                  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

                                              -4-
       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

                                             -5-
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.

                                                 -6-
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


                                               -7-
       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.




                                              -8-
