Murr v. Wisconsin

Citations: 2017 U.S. LEXIS 4046; 137 S. Ct. 1933; 198 L. Ed. 2d 497; 2017 D.A.R. 6029; 47 Envtl. L. Rep. (Envtl. Law Inst.) 20082; 85 U.S.L.W. 4441; 26 Fla. L. Weekly Fed. S 717; 2017 WL 2694699; 84 ERC (BNA) 1713Docket: 15-214

Court: Supreme Court of the United States; June 23, 2017; Federal Supreme Court; Federal Appellate Court

Original Court Document: View Document

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The Supreme Court case of Murret et al. v. Wisconsin et al. involves petitioners who own two adjacent lots along the St. Croix River, which is protected by various laws. Local regulations prohibit the separate sale or development of these lots, unless they each contain at least one acre of land suitable for development. A grandfather clause exists for lots that were separately owned before January 1, 1976. The petitioners’ parents bought Lots E and F separately in the 1960s, but after transferring ownership to the petitioners in the 1990s, the lots were deemed merged under local law due to their common ownership, restricting their use.

The petitioners sought variances to sell Lot E as part of an improvement plan, but their requests were denied by the St. Croix County Board of Adjustment and subsequently affirmed by state courts. The courts determined that the local ordinance effectively combined the lots, allowing only for development on the unified property. The petitioners claimed that this regulatory framework constituted a taking of Lot E, depriving them of its use. However, the County Circuit Court ruled that the petitioners retained viable options for property use and that the loss in market value was minimal (less than 10%).

The State Court of Appeals upheld this decision, concluding that the regulatory analysis should view Lots E and F as a single unit. The Court's takings jurisprudence indicates that a regulation is a taking only if it deprives the property owner of all economically beneficial use, necessitating a fact-specific inquiry into the situation. The Court acknowledged the need for careful evaluation of circumstances to determine if a taking has occurred, referencing precedents on regulatory takings.

A regulatory taking may be established based on several factors: (1) the economic impact on the claimant, (2) the degree of interference with investment-backed expectations, and (3) the nature of the governmental action. Even a complete deprivation of property use may not warrant compensation if the limitations are inherent in existing state property and nuisance laws. The Court's approach to regulatory takings is flexible, balancing individual property rights with governmental powers for public benefit. 

A key issue in assessing a regulatory taking is determining the appropriate unit of property for evaluating the effects of governmental action, with the Court avoiding a narrow definition linked solely to the targeted property. Several factors should be considered: the treatment of the property under state and local laws, its physical characteristics, and the value impacted by the regulation. 

The formal definitions proposed by Wisconsin and petitioners do not fully reflect reasonable property expectations. Wisconsin's approach ties parcel definitions to state law, while petitioners advocate for lot lines as definitive, despite lot lines being subject to state regulation. The merger provision in question represents a legitimate exercise of state power, consistent with established merger regulations.

Under a multifactor analysis, the petitioners' property should be treated as a single parcel, comprising Lots E and F. State law supports the merger of the lots, establishing reasonable expectations for their treatment as a single property. The physical proximity and characteristics of the lots, along with their proximity to regulated waterways, further justify this evaluation.

Lot E's integration with Lot F enhances the value of both properties, providing benefits such as increased privacy and recreational space, along with an ideal location for improvements. The Court of Appeals appropriately regarded the adjacent lots as a single parcel, leading to the conclusion that the petitioners have not experienced a compensable taking of their property. Under the Lucas precedent, the petitioners have not been deprived of all economically beneficial use of their property. Additionally, the broader Penn Central test does not support a claim of taking. The Supreme Court's opinion, delivered by Justice Kennedy, affirmed the lower court's ruling and noted that the governmental entities justified their regulations, arguing that the ownership of the adjacent lot offsets the impact of the restrictions imposed on the undeveloped lot. The case involved the regulatory context of land use along the St. Croix River, which is protected under federal law, necessitating the state to impose development limitations to safeguard the area's environmental qualities.

