Daniels, William v. Area Plan Commission ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 01-1158
WILLIAM DANIELS AND JUDY DANIELS,
Plaintiffs-Appellees,
v.
THE AREA PLAN COMMISSION OF ALLEN COUNTY,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Indiana, Fort Wayne Division.
No. 00 C 157—William C. Lee, Chief Judge.
____________
ARGUED NOVEMBER 1, 2001—DECIDED SEPTEMBER 11, 2002
____________
Before FLAUM, Chief Judge, MANION and KANNE, Circuit
Judges.
MANION, Circuit Judge.
I.
On April 13, 2000, William and Judy Daniels filed a
complaint, under 42 U.S.C. § 1983, in the United States
District Court for the Northern District of Indiana, seeking
a declaratory judgment that the Area Plan Commission of
Allen County violated the Fifth and Fourteenth Amend-
ments to the U.S. Constitution, as well the Indiana Constitu-
2 No. 01-1158
tion, when it vacated a restrictive covenant attached to
their property that was designed to preserve the residen-
tial character of the surrounding neighborhood. On cross-
motions for summary judgment, the district court con-
cluded that the Plan Commission violated the Daniels’ Fifth
Amendment right by vacating the restrictive covenant
without a public purpose. The court entered a permanent
injunction ordering the Plan Commission to reverse its
removal of the covenant and prohibiting the Plan Com-
mission from further removal of the covenants for any
private purpose. The court also found that Indiana Code
§ 36-7-3-11, under which the Plan Commission had vacated
the covenant, was unconstitutional because it does not
require the Commission to follow the procedures set
forth in the state’s eminent domain statute for determin-
ing public use. We affirm in part and reverse in part.
II.
William and Judy Daniels (“the Daniels”) are the cur-
rent owners and residents of the property located at 1735
Broadmoor Avenue in Fort Wayne, Indiana. The Daniels’
property is in a subdivision commonly known as the Broad-
moor Addition (“Broadmoor”). Broadmoor was surveyed
and platted for 80 lots in 1940 and the Daniels own lot 10.
The plat of the Broadmoor Addition has had a restrictive
covenant limiting lots to residential use since the sub-
division was platted. Specifically, the plat’s restrictive cov-
enant states: “No building other than a single family dwell-
ing and a private garage shall be built on any one lot.”
The Broadmoor lots numbered three through five (col-
lectively referred to as “Lots”), located in the 8800 block
on the west side of Lima Road, are the subject of the cur-
rent litigation. Along with lots one and two, these prop-
No. 01-1158 3
erties form the eastern perimeter of Broadmoor along Lima
Road. Lima Road is a north-south corridor into Fort Wayne,
Indiana, where each day over thirty thousand cars travel.
In October 1999, HNS Enterprises, LLC and LST, LLC
(collectively “HNS”), as the owners of the Lots, submitted
a rezoning petition and application for primary develop-
ment to the Area Plan Commission of Allen County (“Plan
Commission”). As part of the application, HNS requested
that the Plan Commission vacate their Lots and the as-
sociated restrictive covenants from the Broadmoor plat
1
pursuant to Indiana Code § 36-7-3-11. HNS also peti-
tioned the Commission to rezone the Lots to C-2A/Neigh-
borhood Shopping Center and approve a primary develop-
ment plan for the Lots consisting of a 12,000 square foot
shopping center which contained five stores within a sin-
gle story building (the “Broadmoor Shops”). At the time,
each of the Lots contained an uninhabited residence.
On December 9, 1999, the Plan Commission held a pub-
lic hearing on the petitions and numerous residents of
Broadmoor objected to the granting of any of HNS’ peti-
tions. Also at the hearing, the Daniels’ counsel appeared
and argued that the Plan Commission did not have the
authority to remove the restrictive covenants requiring
that all structures built within Broadmoor be single-family
residential homes. The Daniels’ counsel further argued
that the vacation and rezoning of lots three through five
of Broadmoor would constitute an unconstitutional taking
1
Broadmoor, with the exception of lot 1, was zoned RS-1/Sub-
urban Residential at the time of the petition. Lot 1, located on
the corner of the plat on Lima Road, was explicitly exempted
from the residential use requirement in the restrictive cove-
nant at the time the subdivision was platted and was instead
zoned C-1/Limited Commercial.
4 No. 01-1158
of private property for a private use. HNS filed a state-
ment of reasons for the proposed vacation along with its
petition to the Plan Commission. In their statement of
reasons, HNS claimed that the conditions relating to the
Lots had changed so as to defeat the purpose of the plat.
HNS also contended that vacating the covenant would be
in the public interest because without the residential
restriction, HNS could develop the property with com-
mercial uses which would serve as a buffer between Lima
Road and the remaining residences. Finally, HNS claimed
that the covenant vacation would not diminish the value
of the remaining single-family homes in the plat and
could in fact increase their value due to the run-down
nature of the uninhabited houses currently on the Lots.
At a second meeting held on January 20, 2000, the Plan
Commission adopted a “do pass” recommendation approv-
ing HNS’ rezoning petition. The Plan Commission also
granted conditional approval to the vacation of the Lots
from the plat of the Broadmoor Addition and for the
primary development plan for the Broadmoor Shops. The
Plan Commission specifically found that it was in the pub-
lic interest to vacate the Lots and covenants from the
Broadmoor plat because:
it would allow the site to be redeveloped with commer-
cial uses which could be a more appropriate use for the
property and could be a benefit to the immediate
neighborhood. The uninhabited and deteriorating res-
idential structures would be removed from the site.
In addition the Plan Commission found that the value of
the other lots in Broadmoor would not be diminished by
the vacation because:
redevelopment of the site for commercial uses will
require development plan review by the plan commis-
No. 01-1158 5
sion. This review will address land use compatibility
issues resulting from commercial use of the property,
and will preserve property values in the remainder
of the subdivision. The uninhabited and deteriorating
residential structures would be removed from the site.
The Plan Commission also imposed several conditions
designed to limit the impact of the development of the
“Broadmoor Shops” on Broadmoor’s residential character.
The conditions impose frontage, transportation and state
agency approval requirements. The Plan Commission
apparently also added limitations on the future commer-
cial uses of the Lots, although those conditions are not
in the record.
2
On April 13, 2000, before HNS began to develop the Lots,
the Daniels filed suit under 42 U.S.C. § 1983 for declaratory
relief and a permanent injunction in the United States
District Court for the Northern District of Indiana. Under
Ind. Code § 36-7-3-11, the Daniels could have challenged
the Plan Commission’s action in state court by filing of a
writ of certiorari to the circuit or superior court of Allen
County. See Ind. Code § 36-7-4-1016 & § 36-7-4-1004. How-
ever, the Daniels did not file the petition to state court
and instead proceeded directly to federal court. The
Daniels’ federal complaint alleged that the Plan Commis-
sion’s actions violated their constitutional rights by taking
the Daniels’ property for private use in violation of the
Fifth and Fourteenth Amendments of the United States
2
At oral argument, the Plan Commission verified that the Lots
are currently listed for sale with a local Ft. Wayne realtor for
$695,000. See also Daniels v. Area Plan Comm’n of Allen County, 125
F. Supp. 2d 351, 353 (N.D. Ind. 2000).
6 No. 01-1158
Constitution and the Indiana Constitution. The Plan Com-
mission filed a motion to dismiss, arguing that the dis-
trict court lacked subject matter jurisdiction because the
Daniels failed to exhaust their administrative remedies
and thus their claim was not ripe, or alternatively because
the Daniels failed to allege damages. The district court
denied the Plan Commission’s motion to dismiss, find-
ing that exhaustion of administrative remedies was not
required under Patsy v. Board of Regents of Florida, 457
U.S. 496, 516 (1982). Both parties then filed motions for
summary judgment on the Daniels’ claim that the prop-
erty was taken for private use. In their motion for sum-
mary judgment, the Daniels also claimed that Indiana Code
§ 37-6-3-11 was facially unconstitutional because it permit-
ted takings for private purpose.
The district court granted the Daniels’ summary judgment
motion. Daniels v. Area Plan Comm’n of Allen County, 125
F. Supp. 2d 338 (N.D. Ind. 2000). The court noted that un-
der Indiana common law, “a restrictive covenant in a plat
is a covenant running with the land, and that a state
that takes a restrictive covenant for a private purpose
violates both the Federal and Indiana Constitutions.” Id.
at 348. (citing Pulos v. James, 302 N.E.2d 768, 771 (Ind.
1973)). The court concluded that the Plan Commission
unconstitutionally took the Daniels’ property for private
use by removing the restrictive covenants and authoriz-
ing another individual to commercially develop property.
