Petition for Writ of Certiorari — K & K Construction, Inc. v. Michigan Department of Natural Resources

Supreme Court brief1998

Ask Donna

What actually matters in this document.

Text

In the

Supreme Court of the United States

October Term, 1997

~ %

K & K CONSTRUCTION, INC., J.F.K. COMPANY, and

RESORTS AND COMPANY, a Michigan Corporation,

Petitioners,

THE MICHIGAN DEPARTMENT OF NATURAL

RESOURCES and STATE OF MICHIGAN, -~

Respondents.

he.

On Petition for Writ of Certiorari to the

Supreme Court of the State of Michigan

PETITION FOR WRIT OF CERTIORARI

—

ROBERT L. BUNTING JAMES S. BURLING

Of Counsel Counsel of Record

P.O. Box 7 Pacific Legal Foundation

Oxford, Michigan 48371 2151 River Plaza Drive,

Telephone: (248) 628-5150 Suite 305

Facsimile: (248) 628-6422 Sacramento, California 95833

Telephone: (916) 641-8888

Facsimile: (916) 920-3444

Counsel for Petitioners

QUESTION PRESENTED

In determining the “relevant parcel” for a takings analysis

may a court consider not only the property on which the

government has denied all use, but also other contiguous

properties owned in whole or in part by the same owners?

TABLE OF CONTENTS

Page

QUES TRIS Fare SA 6 os ks oa ok ae sw wc

TABLE OF AUPE peed ote SAU ee he ee ives Vv

OPT BEA aes vee Coin eh eacwce wan l

JURTSEMG EUR 5 60 Fa i ae wa as Cale brs San ek I

CONSTITUTIONAL PROVISIONS AT ISSUE ......... I

STATEMENT Gl Fane Rte oa eb yea ees, 2

IN TRO BIS ree ees ee eek ees eee 2

A. TR PU os ea ee ea 3

E.R ie eG ice ak Fe 3

a. RU Pi oe eee 4

5. TE Be a a i es 4

©. POR er see eee 5

BS. ‘Sie EMV Pe os a a as ess 5

b. .” SR a ie eee a Pee 5

LR ia ee ee 6

C. FRG Ra ee ee ea eee ca as 6

1. The Michigan Court of Claims .......... 6

&. WE 2 ree eras a oc 7

REASONS FOR GRANTING THE WRIT ............. 9

INTRODRA TRIG ie Beare a ee ai ae ak a y

WHILE THE FEDERAL COURTS ARE IN

DISARRAY OVER HOW TO MEASURE THE

RELEVANT PARCEL FOR TAKINGS

PURPOSES THEY ARE ALL IN CONFLICT

WITH THE MICHIGAN SUPREME COURT ....

The Federal Circuit Has Refused to Elevate

Substance over Form and Has Focused on

the Actual Property That the Government

PN EI ae SUV a pe aut e es aks ss

The Tenth Circuit Has Taken an Approach

That Is in Conflict with the Federal Circuit... .

The Ninth Circuit Has Suggested That the

Uniformity of the Regulation Is a Key

Factor in Determining the Relevant Parcel ....

THE STATE COURTS ARE IN A SIMILAR

CONFLICT WITH THE MICHIGAN

SUPREME COURT

The Oregon Supreme Court Treats a

Uniquely Regulated Portion of Property

Separately for Takings Purposes ..........

The New Hampshire Supreme Court Has

Recognized That There May Be

Circumstances Where a Narrowly Focused

“Relevant Parcel” Is Appropriate .........

The New York Court of Appeals Has

Adopted the Doctrine of “Conceptual

I ce eu ea east

California Has Adopted the Nuanced

Approach of the Ninth Circuit

Page

Ill. WHILE THE COMMENTATORS DO NOT

AGREE AMONG THEMSELVES AS TO

THE APPROPRIATE MEASURE FOR THE

RELEVANT PARCEL, THEY ALL AGREE

THAT THIS COURT CAN RESOLVE THE

2g * 3s ¢ RIREESIR rar prien tay rag aah Uraves SEN Seve peat 23

IV. THIS COURT’S PRECEDENTS ARE IN

CONFLICT WITH THE DECISION OF THE

MIL TAIAIS GUE MEE MAMIE 6c She eens 26

A. Those Supreme Court Cases That Have

Declined to “Segment” Property Are Not

TN BO CRUE Fs rss ad. wipes eas 26

B. The Underlying Rationale Behind This

Court’s Takings Jurisprudence Calls for a

Focused Analysis of the Regulation of Real

POY CR ela bowen fun + cule 27

CAP er RANIITE 0 i 5b a KEG oS Pee a eee 29

TABLE OF AUTHORITIES CITED

Page

Cases

American Savings and Loan Association v. County

of Marin, 653 F.2d 364 (9th Cir. 1981) .... 16-19, 22-23

Andrus v. Allard, 444 U.S. 51 (1967) ...........5555. 27

Aptos Seascape Corp. v. County of Santa Cruz,

138 Cal. App. 3d 484 (1982) .........-.2---0e- : ah

Armstrong v. United States, 364 U.S. 40 (1960) ........ 10

Babbitt v. Youpee, 117 S. Ct. 727 (1997) .......-.. 27-28

Boise Cascade Corporation v. Board of Forestry,

035 F.2d 411 (One: T99T) 3. es ei wee ee 18-19

Ciampitti v. United States, 22 Cl. Ct. 310 (1991) ....... it

Clajon Production Corp. v. Petera, 70 F.3d 1566

CEM Ge: SOIR aii Sas Fe ee ees 15, 18

Concrete Pipe and Products of California, Inc. v.

Construction Laborers Pension Trust for

Southern California, 508 U.S. 602 (1993) ........-. 27

Deltona Corporation v. United States, 657 F.2d

SIRE SEE Ch BURT. occa ee ool ee Chen 14

Dodd v. Hood River County, 1998 WL 57497

(Ot Cll, S998) ook Gi oe eer ee 19

Dodd v. Hood River County, 855 P.2d 608 (1993) ...... 19

Fifth Avenue Corp. v. Washington County,

SQi P28 SO (Owe. 1976) a5 on esi es 16, 19-20, 22-23

First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, 482 U.S.

SA LIST aS eee ee 28

Page

Florida Rock Industries, Inc. v. United States,

18 F.3d 1560 (Fed. Cir. 1994), cert. denied.

LES Gis Cee ak sic ee he Wilcke eee aa 13-16

Florida Rock Industries, Inc. v. United States,

791 F.2d 893 (Fed. Cir. 1986), cert. denied,

CIF A BOER ETE, Fi RGR ELS a 11-12

Hodel v. Irving, 481 U.S. 704 (1987) ............. 27-28

Jenigen v. United States, 657 F.2d 1210 (Ct. Cl.

SEE eis ae RTE VN loos nd ie eee 14

Kaiser Aetna v. United States, 444 U.S. 164

CARTER. FERC Ay ERs Eble eee Pe ee ee ad 28

Kaiser Development Co. v. City and County of

Honolulu, 649 F. Supp. 926 (D. Haw. 1986),

at a, BFGF ae 112 COG, TRO iva ae ee 17

Keystone Bituminous Coal Association v.

DeBenedictis, 480 U.S. 470 (1987) ............ 25-26

Loretto v. Teleprompter Manhattan CATV Corp.,

G56 US: GER CIP es eS coor bs ee cue ee 28

Loveladies Harbor v. United States, 28 F.3d 1171

Cen. CA See se ee eee ea 13-14

Lucas v. South Carolina Coastal Council,

JOS is. TORR PME So oc sees es 8-10, 27-28

MacLeod v. County of Santa Clara, 749 F.2d 541

(Si Car, BOOS? Scie as a Vika 18

Manocherian v. Lenox Hill Hospital, 84 N.Y .2d

385, 643 N.E.2d 479 (N.Y. 1994). cert. denied.

£35 S. OR FIs Cie oe oe ee ee 21

Nectow v. Cambridge, 277 U.S. 183 (1928) ........ 16, 22

——

vil

Page

Penn Central Transportation Co. v. City of New

eee GA UI SORT IOTOD obi ess ee oe Keene so 9, 26

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393

Ce oa gieain ae ree Beko ERS RS ee Ee 28

Quirk v. Town of New Boston, 663 A.2d 1328

COE is eC a RE owe pin 0:5 4 bw we 20

Ruckelshaus v. Monsanto Co., 467 U.S. 986

CR i Fe tenes oes Oe ep aanie Wwe seeps 28

Seawall Associates v. City of New York, 74.N.Y.2d

92. 542 N.E.2d 1059 (N.Y. 1989) .......22065. 20-21

San Diego Gas and Electric v. San Diego,

CTS SB GEE TURE) 66 sas vd le A ay a wee e's 28-29

Twain Harte Associates, Ltd. v. County of

Tuolumne, 217 Cal. App. 3d 71 (1990) ..........-- 22

Whitney Benefits v. United States, 926 F.2d 1169

(Fed. Cir.), cert. denied, 502 U.S. 952 (1991) .. 14-15, 18

United States Constitution

er rer i nie Sha ene eS meee ]

Fourteenth Amendment, Section] ..............+555. 2

Statute

y RA Lady Be 7. fener e tars Se en et ara ae |

Rules

Supreme Court Rule 13.1 ............. Savina eter a

Vill

Page

Miscellaneous

Benjamin D. Barros, Defining “Property” in the

Just Compensation Clause, 63 Fordham L.

NN Se eas si ok CaN eae eek nd ba ewe 24

John E. Fee, Unearthing the Denominator in

Regulatory Takings Claims, 61 U. Chi. L. Rev.

RR PD seis hey sarees Soc aisha hea 6 ci 24, 29

Daniel R. Mandelker, New Property Rights Under

the Takings Clause, 81 Marq. L. Rev. 9(1997) ...... 23

Dwight Merriam, Robert Meltz, and Richard Frank,

The Takings /ssue (island Press, in press 1998) ...... 25

Bernard Siegan, Property and Freedom (Social

Philosophy & Policy Center & Transaction

PNR FD: oi Go oe we kee ee ac a a oa yn

The Petitioners, K & K Construction, e¢ a/., respectfully

pray that a writ of certiorari issue to review the judgment and

opinion of the Michigan Supreme Court, entered in the above-

entitled proceeding on March 24, 1998.

OPINIONS BELOW

This petition is from a decision of the Michigan Supreme

Court reported at 456 Mich. 570, 575 N.W.2d 531 (Mich. 1998),

and reproduced as Appendix A. Page references are to the

appendix

The Michigan Supreme Court decision reversed a Michigan

Court of Appeals decision, K & K Construction Co. v. Michigan

Department of Natural Resources, reported at 551 N.W.2d 413

(Mich. App. 1996). This decision is reproduced as Appendix B.

There were three relevant decisions by the Michigan Court

of Claims. The Final Judgment and Award of Damages to

Plaintiffs Against Defendants DNR and State of Michigan and

Awarding Costs and Attorneys Fees (Trial Court Final Decision)

dated September 9, 1993, is reproduced as Appendix C. The

Opinion and Order of May 4, 1993 (Trial Court Second

Opinion), is reproduced as Appendix D. The Opinion and Order

of November 5, 1992 (Trial Court First Opinion), is reproduced

as Appendix E.

JURISDICTION

The opinion of the Michigan Supreme Court which is the

subject of this petition was filed and entered on March 24, 1998.

This petition for writ of certiorari is timely filed in accordance

with Rule 13.1 of the Rules of this Court. This Court has

jurisdiction over this matter pursuant to 28 U.S.C. § 1257(a)

CONSTITUTIONAL PROVISIONS AT ISSUE

The Fifth Amendment to the United States Constitution

states in relevant part: “[NJor shall private property be taken for

public use without just compensation.”

Section | of the Fourteenth Amendment to the United

States Constitution states in relevant part: “[N]or shall any state

deprive any person of life, liberty, or property. without due

process of law: nor deny to any person within its jurisdiction the

equal protection of the laws.”

STATEMENT OF THE CASE

INTRODUCTION

This is the story of how the Michigan Department of

Natural Resources can take away a 55-acre parcel of land from

its owners and avoid paying just compensation. As will be

shown, the owners first sought a permit to use the 55-acre parcel

for a restarurant and sports complex. The permit was denied

because the state discovered 27 acres of wetlands in the middle

of the property. Next the owners sought a permit to make use of

an irregular ring of uplands on the 55-acre parcel that sur-

rounded the wetland. Although the owners would have

sacrificed the wetlands—creating a de facto wetlands preserve for

the state, that permit was also denied.

The owners sued for a taking. After the owners prevailed

in the trial court, the state belatedly granted the permit to use the

nonwetland portion of the property. The owners persisted, how-

ever, and continued to argue that they had (1) suffered a

temporary taking of the 55-acre parcel and (2) suffered a perma-

nent taking of the wetlands. In a nutshell, the owners based their

allegations upon two facts: (1) all use of the 55 acres had been

denied for several years giving rise to a temporary taking, and

(2) all use of the wetlands had been permanently denied, giving

rise to a permanent taking.

According to the Michigan Supreme Court, however, it

cannot be said that all use of property had been denied because

the owners happened to own several other parcels contiguous to

the 55-acre parcel. These other parcels had to be considered in

determining whether there had been a denial of sufficient

economically viable use for there to have been a taking. The

Di tet iia Dre as ee a as

Michigan court’s requirement that other parcels be considered

in determining whether there has been a denial of all econom-

ically viable use is totally contrary to the settled law in numerous

state courts and federal circuits.

These other courts all employ a variety of tests to determine

what the “relevant parcel” is when analyzing whether there has

been a taking of economically viable use. Despite the disparate

approaches taken by these other courts, they all disagree with the

Michigan court’s novel methodology. And, as a number of

commentators have pointed out, the reason why there are so

many varying approaches is because this Court has not yet

provided guidance to the lower courts, the Nation’s landowners,

and the Nation’s regulators. By taking this case, this Court will

have an excellent vehicle for providing that guidance.

A. The Property

This litigation involves four parcels.

1. Parcel One

Parcel One borders Highway 59 and was originally

purchased by Joseph and Elaine Kosik in a common law partner-

ship along with several other partners in 1976. Trial Court First

Opinion and Order, Appendix E at 2. This parcel is the heart of

the current dispute. In 1986 the property was transferred to

J.F.K. Company, a Michigan Limited Partnership consisting of

the five children of Joseph and Elaine Kosik. Appendix A at 1.

In contrast to the other parcels in this case, the Kosiks retain a

reversionary interest in the property. Appendix E at 2, 6:

Appendix A at 2 and 9 n.5 (“At the very least . . . J.F.K. shares

a joint ownership interest in the property with Mr. and

Mrs. Kosik.”). At about the same time, Resorts and Company

obtained an interest in the property. Appendix A at 2. A small

restaurant, the Ram’s Horn, was built on a small portion of this

parcel and sold. Appendix A at 2 n.1.' The J.F.K. office

building is also located on a part of an adjoining parcel that

borders the highway. Appendix A at 2 n.1; and 11 n.9.

Parcel One is now 55 acres, of which approximately 27 to

28 acres are delineated as a wetland under Michigan’s Wetlands

Protection Act. Appendix A at 2-3; Appendix E at 2. These

wetlands are highly irregular, “such that large fingers of

protected [i.e. wetlands] property run throughout the center of

the property.” Appendix E at 3. Unlike the other parcels in this

case, Parcel One is zoned for commercial use. Appendix A at 2.

2. Parcel Two

Parcel Two is an undeveloped 16-acre parcel that is directly

south of Parcel One. Appendix A at 2. It was purchased at the

same time as Parcel One. Appendix E at 3. Title now belongs

solely to J.F.K. Company as a result of an irrevocable

testamentary trust created by the Kosiks before this litigation

commenced. Appendix E at 3. Parcel Two is zoned for multiple

family residential. Appendix A at 2. It contains a small amount

of wetlands. Appendix A at 2. It is not, however, subject to the

Wetlands Protection Act which affects Parcel One. Appellate

Court Decision, Appendix B at 7.

3. Parcel Three

Parcel Three is a 9.34-acre parcel of property owned in

Partnership by J.F.K. Company and Resorts and Company, a

Michigan Partnership. Appendix E at 3. It is located directly

south of Parcel Two and does not touch Parcel One. J.F.K. and

Resorts and Company built apartments on this property that are

in use today. Appendix E at 3. It is zoned for multiple

' While the Michigan Supreme Court states that the restaurant was

part of the parcel, the record reflects that the restaurant was on a

separate parcel. Testimony of William J. Goga, Appellant's Appendix

at the Michigan Supreme Court at 048a.

a ae es

residential. /d. and Appendix A at 2. It is wetlands-free.

Appendix A at 2.

4. Parcel Four

Parcel Four is a 3.4-acre parcel of undeveloped land that

borders the south side of Parcel One and the east side of Parcel

Two. Appendix A at 2. It is owned by J.F.K. Company,

contains no wetlands, and is zoned for multiple residential.