Petitioners, two sisters and two brothers from the Murr family, inherited two adjacent recreational lots along the Lower St. Croix River in Troy, Wisconsin, designated as Lots E and F. Their parents initially purchased these lots separately, with Lot F transferred to the family plumbing business and Lot E held by their parents. Wisconsin regulations require at least one acre of suitable land for a lot to be developed separately, while a grandfather clause allows for separate development of pre-1976 lots under distinct ownership. However, a merger provision prevents adjacent lots under common ownership from being sold or developed separately unless they meet the size requirement. 

Both lots are approximately 1.25 acres but have less than one acre of developable land due to their steep terrain, with combined buildable land of only 0.98 acres. Lot F was conveyed to the petitioners in 1994 and Lot E in 1995. The record has ambiguities about whether the lots were previously merged, but it is generally accepted that they merged upon transfer to the petitioners. After a decade, the petitioners sought to relocate the cabin on Lot F and sell Lot E to finance the project. However, the merger of the lots led to restrictions against their separate sale or development.

The petitioners requested variances from the St. Croix County Board of Adjustment to facilitate their plans, but the Board denied these requests. The Wisconsin Court of Appeals upheld the Board's decision, confirming that the local ordinance had effectively merged Lots E and F, restricting the petitioners to treating the properties as a single lot for development and sale purposes.

Petitioners initiated a legal action in state court, claiming that state and county regulations constituted a regulatory taking by effectively depriving them of all or nearly all use of Lot E, which could not be sold or developed separately. Both parties presented appraisals to the trial court, with respondents estimating the value of the two lots together at $698,300 and as separate buildable properties at $771,000, while petitioners valued Lot E at $40,000 as undevelopable, based on the assumption it could be sold independently. The Circuit Court of St. Croix County granted summary judgment in favor of the State, stating that petitioners had various options for utilizing their property, such as preserving or relocating the existing cabin or constructing a new residence on either lot. The court determined that petitioners had not lost all economic value, as the combined property’s value diminished by less than 10 percent due to the regulations. The Wisconsin Court of Appeals affirmed this decision, emphasizing that the takings analysis must consider the property as a whole, encompassing both Lots E and F. The court referenced precedent that indicated petitioners could not reasonably expect to use the lots separately, given their knowledge of existing zoning laws at the time of acquisition. The Supreme Court of Wisconsin denied discretionary review, and the U.S. Supreme Court granted certiorari. The Takings Clause of the Fifth Amendment prevents government acquisition of private property without just compensation, a principle applicable to states through the Fourteenth Amendment, but it does not explicitly address regulatory burdens on property.

Lucas v. South Carolina Coastal Council established that while property regulation is permissible, it crosses into a taking when it goes too far, although the Court has not provided detailed criteria for this threshold. Since the Mahon decision, the Court has largely avoided rigid rules, favoring ad hoc evaluations that consider the specifics of each case. Two key guidelines have emerged: (1) a regulation that denies all economically beneficial use of land typically necessitates compensation under the Takings Clause; (2) even if not all use is denied, a taking may still be found by assessing the regulation's economic impact, interference with investment-backed expectations, and the nature of the governmental action. Additionally, the Lucas case introduced a categorical rule for total deprivation of use but acknowledged that compensation may not be required if such limitations align with state property and nuisance law. The Court's approach remains flexible, aiming to balance individual property rights with the government's authority to modify rights for public welfare. Proper adjudication of these cases requires a nuanced evaluation, driven by the Takings Clause's purpose of ensuring that public burdens are shared fairly among the populace.

The case addresses the critical issue of determining the proper unit of property for assessing whether a regulatory taking has occurred. This determination is essential for comparing the value lost due to governmental action against the remaining value of the property. The Court has emphasized that any portion of property taken is considered in its entirety, raising the question of whether the taking involves the whole parcel or just a part. In some instances, the impact of the regulation must be evaluated in the context of the entire property rather than just the affected segment, distinguishing regulatory takings from physical takings, where the effects are clearer.

