Benson v. City of Portland

ROSSMAN, P. J.,

dissenting.

I do not agree with the majority that PCC 24.80 does not effect an unconstitutional taking of petitioner’s properties. One of the primary purposes of Article I, section 18, of the Oregon Constitution, is to ensure that public burdens are paid for by the public and not by a particular individual. I agree that relieving the hazards associated with blighted areas and dilapidated housing is a laudable goal and one of high social order. However, it is the duty of this court to guarantee that the accompanying financial burden is not placed on private property owners in a manner that offends constitutional principles. In my opinion, Article I, section 18, simply does not permit the city, without providing just compensation, to force owners to either lease their buildings to third parties or to ransom their property rights.

Article I, section 18,1 provides, in relevant part:

“Private property shall not be taken for public use * * * without just compensation * *

*414To establish that PCC 24.80 is facially invalid, petitioner must demonstrate that the ordinance (1) effects a taking of private property, (2) commits the property to a public use, and (3) does not include an offsetting provision for fair compensation. I note at the outset that PCC 24.80 does not contain a fair compensation provision. My analysis, therefore, focuses on whether it effects a taking of private property for a public use. I am convinced that it does.

One of the flaws in the majority’s analysis is its reliance on Nelson v. Benton County, 115 Or App 453, 839 P2d 233 (1992). As the majority recognizes, the issue there was whether the county’s determination that the petitioner’s 1.37-acre parcel was not a nonfarm dwelling constituted a regulatory taking. Thus, the petitioner was required to show that the legislation deprived him of “an economically viable and substantial beneficial use of his property[.]” Nelson v. Benton County, supra, 115 Or App at 458. Here, however, petitioner does not contend that PCC 24.80 effects a regulatory taking. Rather, he alleges that PCC 24.80.020G’s requirement that a derelict building be “reoccupied” for it to regain non-derelict status effects a physical taking of an owner’s property by forcing him to offer his property for rent. I believe that he is correct.

A physical taking occurs under the Oregon Constitution when government action substantially interferes with an owner’s use and enjoyment of the owner’s property. Hawkins v. City of La Grande, 315 Or 57, 68, 843 P2d 400 (1992). The term “property” in Article I, section 18, does not refer to the physical thing over which the owner exercises control, but “denote[s] the group of rights inhering in the [owner’s] relation to the physical thing, as the right to possess, use and dispose of it.” Lincoln Loan v. State Hwy. Comm., 274 Or 49, 55, 545 P2d 105 (1976), quoting Cereghino v. State Highway Com., 230 Or 439, 445, 370 P2d 694 (1962). (Emphasis supplied.) One of the most coveted rights held by a landowner is the right of possession, which includes the right to exclude others from occupying the property. Restatement of Property § 7 (1936); Igo et al. v. Butler et al., 199 Or 423, 428, 262 P2d 675 (1953). Indeed, the right to exclude “has traditionally been considered one of the most treasured strands in an owner’s bundle of property rights.” Loretto v. Teleprompter *415Manhattan CATV Corp., 458 US 419, 440, 102 S Ct 3164, 73 L Ed 2d 868 (1982); Kaiser Aetna v. United States, 444 US 164, 176, 100 S Ct 383, 62 L Ed 2d 332 (1979). Accordingly, when the Supreme Court has perceived that the government has negated the right to exclude by authorizing a third party to occupy a landowner’s property, it has found aphysical taking. See Loretto v. Teleprompter Manhattan CATV Corp., supra; Kaiser Aetna v. United States, supra.2

In Loretto v. Teleprompter Manhattan CATV Corp., supra, the Court reviewed a New York statute that required an owner of residential property to “permit a cable television company to install its cable facilities upon his property.” 458 US at 426. The regulation effected an unconstitutional physical taking, because it “required the landlord to suffer the physical occupation of a portion of his building by a third party.” 458 US at 440. (Emphasis in original.) The lesson learned from Loretto is that the government effects a physical taking whenever “it requires the landowner to submit to the physical occupation of his land.” Yee v. City of Escondido, Cal., 503 US_, 112 S Ct 1522, 1528, 118 L Ed 2d 153, 165 (1992). (Emphasis in original.) Indeed, “this element of required acquiescence is at the heart of the concept of occupation.” FCC v. Florida Power Corp., 480 US 245, 252, 107 S Ct 1107, 94 L Ed 2d 282 (1987). Thus,

“whether the government floods a landowner’s property, or does no more than require the landowner to suffer the installation of a cable, the Takings Clause requires compensation if the government authorizes a compelled physical invasion of property.” Yee v. City of Escondido, Cal., supra, 503 US at_, 112 S Ct at 1528. (Citations omitted.)

