Durrett Investment Company, LP v. The City of Clarksville, TN ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
November 27, 2012 Session
DURRETT INVESTMENT COMPANY, LP v. THE CITY OF
CLARKSVILLE, TN
Appeal from the Circuit Court for Montgomery County
No. MCCCCVOD111105 Michael R. Jones, Judge
No. M2012-00807-COA-R3-CV - Filed February 15, 2013
City enacted an ordinance imposing a temporary moratorium on development of land within
a 250 foot corridor abutting land owned by developer. Developer sued City asserting claims
for inverse condemnation, wrongful taking, tortious interference with business relationships,
and damages pursuant to 42 U.S.C. § 1983; City filed a motion to dismiss for failure to state
a claim, which the trial court granted. Developer appeals, contending that the temporary
moratorium constituted a taking and that the tortious interference with business relationships
and interference with contract rights claims were allowed pursuant to the Tennessee
Governmental Tort Liability Act. We affirm the trial court’s dismissal of Plaintiff’s tort
claims and reverse the trial court’s dismissal of Plaintiff’s inverse condemnation and takings
claims.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed in
Part, Reversed in Part; Case Remanded
R ICHARD H. D INKINS, J., delivered the opinion of the court, in which P ATRICIA J. C OTTRELL,
P. J., M. S., and F RANK G. C LEMENT, J R., J., joined.
Mark Robert Olson, Clarksville, Tennessee, for the appellant, Durrett Investment Company,
LP.
James L. Murphy, III, Joel Eckert, and Molly Devlin Loughney, Nashville, Tennessee, for
the appellee, City of Clarksville, Tennessee.
OPINION
I. Facts and Procedural History1
Durrett Investment Co. (“Plaintiff”) is the owner of 228 acres of real property in
Clarksville; the property was zoned in 2004 for development of multi-family and single
family housing. Plaintiff submitted a Master Plan for the development of the property to
Clarksville’s City Planning Commission for approval on May 6, 2010; the Planning
Commission deferred consideration of the plan for thirty days on May 26. On June 14, 2010,
the Clarksville City Council voted on first reading to approve an ordinance establishing a
moratorium on development and construction on property within a 250' corridor, which
abutted the property owned by plaintiff; on June 23, Plaintiff withdrew the Master Plan from
the Planning Commission. The Council did not pass the ordinance on second reading on
August 5. Plaintiff resubmitted the Master Plan to the Planning Commission on October 7,
2010, and the plan was approved by the Planning Commission on November 23. In the
interim, the City Council voted on November 18 to reconsider the ordinance; on December
2, passed the ordinance on second reading. The moratorium on development was to remain
in effect until August 8, 2011.2
1
The factual history is derived in part from the Affidavit of Cal McKay, a professional engineer
whose affidavit was filed by Plaintiff in opposition to a Motion to Dismiss, and in part from materials filed
by the City in support of the motion. The factual history portion of this opinion is provided to give context
to the discussion of the issues and has no bearing on the resolution of the issues.
2
Ordinance 50-2010-11 is entitled “An Ordinance Establishing a Moratorium Regarding
Development and Construction Upon Lands Within the Proposed East-West Corridor”, and recited, inter
alia, that the area between Fort Campbell Boulevard and Wilma Rudolph Boulevard was undergoing rapid
development and that a 2006 study commissioned by the City had found “the need for additional roadway
to serve the existing and future population” in the area, including “an additional east-west arterial connecting
Fort Campbell Boulevard to Trenton Road, Wilma Rudolph Boulevard, and Interstate 24”; the ordinance
provided in part:
1. That there is hereby established a moratorium, for a period of eight (8) months from the
effective date of this Ordinance on any development and/or construction which requires a
building or grading permit, plat or site plan approval, construction plan approval, or zoning
request, within the area as shown on the attached Exhibit A, which is generally a narrow
corridor of two-hundred fifty feet (250') in width.