The Court has rejected overly narrow definitions of the relevant parcel, as seen in the Penn Central case, where the denial of a permit to build above Grand Central Terminal was assessed in relation to the entire property rather than just the air rights. Similarly, in Tahoe-Sierra, the Court cautioned against segmenting property interests based on the specific regulation challenged, arguing that such an approach could misrepresent the regulatory impact.

Additionally, the Court has warned against equating property rights under the Takings Clause strictly with state law definitions. The Palazzolo decision highlighted that states cannot unilaterally define property rights in a way that leaves landowners without protection against unreasonable regulations, indicating that such a definition could undermine legitimate takings claims arising from state actions altering property use contrary to reasonable investment expectations.

A state law may consolidate nonadjacent properties owned by a single entity and impose development limits on the collective holdings. If a court defines these properties as a single parcel based on this law, it could undermine takings claims by focusing on the total retained value instead of the individual value loss. Courts must evaluate multiple factors to determine what constitutes the "denominator" in takings claims, including state and local land treatment, physical characteristics of the land, and the prospective value of the regulated property. Key considerations include whether landowners reasonably expect their properties to be treated as one parcel or separately, based on customary legal understandings.

Judicial assessment should prioritize the treatment of land under local law, recognizing existing restrictions that may influence land use. A valid takings claim remains viable regardless of when a property was acquired, as unreasonable regulations do not lose their validity over time. Existing restrictions can shape reasonable expectations for land acquisition. New regulations, such as zoning changes, may limit property value but can be seen as reasonable and not a taking. Courts should also examine the physical attributes of the land, including its relationship to neighboring properties and environmental regulations. Lastly, the impact of the regulation on property value should be analyzed, noting that while some restrictions may reduce market value, they could enhance the value of adjacent holdings by providing benefits like privacy or natural preservation. If nonadjacent properties lack a special relationship, this could weaken the argument for treating them as a single parcel in a takings context.

If a landowner has adjacent property to a small lot, the combined market value may increase due to potential structural expansion or preservation of skyline views from one parcel benefiting the other. This scenario may support treating the properties as a single parcel, impacting the viability of a regulatory takings challenge. State and federal courts are experienced in handling such claims and will proceed carefully in this complex area. Wisconsin and the petitioners seek a formal rule for parcel inquiries; however, neither proposal adequately captures the essential legal and factual principles regarding property interests. Wisconsin suggests defining the parcel based on state law, merging the two lots under the challenged regulations, but this approach presumes the answer to whether the State can define the relevant parcel to evade justifying regulations against legitimate property expectations. The law must recognize these expectations to balance property owners' rights with the State's authority to enact regulations. The footnote from *Lucas* referenced by Wisconsin indicates that reasonable expectations may depend on how state law recognizes property interests. However, this reference is non-binding and unnecessary for the ruling in *Lucas*. The Court's new test will respect state law while also considering other reasonable expectations regarding property. The petitioners propose a flawed presumption that lot lines define the relevant parcel, which overlooks that lot lines are created by state law, subject to state authority. This perspective conflicts with established case law affirming that reasonable land-use regulations do not constitute a taking. The Court's previous decisions, including *Agins v. City of Tiburon*, validate that zoning regulations can be legitimate exercises of police power, though later rulings clarified that the test in *Agins* was improper for inviting excessive scrutiny of government regulation effectiveness.

The legal discussion emphasizes that the merger provision in question is a legitimate exercise of governmental power, supported by a historical context of state and local merger regulations established nearly a century ago. These provisions are often part of a regulatory framework that sets minimum lot sizes to preserve open spaces while facilitating orderly development. The text cites precedent from *Agins*, highlighting that zoning ordinances can benefit both the public and property owners by ensuring careful development and preserving open spaces.

