Ready Mix, USA, LLC. v. Jefferson County, Tennessee

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

March 8, 2011 Session

READY MIX, USA, LLC., v. JEFFERSON COUNTY, TENNESSEE

Appeal from the Chancery Court for Jefferson County

No. 99-113 Hon. Jon Kerry Blackwood, Senior Judge

No. E2010-00547-COA-R3-CV-FILED-JUNE 9, 2011

Defendant issued a stop work order against plaintiff to cease mining activities on plaintiff's

property. Plaintiff brought suit in Chancery Court seeking a declaratory judgment on the

issue. A bench trial was held and the Trial Court adopted the doctrine of diminishing assets 1

and that Ready Mix had established a pre-existing and non-conforming use on its property

pursuant to Tenn. Code Ann. § 13-7-208 (b)(1). Defendant has appealed and we hold on this

record that plaintiff was required to exhaust its administrative remedies prior to filing an

action in Chancery Court.

Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Reversed

and Case Dismissed.

H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which J OHN W.

M CC LARTY, J., joined, and C HARLES D. S USANO, JR., J., dissented and filed an opinion.

S. Douglas Drinnon and Larry Ray Churchwell, Dandridge, Tennessee, for the appellant,

Jefferson County, Tennessee.

Arthur G. Seymour, Jr., and Benjamin C. Mullins, Knoxville, Tennessee, for the appellee,

Ready Mix, USA, LLC.

1

Generally the doctrine of diminishing assets recognizes that a mining operation is unique and the

holding of property in reserve is a normal part of mining operations and will not be impaired by a subsequent

zoning change on the property.

OPINION

Background

This case arises from a zoning controversy between plaintiff/appellee Ready Mix,

USA, LLC (Ready Mix) and defendant/appellant Jefferson County, Tennessee (Jefferson

County). Ready Mix is the successor company of the original plaintiff American Limestone

Company, Inc. (American Limestone). American Limestone, in turn, was a subsidiary of

ASARCO, also a prior owner of the property. Since the original filing of this action in

1999, there have been numerous corporate acquisitions of American Limestone, culminating

in its absorption into Ready Mix. The subject property is located in Jefferson County,

Tennessee and is referenced herein as the “Grasselli property” or “the property”.

On August 17, 1998 Jefferson County adopted a zoning ordinance and zoning map

that classified the Grasselli property as A-1 agricultural forestry. American Limestone claims

that it continued in the use of the property until November 30, 1998, when it received a stop

work order from a Jefferson County zoning official. Another stop work order was issued by

the County Zoning Office to American Limestone on December 9, 1998.2

American Limestone requested a hearing before the Board of Zoning Appeals to

appeal the stop work order and a hearing was scheduled to take place on August 9, 1999.

The hearing did not take place in August as American Limestone requested that the hearing

be postponed until October 11, 1999. However, on August 2, 1999, American Limestone

filed a Complaint for Declaratory Judgment against Jefferson County in the Chancery Court

of Jefferson County, Tennessee. The Complaint sought a declaration that American

Limestone had a vested right to operate a rock quarry on the Grasselli property and that

plaintiff had established a pre-existing non-conforming use of mining and quarrying on the

property pursuant to Tenn. Code Ann. § 13 -7-208 and Article 6.2 of the Jefferson County

Zoning Resolution. Plaintiff asked that the stop work order be lifted and the County enjoined

from enforcing that order. The suit did not challenge the validity of the zoning ordinance or

any state statute, and there is no explanation in the record as to why the matter was not

considered by the Board of Zoning Appeals.

Jefferson County answered on September 21, 1999 and demanded a jury. The County

asserted affirmative defenses: that plaintiff had failed to exhaust administrative remedies;

that plaintiff’s use of the Grasselli property was illegal; and that plaintiff had not established

a pre-existing non-conforming use of the property for mining purposes.

2

The December 9, 1998 stop work order was issued on behalf of the Jefferson County Zoning Office

by its attorney.

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Defendant filed a motion for summary judgment on March 20, 2000 and American

Limestone filed a response to the motion on June 31, 2001. Almost eight years later, the

motion was heard on March 23, 2009 by the Honorable Jon Kerry Blackwood, Senior Judge,

sitting by designation. The trial court denied the motion by its order of March 27, 2009.3

A bench trial was held on January 19 and 20, 2010, and a Final Judgment was entered

on March 3, 2010 where the Trial Court adopted the doctrine of diminishing assets and that

Ready Mix had established a pre-existing and nonconforming use of the Grasselli property

pursuant to Tenn. Code Ann. § 13-7-208(b)(1). The Court further held that plaintiff was not

required to file an administrative appeal prior to filing suit in Chancery Court.

