Opinion
1:02-cv-01747-LJM-VSS
December 20, 2002
ORDER
Plaintiffs are lot owners in a subdivision in Indianapolis, Indiana, known as Sunset Heights. The deed to each lot in the subdivision contains the following covenant: "2. All lots in this subdivision shall be known and designated as residential lots." In addition, covenant number 12 provides that the covenants will run with the land unless or until a majority of the lot owners vote otherwise. No such vote had taken place nor had anyone represented that it had. After a hearing on the petition of the St. Luke Methodist Church, the Metropolitan Development Commission vacated restriction #2 on lots 37, 38, and 39 of Sunset Heights, First Section.
Plaintiff lot owners have asked this Court for a Declaratory Judgment finding that the Commission's action in vacating the covenant is in violation of 42 U.S.C. § 1983 because its action constitutes an unconstitutional taking of private property for a private use contrary to the Fifth Amendment to the U.S. Constitution. The allegation is that each lot owner covered by the plat has a property interest represented by the restrictive covenant. The plaintiff lot owners have asked this Court for a preliminary and permanent injunction against the Metropolitan Development Commission enjoining it from implementing the approval of the vacation petition. After hearing and argument on the request for a Preliminary Injunction the Court now issues its opinion.
I. BACKGROUND
The St. Luke Methodist Church, located adjacent to the Sunset Heights subdivision, is in the process of expanding its parking lot. It has purchased three lots in the subdivision and seeks to raze the residences located on those lots, expand its parking lot thereon, and make a curb cut designed to provide egress from the already existing and adjacent parking lot. In order to implement its plan the Church filed its Petition for Vacation of Plat Covenant No. 2, as it relates to Lots 37, 38, and 39 of Sunset Heights.
There is some history between St. Luke and the Sunset Heights subdivision. On March 22, 2000 representatives of St. Luke and a not-for- profit corporation known as Sunset Heights Neighborhood Association entered into an agreement which both parties thought settled their differences. St. Luke represented to the Commission that the agreement was binding upon all the lot owners and that those who appeared to the contrary at the vacation hearing were welshing on the agreement. The Neighborhood Association purported to act only for its members. The lot owners appearing at the hearing were not members. Membership in the association is voluntary.
No investigation was made by representatives of St. Luke to determine whether the Association could or did bind all the lot owners prior to the signing of the agreement. Paragraph 13 of the agreement says only that the signatories on the agreement are who they say they are and that they can speak for the members of the association. No representation was made that they spoke for any of the lot owners that were not members or that they were empowered to speak for even a majority of the lot owners pursuant to covenant 12.
There is more history between the parties which resulted in the expansion of the church parking onto what were residential lots. No lot owners appeared before the Commission at that prior time to remonstrate as they now do.
The Metropolitan Development Commission, on October 2, 2002, made its amended findings of fact and found that:
1) The Conditions in the Platted Area Have Changed so as to Defeat the original Purpose of the Plat because: It is unclear whether the plat covenants would prohibit parking on the lots without the vacation. In addition, the Dwelling District Zoning Ordinance has been amended since the recording of the plat to allow religious uses as a permitted use. Also the church's membership has increased substantially and to avoid parking on adjacent residential streets additional parking is necessary and that can be accomplished only through the use of adjacent residential lots.
2) It is in the Public Interest To Vacate All Or Part Of The Plat because: without the additional parking that would be provided by the use of the residential lots for parking, the parking for church services would spill over onto Holliday Drive, which is something that persons living on Holliday Drive do not want.
Neighbors have objected to the church regarding parking on Holliday Drive by church members. Thus the neighborhood association, on behalf of the neighbors or public, entered into an agreement with the church whereby the church would provide additional parking on the residential lots to avoid parking on Holliday Drive.
The Commission made a third finding that is not addressed in this opinion because it does not effect the outcome of this analysis.
The Metropolitan Development Commission raises three defenses. First, it alleges that this Court has no jurisdiction to hear the dispute because plaintiff lot owners failed to exhaust state court administrative remedies before bringing the suit. Second, it alleges that it is the wrong party and that the suit should be against the church. Third, it alleges that a parking lot is a public use and its action in vacating the covenant in favor of a parking lot was, in fact, for a public use and thus does not violate the Fifth Amendment to the U.S. Constitution.
