Should two legally-distinct, but adjacent, commonly-owned parcels be treated as a single parcel when determining whether a regulatory taking has occurred?
In this case, the Supreme Court will decide whether two commonly-owned, contiguous parcels should be considered as a single parcel when determining whether a regulatory taking has occurred. The case arises after four residents of Wisconsin, the Murrs, decided to sell one of two contiguous parcels they had received from their parents. Wisconsin forbid the sale, citing a regulation under which two contiguous parcels of less with a combined area of less than one acre are considered a single parcel. The Murrs argue that the parcels are separate and distinct, as evident by the separate deed to each property. The State of Wisconsin argues that the parcels should be aggregated under the “parcel as a whole” analysis the Supreme Court devised. At stake is just compensation to landowners harmed by overreaching regulation, and the ability of the states and localities to regulate their domain and protect the environment.
Questions as Framed for the Court by the Parties
In a regulatory taking case, does the “parcel as a whole” concept as described in Penn Central Transportation Company v. City of New York, 438 U.S. 104, 130-31 (1978), establish a rule that two legally distinct, but commonly owned contiguous parcels, must be combined for takings analysis purposes?
Between 1994 and 1995, Joseph, Michael, Donna, and Peggy Murr (collectively, “the Murrs”), received from their parents two neighboring lots along the St. Croix River—Lots E and F. A bluff runs along the middle of both parcels, but the parcels “are moderately level at the top and near the river.” Lot F had a cabin built on it; Lot E was entirely undeveloped. Without counting the bluffs, the two parcels have 0.98 acres of developable land.
In 2007, the St. Croix County (“the County”) issued an ordinance that affected the Murrs’ lots The ordinance provides that two adjacent, commonly-owned lots cannot be individually developed unless each of the lot contains at least one acre of developable land. The ordinance also provides that if neither of the two adjacent, commonly-owned lots has one acre of developable land, then the two lots are treated as a single, developable lot. Thus, because the Murrs’ lots combined had 0.98 acres of developable lands, the County merged Lots E and F into a single lot.
Several years after the County issued the ordinance, the Murrs decided to flood proof the cabin on Lot E and sell the undeveloped Lot F and so petitioned the County to exempt them from the ordinance. The County denied their petition and a Wisconsin Circuit Court affirmed the County’s decision. The Murrs appealed this decision, but the Wisconsin Court of Appeals affirmed the circuit court’s determination and the Wisconsin Supreme Court denied the Murrs’ petition for review.
The Murrs then sued the County and Wisconsin, arguing that the ordinance constituted an uncompensated taking of their property, because it rendered Lot E unusable. Specifically, the Murrs asserted that the ordinance prevented Lot E from being sold or developed, and the topology of Lot E prevented any alternative use. Wisconsin and the County sought summary judgment, which the Wisconsin Circuit Court granted, finding that the Murrs’ claim was untimely and that the Murrs were not deprived of any property because Lot E could still be developed as part of Lot F. Wisconsin Court of Appeals affirmed on December 23, 2014, holding that two contiguous commonly-owned parcels are considered as a whole for takings analysis purposes. After the Wisconsin Supreme Court refused their petition for review, the Murrs petitioned the United States Supreme Court for a writ of certiorari, which the Court granted on January 15, 2016.
In this case, the Supreme Court will consider the relevant parcel for takings analysis when two distinct, contiguous parcels are commonly owned. The Wisconsin court emphasized the contiguous nature of the parcels in finding that that the two parcels were the “parcel as a whole.”
The Murrs argue that the Court should focus on the single parcel’s fee interest. The Murrs point to the Supreme Court’s “parcel as a whole” rule in Penn Central which indicates that when considering a takings claim, the diminution of value for the property should be understood by looking at the entire property rather than the discrete rights impacted by the taking. The Murrs label the approach taken by the Wisconsin Court as extreme when compared to the Supreme Court’s takings jurisprudence which takes a more moderate path.
WAS THE APPELLATE COURT’S CONSIDERATION OF THE PROPERTY APPROPRIATE UNDER SUPREME COURT’S TAKINGS JURISPRUDENCE?
The Murrs state that that Lot E and Lot F are separate and distinct, emphasizing that the two lots were purchased for different reasons at separate times. The Murrs distinguish Penn Central on the basis that the case involved segmenting a property rather than merging two properties. The Murrs argue that Penn Central creates a presumption that the level of interference caused by the taking should be identified by looking at the fee title. The Murrs contend that Penn Central allows for a different treatment only after the burden of proof has been met by the party advocating that treating the property differently will lead a more just result.
The Murrs further argue that the Penn Central decision does not establish that contiguously owned parcels must be aggregated when addressing a takings claim. The Murrs explain that the Court indicated in Tahoe-Sierra that a parcel should be understood as it is without aggregation or segmentation. As a result, the Murrs argue that the case law does not suggest that single fee titles should be combined in determining the relevant parcel.
The State of Wisconsin indicates that pursuant to its regulations, the merger provision dictates that the Murrs were entitled to one merged property. Wisconsin argues that the Wisconsin Court of Appeals correctly rejected segmenting the parcels. Wisconsin also notes that the Murrs treated the land as a single parcel. Wisconsin emphasizes that the Wisconsin Court of Appeals relied on a Supreme Court of Wisconsin decision called Zealy. Wisconsin argues that this case is similar to Penn Central in its holding and that the Murrs’ desire to segment the property cannot overcome their expectations about its possible usages given the merger provision.