Attached as Exhibit A is what appears to be a satellite map of the area. The Ordinance prohibited the
Clarksville-Montgomery County Regional Planning Commission from accepting applications for, or issuing
approval of, any zoning requests, subdivision plats, building permits, grading permits, or construction plans
during the eight-month period in the designated area; the Ordinance provided that moratorium did not apply
(continued...)
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On May 19, 2011, Plaintiff filed this action, alleging that Plaintiff owned land that
was subject to the moratorium and that the moratorium constituted a taking; Plaintiff asserted
a claim of inverse condemnation. On August 9, 2011, Plaintiff filed an Amended Complaint,
asserting claims for inverse condemnation, tortious interference with business relationships,
and damages pursuant to 42 U.S.C. § 1983. On September 9, the City filed a Tenn. R. Civ.
P. 12.02(6) Motion to Dismiss; Plaintiff filed its response on November 17. On February 16,
2012, the court rendered an Opinion in which it held in part:
[T]he subject moratorium was for a valid governmental purpose, the
moratorium has expired and has not been extended, the [Plaintiffs] retain the
full use of its land as it existed prior to the moratorium, there was no entry into
the land as for a traditional taking, and the entire tract of land was not subject
to the moratorium.
On March 19, the court entered an Order incorporating the Opinion and dismissing with
prejudice all of Plaintiff’s claims.
Plaintiff appeals and articulates the following issues:
1. Dismissal for Failure to State a Claim Was in Error.
2. The Moratorium Constitutes a “Taking”.
3. Temporary State Actions and Regulations Constitute a Taking.
4. The Moratorium Constitutes Inverse Condemnation.
5. [Plaintiff’s] Cause of Action under the Governmental Tort Liability Act Is
an Allowed Claim under the Tennessee Governmental Tort Liability Act.
II. Standard of Review
The purpose of a Tenn. R. Civ. P. 12.02(6) motion to dismiss is to determine whether
the complaint states a claim upon which relief can be granted; such a motion challenges only
the legal sufficiency of the complaint, not the strength of the plaintiff’s proof. See Bell ex
rel. Snyder v. Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., 986 S.W.2d 550, 554
2
(...continued)
to “the development or construction of buildings, to include houses, located on lands adjacent to or
contiguous with but outside of the subject area proposed for the east-west corridor . . . .”
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(Tenn. 1999). In considering a motion to dismiss, a court is to liberally construe the
complaint, presuming all factual allegations to be true and giving the plaintiff the benefit of
all reasonable inferences. See Pursell v. First American National Bank, 937 S.W.2d 838, 840
(Tenn. 1996); see also Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 696-97
(Tenn. 2002). Thus, a complaint should not be dismissed for failure to state a claim unless
it appears that the plaintiff can prove no set of facts in support of his or her claim that would
warrant relief. See Doe v. Sundquist, 2 S.W.3d 919, 922 (Tenn. 1999); Fuerst v. Methodist
Hospital South, 566 S.W.2d 847, 848 (Tenn. 1978). Making such a determination is a
question of law which this court reviews de novo, with no presumption of correctness. Frye
v. Blue Ridge Neuroscience Center, P.C., 70 S.W.3d 710, 713 (Tenn. 2002); Bowden v.
Ward, 27 S.W.3d 913, 916 (Tenn. 2000).
Pertinent to our review of the trial court’s grant of the motion to dismiss, we note that
Ordinance 50-2010-11, along with other materials, was attached as an exhibit to the City’s
motion; likewise, Plaintiff filed Mr. McKay’s affidavit, with several exhibits. The purpose
of a Tenn. R. Civ. P. 12.02(6) motion to dismiss is to determine whether the pleadings alone
state a claim upon which relief can be granted, Western Exp., Inc. v. Brentwood Servs., Inc.,
No. M2008-02227-COA-R3-CV, 2009 WL 3448747, at *4 (Tenn. Ct. App. October 26,
2009), and matters outside the pleadings should not be considered by the court in deciding
whether to grant the motion. Trau-Med, 71 S.W.3d at 698. However, this court has
recognized exceptions to the rule, allowing the consideration of, among other items, matters
of public record and items subject to judicial notice. Western Exp., Inc., at *4 (citing Ind.