Appendix A at 2. This parcel was purchased later as part of the

“Barrymore Plan” discussed next. Appellant's Appendix at the

Michigan Supreme Court at 345a.

B. The Development Plans

1. The Barrymore Plan

After holding the property for several years, and after

clearing up some preliminary title issues not relevant to this

case, the owners decided to fully develop their property.

(Previously, there had been some minor development and sale of

a small restaurant and the construction of J.F.K.°s office). Their

plan was to build a “C. J. Barrymore's” restaurant and sports

complex on 42 acres of Parcel One. Appendix A at 2.

Appendix B at 2. The plan contemplated that some storm water

would flow to a pond on the southern parcels. See Appellant's

Appendix in Michigan Supreme Court at 306a-307a.”_ An appli-

cation to develop the property was submitted on May 28, 1988,

and denied on November 7, 1988, because respondent Michigan

Department of Natural Resources found that between 27 and 28

acres of protected wetlands on Parcel One would be affected.

Appendix A at 2; Appendix B at 2.

2 The Michigan Supreme Court mistakenly wrote that the Barrymore

Plan also involved multihousing units and storm water retention on

Parcels Two and Four. Appendix A at 2. In fact, only the subsequent

Goga Plan involved development on the other parcels. See, e.g.,

Appellant’s Appendix at 68a, 306a-308a filed in the Michigan

Supreme Court. This mistake, however, is not a factor in this

petition.

2. The Goga Plan

On May 1, 1990, Petitioners submitted a scaled back plan

prepared by their consultant, William J. Goga. The plan would

have developed a narrow discontinuous ring of upland bordering

the wetlands that made up the center of Parcel One. This would

leave all but 3.17 acres of wetlands intact. Appendix A at 3 and

Appendix B at 3. Plaintiffs proposed to mitigate the loss of

wetlands by the conversion of 5.36 acres of uplands into new

wetlands. Appendix A at 3, Appendix B at 3. This plan

involved 72 acres on Parcels One, Two, and Four (including

setting aside 28 acres existing and newly created of wetlands for

conservation purposes). Appendix B at 3. The Goga plan was

denied on July 26, 1990. Appendix B at 3.

C. The Litigation

1. The Michigan Court of Claims

After the Barrymore Plan was denied, but before the Goga

Plan was submitted, plaintiffs filed the present appeal on

December 29, 1988. Appendix B at 2. Initially, Plaintiffs chal-

lenged whether the property was in fact a wetland. Appendix B

at 2. By the time the trial was held on December 17, 1991, the

only issue was whether there had been a taking of plaintiffs”

property. Appendix B at 3. On November 5, 1992, the trial

court ruled that “the geographic configuration of the wetland so

restricts the ability to use Parcel One, that the Plaintiffs have

been deprived of any reasonable return on the good faith

economic investment they have made.” Appendix E at 11. The

court specifically found that the “property has been condemned

by application of the Wetland Preservation Act.” Appendix E

at 11.

Following the November 5, 1992, decision the Michigan

Department of Natural Resources attempted to mitigate its

damages by allowing development to commence under the

“Goga Plan.” Appendix A at 3, Trial Court Second Opinion,

Appendix D at 5. On May 4, 1993, the trial court ruled that

plaintiffs should recover the value of the wetlands taken, as well

as those created in mitigation, pursuant to the Goga plan.

Appendix B at 11, Appendix C at 3-4.

On September 8, 1993, the court awarded plaintiffs $3.24

million for the 28.77 acres of Parcel One that was taken,’ plus

$1.57 million in interest. Appendix C at 3-4, Appendix A at 4.

The court also awarded $459,000 including interest for the

uplands portion of Parcel One that was temporarily taken

between the time the Barrymore Plan was denied and the Goga

Plan approved. Appendix C at 3-4, see Appendix A at 4.

2.- The Appeal

The state appealed. On June 7, 1996, the Court of Appeals

of Michigan affirmed. Appendix B. The court of appeals held

that the trial court’s finding that Parcel One “was essentially

worthless as commercial real estate . . . is not clearly erroneous

based on the evidence.” Appendix B at 9. The appeals court

agreed with the Court of Claims, finding that “27 acres of the

parcel were temporarily taken and 28 acres were permanently

taken.” Appendix B at 12.

Once again, the state appealed. On March 24, 1998, the

Michigan Supreme Court reversed. The court found that Parcel

One could not be considered by itself in determining whether

there had been a taking. Instead, the court instructed the trial

court to lump Parcels One, Two, Four, and possibly Parcel Three

together when it considered the severity of the economic impact

caused by the application of the wetlands law. Appendix A at 8.

12. In other words, although it was clear that all use of the 55-

acre parcel had been temporarily denied, and that all use of 28

acres had been permanently denied, there was no denial of “all

economically viable use,” this Court’s test for a “categorical”

‘ This is more than the original 27 acres of delineated wetland due to

the conversion of uplands into wetlands in accordance with the Goga

Plan’s mitigation proposal.

taking, Lucas v. South Carolina Coastal Council, 505 U.S.

1003, 1015 (1992) (notes that with a “categorical” taking the

government is always liable). The Michigan court found that

there was no denial of all economically viable use because the

owners possessed two or three other nearby parcels of land.

Those other parcels might supply enough economic utility to the

owners’ overall contiguous property holdings in the area to

negate the existence of a categorical taking of either the 55-acre

Parcel One or the 28-acre wetland hole. Appendix A at 11. The

court also found that the potential residual of “some financial

value” in Parcel One negated a categorical taking of the 55

acres.* Appendix A at 15 n.13.

With respect to Parcels One, Two, and Four, the court was

impressed by their “contiguity,” the “unity of J.F.K.’s ownership

interest in all three of these parcels, and plaintiffs’ proposed

comprehensive development scheme.” Appendix A at 8. The

court was not concerned that the ownership interest by the

Kosik’s in Parcel One negated the “common ownership” pattern

by J.F.K. Appendix A at 9n.5. Nor was the court impressed by

the fact that Parcel One was subject to a different zoning desig-

nation. Appendix A at 9n.6. Because the court was uncertain

of the significance of the fact that Parcel Three was owned by

Resorts and Company, it remanded this question to the trial

court. Appendix A at 12. (The ownership pattern of Parcel

Three is not relevant to this petition.) It also found that two

small parcels that had been sold off several years before the

* This Petition for Writ of Certiorari involves only the question of

what the relevant parcel is and not whether the facts do or do not

point to a categorical taking of the 55 acres. Once the relevant parcel

is ascertained, the Michigan court can determine whether any

remainder value negates the presence of a taking caused by the

prohibition of all use of the property. As this Court emphasized in

Lucas, it is the denial of all use that gives rise to a categorical taking.

105 US. at 1015.

ccc

Barrymore Plan must be considered as well. Appendix A at 11

n.9.

The court continued by holding that when Parcels One,

Two. and Four are considered together there was not a cate-

gorical taking of plaintiffs’ property. Appendix A at 14-15. On

remand the Supreme Court ordered the trial court to “compare

the value removed from the plaintiffs” land, and also calculate

what value remains. It then must reevaluate the case under the

three-part balancing test” of Penn Central Transportation Co. Vv.

City of New York, 438 U.S. 104 (1978). Appendix A at 15-16.

REASONS FOR GRANTING THE WRIT

INTRODUCTION

In Michigan, while the law in its majestic equality prohibits

the poor as well as the rich from stealing,” it is acceptable for the

state. in its own magisterial egalitarianism, to take land from

those who own other land.

Where Petitioners once had a sound investment in their

property, they have now been left with a marginal 55-acre parcel

with a gaping irregularly shaped hole in the center. The State of

Michigan has taken this hole for a de facto wetlands preserve, to

be, for all practical purposes, “left substantially in its natural

state.” Twice itturned down proposals to use the parcel; first

it denied the use of 42 acres, then it even denied the use of a

discontinuous ring around the wetlands hole.

Having taken the heart out of the property, and having

denied all use of the whole parcel during the years that it had

5 “The law, in its majestic equality, forbids rich and poor alike to

sleep under bridges, beg in the streets or steal bread.” Anatole

France.

° Regulations that require “land to be left substantially in its natural

state—carry with them a heightened risk that private property is being

pressed into some form of public service.” Lucas v. South Carolina

Coastal Council, 105 U.S. at 1019

denied both the Barrymore and Goga Plans, Michigan has

steadfastly refused to admit any liability for the injury it has

inflicted upon the owners. After having lost at the trial court and

the intermediate court of appeals, the state was ultimately able

to convince the Michigan Supreme Court that a takings analysis

Should consider not the wetlands on which all use was pro-

scribed, and not even on the discrete legal parcel subject to the

regulation. Instead the Michigan court insists that the takings

analysis must consider at least two other separate legal parcels

that (1) do not contain wetlands subject to the regulatory

scheme, (2) are subject to different zoning, and (3) while there

is some overlap in ownership, are mot owned by identical

ownership interests.

In evaluating the “relevant parcel” in a takings analysis of

real property most courts, in contrast to Michigan, focus upon

the regulated property, and not the extraneous circumstances of

the owner. The best approach to ensure that “[gjovernment

[does not force] some people alone to bear public burdens which

in all fairness and justice, should be borne by the public as a

whole,” Armstrong v. United States, 364 U.S. 40, 49 (1960), is

to look at the land the government has actually regulated.

Where, as here, the regulation sterilizes all reasonable use of a

discrete fraction of an otherwise economically useful parcel of

land, the courts must direct their takings analysis at that fraction.

In this case, all use has been prevented on 28 acres of property

owned by J.F.K. and the Kosiks. Under Lucas v. South

Carolina Coastal Council, 505 U.S. at 1015, that is a categorical

taking. As the intermediate court of appeals correctly found,

there was a permanent taking of this 28 acres. Appendix B

at 12.

Even if a court were reluctant to focus only upon the

fraction of a parcel actually subject to the confiscatory

regulation, it would be acceptable under some circumstances to

focus on the whole legal parcel of land subject to or affected by

the offending regulation. Here the denial of both the Barrymore

and Goga Plans resulted in a temporary taking of the entire 55-

acre parcel. Most state and federal appellate courts that have

considered the issue have chosen to look at the takings question

on a parcel-by-parcel basis, treating differently zoned parcels as

discrete units for analysis. In fact most courts would have con-

sidered the disunity of ownership combined with the application

of different zoning and regulatory constraints as decisive factors

in segregating Parcel One from other property owned by J.F.K.

and the Kosiks.

Because the decision below conflicts with the holdings of

numerous federal and state appellate courts, because these

appellate courts have devised a myriad of inconsistent methods

for determining the “relevant parcel” (sometimes openly dis-

agreeing with one another by name), and because of the growing

clamor from the legal commentators for this Court to step in and

resolve the confusion and uncertainty, there is a need for this

Court to grant this Petition for Writ of Certiorari.

WHILE THE FEDERAL COURTS ARE IN

DISARRAY OVER HOW TO MEASURE THE

RELEVANT PARCEL FOR TAKINGS PURPOSES

THEY ARE ALL IN CONFLICT WITH THE

MICHIGAN SUPREME COURT

A. The Federal Circuit Has Refused to Elevate

Substance over Form and Has Focused on the Actual

Property That the Government Has Regulated

in Florida Rock Industries, Inc. v. United States, 791 F.2d

893 (Fed. Cir. 1986), cert. denied, 479 U.S. 1053 (1987)

(Florida Rock I), the Federal Circuit Court of Appeals was

confronted by a single 1,560-acre parcel subject to the Corps of

Engineers’ restrictions. The landowner originally argued that all

1.560 acres of its wetland mining property had been taken after

a permit to mine 98 acres was denied, 791 F.2d at 895-96, 904-

eee

05.’ The government argued, on the other hand, that there was

no taking because the use of only 98 acres had been denied--

leaving the “parcel as a whole” largely unaffected by the denial.

Id. at 904. The Federal Circuit rejected both arguments, holding

that (1) it would be unfair to award compensation for property

for which the applicant had no immediate plans, id. at 904-05,

and (2) the idea that there was some value to the remaining

1,458 acres (which would give meaning to the government's

“parcel as a whole” value argument) was totally unrealistic under

the circumstances. /d. at 904.

The point of Florida Rock / is that it is appropriate to look

at just the fraction of land that government has regulated.

This approach is entirely consistent with the Michigan

Court of Appeals decision that focused on the entire 55-acre

parcel of property in the context of a temporary taking effected

when the Barrymore and Goga Plans were turned down. The

Florida Rock | holding is also consistent with the Michigan

intermediate court’s focus on the 28 acres of wetlands core and

mitigation property in the context of a. permanent taking of that

28 acres.

The approach in Florida Rock |, however, is entirely incon-

sistent with the Michigan Supreme Court’s decision. Instead of

confining its analysis to either the wetlands subject to permanent

prohibitions, or the 55-acre parcel on which all use had been

twice denied at least temporarily, the Michigan Court lumped

together all the surrounding parcels owned in whole or in part by

the owners of the 55-acre parcel.

Several years after F/orida Rock | was decided, the Federal

Circuit in a later iteration of the same case responded to the

government's new argument that the takings denominator should

include more than the mineral rights and surface resources

’ The Corps of Engineers would consider a permit only for a three

year mining plan, in this case 98 acres. /d.

needed for mining. The court disagreed. It suggested that, in

looking at the takings denominator in a regulatory takings case,

it can be appropriate to look at a subset of the strands of the indi-

vidual rights that make up a property: “ By taking some portion

of Florida Rock’s economic use of the property--its power to

disturb the overlying wetlands, and with it the common law

property right to mine its subsurface minerals--the Government

appears to have destroyed part of the value of Florida Rock’s

holdings.” Florida Rock Industries, Inc. v. United States.

18 F.3d 1560, 1572 ( Fed. Cir. 1994), cert. denied, 115 S. Ct.

898 (1995) (Florida Rock /V). \n appropriate circumstances a

subset of the bundle of rights can be taken through inverse

condemnation. See id. at 1572 n.32.

In Loveladies Harbor v. United States, 28 F.3d 1171

(Fed. Cir. 1994), the same court was confronted with a claim for

a taking of a 12.5-acre parcel of wetland property that was once

part of a larger 51-acre parcel of which some 38.5 acres had

been dedicated as a wetlands preserve in order to obtain permits

from the State of New Jersey. Originally, the 51 acres had been

part of a 250-acre parcel, of which 199 acres had been devel-

oped, and subdivided, and mostly sold in the past. /d. at | 180.

The government argued in Love/adies that the relevant

parcel must be the original 250-acre parcel, or in the alternative,

the 5l-acre parcel. The Federal Circuit had no trouble holding

that the property developed and sold before the imposition of the

current regulatory environment should not be considered in the

denominator. /d. at 1181. That is quite opposite the Michigan

court’s suggestion that parcels already developed and sold must

be made part of the takings denominator. See Appendix A at 1]

n.9.

As for the 38.5-acre parcel, the court suggested it wouid be

“ungrateful in the extreme to require Loveladies to convey to the

public the rights in the 38.5 acres in exchange for the right to

develop 12.5 acres, and then to include the value of the grant as

a charge against the givers.” /d. (emphasis added). The Federal

Circuit’s focus in a multiparcel context upon the property

actually affected by the relevant government regulation, rather

than on an artificial construct of what the owner may have

owned in the past, is in stark contrast to the approach of the

Michigan Supreme Court. If the plaintiffs in either Loveladies

or Florida Rock had brought their takings claim in Michigan, the

results would have been very different."

Finally, it should be noted in the context of mineral leases,

the Federal Circuit has separated out a coal deposit from the

surface rights. In Whitney Benefits v. United States, 926 F.2d

1169 (Fed. Cir.), cert. denied, 502 U.S. 952 (1991), the court

rejected the government's suggestion that there was no taking

because the coal owner could farm about half of the property.

Noting that the mining company bought the farm not to farm it

but solely to facilitate mining, the court ruled, “Wyoming

recognizes separate mineral and surface estates . . . and mineral

rights are clearly property subject to the taking clause of the

Fifth Amendment.” 926 F.2d at 1174 (citation omitted).

The segmentation in Whitney Benefits (and that discussed

in Florida Rock IV, 18 F.3d at 1572 n.32) did not involve what

is often referred to as “horizontal” segmentation where land is

divided into discrete geographic units such as in a residential

subdivision or where land is set aside for a nature preserve.

While horizontal segmentation is often easier to visualize, non-

horizontal segmentation of land, such as with mineral rights, air

rights, or development rights is well established in the law. That

* The Court of Federal Claims has demonstrated confusion over what

constitutes the relevant parcel for the takings analysis. In several

instances, the tna! court has reached out to include other lands owned

by the same owners. See, e.g., Ciampitti v. United States, 22 Cl. Ct.

310 (1991); Deltona Corporation y. United States, 657 F.2d 1184

(Ct. Cl. 1981); and Jentgen v. United States, 657 F.2d 1210 (Ct. Cl.