Id. at 353. The court further concluded that because Indi-
ana Code § 36-7-3-11 authorized private takings, it was
facially invalid. Id. at 353-54. The court issued a declara-
tory judgment finding that the Plan Commission had
committed a violation under § 1983 by depriving the
Daniels of their constitutional rights by removing the
restrictive covenants from lots 3-5 of Broadmoor. Id. The
court also entered a declaratory judgment voiding the
No. 01-1158 7
acts of the Plan Commission purporting to vacate the
restrictive covenant on the Lots, and stating that the cove-
nant remains in full force and effect. Id. Finally, the court
issued a permanent injunction ordering the Plan Com-
mission to reverse the HNS petition and prohibiting the
Plan Commission from removing the restrictive covenants
in the plat of Broadmoor for any private purpose. Id. at
357. The Plan Commission appeals.
III.
On appeal the Plan Commission maintains that because
the Daniels’ claims were not ripe for review the dis-
trict court erred in concluding that it had subject matter
jurisdiction. Additionally, the Plan Commission argues
that even if the Daniels’ claims were ripe, the district court
erred in concluding that its actions constituted a taking
for a private purpose. Finally the Plan Commission con-
tends that the statute is not facially unconstitutional.
A. Subject Matter Jurisdiction
The Plan Commission argues that the district court did
not have subject matter jurisdiction over the Daniels’ claims.
Because the Daniels failed to exhaust their remedies in
state court, the Plan Commission asserts that the Daniels’
claims are not ripe for review. We review de novo a district
court’s decision that it had subject matter jurisdiction.
CCC Inform. Services, Inc. v. Amer. Salvage Pool Assoc., 230
F.3d 342, 345-46 (7th Cir. 2000).
In the recent cases of Forseth County v. Village of Sussex,
199 F.3d 363 (7th Cir. 2001), Covington Court Ltd. v. Village
of Oak Brook, 77 F.3d 177 (7th Cir. 1996), and Gamble v.
Eu Claire County, 5 F.3d 285 (7th Cir. 1993), we have had
8 No. 01-1158
the opportunity to consider the ripeness requirements
imposed on litigants by federal courts seeking to challenge
3
takings for private purpose. In each case, we held that
the court lacked subject matter jurisdiction because the
claim was not ripe for review due to the failure of the
plaintiffs to seek state remedies. See Forseth, 199 F.3d at 370,
Covington Court, 77 F.3d at 179, Gamble, 5 F.3d at 288.
These cases all hinged on the ripeness hurdles imposed
on Takings Clause litigants by the Supreme Court in
Williamson County Regional Planning Comm’n v. Hamilton
Bank of Johnson City, 473 U.S. 172 (1985). In light of our
past jurisprudence, we begin our analysis with Williamson
County.
In Williamson County, the Supreme Court held that prior
to initiating a civil action for a taking in federal court,
a plaintiff must demonstrate that he has both received a
“final decision regarding the application of the [chal-
lenged] regulations to the property at issue” from “the
government entity charged with implementing the reg-
ulations,” id. at 186, and has sought “compensation
through the procedures the State has provided for doing
so.” Id. at 194. The Plan Commission argues that because
the Daniels did not seek state remedies for the alleged
taking, their claim is barred under Williamson County.
In this case the Daniels did not seek redress in state
court for either equitable relief or compensation after the
3
In Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725, 733
n. 7, the court noted that ripeness requirements stem from both
Article III as well as “prudential reasons for refusing to exercise
jurisdiction.” (citing Reno v. Catholic Social Services, Inc., 509
U.S. 43, 57, n. 18 (1993)). The Court describes the requirements
imposed specifically on federal Takings Clause claimants as
“prudential”. Id. at 734.
No. 01-1158 9
Plan Commission issued its decision on the plat vacation.
They claim that they bypassed state court first because
they were not seeking monetary compensation, which is
the only remedy available through the state’s inverse
condemnation procedure, and second, state court relief
is not mandated in Takings Clause cases where plaintiffs
are only seeking equitable remedies. Instead, the Daniels
proceeded to federal court by filing a claim under 42 U.S.C.
§ 1983. The district court denied the Plan Commission’s
motion to dismiss for lack of subject matter jurisdiction,
relying on Patsy v. Board of Regents of Florida, 457 U.S.
496, 516 (1982). In Patsy, the Supreme Court held that
“exhaustion of state administrative remedies should not
be required as a prerequisite to bringing an action pur-
suant to § 1983.” Id. See also Wudke v. Davel, 128 F.3d 1057,
1063 (7th Cir. 1997) (“[T]here is no general exhaustion
requirement for § 1983 plaintiffs.”). The district court
reasoned that because the Daniels were litigating a case
filed under § 1983, they were not required to pursue
state administrative remedies under Patsy.
The district court’s conclusions are not without founda-
tion as we have commented in the past on the tension
between Patsy and Williamson County. See Gamble, 5 F.3d
4at 288. In general, Patsy does not “require exhaustion
of judicial remedies as a precondition to bringing a federal
civil rights suit.” Id. However, the additional ripeness
requirements of Williamson County create a takings claim
exception to Patsy’s general requirement that exhaustion
4
See also Samaad v. City of Dallas, 940 F.2d 925, 937 n. 27 (5th
Cir. 1991) (noting that a district court’s interpretation of William-
son County as imposing an exhaustion requirement in pri-
vate takings claims was in violation of Patsy) (citing HMK Corp.
v. County of Chesterfield, 616 F. Supp. 667, 670 (E.D. Va. 1985)).
10 No. 01-1158
is not required in § 1983 suits. Id. at 287. Therefore liti-
gants, like the Daniels in this case, who assert a takings
claim under 42 U.S.C. § 1983 may not rely solely on Patsy,
but must meet the Court imposed ripeness requirements
5
of Williamson County prior to bringing a federal claim.
Unlike some circuits, this Circuit has consistently main-
tained a strict requirement that Takings Clause litigants
must first take their claim to state court even when plain-
tiffs, such as the Daniels, are alleging a taking for private
purpose. See Forseth, 199 F.3d at 370, Covington Court, 77
F.3d at 179, Gamble, 5 F.3d at 288. In Covington Court, we
explicitly stated that even where a state takes property for
“a purely private rather than a public use,” on “takings
and due process claims, [a plaintiff] first must show that
it has availed itself of state court remedies.” See Covington
6
Court, 77 F.3d at 179-80.
5
In determining whether or not the Daniels claim is ripe for
review under Williamson County it is immaterial whether the
Daniels are classifying their federal claim as a Fifth Amendment
takings claim or a substantive due process claim under the
Fourteenth Amendment. We have chosen to review ripeness
concerns in claims for takings for a private purpose under the
Fifth Amendment’s taking’s analysis even if a litigant has claimed
that his property was taken in violation of his substantive
due process rights. See, e.g., Forseth, 199 F.3d at 369, n. 8; Coving-
ton Court, 77 F.3d at 179 (7th Cir. 1996) (holding that Williamson
County ‘s ripeness analysis applies “[r]egardless of the purpose
of the taking”); Coniston Corp. v. Village of Hoffman Estates, 844
F.2d 461, 464-66 (7th Cir. 1988) (“[T]he takings clause may be
broad enough to take care of the problem without the help of
the due process clause.”); see also Gamble, 5 F.3d at 286-87.
6
Other circuits have disagreed with this requirement. In Mont-
gomery v. Carter County, Tennessee, 226 F.3d 758 (6th Cir. 2000),
(continued...)
No. 01-1158 11
6
(...continued)
the Sixth Circuit held that requiring a plaintiff to wait before
suing in federal court, “when her sole claim is that she was
dispossessed of property for a private use, would have only one
apparent purpose—to force the plaintiff to vet her claims in state
proceedings (such as a state court declaratory judgment action
to quiet title, as the county defendants have suggested) before
the claims can be aired in federal court.” Id. at 770. The court
reasoned that forcing the plaintiff to pursue state “remedial”
procedures would be an exhaustion requirement, “a require-
ment that Williamson County explicitly does not impose.” Id.(citing Williamson County, 473 U.S. at 193-94 (distinguishing
the obtaining of final administrative action (required) from
the exhaustion of judicial remedies (not required))); also citing
Steffel v. Thompson, 415 U.S. 452, 472-73 (1974) (noting the gen-
eral rule that exhaustion of state remedies is not a prerequisite
to a § 1983 action). In Montgomery, like the case at hand, there
was no doubt that the plaintiff had received a final administra-
tive action. Id. at 768 (finding a physical invasion had occurred).
