State ex rel. Shelly Materials, Inc. v. Clark County Board of Commissioners

Pfeifer, J.,

dissenting.

{¶ 43} I dissent from the majority opinion, which muddles takings law in Ohio by ignoring precedent. This case is in all relevant regards identical to State ex rel. R.T.G., Inc. v. State, 98 Ohio St.3d 1, 2002-Ohio-6716, 780 N.E.2d 998. However, in direct contradiction to R.T.G., the majority concludes here that “Shelly’s sand and gravel interests in its property are not severable as separate property interests because the deed did not specify a transfer of mineral rights alone, but transferred fee simple title to Shelly,” holding that this conclusion is supported by a “limitation” on our previous holding in R.T.G.

*347{¶ 44} The court’s holding is erroneous for several reasons: (1) it actually overrules R.T.G. instead of limiting it, (2) it makes arbitrary distinctions between the facts in R.T.G. and the facts of this case, and (3) it relies on a ground that was neither argued by the parties nor adopted by the court of appeals. Moreover, even if the court’s sua sponte limitation of R.T.G. is appropriate, a reversal and remand are warranted so that Shelly is afforded the opportunity to raise a Penn Cent. taking claim. Penn Cent. v. New York City (1978), 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631.

{¶ 45} First, the court’s holding — that a mineral estate may be considered the relevant parcel for a regulatory-taking determination only if the mineral estate was purchased separately from other interests in the real property — actually overrules R.T.G. rather than limiting or clarifying it. In R.T.G., 98 Ohio St.3d 1, 2002-Ohio-6716, 780 N.E.2d 998, syllabus, and ¶ 49-50, the court held that regardless of whether a mineral-extracting company purchases property in fee simple or through mineral-rights leases or purchases, as long as the company does so for the sole purpose of mining the minerals from the property, the mineral estate is severable from the remainder of the property owned in fee, and the relevant parcel for a takings analysis is the severed mineral estate.

{¶ 46} R.T.G. did not require that the deed to the property transferred to a mineral-extracting company “specify a transfer of mineral rights alone” in lieu of a fee interest. Instead, the court specifically held that “RTG acquired all the property at issue herein, whether in fee or through coal leases or purchases, for the sole purpose of surface-mining the coal * * * ” and that all of that mineral estate was the relevant parcel for a takings analysis. (Emphasis added.) R.T.G. at ¶ 50.

{¶ 47} In effect, the majority opinion adopts the holding of the court of appeals in R.T.G., which distinguished between owning mineral rights separately and owning those rights as part of the property purchased in fee. R.T.G. at ¶ 19-23. But in R.T.G., we reversed the portion of the court of appeals’ judgment that did not sever the mineral estate from the property owned by R.T.G. in fee:

{¶ 48} “We reverse the judgment of the court of appeals in part and hold that the UFM [unsuitable for mining] regulation resulted in a taking of RTG’s coal that lies under the tracts of land in which RTG owned only coal rights and that are located within the UFM-designated area, as well as the coal rights that lie under the tracts of land that RTG owned in fee and that are located in the UFM-designated area.” (Emphasis added.) Id. at ¶ 3.

{¶ 49} Therefore, the so-called “limitation” or “clarification” of R.T.G. espoused by the majority manifestly overrules R.T.G. instead of limiting or clarifying it. That is, the majority’s application of its holding here would have resulted in a completely different outcome in R.T.G.

*348{¶ 50} Yet the majority concedes that R.T.G. cannot be overruled here. That is because the majority is constrained by the hopelessly random and formulaic approach to overruling precedent set forth in Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256. The GafoNs-related problems with overruling R.T.G. in the context of this appeal are that (1) neither the parties nor the court of appeals argues or otherwise suggests that R.T.G. was either wrongly decided or should be overruled, (2) even if appellee — the board of county commissioners — had requested that R.T.G. be overruled because it was wrongly decided, an incorrect decision satisfies only the first part of the court’s three-part Galatis test to overrule precedent, and (3) there is no evidence or argument supporting the latter two requirements for overruling R.T.G. pursuant to Galatis. In State ex rel. Grimes Aerospace Co., Inc. v. Indus. Comm., 112 Ohio St.3d 85, 2006-Ohio-6504, 858 N.E.2d 351, ¶ 6, this court denied a request to overrule precedent, because the appellant had failed to argue that the final two Galatis requirements were met.