1981). While these cases are factually distinguishable from Florida

Rock, Loveladies, and this case, language in these cases suggests a

need for clearer guidance from this Court.

the Federal Circuit in Whitney Benefits and Florida Rock IV

acknowledged that it could be appropriate to focus a takings

inquiry on what has actually been regulated or resiricted even in

the context of nonhorizontal segmentation of land, demonstrates

just how different the Federal Circuit is from the Michigan

court.

B. The Tenth Circuit Has Taken an Approach

That Is in Conflict with the Federal Circuit

Doctrinal harmony does not prevail in the federal circuits

over the issue of how the relevant parcel should be measured.

The Tenth Circuit in Clajon Production Corp. v. Petera, 70 F.3d

1566 (10th Cir. 1995), expressly rejected the Florida Rock IV

holding on this issue. C/ajon involved an attempt to bring a

takings challenge to hunting regulations in Wyoming that limited

wild game licenses sold to hunters from out of state. The plain-

tiff. who owned a ranch and derived significant income from out

of state hunters, complained that this somehow was a taking of

his “right to hunt.” 70 F.3d at 1577.

Faced with this rather odd argument, however, the Tenth

Circuit did more than simply say that the regulation was lawful

and that there was no property interest at stake. It also took the

trouble to expressly reject the Federal Circuit's language in

Florida Rock IV that it can be appropriate to focus more nar-

rowly on the property interest actually taken: “However, we

believe that the relevant denominator must be derived from the

entire bundle of rights associated with the parcel of land... .

Thus, we reject the Florida Rock approach.” /d. (citations

omitted).

It is not clear what the Tenth Circuit would have done if

faced with the denial of the right to use the property belonging

to the Kosiks and J.F.K. It was not presented with a situation

where the government regulation itself segregates property into

geographically distinct components. Nor was the court faced

with an attempt to merge discrete separate legal parcels into a

single unit. Nonetheless, the Tenth Circuit’s decision to

expressly reject the Florida Rock /V formulation highlights an

actual conflict with the Federal Circuii that may or may not

indicate a potential conflict with Michigan.

C. The Ninth Circuit Has Suggested That the

Uniformity of the Regulation Is a Key

Factor in Determining the Relevant Parcel

Yet another approach to determining the relevant

denominator in a takings context was spelled out by the Ninth

Circuit in American Savings and Loan Association v. County of

Marin, 653 F.2d 364 (9th Cir. 1981). In this case the county

placed two contiguous sections of an owner's property into two

distinct zoning classifications: A 48-acre section called Straw-

berry Spit zoned as “urban open space” with a 5-acre minimum

lot size and a 20-acre section known as “Strawberry Point” that

was zoned to allow four “multiple residential units” per acre. /d.

at 367. The owner alleged a taking of Strawberry Point. In

response the county advocated a “single parcel” theory under

which both the point and the spit would be considered together

in a takings analysis.

The court first noted that the county’s position was

“inconsistent with general principles governing taking ques-

tions.” /d at 369. It next rejected as inapplicable cases where

property was treated as a single unit for takings purposes

because in those cases “the entire subject property was covered

by a uniform restriction.” /d. Instead, the court noted that in

Nectow v. Cambridge, 277 U.S. 183 (1928), this Court

“considered the smaller tract separately from the larger tract.”

653 F.2d at 370.

The Ninth Circuit also agreed with dicta in Fifth Avenue

Corp. v. Washington County, 581 P.2d 50 (Ore. 1978), where

“the court divided the property analytically into two parcels”

depending on whether they were zoned as developable or not.

American Savings, 563 F.2d at 370. Ultimately, the Ninth

i webbed

eden wail ara

Circuit was unable to determine whether the Strawberry Spit

should be considered separately, because the “appellant did not

submit a development plan” making it “unclear whether the Spit

and Point would be treated separately at the development stage.”

Id. at 371.

Most significantly, the American Savings court concluded

by holding that if the appellant can show that “the Spit and

Point have been, or would be, treated separately when its

development plans are submitted . . . [then] the Spit must be

analyzed as a separate parcel for takings purposes.” Id. at 372

(emphasis added).”

This holding is clearly at odds with the Michigan court's

holding in K & K. First, the Michigan court refused to consider

the 55-acre parcel, zoned for commercial use, separately from

the other parcels zoned for multiunit residential. Second, the

Michigan court refused to consider separately that portion of the

property that was subject to a unique regulatory scheme, i.e., the

28 acres of wetlands and wetlands mitigation. Third, the

Michigan court found the fact that the owners had submitted a

development plan encompassing several parcels to justify an

° Accord, Kaiser Development Co. v. City and County of Honolulu,

649 F. Supp. 926 (D. Haw. 1986), aff'd, 898 F.2d 112 (9th Cir.

1990). In deciding to treat different portions of a single legal property

as separate parcels, the court notes that the property

has not been developed by Bishop [the owner] as part of

the residential community. .. . [The owners] have always

considered Queen’s Beach [the distinct property] a separate

area on which they seek to build a resort. Most

importantly, the City has treated Queen ’s Beach

separately for zoning and planning purposes. In

summary, under the facts of this case, Queen's Beach is to

be considered a separate parcel for the purposes of

determining whether there has been a taking.

649 F. Supp. at 947-48 (emphasis added).

expanded takings denominator.'” In contrast, the Ninth Circuit

required such a submission in order to prove that the county

would, in fact. treat the property as separate parcels. ''

THE STATE COURTS ARE IN A SIMILAR CONFLICT

WITH THE MICHIGAN SUPREME COURT

A. The Oregon Supreme Court Treats a

Uniquely Regulated Portion of Property

Separately for Takings Purposes

In contrast to the Michigan Supreme Court the Oregon

Supreme Court has consistently viewed the takings denominator

in a realistic manner. Most recently, in Boise Cascade Corpor-

ation v. Board of Forestry, 935 P.2d 411 (Ore. 1997), the court

had to decide how to deal with a 64-acre parcel of timberland on

which a spotted owl established residency. As a result of the

owl's settlement on Boise Cascade's property, the Board of

Forestry established a 56-acre buffer zone around the owl's nest,

leaving 8 acres available to be logged only in the rainy season.

Id. at 415-16. Boise sued, alleging, among other things, a denial

of all economically viable use of its 56 acres.

As a practical matter by holding the fact that the Michigan

property owners submitted a single development plan for several

parcels as a rationale to expand the “relevant parcel” in the takings

analysis, the Michigan court is encouraging piecemeal development

plans, surely an anathema to the goal of orderly planning and

development.

'! American Savings is to be distinguished from cases like

MacLeod v. County of Santa Clara, 749 F.2d 541, 547 (9th Cir.

1984), where the Ninth Circuit declined to treat timber nghts on a

parcel of land separate from the surface estate. The property had

long been used as a cattle ranch. Noting that economically viable use

of the ranch property remained, the court declined the owner's

invitation to segment the property into a timber use only property

right. The rejection of this nonhorizontal segmentation is more

consistent with Clajon than Whitney Benefits

In recent years the Oregon Supreme Court has adopted a

rather strict view toward property owners in its takings analyses.

It has adopted a test that there must be a denial of all

economically viable use for there to be a taking, Boise C ascade,

935 P.2d at 420 (citing Fifth Avenue Corp. v. Washington Co.,

581 P.2d 50), and that there is mo taking if “the owner has “some

substantial beneficial use’ of the property remaining.” Boise

Cascade, 935 P.2d at 402 (citing Dodd v. Hood River County,

855 P.2d 608 (1993)).'? For present purposes it should suffice

to say that the rigidity of the Oregon court's tests makes it

imperative that it adopt a reasonable approach toward defining

the relevant parcel. It has.

In this case, the Oregon court noted that plaintiff had

alleged “‘depriv[ation] . . . of the only economically viable use

of approximately 56 acres of merchantable timber.”” /d. The

court held that the allegation, if it could be proved, was ade-

quate to sustain a claim for a taking. /d. Thus the court

segregated the 56 acres of owl habitat from the remaining 8

acres of harvestable timber and considered the timber on the 56

acres to be the relevant parcel. This is, of course, in contrast to

the Michigan Supreme Court which refused to consider“as the

relevant parcel either the wetlands acres directly and perma-

nently affected or the larger 55-acre parcel on which all use was

temporarily sterilized.

As noted earlier, the Oregon Supreme Court’s practice of

looking at the particular property affected by a particular regula-

tion was first adopted in Fifth Avenue Corporation. in that case,

as expounded upon in American Savings, the court found that

2 While there may be problems with the nuance of the application

of these tests, they are not germane to this petition. They will be

germane, however, to a petition for writ of certiorari that this Court

will be receiving in the near future in Dodd v. Hood River County,

1998 WL 57497 (9th Cir. 1998) (finding no taking after all residential

use of a parcel with a fair market value of $33,000 was prohibited

because a timber clear cut might yield $10,000).

“(flor the purpose of the following [takings] discussion, we must

divide the subject property into two separate parceis” based on

the county’s regulation of the property. 581 P.2d at 60

(emphasis added).

These Oregon cases are in conflict with the Michigan

Supreme Court’s opinion.

B. The New Hampshire Supreme Court Has Recognized

That There May Be Circumstances Where a

Narrowly Focused “Relevant Parcel” Ils Appropriate

In Quirk v. Town of New Boston, 663 A.2d 1328 (N.H.

1995), the New Hampshire Supreme Court had to decide

whether the owner of a campground could assert a takings claim

based on the establishment of a buffer zone on the exterior

boundaries of the campsite. /d. at 1330-31. Ultimately the Court

found there was no taking, and that the buffer zone could not be

considered as a separate parcel. /d. 1333. The need for the

buffer zone was created specifically by economic activities

within the center of the property. /d. Furthermore, the stated

justification of the buffer zone, to reduce noise emanating from

the campsites, reflects a certain “use” of the property as a whole.

That is, the buffer zone was being used as a noise filter for the

camping activities.

What is noteworthy about the case in the context of this

petition, however, is that court embraced a flexible approach to

determining the relevant parcel: “Focusing on a discrete portion

of a larger tract may be appropriate where the land owner has

fragmented the property for distinct development or uses.” /d.

at 1332. Quite obviously, the Michigan court in contrast ignored

the distinct development and uses of the four parcels in this case.

C. The New York Court of Appeals Has Adopted

the Doctrine of “Conceptual Severance”

In Seawall Associates v. City of New York, 74 N.Y .2d 92,

542 N.E.2d 1059 (N.Y. 1989), the New York Court of Appeals

addressed a challenge to New York City’s law regulating the

Uh Ors Sak

Bsa GI KA AAT RS LE RIS, ed

RSAC AE SPAS

conversion of single-room occupancy housing. Ultimately, the

court found the regulation was both a physical invasion taking

and a nonphysical regulatory taking. 542 N.E.2d at 1062, 1065,

1078. In the context of determining whether the regulation was

a regulatory taking, the court considered the nature of the

relevant parcel.

The city suggested that the property owners could have no

claim to a taking or denial of economically viable use after

comparing the value of the rights affected by the law with the

total “bundle” of the owners’ property interests. 542 N.E.2d

at 1067. The high court did not agree: “But the permanent

abrogation of one of those rights, without regard to its compara-

tive value in relation to the whole, may well be sufficient to

constitute a taking.” /d. The court elaborated by citing with

favor “various comments on the theory of ‘conceptual sever-

ance’ [i.e., assessing only the value of the rights taken without

regard to its relationship to the value of the whole property].”

Id. (brackets in original). Accord Manocherian v. Lenox Hill

Hospital, 84 N.Y.2d 385, 398-400, 643 N.E.2d 479 (N.Y.

1994), cert. denied, 115 S. Ct. 1961 (1995) (finding the

destruction of a reversionary interest to constitute a regulatory

taking).

The conceptual severance issue in Seawall, of course, is not

strictly identical to the Michigan Supreme Court's joining of

properties in the horizontal or geographic sense. Nevertheless,

the New York court’s resolve to look at the actual impact of the

regulation on a discrete property interest, rather than focusing on

how the regulation affects an agglomeration of rights associated

with a parcel, demonstrates the court’s willingness to put

substance over form. Michigan, on the other hand, did the

opposite. It failed to focus on the actual property adversely

affected by the regulation; it elevated form over substance when

held that several discrete parcels must be fused together when

considering whether the impact was great enough to constitute

a taking.

D. California Has Adopted the Nuanced

Approach of the Ninth Circuit

In several opinions over the past decade the intermediate

California appellate courts have adopted the approach first

utilized by Oregon in Fifth Avenue and by the Ninth Circuit in

American Savings. The best exemplar of this trend is 7wain

Harte Associates, Lid. v. County of Tuolumne, 217 Cal. App. 3d

71 (1990), where the county had applied different zoning criteria

to different portions of an 8.5-acre parcel. In a nutshell, after

most of the 8.5-acre parcel had been developed, the county

rezoned an undeveloped 1.7-acre plot from light commercial to

open space. The owner sued for a taking. /d. at 79. The county

argued that there was no economic deprivation and, accordingly

no taking, because the “8.5-acre parcel has . . . undoubted mone-

tary benefit” from the past development. /d. at 85.

The court did not agree. First it noted that “the nature of a

particular land use regulation has been recognized as potentially

creating separate parcels for ‘taking’ purposes.” /d. (citing

Aptos Seascape Corp. v. County of Santa Cruz, 138 Cal. App.

3d 484, 495-96 (1982), Nectow, and Fifth Avenue. Also citing

to American Savings, the court concluded:

Accordingly, we decide the law does not demand the

entire 8.5 acre parcel be treated as a whole in an “as

applied” inverse condemnation analysis. ... [Instead]

it entails assessment of the potential for development

of each of the differently zoned properties, from the

standpoint of both site economics and government

cooperation.

ld.

The court's point here is that by zoning different portions of

the same parcel differently. it was the government that, for want

of a better term, “subdivided” the parcel for regulatory purposes.

BRE is gas igi hs Sea Sia SRA a Re Naa 2S ah dS AER

As noted in the discussion of American Savings and Fifth

Avenue, the Michigan court stands far apart from the rest of the

appellate courts, including California’s, as they struggle to make

sense of the “relevant parcel” issue.

WHILE THE COMMENTATORS DO NOT

AGREE AMONG THEMSELVES AS TO

THE APPROPRIATE MEASURE FOR THE

RELEVANT PARCEL, THEY ALL AGREE THAT

THIS COURT CAN RESOLVE THE CONFLICTS

Across the spectrum of commentators, from property rights

hawks to property rights doves, there is little agreement as to

what the appropriate measure of the relevant parcel should be.

As with the lower courts, there are almost as many views as

there are commentators. But there is one point on which all

serious scholars can agree: this Court needs to create order out

of the chaos.

Last year, environmental and land use scholar Professor

Daniel R. Mandelker analyzed the relevant parcel question in

Daniel R. Mandelker, New Property Rights Under the Takings

Clause, 81 Marg. L. Rev. 9 (1997). In discussing the various

currents in the relevant parcel debate, Mandelker fervently calls

for an end to the segmentation of property by courts in takings

analyses. He pointedly notes that “[sJegmentation remains,

nevertheless, a troublesome problem that demands closer atten-

tion from the Court.” /d. at 19. He concludes by calling for this

Court to resolve the debate: “The Court needs to return to the

hard, pragmatic, ethical question: when is it fair to ask owners

of land to bear costs that society as a whole must accept.” /d.

While Petitioners are obviously not unhappy with the way many

courts (other than Michigan’s) have handled the issue, Peti-

tioners agree that it is time for the Court to straighten out the

doctrine (although not, of course, in the direction Mandelker

suggests. )

In a particularly insightful commentary published in 1994,

John Fee suggests the following test for defining the relevant

parcel: “Any identifiable segment of land is a parcel for pur-

poses of regulatory taking analysis if prior to regulation it could

have been put to at least one economically viable use,

independent of the surrounding land segments.” John E. Fee,

Unearthing the Denominator in Regulatory Takings Claims,

61 U. Chi. L. Rev. 1534 (1994). If this test had been adopted in

Michigan, for exampie, the court would first have looked at the

27 acres of wetlands and asked whether that land could have an

economically viable use apart from any influence or utility

deriving from the remainder of the property. If the answer is

yes, then the affected property can be treated separately for

takings purposes. A similar consideration would be appropriate

for the 55-acre parcel. In contrast, a small buffer zone would

rarely meet Fee's proposed test, thus limiting government

liability in run of the mill buffer zone cases and minor regulatory

actions.

Buttressing Petitioners’ argument that only this Court can

resolve the conflict, Fee suggests the source of the difficulty that

courts have had with defining the relevant parcel: this Court “has

thus failed to provide clear guidance to courts on the denomi-

nator question . . . it has failed to define ‘parcel as a whole.” /d.

at 1545.