The Sixth Circuit concluded that to the extent that a plaintiff
claims that her property was taken for a private use, the claim is
ripe and the plaintiff may sue immediately without resorting
to state remedies Id. at 771. Both the Fifth and Ninth Circuits
have also followed this line of reasoning. See Samaad v. City
of Dallas, 940 F.2d 925 (5th Cir. 1991) (holding that a private-
purpose takings claim was immediately ripe for judicial determi-
nation); Armendariz v. Penman, 75 F.3d 1311, 1320-21 & n. 5 (9th
Cir. 1996) (en banc) (“Because a ‘private taking’ cannot be con-
stitutional even if compensated, a plaintiff alleging such a tak-
ing would not need to seek compensation in state proceed-
ings before filing a federal takings claim under the rule of
Williamson County . . . .”). The Sixth Circuit stated that the
approach of the Seventh Circuit articulated in Covington Court
imposed a judicial exhaustion requirement that Williamson
County does not require. Because we find that the Daniels claim
(continued...)
12 No. 01-1158
Under Williamson County, federal courts are precluded
from adjudicating a claim of a taking for a private purpose
until litigants have met two requirements: “(1) the ‘Final
Decision Requirement’: the plaintiff must demonstrate
that he or she received a ‘final decision’ from the relevant
government entity; and (2) the ‘Exhaustion Requirement’:
the plaintiff must have sought ‘compensation through
the procedures the State has provided for doing so.’ ”
Forseth, 199 F.3d at 372 (citing Williamson County, 473 U.S.
at 186-87, 194; see also Unity Ventures v. County of Lake, 841
F.2d 770, 774-75 (7th Cir. 1988); Hager v. City of West
Peoria, 84 F.3d 865, 869 (7th Cir. 1996)).
1. Final decision requirement.
Under the ripeness analysis of Williamson County, the
plaintiff’s first requirement is to show that he received a
final definitive determination by the agency responsible
for deciding the permitted development on the land. See
MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340,
351, (1987); Williamson County, 473 U.S. 172 at 193-94. Thus,
to determine whether the Plan Commission’s actions con-
stitute a final decision, we turn to Indiana law to ana-
lyze whether the plat vacation statute imposed additional
administrative responsibilities on the Daniels. Indiana law
provides that “the approval, disapproval, or imposition
of a condition on the approval of the vacation of all or
6
(...continued)
satisfies the futility exception to Williamson County’s ripeness
requirement, see infra § III, B, we need not resolve the tension
between this circuit’s and the Sixth Circuit’s reading of Williamson
County.
No. 01-1158 13
part of a plat is a final decision of the plan commission” and
may be appealed to a court for review. Ind. Code § 36-7-3-
11(h). In this case the Plan Commission approved HNS’
petition for vacation of the Lots and covenants in Broad-
moor. Although the Plan Commission conditioned the
final vacation on the approval of the development plan
by various utility providers, both an approval of a plat
vacation and the imposition of a condition on a plat va-
cation constitutes a final decision. Id. Therefore the Plan
Commission’s plat and covenant vacation of the Lots from
Broadmoor’s plat satisfied Williamson County’s final deci-
sion requirement.
2. Exhaustion requirement.
Under the second requirement for ripeness imposed by
Williamson County, the plaintiff must seek compensation
from the state prior to proceeding to federal court. The
Supreme Court has explained that Williamson County’s
exhaustion requirement “stems from the Fifth Amendment’s
proviso that only takings without ‘just compensation’ in-
fringe that Amendment.” Suitum v. Tahoe Regional Planning
Agency, 520 U.S. 725, 734 (1997). The Court reasoned that, “if
a State provides an adequate procedure for seeking just
compensation, the property owner cannot claim a viola-
tion of the Just Compensation Clause until it has used
the procedure and been denied just compensation.” Id.(citation and quotation omitted); see also Williamson County,
473 U.S. at 194 n. 13 (“[B]ecause the Fifth Amendment
proscribes takings without just compensation, no constitu-
tional violation occurs until just compensation has been
denied. The nature of the constitutional right therefore
requires that a property owner utilize procedures for ob-
taining compensation before bringing a § 1983 action.”)
(emphasis in original); Gamble, 5 F.3d at 286 (“[U]ntil he
14 No. 01-1158
exhausts his remedies for obtaining a compensation award
or equivalent relief from the state . . . [a landowner] cannot
know whether he has suffered the only type of harm
for which the just-compensation provision of the Consti-
tution entitles him to a remedy.”) (internal citations omit-
ted). The Plan Commission argues that the Daniels’ claim
is not ripe because they failed to exhaust their available
state law remedies by either seeking statutory certiorari
review of the Plan Commission’s decisions, see Ind. Code
§ 36-7-4-1004, or suing for inverse condemnation. See Ind.
7
Code § 32-24-1-16.
Initially we note that the Plan Commission’s claim that
the Daniels should have sought state certiorari review is
clearly not required by Williamson County. The only reme-
dies available to plaintiffs under certiorari review of a
covenant vacation are reversal, affirmation or modification.
See Ind. Code § 36-7-4-1009, 1016. In Williamson County,
the Court specifically contrasted this type of review proce-
dure, and “those for obtaining a declaratory judgment . . .
with procedures that allow a property owner to obtain
compensation for a taking. Exhaustion of review proce-
dures is not required.” Williamson County, 473 U.S. at 194
n. 13 (citing Patsy v. Board of Regents of Florida, 457 U.S.
496 (1982)). The Court concluded that Takings Clause
litigants need only exhaust “procedures for obtaining com-
pensation before bringing a § 1983 action.” Id.
However, the availability and adequacy of an inverse
condemnation claim in state court is a different matter. In
SGB Financial Services, Inc. v. Consolidated City of Indiana-
7
In 2002, Ind. Code 32-24-1-16 replaced the prior inverse
condemnation statute, Ind. Code 32-11-1-12, which was relied on
by both parties. The new statute is substantively identical to its
predecessor.
No. 01-1158 15
polis-Marion County, Indiana, 235 F.3d 1036, 1037-38 (7th
Cir. 2000) this court applied the inverse condemnation
requirements of Williamson County to Takings Clause
litigants in Indiana. In SGB, the plaintiff, SGB, owned 26
buildings in the Timber Ridge Apartment complex in the
City of Indianapolis. The city put SGB’s buildings on its
“acquisition list” of properties. SGB claimed that by listing
their properties, the city had accomplished a taking be-
cause no potential purchaser would be willing to pay the
pre-listing value once the properties were designated for
possible condemnation. Id. at 1037. We dismissed SGB’s
claim because the plaintiff failed to take advantage of
Indiana’s inverse condemnation proceedings before filing
the federal suit. Id. (citing Ind. Code § 32-11-1-12). We held
that because the Takings Clause “does not forbid takings
but simply requires ‘just compensation’ for the property,
a state violates the Constitution only by refusing to pay
up.” Id. Accordingly, in SGB we concluded that “[a] final
decision about the disposition of the plaintiff’s property,
coupled with a lack of any financial remedy . . . could sat-
8
isfy both [prongs of Williamson County].” Id. at 1038.
Generally an inverse condemnation comes into play when
property not actually taken or condemned is detrimentally
affected by a threatened condemnation or the actual con-
demnation of an adjoining parcel of land. For example
if condemnation of parcel A limits access to (or even
landlocks) parcel B, the owner of parcel B could have
8
Cf. Hoehne v. County of San Benito, 870 F.2d 529, 533 (9th Cir.
1989) (takings claim ripe for review because California did not
provide an inverse condemnation remedy at time of the alleged
taking); Corn v. City of Lauderdale Lakes, 816 F.2d 1514, 1517 (11th
Cir. 1987) (takings claim ripe for review because Florida did not
recognize inverse condemnation suits).
16 No. 01-1158
a cause of action for the diminished value of his parcel
that was not actually taken. After utilizing a state remedy,
such as a suit for inverse condemnation, if the owner
does not receive what he believes is just compensation,
he may proceed with a Takings Clause claim in federal
court. But what happens with a condemnation that leaves
no diminished value to the property of an adjacent owner?
That is the question before us.
The Daniels did not file a state inverse condemnation
action prior to filing their § 1983 claim in federal court.
They claim that while under Williamson County they would
normally be required to seek compensation through the
state court’s inverse condemnation proceedings, under
the facts of this case, such a proceeding would be futile
because there is no monetary loss that begs compensa-
9
tion. Therefore they insist that their federal claim is ripe.
In Williamson County, the Supreme Court adopted a
limited exception to its exhaustion requirement based on
the futility of seeking state court relief. Specifically, the
Court held that a plaintiff may be excused from the exhaus-
tion requirement if he demonstrates that “the inverse
condemnation procedure is unavailable or inadequate.”