The County filed an appeal to this Court and raised the following issues:

A. Did the Trial Court err when it denied appellant a jury trial?

B. Did the Trial Court err when it held that appellee was not required to exhaust

administrative remedies prior to filing this action in the Chancery Court?

C. Did the Trial Court allow appellee’s expert witness to express legal

conclusions?

D. Did the Trial Court err when it adopted the diminishing assets doctrine?

E. Did the Trial Court err in finding that appellee had established a

nonconforming use on the property prior to the enactment of the county zoning

ordinance?

F. Did appellee establish a vested right in the use of the property as a quarry?

G. Did the Trial Court err in not applying the “pending ordinance doctrine”?

3

The Chancellor recused himself on October 27, 1999, and in his Order referred to the Presiding

Judge of the district to assign another Judge to the case. The Presiding Judge assigned a Chancellor from

another district to hear the case but, for whatever reason, the summary judgment was not acted upon at the

time. On May 15, 2008, the Chancellor who had recused himself entered the following Order which states

in part: "The last activity in the court file was January 24, 2002. Pursuant to the provisions of Tennessee

Code Annotated 17-2-201, IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that the above-

captioned matter be referred to the Administrative Office of the Courts for assignment of a special judge for

hearing by the chief Justice of the State of Tennessee", which resulted in the appointment of Judge

Blackwood. Accordingly, the case languished in the Court for six years without either party seemingly

having any interest in completing the matter.

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We review the trial court’s findings of fact de novo with the presumption that the trial

court’s factual determinations are correct unless the evidence preponderates against such

factual determinations. Tenn. R. App. P. 13 (d). The trial court’s conclusions of law are

reviewed under a purely de novo standard with no presumption of correctness. Taylor v.

Fezell, 158 S.W.3d 352, 357 (Tenn. 2005); Union Carbide Corp. v. Huddleston 854 S.W.2d

87, 91 (Tenn. 1993).

Defendant/appellant Jefferson County appeals the Trial Court’s order striking its jury

demand. This issue should not have been raised on appeal as the Trial Court’s order striking

the County’s jury demand clearly and unequivocally states that following a hearing on

plaintiff’s motion to strike defendant’s jury demand “[t]he parties so notified the court that

a jury was not necessary under the circumstances.” There is nothing in this record that shows

that the County disputed the Court’s statement in the order that the parties had agreed that

a jury was not necessary. As such, the County waived its right to a jury trial and to raise this

issue on appeal is disingenuous at best.

Next, defendant/appellant contends the Trial court erred when it refused to dismiss

plaintiff’s claims brought under Tenn. Code Ann. § 13-7-208 because plaintiff failed to

exhaust its administrative remedies after the County Zoning Office issued a stop work order.

This issue is a challenge to the Trial Court’s subject matter jurisdiction, and the

determination of whether subject matter jurisdiction exists is a question of law, to be

reviewed de novo, without a presumption of correctness. Cheatham County ex rel.

Armstrong v. Kong, M2008-01914-COA-R3-CV, 2009 WL 1910952 at * 3 (Tenn. Ct. App.

June 30, 2009)(citing Northland Ins. Co. v. State, 33 S.W.3d 727, 729 (Tenn.2000).

The Complaint for Declaratory Judgment sought a declaration that plaintiff had a

vested right to operate a rock quarry on the Grasselli property and that plaintiff had

established a pre-existing non-conforming use of mining and quarrying on the property

pursuant to Tenn. Code Ann. § 13 -7-208 and Article 6.2 of the Jefferson County Zoning

Resolution. Plaintiff specifically based the Complaint on Tenn. Code Ann. § 13-7-208 (b)(1)

that provides:

In the event that a zoning change occurs in any land area where such land area was

not previously covered by any zoning restrictions of any governmental agency of this

state or its political subdivisions, or where such land area is covered by zoning

restrictions of a governmental agency of this state or its political subdivisions, and

such zoning restrictions differ from zoning restrictions imposed after the zoning

change, then any industrial, commercial or business establishment in operation,

permitted to operate under zoning regulations or exceptions thereto prior to the zoning

change shall be allowed to continue in operation and be permitted; provided, that no

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change in the use of the land is undertaken by such industry or business.

Tenn. Code Ann. § 13-7-208 (b)(1) is often referred to as the “grandfather statute” or

“grandfather clause”, which was defined by the Supreme Court in Smith County Reg'l

Planning Comm'n v. Hiwassee Vill. Mobile Home Park, LLC, 304 S.W.3d 302, 310 (Tenn.