In another recent note Benjamin Barros weighs in with a

discussion of the tension between utilitarian and libertarian

interpretations of the Just Compensation Clause and concludes

by advocating an embrace of the doctrine of conceptual

severance. Benjamin D. Barros, Defining “Property” in the Just

Compensation Clause, 63 Fordham L. Rev. 1853 (1995). The

author notes at the outset, however, that: “Much of this

confusion [over the Takings Clause] is caused by the failure of

the Supreme Court to define the terms of the Just Compensation

Clause.” /d.

a adhe i Di iad OS ag

RAH ARORA RR IEG BMD

Le A SOREL ASIA Pak Aleta na Bilin ater s

fot eT i ee ele cy RIALS Weens ea wer OM TEES ST 7

in his recent book, Professor Bernard Siegan criticizes this

Court’s decision in Keystone Bituminous Coal Association v.

DeBenedictis, 480 U.S. 470 (1987), as being a source of much

of the confusion. In that case, this Court found that leaving coal

underground did not significantly affect economic interests.

Siegan suggests, however: “Such an inquiry is wrong for two

reasons: it makes the wealth of the owner a factor in takings

jurisprudence, and it ignores the separable aspect of the coal

company’s subsurface rights.” Bernard Siegan, Property and

Freedom (Social Philosophy & Policy Center & Transaction

Publishers) (1997) at 120. Siegan analogizes the taking of the

coal to bank robbery: “Surely, if government seeks to confiscate

someone’s bank account, it cannot justify this action because the

owner has many other accounts at the same bank. The wealth of

the owner is not a relevant consideration in legally securing

ownership... .” /d. Agree or disagree, the confusion found in

the lower courts can only be clarified by this Court.

Finally, in the upcoming book, The Takings Issue by

Dwight Merriam, Robert Meltz, and Richard Frank (Island

Press, in press 1998), after noting the “disparate views” of the

federal courts, the authors conclude:

[There is] an inter-circuit conflict on a constitutional

issue of considerable moment. Juxtaposition of the

Florida Rock and Clajon decisions reflects a desultory

fact of life for the planners, lawyers and decision-

makers who labor in the land use vineyard: absent

further clarification from the U.S. Supreme Court, it is

difficult if not impossible to discern many of the

applicable ground rules in regulatory takings law.

Advance excerpt reprinted in /nverse Condemnation and

Related Government Liability, ALI-ABA Course of Study,

American Law Institute (eds.) at 544 (1998).

THIS COURT’S PRECEDENTS ARE IN

CONFLICT WITH THE DECISION OF THE

MICHIGAN SUPREME COURT

It is true that this Court’s precedents have not yet provided

the lower courts with the necessary guidance to tackle the

relevant parcel question. Nevertheless, it is clear that the

Michigan Supreme Court has strayed beyond the boundaries of

what can be appropriately inferred from this Court’s decisions.

A. Those Supreme Court Cases That Have Declined to

“Segment” Property Are Not Relevant to This Case

It should first be noted that while there have been several

cases where this Court has cautioned against segmenting

property into inappropriately narrow strands, these cases are

inapplicable where, as in the present case, the segments were

treated differently by the regulatory agency, the ownership

interests are not entirely identical, and where the regulation

sterilizes all reasonable use of a discrete fraction of an otherwise

economically useful portion of land. These cases do not address

the horizontal segmentation of real property created by govern-

ment regulation such as in the present case.

For example, in Keystone Bituminous (irrespective of

Professor Siegan’s comments), there was no issue of a

horizontal segmentation (e.g., into “wetlands” and “nonwet-

lands” categories). It was not suggested that the owners of the

pillars of coal were not the same as the owners of the

surrounding coal, and regulation did not take all of the coal

deposits.

Penn Central is not relevant to this case. All of the terminal

property was subject to the same zoning scheme. With respect

to the “air rights” these rights were identical across the entire

horizontal extent of the property.

}

Lb gahaarteice tera

mia

in Andrus v. Allard, 444 U.S. 51 (1967) (prohibition on the

sale of eagle feathers not a taking), this Court was examining a

prohibition on a use of personal property in a case that has

pretty much been confined to its facts. See Hodel v. Irving,

481 U.S. 704 (1987) (segmenting inheritance rights for takings

purposes), Babbitt v. Youpee, 117 S. Ct. 727 (1997) (same).

Finally, in Concrete Pipe and Products of California,

Inc. v. Construction Laborers Pension Trust for Southern

California, 508 U.S. 602 (1993), where this Court declined to

segment certain economic rights from others this Court was not

dealing with real estate that had already been horizontally

segmented by state regulation.

B. The Underlying Rationale Behind This Court’s

Takings Jurisprudence Calls for a Focused Analysis

of the Regulation of Real Property Interests

As recently as 1994 this Court itself has suggested that this

Court is in some way responsible for the confusion among the

lower courts: “Unsurprisingly, this uncertainty regarding the

composition of the denominator in our ‘deprivation’ fraction has

produced inconsistent pronouncements by the Court.” Lucas,

505 US. at 1016 n.7. This Court, however, most certainly did

not close the door upon an analysis that recognizes the impact

upon the property caused by the regulation:

When, for example, a regulation requires a developer

to leave 90% of a rural tract in its natural state, it is

unclear whether we would analyze the situation as one

in which the owner has been deprived of all

economically beneficial use of the burdened portion of

the tract. or as one in which the owner has suffered a

mere diminution in value of the tract as a whole.

Id.

What is clear, however, is that this Court looked askance at

the notion that a court should look at other holdings of the

owners. This Court labeled as “extreme” and “unsupportable”

a New York court’s “examin{ation of] the diminution in a

particular parcel’s value produced by a municipal ordinance in

light of total value of the taking claimant's other holdings in the

vicinity.” /d. The New York court’s practice of looking at

other parcels in the vicinity of the one affected by a regulation is

very similar to what the Michigan Supreme Court did in this

case. As such, it is “extreme” and “unsupportable.”

In any event based on the number of cases where this Court

has embraced a takings analysis of less than the totality of all

property interests possessed by an owner'’ it is important to note

that such an approach is consistent with this Court’s rationale

behind the doctrine of physical invasion takings. This Court has

long recognized that a physical invasion of real property, no

matter how minute, must be treated as a categorical taking.

Kaiser Aetna, 444 U.S. at 179-80, Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419, 435-40 (1982); accord,

Lucas, 105 U.S. at 1014.

Furthermore, as Justice Brennan noted in San Diego Gas

and Electric v. San Diego, 450 U.S. 621, 652 (1981) (Brennan,

J., dissenting):

Police power reguiations such as zoning ordinances

and other land-use restrictions can destroy the use and

enjoyment of property in order to promote the public

good just as effectively as formal condemnation or

physical invasion of property. From the property

1 See, e.g., First Englisn Evangelical Lutheran Church of

Glendale v. County of Los Angeles, 482 U.S. 304 (1987) (a partial

taking in a temporal sense), Ruckelshaus v. Monsanto Co., 467 U.S.

986 (1984) (intellectual property rights); Kaiser Aetna v. United

States, 444 U.S. 164 (navigational nghts), Hodel v. Irving, supra

(inheritance rights); and Babbitt v. Youpee, supra (same), Pennsyl-

vania Coal Co. v. Mahon, 260 U.S. 393 (1922) (mineral and support

estate nights).

FT nee ee |

eee SS MOEA ESOS

eo. -

SRG et ads ce eaten ORs cee ae eae

oats.

ati at elidel im eR

owner's point of view, it may matter little whether his

land is condemned or flooded, or whether it ts

restricted by regulation to use in its natural state, if the

effect in both cases is to deprive him of all beneficial

use of it.

(Footnote omitted. )

To the Petitioners in the present case, it matters little to

them whether the state had taken the 27-acre heart out of their

property for a parking lot, an office building, or a toad farm, and

it matters little to them if the state had deprived them tempor-

arily of the use of the entire 55-acre parcel for a staging area for

troops, for a temporary water retention basin, or for a spotted

owl (or Michigan equivalent) sanctuary. The impact remains the

same: it is no longer their property. For al! practical purposes,

the owners have been evicted. The state, not the owners, has

dominion over the property. If a physical invasion of any scope

can be a taking, then why not a regulatory action that totally

destroys the use of an identifiable segment of land?"

CONCLUSION

The Kosiks and J.F.K. Company own 27 acres of wetlands

on which the State of Michigan prohibits all use. It owns 55

acres on which the state denied all use until a trial court found

that the state would be liable for a taking. Because, however,

J.F.K. Company owns several other contiguous parcels, the

Michigan Supreme Court held that the Kosiks and J.F.K. did not

suffer a categorical taking. Instead, the trial court must factor

J.F.K.’s-other holdings into the “relevant parcel” for purposes of

analyzing whether there has been a taking.

'' Both Siegan and Fee believe that Justice Brennan’s dissent in San

Diego Gas & Electric is pivotal to a better understanding of the

relevant parcel problem. Seigan, Property and Freedo:n at 121-22

Fee, Unearthing the Denominator, 61 U. Chi. L. Rev. at 1562-63

In addition to Michigan, at least three federal circuits and

four states have attempted to resolve the question of what the

relevant parcel should be in a takings analysis. Few of these

analyses share much in the way of doctrinal consistency with

one another. With one possible exception (the Tenth Circuit,

although the facts of its case are rather unique), each one of

these courts would have reached a different result with respect

to Petitioners’ property.

Virtually every commentator that has examined the relevant

parcel issue agrees that the confusion in the lower courts is due

to this Court's reluctance to address the issue head on. It is time

for this Court to cast aside some of the miasmic confusion that

reigns in the lower courts. ,

It is respectfully requested that this Court grant this petition

for writ of certiorari in order to provide guidance to the courts,

the regulated landowners. and the regulating agencies.

DATED: May, 1998.

Respectfully submitted.

ROBERT L. BUNTING JAMES S. BURLING

Of Counsel Counsel of Record

P.O. Box 7 Pacific Legal Foundation

Oxford, Michigan 48371 2151 River Plaza Drive.

Telephone: (248) 628-5150 Suite 305

Facsimile: (248) 628-6422 Sacramento, California 95835

Telephone: (916) 641-8888

Facsimile: (916) 920-3444

Counsel for Petitioners

APPENDIX

Appendix A-1

Filed 3/24/98

K & K CONSTRUCTION. INC.

J.F.K. COMPANY, and

RESORTS AND COMPANY.

Plaintiffs-Appellees.

\ No. 106712

DEPARTMENT OF NATURAL

RESOURCES,

Defendant-Appellant.

BEFORE THE ENTIRE BENCH (except TAYLOR, J.).

CAVANAGH, J.

This case requires us to decide whether the denial of a

permit to fill wetlands on the plaintiffs’ property constitutes a

regulatory taking of the property without just compensation. On

two separate occasions, plaintiffs applied to the Department of

Natural Resources for a permit to fill wetlands on a portion of

their property so that they could commercially develop the land.

Both permits were denied, and the plaintiffs filed the instant

action, claiming that the permit denials constituted a regulatory

taking of their land. The trial court found that the permit denials

effectively rendered part of the plaintiffs’ land worthless: there-

fore. the DNR was required to compensate the plaintiffs. The

Court of Appeals affirmed. We granted leave. and we now

reverse in part and remand the case to the trial court.

Plaintiffs J.F.K. Company and Resorts and Company own

eighty-two acres of property near M-59 in Waterford Township.

J.F.K. is a Michigan limited partnership, consisting of the five

children of Joseph and Elaine Kosik. Resorts and Company is

a Michigan copartnership, consisting of Wisconsin Resorts, Inc..

and J.F.K. K & K Construction Co., Inc., is a Michigan

Appendix A-2

corporation. Mr. Kosik and his son are the sole shareholders of

K & K. It has no ownership interest in the property, but it has

contracted with the owners to build a C.J. Barrymore's restau-

rant and sports complex on the property.

Mr. and Mrs. Kosik originally acquired the property in

question during 1976. The property was transferred to J.F.K. by

quitclaim deed in 1986 so J.F.K. could develop the land. The

Kosiks retained a reversionary interest in part of the property>

conditioned upon J.F.K.’s ability to obtain financing for the

project. Resorts and Company obtained its interest in the

property about the same time.

The trial court found that the property consists of four

defined parcels, all of which are contiguous. Parcel one consists

of approximately fifty-five acres, twenty-seven acres of which

are wetlands. It is zoned for commercial use.' Parcel two

(sixteen acres) is directly south of parcel one. It contains a small

portion of the wetlands. Parcel three (9.34 acres) is directly

south of parcel two, and does not contain any wetlands. Parcel

four (3.4 acres) borders the south side of parcel one, and the east

side of parcel two. It is also free of wetlands. Parcels two,

three, and four are zoned for multiple family residential housing

(R-2). Parcel three has already been developed; parcels two and

four have not been developed.

Plaintiffs’ original plan, referred to as the “Barrymore

Plan,” was to build a restaurant and sports complex on forty-two

acres of parcel one, and several multiple-family residential struc-

tures with a storm-water retention pond on parcels two and four.

Pursuant to this plan, plaintiffs applied for a permit to fill part of

parcel one in June 1988. The DNR denied the permit, finding

that approximately twenty-eight acres of the property were

' Two portions of parcel one have already been developed. The

J.F.K. office building has been built on part of the parcel that borders

North Oakland Boulevard, and a Ram’s Horn restaurant has been

developed and sold from a portion of the land that borders M-59

Wha ng Deora the

Re A! Hee NAT scone

Appendix A-3

protected wetlands under the Wetland Protection Act (WPA),

MCL 281.701 ef seg.. MSA 18.595(51) ef seq., since repealed

and replaced. Plaintiffs did not file an administrative appeal.

Instead, they filed the instant action in December 1988. In May

1990, plaintiffs submitted a second application for a permit to

fill approximately three acres of wetland, while mitigating the fill

by converting five acres of upland to wetland. This second

application, referred to as the “Goga Plan,” would have devel-

oped the primarily upland ring around the wetland, while leaving

most of the wetland intact. The second permit was also denied.

and again no administrative appeal was taken.

The case was tried in December 1991. The only issue

before the court was whether the permit denials constituted

takings of the plaintiffs’ property. The trial court held that

parcel one was the only property relevant to the taking analysis,

and that denial of the permit to construct the restaurant and

sports complex effectively rendered plaintiffs’ property commer-

cially worthless. The DNR was required to compensate

plaintiffs for the full value of their property.

Once faced with a substantial adverse judgment, the DNR

attempted to mitigate the loss in value of the property by

allowing development to commence under the “Goga Plan.”

Even so, the trial court held that the DNR owed plaintiffs

* The trial court was required by statute to give defendant the option

of mitigating its damages. MCL 324.30323; MSA 13A.30323 states

that once the court has determined that the department's actions

constitute a taking, the court shall order the department, at the

department’s option, to do one or more of the following:

(a) Compensate the property owner for the full amount of

the lost value

(b) Purchase the property in the public interest . .

property so as to minimize the detrimental affect to the

property's value

Appendix A-4

damages both for a “temporary” taking of the land that could

now be developed under the Goga Plan, and also for the full

value of the wetlands that were not usable under the Goga Plan.

The trial court ultimately decided that the DNR was liable for

approximately $3.5 million plus interest for the unusable interior

wetlands, and approximately $500,000, plus interest for the

temporary taking. The Court of Appeals affirmed the trial

court's judgment. 217 Mich App 56; 551 NW2d 413 (1996).

The Fifth Amendment of the United States Constitution

provides in part: “nor shall private property be taken for public

use. without just compensation.”’ Similarly, the Michigan

Constitution provides:

Private property shall not be taken for public use

without just compensation therefor being first made or

secured in a manner prescribed by law. Compensation

shall be determined in proceedings in a court of record.

[Const 1963. art 10, § 2.]

The United States Supreme Court has recognized that the

government may effectively “take” a person’s property by over-

burdening that property with regulations. As stated by Justice

Holmes, “[t]he general rule at least is, that while property may

be regulated to a certain extent, if regulation goes too far it will

be recognized as a taking.” Pennsylvania Coal Co v Mahon,

260 US 393, 415; 43 S Ct 158; 67 L Ed 322 (1922). While all

taking cases require a case-specific inquiry, courts have found

that land use regulations effectuate a taking in two general situa-

tions: (1) where the regulation does not substantially advance a

legitimate state interest, or (2) where the regulation denies an

The Fifth Amendment's Taking Clause is applied to the states

through the Fourteenth Amendment. Penn Central Transportation

Co v New York City, 438 US 104, 122; 98 S Ct 2646; 57 L Ed 2d 631

(1978)

hi ale ah peg ONGC Li Aichi END

Appendix A-5

owner economically viable use of his land. Keystone Bituminous

Coal Ass'n v DeBenedictis, 480 US 470, 485; 107 S Ct 1232:

94 L Ed 2d 472 (1987).

The second type of taking, where the regulation denies an

owner of economically viable use of land, is further subdivided

into two Situations: (a) a “categorical” taking, where the owner

is deprived of “all economically beneficial or productive use of

land.” Lucas v South Carolina Coastal Council, 505 US 1003,

1015; 112 S Ct 2886; 120 L Ed 2d 798 (1992); or (b) a taking

recognized on the basis of the application of the traditional

“balancing test” established in Penn Central Transportation

Co v New York City, 438 US 104; 98 S Ct 2646; 57 L Ed 2d 631

(1978).