Williamson County, 473 U.S. at 197. If inverse condemna-
tion is inadequate, i.e., where compensation for dimin-
ished value is not an issue, resorting to that remedy would
9
In this manner the case presented before us is distinguished
from Forseth, Covington Court and Gamble. In all three of those
cases, the plaintiffs had incurred pecuniary damages from an
adverse zoning decision. See Forseth, 199 F.3d at 366; Coving-
ton Court, 77 F.3d at 178; Gamble, 5 F.3d at 285. See also Conniston
Corp., 844 F.2d at 466 (stating in a case where the plaintiff al-
leged a taking for private purpose that the “the rejection of the
plaintiffs’ site plan probably reduced the value of their land.”).
No. 01-1158 17
be futile. Accordingly, we turn to the question of whether,
given the facts of this case, Indiana’s inverse condemna-
tion procedure while “available” is nevertheless inadequate.
In Indiana, an inverse condemnation action is one
“against an entity with the power to condemn (usually a
governmental defendant) to recover the value of property
which has been taken in fact, even though no formal
exercise of the power of eminent domain has been at-
tempted by the taking agency.” City of Gary v. Belovich, 623
N.E.2d 1084, 1095 n. 1 (Ind. Ct. App. 1993). Moreover, un-
der Indiana law, an inverse condemnation action is an
action at law limited to monetary compensation. See Dible
v. City of Lafayette, 713 N.E.2d 269, 274 (Ind. 1999); Indiana
Dept. of Trans. v. Southern Bells, Inc., 723 N.E.2d 432, 434
(Ind. Ct. App. 1999). However, the manner in which
the Plan Commission allegedly took the Daniels’ proper-
ty leaves them without a definable pecuniary loss. The
Daniels’ property value has not decreased as a result of
the Plan Commission’s action. In fact, prior to granting a
plat vacation petition a plan commission must find, as it
did here, that the surrounding plat will suffer no injury
to the value of their land. Ind. Code § 36-7- 3-11(e). The
Code provides, in pertinent part, as follows:
The plan commission shall approve the petition for
vacation of all or part of a plat only upon a determina-
tion that:
...
3. the value of that part of the land in the plat not
owned by the petitioner will not be diminished by
vacation.
In this case the Plan Commission found that the value of
the land in the plat would not be diminished because
redevelopment of the site for commercial uses will re-
18 No. 01-1158
quire development plan review by the plan commission.
This review will address land use compatibility issues
resulting from commercial use of the property, and
will preserve property values in the remainder of
the subdivision. The uninhabited and deteriorat-
ing residential structures would be removed from the
site.
The Plan Commission does not dispute this admission
on appeal. In fact, the Daniels’ property value may have
even increased, at least according to HNS’ assertion to the
Plan Commission that property values will be enhanced
10
by the commercial development. Both parties effectively
agree that vacating the plat and the covenant did not
diminish the value of the Daniels’ property. Therefore, a
suit for monetary relief under Indiana’s inverse condem-
nation proceedings would be futile, if not frivolous.
This does not mean that a taking has not occurred, or
11
that the Daniels are not entitled to relief. Indiana courts
have held injunctive relief instead may be necessary to
remedy interference with a landowner’s property rights
10
Whether a taking in violation of the Fifth Amendment exists
under these circumstances is a separate issue and one discussed
infra at III, 2.
11
Cf. Duke Power Co. v. Carolina Environ. Study Group, Inc., 438
U.S. 59, 71 n. 15 (1978) (“[The Declaratory Judgment Act] allows
individuals threatened with a taking to seek a declaration of the
constitutionality of the disputed governmental action before
potentially uncompensable damages are sustained.”); Transohio
Sav. Bank v. Director, Office of Thrift Supervision, 967 F.2d 598, 613
(D.C. Cir. 1992) (“the district court should accept jurisdiction
over takings claims for injunctive relief in the few cases where
a Claims Court remedy is ‘so inadequate that the plaintiff
would not be justly compensated.’ ” (citation omitted)).
No. 01-1158 19
for a private purpose. See Indiana Dept. of Trans. v. Southern
Bells, 723 N.E.2d 432, 434 (Ind. Ct. App. 1999). Cf. Pulos,
302 N.E.2d at 771 (holding that a governmental entity
cannot take private property for a private purpose). But
under Indiana law, purely equitable relief—a reversal of
the rezoning and the eradication of the covenant and
plat—is unavailable under the inverse condemnation
procedure. See Southern Bells, 723 N.E.2d at 434. Accord-
ingly, with no monetary loss and injunctive relief not
an available option under the statute, the inverse con-
demnation procedure is inadequate to address the Daniels’
injury. Under Williamson County this futility exempts
12
them from the exhaustion requirement. Therefore, the
Daniels have satisfied the Takings Clause ripeness require-
ments of Williamson County, and the court has subject
13
matter jurisdiction to hear the merits of the case.
12
Of course, the Daniels had the option of bringing their claim for
equitable or declaratory relief in state court, but they were not
required to do so under Williamson County’s ripeness require-
ments.
13
The Daniels eventually amended their complaint to include
a facial challenge to the constitutionality of the statute. Litigants
are not required to meet the Williamson County ripeness re-
quirements when solely mounting a pre-enforcement facial
challenge to the constitutionality of a statute under the Fifth
Amendment. Yee v. City of Escondido, 503 U.S. 519, 533 (1992);
Triple G Landfills, Inc. v. Board of Commissioners of Fountain Cty.,
Indiana, 977 F.2d 287 (7th Cir. 1992). In this case the Daniels
did not mount a facial challenge to the statute until after it had
been enforced to their detriment. While we see no reason why
enforcement would change the ripeness requirements of a purely
facial challenge, this finding would not impact the ripeness
of their separate as-applied challenge under Williamson County.
20 No. 01-1158
B. Takings for a Public Purpose
Having concluded that the Daniels’ takings claim is ripe,
we now proceed to the merits. We first address whether
the vacation statute was applied unconstitutionally to the
Daniels and then address their facial challenge. Cf. Renne v.
Geary, 501 U.S. 312, 324 (1991) (facial challenge should
generally not be entertained when an “as-applied” challenge
could resolve the case). The Daniels allege that the Plan
Commission violated § 1983 by acting under the color
of state law to take their property in violation of their
constitutional rights. The Daniels argue that the covenant
vacation was a taking for private purpose in violation
of their rights under the Fifth and Fourteenth Amend-
ments to the Constitution and Article 1, §§ 21, 23 of the
14
Indiana Constitution. In this case, the Plan Commission
14
The Daniels’ theory of the case has consistently been that the
taking in this case resulted in a violation of the Takings Clause
as opposed to a violation of their substantive due process rights.
We have had an opportunity in the past to examine whether
a taking for private purpose claim is more properly analyzed
under the standards of the Fourteenth Amendment Due Process
Clause or the Takings Clause of the Fifth Amendment. See
Forseth, 199 F.3d at 369-70; Covington Court Ltd. v. Village of Oak
Brook, 77 F.3d 177, 179-80 (7th Cir. 1996); Coniston Corp. v. Village
of Hoffman Estates, 844 F.2d 461, 464-66 (7th Cir 1988). We have
also recognized that plaintiffs may maintain a substantive
due process claim to contest land use decisions. See, e.g., Doherty
v. City of Chicago, 75 F.3d 318, 325 (7th Cir. 1996). However, in
our latest discussion of this issue we held that we will analyze
a taking for a private purpose claim under the Takings Clause.
See Forseth, 199 F.3d at 369 n. 8 (stating, “there is authority that
when a taking is made for wholly private use, the takings clause
and not substantive due process provides the analytical frame-
(continued...)
No. 01-1158 21
asserts that it was entitled to summary judgment because
the undisputed facts demonstrate that the restrictive
covenants on the Lots were vacated in the public inter-
est. We review de novo the district court’s decision to grant
summary judgment to the Daniels, construing all facts,
and drawing all reasonable inferences from those facts,
in favor of the Plan Commission, the party against
whom the motion under consideration was made. See
Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir.
1998); Hall v. Bodine Elec. Co., 276 F.3d 345, 352 (7th
Cir. 2002). Summary judgment is proper when the “plead-
ings, depositions, answers to interrogatories, and admis-
sions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(c).
The Takings Clause of the Fifth Amendment provides,
“nor shall private property be taken for public use, with-
out just compensation.” This limitation on governmental
power has been imposed on the States through the Four-
teenth Amendment, see Phillips, 524 U.S. at 163; Chicago,
Burlington & Quincy R.R. v. Chicago, 166 U.S. 226, 239
(1897). The Constitution only protects, rather than creates,
14
(...continued)
work.”). See also Armendariz v. Penman, 75 F.3d 1311, 1325-26
(9th Cir. 1996) (holding that if the Takings Clause applies to an
alleged violation, no substantive due process claim applies.
