Liu Guangjia, whose house and a museum-style garden of bonsai trees and exotic rocks in the southwestern suburb of Anle were destroyed in April last year, is seeking 289 million yuan (USD 47.6 million) in compensation, the official Xinhua news agency reported.
The museum was free to visit for the public, it added.
It is rare for cases against the authorities to reach the courts in China, and state media said Liu's demand was the largest ever brought against a local government.
"Zhu had just finished treatment for breast cancer and Liu's arm was dislocated in the struggle," it reported.
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"When they were released, the house, museum and all the contents were all gone," it added.
In an online trial report, the court said objects taken away from the house and museum included dinosaur fossils, calligraphy, gold and jewellery.
Liu said the district authorities and a local property developer "forcefully and unlawfully" tore down the property and took away his collections, according to Xinhua.
Forced demolitions are common in China as local governments rely heavily on land sales for their incomes and investment projects to drive economic development.
Users of China's Twitter-like Sina Weibo microblogging service condemned the Minhang authorities.
"Forced requisition and demolition are no different from robbery and plunder of villains and bandits," Xie Zhiyong, a professor at Chinese University of Political Science and Law, wrote on his verified Weibo.
"I hope to see an impartial verdict from the court," said another Weibo user.
The case was continuing today, the Higher People's Court of Shanghai said on its verified microblog.