State Dist. Council of Laborers v. Brukardt, No, M2007-02271-COA-R3-CV, 2009 WL
426237, at *8 (Tenn. Ct. App. February 19, 2009) (perm. app. denied Aug. 24, 2009); Wright
and Miller, Federal Practice and Procedure, Civil § 1357, p. 376 (3d ed. 2004)). Such items
may be considered by the court without converting the motion to dismiss into one for
summary judgment. Id.
Tenn. R. Evid. 202(b) provides that a court may, upon request, take judicial notice of
all “duly enacted ordinances of municipalities or other government subdivisions[.]” In this
case, the trial court’s Opinion, which was incorporated into the Order dismissing the
complaint, recited that the court “has reviewed the pleadings, the memoranda provided by
the attorneys, including the cases cited and other research done by the court . . . .” The record
does not contain a request for the trial court to take judicial notice of the ordinance; however,
no issue has been raised as to the court’s consideration of same. In our resolution of this
appeal, we, likewise, have taken judicial notice of Ordinance 50-2010-11; we have not
considered any of the other materials filed in support of or in opposition to the motion to
dismiss.
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III. Discussion
A. Claim under the Governmental Tort Liability Act
The Tennessee Governmental Tort Liability Act (“GLTA”), located at Tenn. Code
Ann. §§ 29-20-101-408, codifies the common law rule that “all governmental entities shall
be immune from suit for any such injuries which may result from the activities of such
governmental entities, subject to statutory exceptions in the Act’s provisions.” Limbaugh v.
Coffee Medical Center, 59 S.W.3d 73, 79 (Tenn. 2001). To come within the provisions of
the Act, a plaintiff must prove that the claim asserted is one of the “specific causes of action
for which the legislature removes immunity.” Halliburton v. Town of Halls, 295 S.W.3d 636,
638 (Tenn. Ct. App. 2008) (citing Tenn. Code Ann. §§ 29-20-101 and 29-20-201; Kirby v.
Macon County, 892 S.W.2d 403, 406 (Tenn. 1994)). In Halliburton, we summarized the
causes of action enumerated in the GTLA for which immunity is removed:
Section 202 removes immunity for “injuries resulting from the negligent
operation by any employee of a motor vehicle or other equipment.” Section
203 removes immunity for “any injury caused by a defective, unsafe, or
dangerous condition of any street, alley, sidewalk or highway.” Section 204
provides that “[i]mmunity from suit of a governmental entity is removed for
any injury caused by the dangerous or defective condition of any public
building, structure, dam, reservoir or other public improvement.” And Section
205 removes immunity for the negligent acts of employees, with various
exceptions.
Halliburton, 295 S.W.3d at 638-39 (citations omitted).
Plaintiff contends that Tenn. Code Ann. § 29-20-205, which removes governmental
immunity for injuries caused by the negligent act or omission of employees, allows Plaintiff
to proceed with a claim arising under the Act.3 In its brief on appeal, Plaintiff contends that
3
Tenn. Code Ann. § 29-20-205 provides:
Immunity from suit of all governmental entities is removed for injury proximately caused
by a negligent act or omission of any employee within the scope of his employment except
if the injury arises out of:
(1) The exercise or performance or the failure to exercise or perform a discretionary
function, whether or not the discretion is abused;
(2) False imprisonment pursuant to a mittimus from a court, false arrest, malicious
prosecution, intentional trespass, abuse of process, libel, slander, deceit, interference with
(continued...)