“Substantive due process analysis has no place in contexts
already addressed by explicit textual provisions of constitu-
tional protection, regardless of whether the plaintiff’s poten-
tial claims under those amendments have merit.”). Because the
Daniels have chosen to frame their claim as an improper taking
for a private purpose in violation of the Fifth Amendment, we
see no need to readdress the issue in this case.
22 No. 01-1158
property interests, therefore the existence of a property
interest is determined by reference to “existing rules or
understandings that stem from an independent source
such as state law . . . .” Board of Regents of State Colleges
v. Roth, 408 U.S. 564, 577 (1972); see also Chapman v. Sheridan
Wyo. Coal Co., 338 U.S. 621, 626-27 (1950) (finding that a
restrictive covenant was a property right similar to an
easement by relying on state common law).
The property interest at issue here is the restrictive
covenant that was included in the plat of Broadmoor
limiting construction in the plats to single-family residences.
By removing the Lots from the Plat and the restrictive
covenants included therein, the Plan Commission has
prevented the enforcement of the residential covenant
against the current or future owners of the Lots. Under
Indiana law it is well established that a restrictive cove-
nant constitutes a constitutionally protected property
interest. Pulos v. James, 302 N.E.2d 768, 771 (Ind. 1973). It
is a covenant that runs with the land and “creates a prop-
erty right in each grantee and subsequent grantee of a lot
in the plat subject to the restriction.” Id. (citing Wischmey-
15
er v. Finch, 107 N.E.2d 661 (Ind. 1952)). The Daniels,
15
Indiana courts have also held that a restrictive covenant is
a “species of express contract,” Columbia Club, Inc. v. American
Fletcher Realty Corp., 720 N.E.2d 411, 417 (Ind. Ct. App. 1999),
subject to the Contracts Clause of the Indiana constitution. Clem
v. Cristole, 582 N.E.2d 780, 782 (Ind. 1991). While Indiana has
recognized that a restrictive covenant is both a property right
and a contract right, in the context of takings jurisprudence,
Indiana has indicated that a restrictive covenant may only be
taken for a public purpose. See Pulos, 302 N.E.2d at 772-75; see
also, Dible, 713 N.E.2d at 274. (“Our precedents, and today’s
holding, clearly indicate that where a governmental entity
(continued...)
No. 01-1158 23
as owners of the right to enforce the covenant pursuant
to their ownership of a lot in Broadmoor, may no longer
prevent commercial development in the Lots, which were
in the original plat of Broadmoor. Because they have
been dispossessed of this enforcement ability by the Plan
Commission, they have demonstrated a property right
that has been taken by state action. See Dible, 713 N.E.2d
at 274.
Next, we look to the Daniels’ claim that their property
was taken not for a “public use.” The Supreme Court has
held that implicit in the Fifth Amendment is a require-
ment that the government not take property for private
purposes: “one person’s property may not be taken for
the benefit of another private person without a justifying
public purpose, even though compensation be paid.”
Thompson v. Consolidated Gas Utils. Corp., 300 U.S. 55, 80
(1937). See also, Hawaii Housing Auth. v. Midkiff, 467 U.S. 229,
245 (1984) (“A purely private taking could not withstand
the scrutiny of the public use requirement; it would serve
no legitimate purpose of government and would thus
16
be void.”).
15
(...continued)
violates restrictive covenants in furtherance of a public use
or purpose, that violation is a taking for which compensation
must be paid.”)
16
See also Cincinnati v. Vester, 281 U.S. 439, 447 (1930); Madisonville
Traction Co. v. St. Bernard Mining Co., 196 U.S. 239, 251-52 (1905);
Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112, 158 (1896); Calder
v. Bull, 3 U.S. (3 Dall.) 386, 388 (1798) (Chase, J.) (noting
that because “[i]t is against all reason and justice, for a people
to entrust a Legislature with such powers” as the power to
enact “a law that takes property from A and gives it to B,” the
legislature cannot be presumed to have such powers).
24 No. 01-1158
Even though the Supreme Court has required the exis-
tence of a public use to justify a taking, the burden on
the state is remarkably light. When a state’s exercise of
eminent domain power is “rationally related to a conceiv-
able public purpose, the Court has never held a compen-
sated taking to be proscribed by the Public Use Clause.”
Midkiff, 467 U.S. at 241 (citing Berman v. Parker, 348 U.S.
1726 (1954)). Due to the “rational relationship” test, the
17
We made a similar observation in 1993 in Gamble v. City of
Eau Claire, noting that we could find “no case in the last half
century where a taking was squarely held to be for a private use.”
See Gamble, 5 F.3d at 287. However, several courts have recently
found unconstitutional takings that were for a private use.
See, e.g., 99 Cents Only Stores v. Lancaster Dev. Agc’y, 2001 WL
811056 (C.D. Cal. 2001) (holding that a plan condemning com-
mercially viable real property in order to transfer it to a poten-
tially more lucrative private entity was a private taking); South-
western Ill. Dev. Auth. v. National City Environmental, L.L.C.,
768 N.E.2d 1 (Ill. 2002) (holding that a taking of a recycling
facility’s property to convey to a racetrack for the purpose of
expansion of its parking lot was unconstitutional as it would
not achieve a legitimate public use). Cf. Tolksdorf v. Griffith,
626 N.W.2d 163 (Mich. 2001) (holding that the Opening of
Private Roads and Temporary Highways Act was unconstitu-
tional as it authorized the taking of private property for a
predominantly private purpose). See also Pulos v. James, 302 N.E.
2d 768 (Ind. 1973) (holding that a statute authorizing Metropoli-
tan Plan Commission or its committee to vacate covenants or
restrictions applying to subdivided real estate where such
restrictions were contained in recorded plan was invalid as
authorizing taking of property for private purpose); Port Author-
ity of the City of St. Paul v. Grippoli, 202 N.W.2d 371 (Minn. 1972)
(holding that the condemnation of property and subsequent
transfer to a different private interest under a thirty-year lease
(continued...)
No. 01-1158 25
Court has held that “the ‘public use’ requirement is thus
coterminous with the scope of a sovereign’s police powers.”
Id. However, while the scope of judicial scrutiny is nar-
row, “[t]here is, of course, a role for courts to play in
reviewing a legislature’s judgment of what constitutes a
public use,” id., although this role is very limited when
the legislature has determined what constitutes a public
use. See National Paint & Coatings Ass’n v. City of Chicago,
45 F.3d 1124, 1127 (7th Cir. 1995) (“a legislative decision
‘is not subject to courtroom fact-finding and may be based
on rational speculation unsupported by evidence or empiri-
cal data.’ ”) (citing FCC v. Beach Communications, Inc.,
508 U.S. 307 (1993)). Therefore, to the extent that the de-
cisions of the Area Plan Commission fall under specific
Indiana legislative determinations of public use, they
should not be disturbed unless the decision is “palpably
without reasonable foundation.” Midkiff at 241.
In this case, however, the legislature has not made a
specific determination of what constitutes a “public use”
under Ind. Code 37-7-3-11(e) and instead has delegated
that duty to the local Plan Commission. See Ind. Code 37-7-
3-11(e) (“a plan commission shall approve the petition for
vacation of all or part of a plat only upon a determina-
tion that . . . it is in the public interest to vacate all or part
of the plat.”). This has not been the situation in prior
case law prescribing deference to state “public use” deter-
minations. For example, in Midkiff, the Court ruled that
the decisions of the Hawaii Housing Authority in deter-
mining whether state acquisition of a certain tract of
land effectuated the public purposes of the Land Reform
17
(...continued)
without change in the character of the property was a taking
for private purpose).
26 No. 01-1158
Act of 1967, as passed by the Hawaiian Legislature, would
not be disturbed unless shown to be irrational. Midkiff
at 242. Similarly in Berman v. Parker, 348 U.S. 26 (1954), the
Court upheld the taking of private property that the gov-
ernment intended to reconvey to other private persons
because the taking was part of a legislatively enacted
plan to remove blight found by the legislature to be for
public good. And finally, in United States ex rel. TVA v.