It explains how local governments address existing substandard lots through gradual reduction, using merger provisions to combine contiguous substandard lots under common ownership, complemented by grandfather clauses for adjacent lots in separate ownership. The possibility of obtaining a variance from local zoning authorities in special circumstances further mitigates the impact of such merger provisions.

Petitioners argue that lot lines should define the relevant parcel, but this perspective neglects the established use of merger provisions to balance regulatory goals with landowner expectations. It would undermine municipalities' ability to enforce minimum lot size regulations and poses challenges due to the varying formality of lot lines across states. Informal adjustments to lot lines, often exempt from oversight, could lead to manipulative behaviors by landowners anticipating future regulations.

Ultimately, the text concludes that under a multifactor evaluation standard, petitioners' property should be assessed as a single parcel, comprising Lots E and F, due to state and local laws that recognize their merger, particularly after the 1995 transfer of Lot E, which brought both lots under common ownership.

The merger provision in question was adopted for a legitimate purpose, acknowledging that lot lines do not always dictate property treatment. Petitioners' land was subject to this provision because they voluntarily combined the lots after the regulations were in place, establishing a reasonable expectation that the lots would be treated as a single property. The physical characteristics of the property, including the contiguity of the lots and their rough terrain, support this unified treatment. Lot E's limited potential for alternative uses due to its size, location, and steep terrain, along with its proximity to a regulated river area, reinforces this expectation of public regulation affecting property enjoyment.

Additionally, the interrelation of Lot E and Lot F justifies considering them as one parcel for regulatory taking assessments. Restrictions prevent separate sales or development of the lots, but their combination offers enhanced privacy, recreational opportunities, and optimal site improvements. While Lot E alone would be valued at $40,000, the combined value of Lots E and F is $698,300, indicating their complementary nature. The State Court of Appeals correctly viewed the properties as a single unit, and although petitioners argue this approach applies a rigid rule for contiguous properties, the Court of Appeals considered multiple factors in its decision, aligning with established precedent.

The court evaluated the Murr family's claim regarding their two adjacent lots along the Lower St. Croix River, which local regulations prevent from being sold or developed separately due to insufficient buildable land. The judgment affirmed by the Wisconsin Court of Appeals stated that the property should be considered as a whole, given its status as a single purchase and the undeveloped nature of all 10.4 acres. The court determined that the Murrs did not experience a compensable taking under the Lucas standard, as they retained the ability to use the property for residential purposes and had not been deprived of all economically beneficial use. The property's value had decreased by less than 10 percent, which, according to precedent, does not constitute a taking. Additionally, under the Penn Central test, the economic impact of the regulation was not deemed severe, and the Murrs could not reasonably expect to sell the lots separately due to pre-existing regulations. The court emphasized that the regulation served a legitimate public interest in land preservation and that treating the lots as a single parcel was appropriate for the takings inquiry. The Supreme Court upheld the Wisconsin Court of Appeals' decision, affirming that no regulatory taking occurred. Justice Gorsuch did not participate in the case, while Chief Justice Roberts, joined by Justices Thomas and Alito, dissented.

The conclusion reached by the majority, which asserts that the Murrs can effectively utilize both lots despite regulatory restrictions, is deemed acceptable, given that the ordinance aims to preserve scenic areas for public and landowner benefit. However, the majority's approach is criticized for introducing a complex definition of “private property” that relies on various factors—such as land characteristics, prospective value, owner expectations, and legal customs—rather than adhering to the traditional understanding that state law defines property rights. This new definition is argued to weaken the protections offered by the Takings Clause, which is intended to safeguard individuals from bearing the burdens of government actions that should be public responsibilities. The dissent emphasizes that property boundaries, as defined by state law, should determine the property in regulatory takings cases, with the assessment of whether a taking has occurred being a separate issue. The Takings Clause sets conditions on governmental property interference, necessitating consideration of what property is affected, whether it has been taken for public use, and the calculation of just compensation owed to the owner. The identification of the property interest involved relies on external legal definitions rather than the Constitution itself. The Takings Clause serves to protect established property rights from government encroachment, and when such rights are compromised, the critical question is whether this constitutes a taking, which is typically characterized by direct appropriation or physical invasion.