The staff of the Commission recommended that the request for vacation be denied. The staff made that recommendation out of concern that the Comprehensive plan recommends "very low-density residential development of zero to two units per acre." Further, the staff found that "[a] rezoning of the site to the SU-1 classification for the express purpose of a parking lot expansion would negatively impact the adjoining properties, would be an intrusion into an established residential neighborhood, and would be detrimental to the established neighborhood." The staff raised other concerns about the rezoning but the Court is concerned about those just set out.
II. PRELIMINARY INJUNCTION STANDARD
A preliminary injunction is an extraordinary remedy that will only issue on a clear showing of need. See Cooper v. Salazar, 196 F.3d 809, 813 (7th Cir. 1999) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)). The movant bears the burden of proving its entitlement to such relief. Cooper, 196 F.3d at 813. Generally, in order to obtain an injunction, a plaintiff must show: 1) a reasonable likelihood of success on the merits; 2) irreparable harm; 3) the inadequacy of any remedy at law; 4) the balance of hardships tipped in its favor; and 5) the adverse impact on the public interest. See Cooper, 196 F.3d at 813; Ferrell v. U.S. Dep't of Housing Urban Dev., 186 F.3d 805, 811 (7th Cir. 1999); Rust Environment Infrastructure, Inc. v. Teunissen, 131 F.3d 1210, 1213 (7th Cir. 1997); JAK Prods. Inc. v. Wiza, 986 F.2d 1080, 1084 (7th Cir. 1993). The first three factors are considered threshold questions that must be satisfied before balancing the interests of the parties or weighing the impact on the public interest. See Cooper, 196 F.3d at 813. The Court must "balance the harms to both parties using a `sliding scale' analysis: the greater the moving party's likelihood of prevailing on the merits, the less strongly it must show that the balance of harms weighs in its favor." Ferrell, 186 F.3d at 811 (citing Allied Signal, Inc. v. B.F. Goodrich Co., 183 F.3d 568, 573-74 (7th Cir. 1999); Roth v. Luthern Gen'l Hosp., 57 F.3d 1446, 1453 (7th Cir. 1995); Storck U.S.A., L.P. v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994)).
III. MEMORANDUM OPINION
Much of the legal analysis of this case is directed by Daniels v. Area Plan Commission of Allen County, 306 F.3d 445 (7th Cir. 2002). That case involved the vacation of the same residential only covenant as this case and the constitutional issues set out therein are, on the dispositive issues, very similar to those raised in the instant case. It is interesting to note that the findings of fact of the local zoning agency were much more extensive in Daniels than in this case.
Certain of the defenses raised by the Commission were addressed in Daniels. Exhaustion of state remedies is one of those issues. There is Supreme Court precedent that would lead a reasonable lawyer to suggest that this Court has no jurisdiction in this case because plaintiffs did not seek state remedies for the alleged taking. Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985). Daniels discusses the issue extensively and concludes that when no money loss is alleged and injunctive relief alone is sought, as it is here, Williamson County exempted the Daniels from the exhaustion requirement. This case falls within that same exception to the exhaustion doctrine. The suit requests no money damages and asks for injunctive relief. For these reasons, this Court does have jurisdiction to entertain this dispute.
The defense alleges further that the church must be a defendant in this action. Because the church can not restore the property right at issue here it need not be a party to this suit.
The dispositive issue before the Court is whether the taking of a recognized property right, the covenant existing in all the lot owner deeds, in order to allow the church to expand its parking lot is a taking for a public or private use. The property right at issue here, as in Daniels, is the very covenant that the defendant vacated. Daniels recognized that in Indiana such a covenant creates a property right in each lot owner within the plat. Daniels, 306 F.3d at 459. Thus, the plaintiff lot owners here have a right to enforce the covenant and because it was taken from them by the defendant Commission, the ensuing right to attempt to set aside the vacation.
Daniels contains an extensive discussion of public and private use. The taking here, as is recognized by both sides, must be for a public use or public purpose. Both sides understand that the relevant prohibition of the Fifth Amendment is "nor shall private property be taken for public use, without just compensation."
The issue is refined further by acknowledging Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 80 (1937), wherein the U.S. Supreme Court said, "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." As pointed out above, the issue is not whether the taking was justly compensated. The issue is whether the taking was for a public purpose or use.