Welch, 327 U.S. 546, 552 (1946), the Court stated that “it is
the function of Congress to decide what type of taking is
for a public use and that the agency authorized to do the
taking may do so to the full extent of its statutory author-
ity.” Midkiff, Berman and Welch differ from our situation
in that the condemning state agencies were not free to
create a public purpose out of whole cloth but instead
were limited to findings of public purpose established
by the legislature. See Midkiff, 467 U.S. at 233-34; Berman,
348 U.S. at 28-30; Welch, 327 U.S. at 552.
Instead we are faced with a situation where a local plan
commission is making legislatively unrestrained decisions
as to what constitutes a public use. The Ninth Circuit
has warned that takings made by local agencies without
legislative authority serve to undermine the public use
requirement. See Armendariz v. Penman, 75 F.3d 1311, 1321
(9th Cir. 1996). The court noted that “[if] officials could
take private property, even with adequate compensation,
simply by deciding behind closed doors that some other
use of the property would be a ‘public use,’ and if those
officials could later justify their decisions in court merely
by positing ‘a conceivable public purpose’ to which the
taking is rationally related, the ‘public use’ provision of
the Takings Clause would lose all power to restrain gov-
ernment takings.” Id. Therefore, to the extent that the Area
Plan Commission’s determination of a use that is in the
public interest falls outside Indiana’s legislative defini-
No. 01-1158 27
tions of “public use” in other areas of state law, they will
not be given the almost complete deference that the
Court has afforded legislative determinations. Cf. Cinncin-
nati v. Vester, 281 U.S. 439, 448 (1930) (holding that con-
demnation proceedings by a municipality exercised outside
the grant of authority conferred by the legislature were
void).
In this case, pursuant to Indiana Code § 36-7-3-11(e) the
Plan Commission determined that the vacation was in
the public interest because “it would allow the site to be
redeveloped with commercial uses which could be a more
appropriate use for the property and could be a benefit
to the immediate neighborhood. The uninhabited and
deteriorating residential structures would be removed from
the site.” In approving the rezoning and primary develop-
ment plan, the Plan Commission also made several find-
ings of fact:
(1) Nearby commercial development and increased
traffic along Lima Road have made this property
less desirable for residential use.
(2) Redevelopment of the site for commercial uses will
require development plan review by the plan
commission. This review will address land use
compatibility issues resulting from commercial use
of the property, and will preserve property values
in the remainder of the subdivision.
(3) The proposed redevelopment of the site would
create a commercial development which could be
an asset to the surrounding neighborhood. Site
development plan review will mitigate any nega-
tive impacts on the adjacent residential properties.
(4) The proposed rezoning will establish a desirable
precedent in the area because: it will continue the
28 No. 01-1158
established precedent for commercial development
or redevelopment of properties fronting on Lima
Road in this area.
At the same time that the Plan Commission approved
the covenant vacation, it also rezoned the area for com-
mercial uses and conditionally approved HNS’s develop-
ment plan for the Lots that provided for a development
of a 12,000 sq. ft. commercial space. Based on a plain
reading of the Plan Commission’s findings it is appar-
ent that the public benefit of the vacation and zoning ac-
tion will not materialize absent any promised commercial
development of the Lots by HNS or a subsequent owner.
HNS is thus the primary beneficiary of the vacation of the
restrictive covenant, and not Allen County. The direct
benefit to HNS is emphasized further by the fact that rath-
er than build the proposed shopping center, the property
is currently up for sale as commercial property for $695,000.
The residents of Allen County will see none of the pos-
sible improvement in their health, safety and welfare
until HNS either sells the property to a potential develop-
er or commercially develops the property itself. This pri-
vate benefit does not necessarily doom the covenant vaca-
tion under current takings jurisprudence, as even takings
that transfer property from one private person to another
have been deemed valid as long as there is a public pur-
pose underlying the transfer. Hawaii Housing Auth. v.
Midkiff, 467 U.S. 229, 245 (1984). However in this case there
is no rationally related public purpose as defined by ei-
ther the Indiana legislature or the Plan Commission to
support the private taking.
1. Legislatively Determined Public Purposes
The Plan Commission’s stated purpose for the covenant
vacation is the development of commercial property and
No. 01-1158 29
the removal of empty homes. The Indiana legislature
has addressed, in other enactments, the public purpose
requirement of eminent domain procedures in areas of
commercial development and vacated homes in blighted
areas. The Plan Commission’s statement of public use
fails under either scenario.
First, under Indiana law, the Plan Commission may not
condemn property if “commercial development” is the
sole public purpose. In Indiana, local governments may
designate areas “economic development areas” and es-
tablish redevelopment commissions based on findings
that increased development in the region will promote
employment, attract a new business enterprise, increase
the property tax base, improve diversity of the economic
base and create other similar benefits. Ind. Code 36-7-14-41
(b)(4). Redevelopment commissions have several powers
in economic development zones including purchasing, sell-
ing and leasing property, maintaining structures, provid-
ing financial assistance to local entities, and contracting
to construct necessary structures. Ind. Code 36-7-14-12.2.
However, Ind. Code 36-7-14-43(a)(7) specifically prohibits
a commission from exercising the right of eminent do-
main in an economic development area. See also, Evansville
v. Reising, 547 N.E.2d 1106, 1110 (Ind. Ct. App. 1989).
Similarly, local commissions may not use eminent do-
main for industrial development but instead may only
“acquire by purchase, gift, or devise, and own, improve,
maintain, sell, lease, convey, contract for, or otherwise
deal in, real property for the development of industrial
parks or industrial sites.” Ind. Code § 36-7-13-3. Therefore,
the Indiana legislature has determined that economic
development on its own does not constitute a public
purpose sufficient to satisfy the public use requirement
inherent in the exercise of eminent domain under Indiana
law.
30 No. 01-1158
Instead, redevelopment commissions must treat an area
as “blighted” in order to use eminent domain to achieve
the purpose of commercial development. Id. at 1111-12.
Under Indiana law the clearance of blighted areas consti-
tutes a public purpose sufficient to enable the exercise
of eminent domain. Ind. Code § 36-7-14-2(a) (“The clear-
ance, replanning, and redevelopment of blighted areas
under this chapter are public uses and purposes for which
public money may be spent and private property may be
acquired.”). However, the determination of blight is a
significant step that requires more than just a finding of a
couple of vacant houses. See Ind. Code § 36-7-9-4.5. For
vacant structures the Indiana legislature has authorized
local governmental bodies to enact regulatory standards
for repair and maintenance, and order repair or at most
removal of the structure itself, providing certain proce-
dural requirements are met. Id.; see also Ind. Code § 36-7-9-5.
Even if there were an argument that these structures
constitute a blight, Indiana has established specific and
detailed processes through which a local commission
must go in order to make that determination. Ind. Code
§ 36-7-14-15. The code provides in part:
Whenever the redevelopment commission finds that
an area in the territory under their jurisdiction has
become blighted to an extent that cannot be corrected
by regulatory processes or the ordinary operations
of private enterprise without resort to this chapter,
and that the public health and welfare will be bene-
fitted by the acquisition and redevelopment of the area
under this chapter, the commission shall cause to be
prepared:
(1) maps and plats showing:
[the affected areas and designated public uses of
those areas]
No. 01-1158 31
(2) lists of the owners of the various parcels of
property proposed to be acquired; and
(3) an estimate of the cost of acquisition and rede-
velopment.
Ind. Code § 36-7-14-15.
Once these findings are made “the redevelopment com-
mission shall adopt a resolution declaring that the blighted
area is a menace to the social and economic interest of
the unit and its inhabitants.” Id. The resolution must then
be submitted to the plan commission which deter-
mines whether the resolution and the redevelopment plan
conform to the plan of development for the unit and
approve or disapprove the resolution and plan proposed.
Ind. Code 36-7-14-16.
Obviously, the Plan Commission did not pursue this
statutory option. Instead, it simply justified the vacation
based on conclusory and largely unsupported statements
as to the state of the homes on HNS properties. Because
the Plan Commission has neglected to follow the stat-
utory requirements for determining blight, they cannot
now rely on that legislatively determined public use in
order to justify their taking. To hold otherwise would
obviate the procedural requirements of Indiana’s blight
code. Because the Plan Commission has not relied on a
legislative determination of public use, the traditional
deference given to those determinations is not appropri-
18
ate in this case.
18
While there are other legislatively defined public purposes
in the Indiana Code, we are not aware of any which could justify
a taking by the Plan Commission in this case. See, e.g., Ind. Code
36-7-18-2 (“[t]he clearance, replanning, and reconstruction of
(continued...)