St. Croix County also argues that the appellate court was correct and indicates that Penn Central requires a court to consider the “parcel as a whole” with regards to a takings analysis. The County stresses that state law combined the lots to create the “whole parcel” and that the Murrs’ attempt to split it up is something which was forbidden by the ruling in Penn Central. The County suggests that the drawing of lines is not relevant to the takings analysis where state law stands in opposition. The County also states that it is the state law which controls the allowable uses which ultimately determines the value of the property. The County also notes that there would only be a ten percent difference in the value of the property as a single parcel with a single residence compared to two lots each with a residence.
WHAT IS THE APPROPRIATE MEANS FOR DETERMINING WHAT IS THE ‘RELEVANT PARCEL’ OF LAND?
The Murrs argue that in Penn Central the Court rejected a theory which would have segmented the relevant parcel into distinct rights. The Murrs also indicate that the Court did not consider the effects on the owner’s other real estate when the Court analyzed the takings claim. As a result, the Murrs argue that the Court determined that the parcel should be measured by the fee estate of a single parcel. The Murrs indicate that because the parcel should be measured by the fee estate, the Court also rejected the aggregation of other properties for the purposes of the takings analysis.
The State of Wisconsin suggests that the proper understanding of what defines the relevant parcel can be determined by looking at Lucas. Wisconsin indicates that Lucas states that the relevant parcel should be identified by investigating the reasonable expectations of the property owner based on state property law. Wisconsin thus argues that the Court should look to state law in order to find the relevant protected rights. Wisconsin emphasizes that the boundaries which separate land are created by state law—a principle that has been uniformly recognized by the Court. Wisconsin thus argues that when two substandard lots are joined through a merger provision, the owner should not expect the lots to be separate parcels. Wisconsin argues that when the Murrs obtained the second lot, their expectations would have been shaped by the existing state law, which would mean that their purchase would trigger the merger provision.
St. Croix County similarly emphasizes the importance of the County’s minimum buildable acreage requirement. St. Croix County argues that the Murrs recognize the ability of state law to draw lot lines, yet they do not acknowledge the same power of the state to merge the property. St. Croix County argues that the whole of state property law should determine the scope of the relevant parcel for the purposes of takings analysis. The County further emphasizes the historic nature of the ability of state’s to perform this function and point to a myriad of similar state statutes and regulations around the country.
FAIRNESS TO THE LANDOWNERS AND THE STATES
The Chamber of Commerce and Mountain States Legal Foundation assert that the merger ordinance is unfair because it extinguishes the Murrs’ property rights in a parcel that they have a valid deed to. As the Southeastern Legal Foundation and the State of Nevada assert, the effect of the ordinance on individuals like the Murrs is particularly unfair, because the parcels were acquired at different times and for different purposes—the ordinance prevents the parcels from being put to their intended use. The National Association of Home Builders, the Mountain States Legal Foundation, and the State of Nevada echo this concern, asserting that the ordinance disproportionately affects multi-parcel owners and is, therefore, discriminatory. Other amici—including the Center for Constitutional Jurisprudence, the New England Legal Foundation, the Reason Foundation, the Wisconsin Realtors Association—decry the ordinance as arbitrary and inequitable, noting that it leaves property owners undercompensated. For these reasons, the Reason Foundation and the State of Nevada urge the Court to develop a rule that adequately protects landowners—and states—from overreaching regulation.
The National Association of Counties and Carlisle Ford Runge, on the other hand, assert that the ordinance is fair because the ordinance has served the St. Croix community for many decades. The State of California also asserts that the ordinance may impose only a nominal burden on properties. In fact, as asserted by California and the United States, the combined value of the Murrs’ parcels is only 10% less than the value of those parcels if sold separately. According to other amici supporting Wisconsin—the American Planning Association, the National Association of Counties, and the National Trust for Historic Preservation—state and local governments have long exercised the power to enact ordinances like the one in question. For these reasons, the National Trust for Historic Preservation and the National Association of Counties urges the Court not to adopt a new standard, as doing so would force states and local governments to revise long standing ordinances and regulations.
ECONOMIC AND ENVIRONMENTAL IMPACT
The Cato Institute and Nevada assert that the aggregation rule Wisconsin adopted hurts property values. Additionally, Nevada and the Wisconsin Realtors Association asserts that without the ordinance two contiguous parcels could create more value if used separately; therefore, economic growth is best served by abolishing the aggregation rule. Similarly, the Cato Institute urges the Court to adopt a presumption against aggregation, as doing so would promote land development.
Walter F. Mondale, on the other hand, argued that the ordinance preserves the St. Croix River, such that abolishing the aggregation rule would hurt the environment. Mondale also asserts that the preservation of the St. Croix River encourages tourism, which benefits the local economy. Similarly, Carlisle Ford Runge asserts the ordinance does benefit the property values: it increases the demand for the property and so raises its value.
- Richard Epstein, Takings: Private Property and the Power of Eminent Domain (1985).
- Roberty A. Levy & William Mellor, Taking Property by Regulation, in The Dirty Dozen 169 (2010).
- Amanda Reilly, Justices Set March Date to Hear Key Property Rights Case, E&E News (Feb. 3, 2017).
- Ilya Somin, The Grasping Hand: “Kelo v. City of New London” and the Limits of Eminent Domain (2015).
- Ilya Somin, Thoughts on the California Amicus Brief in Murr v. Wisconsin – an important takings case currently before the Supreme Court, The Washington Post (June 22, 2016).