A look at Paeth v. Worth Township Land-use dispute leads to record $600K settlement Township and homeowners were in bitter battle for a decade over property

By John Minnis Legal News When George and Margaret Paeth purchased "an old, abandoned cottage" in Worth Township, just half a block off Lake Huron south of Lexington, little did they know they had just entered the Twilight Zone. The couple had originally planned on making the cottage livable and flipping it, but they then decided to renovate it for themselves. The work included enclosing a covered porch on the northwest corner of the structure, but the footprint remained the same. The Paeths were required to obtain a property survey before being granted a land-use permit from the township. The survey revealed a non-conformance issue: the northwest corner encroached the former five-foot setback requirement. (The township's current ordinance requires an eight-foot setback.) Nevertheless, the zoning administrator issued the land-use permit and said the setback would not be an issue. The Paeths then obtained a building permit from Sanilac County (Worth Township did not have a building department in 1998) and closed in the porch. Also in 1998, the Paeths obtained a well-drilling permit from the township, but when they hired a contractor in 1999, they learned all well-drilling permits had been revoked, requiring property owners to hook up to the township's new municipal water system. The Paeths applied to tap into the water system, but their application was not acted on until 2001 when they hired an excavator, who himself obtained a municipal water permit from township. When the excavator began digging the trench, however, a Worth Township inspector arrived on the scene, stopped work and revoked the Paeths' water permit without explanation. They were finally allowed to connect to the township's water main in August 2002. The Paeths were without water for three years and had to rely on neighbors for water. Lack of water also impeded the owners' efforts in obtaining construction loans. The Paeths "troubles with Worth Township began in earnest in 2002, when the township formed its own building department," according to U.S. District Judge David M. Lawson, Eastern District of Michigan, in his 30-page opinion in Paeth v. Worth Township. The new building department required a new building permit, claiming the old permit expired. The Paeths disagreed, stating that under applicable National Building Code, permits do not expire unless work does not begin or is halted for six months. The county insisted permits were only good for a year, so the Paeths filed for a new building permit from the township and were granted one on July 7, 2003. Work commenced peacefully for about a year until the Paeths complained that their neighbor had erected a fence without a permit. The building administrator responded that "her attention had been directed to their structure's noncompliance with the township's setback ordinance." The Paeths insisted that the building official knew about the noncompliance when issuing the permit and that requesting a variance at this point was not necessary. Nevertheless, the couple submitted a variance application and was told they needed another certified survey of the property. The updated survey found the original survey was incorrect, thus, the township maintained, the original land-use permit relied on a faulty survey. A hearing was held before the Zoning Board of Appeals on May 18, 2005, 11 months after the variance application had been filed. Some 60 people attended the meeting, most speaking in opposition to the variance request. Their objections were based on the prolonged construction time, the belief the owners had disregarded the building ordinance and the perception that the Paeths never obtained a valid permit to begin with or that they had expanded their renovation beyond the original allowances. The Paeths complained that those in favor of the variance were not allowed to speak. The ZBA voted unanimously to deny the request, meaning the homeowners would have to remove the offending portion of structure to bring it into compliance. The Paeths appealed the ZBA's decision to Sanilac County Circuit Court, which found the ZBA applied the wrong standard and remanded the matter back to the ZBA. On remand, however, the zoning board again denied the variance and failed to notify the Paeths of the hearing. The couple again returned to circuit court and succeeded in getting a third hearing ordered before the ZBA, which again denied the variance. This time on appeal, the circuit court reversed the ZBA and granted the variance. On July 14, 2007, the Michigan Court of Appeals -- nine years after the Paeths had bought the property, four years after obtaining a township building permit and three years after submitting a variance application -- dismissed the township's appeal for lack of jurisdiction. The township decided not to appeal to the Michigan Supreme Court. In a letter three months later, a township attorney seemed relieved to have the case concluded: "The Township's decision clears the way for Mr. Paeth to obtain or renew all necessary building permits and bring his project to a speedy conclusion -- first by removing all of the debris and finishing work on the exterior, calming, perhaps, his neighbors, who have endured too long." After going 0-4 in the courts, the township responded in November 2007 by posting a stop-work order on the property without warning or a hearing, insisting