32 No. 01-1158
2. Plan Commission’s Stated Public Purpose
Next we will examine whether the Plan Commission’s
stated public purpose satisfies the Fifth Amendment’s
public use requirement. As we have stated, the Court
has held that the public use requirement is cotermi-
nous with the scope of a sovereign’s police powers. See
Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1014 (1984) (cit-
ing Midkiff, 467 U.S. at 240 (1984)). See generally R. Epstein,
Takings 108-112 (1985). Regulations enacted pursuant to
the police power must be substantially related to the ad-
vancement of the public health, safety, morals, or gen-
eral welfare. See Village of Euclid v. Ambler Realty Co.,
19
272 U.S. 365, 395 (1926). The Plan Commission argues
18
(...continued)
the areas in which unsanitary or unsafe housing conditions
exist and the providing of safe and sanitary dwelling accom-
modations for persons of low income are public uses and
purposes for which public money may be spent and private
property may be acquired.”); Ind. Code 36-9-11-5 (municipal
parking facilities are public use); Ind. Code 36-9-2-17 (the
improvement of drains in order to increase the public health is
a public use).
19
The Court has not defined, nor attempted to define when this
test is met and has stated that “[a]n attempt to define its reach
or trace [the police power’s] outer limits is fruitless, for each
case must turn on its own facts.” Berman, 348 U.S. at 32. This
standard, “substantially related to the advancement of the pub-
lic health, safety, morals, or general welfare,” of course is sim-
ilar, if not functionally equivalent, to the first half of the test that
the Court has used to determine when a regulation effects a
taking. See Agins v. City of Tiburon, 447 U.S. 255, 260 (1980)
(holding that a land use regulation does not effect a taking if
it “substantially advance[s] legitimate state interests” and does
(continued...)
No. 01-1158 33
that if the covenant is vacated, then HNS may develop the
property in the future, thereby removing vacant houses
and creating a commercial zone that may be an asset to
the community. However this possible future public bene-
fit, even combined with the possibility that HNS may de-
cide to remove the vacant homes, is not substantially re-
lated to the advancement of the public health, safety or
welfare.
First, this case contrasts sharply even with those cases
where courts have pushed the limits of the Public Use
Clause and have held that a state transfer of property to
a private entity served a public interest. For example in
Poletown Neigh. Council v. City of Detroit, 304 N.W.2d 455,
458 (Mich. 1981), the Michigan Supreme Court authorized
a municipality to take private property for the develop-
ment of a General Motors plant. In that case, the city of
Poletown condemned a site approved by General Motors
19
(...continued)
not “den[y] an owner economically viable use of his land.”).
Because of the vague nature of the test, the Court has struggled
in regulatory takings scenarios with defining whether a public
interest is legitimate, and whether a regulation is “substantially
related” to that interest. See Nollan v. California Coastal Comm’n,
483 U.S. 825, 834-35 (1987). But it has noted that a “broad range
of governmental purposes and regulations satisfies these re-
quirements.” Id. We need not test the limits of “substantially
related” here, however, due to the completely private and
prospective nature of the stated public interest served by the
covenant vacation. Because the removal of the covenant only
benefits the public if HNS benefits first, and even then if the
commercial development is completed and successful, there
is barely a rational relationship much less a substantial relation
of the covenant vacation to the health, safety, and welfare of the
local community.
34 No. 01-1158
under the authority of the Economic Development Cor-
porations Act. Id. at 457. The court upheld the stated
public purpose of a new General Motors plant, stating
that “the city presented substantial evidence of the se-
vere economic conditions facing the residents of the city
and state, the need for new industrial development to
revitalize local industries, the economic boost the pro-
posed project would provide, and the lack of other ade-
quate available sites to implement the project.” Id. at 459.
Poletown differs from the case at hand. There, the city
made specific findings pursuant to a legislatively deter-
mined public use (under the Economic Development
Corporations Act) as to the exact needs of the local com-
munity and the property was condemned for a specific
type of economic development that met those needs and
statutory requirements.
Similarly, in Midkiff v. Hawaii Hous. Auth., the Supreme
Court validated takings of private property for transfer
to individuals under the Hawaii Land Reform Act. Midkiff,
467 U.S. at 233-34 (citing Haw. Rev. Stat. § 516 (1976)).
The land reform statute allowed a local commission to tar-
get certain properties and permit the holders of long-term
leases on those properties to purchase the leased prop-
erty from the owners. Id. The Hawaiian legislature deter-
mined that ownership of land in Hawaii was so highly
concentrated as to constitute a “land oligopoly”and thus
allowed those transfers to occur without the landlords’
consent. Id. These transfers were determined by the Court
to be in the public interest because they would effect a
decrease in land prices and an increase in land transfers.
Id. at 240-241. In Midkiff, the actual act of the transfer,
regardless of the proposed use of the property, was found
to serve a public purpose.
Here there is no determination that commercial develop-
ment in and of itself would serve some overriding pub-
No. 01-1158 35
lic purpose. In fact there is no limit as to the actual com-
mercial or residential purposes that HNS may use the
property. Under § 3-6-13-2 of the Allen County Zoning
Ordinance land zoned C-2A may be used to provide “goods
and services that meet day-to-day needs.” However,
owners of areas that are zoned C-2A may also use the
property for most C-1A and C-1 uses such as “a service
station, a tire store, a car wash, a laundromat, a tavern, a
package liquor store, a massage salon, a bowling alley, a
pool hall, billboards, and manufactured or mobile homes.”
See Daniels, 125 F. Supp. 2d at 351. As the Daniels point
out, the impact on the community depends on the use to
which the property is put, and without knowing the use,
the Plan Commission could not reasonably find that the
20
vacation of the covenant could benefit the community.
The only common feature to all of the potential future
commercial uses of the Lots would be to confer a private
benefit on HNS either through their own development of
the Lots or the sale of the property to a developer. The
underlying purpose of a government taking that transfers
a property interest to a private entity must be for a pub-
lic benefit, and in this case any speculative public benefit
would be incidental at best.
Secondly, the Plan Commission did not find that any
eventual commercial development would be an asset to
the community, merely that it could be an asset to the
community. This type of possible public use does not sat-
isfy the Fifth Amendment requirements. The Supreme
20
For example, if HNS chose not to commercially develop the
property but instead sold the Lots for residential uses, then the
Plan Commission plat vacation would have no effect on the
plat or local community. If there is no effect on a local commu-
nity then there can be no public purpose.
36 No. 01-1158
Court has held that when there is a delegation of power
to a local government to determine a public use, “it is
not enough that property may be devoted hereafter to a pub-
lic use for which there may be an appropriate condemna-
tion.” Vester, 281 U.S. at 448 (holding that a public use
declaration that an excess condemnation was in “further-
ance of the public use” was not suitably defined enough
to justify the taking under a state law requiring that con-
demnations be supported by a public use) (emphasis
21
added). The Plan Commission argues in response that we
should not just consider the actual purposes that were
considered, but also any “conceivable public purpose.” See
Gamble, 5 F.3d at 287 (emphasis in original). However, that
standard, as enunciated in Midkiff, has traditionally ap-
plied to state legislatively or congressionally designated
public purposes employed to justify the use of eminent
domain and so does not apply to independent findings by
the Plan Commission that are unsupported by state code.
See Midkiff, 467 U.S. at 244 (“Thus, if a legislature, state or
federal, determines there are substantial reasons for an
exercise of the taking power, courts must defer to its de-
21
But see Rindge Co. v. Los Angeles, 262 U.S. 700, 707 (1923) (“In
determining whether the taking of property is necessary for
public use not only the present demands of the public, but
those which may be fairly anticipated in the future, may be
considered.” (citing Central Pacific Railway v. Feldman, 152 Cal.
303, 309 (Cal. 1909)). In Rindge the Court was considering an
eminent domain procedure to expand the highway system
in Los Angeles to alleviate traffic concerns. Id. at 308-09. In
this case, the Plan Commission has not pointed to future needs
of the community, especially on the scale of the future traffic
problems of Los Angeles, but instead stated that commercial
development “could be a more appropriate use for the prop-
erty and could be a benefit to the immediate neighborhood.”
No. 01-1158 37
termination that the taking will serve a public use.” (empha-
sis added)). See also Armendariz, 75 F.3d at 1321. Even so,
while in this case there may be some conceivable pub-
lic benefit of some possible future use of the property,
that benefit will always be subservient to the future pri-
vate uses of the Lots, and therefore private benefits, by
HNS. Much like the value of the property taken, “public
use” is to be determined at the time of the taking, and at
the time of the taking of the restrictive covenant, the
possible future commercial development could not be
rationally described as for a public purpose. Cf. Coniston
Corp., 844 F.3d at 463 (“The taking is complete when it
occurs . . . .”) (citing First Evangelical Lutheran Church
v. County of Los Angeles, 482 U.S. 304, 320 (1987)). The
public use requirement would be rendered meaningless
if it encompassed speculative future public benefits that
could accrue only if a landowner chooses to use his prop-
erty in a beneficial, but not mandated, manner.