In the former situation, the categorical taking, a reviewing

court need not apply a case-specific analysis, and the owner

should automatically recover for a taking of his property. Lucas.

supra at 1015. A person may recover for this type of taking in

the case of a physical invasion of his property by the government

(not at issue in this case), or where a regulation forces an owner

to “sacrifice a// economically beneficial uses [of his land] in the

name of the common good... .” /d. at 1019 (emphasis in origi-

nal). In the latter situation, the balancing test, a reviewing court

must engage in an “ad hoc, factual inquir[y],” centering on three

factors: (1) the character of the government's action, (2) the

economic effect of the regulation on the property, and (3) the

extent by which the regulation has interfered with distinct,

investment-backed expectations. Penn Central, 438 US 124.

The trial court found that the WPA had effectively elimi-

nated the economically viable use of plaintiffs’ land; therefore.

plaintiffs were due compensation for a taking of their property.

Significantly, the trial court only considered the effect of the

regulations on parcel one of plaintiffs’ property, finding that

parcel one was the only relevant parcel for the taking analysis.

The Court of Appeals upheld the award of damages to the

piaintiffs for a taking. It held that the WPA eliminated all

Appendix A-6

economically viable use of the plaintiffs’ land, which meant that

plaintiffs could recover categorically for the taking under the

United States Supreme Court’s decision in Lucas.*

Ill

Before we decide whether the regulations imposed on

plaintiffs’ property constitute a taking, we must first address an

important preliminary matter. The first step in our analysis is to

determine which parcel or parcels owned by plaintiffs are rele-

vant for the taking inquiry. The determination of what is refer-

red to as the “denominator parcel” is important because it often

affects the analysis of what economically viable uses remain for

a person’s property after the regulations are imposed. Plaintiffs

urge us to focus our analysis only on parcel one, while defendant

argues that we must look at all four of plaintiffs’ parcels as a

single unit.

One of the fundamental principles of taking jurisprudence

is the “nonsegmentation” principle. This principle holds that

when evaluating the effect of a regulation on a parcel of

property, the effect of the regulation must be viewed with

respect to the parcel as a whole. Keystone, 480 US 498; Korby v

Redford Twp, 348 Mich 193, 198; 82 NW2d 441 (1957). Courts

should not “divide a single parcel into discrete segments and

attempt to determine whether rights in a particular segment have

been entirely abrogated.” Penn Central, 438 US 130. Rather,

we must examine the effect of the regulation on the entire

parcel, not just the affected portion of that parcel.

The denominator parcel is also not limited to each parcel of

property. As explained by the United States Court of Appeals

* Lucas was decided only a few months before the trial judge issued

his opinion in the instant case, and the opinion does not discuss the

categorical-taking standard. However, the Court of Appeals found

the categorical-taking analysis applicable on the basis of the trial

court's findings.

Appendix A-7

for the Federal Circuit in Tabb Lakes, Lid v United States.

10 F3d 796, 802 (CA Fed, 1993):

Clearly, the quantum of land to be considered is not

each individual lot containing wetlands or even the

combined area of wetlands. If that were true, the

Corps’ protection of wetlands via a permit system

would, ipso facto, constitute a taking in every case

where it exercises its statutory authority. [Citations

omitted. |

This Court has previously found the nonsegmentation

principle applicable to two adjoining parcels of property with

unity of ownership. Bevan v Brandon Twp, 438 Mich 385;

475 NW2d 37 (1991). In Bevan, the plaintiffs purchased two

contiguous lots of land separately. The plaintiffs were only

allowed to build a single house on the two lots because of town-

ship land-use ordinances adopted after they had purchased the

property. The plaintiffs sued, claiming that the regulations

constituted an unconstitutional taking of their property. The

lower courts agreed with them, finding that the regulation of the

property constituted a regulatory taking of one of plaintiffs’ two

parcels. This Court reversed, stating:

As a general rule, a person’s property should be con-

sidered as a whole when deciding whether a regulatory

taking has occurred. 1 Rathkopf, Zoning and

Planning, § 6.07(5), p 6-45.

** *

This Court has recognized that contiguous lots under

the same ownership are to be considered as a whole for

purposes of judging the reasonableness of zoning

ordinances, despite the owner’s division of the

property into separate, identifiable lots. [438 Mich

393, 395.]

Appendix A-8

The Court refused to apply the taking analysis to only one

of the two lots; instead, it viewed the property “in its entirety.”

Id. at 397.

In the present case, the Court of Appeals noted that

plaintiffs’ parcels were contiguous, just as those in Bevan. How-

ever, the Court found Bevan distinguishable because the

property in that case concerned two parcels under the same

ownership and subject to a single-zoning scheme. 217 Mich

App 65. While we recognize that this case is not factually the

same as Bevan, the principles underlying the decision in Bevan

require us to conclude that the denominator parcel is more than

just parcel one of plaintiffs’ property. The relevant denominator

in this case includes at least parcels one, two, and four.

Determining the size of the denominator parcel is inherently

a factual inquiry. As explained in Ciampitti v United States, 22

Cl Ct 310, 318-319 (1991):

Factors such as the degree of contiguity, the dates of

acquisition, the extent to which the parcel has been

treated as a single unit, the extent to which the protec-

ted lands enhance the value of remaining lands, and no

doubt many others would enter the calculus. The

effect of a taking can obviously be disguised if the

property at issue is too broadly defined. Conversely,

a taking can appear to emerge if the property is viewed

too narrowly. The effort should be to identify the

parcel as realistically and fairly as possible, given the

entire factual and regulatory environment.

In this case it is neither realistic nor fair to consider only

parcel one for purposes of the taking analysis. Parcels one, two.

and four are bound together through their contiguity, the unity of

J.F.K.°s ownership interest in all three of these parcels, and

plaintiffs’ proposed comprehensive development scheme. Thus.

the Court of Appeals erred when it concluded that it was proper

PERG SARNIA TAY

Appendix A-9

for the trial court to consider only parcel one in the taking

analysis.

First, there is no dispute that parcels one, two, and four are

contiguous. Second, J.F.K. had an ownership interest in parcels

one, two, and four. At the time the instant litigation was started,

as well as when the permits were submitted to and denied by the

DNR. J.F.K. was the title owner of all three parcels of property.”

As explained in Bevan, contiguity and common ownership create

a common thread tying these three parcels together for the

purposes of the taking analysis."

Third, the connection between parcels one, two, and four is

further solidified by plaintiffs’ comprehensive development

plans. The plaintiffs” proposed use of the property is highly rele-

vant to establishing the denominator parcel. Where “a property

owner treats a series of properties as one income-producing unit,

the value lost to the claimant is not simply the loss of the segre-

gated parcel affected by the Government action,” rather it is the

* The trial court recognized the fact that J.F.K. 1s the titled property

owner of parcel one. However, it found that there was an “equitable

lien on the title to the property in favor of Mr. and Mrs. Kosik.” At

the very least, the record indicates that J.F.K. shares a joint ownership

interest in the property with Mr. and Mrs. Kosik. We find this joint

ownership interest, combined with the fact that J.F.K. was the sole

titled owner of the property at the time that the alleged taking

occurred, sufficient to create a common ownership interest in all of

parcels one, two, and four.

° We acknowledge that these three parcels of property do have

different zoning classifications. However, the fact that plaintiffs

intended to use all three of them in a single development plan negates

the fact that they were zoned differently, in this case. See Zealy v

City of Waukesha, 201 Wis. 2d 365, 548 NW2d 528 (1996) (although

zoning changes by the city resulted in three different zoning

classifications on the plaintiff's parcel of land, the entire 10.4 acres

of the parcel were considered relevant to the taking analysis rather

than the 8.2 acres that were rezoned).

Appendix A-10

loss as it relates to the value of the entire unit. Forest

Properties, Inc v United States, unpublished opinion of the

United States Court of Federal Claims, issued August 6, 1997

- (Docket No. 92-851L), p 36. Both permit applications filed by

plaintiffs with the DNR contemplated a comprehensive develop-

ment using part of parceis one, two, and four.’ In a similar

situation, the United States Court of Claims held that a plaintiff

may not separate a certain lot of property from others that he

owned with regard to his taking claim when he had previously

treated them as “a single parcel for purposes of purchase and

financing.” Ciampitti, supra at 320. Indeed, it is inappropriate

to allow a person to “sever the connection he forged when it

assists in making a legal argument.” /d. Here, the plaintiffs

forged a connection between parcels one, two, and four through

the proposed development scheme and permit applications." It

would be inappropriate to allow plaintiffs to sever this connec-

tion now that it makes their legal argument stronger.

’ The first permit filed with the DNR does not clearly state how many

acres of plaintiffs’ property were going to be involved in the

development. However, there was testimony at trial explaining that

along with the construction of the C.J. Barrymore’s restaurant and

sports complex on parcel one, plaintiffs planned on building a storm-

water retention pond and multiple-family residential structures on

parcels two and four. The second permit application also

contemplated using parcels two and four as part of the development.

It described the proposal as “development of a 72.2 acre parcel

which includes commercial, general office, multiple housing and

senior citizen congregate care facilities.”

* Just as in the case at hand, the plaintiff's suit in Forest Properties

was for the taking of 5.4 acres of lake bottom property when their

permit application described the project as “53.36 acres existing plus

5.4 acres lake bottom.” Forest Properties at 38. The Court of Claims

found this as evidence of the unity of “development and the economic

expectations” of the plaintiff. /d.

Appendix A-1 1

Finally, the reliance of the Court of Appeals on Loveladies

Harbor. Inc v United States, 28 F3d 1171 (CA Fed, 1994), is

misplaced. In Loveladies, the plaintiffs agreed to convey 38.5

acres of wetland to the state in return for a permit to develop the

remaining 12.5 acres of their land. However, the plaintiffs were

denied a federal permit to fill the 12.5 acres on the basis of the

state’s recommendation to the Army Corps of Engineers that the

permit be denied. In the subsequent action, the defendants

argued that the court should consider all fifty-one acres of the

plaintiffs’ property for the taking analysis, not just the 12.5 listed

in the permit application. The court rejected the defendants’

argument, explaining that it was illogical to “require Loveladies

to convey to the public the rights in the 38.5 acres in exchange

for the right to develop 12.5 acres, and then to include the value

of the grant as a charge against the givers.” Id. at 1181.

Similarly, it seems illogical in this case for J.F.K. to apply for

permits to develop parcels one, two, and four, and then for the

Court to consider only parcel one in the taking analysis.

We conclude that the lower courts erred in limiting their

analysis of the taking claim to parcel one. In this case, the

plaintiffs proposed a comprehensive development, using parts of

parcels one, two, and four of the property. The taking claim is

based on the DNR’s refusal to issue permits to allow this com-

prehensive development. Thus, this case is analogous to Bevan,

supra. At the least, all three of plaintiffs’ parcels of property

should be considered in the taking analysis.’

° in this case, two parts of parcel one as originally purchased have

been developed. Defendant argues that the trial court failed to

consider these two parcels in its ruling on the value of parcel one, but

it is unclear from the trial court’s opinion whether this was the case.

We see no reason for these two parts of parcel one to be excluded

from the taking analysis. They were both part of parcel one as

originally purchased, and neither was sold or developed before the

enactment of the regulations in question. See Blue Water Isles Co v

DNR, 171 Mich App 526, 536, 431 NW2d 53 (1988) (two parcels

(continued...)

Appendix A-12

We note that defendant has urged us also to include parcel

three as part of the denominator parcel. Parcel three is contig-

uous with the other parcels in this case, and J.F.K. does have an

ownership interest in parcel three. However, the record is

unclear with respect to the extent of J.F.K.°s ownership interest

in parcel three. More importantly, parcel three was not included

in plaintiffs’ development plan: it had previously been

developed.

However, this should not end the inquiry. The failure to

include a parcel of land in a development plan should not, by

itself, exclude that parcel from consideration as part of the

denominator. To so conclude would encourage piecemeal devel-

opment. Thus, while we can safely state that the denominator

parcel includes parcels one, two, and four, we believe it is

inappropriate to conclude one way or the other with regard to

parcel three. On remand, we instruct the trial court to determine

the extent of J.F.K.°s ownership interest in parcel three, and

whether it is sufficiently connected to the other parcels to con-

clude that all four parcels should be considered in the taking

analysis.”

* (...continued)

sold to a third party before regulatory action was considered in taking

analysis).

There is no single set of factors or “test” that the trial court should

apply when determining the extent of the denominator parcel.

Obviously the extent of plaintiffs’ ownership interest in the relevant

parcels, the contiguity of the parcels, and the extent to which the

parcels have been treated as a single unit should all be considered.

Some other factors that may be instructive include: whether the

relevant parcels were part of the original parcel purchased, see

Ciampitti, Blue Water Isles Co, and Loveladies Harbor, supra, the

date of the parcels’ purchase and the extent of development relative

to the date of enactment of the challenged regulations, Loveladies

Harbor, supra, and the zoning of the parcels, Bevan, supra.

Appendix A-13

Next, we address the Court of Appeals conclusion that the

regulation of plaintiffs’ land constituted a regulatory taking. As

explained in part Il, a regulatory taking exists when: (1) the regu-

lation fails to advance a legitimate state interest, or (2) the

regulation denies an owner economically viable use of his land.

This second type of taking is subdivided into: (a) a categorical

taking, or (b) a taking recognized on the basis of the application

of the traditional balancing test. Because plaintiffs concede that

the state has a legitimate interest in protecting and preserving

wetlands, '' the first type of taking is not at issue. Thus, we limit

our analysis to whether plaintiffs were deprived of economically

viable use of their land, either by a categorical taking or under

the balancing test.

A. Categorical Taking

When considering only parcel one, the Court of Appeals

concluded that the reguiation of plaintiffs’ property constituted

a categorical taking of their land. However, when we expand

our consideration of plaintiffs” property to include at least all of

parcels one, two, and four, it is clear that there was not a cate-

gorical taking of plaintiffs’ property.

For a categorical taking to exist, there must be a denial of

“all economically beneficial or productive use of land.” Lucas,

supra at 1015. In Lucas, the plaintiff purchased two lots of land

approximately three hundred feet from a beach, with plans to

build single-family houses on the property. A subsequent revi-

sion of South Carolina’s Coastal Tidelands & Wetlands Act’?

thwarted the plaintiff's planned construction, and prevented him

from developing the land in any way. This led the Court to

" See Harkings v Dep't of Natural Resources, 206 Mich App 317,

324: 520 NW2d 653 (1994) (“the WPA unquestionably advances a

legitimate state interest”).

2 SC Code, § 48-39-10 ef seg.

Appendix A-14

conclude that “when the owner of real property has been called

upon to sacrifice a// economically beneficial uses in the name of

the common good, that is, to leave his property economically

idle, he has suffered a taking.” /d. at 1019 (emphasis in origi-

nal). The fact that the property owner must be completely

deprived of economically beneficial use of his property was

emphasized in a footnote responding to Justice Stevens’ dissent:

Justice Stevens criticizes the “deprivation of all eco-

nomically beneficial use™ rule as “wholly arbitrary.” in

that “[the] landowner whose property is diminished in

value 95% recovers nothing,” while the landowner

who suffers a complete elimination of value “recovers

the land's full value.” Post at 1064. This analysis errs

in its assumption that the landowner whose deprivation

is one step short of complete is not entitled to

compensation. Such an owner might not be able to

claim the benefit of our categorical formulation, but, as

we have acknowledged time and again, “[t}he

economic impact of the regulation on the claimant and

.. . the extent to which the regulation has interfered

with distinct investment-backed expectations” are

keenly relevant to takings analysis generally. [Penn

Central, 438 US 124.] [/d. at 1019, n 8.]

Unlike the property in Lucas, plaintiffs” land in the present

case was not left economically idle. In Lucas, the plaintiff was

completely prohibited from developing any part of his land.

Here, however, plaintiffs were not prohibited from developing

the remaining upland on parcel one. as well as almost all of

parcels two and four. Indeed, plaintiffs’ second permit applica-

tion clearly contemplated such development. While the com-

mercial value of the land may have been reduced by the

Den ate eel tae te DF as ie

: Appendix A-15

restrictions placed on it by the WPA, it was not rendered

worthless or economically idle."