2010) as “an exception to a restriction that allows all those already doing something to

continue doing it, even if they would be stopped by the new restriction.” Id. (citing Black's

Law Dictionary 629 (5th ed.1979). The purpose of the grandfather clause was explained in

Smith as follows: Because property is usually already in use when it is first zoned it is

inevitable that the zoning provisions will clash with the existing use of particular pieces of

property. The grandfather clause “avoids the legal problems that would attend a local

government's efforts to force a private property owner to discontinue an otherwise

permissible use of property. Smith at 310 (citing Custom Land Dev., Inc. v. Town of

Coopertown, 168 S.W.3d 764, 772 n. 4 (Tenn. Ct. App.2004)(quoting Lafferty v. City of

Winchester, 46 S.W.3d 752, 758 (Tenn. Ct. App.2000)).

Ready Mix claims that the use of the Grasselli property as a quarry was a

nonconforming use allowed prior to a enactment of the Jefferson County zoning ordinance,

and, therefore, it is entitled to protection under Tenn. Code Ann. § 13-7-208, the grandfather

statute. Plaintiff asked that the stop work order be lifted and the County be enjoined from

enforcing the order. The suit did not challenge the validity of the zoning ordinance. The

County contends that Ready Mix was required to file an appeal with the Jefferson County

Board of Zoning Appeals before it could seek relief in the Chancery Court.

Counties obtain their power to enact zoning ordinances and otherwise regulate the use

of land by delegation from the state. Smith at 309 - 310 (citing Edwards v. Allen, 216 S.W.3d

278, 284 (Tenn.2007); Cherokee Country Club, Inc. v. City of Knoxville, 152 S.W.3d 466,

471 (Tenn.2004)). Tennessee Code Annotated section 13–7–101(a)(1) ) empowers county

legislative bodies to regulate the uses of land. Smith at 310 (citing Edwards, 216 S.W.3d at

284). The state delegates the zoning power to local legislative bodies because that power “is

viewed as essentially a legislative exercise of the government's police power.” Smith at 310

(citing Family Golf of Nashville, Inc. v. Metro. Gov't, 964 S.W.2d 254, 258 (Tenn. Ct.

App.1997)).

Tenn. Code Ann. § 13-7-106 and § 13-7-107 set forth the jurisdiction and powers of

a board of zoning appeals: § 13–7–106 (a) provides that ‘the legislative body of any county

which enacts zoning regulations under the authority of this part shall create a county board

of zoning appeals of three (3) or five (5) members.”

Tenn. Code Ann. § 13-7-108 states that an appeal to the board of appeals “ may be

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taken by any person aggrieved, or by any officer, department or board of the county affected,

by any grant or withholding of a building permit or by any other decision of a building

commissioner or other administrative official, based in whole or in part upon the provisions

of any ordinance under this part.” Tenn. Code Ann. § 13-7-109 provides the powers a board

of zoning appeals has including to “ [h]ear and decide appeals where it is alleged by the

appellant that there is error in any order, requirement, decision or refusal made by the county

building commissioner or any other administrative official in the carrying out or enforcement

of any ordinance enacted pursuant to this part.”

Both state law and the Jefferson County Zoning Resolution provide the Board of

Zoning Appeals with the authority to review the zoning officer’s stop work order issued to

plaintiff. The issue thus before this Court is whether it is mandatory that an aggrieved

landowner, such as Ready Mix, is required to appeal to the County Board of Zoning Appeals

prior to filing a suit in Chancery Court.

When a court considers whether the doctrine of exhaustion of administrative remedies

is applicable, an initial determination of whether a statute provides an administrative

remedy must be made. If a statute explicitly provides an administrative remedy, a party must

exhaust this remedy prior to seeking relief from the courts. B.F. Nashville, Inc. v. City of

Franklin, No. M2003-00180-COA-R3-CV, 2005 WL 127082 at * 5 (Tenn. Ct. App. Jan. 21,

2005) (citing Thomas v. State Bd. of Equalization, 940 S.W.2d 563, 566 (Tenn.1997); Bracey

v. Woods, 571 S.W.2d 828, 829 (Tenn. 1978); Tennessee Enamel Mfg. Co. v. Hake, 183

Tenn. 615, 194 S.W.2d 468 (1946)). However, the courts have held that exhaustion is not

statutorily required unless the statute “by its plain words” requires it. Thomas, 940 S.W.2d

at 566; Reeves v. Olsen, 691 S.W.2d 527, 530 (Tenn.1985).