Here, PCC 24.25.215 provides that a building is “unoccupied” if it is “not being used for a lawful occupancy.” However, the ordinance does not define the term “occupancy” or indicate when a building is considered “reoccupied.” When a statute or ordinance does not define a term used therein, the term will be defined in accordance with its ordinary meaning. Nicolai-Morgan Products Co. v. Employment Div., 102 Or App 578, 582, 795 P2d 598 (1990); Naumes *416of Ore. v. Employment Div., 23 Or App 57, 61, 541 P2d 141 (1975). The ordinary meaning of “reoccupy” can be discerned from treatises that have defined the term and from statutes and case law3 that have resolved when a building is “occupied” for purposes of determining coverage under a fire insurance policy.4

A building is “occupied” when it is used in a manner consistent with the purpose for which it was designed. 67 CJS, “Occupy.” See also ORS 479.010(l)(f).5 Thus, a residential building is ‘ ‘occupied” when it is ‘ ‘in actual use by human beings who are living in it as aplace of habitation.”6 Schoene-man v. Hartford Fire Ins. Co., 125 Or 571, 575, 267 P 815 (1928); Weidert v. State Ins. Co., 19 Or 261, 283-84, 24 P 242 *417(1890); ORS 479.010(l)(h).7 It is not necessary that there be someone constantly in the dwelling, but only

“that it is the place of usual return and habitual stoppage. It is not sufficient, therefore, that furniture, tools, or other chattels may he left in the building, or that it is occasionally [or frequently] visited and inspected by some one [sic], or is used and controlled, though not inhabited, by a tenant, or is used temporarily as a place of abode.” Schoeneman v. Hartford Fire Ins. Co., supra, 125 Or at 575.

To “reoccupy” a residential building that falls into a derelict state, either the owner or a third party must take up permanent residence there. It is untenable to expect an owner to move from a current home into the derelict building and establish permanent residence there merely to satisfy the “reoccupancy” requirement; indeed, if a person owns more than one building, unless that person has the comparable powers of elasticity of a super-hero like Plastic Man, it would be physically impossible for the person to “reoccupy” all of them. As a practical matter, the owner is required to admit persons as tenants, with all the pos-sessory and other rights accorded that status, or be subject to a $400 annual fee.8 PCC 24.80.020G thus compels owners to rehabilitate their properties and offer them for rent, thereby requiring owners to be residential landlords and depriving them of their quintessential rights of possession and exclusion. In short, the city has required nonresident owners either to consent to a physical invasion of their properties or pay a fee as a penalty.

*418I would reach the same conclusion if the subject property was commercial rather than residential. To be “occupied,” a commercial building must be in use by a person who is operating it as a place of business.9 See 67 CJS, “Occupy”; Weidert v. State Ins. Co., supra, 19 Or at 283-84. It is unrealistic to expect an owner to launch a new business or, assuming that the owner is in business for himself or herself, to move the concern to the “derelict” building, to ensure that the building is “reoccupied.” As is the case with residential properties, the owner is required, as a practical matter, to lease the property to a third party to fulfill the ‘ ‘reoccupancy’ ’ requirement.10 It is the nature of the invasion that is determinative — the owner is forced to accept the occupation of the property by a third party and is deprived of the elemental rights of possession and exclusion.

The majority argues that my interpretation of PCC 24.80 is inconsistent with this court’s obligation to construe the ordinance as constitutional if a reasonable construction is possible. I recognize that we do have such a duty, but do not believe that PCC 24.80 is susceptible to a reasonable interpretation that would render it constitutional. The majority, without ever defining the term “occupancy,” suggests that we interpret the “reoccupancy” requirement as being satisfied “with ongoing commercial and myriad other uses of the buildings, by petitioner or his agents * * *.”11 119 Or App at 410. However, as mentioned previously, assuming that an owner is financially able and that the building is amenable to commercial use, the owner cannot be forced to launch a commercial venture merely to fulfill the “reoccupancy” requirement. Nor do I think it would be feasible for an owner, or anyone else, to use a “derelict” residential building that is *419located in a residential area for commercial purposes. Indeed, in all likelihood, the applicable zoning requirements would prohibit such a use. I believe that the majority’s reading of PCC 24.80 overlooks the true implications of the “reoccupancy” requirement and ignores the practicalities of the situation.