B. The Balancing Analysis

As Lucas indicates, regulations that do not rise to the level

of a categorical taking may still be so burdensome as to rise to

the level of a taking. /d. at 1019-1020,n 8. Therefore, plaintiffs

must prove a taking on the basis of the balancing analysis. As

explained in part II, this requires an “ad hoc, factual inquir[y]”

into three factors: (1) the character of the governmental action,

(2) the economic effect of the regulation on the claimant, and

(3) the extent to which the regulation interfered with distinct

investment-backed expectations. Penn Central at 124. While

there is no set formula for determining when a taking has

occurred under this test, it is at least “clear that the question

whether a regulation denies the owner economically viable use

of his land requires at least a comparison of the value removed

with the value that remains.” Bevan, 438 Mich 391, citing

Keystone Bituminous Coal Ass'n v DeBenedictis, 480 US 497.

In the present case, the trial court made several findings of

fact with regard to the economic effect of the WPA on parcel

one. However, it failed to take into consideration the value of

the property when it included parcels two and four. We do not

know the value of all three parcels combined, either with or

without the regulations. It would be imprudent to decide

whether there was a taking of plaintiffs’ property on the basis of

'* Even if we did limit our analysis to parcel one, the Court of

Appeals conclusion that a categorical taking had occurred is not

supported by the record. In its first opinion, the trial court stated:

“While it is true that some financial value will remain, this Court

finds that what little economic value remains is but a small fraction

of the economic value the property would have if all of it could be

developed.” (Emphasis added.) Thus, while the regulations may

have duminished the value of plaintiffs’ land, this diminution in value

would not give rise to a categorical taking. Instead, it should be

analyzed under the traditional case-specific inquiry.

Appendix A-16

an inadequate record. Therefore, we reverse the decision of the

Court of Appeals, and remand the matter to the trial court for

further consideration. On remand, the trial court should com-

pare the value removed from the plaintiffs’ land, and also

calculate what value remains. It then must reevaluate the case

under the three-part balancing test.

The decision of the Court of Appeals is reversed and the

case is remanded to the trial court. On remand, the trial court

must determine (1) if parcel three of plaintiffs’ property should

be included in the denominator parcel, and (2) whether the effect

of the regulations on the entire denominator parcel resulted in a

taking under the balancing test.

MALLETT, C.J.. and BRICKLEY, BOYLE. WEAVER. and

KELLY, JJ.. concurred with CAVANAGH., J.

K & K Construction, Inc, v Dep’t of Natural Resources

Robert L. Bunting [P.O. Box 7, Oxford, MI 48371] [(248)

628-5150] for plaintiffs-appeilees.

Frank J. Kelley, Attorney General, Thomas L. Casey,

Solicitor General, A. Michael Leffler, Assistant in Charge, and

Stanley F. Pruss and S. Peter Manning, Assistant Attorneys

General [Knapp’s Office Centre. Suite 530, 300 South

Washington Square, Lansing, MI 48913] [(517) 335-1488], for

the defendant-appellant.

Amici Curiae:

John F. Rohe and Gail S. Gruenwald [438 East Lake

St. Petoskey, MI 49770] [(616) 347-7327] for Tipp of the Mitt

Watershed Council.

Chris A. Shafer [217 S. Capitol Ave., Lansing, MI 48901]

{(517) 371-5140] for Michigan Natural Areas Council.

Appendix A-17

Olson, Noonan, Ursu & Ringsmith, P.C. (by James M.

Olson, John D. Noonan, and Christopher M. Bzdok) [P.O. Box

2358. Traverse City, MI 49685-2358] [(616) 946-0044], for

Michigan Environmental Council, League of Women Voters of

Michigan, Sierra Club, West Michigan Environmental Action

Council, Michigan Land Use Institute, Ecology Center of Ann

Arbor, Mid-Michigan Action Council, Citizens Against

Pollution, Citizens for Alternatives to Chemical Contamination.

Eastern Michigan Environmental Action Council, and Clean

Water Action Council.

Lois J. Schiffer, Assistant Attorney General, W. Francesca

Ferguson, Assistant United States Attorney, and Edward

Shawaker and Timothy J. Dowling, Attorneys, Environment and

Natural Resources Division [P.O. Box 4390, Washington, D.C.

20044-4390] [(202) 514-4642]: Jonathan Z. Cannon, General

Counsel, and David F. Coursen, Attorney, Office of General

Counsel, for United States Environmental Protection Agency.

Marc K. Shave, [201 W. Big Beaver Road, Suite 220, Troy,

MI 48084] [(810) 619-9220] James S. Burling, and Stephen E.

Abraham [2151 River Plaza Drive, Suite 305, Sacramento, CA

95833] [(916) 641-8888] for Pacific Legal Foundation.

Kohl, Secrest, Wardle, Lynch, Clark & Hampton (by

Gerald A. Fisher) [30903 Northwestern Highway, P.O. Box

3040, Farmington Hills, MI 48333-3040] [(810) 851-9500]:

Susan Marie Connor, of counsel, American Planning

Association [122 South Michigan Ave., Suite 1600, Chicago, IL

60693-6107] [(312) 987-2375], for Michigan Municipal League,

Michigan Townships Association, and Public Corporation Law

Section of the State Bar of Michigan.

Butzel Long (by William R. Ralls, John H. Dudley, Jr., and

Steven D. Weyhing) [118 West Ottawa Street, Lansing, MI

48933] [(517) 372-6622] for Michigan Peat, Inc.

Twohey Magginni, P.L.C. (by Patrick M. Muldoon and

Ralph Wyngarden) [161 Ottawa Ave., NW, Grand Rapids, MI

Appendix A-18

49503] [(616) 459-6168]; John D. Echeverria and Enrico G.

Nardone, of counsel [1901 Pennsylvania Ave... NW.

Washington, D.C. 20006] [(202) 861-2242], for Michigan

Audubon Society. Detroit Audubon Society, and National

Audubon Society

Glenn P. Sugameli {1400 16th Street, NW, Washington,

D.C. 20036] [(202) 797-6865]. Carol Bamberv [2101 Wood

Street, Box 30235, Lansing, MI 48909] [(517) 371-1041], and

V1. Cameron Davis {506 East Liberty Street. Second Floor, Ann

Arbor, MI 48104] [(313) 769-3351]. for Michigan United

Conversation Clubs and National Wildlife Federation.

Appendix B-]

Filed 6/4/96

K & K CONSTRUCTION, INC. v. DEPARTMENT

OF NATURAL RESOURCES

Docket No. No. 168393. Submitted December 13, 1995,

at Lansing. Decided June 4, 1996, at 9:00 a.m. Leave to

appeal sought.

LC No. 88-012120-CM.

DISPOSITION: Affirmed.

COUNSEL: Robert L. Bunting and Karen Russell, for the

plaintiffs. Oxford, Mt. Clemens.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor

General, A. Michael Leffler and Kevin T. Smith, Assistant

Attorneys General, for the defendant.

Amicus Curiae:

Dickinson. Wright, Moon, Van Dusen & Freeman (by

Gregory L. McClelland, David E. Pierson, and Jeffery V.

Stuckey), for Michigan Association of Home Builders. Lansing.

JUDGES: Before: Jansen, P.J., and Taylor and J.P. Noecker,” JJ.

OPINION BY: Kathleen Jansen

OPINION:

JANSEN, P.J.

This is a regulatory takings case. Defendant Department of

Natural Resources appeals as of right from a September 8, 1993,

judgment of the Court of Claims in plaintiffs’ favor. The Court

of Claims determined that a taking had occurred as a result of

defendant's decision to deny plaintiffs’ application for a permit

to build a restaurant on a parcel of land on the basis that the land

" Circuit judge, sitting on the Court of Appeals by assignment

Appendix B-2

was protected wetlands. The Court of Claims awarded

$3,245,256 for the property taken, plus interest of

$1,574,522.60, and $ 459,400 for a temporary taking of part of

the land. We affirm.

Plaintiffs own approximately eighty-two acres of property

in Waterford Township in Oakland County. The property was

acquired in 1976 by Joseph and Elaine Kosik. J.F.K. Company

is a Michigan limited partnership consisting of the five children

of the Kosiks. J.F.K. Company is a part owner of the property

through a quit-claim deed executed by the Kosiks. K & K

Construction is a Michigan corporation, of which Joseph Kosik

and one of his sons are the sole shareholders. K & K

Construction has no ownership interest in the property involved

in this case. Resorts and Company is a Michigan copartnership

and is a part owner of the eighty-two-acre property.

The Court of Claims concluded that the property consisted

of four distinct parcels. The parcel at issue was parcel 1, on

which J.F.K. Company wished to build a C.J. Barrymore’s

Restaurant. Parcel 1 covered approximately fifty-five acres of

the entire property. On May 28, 1988, plaintiffs applied for a

permit to develop the property on November 7, 1988, defendant

denied the permit on the basis of a determination that approxi-

mately twenty-eight acres of the property was protected wetlands

under the Wetland Protection Act (WPA), MCL 281.701 et seq.:

MSA 18.595(51) et seq.

Plaintiffs then filed the present action on December 29,

1988, in the Court of Claims. Plaintiffs initially sought a declara-

tory ruling that the area is not wetlands and also sought injunc-

tive relief against defendant's enforcement of the WPA and

damages under the WPA. Plaintiffs sought a determination that

defendant's actions constituted a taking of their property for

which they were entitled to just compensation. On May 1, 1990,

plaintiffs submitted a second application for a permit to fill

Appendix B-3

approximately 3.17 acres of wetlands and to convert 5.36 acres

of upland to wetlands. This plan was known as the “Goga Plan”

and involved a total of over seventy-two acres of property on

parcels 1, 2, and 4. This second application was also denied on

July 26, 1990.

Trial was held before the Court of Claims, sitting as the

factfinder, on December 17, 1991. The only issue before the

court was whether there was a taking because of the permit

denial such that plaintiffs were entitled to just compensation. On

November 2, 1992, the Court of Claims issued its opinion and

order determining that a taking occurred because the wetlands

restrictions rendered the property essentially worthless as com-

mercial real estate, and that plaintiffs were therefore entitled to

just compensation. After various postjudgment motions and con-

sideration of the Goga Plan, the Court of Claims awarded a total

of $ 5,279,178 in favor of plaintiffs.

Plaintiffs contend that defendant's actions of denying the

permit to fill the wetlands constitute an unconstitutional taking

of property without just compensation. The Fiith Amendment of

the United States Constitution provides in part: “nor shall private

property be taken for public use, without just compensation.”

Similarly, the Michigan Constitution provides: “Private property

shall not be taken for public use without just compensation

therefor being first made or secured in a manner prescribed by

law.” Const 1963, art 10, § 2. The Takings Clause of the Fifth

Amendment has been made applicable to the states through the

Fourteenth Amendment. Dolan v City of Tigard, 512 U.S. __

114 S. Ct. 2309; 129 L. Ed. 2d 304, 315 (1994); Peterman y

Dep't of Natural Resources, 446 Mich. 177, 184, n 10;

521 N.W.2d 499 (1994).

Property may be taken only when an essential nexus exists

between a legitimate state interest and the taking. If the nexus

Appendix B-4

exists, then there must be a “rough proportionality” between the

manner of the taking and the actual state interest involved.

Dolan, supra, p 317, Peterman, supra, p 201. The parties do not

dispute that the state has a legitimate interest in preserving and

protecting wetlands. See Attorney General ex rel Dep't of

Natural Resources v Huron Co Rad Comm'n, 212 Mich. App.

510, 516; 538 N.W.2d 68 (1995) (“the primary purpose of the

WPA is to ensure that wetland habitats are preserved and

protected”). Further, there is no dispute that an essential nexus

exists between the legitimate state interest in this case (the

preservation and protection of wetlands) and the taking (the

land-use regulation). See Harkins v Dep't of Natural Resources,

206 Mich. App. 317, 324; 520 N.W.2d 653 (1994) (“the WPA

unquestionably advances a legitimate state interest”). The crucial

issue we face is whether there is a taking within the meaning of

the Fifth Amendment to require just compensation.

The United States Supreme Court has explained that the

Fifth Amendment is violated when land-use regulation does not

substantially advance legitimate state interests or denies an

owner economically viable use of the owner’s land. Lucas v

South Carolina Coastal Coastal, 505 U.S. 1003, 1015; 112 S.

Ct. 2886; 120 L. Ed. 2d 798 (1992). In land-use regulation cases,

it has been recognized that while property may be regulated to

a certain extent, if the regulation goes too far it will be

recognized as a taking. /d., p 1014, Volkema v Dep't of Natural

Resources, 214 Mich. App. 66, 69; 542 N.W.2d 282 (1995).

The Supreme Court has not set a formula regarding what

constitutes going “too far,” but has engaged in ad hoc factual

inquiries. Lucas, supra, p 1015.

However, there are two distinct categories of regulatory

action that require compensation without case-specific inquiry.

The first category encompasses regulations that compel the

property owner to suffer a physical invasion of the property.

The second category is where regulation denies all economically

beneficial or productive use of the land. /d., pp 1015-1019. The

Appendix B-5

Court of Claims concluded that application of the WPA denied

plaintiffs all economically beneficial or productive use of the

land.

The United States Supreme Court has noted that “affirma-

tively supporting a compensation requirement . . . [are] regula-

tions that leave the owner of land without economically

beneficial or productive options for its use--typically by

requiring land to be left substantially in its natural state.” /d..

p 1018. In Lucas, the Court held that where the state seeks to

sustain regulation that deprives property of all economically

beneficial use, the state may resist compensation only if an

inquiry into the nature of the owner’s property shows that the

interests behind the proscribed use were not part of the title to

begin with. /d., p 1027. Thus, a regulation that prohibits all

economically beneficial use of land cannot be newly legislated

or decreed without compensation, but must inhere in the owner’s

title itself, with the restriction that background principles of state

property or nuisance law may already place on land ownership.

/d., pp 1028-1029.

In the case before us, we reject defendant’s claim that the

permit denial was based on a fundamental principle of Michigan

property law. Defendant claims that such a principle is found in

our state constitution:

The conservation and development of the natural resources

of the state are hereby declared to be of paramount public

concern in the interest of the health, safety and general welfare

of the people. The legislature shall provide for the protection of

the air, water and other natural resources of the state from

pollution, impairment and destruction. [Const 1963. art 4. § 52.]

In Lucas, the Supreme Court made clear that the state must

do more than proffer the legislatures declaration that the uses the

landowner desires are inconsistent with the public interest.

Rather, the state must identify background principles of nuisance

and property law that prohibit the uses the landowner intends in

Appendix B-6

the circumstances in which the property is found. Lucas, supra,

pp 1030-1031.

The constitutional provision quoted above is not a principle

of nuisance and property law. The decision to build a restaurant

on land, or a request to fill in wetlands, does not constitute a

nuisance that the government may abate. See id., p 1029; Miller

Bros v Dep't of Natural Resources, 203 Mich. App. 674, 682;

513 N.W.2d 217 (1994). We are not aware of any common-law

principle preventing the building of a restaurant on plaintiffs’

land. Thus, the generalized invocation of public interests in the

state constitution, and the Legislature's declarations in the WPA

and the Michigan Environmental Protection Act, MCL 691.1201

et seq.; MSA 14.528(201) et seg., do not constitute background

principles of nuisance and property law sufficient to prohibit the

use of plaintiffs” land without just compensation.

Defendant also contends that because the regulation, the —

WPA, was enacted before the quit-claim deed passed title to

J.F.K. Company, plaintiffs are precluded from compensation.

We do not agree that the timing of the regulation and ownership

would act to preclude just compensation where it would other-

wise be due. See Nollan v. California Coastal Comm, 483 U.S.

825, 833, n 2; 107 S. Ct. 3141; 97 L. Ed. 2d 677 (1987) (The

landowners’ rights were not altered because they acquired the

land well after the commission had begun to implement its

policy. As long as the commission could not have deprived the

prior owners of the easement without compensation, the prior

owners must be understood to have transferred their full property

rights in conveying the lot.)

In this case, the property was acquired by Joseph and Elaine

Kosik in 1976. They transferred the property through a quit-

claim deed to J.F.K. Company in 1986. The WPA took effect in

1980. The passage of the WPA cannot be understood as

depriving J.F.K. Company of just compensation merely because

esenenrseenicia sirname re oe

Appendix B-7

the WPA was in effect when the quit-claim deed was executed.

Because we have concluded that the interests served by the

proscribed use in this case do not inhere in the title itself. the

timing of the regulation and the transfer of the land do not

dictate that plaintiffs are not entitled to just compensation.

Lucas, supra, pp 1027-1031.

Next, in order to determine if plaintiffs were deprived of all

economically beneficial or productive use of their land, we must

decide what specific property was affected by the permit denial.

It is defendant's contention that the Court of Claims should have

considered all eighty-two acres of the property in determining

whether a taking occurred in this case. At trial, plaintiffs argued

that the Court of Claims should consider only the twenty-eight

acres that were declared to be wetlands. The Court of Claims

rejected both contentions and found that it would consider the

fifty-five acres designated as parcel 1. On appeal. plaintiffs urge

us to affirm the Court of Claims’ ruling. We find that the Court

of Claims’ factual finding in this regard is not clearly erroneous.

