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Gazza v. New York State Dep't of Envtl. Conservation, 89 N.Y.2d 603 (Feb. 18, 1997).

TAKING - VARIANCE - WETLANDS - PRESERVATION - PROPERTY INTEREST

ENFORCEMENT OF A PRE-EXISTING STATUTORY WETLANDS RESTRICTION DOES NOT CONSTITUTE A TAKING.

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

Petitioner purchased a residentially-zoned parcel, sixty-five percent of which had previously been inventoried as tidal wetlands by the New York State Department of Environmental Conservation (DEC). The purchase price of $100,000 reflected the wetlands restrictions. Under Petitioner's estimation, the value of the property would be $396,000 if the building variance were granted.

The DEC denied Petitioner's application for to allow him to build a single-family home on the parcel. Petitioner now argues that the DEC's decision constitutes a taking without just compensation of petitioner's real property. The New York Supreme Court found that no taking had occurred, and the Appellate Division affirmed.

ISSUE & DISPOSITION

Issue

Whether the denial of a building variance pursuant to wetlands regulation effects an unconstitutional taking.

Disposition

No. There is not a compensable taking because (1) Petitioner never owned an absolute right to build on his land without a variance, and (2) Petitioner's property has not lost all, or nearly all, of its economic value.

AUTHORITIES CITED

Cases Cited by the Court

Other Sources Cited by the Court

RELATED SOURCES

  • Cottonwood Farms v. Board of County Comm'rs, 763 P.2d 551 (Colo. 1988).
  • Majestic Heights Co. v. Board of County Comm'rs of Jefferson County, 476 P.2d 745 (Colo. 1970).
  • Vatalaro v. Department of Envtl. Regulation, 601 So. 2d 1223 (Fla. 1992).
  • Westbrook v. Board of Adjustment, 262 S.E.2d 785 (Ga. 1980).
  • County of Ada v. Henry, 668 P.2d 994 (Idaho 1983).
  • Leonard v. Town of Brimfield, 666 N.E.2d 1300 (Mass. 1996).
  • Hutton Park Gardens v. West Orange Town Council, 350 A.2d 1 (N.J. 1975).
  • Mintz v. Village of Pepper Pike, 386 N.E.2d 849 (Ohio App. 1978).

COMMENTARY

State of the Law Before Gazza

The Gazza court in applies takings law as set out by the U.S. Supreme Court principally in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) and Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).

The Lucas court held first that regulations that prohibit all economically beneficial use of land constitute a compensable taking unless the regulation prohibits a use that was already unlawful. Second, the court held that a land owner must have a reasonable investment-backed expectation that was denied by application of the regulation.

A landowner must have a property interest to assert when claiming a taking. United States v. Willow River Power Co., 324 U.S. 499 (1945); Bennett v. Long Island R.R. Co., 181 N.Y. 431 (N.Y. 1905). A subsequent purchaser may challenge a previously enacted regulation that affects the purchased land by arguing the regulation is an invalid exercise of the state's police power. Gazza at para. 22. See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) (interested parties may contend that the legislature has gone beyond its constitutional power); Vernon Park Realty v. City of Mount Vernon, 307 N.Y. 493 (N.Y. 1954) (subsequent purchaser with knowledge of previous restriction may challenge the validity of the restriction). In takings cases, regulations have a presumption of constitutionality, and the claimant bears the burden of showing the unconstitutional taking. de St. Aubin v. Flacke, 68 N.Y.2d 66 (N.Y. 1986).

Effect of Gazza on Current Law

Judicial review of a variance denial is a two-step process: (1) is the permit denial supported by substantial evidence, and (2) is the restriction an unconstitutional taking requiring compensation. See de St. Aubin v. Flacke, 68 N.Y.2d 66 (N.Y. 1986).