Actions that result in a "per se taking" significantly invade an owner's property rights, denying them the ability to possess, use, and dispose of their property. However, not all takings are direct; governments may also infringe on private property rights through regulations intended for public use. Requiring compensation for appropriations but not for regulatory actions could lead to extensive and detrimental regulation of private property. Regulatory takings jurisprudence recognizes that while some regulation is permissible, excessive regulation constitutes a taking. This establishes a balance between property owners' rights and governmental authority to promote the common good. 

Compensation is warranted for onerous regulatory actions, with the extent of permissible regulation being context-specific rather than governed by strict rules. Fixed principles include evaluating the impact on specific property and recognizing that a regulation which eliminates all economically beneficial use of land constitutes a taking. For regulations that do not have such extreme effects, a flexible analysis is required, considering factors like economic impact, investment-backed expectations, and the nature of government actions. Ultimately, the inquiry assesses whether the property owner has unfairly borne public burdens.

If a taking is established, "just compensation" is typically based on the property's market value at the time of the taking. There is an incentive for property owners to narrowly define "private property" to challenge regulations, which risks upsetting the balance between property rights and government authority. Thus, the Supreme Court has ruled that property owners cannot claim a taking merely by demonstrating loss of the ability to exploit a property interest.

The owner of Grand Central Terminal contended that restrictions on adding an office building constituted a taking of air rights. The court rejected this narrow interpretation, asserting that property should be viewed as a whole bundle of rights. When one right is diminished, it does not equate to a taking if the overall ownership remains intact. The case raises questions about how to define the relevant property for regulatory takings when multiple plots are involved—should each plot be considered individually or as a collective unit? The majority opinion suggests evaluating various factors related to the land and regulations to determine if a landowner would view their holdings as a single parcel or separate tracts. In contrast, the dissent argues that state laws clearly define distinct land units, which should guide property definitions in regulatory takings. The dissent emphasizes that property rights are inherently tied to specific geographic boundaries and that adherence to state-defined property lines aligns with existing jurisprudence. The concern of strategic unbundling of property rights is not applicable when dealing with legally distinct parcels, as state law clearly delineates the rights associated with each parcel.

Attempts to modify property lines in anticipation of regulatory changes may be perceived as strategies to circumvent takings claims. Courts have historically rejected manipulative divisions of property rights, as seen in Penn Central, and would likely do so again if faced with attempts to redefine “private property” narrowly. States cannot evade the Takings Clause by denying established property interests recognized under state law.

When assessing whether a regulation constitutes a taking, courts should evaluate the impact of the regulation on the identified property, considering adjacent land under common ownership, which can inform expected uses of the affected parcel. If a regulation is determined to be a taking, principles of just compensation may allow recovery for damages concerning contiguous properties used in relation to the impacted parcel.

The “parcel as a whole” doctrine prevents property owners from isolating individual rights within their property bundle to claim a taking. This approach safeguards the balance in regulatory takings jurisprudence, as state law delineates distinct parcels and associated rights. While contiguous ownership may influence whether a parcel has been taken, the definition of the “parcel as a whole” should adhere to state property lines, as illustrated by Penn Central. 

The majority's conclusion that the Murrs' Lots E and F are a single parcel, guided by complex factors assessing the ordinance's relevance and the Murrs’ expectations, could undermine the protective function of the Takings Clause. These considerations should emerge in the evaluation of whether a regulation amounts to a taking, rather than being conflated with the definition of “private property.” The majority's reasoning may obscure the fundamental structure of claims under the Takings Clause.

