case. The Leiszs offered affidavits and copies of old leases listing the names of four or five individuals living in the rentals when the ordinance was enacted. However, the BZA found this insufficient to prove uninterrupted occupancy by more than three adults since 1985.See footnote 4 Leisz, 686 N.E.2d at 939. Moreover, one of the purposes of any city's zoning regulations is to promote the orderly, responsible, and beneficial development and growth of its city. See, e.g., BMC § 20.01.02.02(a). This would be very difficult -- if not impossible -- without some mechanism to monitor nonconforming uses.
Although they concede the value of requiring registration of nonconforming uses, the Leiszs seem to suggest that there should be no penalty for noncompliance. The forfeiture provision, however, is a necessary part of the registration requirement. By its very nature, registration requires that a deadline be set. In this case, the June 8, 1985 ordinance required registration of nonconforming uses by October 1, 1985. Allowing nonconforming uses to
continue indefinitely after the expiration of the registration deadline would make the entire
registration requirement an exercise in futility. In sum, we conclude that the registration
requirement, including the forfeiture sanction, substantially advances a legitimate state
2. Economic considerations
The U.S. Supreme Court has identified three factors of particular significance to an ad hoc takings inquiry: (1) [t]he economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with distinct investment-backed expectations, and (3) the character of the governmental action. Penn Central, 438 U.S. at 124. Under the current zoning ordinance, the Leiszs may continue to use their two properties as rental units. Due to the failure of the prior owners to register their nonconforming use, however, they are restricted to renting the units to a maximum of three unrelated adults. Their property continues to have an economically viable use, even if it is somewhat diminished.
When a regulation is, as in this case, reasonably related to the promotion of the general welfare, the Supreme Court has uniformly reject[ed] the proposition that diminution in property value, standing alone, can establish a 'taking[.]' Id. at 131 (citing Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S. Ct. 114, 71 L. Ed. 303 (1926) (75% diminution in value); Hadacheck v. Sebastian, 239 U.S. 394, 36 S. Ct. 143, 60 L. Ed. 348 (1915) (87½% diminution in value)). Although a valid consideration, the diminution of the value of the Leiszs' rentals is not the only consideration. Even if it is a fair measure of the
economic impact of the regulation prong of Penn Central, other factors are equally relevant to the takings issue under the facts of this case. In particular, the forfeiture of the Leiszs nonconforming use caused no interference with their reasonable investment-based expectations. Both the ordinance and the prior owners' failure to register were matters of public record at the time the Leiszs bought their property. Property owners are charged with knowledge of ordinances that affect their property.See footnote 5 Wesner v. Metropolitan Dev. Comm'n, 609 N.E.2d 1135, 1137 n.2 (Ind. Ct. App. 1993); cf. Texaco, Inc. v. Short, 454 U.S. 516, 532, 102 S. Ct. 781, 70 L. Ed. 2d 738 (1982) (It is well established that persons owning property within a state are charged with knowledge of relevant statutory provisions affecting the control and disposition of such property.). Their reasonable expectation was that the city might show up at their properties at any time and demand the termination of their unregistered nonconforming use. Any investment-backed expectation they harbored out of ignorance of the ordinance is entitled to no weight.See footnote 6 Indeed, whether they were aware of it or not, the price at which they bought the properties may have been, and in a perfect world was, a reflection of this risk.
Id. The claims in Locke were worth millions of dollars and reverted to the federal
government. Id. at 89. In contrast, the Leiszs have merely forfeited the right to use their
rental properties to house more than three unrelated individuals and the City of Bloomington
has received nothing from them.
We conclude that the forfeiture of the Leiszs' nonconforming use due to its nonregistration is not a taking under the Fifth and Fourteenth Amendments. The ordinance at issue serves important public purposes. Any diminution in the economic value of the
Leiszs' property is the direct result of their predecessors' failure to comply with a reasonable
registration requirement. Under these facts, the forfeiture of the Leiszs' nonconforming use
in no way offends notions of fairness and justice. This view is consistent with the
Supreme Court's opinion in Locke and also finds support in other jurisdictions that have
considered and upheld similar provisions. See, e.g., Uhler, 552 A.2d at 946 (landowner's
failure to comply with requirement for obtaining nonconforming use certificate required
discontinuance of nonconforming use); Nelson, 577 S.W.2d at 785-86 (nonconforming use
lost where owner failed to register it within time period provided by ordinance).See footnote
B. Reconsidering Ailes
The Court of Appeals drew guidance from our opinion in Ailes v. Decatur County Area Planning Comm'n, 448 N.E.2d 1057 (Ind. 1983), in which this Court held certain zoning provisions to be per se violations of the federal constitution. The Court of Appeals inferred from Ailes that Indiana's vigorous protect[ion of] vested interests in nonconforming uses is greater than that of other states. Leisz, 686 N.E.2d at 939. The federal constitution does not vary from state to state. Although we are free to find greater
restrictions on regulatory takings in our state constitution, this Court in Ailes was not
interpreting the state constitution. Rather, the Court there, like the Court of Appeals and the
Leiszs, referred to the taking of property without due process of law[.] Ailes, 448 N.E.2d
at 1060. For the reasons discussed above and because it cited no Indiana constitutional
provision or precedent, Ailes rested solely on federal constitutional grounds. Accordingly,
we now re-examine our holding in Ailes, which clearly represents a minority view and is
inconsistent with decisions in other jurisdictions interpreting the federal constitution.