I believe that this case is not far removed from Seawall Assocs. v. City of NY, 74 NY2d 92, 544 NYS2d 542, 542 NE2d 1059 (1989), which squarely addresses the question presented here, i.e., whether tenancies coerced by the government effect a physical taking of the land owner’s property, and provides what I believe is the correct answer. In Seawall, the City of New York enacted an ordinance which, among other things, required owners of single-room occupancy properties to restore all units to habitable condition and to lease them to a bona fide tenant for an indefinite period. The ordinance also required owners to pay a $500 per unit penalty for each unit that remained unrented. In holding the ordinance unconstitutional on its face, the court stated:

“Where, as here, owners are forced to accept the occupation of their properties by persons not already in residence, the resulting deprivation of rights in those properties is sufficient to constitute a physical taking for which compensation is required [under New York’s state constitution and the Fifth Amendment].
a* * * * *
“Although the Supreme Court has not passed on the specific issue of whether the loss of possessory interests, including the right to exclude, resulting from tenancies coerced by the government would constitute a per se physical taking, we believe that it would. Indeed, it would be difficult to see how such forced occupancy of one’s property could not do so.
“By any ordinary standard, such interference with an owner’s rights to possession and exclusion is far more offensive and invasive than the easements in Kaiser Aetna or Nollan [v. California Coastal Comm’n, 483 US 825, 837, 107 S Ct 3141, 97 L Ed 2d 677 (1986)] or the installation of the CATV equipment in Loretto.” 74 NY2d at 103-04.

Although Seawall is not binding on this court, I find the opinion well reasoned and persuasive.12 I conclude that Portland’s *420requirement that a derelict building be “reoccupied” requires a physical invasion that substantially interferes with a landowner’s possessory rights and, therefore, constitutes a physical “taking” of his property.13

I also believe that the destruction of an owner’s building, under PCC 24.80.020G, is a compensable taking under Article I, section 18. A municipality can, pursuant to its police power and without compensating the owner, demolish a structurally impaired building that threatens the public welfare only if the owner, after reasonable notice and opportunity, refuses to repair it. Shaffer v. City of Winston, 33 Or App 391, 394-95, 576 P2d 823 (1978). PCC 24.80 effects an unconstitutional taking, because it does not give the owner this “prior opportunity for repair.” 33 Or App at 395 n 3. To be free from the burdens imposed by the ordinance, the owner must not only repair the building, the owner must also have it reoccupied, a requirement that I believe achieves a taking of the property in and of itself.

I also conclude that the requirements of PCC 24.80 compel owners of derelict'buildings to dedicate their properties for a “public use.” Two of the primary objectives of the ordinance are to mitigate the blighting impact of derelict buildings and to prevent buildings from falling into a derelict state. PCC 24.80.010. The city contends that the accomplishment of those objectives helps prevent neighborhoods from deteriorating to such an extent that the safety and welfare of *421the residents are threatened; indeed, it is well recognized that blighted areas receive “a disproportionate amount of attention of fire, police, and health departments.” Foeller v. Housing Authority of Portland, 198 Or 205, 239, 256 P2d 752 (1953).

In Foeller, the Supreme Court also recognized that, when a certain section of a city “sinks into a substandard condition which subjects the city’s health, morals and safety to uncommon hazards, the [taking] of the area by the public for the purpose of eradicating its evils and thwarting recrudescence summons the property to public use. ” 198 Or at 253. (Emphasis supplied.) Portland, therefore, by mandating that derelict buildings be repaired and “reoccupied” or destroyed as part of an effort to alleviate the hazards associated with blighted areas,

“is acting in its enterprise capacity, where it takes unto itself private resources in use for the common good. * * * Where government acts in its enterprise capacity * * * there is a compensable taking.” Fifth Ave. Corp. v. Washington Co., 282 Or 591, 613, 581 P2d 50 (1978), quoting Fred F. French Inv. Co., Inv. v. City of New York, 39 NY 2d 587, 593, 385 NYS 2d 5, 350 NE2d 381 (1976).

