Missouri Supreme Court Grants Shopping Center Owner Right To Sue City For Damages Caused By Threat Of Condemnation, But...

Property owners in Missouri need not wait until their

property is condemned to seek precondemnation damages, at least

according to the Missouri Supreme Court. In its recent

decision, Clay County Realty Company v. City of

Gladstone, Case No. SC88924 (June 10, 2008), the Missouri

Supreme Court appears to have opened the door for property

owners to make a claim for damages where the threat of eminent

domain alone has resulted in lost income, diminished property

values and other costs. However, upon closer analysis, it

appears that its decision did little more than clarify existing

case law on inverse condemnation and created a heavy burden for

property owners seeking damages for condemnation blight.

In Clay County Realty Company, Clay County Realty

Company and Edith Investment Company ("Property

Owners") owned a retail building commonly known as the

Gladstone Plaza Shopping Center (the "Shopping

Center"). The City of Gladstone declared the Shopping

Center blighted in 2003, pursuant to the provisions of chapter

353, RSMo 2000 ("The Urban Redevelopment Corporations

Law") and, where amended, RSMo Supp. 2007. Thereafter, the

City entered into a redevelopment agreement with a developer in

May 2004. Nonetheless, by August 2005, the City withdrew its

designation of the developer and cancelled the agreement.

In August 2005, however, the City began to solicit tax

increment financing ("TIF") proposals for the

Shopping Center pursuant to the provisions of Missouri's

Real Property Tax Increment Allocation Redevelopment Act

("TIF Act"), sections 99.800 to 99.865, RSMo 2000,

and where amended, RSMo Supp. 2007. The City, in October 2007,

adopted another ordinance designating the Shopping Center as

blighted under the TIF Act and approved a TIF plan for the

property. The approved TIF plan provided for the use of eminent

domain for economic development. See section 99.805

(13), RSMo Supp. 2007 (definition of TIF "redevelopment

plan").

The City never approved a TIF project specifying the

redevelopment to occur at the property and never completed a

formal condemnation proceeding against the Shopping Center.

See section 99.805(14), RSMo Supp. 2007 (defining TIF

"redevelopment project"). In this regard, however,

section 99.810.1(3) provides in relevant part:

[N]o ordinance approving a redevelopment project shall be

adopted later than ten years from the adoption of the

ordinance approving the redevelopment plan under which such

project is authorized and provided that no property for a

redevelopment project shall be acquired by eminent domain

later than five years from the adoption of an ordinance

approving such redevelopment project.

Thus, as the Property Owners acknowledged, because the City

had not approved a TIF project ordinance for the Shopping

Center, the City was not yet under the five-year time

limitation for acquiring the Shopping Center as set forth under

section 99.810.1(3). Though no allegations were made that the

City violated any of the applicable time provisions, the

Property Owners nevertheless filed a complaint against the City

several years after the initial blight designation, alleging a

violation of Missouri Constitution article I, section 26,

because the City's actions caused "significant

diminution in value...