The court gave two independent reasons for denying the variance. Gazza at para. 27. First, there was no taking because Gazza never owned an absolute right to build without a variance. Id. Second, the court applied the federal Lucas analysis. Under this alternative analysis, the test is (1) whether there is a substantial state interest and close nexus, and (2) whether the regulations result in a substantial decrease in the value of the property. Gazza at para. 29. See Andrus v. Allard, 444 U.S. 51 (1979). Applying the test, the court found a significant interest in the state's purpose in preserving wetlands. Gazza at para. 30. Second, the economic value of the land was not extinguished. The court noted that the parcel, as restricted, had a value of approximately $80,000, which was close to petitioner's purchase price.

Unanswered Questions

As one of its bases for dismissing Gazza's appeal, the majority states that "Petitioner cannot base a taking claim upon an interest he never owned." Gazza at para. 27. Petitioner's property interest is limited by those state laws in effect at the time he took title. Id. This reasoning raises two questions. The first is "whether an existing taking[s] claim may be donated, sold, inherited or otherwise assigned." Gazza at footnote 3. The court refused to address the issue because it had not been raised.

The second question, raised by Judge Wesley's concurring opinion, is whether opportunities for takings compensation should be forfeited simply because title to the land was transferred. Judge Wesley takes exception with the majority's assertion that property interests are defined at the time title is passed. He explains that a prior owner may choose not to assert his rights to compensation for a taking for a variety of reasons, including a lack of financial resources to pursue such a claim. "If, as the majority reaffirms, 'a subsequent purchaser may attack previously enacted regulations that affect the purchased property as beyond government's legitimate police power,' then a subsequent purchaser should also be able to challenge an otherwise valid regulation if it results in a taking without compensation." Gazza at para. 42 (Wesley, J., concurring) (internal citations omitted) (citing Gazza at para. 22). It remains to be seen whether future Court of Appeals decisions will adopt Judge Wesley's opinion.

Survey of the Law in Other Jurisdictions

The exact formulation for determining a compensable taking varies slightly among the states. See Hutton Park Gardens v. West Orange Town Council, 350 A.2d 1 (N.J. 1975) (whether the regulatory scheme allows "an economically efficient operator to obtain a 'just and reasonable' return on his investment."); Leonard v. Town of Brimfield, 666 N.E.2d 1300 (Mass. 1996) (whether the restriction denies complainant's reasonable investment-backed expectations which were predicated on existing conditions at time of purchase); Cottonwood Farms v. Board of County Comm'rs, 763 P.2d 551 (Colo. 1988) (en banc) (whether the restriction denies all reasonable use).

The court set a high standard to meet in order to find a compensable taking. An example of a compensable taking is Vatalaro v. Department of Envtl. Regulation, 601 So. 2d 1223 (Fla. 1992), in which the complainant purchased property for $125,000 and the only remaining viable use was the construction of an elevated wooden boardwalk through a portion of the property.

The acquisition of property already subject to a limiting restriction often bars a takings claim. Two basic approaches dominate the takings cases: a property rights analysis, and a knowledge approach. Under the first approach, the court reasons that the complainant never acquired a full bundle of property rights. Majestic Heights Co. v. Board of County Comm'rs of Jefferson County, 476 P.2d 745 (Colo. 1970) (en banc); Leonard v. Town of Brimfield, 666 N.E.2d 1300 (Mass. 1996). Under the second approach, the complainant's knowledge of the restriction at the time of purchase is a factor against the complainant. See, e.g., Westbrook v. Board of Adjustment, 262 S.E.2d 785 (Ga. 1980); County of Ada v. Henry, 668 P.2d 994 (Idaho 1983).

Courts often assume that the purchase price and expected use reflect the constraint. Some courts go so far as to bar any challenge based upon a denial of a permit if the complainant acquired the property with knowledge. See Mintz v. Village of Pepper Pike, 386 N.E.2d 849 (Ohio App. 1978).

Special thanks to Peter W. Martin, Professor of Law, Cornell Law School, for his assistance in the preparation of this commentary.

Prepared By:

  • Rene M. Devlin, '97
  • Christopher M. Dube, '98
  • Denise A. Johnson, '98
  • Kelly M. Mann, '98
  • Rafael E. Morell, '98
  • Anne R. Myers, '97
  • Jason A. Shrensky, '98