{¶ 51} Thus, instead of explicitly overruling R.T.G., the majority opinion arbitrarily distinguishes the facts in R.T.G. from the facts in this case. The majority concludes that R.T.G. “was largely dependent on unique circumstances,” including that “[b]ecause a majority of the property had been leased for its coal rights, a separate mineral estate was created for the greater portion of R.T.G.’s land” and that R.T.G. “already had received conditional-use permits for some of the acreage and had been surface mining the coal in the area for ten years.” The majority may have just as well have distinguished R.T.G. on the basis that in this case, the parties’ names are different.

{¶ 52} The first limitation suggested by the majority is that as long as most of the total property acquired is only the mineral estate, the property owner will receive the benefit of the R.T.G. holding for any remaining property it owns in fee simple. This is a peculiar and arbitrary distinction. At issue in R.T.G. were approximately 500 acres owned by the coal-mining company: 200 acres of property in fee and approximately 300 acres of owned or leased coal rights only. R.T.G. at ¶ 5. We held that for all of this property — including that portion of the roughly 200 acres that R.T.G. owned in fee and was within the UFM-designated area — the mineral rights were severable and would be treated as the relevant parcel for R.T.G.’s taking claim. R.T.G. at ¶ 50. The fact that a majority of the acreage involved only mineral rights was not cited as a relevant fact in R.T.G. This court dealt with the property owned in fee separately, without consideration of the character of the other property. The majority’s odd distinction is not supported by any logical or equitable rationale.

{¶ 53} The other limitation set forth by the majority — that R.T.G. had already received permits for some of its property before the regulatory taking occurred— *349is also not a basis to distinguish this case from R.T.G. Both the United States Supreme Court and this court have recognized that the denial of a permit to allow a property use can constitute a compensable taking if the effect of the denial is to prevent all economically viable use of the land. United States v. Riverside Bayview Homes, Inc. (1985), 474 U.S. 121, 127, 106 S.Ct. 455, 88 L.Ed.2d 419; State ex rel. BSW Dev. Group v. Dayton (1998), 83 Ohio St.3d 338, 343, 699 N.E.2d 1271. And as the majority acknowledges, a regulatory-taking claim is not barred by the mere fact that the property owner acquired the property with knowledge of a preexisting land-use restriction. Palazzolo v. Rhode Island (2001), 533 U.S. 606, 627-628, 121 S.Ct. 2448, 150 L.Ed.2d 592; State ex rel. Shemo v. Mayfield Hts. (2002), 95 Ohio St.3d 59, 765 N.E.2d 345. R.T.G. had in fact received permits to mine only 107.4 of its roughly 500 acres at the time of the state’s UFM designation. R.T.G. at ¶ 5-13. Therefore, for about 80 percent of its property, R.T.G. was in no different a position than Shelly was in here— without any permit to mine.

{¶ 54} The third flaw in the majority’s holding is that its “limitation” — that “Shelly’s sand and gravel interests in its property are not severable as separate property interests because the deed did not specify a transfer of mineral rights alone, but transferred fee simple to Shelly * * * ” — was not raised by the parties or the court of appeals. (Emphasis added.) Neither party requested and the court of appeals did not conclude that R.T.G. should be so “limited.” Instead, the board of county commissioners and the court of appeals sought to distinguish R.T.G. on the erroneous grounds of no vested rights, preexisting knowledge of land-use restrictions, and background principles of zoning law. Shelly, 2005-Ohio-6682, 2005 WL 3454751, 1113-16, 20-21.