In sum, because the Plan Commission has not followed
legislative determinations of what constitutes a valid pub-
lic use, nor provided any facts that demonstrate that the
covenant vacation is substantially related to a public
interest, we conclude that the Plan Commission has vio-
lated the public use requirement of the Takings Clause by
vacating the restrictive covenant for a private purpose.
C. Facial Challenge
In addition to holding that the Plan Commission violated
the Daniels’ Fifth Amendment rights by vacating the
restrictive covenant, the district court also held that Indi-
ana Code § 36-7-3-11 was facially invalid under the Tak-
ings Clause. Subsection (e) of Indiana Code § 36-7-3-11
provides, in pertinent part:
38 No. 01-1158
The Plan Commission shall approve the petition for
vacation of all or part of a plat only upon determination
that:
1. Conditions in the platted area have changed so
as to defeat the original purpose of the plat;
2. It is in the public interest to vacate all or part of
the plat; and
3. The value of that part of land in the plat not
owned by the petitioner will not be diminished by
vacation.
22
Ind. Code § 36-7-3-11(e).
A zoning regulation may be challenged on the basis
that the “mere enactment” of the regulation is unconstitu-
tional and constitutes a taking of property. Agins v. City of
Tiburon, 447 U.S. 255, 260 (1980). However, when making
such a challenge, plaintiffs face an “uphill battle.” Keystone
Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 495
(1987). To successfully claim that a zoning restriction is
unconstitutional on its face, plaintiffs must show either
that it does not substantially advance legitimate state
interests or that it denies them economically viable use
of their land. Agins, 447 U.S. at 260; Lake Nacimiento Ranch
v. County of San Luis Obispo, 841 F.2d 872, 877 (9th Cir.
1987). Moreover, to mount a successful facial challenge
the plaintiff “must establish that no set of circumstances
exists under which the Act would be valid.” United States
v. Salerno, 481 U.S. 739, 745 (1987).
22
This current version of § 36-7-3-11 incorporates amendments
to the statue made in 1981 and 1986 after the Indiana Supreme
Court found that it unconstitutionally permitted takings without
a public purpose. Pulos v. James, 302 N.E.2d 768, 770-71 (1973).
No. 01-1158 39
The Daniels argue that Indiana Code § 36-7-3-11 is facially
invalid because it does not define what constitutes a
public purpose. However, neither the Supreme Court
nor this court has ever required a specific legislative state-
ment as to the limits of a public purpose to avoid a
Fifth Amendment facial challenge. It is true that in de-
termining if the state action satisfies the Fifth Amend-
ment’s Public Use Clause the Supreme Court has relied
primarily, if not exclusively, upon legislative determina-
tions of public purposes within the taking statute. See,
e.g., Hawaii Housing, Auth. v. Midkiff, 467 U.S. 229, 239-42
(1984). However the Court has never held that the sole
source of a definable public use is the specific takings-
enabling statute. Indeed because the power of eminent
domain is coterminous with the police power, as long as
a taking is substantially related to the advancement of
the health, safety and welfare of the public it is constitu-
tionally sound under the Public Use Clause. Id.Also, the United States Constitution does not prescribe
any particular allocation or separation of powers among
the states. See Markham v. Clark, 978 F.2d 993, 995 (7th Cir.
1992). Thus, at least for Fifth Amendment purposes, the
Indiana legislature was free to delegate the authority to
determine public purpose to another branch or unit of
the government. See, e.g., Wisconsin Central Ltd. v. Public
Service Comm’n of Wisconsin, 95 F.3d 1359, 1368-69 (7th Cir.
1996) (no constitutional violation where agency-written
rules delegated to utilities the authority to determine
whether a particular taking had a public purpose; takings
claimants had right to judicial review); United Beverage
Co. of South Bend, Inc. v. Indiana Alcoholic Beverage Comm’n,
760 F.2d 155, 157-58 (7th Cir. 1985) (no general federal con-
stitutional doctrine limiting a state legislature’s delega-
tion of legislative authority to an administrative agency).
Cf. Rindge Co. v. Los Angeles Co., 262 U.S. 700, 709 (1923)
40 No. 01-1158
(“The necessity for appropriating private property for
public use is not a judicial question. This power resides
in the Legislature, and may either be exercised by the
Legislature or delegated by it to public officers.”). The
legislature did in fact delegate this authority when it
authorized the Plan Commission to determine whether
to vacate plats for a public purpose.
Even assuming, arguendo, that the Daniels could show
that the covenant vacation statute was an impermissible
delegation of legislative authority under Indiana law, see,
e.g., Telecommunications Ass’n of Indiana, Inc. v. Indiana
Bell Tel. Co., 580 N.E.2d 713, 716 (Ind. Ct. App. 1991) (recog-
nizing that under Indiana law, some delegations of leg-
islative authority are impermissible), their claim does
not implicate federal law but instead should have been
brought in the Indiana courts. A “failure to implement
state law violates that state law, not the Constitution; the
remedy lies in state court.” River Park v. City of Highland
Park, 23 F.3d 164, 166-67 (7th Cir. 1994). In any event,
while § 36-7-3-11 does not specifically define a public use,
it clearly requires that a public use exist so as to justify a
plan commission’s action.
The Daniels further challenge the procedures authorized
by Indiana Code § 36-7-3-11 because those procedures
demonstrate that the statute authorizes takings for pri-
vate purpose. Under the procedures mandated by the
statute, the Daniels claim that plat vacations only occur
when a private individual requests that a plan commis-
sion alter plats (to the possible detriment of other private
individuals) solely for the petitioner’s benefit. As a result,
even though a typical petitioner could not have any mo-
tive for making a request other than for his sole benefit, the
Plan Commission need only make conclusory, written
findings that the vacation of the covenants is “in the pub-
lic interest.”
No. 01-1158 41
The statute, however, is not that porous. As stated
above, the Public Use Clause is only violated if a person’s
property is “taken for the benefit of another private per-
son without a justifying public purpose, even though
compensation be paid.” Thompson, 300 U.S. at 80. Therefore,
even if a petitioner applies for a plat vacation for a pri-
vate benefit, if there is a justifying public purpose then
the Fifth Amendment is not violated. Additionally, a lo-
cal plan commission is not completely without guidance
under 36-7-3-11(e). Specifically all or part of a plat may only
be vacated if “conditions in the platted area have changed
so as to defeat the original purpose of the plat,” Ind. Code
36-7-3-11(e), and “it is in the public interest to vacate all
or part of the plat.” These limits sufficiently direct a plan
commission to act only in concert with the Fifth Amend-
ment. Of course, as demonstrated in this case, a commis-
sion may fail to follow those directions. While the Daniels
have been subject to an unconstitutional application of
the statute because the taking of their property was not
in the public interest, this does not render the statute
unconstitutional in every aspect. Under the Salerno stan-
dard we can envision several scenarios where a plan
commission could comply with their statutory mandate
and allow a proposed covenant vacation that is in
the public interest. For example, the plan commission
could vacate a covenant if it was rationally related to a
public interest already authorized by legislative enact-
ment. Also, the plan commission could find that the vaca-
tion would substantially advance the health, safety and
welfare of the community. For example if the commis-
sion found that an area was under-served by doctors’ or
dentists’ offices, or day care facilities, and the vaca-
tion would substantially serve to fill that need, then the
vacation could be found to be in the public interest. There-
fore, since the covenant vacation statute has potential
constitutional applications, this facial attack fails. See
42 No. 01-1158
Salerno, 481 U.S. at 745. In conclusion, the Daniels have
not shown that Indiana Code 36-7-3-11 is unconstitu-
tional because the statute expressly requires that vacations
be in the public interest, and does not delegate public
use determinations in violation of the Federal Constitution.
IV.
In conclusion, the district court properly asserted sub-
ject matter jurisdiction over the Daniels’ claim, although
not under Patsy, but because they were exempted from
Williamson County’s ripeness requirements due to futility.
The district court also properly concluded that Indiana
Code 36-7-3-11 was unconstitutionally applied against
the Daniels by effectuating a public taking for a private
purpose. However the district court improperly found that
Indiana Code 36-7-3-11 was unconstitutional on its face.
The statute could be constitutionally applied and the
Constitution does not prohibit specific delegations of state
legislative power. For these and the foregoing reasons we
AFFIRM the injunction against the Plan Commission from
vacating the restrictive covenant of the Broadmoor Addi-
tion for a private purpose, but REVERSE the district court
decision finding Ind. Code § 36-7-3-11 facially unconstitu-
tional.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-97-C-006—9-11-02