SCOTUS may clarify ‘parcel as a whole’ language for regulatory takings

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The U.S. Supreme Court is considering a local case that could clarify what constitutes a parcel of land in analyses of regulatory takings.

The case stems from a dispute between St. Croix County and a group of heirs who were bequeathed lakefront land along the St. Croix River, east of Minneapolis and St. Paul.

The heirs’ father, William Murr, a plumber, bought one piece of land in 1960 and built a 950-square-foot cabin on it. Two years later he bought an adjacent plot, which he planned to use as a retirement investment.

That site — the land at the heart of the dispute — remains vacant and undeveloped. The plots were transferred to Murr’s six children separately in 1994 and 1995.

Whereas two of the heirs relinquished their interest in the land, the other four tried to sell the vacant parcel in 2004 to pay for improvements to the cabin. Only later did they learn from county officials that zoning regulations enacted in 1975 prohibited the parcels from being sold separately.

The Murrs’ attempt to get a zoning variance that would have let the sale proceed was denied by the county. The Murrs appealed, but the decision was upheld.

They then filed a lawsuit in 2013 against the state and the county, alleging that a regulatory taking had occurred. They contended that they should be compensated for the county’s decision and its effects on the value of their property.

The local regulation, they argued, was preventing their land from being put to any economically viable uses. To support their argument that a taking had occurred, they cited a balancing test established by the U.S. Supreme Court in the case of Penn Central Transportation Co. v. City of New York.

The test established by Penn calls on courts that are trying to decide if a regulatory taking has occurred to first look at three factors:

The economic effects of the regulation on both land owners and local governments, the landowners’ investment-backed expectations, and the character of the regulation.

The state and St. Croix County argued that, among other things, the Murrs’ claim had been made too late. They contended that no taking had occurred because the property could still be used in beneficial ways.

St. Croix County Circuit Court Judge Scott Needham agreed, finding both that the Murrs’ claim was made too late and that local regulations had not deprived the Murrs of all substantial use of their property.

The property retained significant value, for instance, and could still be put to residential purposes. The District 3 Court of Appeals agreed with Needham, affirming his decision in 2014.

The Murrs appealed to the Wisconsin Supreme Court, which declined in 2015 to hear the case. They then turned to the U.S. Supreme Court, which agreed in January to take up the appeal.

The Murrs are now arguing that Wisconsin courts were wrong to consider the two parcels a single piece of property when conducting their takings analysis.

In bringing their case before the country’s highest court, the Murrs are being represented by the Pacific Legal Foundation, a libertarian public-interest law firm that litigated two prominent cases that are now fixtures in property-law classes: Nollan v. California Coastal Commission and Palazzolo v. Rhode Island.

As for the precedents from the Penn Central case, they have also established a rule that courts must consider a “parcel as a whole” in takings cases. The trouble here, though, is that the nation’s highest court has not provided much guidance concerning the exact meaning of that phrase.

The upshot is that it remains unclear how property should be defined when the courts are trying to decide whether a taking has occurred, said Tom Larson, vice president of legal and public affairs at the Wisconsin Realtors Association.

Courts throughout the country have taken different positions on the matter. In siding with St. Croix County Circuit Court Judge Scott Needham, the state Court of Appeals ruled that whenever contiguous parcels are at issue, regardless of their zoning or when they were acquired, they should be considered together.

“The Court of Appeals came up with a bright-line rule,” said Larson. “This is a major private-property rights case.”

The appeals court ruling has far-reaching consequences because it essentially absolves government officials who adopt regulations that deprive property of most or all of its value of having to pay any compensation, he said.

“If you’re a developer and doing a large-scale development you have to acquire parcels over time,” Larson said. “And this seems to say if you do, beware because if a government changes the regulations, they may be able to take that property without providing compensation.”

The implications are also bleak for homeowners, who might buy an adjacent parcel to give themselves a bigger yard but then later decide to sell the land off as a way to stow away money for retirement. The lower court’s ruling against the Murrs suggests that governments shouldn’t have to provide compensation after adopting lot-size minimums, lot-merger requirements or other regulations that might prevent sales from taking place.

Larson’s group submitted one of the 20 amicus briefs that have been filed in the case. Thirteen of the briefs call on the court to side with the Murrs, whereas seven urge the court to side with the county and Wisconsin. Submissions came from the Wisconsin Relators Association, the California Cattlemen’s Association, the American Planning Association and a group of 12 property law professors from schools such as Cornell University and Georgetown University.

The case is in briefing. The high court has not yet set a date for oral arguments.

Larson says the outcome of the case was thrown even more into question by the recent death of Justice Antonin Scalia.

“Scalia was probably the biggest prop-rights advocate of all of them, and he’s not there,” Larson said. Follow @erikastrebel