The majority criticizes my omission of certain language from the passage quoted above. It asserts that when the omitted language is inserted, it requires the conclusion that the city is acting in a purely regulatory capacity. 119 Or App at 412-13. What the majority has failed to acknowledge is that PCC 24.80 entails a government acquisition of property and that, consequently, the city is acting in its “enterprise capacity” by regulating the blighting impact of “derelict” buildings in the manner that it does.

I am convinced that the $400 fee payment provision fails to mitigate the constitutional infirmities of PCC 24.80. With that provision, Portland is saying, in essence, that it will not perform an unconstitutional act if the owner pays the city not to do it. The fact that the owner is permitted to avoid the unconstitutional taking of his property by paying a ‘ ‘ransom” to the city cannot make the ordinance constitutionally acceptable. Indeed, the stark alternatives offered by PCC 24.80 — either submit to an unconstitutional taking of property or pay *422$400 — amount to the type of exaction has been referred to as “an out-and-out plan of extortion.” Nollan v. California Coastal Comm’n, supra, 483 US at 837.

The city nevertheless argues that PCC 24.80 is a valid exercise of its police powers. That is probably true. I do not dispute that the city has authority to require owners of derelict buildings to renovate and “reoccupy” their properties or have them demolished. The issue is whether those requirements amount to a taking of property and whether the city — in accordance with the Article I, section 18 — must compensate the land owners for it.

The majority, quoting Eckles v. State of Oregon, 306 Or 380, 398, 760 P2d 846 (1988), asserts that the “[ejxercise of the ‘police power,’ unlike exercise of the ‘eminent domain power,’ does not require compensation.” 119 Or App'at 412. However, where a valid police power regulation also amounts to a taking of private property for a public use, compensation is required. As the United States Supreme Court noted in Loretto v. Teleprompter Manhattan CATV Corp., supra:

“The Court of Appeals determined that [the statute] serves the legitimate public purpose of ‘rapid development of and maximum penetration by a means of communication which has important educational and community aspects,’ * * * and thus is within the State’s police power. We have no reason to question that determination. It is a separate question, however, whether an otherwise valid [police power] regulation so frustrates property rights that compensation must be paid.” 458 US at 425. (Citations omitted; emphasis supplied.)

I conclude that PCC 24.80 so drastically interferes with an owner’s basic property rights that it effects a physical taking of the owner’s property for a public use. Even though the ordinance may be a permissible exercise of the city’s police power, absent an offsetting provision for fair compensation, I would hold that it effects a taking of property that violates Article I, section 18, of the Oregon Constitution. As Justice Holmes admonished in Pennsylvania Coal Co. v. Mahon, 260 US 393, 416, 43 S Ct 158, 67 L Ed 322 (1922):

“We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant *423achieving the desire by a shorter cut than the constitutional way of paying for the change.”

I dissent.

Petitioner’s claim is also based on the Fifth Amendment to the federal constitution. However, because I must consider petitioner’s state constitutional claim first, State v. Kennedy, 295 Or 260, 262, 666 P2d 1316 (1983), and because I believe that the ordinance effects a taking under Article I, section 18,1 do not reach petitioner’s federal takings clause claim. Nevertheless, I refer to the federal constitution and federal cases when of assistance in my analysis under the Oregon Constitution. See Suess Builders v. City of Beaverton, 294 Or 254, 259 n 5, 656 P2d 306 (1982); Cereghino v. State Highway Com., 230 Or 439, 445, 370 P2d 694 (1962).

In Loretto, the Court recognized that a physical taking may be found where the occupation is by the government itself or by third parties under its authority. 458 US at 433 n 9.

In determining whether a building is “occupied” within the meaning of a fire insurance policy, courts have not considered the term in a technical sense, but rather in a popular sense, and have accorded to it a reasonable and practical construction that is consistent with its common and ordinary meaning. Annot., 36 ALR3d 505 (1971 & 1992 Supp.); Annot., 47 ALR3d 398 (1973 & 1992 Supp.); National Sec. Fire & Cas. Co. v. James, 358 SO 2d 737, 739 (Ala. Civ. App. 1978) (noting that the term “unoccupied” as interpreted in a fire insurance policy comports with the definition that is commonly accepted by the general public); Jelin v. Home Ins. Co., 5 F Supp 908, (D NJ), aff'd 72 F2d 326 (3rd Cir 1934) (considering the etymology and common usage of “unoccupied” in arriving at a definition).

