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Property Rights Case Law Evolves With 9th Circuit Decision

The Ninth U.S. Circuit Court of Appeals continued to flesh out its property rights jurisprudence with a decision from Spokane, Washington — this time by siding with property owners seeking to protect their own rights by enforcing historic preservation regulations.

The case was brought by property owners seeking to preserve the integrity of their historic neighborhood. The court ruled that the neighborhood group could sue under the Fourteenth Amendment's due process clause — which was perhaps the most important precedent from the case. However, the court concluded the group had not proven its claims.

The decision from Spokane builds on a 2007 decision from Idaho in which a Ninth Circuit panel made clear that Fourteenth Amendment due process claims are not necessarily subsumed by the Fifth Amendment clause prohibiting a taking of private property without just compensation. The decision in Crown Point Dev., Inc. v. City of Sun Valley, 506 F3d 851 (2007) (see CP&DR Legal Digest, December 2007) reversed the court's long-standing rule against allowing substantive due process claims when a real property interest is at stake. The Crown Point decision was seen as a victory for property owners, who have had difficulty advancing 5th amendment takings claims in federal and state courts. In the case from Spokane, however, people fighting development attempted to leverage the Crown Point precedent to defeat a project.

Filled with Queen Anne, foursquare, craftsman and bungalow style houses, the Mission Avenue Historic District is located just north of Gonzaga University in Spokane. The district is listed on the National Register of Historic Places, and since 1981 the city has had specific criteria and procedures in its municipal code for managing historic landmarks. In 2005, the city granted Vincent and Janet Dressel a permit to construct a duplex addition to a clapboard-sided foursquare house within the historic district. The Dressels, who remodel and convert houses into student residences, demolished a garage and erected what neighbors complained was a "box-like dormitory building." The city apparently granted the building permit without requiring a "certificate of appropriateness" or a special permit as specified by the municipal code.

The Logan Neighborhood Association and individual residents sued the Dressels and the city, arguing that the neighbors' due process rights had been violated because the city did not enforce its municipal code. They also argued that the city violated the National Historic Preservation Act and the municipal code. A district court judge ruled for the city and the developers.

At the Ninth Circuit, the city argued that any claim involving a diminution in real property value involved the takings clause, not the due process clause. That argument might have won a few years ago, but no longer. Three years ago in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005) (see CP&DR, July 2005), the U.S. Supreme Court determined that a claim based on whether or not a regulation substantially advances a legitimate state interest is actually a due process claim, not a takings claim.

"[W]e agree with Logan Neighborhood that the takings clause of the constitution does not invariably pre-empt a real property owner's challenge under the due process clause," Judge Raymond Fisher wrote for the three-judge panel.

However, to win a substantive due process claim, the plaintiff must also show it was deprived of a constitutionally recognized property interest, according to the Ninth Circuit. The neighborhood group argued that by misapplying the code, the city had decreased surrounding homes' property values. The court was not convinced.

"Logan Neighborhood's ‘failure-to-protect' and ‘failure-to-enforce' allegations do not suffice. The constitution generally does not require the state to ‘protected the life, liberty and property of its citizens against invasion by private actors,'" Fisher wrote, citing DeShaney v. Winnebago County Dep't of Soc. Serv., 489 U.S. 189 (1989). "Spokane has no independent constitutional duty to safeguard the Dressels' neighbors from the negative consequences – economic, aesthetic or other otherwise – of the Dressels' construction project."

The court also rejected the neighborhood group's argument that it had been deprived of procedural due process because it was not notified and given an opportunity to comment before the city issued the Dressels' building permit.

"Assuming without deciding that a property owner ever could have a constitutionally protected interest in the proper application of zoning restrictions to neighboring properties, we conclude that Logan Neighborhood's procedural due process claim failed because Spokane's historic preservation provisions do not ‘contain mandatory language' that significantly constrains the decision-maker's discretion," the court ruled.

The court also ruled that the neighbors could not press a claim under the historic preservation act and that potential municipal code violation was not subject to federal court review.

The Case:
Shanks v. Dressel, No. 06-35665, 08 C.D.O.S. 11447, 2008 DJDAR 13658. Filed August 27, 2008.
The Lawyers;
For Shanks: Charles Cleveland, (509) 326-1029.
For Spokane: Milton Rowland, city attorney's office, (509) 777-1610.
For Dressel: Steven Schneider, Murphy, Bantz & Bury, (509) 838-445.

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