The Middle Section of this Court considered the issue before us in State ex rel. Moore

& Assocs. Inc. v. West, 246 S.W.3d 569 (Tenn. Ct. App. 2005) perm. app. denied. In Moore,

as here, the plaintiff/landowner contended that it was not required, under the doctrine of

exhaustion of administrative remedies, to appeal to the Board of Zoning Appeals because the

statute does not explicitly provide for an exclusive administrative remedy.4 First, the Moore

Court discussed the general rule set forth by the Tennessee Supreme Court in Thomas, that

when a statute does not mandate an administrative remedy, the question of whether to require

a party to exhaust available administrative remedies is a matter of judicial discretion. Moore

at 577 (citing Thomas at 566; Reeves at 530). That discretion is not unlimited, however, and

4

Moore concerned Tenn. Code Ann. § 13-7-207(1) which provides for the powers of a Municipal

Board of Zoning Appeals while this case concerns Tenn. Code Ann. § 13-7-109 which provides for the

powers of a County Board of Zoning Appeals. However, the two statutes contain the same language, thus

the analysis in Moore is applicable here.

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our Supreme Court has held that it must be exercised in conformance with certain principles

including consideration of whether judicial review would prematurely interrupt the

administrative process and what the purpose behind the doctrine of exhaustion of

administrative remedies is. Moore at 577 - 578 (citing Thomas at 566; Reeves at 530). The

Court in Thomas discussed the purpose of the doctrine of exhaustion of administrative

remedies as follows:

The exhaustion doctrine serves to prevent premature interference with agency

processes, so that the agency may (1) function efficiently and have an opportunity to

correct its own errors; (2) afford the parties and the courts the benefit of its experience

and expertise without the threat of litigious interruption; and (3) compile a record

which is adequate for judicial review. In addition, an agency has an interest in

discouraging frequent and deliberate flouting of the administrative process.

Thomas at 566.

The Court in Moore then proceeded to examine several zoning cases where the

Supreme Court was called upon to exercise discretion regarding whether to require an

exhaustion of administrative remedies. See Moore at 578 - 579. The Court discussed Poteat

v. Bowman, 491 S.W.2d 77 (Tenn.1973), and the more recent case from the Tennessee

Supreme Court, Cherokee Country Club, Inc. v. City of Knoxville, 152 S.W.3d 466

(Tenn.2004). In Cherokee Country Club, Inc., the Supreme Court applied the test to

determine whether a party challenging a local zoning decision must exhaust administrative

remedies by appealing to the Board of Zoning Appeals. The Court held that the issuance of

a writ on mandamus was proper, even though the landowner had not appealed the denial of

the demolition permit to the local Board of Zoning Appeals, because the landowner

challenged the validity of an ordinance, not the official's discretion in denying the permit.

Id. at 79. The Moore Court noted that Moore & Associates' challenge was to the zoning

administrator's denial of the certificate, as it did not challenge the validity of the ordinance.

Moore at 579. Similarly, Ready Mix did not seek a declaratory judgment from the Chancery

Court regarding the constitutionality or validity of the Jefferson County Zoning Ordinance.

Rather, Ready Mix's Complaint challenged the validity of the zoning official's interpretation

of the ordinance, which did not consider the rights of Ready Mix under the grandfather

statute.

After consideration of several Tennessee cases, the Moore Court concluded that

plaintiff had failed to exhaust administrative remedies and dismissed the Complaint. The

Court supplied the following rationale for its holding:

While these and similar authorities implicitly recognize that exhaustion is not

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statutorily required in this context, it is generally imposed in the zoning context as a

matter of the exercise of judicial discretion. Absent unusual facts, such a result is

compelled by the principles established in Thomas, the Supreme Court's holding in

Poteat, and the well-settled authority regarding the courts' deference to the

responsibility and authority of local zoning officials. It is clear that Moore &

Associates was required to exhaust its administrative remedies by appealing the

zoning administrator's decision to the Board of Zoning Appeals. The administrative

process had begun by virtue of the request for the certificate of compliance; the Board

should have been given the opportunity to apply its experience and expertise to the

issue and to correct any errors it found in the administrator's decision; a hearing

before the Board would have resulted in a record that the court could review under the

common law writ of certiorari procedure; and parties should not be allowed to deprive

local zoning officials of the opportunity to perform the responsibilities assigned them

by law.

Moore at 580.

Based upon the compelling rationale expressed in Moore, we conclude that Ready

Mix was required to exhaust the administrative remedies provided by statute and the

ordinance by appealing the zoning official's stop work order to the Board of Zoning Appeals.

Ready Mix's complaint is that the Zoning Office was in error when it issued a stop work

order not that the County ordinance at issue is invalid or that the state statutes at issue are

invalid. Nor are there any unusual facts or circumstances considered here that would create

a basis for this Court to deviate from the rationale set forth in the cases examined by the

Court it Moore.

Accordingly, we reverse the Judgment of the Trial Court and dismiss the action with

the cost of the appeal assessed one-half to Ready Mix and one-half to Jefferson County, in

our discretion.

_________________________________

HERSCHEL PICKENS FRANKS, P.J.

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