Regulatory takings claims involve complex, ad hoc factual inquiries, particularly when determining what constitutes a "taking" under the Penn Central framework. This assessment begins only after confirming that the regulation does not eliminate all productive use of the property in question. The identification of relevant "private property" is crucial and traditionally relies on state property principles, a method that the majority deviates from, potentially allowing governments to create litigation-specific definitions of "property." This deviation enables governments to aggregate distinct properties for the purpose of countering takings claims, complicating the identification of the "parcel as a whole" and allowing the government's regulatory interests to influence both the parcel definition and the determination of regulatory burdens.

Regulatory takings inherently create a conflict between the common good and individual property rights, where the societal benefits of regulations often overshadow individual losses. The Takings Clause is designed to prevent disproportionate burdens on individuals. However, the majority’s approach undermines this protection by allowing government objectives to dictate property definitions, which can skew the evaluation of whether a regulation imposes excessive burdens. For instance, if a person owns two separate plots of land, one of which abuts a protected beach, a new regulation preventing development on that land could illustrate how the government's interests might overshadow individual rights, especially when the regulation serves to protect a public interest, such as wildlife conservation.

A regulatory takings claim regarding Lot E would likely succeed as a per se taking, given that Lot B has no economic value or productive use. However, the majority opinion allows the government to argue that Lots A and B should be treated as a single "parcel." If this argument prevails, the owner's per se takings claim would be negated, forcing them into the Penn Central balancing framework, which evaluates the reasonableness of the government's regulatory action. The majority's assertion that property definitions should not dictate outcomes lacks clarity and risks favoring government interests by allowing the definition of the "parcel" to hinge on the reasonableness of the regulation.

This approach could lead to inconsistencies, where two lots are considered a single parcel for one claim and separate for another, effectively manipulating the definition of "private property" to undermine takings claims. The majority's emphasis on ensuring that public burdens are fairly distributed contrasts with the traditional understanding of identifying a taking, suggesting a departure from stable state law definitions of private property. Instead, the new framework complicates the relationship between individuals' property rights and public interest, weakening the protection offered by the Takings Clause. The Murr siblings' situation illustrates this issue: they acquired two lots that, under state regulations, could not be developed or sold separately, leading to the argument that the ordinance resulted in a taking of Lot E, while the state and county contend that both lots should be considered a single relevant parcel.

The trial court ruled in favor of the State and County, a decision upheld by the Wisconsin Court of Appeals. The appellate court, rather than determining if Lots E and F are separate parcels under Wisconsin law, employed a takings-specific approach to define the relevant property. It framed the issue as whether contiguous property under common ownership is analytically divisible for regulatory takings claims, concluding that the two lots should be considered a single parcel due to their adjacency and common ownership by the Murrs. Consequently, the ordinance's impact was assessed based on both lots together. 

In dissent, it is argued that the Court of Appeals erred by not first evaluating if Lots E and F are legally distinct under state law. The dissenting opinion calls for vacating the judgment and remanding for a proper state law determination before assessing whether the ordinance constitutes a taking. If Lot E is found to be a distinct parcel, the takings analysis would need to be reconsidered, but the court could still evaluate relevant factors from the majority's findings, such as the economic impact of the regulation and the Murrs' use of Lot E in relation to Lot F. 

The dissent emphasizes that property rights as defined by state law should guide the determination of whether a regulation constitutes a taking, cautioning against allowing government interests to distort these rights. The dissent concludes with a reminder of the purpose of the Takings Clause in securing property rights.

Agreement is expressed with the Chief Justice's dissent, which appropriately applies existing regulatory takings precedents without calls for reconsideration. The Court has not historically based these precedents on the original understanding of the Constitution. In *Pennsylvania Coal Co. v. Mahon*, the Court established a rule stating that excessive regulation may constitute a taking. Historically, prior to *Mahon*, it was believed that the Takings Clause addressed only direct property appropriation or situations effectively removing possession. There is a suggestion to reevaluate regulatory takings jurisprudence to determine its alignment with the original public meaning of the Takings Clause in the Fifth Amendment and the Privileges or Immunities Clause in the Fourteenth Amendment, referencing scholarly debate on this issue.