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the City is not immune from suit because “[i]mmunity is removed from any employee or
officer for exercise or performance of, or the failure to exercise or perform, a discretionary
function related to interference with contract rights, and the failure or refusal to withhold
specific authorizations.”4 In the portion of its brief discussing the GTLA claim, Plaintiff
argues that “[t]he actions of the appellee constitutes an interference with contract right.
Appellant had obtained from the City of Clarksville a Master Plan. The interference caused
by the Moratorium is interference with a contract, the Master Plan, and interference with an
existing business relationship.” In making these contentions, Plaintiff misconstrues and
misapplies the statute.
Tenn. Code Ann. § 29-20-205 removes immunity in cases in which the negligent act
or omission of a governmental employee causes an injury. Sections (1)-(9) of the statute are
exceptions to the removal of the immunity; they are not grounds upon which immunity is
removed or causes of action against the governmental entity. Construing the allegations of
the complaint liberally, Plaintiff alleges no negligence on the part of any employee acting in
the scope of employment and does not allege any fact which would support the removal of
the City’s immunity in accordance with the statute.
In the same manner, Plaintiff’s argument that application of the statute affords a claim
for interference with contract rights misconstrues and misapplies the statute.
3
(...continued)
contract rights, infliction of mental anguish, invasion of right of privacy, or civil rights;
(3) The issuance, denial, suspension or revocation of, or by the failure or refusal to issue,
deny, suspend or revoke, any permit, license, certificate, approval, order or similar authorization;
(4) A failure to make an inspection, or by reason of making an inadequate or negligent
inspection of any property;
(5) The institution or prosecution of any judicial or administrative proceeding, even if
malicious or without probable cause;
(6) Misrepresentation by an employee whether or not such is negligent or intentional;
(7) Or results from riots, unlawful assemblies, public demonstrations, mob violence and civil
disturbances;
(8) Or in connection with the assessment, levy or collection of taxes; or
(9) Or in connection with any failure occurring before January 1, 2005, which is caused
directly or indirectly by the failure of computer software or any device containing a
computer processor to accurately or properly recognize, calculate, display, sort, or otherwise
process dates or times, . . . .
Tenn. Code Ann. § 29-20-205 (West).
4
This statement appears to be referring to Tenn. Code Ann. § 29-20-205 (1) and (3).
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B. Takings and inverse condemnation claim
Plaintiff contends that the moratorium on development contained in Ordinance 50-
2010-11 constitutes a “taking”, and that the trial court erred when it dismissed Plaintiff’s
complaint for failure to state a takings claim and a claim for inverse condemnation.
In discussing the cause of action for inverse condemnation in Edwards v. Hallsdale-
Powell Util. Dist. Knox County, Tenn., our Supreme Court noted:
The Tennessee Constitution states that “no man’s particular services shall be
demanded, or property taken, or applied to public use, without the consent of
his representatives, or without just compensation being made therefor.” Tenn.
Const. Art. I, § 21. This constitutional provision recognizes the governmental
right of eminent domain. The government is prohibited, however, from taking
property for private purposes and must pay just compensation when property
is taken for public use. See Jackson v. Metro. Knoxville Airport Auth., 922
S.W.2d 860, 861 (Tenn.1996). The Tennessee General Assembly has
implemented this provision by its passage of eminent domain and inverse
condemnation statutes. See Tenn.Code Ann. §§ 29–16–101 to 29–16–127
(2000 & Supp.2002); 29–17–101 to 29–17–1202 (2000).
“Inverse condemnation” is the popular description for a cause of action
brought by a property owner to recover the value of real property that has been
taken for public use by a governmental defendant even though no formal
condemnation proceedings under the government's power of eminent domain
have been instituted. See Johnson v. City of Greeneville, 222 Tenn. 260, 435
S.W.2d 476, 478 (1968). A “taking” of real property occurs when a
governmental defendant with the power of eminent domain performs an
authorized action that “destroys, interrupts, or interferes with the common and
necessary use of real property of another.” Pleasant View Util. Dist. v.