Daniels directs this Court to determine whether the Indiana legislature has made a determination under the applicable statute of what is a public use. Daniels found that in the case of the statute at issue here, Indiana Code § 36-7-3-11(e), the legislature has not made a specific determination of what constitutes a public use and has delegated that duty to the local plan commission. The court in Daniels expressed concern that as a result, we are left with a local plan commission "making unrestrained decisions as to what constitutes a public use." Daniels, 306 F.3d at 461.
In this case the defendant found vacation restrictive covenant number 2 in the public interest because "without the additional parking that would be provided by the use of residential lots for parking, the parking for church services would spill over into Holliday Drive. . . ." It then stated, "Thus the neighborhood association, on behalf of the neighbors or public, entered into an agreement with the church whereby the church would provide additional parking on the residential lots to avoid parking on Holliday Drive."
Thus, the defendant's findings illustrate that the purpose for the vacation is the alleviation of parking on Holliday Drive. Present in the findings also is a reliance upon the neighborhood association's agreement on behalf of the "neighbors or public."
The statute upon which the defendants rely reflects a second finding that was virtually ignored by defendants. That requirement is found at Indiana Code § 36-7-3-11(e)(1). According to that statute, the zoning agency must find that conditions in the platted area have "changed so as to defeat the original purpose of the plat." Id. In other words, as suggested by Daniels, a finding that the taking is in the public interest or for a public use is not enough to support the vacation. In discussing the facial constitutionality of the statute the Daniels court said:
Additionally, a local plan commission is not completely without guidance [in determining whether a taking is justified] under [Indiana Code §] 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."
Daniels, 306 F.3d at. 486 (quoting Ind. Code § 36-7-3-11(e)). Thus the constitutional application of the statute depends upon this additional finding of change that is so extensive as to frustrate the original purpose of the plat.
The only findings made by the defendant about any defeat of the original purpose of the plat are as follows:
[I]t is unclear whether the plat covenants would prohibit parking on the lots without the vacation. In addition, the Dwelling District Zoning ordinance has been amended since the recording of the plat to allow religious uses as a permitted use. Also the church's membership has increased substantially and to avoid parking on adjacent residential streets additional parking is necessary and that can be accomplished only through the use of residential lots.
Absent from this recitation is any finding that the conditions of the platted area have changed so as to defeat the original purpose of the plat. There is no finding by the defendant that parking has made maintaining a residence in this neighborhood either unfeasible or even changed. The only change mentioned in any of the findings is the increased membership of the church and additional parking on the street caused by the church itself.
Daniels makes clear that the legislature, by enacting Indiana Code § 36-7-3-11, has required that in order for a zoning agency to constitutionally apply the statute it must find that the conditions in the platted area have changed so as to defeat the original purpose of the plat. Because defendant has not made such a finding, plaintiffs have established a strong likelihood of success in proving that the Commission unconstitutionally applied the statute when it vacated the covenants upon the three lots.
On the issue of irreparable harm, the Commission points out that the Church has spent a great deal of time and money in reliance upon the agreement of the homeowners association. The home owners association is not created in the covenants and thus is not inclusive of all home owners.
Neither do the incorporating papers of the association represent that it is made up of all the home owners. The agreement upon which the church relied at the vacation hearing does no purport to represent the will of all or even a majority of the lot owners. Therefore, the reliance by the church and by the Commission upon the agreement is misplaced. The Commission cannot rely upon the agreement as an expression of all the lot owners. Notice of the hearing went to all the lot owners and not just to the Association.
Plaintiffs have no adequate remedy at law in this case. The harm is constitutional.
In balancing the harm to the parties, the strength of the lot owners' case weighs heavily in their favor. Whether this Court can consider the hardship on a non-party, the church in this case, is not at all clear. Even if it were clear that the church's hardship came into the balance, the church's reliance on an agreement with the homeowners' association that does not represent even a majority of the home owners, would not carry the day.
Finally, it is in the public interest to protect the constitutional rights of the owners of covenants such as those in this case. The Commission must abide by constitutional principles in the vacation of restrictive covenants.
IV. CONCLUSION
For the reasons discussed herein, the plaintiffs' motion for preliminary injunction is GRANTED. It is further ordered that covenant #2 in the Sunset Heights subdivision remain in force and effect until further order of the Court.