Fire insurance companies include “occupancy” clauses in their policies because the risk of a fire decreases when an insured building is used by humans. See Jelin v. Home Ins. Co., 5 F Supp 908, 909 (D NJ 1934), aff'd 72 F2d 326 (3rd Cir 1934). Courts have interpreted the term “occupancy” in insurance policies in a practical and sensible manner that is consonant with the insurer’s object of minimizing the risk of fire. See Annot., 36 ALR3d 505 (1971 & 1992 Supp.); Annot., 47 ALR3d 398 (1973 & 1992 Supp.)

The meaning of “occupancy” that has emerged from the insurance cases also effectuates the city’s purpose in requiring “reoccupancy” under PCC 24.80. Like the insurance companies, the city has imposed its ‘ ‘occupancy” requirement to minimize arisk — the risk ofabuildingbecomingor remaining derelict, see PCC 24.80.010 — and has concluded that a building is less likely to become derelict if it is “occupied. ’ ’ Thus, as in a fire insurance policy, the “occupancy” requirement in PCC 24.80 is designed to lessen the likelihood of an undesirable result (a derelict building) by mandating human use of the premises. It logically follows that the same reasonable and practical interpretation of “occupancy” that has evolved from the insurance cases should be applied here as well.

The term “occupancy” is defined in ORS 479.010(l)(f), the insurance code section entitled “PROTECTION OF BUILDINGS FROM FIRE.” That section provides, in pertinent part:

“ ‘Occupancy’ means the purpose for which a building or structure is used or intended to be used. * * *”

PCC 24.15.140 defines “residential structure” as “any building or other improvement designed or intended to be used for residential purposes.”

ORS 479.010(l)(h) defines “private residence” as

“that part of a single, double or multiple dwelling house or building occupied as living or sleeping quarters by one or more family units * * (Emphasis supplied.)

“Family” is defined as

“an individual or two or more persons related by blood or marriage or a group of not more than five persons, excluding servants, who need not be related by blood or marriage, living together in a dwelling unit.” ORS 469.010(d).

I also conclude that the provision in PCC 24.80.030E that permits the Director to waive the $400 fee if certain conditions are satisfied fails to mitigate the constitutional defects of the ordinance. Before the Director can waive the fee, he or she must approve a plan submitted by the owner that provides for the reoccupancy or demolition of the building. See PCC 24.80.020C; PCC 24.80.030E. Moreover, even if such a plan is submitted by the owner and approved by the Director, there is no guarantee that the fee will be waived.

The dispositive factors in determining whether a building other than a dwelling is occupied are the nature of building and the normal incidents of its use. Annot., 36 ALR3d 505 (1971 & 1992 Supp.)

My interpretation also comports with the definition of “occupancy” in Black’s Law Dictionary 1078 (6th ed 1990):

“Taking possession of property and use of the same; said e.g., of a tenant’s use of leased premises[.]”

Because the resolution of this case turns on what a property owner must do to satisfy the ‘ ‘reoccupancy” requirement, I believe that it is essential to define the term “occupancy.” It seems anomalous to me that the majority is able to conclude that PCC 24.80 does not compel a physical invasion of an owner’s properties without providing a precise definition of that term.

The majority asserts that Nelson v. Benton County, supra, is analogous because, there, “[t]he county[ did] not compel or even suggest that [petitioner] sell, *420lease or do anything else with his land.” 119 Or App at 411. The short answer to that contention is that, here, the ordinance does compel the land owner to do something with the land. It requires the owner either to “reoccupy” the building, which, as a practical matter, forces the owner to lease the building toa third party, or to have the building destroyed. PCC 24.80 thus imposes affirmative duties on the property owner that are qualitatively more severe and invasive than a mere restriction on the use of property that was at issue in Nelson.

Acknowledge that the physical occupation of the owner’s premises may not be permanent. PCC 24.80 does not require that, once the building is reoccupied, it remain occupied for an indefinite period. Once the building is leased to a tenant and used in a manner consistent with the purpose for which it was designed, then presumably the reoccupancy requirement would be satisfied. If the tenancy ends, PCC 24.80 does not obligate the landowner to re-lease the building. Nevertheless, there would be a physical taking for whatever time period that the tenancy was in effect. See Schoonover v. Klamath County, 105 Or App 611, 806 P2d 156, rev den 311 Or 432, cert den_US_, 112 S Ct 375, 116 L Ed 2d 327 (1991); First Lutheran Church v. County of Los Angeles, 482 US 304, 107 S Ct 2378, 96 L Ed 2d 250 (1987).