Vradenburg, 545 S.W.2d 733, 735 (Tenn.1977).
Edwards v. Hallsdale-Powell Util. Dist. Knox County, Tenn., 115 S.W.3d 461, 464 (Tenn.
2003).5
5
Tenn. Code Ann. § 29-16-123 creates a cause of action for inverse condemnation, an action
“brought by a property owner to recover the value of real property that has been taken for public use by [the
government] even though no formal condemnation proceedings under the government’s power of eminent
domain have been instituted.” Edwards, at 464-65 (citing Johnson v. City of Greeneville, 435 S.W.2d 476,
(continued...)
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In Lucas v. South Carolina Coastal Council, the United States Supreme Court held
that the United States Constitution’s prohibition against the physical appropriation of
property without compensation extends to governmental regulation of property. Lucas v.
South Carolina Coastal Council, 505 U.S. 1003, 1015 (1992). Regulatory takings are found
when a regulation compels a property owner to suffer a physical invasion onto his or her
parcel or where a regulation denies a property owner “all economically beneficial or
productive uses of the land.” Id. A deprivation of beneficial economic use is considered the
equivalent of a physical invasion. Id. at 1016. Similarly, a regulation that “does not
substantially advance legitimate state interests” will also be considered a taking for which
compensation is owed. Id. at 1015. The concept of a “regulatory taking” was recognized by
our Supreme Court in B&B Enterprises of Wilson County, LLC v. City of Lebanon, wherein
the court noted:
A regulatory taking results when a governmental regulation places such a
burdensome restriction on a landowner’s use of its property that the
government has for all intents and purposes “taken” the property. In 1922, a
near unanimous United States Supreme Court noted that a regulation that goes
“too far” is a taking of property, presumably as much as a physical taking or
invasion of property is a taking. Pennsylvania Coal Co. v. Mahon, 260 U.S.
393, 415-16, 43 S. Ct. 158, 67 L. Ed. 322 (1922); see also 11 Eugene
McQuillen, Law of Municipal Corporations § 32.31, at 582-86 (3d ed. Rev.
Vol. 2010); David L. Callies, Takings: An Introduction and Overview, 24 U.
Haw. L. Rev. 441, 443 (2002).
B&B Enterprises of Wilson County, LLC, 318 S.W.3d at 845.6
No bright line rule or formula exists for determining when a regulation “goes too far”
such that it is recognized as a taking, and the United States Supreme Court has repeatedly
declined to adopt such a formula; the Court has consistently held that multiple factors must
be examined to determine whether a regulation amounts to a taking. Tahoe-Sierra
Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302, 326-37 (2002). In
Tahoe, the Court considered a challenge by a nonprofit membership corporation representing
owners of improved and unimproved parcels of real estate in the Lake Tahoe area of Nevada
5
(...continued)
478 (Tenn. 1968)).
6
The Court determined that “because of its procedural posture, this case is not the proper vehicle
for deciding the existence or scope of a regulatory takings claim under Article I, Section 21 [of the Tennessee
Constitution].” B&B Enterprises of Wilson County, LLC v. City of Lebanon, 318 S.W.3d 839, 846 (Tenn.
2010).
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to a 32-month moratorium on development as being a taking of their property without just
compensation. The court rejected the owners’ desire that the court establish “a categorical
rule requiring compensation whenever the government imposes such a moratorium on
development.” Id. at 320. Instead, the Court concluded that the answer to the “abstract
question” of whether a temporary moratorium constitutes a taking depended on the
“particular circumstances of the case” and was best analyzed under the framework laid out
in Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978). Id. at 320-21.