Most states allow local zoning authorities to phase out nonconforming uses with amortization provisions that require the owner to discontinue the nonconforming use after a certain period of time. Leisz, 686 N.E.2d at 939 (citing Daniel R. Mandelker, Land Use Law § 5.70 (3d ed. 1993)). Under an amortization provision, an owner's property right is absolutely extinguished at some point in time. Our decision in Ailes found this to be an unconstitutional taking of property without due process of law, not specifically a violation of the Takings Clause but inferentially implicating the Fifth Amendment. See Ailes, 448 N.E.2d at 1060. As noted in Ailes and conceded by the Leiszs, however, property rights are not absolute, and many zoning provisions other than amortization are permitted in Indiana. Examples include prohibiting the expansion or increase of a nonconforming use and disallowing reinstatement after abandonment of the nonconforming use. Id. at 1059.
Because Ailes turns on the federal constitution, it is correct only to the extent consistent with U.S. Supreme Court precedent. The Supreme Court has never directly considered the constitutionality of amortization provisions. However, most other courts that
have considered the issue have held that amortization provisions are not unconstitutional per
se. See Jay M. Zitter, Annotation, Validity of Provisions for Amortization of
Nonconforming Uses, 8 A.L.R.5th 391, 412-22 (1992) (listing three federal circuits and
twenty-four states as supporting the [v]iew that amortization provisions are valid if they are
reasonable, and no federal circuits and only four states adhering to the [v]iew that all
amortization provisions are invalid in general). Although each state is free to find
amortization provisions to be in violation of its state constitution, no state court can uphold
amortization provisions if they are in violation of the federal constitution.
With the sole exception of this Court's decision in Ailes, state courts that have found amortization provisions unconstitutional have done so on the basis of their state constitution. Id. at 419; see also Hoffman v. Kinealy, 389 S.W.2d 745 (Mo. 1965); Akron v. Chapman, 116 N.E.2d 697 (Ohio 1953) (citing both state and federal constitutional provisions); PA Northwestern Distribs., Inc. v. Zoning Hearing Bd., 584 A.2d 1372 (Pa. 1991). We can only conclude that Ailes, in holding that amortization provisions are unconstitutional per se, incorrectly decided an issue of federal constitutional law. No issue has been raised and we express no opinion as to any state constitutional point.
be lost to a grandfathering requirement, the notice of which was sent only to specific
recipients, and which required registration within a very short period of time. Leisz, 686
N.E.2d at 938. Both courts focused on the means of notice given and the length of time
provided to register as a nonconforming use.
In granting the Leiszs' motion to correct error, the trial court stated [o]bviously, the Leiszs (or their predecessors) could not have registered their properties for purposes of grandfathering because the notices were sent only to those who were registered as rentals. We disagree. Notice was mailed to all property owners registered under BMC § 16.12.060, a housing ordinance that requires all rental units to be registered with the city engineer in order to subject them to inspections to ensure compliance with minimum health, safety, and public welfare standards. Leisz, 686 N.E.2d at 936; see also Noble v. Alis, 474 N.E.2d 109, 111 (Ind. Ct. App. 1985) (discussing the Title 16 housing ordinance). By not registering under this ordinance, the prior owners presumably avoided these inspections but also lost the opportunity to receive individualized notice by mail of the enactment of the grandfathering registration requirement. See, e.g., Elizondo v. Read, 588 N.E.2d 501, 504 (Ind. 1992) (The U.S. Supreme Court's line of opinions addressing the issue of notice has never disregarded a party's ability to take steps to protect itself. Rather, the Court has considered the interest- holder's ability to take reasonable steps to protect his interest as a crucial aspect of the balancing test.). Sending individualized notice only to those units registered under the housing code satisfied the requirements of procedural due process where both affected properties were required to be registered under a different valid ordinance. Cf. Holmes v.
Randolph, 610 N.E.2d 839, 846 (Ind. 1993) (upholding the notice provisions of statute
dealing with abandoned vehicles by noting that vehicle owners have a duty to notify the
BMV of changes in address and the BMV can assume that mailing notice to last recorded
address will reach the owner of an abandoned vehicle). We cannot expect a city to canvass
all of its housing units to search for those being used as rentals in order to provide them with
individualized notice. The Due Process Clause
does not require that the procedures used to guard against an erroneous deprivation . . . be so comprehensive as to preclude any possibility of error, and in addition we have emphasized that the marginal gains from affording an additional procedural safeguard often may be outweighed by the societal cost of providing such a safeguard.
Walters v. National Ass'n of Radiation Survivors, 473 U.S. 305, 320-21, 105 S. Ct. 3180,
87 L. Ed. 2d 220 (1985) (quoting Mackey v. Montrym, 443 U.S. 1, 13, 99 S. Ct. 2612, 61
L. Ed. 2d 321 (1979)).
The trial court also expressed concern with the brevity of time allowed for the required registration. We assume that the registration form, although not contained in the record, was relatively short and simple. The four months given to complete and file this form is longer than the time allowed to file a federal or state income tax return.See footnote 8 It is enough to satisfy the Constitution.
SHEPARD, C.J., and DICKSON, SULLIVAN and SELBY, JJ., concur.
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