Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

SAMUEL C. JOHNSON 1988 TRUST v. BAYFIELD COUNTY (June 17, 2011)

In the middle of the 19th century, the federal government wanted to encourage railroading. It created a checkerboard-like pattern of identical square sections on federal land. It assigned the squares alternating odd and even numbers. It gave the odd-numbered sections to the railroads in fee simple. It sold the even-numbered sections. The railroads would be able to sell part of the land they owned but did not need in order to finance their operations and the acquisition of rights in the land they did not own. The Samuel C. Johnson 1988 Trust is the current owner of property in northern Wisconsin that was part of this checkerboard. It owns property in an even-numbered section that its predecessor purchased from the federal government in fee simple in the late-19th century. It also owns property in an odd-numbered section that it purchased from a railroad. Bayfield County thinks it has rights in the now-abandoned railroad right-of-way on the Trust's properties and wants to build a snowmobile trail. The Trust brought suit to quiet title. Judge Crabb (W.D. Wis.) granted summary judgment to the County. The Trust appeals.

In their opinion, Judges Posner, Wood, and Tinder reversed. The Court first addressed its jurisdiction, since the suit seems to arise under state law and there is not complete diversity. Both the plaintiff and defendant rely on federal law for their claimed property rights. Whether viewed from the plaintiff’s perspective or, since it is a type of declaratory judgment case, from the presumed suit by the defendant, the case arises under federal law. On the merits, the Court addressed each section separately. With respect to the even-numbered section, the railroad obtained its right-of-way by condemnation. The Court rejected the County's assertion that it was obtained by statute. Once the railroad abandoned the right-of-way, the Trust became the holder of the full rights to the property. With respect to the odd-numbered section, there was no right-of-way because the railroad owned the property in fee simple. When it conveyed the property to the Trust, it conveyed all rights in the property. This County has no right to build a trail.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

UNITED STATES OF AMERICA v. BUCHMAN (May 16, 2011)

Christopher Buchman borrowed money from the Department of Agriculture's Farm Service Agency. He secured the loans with mortgages on three pieces of property. When he defaulted, the United States filed suit to foreclose. His attempts to negotiate a resolution were unsuccessful and a default judgment was entered. A year later, the property was sold at public auction. Judge Griesbach (E.D. Wis.) confirmed the sale and entered a deficiency judgment against Buchman, rejecting his arguments that the sale price was inadequate and that he wanted an opportunity to redeem the property. Buchman appeals.

In their opinion, Chief Judge Easterbrook, Circuit Judge Bauer, and District Judge Young affirmed. The Court first rejected the government's argument that the completed property transfer made the appeal moot. Although the Court did hold that it would not upset the completed sale, it noted that it could vacate the deficiency judgment or order the government to give up some of the proceeds of the sale. On the merits, the Court agreed with the district court that Buchman forfeited his claim that the court erred in not providing him an opportunity to redeem. He allowed a default judgment to be entered and, even then, waited more than a year to complain. With respect to the inadequate price argument, the Court applied the Wisconsin rule that a sale should be confirmed unless the price "shocks the conscience." Buchman’s only evidence was an appraisal. A competitive sale is better evidence of value than an appraisal. Also, Buchman never identified anyone who is or was willing to pay a higher price. The Court found no error in the sale confirmation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

LOUIS AND KAREN METRO FAMILY, LLC v. LAWRENCEBURG CONSERVANCY DISTRICT (July 29, 2010)

Louis and Karen Metro Family, LLC is a limited liability company owned by Louis and Karen Metro. The company owns a number of parcels of property in Ohio and Indiana. One such parcel sat on a bank of Tanners Creek and was home to a pizza parlor. Because Tanners Creek had a long history of flooding, the City of Lawrenceburg and the Lawrenceburg Conservancy District agreed to jointly build a floodwall along the creek. The District notified Metro Family of its intent to acquire the Tanner Creek property through eminent domain. It offered $417,000 -- the appraised fair market value. Metro Family refused the offer but eventually agreed on the sale of the property for $417,000 plus an irrevocable option to purchase 1.4 acres back for $269,490. The option was exercisable for 18 months after completion of the floodwall. Unfortunately, the floodwall was never built. The City withdrew from the project and the District could not complete it on its own. The District conveyed the Metro Family parcel to the City. The property was converted to highway use. Metro Family brought suit against the City and the District for breach of contract. Magistrate Judge Hussman (S.D. Ind.) concluded that there was a breach but that Metro Family was entitled to no monetary recovery. Instead, he ordered reformation of the contract and gave Metro Family 18 additional months within which to exercise the option. The City and the District appeal. Metro Family cross-appeals.