the owners needed a new permit. The township maintained that the permit expired because the plaintiffs suspended construction for over six months during the two-year period they litigated the setback variance issue at the ZBA and in circuit court. "Whatever the motivation," Judge Lawson wrote, "the facts are undisputed that the plaintiffs were not given notice or a hearing before the township posted the stop-work order, despite a provision of state law that requires notice." In March 2008, the Worth Township building inspector reversed her position and said the Paeths' permit was still valid. In May, a state inspector wrote to the Paeths, saying they "may begin work to complete [their] residence..." Despite all this, the township did not remove the stop-work order until October 2008. For two years, while the matter was before the courts, no work was done on the property. Judge Lawson noted in his opinion that the township officials' involvement in the matter "came to a dramatic end" when the building and zoning administrator, in an unrelated matter, was disciplined by the State of Michigan for falsifying Clyde Township Board of Review documents by cutting and pasting Board of Review members' signatures onto affidavits and reports; the Worth Township treasurer was convicted of embezzlement; and the township's building department was dissolved by the State of Michigan in July 2008. In their complaint in federal court, noted land-use attorney Daniel P. Dalton and Pauline Pensler, both with Tomkiw Dalton in Royal Oak, stated four counts: 1) Violation of the Paeths' First Amendment rights when the township retaliated against the plaintiffs for appealing the decision of the ZBA in 2005 (count I); 2) Violation of the Equal Protection Clause based on the defendants' policy of selectively enforcing unlawful decisions against the plaintiffs when they engaged in protected activities under the First Amendment (count II); 3) Violation of substantive and procedural due process by issuing a stop-work order without notice and an opportunity to respond (count III); and 4) Request for mandamus and superintending control over the defendants (count IV). Mandamus became moot after the stop-work order was removed Oct. 28. Both sides sought summary judgment in their favor as a matter of law. Although Judge Lawson seemed inclined to find for the Paeths in count I, he stopped short of issuing summary judgment, allowing a jury to decide whom to believe. "There is ample evidence that township officials posted the stop-work order as a ham-handed method of overriding the adverse judicial decision and punishing the plaintiffs for their successful resort to the courts, " Lawson wrote. " On count 2, Lawson found in favor of the defendants. "The plaintiffs have not offered any evidence of comparators who were allowed to proceed with construction despite the violation of the setback ordinance," Lawson wrote. "[T]he plaintiffs have not shown that they were singled out or otherwise denied the equal protection of the law." As for count 3, violation of substantive and procedural due process, Judge Lawson granted summary judgment to plaintiffs on violation of procedural due process but for the defendants on the substantive due process claim. "The township's conduct after the courts granted the variance is indefensible, and there is evidence that the official directive to post the stop-work order was vindictive," Lawson wrote. "However, that conduct can be addressed by the more specific alleged constitutional violations of First Amendment rights and procedural due process under the Fourteenth Amendment - both of which are 'explicit textual source[s] of constitutional protection.'" Since the federal complaint was filed Sept. 11, 2008, the township claimed that the Paeths could not recover for any of the township's wrongful acts before Sept.11, 2005, because of the three-year statute of limitations. However, the court found that the actionable conduct surrounding the posting of the stop-work order occurred in 2007 and thereafter, well within the statute of limitations. Following Judge Lawson's opinion granting in part and denying in part, the case went before a jury. "I never in my wildest dreams thought we would even go to trial," the Paeths' attorney Dalton said. "The township never offered a penny." The jury was out for 11 hours. "It seemed like an eternity," Dalton said. "It's been 10 years (for the Paeths). Since 2004, they haven't been able to do anything. It's been a really long haul for them." The jury returned with a $275,000 verdict in favor of the Paeths' on the retaliation for exercising their First Amendment rights claim and $325,000 award for violating the couple's procedural due process rights. The monetary amount was based, in part, on the township's penalty of $600 a day for ordinance violations. "We used the same analogy," Dalton said. The $600,000 verdict is the largest procedural due process and First Amendment retaliation case in the history of the federal courts within the Eastern District of Michigan and one of the largest such verdicts to date nationwide. Attorney fees and statutory interest will bring monetary liability to the township to more than $1 million, or $250 per household. "Unfortunately for them, they don't have insurance," Dalton said. "It could have been settled so cheaply so many times." Township attorney Robert Seibert could not be reached for comment. Published: Tue, Aug 24, 2010

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