Measure 7 was declared unconstitutional Thursday by Marion County Circuit Court Judge Paul Lipscomb.
The decision will be appealed by State Attorney General Hardy Myers as well as proponents of the constitutional amendment.
Judge Lipscombs ruling will serve to keep the property-compensation measure on hold for at least a year as the measure goes through the appeals process.
Lipscomb said the measure cannot take effect because it falls short of legal requirements for amending the Oregon Constitution.
In issuing his preliminary injunction in December, Judge Lipscomb said it appeared the measure would fail the separate vote test and did not fully comply with the full text requirement.
Lipscomb said voters werent told enough about changes the measure would make in the constitution the full text requirement.
Article 1, Section 18 of the state constitution already provides for just compensation to be paid to owners whose property is taken for public purposes through the condemnation process, Lipscomb wrote.
Measure 7 adds requirements for compensating owners for partial takings that result from regulatory restrictions.
But they also add several new definitions which also apply to and change the original condemnation process, Lipscomb wrote. For example, Measure 7 changes the definition of just compensation to include attorney fees.
Ballot Measure 7 not only adds new provisions to Section 18 of Article 1, but it also changes the substance and the meaning of the existing provisions of Section 18 without giving any notice to the voters of those direct and substantive changes, he wrote.
In addition, Lipscomb said the measure did not meet the requirement that amendments to the constitution be voted on separately.
In a 1998 ruling, the Oregon Supreme Court said the test is whether a single measure would make two or more substantive changes that are not closely related.
In a series of recent cases the Oregon Court of Appeals has interpreted that closely related changes are ones where a voters support for one change would necessarily imply support for the other.
In Thursdays ruling Lipscomb said the measure makes a number of substantive changes from changing the process of compensating owners when government takes private property for public uses to requiring compensation of citizens for restricting the use of their property, while exempting liquor stores, adult businesses and casinos from the measures effects.
Many voters might vote for any one of these individual provisions and some might choose to vote for all of them, Lipscomb wrote. But no one of these provisions necessarily implies support for any of the others.
John DiLorenzo, who represents the measures chief petitioner, Stuart Miller, disagreed with both of the key points in the judges ruling.
We respectfully disagree, DiLorenzo said. I believe we will ultimately prevail on appeal.
Opponents of the measure applauded Lipscombs decision, saying it will allow time for the legislature, Governor John Kitzhaber and others to have deliberative discussions about the measure.
Were gratified by this decision, said Randy Tucker of the land-use watchdog group 1000 Friends of Oregon. It tells Oregon voters that there was more to this measure than was evident on the surface.
However, Senate President Gene Derfler, R-Salem, predicted Lipscombs ruling will anger many Oregonians.
Courts are making decisions that override their decisions and the decisions of their legislators, Derfler said.
Senate leaders are reportedly taking a wait-and-see approach while the House is trying to structure an agreement on the measures provisions.
Bob Applegate, a spokesman for Kitzhaber, said the governors staff will work with the Legislature to address compensation.
While acknowledging the issue is one voters have shown they support, rather than rush to get something done quickly, lawmakers should take their time and get it right.