Wednesday, September 5, 2012

The Diminishing Assets Doctrine

Last week the Tennessee Supreme Court handed down an interesting and important case relating to nonconforming properties here in Tennessee, and reversing a decision of the Tennessee Court of Appeals. The case is Ready Mix v Jefferson County2012 WL 3757025, and the issue presented was whether or not the quarry activities were sufficiently established on the property such that a new zoning resolution adopted by the County did not limit the continuation of the quarrying activities. The Court of Appeals had ruled that the quarry owners had failed to exhaust administrative remedies because they proceeded directly to court, rather than to the Board of Zoning Appeals. the Supreme Court found that the quarry owners did not need to appeal to the zoning board, because the real question was a legal one concerning the applicability of the zoning ordinance itself rather than to the discretion of the zoning official who issued a stop work order in this case.

After a discussion of nonconforming properties, and the requirement of "substantial" activity before the adoption of the zoning regulations in order to validate the existence of the nonconforming use, the court turned to an analysis of the diminishing assets doctrine.

The Supreme Court emphasized that whether a particular business is "in operation" depends to some extent upon the nature of the business itself. Since the mining and quarrying industry is comprised of the excavation and sale of the very natural resources that make up the property, those reserves may be considered pre-existing uses themselves in the event of a more restrictive zoning change. Applying the doctrine to the facts in the case, the court concluded that the company had engaged in a variety of activities on the property prior to the adoption of the zoning regulations. The company applied for permits from the state government, analyzed suitability as a quarry site, cleared overgrown brush and vegetation from the pre-existing bits which had been used previously, and moved substantial equipment on the property. In addition, at least two completed blast shots were performed on the property before the adoption of the zoning regulations.

The Supreme Court held that the evidence did not preponderate against the trial court's finding that the activities established a  pre-existing use and qualifed for protection under the Tennessee Non-Conforming Property Act. the court indicated that "substantial steps" in construction may often satisfy the Non-Conforming Property Act, and that a demonstrated "devotion of the property" to particular use can also result in a finding of a non-conforming use protected by the statute.

Over the next week or so, I will come back to discuss both the diminishing assets doctrine, and the failure to exhaust issues presented by this case. in addition, Justice Wade, writing for the Court, briefly discusses the vested rights doctrine which is worth considering as well. We will try to take a look at that also in the next few days.

It is certainly an interesting case, applying the "in operation" language of the Tennessee statute in a flexible way so as to protect the demonstrated assets of this quarrying company.

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