{¶ 55} The problem with deciding a case on an issue that did not form the basis for either the trial court’s decision or the parties’ arguments is that “[wjhile appellate courts have the power to raise issues sua sponte, they should cease deciding cases on such issues without giving the parties an opportunity to be heard through supplemental briefing and argument * * * [because the] failure to do so is inconsistent with the fundamental principles of due process that a party should have notice of, and the opportunity to be heard on, the determinative issue in the case.” (Emphasis sic.) Milani & Smith, Playing God: A Critical Look at Sua Sponte Decisions by Appellate Courts (2002), 69 Tenn.L.Rev. 245, 315. The preferable course is to request supplemental briefing on issues that are not raised by the parties and that are susceptible of reasonable disagreement and are considered to be potentially dispositive. See, e.g., State v. Drummond, 111 Ohio St.3d 14, 2006-Ohio-5084, 854 N.E.2d 1038, ¶ 28; Kish v. Akron, 106 Ohio St.3d 1402, 2005-Ohio-3118, 829 N.E.2d 1215; State v. Yarbrough, 104 Ohio St.3d 1, 2004-Ohio-6087, 817 N.E.2d 845, ¶ 4.

*350{¶ 56} Finally, even if the majority’s sua sponte overruling of R.T.G. were appropriate, it should have remanded the cause to the appellate court for further proceedings to permit Shelly to assert a Penn Cent, taking claim. It is hardly equitable to apply an overruling or “limitation” of precedent that neither party requested and then apparently simultaneously preclude the party harmed by that holding from raising a new taking claim. Because Shelly could not have reasonably foreseen that this court would apply a limitation to our R.T.G. holding that neither party advocated and the court of appeals did not find, Shelly could not have intentionally waived a Penn Cent, claim under these circumstances. Pursuant to Penn Cent., the conditional-use limitation would not necessarily mean that Shelly’s economic expectation of being able to obtain the permit to extract sand and gravel was so unreasonable that it would defeat Shelly’s taking claim. This is particularly true when the denial of Shelly’s conditional-use permit was affirmed by a sharply divided panel of the court of appeals in which even the majority found that the evidence supporting the denial was “far from overwhelming.” Shelly Materials, Inc. v. Daniels, Clark App. No. 2002-CA-13, 2003-Ohio-51, 2003 WL 77176, ¶ 84.

{¶ 57} In sum, notwithstanding the majority’s view that Shelly requests that we “expand” or “broaden” R.T.G., Shelly simply requests that we apply R.T.G. here. So applied, R.T.G. does not require a separate purchase of the mineral estate in order for the estate to be considered the relevant parcel for a compensable regulatory taking. R.T.G. merely requires evidence that the property owner’s interest in purchasing the property was solely for the purpose of mining the minerals. Id. at syllabus and ¶ 50. Consistent with the court’s precedent in R.T.G., Shelly submitted an uncontroverted affidavit that its sole purpose in purchasing the property was to mine sand and gravel. The board of county commissioners never contested that evidence.

{¶ 58} Therefore, because the court’s holding effects a sub silentio overruling of R.T.G. that neither the parties nor the court of appeals requested and is not supported by any logical factual distinction, I dissent. Only Galatis keeps the majority from its true objective. Without Galatis, the court could have explicitly overruled R.T.G., which would have at least lent clarity to takings law in Ohio. Now, parties will be left to wonder what the law is and which irrelevant fact from R.T.G. might be used in the future to further limit its application.

{¶ 59} Meanwhile, the evidence mounts against the precedential value of Galatis. As to its own magical second element — “workability”—Galatis continues to come up short, which may some day result in this court’s overruling Galatis on the authority of Galatis. See Dwight Latham and Moe Jaffe, “I’m My Own Grandpa.”

Bieser, Greer & Landis, L.L.P., Carla J. Morman, and David C. Greer, for appellant. Onda, LaBuhn, Rankin & Boggs Co., L.P.A., Timothy S. Rankin, and Benjamin W. Ogg; Stephen A. Schumaker, Clark County Prosecuting Attorney, and Andrew J. Pickering, Assistant Prosecuting Attorney, for appellee. Brady, Coyle & Schmidt, L.L.P., Brian P. Barger, and Margaret G. Beck, urging reversal for amicus curiae, Ohio Aggregates and Industrial Minerals Association.