MCR 2.613(C).

A proper resolution of this issue is not subject to any clear

rule. In Bevan v Brandon Twp, 438 Mich. 385, 393: 475 N.W.2d

37 (1991), our Supreme Court held that a person’s property

generally should be considered as a whole when deciding

whether a regulatory taking has occurred. In Bevan, however, the

property in question consisted of two contiguous parcels under

the same ownership and subject to a single zoning scheme. In

the case before us, parcel | is zoned for commercial use. while

parcels 2, 3, and 4 are zoned for residential use. Further, there is

no single owner of all four parcels. Parcel | is owned in part by

J.F.K. Company, and parcels 2 and 4 are owned solely by J.F.K.

Company. Parcel 3 is owned by both J.F.K. Company and

Resorts and Company. Finally, the regulation in this case does

not affect all four parcels. Only parcel | is affected by the WPA.

Appendix B-8

More recently. this Court relied on Loveladies Harbor, Inc v

United States, 28 F.3d 1171 (CA Fed, 1994), in analyzing a

similar issue See Volkema, supra, pp 71-72. In Loveladies

Harbor, the plaintiffs originally owned 250 acres of land that had

been acquired in 1958. By 1972. 199 acres of the land had been

developed, before the enactment of § 404 of the Clean Water

Act. 33 USC 1344. The plaintiffs sought a fill permit to develop

the remaining fifty-one acres for residential use. The permit was

initially denied, but the stale eventually entered into an agree-

ment whereby the plaintiffs could develop 12.5 acres of the land.

However, the plaintiffs also had to seek permit approval from

the Army Corps of Engineers. The corps ultimately denied the

permit.

The court in Loveladies Harbor had to determine the

“denominator parcel” in order to determine whether a taking had

occurred. The court rejected any bright-line rule and instead

adopted a flexible approach to account for factual nuances of

each individual case. Loveladies Harbor, supra, p 1181. This

approach was also recently adopted by this Court in Volkema.

supra, p 73. The court in Loveladies Harbor, found that the 199

acres that had been developed before enactment of § 404 of the

Clean Water Act should not be considered as part of the denomi-

nator because no effort had been made by the state to regulate

that land. With regard to the remaining fifty-one acres, the court

found that the 38.5 acres had been essentially given to the state

in exchange for the permit to develop the remaining 12.5 acres.

The court refused to include the 38.5 acres as part of the

denominator because that land had no value to the plaintiffs.

Thus, the court concluded that only 12.5 acres would be consid-

ered as the denominator, and that because the value was de

minimis, the owner was deprived of all economically feasible

use of the property and was entitled to just compensation.

Loveladies Harbor supra, pp 1181-1182.

In Folkema, this Court employed the same “factual

nuances” analysis, but reached a different conclusion. The

Appendix B-9

plaintiffs in Volkema bought forty-five acres of commercial

property in 1963 and a contiguous five-acre parcel in 1979. The

plaintiffs developed the property and were left with 24.6 acres at

the time of the litigation. The plaintiffs sought a permit to fill 4.3

acres of wetlands, but that permit was denied. The plaintiffs

sought compensation for the six acres they claimed were

rendered useless because of the denial of the fill permit.

This Court held that it would not include the entire forty-

five acres in the denominator because approximately half of that

land was developed before enactment of the WPA. However.

this Court held that it would consider the remaining 24.6 acres

as the denominator, rather than the six acres as urged by the

plaintiffs. In Volkema, the entire 24.6 acres was of high value to

the plaintiffs, and the land, when viewed as a whole, continued

to have substantial value because it could still be developed for

commercial purposes. Thus, this Court concluded that the

plaintiffs had suffered no taking where most of the land could be

developed for commercial purposes. Volkema, supra, p 74.

In the present case, the Court of Claims properly considered

only the fifty-five acres of parcel 1. Parcels 2, 3, and 4 are zoned

for residential purposes, while parcel 1 is zoned for commercial

uses. Parcel 3 was developed before plaintiffs first applied for

the permit. Parcels 2 and 4 are not developed. Because of the

differences in the zoning of the four parcels and the differences

in their ownership, we conclude that the Court of Claims’ factual

finding that the fifty-five acres should be considered as the

denominator is not clearly erroneous.

Defendant next contends, however, that even in light of the

regulation, there was no taking because the property retained

significant value. The Court of Claims found that parcel 1, as

affected by the permit denial, was essentially worthless as

commercial real estate. This factual finding is not clearly

erroneous, given the evidence presented at trial.

Appendix B-10

The Court of Claims credited the testimony of plaintiffs”

experts, who concluded that the property was essentially

worthless. The Court of Claims discounted the conclusion of

defendant's expert that the edges of the parcel could still be

developed, because that conclusion was refuted by plaintiffs’

experts. We note that the twenty-eight acres of wetlands is

irregularly shaped within the fifty-five-acre parcel. Thus, it is not

possible to simply leave the wetlands area undeveloped and

build on the remaining twenty-seven acres. If the twenty-eight

acres of wetlands was not developed, the only area that could be

feasibly developed would be the edges of the area of parcel 1.

This was apparently not economically feasible because of the

land needs for a restaurant, including parking lots or any other

commercially viable use. Thus, this case is unlike Volkema

because there the plaintiffs could still use the remaining eighteen

acres of over twenty-four acres of property. Here. the plaintiffs

could not develop the remaining twenty-seven acres because of

the configuration of the wetlands within the parcel.

Accordingly, the Court of Claims did not err in concluding

that the regulation in this case denied the owners all econom-

ically beneficial or productive use of the land. Thus, a taking

occurred within the meaning of the Fifth Amendment and

plaintiffs were entitled to just compensation for the fifty-five

acres of land affected by the regulation.

Defendant next argues that the Court of Claims erred in

rejecting its option to cure the taking by permitting implemen-

tation of the Goga Plan.

Plaintiffs first submitted an application on May 28. 1988.

regarding development of parcel 1. On November 7, 1988.

defendant denied a permit to develop the property because

twenty-eight acres of the parcel were determined to be protected

wetlands. Plaintiffs then filed their complaint on December 29.

1988. Thereafter, William Goga, a civil engineer retained by

Appendix B-11

plaintiffs, developed a mitigation plan. He proposed that some

wetlands be filled in parcel 1, but that wetlands could be created

in the parcel from nonwetlands area. This plan was submitted to

defendant in April 1990. Defendant rejected this plan and denied

the subsequent permit application based on Goga’s plan in July

1990.

Trial in this matter was held on December 17, 1991. On

November 5, 1992, the Court of Claims issued an opinion and

order in which it found that a taking had occurred because

plaintiffs were denied all economically beneficial or productive

use of the land because of the permit denial. It was not until after

this determination that defendant agreed to accept the Goga

Plan. The Court of Claims issued a second opinion and order.

dated May 4. 1993, which mainly dealt with various compen-

sation issues. The Court of Claims specifically found that

defendant was entitled to accept the Goga Plan pursuant to MCI

281.721(3c); MSA 18.595(71)(3\(c). This provision specifi-

cally allowed defendant to modify its action so as to minimize

the detrimental effect to the property’s value after the court

determined that defendant's action constituted a taking. The

Court of Claims found no objection to this approach. The Court

of Claims then stated that those portions of the property defined

as being part of the Goga Plan could be exempted from the

taking. while those portions that were to be transformed into

wetlands would be considered to be condemned.

In considering what constituted just compensation, the

Court of Claims ruled that plaintiffs would be awarded interest

and fair market value of the portion of land actually condemned.

The court specifically did not include that portion of the land that

could still be commercially developed under the Goga Plan.

Thus. defendant's characterization of the Court of Claims’

action as being a rejection of defendant's decision to accept the

Goga Plan is not supported by the record.

Further, we cannot agree with defendant's contention that

its decision to offer a permit for the Goga Plan eliminates the

Appendix B-12

taking the Court of Claims found, and we agree, that there was

an unconstitutional taking in this case due to the regulation of the

wetlands area. It was not until after a finding by the Court of

Claims that defendant decided to accept implementation of the

Goga Plan. However, this action does not eliminate a taking. As

the Court of Claims correctly determined, twenty-seven acres of

the parcel were temporarily taken and twenty-eight acres were

permanently taken.

In First English Evangelical Lutheran Church of Glendale v

Los Angeles Co, 482 U.S. 304, 321; 107 S.Ct. 2378: 96 L. Ed.

2d 250 (1987), the Supreme Court held that where the

government's activities have created a taking of all use of

property, no subsequent action by the government can relieve it

of the duty to provide compensation for the period during which

the taking was effective. Such “temporary takings” are also

entitled to just compensation.

Therefore, we find that the Court of Claims did not err in

awarding compensation. The court properly found that there was

a temporary taking concerning part of the land and a permanent

taking concerning the remaining portion of the land. Thus, the

court's order awarding compensation complied with MCL

281.721(4); MSA 18.595(71)\4) in that it found a temporary

taking concerning part of the land that could be developed under

the Goga Plan.

Next, defendant contends that the trial court erred in finding

MCL 281.721(4); MSA 18.595(71)\4) unconstitutional in that

it violated the Just Compensation Clauses of the Fifth

Amendment and Const 1963, art 10, § 2.

The Court of Claims did not err in finding that § 21(4) is

unconstitutional because it limits plaintiffs’ recovery to twice the

State equalized value of the property taken. Both the federal and

State constitutions provide that private property cannot be taken

for public use without just compensation. Just compensation

Appendix B-13

means the full monetary equivalent of the property taken. A/mota

Farmers Elevator & Warehouse Co v United States. 409 U.S.

470, 473, 93 S. Ct. 791; 35 L. Ed. 2d 1 (1973). Just compensa-

tion is that amount that places a property owner in a condition as

good as the owner would have been had the taking not occurred.

Id; Oakland Hills Development Corp v Lueders Drainage

District, 212 Mich. App. 284, 292-293; 537 N.W.2d 258 (1995).

The determination of the measure of just compensation for

a taking is a judicial, not a legislative, question. United States y

Sioux Nation of Indians, 448 U.S. 371, 417. n 30: 100 S. Ct

2716, 65 L. Ed. 2d 844 (1980), citing Monongahela Navigation

Co v United States, 148 U.S. 312, 327; 13 S. Ct. 622: 37 L. Ed.

463 (1893). Because the determination of the proper measure of

compensation for a taking is solely a judicial question, the

Legislature may not restrict the measure of just compensation in

a takings case. Baltimore & O R Co v United States. 298 US.

349, 368: 56 S. Ct. 797; 80 L. Ed. 1209 (1936). Thus. statutes

that set forth the compensation rate for a taking, such as MCL

281.721(4). MSA 18.595(71\4), are unconstitutional. See

Baltimore & O R Co, supra; Monongahela, supra.

Because MCL 281.721(4); MSA 18.595(71\4) mandates

the method of computing just compensation for a taking, the

Court of Claims correctly held that it is unconstitutional.

Last, defendant argues that the Court of Claims awarded

excessive damages for the taking. We disagree.

The purpose of just compensation is to put property owners

in as good a position as they would have been had their property

not been taken from them. Miller Bros. supra, p 685. The public

must not be enriched at the property owner's expense. but

neither should the property owner be enriched at the public's

expense. /d There is no formula or artificial measure of damages

applicable to all condemnation cases. The amount of damages to

be recovered by the property owner is generally left to the

Appendix B-14

discretion of the trier of fact after consideration of the evidence

presented. Poirier v Grand Blanc Twp (After Remand),

192 Mich. App. 539, 543; 481 N.W.2d 762 (1992).

In avoiding a windfall to the property owner, the nature of

the taking must be considered. Where there is a temporary

taking, the just compensation awarded must reflect its temporary

nature. Miller Bros, supra, p 687. This Court has recognized that

money dainages are recoverable for a temporary, unconstitu-

tional taking. Courts should engage in a flexible approach in

determining compensation for a temporary taking. Some factors

to consider are: rental return, option price, interest on lost profit.

before and after valuation, and benefit to the government.

Poirer, supra, pp 544-545.

The Court of Claims awarded $3,245,256 and interest of

$1.574.522.60 for the property taken. The Court of Claims also

awarded $459.400 for the temporary taking of the property. The

court's award of damages is based on the evidence presented

and does not appear to be an abuse of discretion. In this case,

because of the difficulty in determining the fair market value of

the land with the use restrictions placed on it, the court appears

to have engaged in a flexible approach in computing damages.

Defendant has not shown that the Court of Claims’ computation

of damages was erroneous or excessive.

Affirmed

/s/ Kathleen Jansen

/s/ Clifford W. Taylor

/s/ James P. Noecker

Appendix C-1]

Filed 9/9/93

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

K & K CONSTRUCTION, INC..

J.F.K. COMPANY, and RESORTS

AND COMPANY, a Michigan

Corporation,

Plaintiffs.

vs Case No.: 88-12120-CM

HON. WILLIAM COLLETTE

THE MICHIGAN DEPART-

MENT OF NATURAL

RESOURCES and STATE OF

MICHIGAN.

Defendants.

ROBERT L. BUNTING (P-24212)

Attorney for Plaintiffs

P.O. Box 7

Oxford, MI 4837]

(313) 628-5150

KEVIN T. SMITH (P-32825)

Attorney for Defendants

Plaza One

3rd Floor

401 S. Washington Avenue

Lansing, MI 48913

ooo

Appendix C-2

FINAL JUDGMENT AND AWARD OF DAMAGES

TO PLAINTIFFS AGAINST DEFENDANTS DNR

AND STATE OF MICHIGAN AND AWARDING

COSTS AND ATTORNEY FEES

At a session of said Court held in the

City of Lansing, said County and State

PRESENT: HON.

WILLIAM COLLETTE

The Court being duly advised in the premises after trial on

the merits of the above entitled cause, submission.of briefs,

responsive briefs and reply briefs together with exhibits and

Stipulations and being persuaded thereby;

NOW, THEREFORE, IT IS HEREBY ORDERED AND

ADJUDGED that Plaintiffs are awarded judgment in that their

property interest have been condemned by the application of the

Wetlands Preservation Act and there has been both a complete

taking and interim taking entitling Plaintiffs to just compensation

accordingly.

IT IS FURTHER ORDERED AND ADJUDGED that the

Statutory limit on just compensation payable to owners of

property condemned is hereby declared unconstitutional and held

for naught as it is solely the province of the Court to determine

just compensation under the United States and Michigan

Constitutions.

IT IS FURTHER ORDERED AND ADJUDGED that the

Court recognizes from the pleadings, evidence and arguments

made in this case together with the various stipulations entered

into between the parties that good faith efforts were made to

resolve portions of the above entitled case which resulted in a

plan prepared that allowed for the limited commercial develop-

ment of some of the perimeter of Plaintiffs’ property which plan

Appendix C-3

is known as the “Goga Plan”. Defendants are now conceding to

Plaintiffs the right to develop and/or sell that limited portion of

the property which reduces the award to the Plaintiffs as not all

the property would be condemned while at the same time

fulfilling the intent of the Wetland Protection Act to minimize

the impact on future growth on a valuable resource. Plaintiffs

shall have the right to develop and/or sell the Goga Plan property

and a permit shall issue within 30 days therefore pursuant to

Exhibit ___ consistent with the Goga Plan and this Court retains

exclusive jurisdiction over any issues arising therefrom.

IT IS HEREBY ORDERED AND ADJUDGED that the

fair market value under a taking analysis awards plaintiffs

$5,941,181.00 for the entire parcel consisting of 52.67 acres

which total acreage and damage calculation is agreed upon by

the parties. This entire tract and award is reduced by the amount

of acreage in the Goga Plan agreed upon by the parties as 23.9

acres leaving a balance of 28.77 acres as the total acreage which

has been condemned by a takings by the Defendants, said

calculation agreed upon by the parties after reference to the

surveys of the property involved.

THEREFORE, IT IS FURTHER ORDERED AND

ADJUDGED that Plaintiffs award shall be reduced accordingly

and they shall recover the percentage of the $5,941,181.00

divided by the total acreage of 52.67 acres resulting in a net

award of $3,245,256.00 of the taken 28.77 acres of property by

condemnation, plus $1,574,522.60 in interest through June 30,

1993.

IT IS FURTHER ORDERED AND ADJUDGED that the

Court finds that Plaintiffs loss the use cf the “Goga”™ property for

several years back to November 12, 1988 which loss is deter-

mined to be an interim taking with a damage award based on the

testimony and evidence as $106,635.00 annually when adjusted

to the Goga property alone, a figure computed and agreed upon

as the proper computation by the parties. Therefore, Plaintiffs

are awarded an interim taking damage award of $459,400.00

Appendix C-4

including interest through June 30, 1993, on the interim taking

of the Goga Plan property for a total award of damages and

interest through June 30, 1993 of $5,279,178.00.