In their opinion, Judges Cudahy, Wood, and Evans vacated and remanded. The only issue on appeal was the remedy for the breach. In Indiana, reformation of the contract is available when there is a mutual mistake. The Court noted that the problem was not really a mutual mistake but a failure to allocate risk in the event the underlying project was canceled. Nevertheless, the Court believed that an Indiana court would use the mutual mistake concept -- that the parties shared a common assumption regarding a fact that was the essence of the agreement -- to find for Metro Family. Therefore, the Metro Family is entitled to the value of the option. The Court opined that the magistrate judge's reformation approach would have been appropriate if the option parcel was still undeveloped. Since exercising the option is no longer a viable alternative, however, the Court concluded that the next best approach was to compare the option price ($269,490) with the appraised value of the option parcel prior to the construction of the highway. Metro Family is entitled to the excess (if any) of the appraised value over the option price.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

FLYING J INC. v. CITY OF NEW HAVEN (December 5, 2008)

Flying J develops and operates travel plazas for truck drivers and other travelers. It purchased 50+ acres in New Haven, Indiana (the “City”) to develop a new travel plaza. The City opposed the development and took the position that it was not allowed under the then-current zoning. Flying J ultimately prevailed in the Indiana state courts on its challenge to the City’s position. Undaunted, the City amended its zoning ordinance to limit developments of this type to two acres. The Flying J development was the only parcel affected by this limitation. The City held several public meetings on the amendment but never gave Flying J specific notice of them. In August of 2007, the City advised Flying J that its development must comply with the two acre rule. Flying J filed suit in September, alleging violations of its rights under the U.S. and Indiana Constitutions. The district court dismissed for failure to state a claim. Flying J appeals.

In their opinion, Judges Bauer, Flaum and Williams affirmed. The Court first addressed the City’s position that the Court lacked jurisdiction under the principles of Williamson County. The Supreme Court in Williamson County held that takings claims in land use cases are not ripe until the local authority has reached a final decision, including a decision on a variance application and compensation. Courts have applied the doctrine to takings claims even when they are labeled as due process or equal protection claims. The Court noted that it has created an exception for claims alleging the malicious conduct of a government agent unrelated to a legitimate state objective. Flying J’s allegations of the City’s protracted litigation, its covert amendment to the ordinance, the ordinance’s application only to Flying J, and the potential conflicts of interest of several commission members fit its claim within that exception.

The Court next addressed whether Flying J stated a claim. Relying on its precedent in Wroblewski and Lauth, the Court identified the pleading standard for a class-of-one equal protection claim. In those cases, the plaintiff must negate any set of facts that provides a rational basis for the classification challenged. Animus of the defendant comes into play only after the plaintiff has pled facts that show the irrationality of the government’s conduct. Flying J does allege facts that would show that the City took its actions in response solely to Flying J’s development but it does not allege facts to establish that the zoning amendment was irrational. Flying J’s allegations therefore do not overcome the presumption of rationality the government enjoys in cases of this nature.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

JOHNSON v. ORR (December 04, 2008)

David Johnson obtained a certificate of purchase for a tax-delinquent piece of land in Cook County (the “County”). The certificate allowed him to acquire the property by following certain notice requirements and by then petitioning the court. He complied with the notice requirements. Before he petitioned the court, the County realized that its determination of delinquency was in error. The County and Johnson agreed to an order, entered by the court, declaring the tax sale in error and directing the cancellation of the certificate and return of the purchase price. Notwithstanding the order, Johnson petitioned the state court for a deed. Johnson later filed suit in federal court. He alleged that the County’s failure to issue the deed violated his constitutional rights and the Interstate Land Sales Full Disclosure Act, as well as various other state statutory and common laws. The court granted defendant’s motion to dismiss, ruling that the complaint sought review of a state court decision in violation of the Rooker-Feldman doctrine and that jurisdiction was barred by the Tax Injunction Act (“TIA”). Johnson appeals.

In their opinion, Judges Ripple, Evans and Tinder affirmed. The Court first addressed the Rooker-Feldman doctrine. That doctrine deprives federal courts (except the Supreme Court) of jurisdiction to hear a party complain about the effects of a state court judgment. Although Johnson attempted to style his request for relief as something other than an attack on the state court judgment, the Court looked beyond the complaint to identify the actual injury. Johnson’s injury, the state court’s failure to grant him a tax deed, comes directly from the order entered by the court canceling the certificate. The gravamen of his complaint is that the court’s order was erroneous. The district court therefore lacked subject matter jurisdiction of Johnson’s constitutional claims. Johnson also alleged a violation of the Interstate Land Sales Full Disclosure Act (the “Act”), a federal statute. Although a claim pursuant to a federal statute would normally provide subject matter jurisdiction, the Court stated that such a claim should be dismissed if it is “wholly insubstantial and frivolous.” The Court concluded that Johnson’s claim was just that. The Act applies only to sales of real estate. Here, the County did not sell the property and Johnson did not buy the property. Even if there was a sale, the Court observed that the Act would not apply because it contains an exemption for a sale by a government body. Although it did not have to, the Court did briefly address the TIA issue. It disagreed with the district court’s conclusion that the TIA applied. The TIA only applies where the relief requested would reduce the State’s tax benefit or impede the collection of taxes. The Court found neither present in the case.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link