Beginning in December 2003, Taylor Acquisitions and Taylor, Mich., city officials conducted extensive negotiations over a proposal to build a 240-unit condominium development on 31 acres of land, comprised of 13 parcels, six of which were owned by the city. The deal called for the city to sell its land to Taylor, rezone all of the property from commercial to residential, and sign a brownfield development agreement for the property, which would result in tax and financing incentives for the developer.
In the fall of 2005, the city council voted to approve the development agreement and the sale of the city-owned land. The council also approved the first reading of a rezoning ordinance. Meanwhile, that fall the voters elected a new mayor and three new city council members. The new mayor had campaigned on an anti-development platform, and had attacked a Taylor’s project on numerous occasions. After he took office, the city canceled the purchase agreement and refunded Taylor’s deposit. Taylor sued the city and the mayor in federal court, claiming violations of substantive and procedural due process and equal protection. The court granted the city’s motion for summary judgment in 2007.
The appeals court took up Taylor’s procedural due process claim first. The first element of such a claim is a constitutionally protected property or liberty interest. Taylor argued it had a property interest in the six city-owned parcels, for which it had signed a purchase agreement. The lower court held a purchase agreement does not give the buyer any protected property rights, relying on a 5th Circuit decision applying Mississippi law. Although the court doubted the cited case stood for the proposition that a purchase agreement does not convey any property rights, it was not able to find any Michigan cases to the contrary. In Michigan, a land contract (installment purchase) conveys equitable title to the buyer, but the doctrine apparently does not extend to purchase agreements.
But even if the agreement conferred a property right on Taylor, and even if the city’s abrogation of the agreement deprived Taylor of that interest, Taylor could not establish that it did not receive adequate procedural protection, the court continued. The city’s action fell within the scope of cases that are most appropriately handled by a state breach of contract action, it said. The only difference between this case and a garden-variety breach of contract case is that the city happened to be one of the parties. Because a breach of contract action would provide adequate procedural protection, Taylor failed to set out a claim for violation of its procedural due process rights.
Because Taylor failed to assert a property or liberty interest for purposes of procedural due process, its substantive due process claim must necessarily fail, the court said. In any event, the city also offered a rational basis for its actions.
Turning to Taylor’s equal protection claim, the court observed it alleged the city had intentionally treated it differently from others similarly situated without any rational basis. To satisfy the threshold inquiry of differential treatment, Taylor had to show that it and other parties said to have been treated differently were similarly situated in all material aspects. Taylor claimed the city council has never denied a developer a second reading on a rezoning after completing all prior administrative steps, and the mayor has never unilaterally rescinded a purchase agreement without a city council vote. While that might create an issue whether Taylor was treated differently from other developers, it did not demonstrate how Taylor was similarly situated to any of those other developers.
It was significant, the court continued, that unlike any of the prior developers, Taylor’s proposal was considered by two differently composed city councils. So, even if Taylor was treated differently than developers had been treated in the past, the election of a new mayor and city council countered any assertion that Taylor was similarly situated to those developers. The city offered a rational basis for its actions, the court said. The new mayor and council wanted to curtail residential development because the housing market was oversaturated, wanted to protect the city’s financial interests; wished to eliminate overly generous financial subsidies to developers; and desired to preserve open space. Taylor might disagree with those objectives as a policy matter, but it offered no evidence that they were irrational.
Taylor Acquisitions,LLC v. City of Taylor, 2009 WL 415993 (C.A. 6th cir., Mich., 2/19/2009).
The opinion can be accessed at:
http://www.ca6.uscourts.gov/opinions.pdf/09a0148n-06.pdf
Special thanks to James Lawlor, Esq. of the Land Use Legal Report LULR) for permission to use this abstract from vol. 3 no. 6 (2/28/2009). For information on the LULR contact Jim at landlaw@verizon.net