In STS/BAC Joint Venture v. City of Mt. Juliet, this court described the Penn Central
analytical framework as follows:
Under Penn Central, regulatory takings claims require “ad hoc, factual
inquiries” involving a balancing of the public and private interests involved in
the particular case. The factors to be considered include (1) the economic
impact of the regulation, (2) the degree to which the regulation has interfered
with the owner's reasonable “distinct investment-backed” expectations
concerning the property, and (3) the character of the regulatory action. Penn
Central, 438 U.S. at 124-25; 98 S. Ct. 2646. Other relevant factors may also be
considered. The analysis, however, must focus on “the parcel as a whole.”
Tahoe-Sierra Preservation Council, 535 U.S. at 326-27, 122 S.Ct. at 1481
Penn Central, 438 U.S. at 130-131, 98 S. Ct. 2646.
STS/BAC Joint Venture v. City of Mt. Juliet, M2003-00171-COA-R3CV, 2004 WL 2752809at *4 (Tenn. Ct. App. Dec. 1, 2004). It is within this framework that we consider the
allegations of Plaintiff’s amended complaint.
The salient allegations of the amended complaint relative to this cause of action
include the following:
3. Durrett, by Deed of Record, owns real property within Clarksville,
Tennessee (Herein the “Durrett Real Property”).
4. In association with a proposed highway development, the City of
Clarksville, . . . did enact a “Moratorium” related to a significant portion of the
Durrett Real Property. This Moratorium was designed to stop the development
of the Durrett Real Property. The Moratorium was enacted because of the
proposed building of a new “East West Corridor” roadway in Clarksville[.]
5. The Durrett Real Property has been approved for development, was platted
and Durrett was prepared to conduct the development for profit.
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7. The Moratorium did stop all development of the Durrett Real Property by
action of the Clarksville City Council. No compensation was offered or paid.7
8. This Moratorium constitutes a taking of the Durrett Real property without
compensation.
***
10. The City Council enacted this Moratorium knowing that the building of
the East West Corridor was not expected to take place, if it took place at all,
for at least 11 to 13 years.
11. At the time the City Council enacted the Moratorium, the City, by its
agents, had not identified the actual route that will be used for development of
the highway. There was no specific building plan in place which called for the
use of the Durrett Real Property in the building of the East West Corridor.
Only broad proposals were made requesting the route of a future roadway
which was not funded or approved.
12. At the time the City Council enacted the Moratorium, the City, by its
agents, had not developed any plans for the building of the East West Corridor.
The East West Corridor was, at best, in the discussion stage. Early studies
identified at least three routes which the East West Corridor may take, which
may, or may not, involve and require the use of a portion of, the Durrett real
Property.
13. At the time the City Council enacted the Moratorium, the City, by its
agents, had not received any environmental studies necessary for the route of
the East West Corridor to be selected.
14. At the time the City Council enacted the Moratorium, the City, by its
agents, knew that Durrett was in the business of real estate development, and
had a development plan for the Durrett Real Property. The City by its agents,
knew that Durrett had an existing business relationship with a specific
identifiable class of third persons, specifically, purchasers for development[.]
15. At the time the City Council enacted the Moratorium, the City, by its
agents, knew of the Plaintiff’s business dealings with others and knew
specifically of the intent to develop the Durrett Real Property for profit.
The factual allegations of the complaint, construed liberally and presumed to be true,
and giving the Plaintiff the benefit of reasonable inferences arising therefrom, are sufficient
to be analyzed under the standards set forth in Penn Central to determine whether the
moratorium established in the ordinance constituted a regulatory taking of Plaintiff’s
property. We express no opinion as to whether the facts alleged, if proven at trial, would
support a holding that the moratorium constitutes a taking; we hold only that there are
7
The Amended Complaint did not contain a sixth allegation.
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sufficient factual allegations to state a claim for relief under the inverse condemnation and
regulatory taking causes of action asserted by Plaintiff.
IV. Conclusion
For the foregoing reasons, we reverse the trial court’s dismissal of the takings and
inverse condemnation claims and remand the case for further proceedings with respect to
those claims; in all other respects, the judgment of the trial court is affirmed.
___________________________________
RICHARD H. DINKINS, JUDGE
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