IT IS FURTHER ORDERED AND ADJUDGED that in

light on this Court’s determination that Defendants took and

must compensate Plaintiffs for the taking of 28.77 acres, title to

the 28.77 acres is vested in Defendants, subject to Plaintiffs’

right to use 5.359 acres of the 28.77 acre parcel for wetland

mitigation as set forth in the Goga Plan presented to the Court.

IT IS HEREBY ORDERED AND ADJUDGED that the

interior 28.77 acre property as described in Trial Exhibit A and

A-2 is conveyed pursuant to order of this Court and Circuit

Court Deed to Defendants as of November 12, 1988 subject to

the right of mitigation vested in Plaintiffs pursuant to the Goga

Plan. This judgment is deemed recordable in the chain of title

and Plaintiffs shall execute a Quit Claim Deed accordingly

conveying the interior 28.77 acres only with the right of

mitigation under the Goga Plan.

IT IS FURTHER ORDERED AND ADJUDGED that

Plaintiffs are awarded their costs in the amount of $10,075

which is awarded to Plaintiffs after review by opposing counsel

in addition to the award on damages against Defendants, State

of Michigan and DNR.

~ IT IS FURTHER ORDERED AND ADJUDGED that the

Court is cognizant that Plaintiffs retained their attorney under a

one-third contingency agreement should the matter proceed to

trial; the Court declines to award a one-third attorney fee in the

above entitled case given the status of current case law and

limits Plaintiffs award for attorney fees to reasonable attorney

fees under the Mediation Rule. The Court finds a reasonable fee

given the complexity of the case, diligence of counsel and

complexity of issues involved as the hourly rate of $185.00 an

hour for 380 hours which amount is based upon prior review by

opposing counsel since the date of the acceptance\rejection

Appendix C-5

period of mediation for a total award of $70,300.00 in attorney

fees sustained in this cause pursuant to the mediation rule and

awards the same as part of this judgment together with judgment

interest on the entire award excluding fees and costs running

from July 1, 1993 onward.

IT IS FURTHER ORDERED AND ADJUDGED that

Defendants’ Motion for Entry of Judgment, dated December 4.

1992, is denied.

IT IS FURTHER ORDERED AND ADJUDGED that while

both counsel have cooperated in referencing detailed exhibits

and surveys to accurately compute the acreage and damages

awarded by this Court, the Attorney General preserves all of its

appellate rights on the result reached by this Court.

/s/ WILLIAM E. COLLETTE

HONORABLE WILLIAM COLLETTE

APPROVED AS TO FORM

WITH NOTICE OF ENTRY WAIVED:

/s/ ROBERT L. BUNTING w/change pg 3°

ROBERT L. BUNTING (P-24212)

Attorney for Plaintiffs

/s/ KEVIN T. SMITH w/change on pg 3

KEVIN T. SMITH (P-32825)

Assistant Attorney General

Attorney for Defendants

' [Changes marked with bold and italics. ]

Appendix D-1

Filed 5/4/93

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

K & K CONSTRUCTION, INC., File No. 88-12120-

J.F.K. COMPANY, and RESORTS CM

AND COMPANY, a Michigan

corporation, Hon. William E.

Collette

Plaintiffs,

OPINION

V. AND ORDER

THE MICHIGAN DEPARTMENT

OF NATURAL RESOURCES AND

STATE OF MICHIGAN,

Defendants.

Previously, this Court determined that the property of

Plaintiffs has been condemned by the actions of the Defendants

in declaring a substantial portion of it to be a wetland protected

under the Goamaere-Anderson Wetland Protection Act, MCLA

281.701, et seg. This Court ruled that damages suffered by

Plaintiffs cannot exceed twice the state equalized evaluation

(SEV) pursuant to MCLA 281.721(4).

This Court also allowed the Defendants the option of

issuing a waiver of all or a portion of the designation in lieu of

compensation, pursuant to MCLA 281.721(3\C). The

following questions are presented for consideration by the Court

in this supplementary opinion.

Appendix D-2

1. Is MCLA 281.721(4) unconstitutional in that it limits

compensation for a taking to twice the SEV, rather than the fair

market value of the property?

2. May the Defendants issue a “waiver” for a portion of the

property and thus minimize the taking and resultant expense?

3. If the Court permits the partial waiver, what amount. if

any. will fairly compensate Plaintiffs for that portion of the

property actually taken?

4. Must Defendants compensate Plaintiffs for the time the

property now “waived” was “taken” under the original desig-

nation?

5. Are Plaintiffs entitled to mediation fees?

6. Are Plaintiffs entitled to interest?

IS MCLA 281.721(4) UNCONSTITUTIONAL IN

- THAT IT DOES NOT PROVIDE FOR

COMPENSATION EQUAL TO THE TRUE

VALUE OF THE PROPERTY TAKEN?

MCLA 281.721(4) provides in part that:

... the value of the property may not exceed that share

which the area in dispute occupies in the total parcel of

land, of the state equalized evaluation of the total

parcel, multiplied by 2, as determined by an inspection

of the most recent assessment roll of the township or

city in which the parcel is located.

Pursuant to this section, the Court limited the recovery of

the Plaintiffs to twice the SEV of the property. This amount is

substantially less than the fair market value of the parcel which

has been described as being one of the last available large

parcels of commercial real estate on M-59 in Oakland C ounty

Appendix D-3

Article V of the Bill of Rights provides that:

No person shall be . . . deprived of life, liberty, or

property without due process of law; nor shall private

property be taken for public use. without just

compensation.

The Constitution of the State of Michigan also indicates in

Article X, Section 2, that:

Private property shall not be taken for public use

without just compensation therefore being first made

or secured . . .

The intent of the Bill of Rights and the Constitution is

unmistakable.

Just compensation . . . must put the party injured in as

good position as he would have been if the injury had

not occurred. It should neither enrich the individual at

the expense of the public nor the public at the expense

of the individual. State Highway Commissioner v.

Eilender, 362 Mich. 697, 699 (1961) citing /n Re John

C. Lodge Highway, 340 Mich. 254 (1954).

This concept has been rigidly followed in the law of the

State of Michigan and is embroidered into the Michigan

Standard Jury Instructions in CJI2d 90.05.

In order to adequately comply with these mandates, we

must use the actual fair market value of the property as the true

measure of its value. Since only that measure can place the

owner in as good a position as he would have been had there

been no taking. Consumers Power Co. v. Allegan State Bank,

20 Mich. App. 720 (1969).

The government that, through its legislative power, decides

to take a parcel of property cannot, through that same power.

determine the fair compensation for its taking. See Baltimore

Appendix D-4

and O.R. Co. v. United States, 298 U.S. 349 (1935):

Monongahela Navigation Co. v. United States, 148 U.S. 310

(1892). Only a court of law standing separate and apart from the

executive and legislative branches of government should and

does have the power constitutionally to fix “just compensation”

for a taking. Consumers Power Co. v. Allegan State Bank.

supra.

In drafting the Wetland Protection Act, the legislature was

cognizant that many competing interests were at stake. This is

evident from the attempts made to address the concerns of both

the owners of potentially-affected property and the necessity of

protecting our environment. Previously, this Court has noted a

concern with the failure of the government to properly inventory

potential wetland areas as required by MCLA 281.719. This

section. if properly implemented, requires the Department of

Natural Resources (DNR) to inventory on a county by county

basis all of the potentially affected lands in the state. Under

MCLA 281.720, each property owner with affected property

would be notified of the possible change in the status of their

property and the possible change in status would be printed on

the tax bill. Obviously, this action would substantially affect the

SEV of the subject property and an owner could demand a

reduction in the taxes paid on the property.

Property owners in the position of the Plaintiffs in this case

are faced with a dilemma. If they wish to institute a suit to have

the property condemned, they cannot ask to have their taxes

reduced because of the classification of the property as a

wetland. They are required under the Act to continue to pay

excessive taxes (in this case over $24,000 per year) while

attempting to recover something for their property. To place any

aggrieved party in this position is intolerable.

It is therefore the opinion of this Court that the limit on

“just compensation™ payable to the owners of property

condemned under MCLA 281.721(4) is unconstitutional.

Appendix D-5

CAN THE STATE MODIFY THE TAKING IN THIS CASE

TO ALLOW DEVELOPMENT OF SOME OF THE

PROPERTY AND THUS LIMIT THE AMOUNT OF

COMPENSATION DUE THE PLAINTIFFS?

During the lengthy history of this case, the parties in good

faith efforts to resolve the dispute had a plan prepared that

allowed for the development of some of the perimeter of the

property. This plan (known as the “Goga plan”) would have

required that some areas of the property delineated as wetlands

be destroyed. However, other areas would be added to the

wetland areas to offset this action.

Under MCLA 281.721(3\C), the Defendants are now

prepared to accept the Goga plan. This would allow use by the

Plaintiffs of some property for limited commercial development.

Of course there would need to be a reduction it the award to the

Plaintiffs, as not all of the property would be condemned. This

Court finds no objection to this approach and applauds the

Defendants for this action. One must remember that the intent

of the Wetland Protection Act is to minimize the impact of

future growth on a valuable resource. The obvious conflict

between these two highly necessary endeavors will continue

unless we use a rational approach to resolving the conflicts. The

testimony in this case showed that much of the property is a true

wetland. Other portions of the wetland are marginal at best

Thus, to allow the “squaring off of commercial lots on the

perimeters of the property by use of small portions of carefully

selected wetlands and the replacement of those with other

comparable land is in this Court's view within the spirit of the

law.

We must remember that the boundaries of a wetland, unlike

those of a highway right of way, are much less clearly defined

The Court believes that the legislative intent in this case is

harmonious with the law of eminent domain

Appendix D-6

Therefore, those portions of the property defined as being

part of the Goga plan may be exempted from the taking in this

case. Conversely, those portions of the “high lands” that were

to be added to the wetlands as an exchange shall be deemed

condemned.

Ill.

WHAT IS THE FAIR COMPENSATION

FOR THE ACREAGE TAKEN?

During trial, the testimony placed a fair market value of

$5,941,181 for the entire parcel. Consequently, Plaintiffs shall

recover the percentage of that figure computed by dividing the

acres taken by the total acreage of the parcel to reach a fair

compensation.

IV.

Plaintiff has lost the use of the “Goga™ property for several

years, going back to the time that this property was first declared

a wetland. There is no question that government has the right to

reduce the size of the parcel taken as noted above. However, it

would be unfair to allow the government to tie up the property

for such an extended time without some fair compensation

awarded. However, this compensation is limited to that portion

of the property not taken (the “Goga”™ property), since Plaintiffs

will be awarded interest and fair market value on the portion

actually condemned as a wetland. Thus, Plaintiffs shall recover

the monthly overhead for carrying the portion of the property,

i.€., imterest payments, taxes, and insurance; that is being

withheld from condemnation under the Goga plan. The Court is

hopeful that the parties can agree on this figure without need for

a further hearing. However, either side can ask for the Court's

assistance on this point, if desired.

Appendix D-7

MEDIATION FEES

This Court finds that mediation sanctions are available in

this case. If either party has met the proper requirements, they

may recover them.

Vi.

ARE PLAINTIFFS ENTITLED TO INTEREST?

This Court awards interest to the Plaintiffs on the portion of

the property condemned as a wetland from the date this lawsuit

was began. Interest on the “carrying charges” for the Goga

parcel shall run from the date of notice by the State of its intent

to elect that remedy. Plaintiffs are to prepare a judgment in

conformity with this Opinion.

/s/ William E. Collette

William E. Collette

Circuit Court Judge

Dated: 5/4/93

Appendix E-1

Filed 11/5/92

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

K & K CONSTRUCTION, INC..

J.F.K. COMPANY, and RESORTS

AND COMPANY, a Michigan

Corporation,

Plaintiffs.

vs File No.: 88-12120-CM

HON. WILLIAM I

THE MICHIGAN DEPART- COLLETTE

MENT OF NATURAL

RESOURCES and STATE OF OPINION

MICHIGAN. AND ORDER

Defendants.

INTRODUCTION

Plaintiffs, K & K Construction, Inc., J.F.K. Company, and

Resorts and Company, have sued the State of Michigan alleging

that certain property has been condemned because of its desig-

nation as a wetland. While there was some question in this

Court’s mind as to who the correct plaintiffs are, the parties have

Stipulated for purposes of this litigation that the (named)

Plaintiffs have standing to bring this suit. After a non-jury trial.

this matter was taken under advisement and briefs and exhibits

have been submitted and reviewed by this Court. Following is

this Court’s Opinion and Order.

FACTS

The property in this lawsuit is located on Highway M-59 in

Oakland County, just west of Telegraph Road. The total area of

the property being considered is about 82 acres. The Plaintiffs.

in varying combinations, are the owners of the affected property

that consists of four clearly defined parcels

Appendix E-2

Parcel One

Parcel One was originally purchased by Joseph Kosik and

several partners in 1976. The property was purchased for future

commercial development because of Mr. Kosik’s observations

that M-59 was going to become a busy thoroughfare over the

next several years. This property is the primary subject of this

lawsuit and contains about 55 acres of land.

In the 1980's, Mr. Kosik, his wife and J.F.K. Company (a

lumited partnership comprised of Mr. Kosik and his five child-

ren) became the sole owners of this parcel of property. Prior to

any of the parcel being designated as a wetland, some commer-

cial development of the property occurred with a Ram’s Hom

Restaurant constructed on a small piece of the property by

Mr. Kosik.

Before the inception of this lawsuit. Mr and Mrs. Kosik

executed a quit claim deed of their interest n Parcel A. This

recorded deed conveyed their interest in the property of J.F.K.

Company in anticipation of J.F.K. Company ottaining a substan-

tial mortgage on the property to pay the Kosiks for their interests

and to finance a C.J. Barrymore's restaurant on the property.

Mr. Kosik testified that J.F.K. Company wil be required to

reconvey an interest in the property back to the Kosiks if J.F.K.

Company ts unable to obtain the required financing.

Shortly after the above conveyance, the Plaintiffs, comply-

ing with the law, applied for a wetlands assessment from the

Michigan Department of Natural Resources. After a survey of

the property by a field agent, the DNR determined that, of the 55

acres of Parcel | approximately 27 acres lying at the very heart

of the property was a protected wetland as cefined under the

Goemaere-Anderson Wetland Protection Act, MCLA Sec-

tion 281.701, et seg. Accordingly, a permt to develop the

property was denied and this lingation followed.

Exhibit A ts an aerial survey of Parcel One, as well as

portions of Parcels Two. Three, and Fou. This exhibit

Appendix E-3

demonstrates that the wetland comprises approximately fifty

percent (50%) of Parcel One. As most often is the case. the

boundaries of the wetland are not uniform. The terrain is such

that large fingers of protected property run throughout the center

of the property, as well as other numerous irregular boundaries.

Parcel One is zoned C-2, which is commercial under the

Waterford Township zoning plan.

Parcel Two

Parcel Two is the contiguous parcel consisting of 16 acres

directly to the south of Parcel One. It was purchased under the

same arrangements as Parcel One and came into the joint owner-

ship of Mr. and Mrs. Kosik, and J.F.K. Company at the same

time as Parcel One. Title to this property belongs solely to

J.F.K. Company as a result of an irrevocable testamentary trust

created by Mr. Kosik and Mrs. Kosik well before this litigation

was commenced. This trust agreement cannot be altered by the

Kosiks. The property is zoned R-2, which is multiple family

residential. A review of Exhibit A shows that a large portion of

this parcel also consists of a wetland. The testimony confirmed

that a small lake is on this parcel as well.

Parcel Three

At some point, J.F.K. Company became the owner in

partnership with Resorts and Company (another Michigan part-

nership) of 9.34 acres south of, and contiguous with, Parcel 2.

This parcel is fronting to the west on North Oakland Boulevard.

These two entities have constructed apartment dwellings on this

property that are in use today. This property is zoned R-2. the

same as Parcel Two.

Parcel Four

J.F.K. Company also owns a 3.4 acre parcel of undeveloped

land at the southern border of Parcel 3 that is contiguous with

Parcel 3. This Court believes the zoning on this parcel is R-2.

Appendix E-4

DISCUSSION

“WHAT IS THE OVERALL SIZE OF THE PARCEL

TO BE CONSIDERED IN DETERMINING IF A

TAKING HAS OCCURRED IN THIS CASE?”

In a takings case under the Wetland Protection Act, the

Court must determine what effect the regulation has on the over-

all economic value and/or use of the subject property. In order

to make this evaluation, it is critical to define the area of land

that constitutes the affected parcel. Each factual situation must

be evaluated on its own merits.

The Plaintiffs have taken the position that this Court must

only consider the 27 acres that have been declared a wetland in

determining if a taking has occurred. They contend that the

Court must ignore the economic value of the balance of the

property and focus solely on the restricted acreage. Such is not

the case. The law is well established that, in determining if a

taking has occurred, the parcel as a whole must be considered.

Penn Central Transportation Co v New York, 438 US 104; 98S

Ct 2646; 57 L Ed 2d 631 (1978).

In Ciampitti v US, 22 Cl Ct 310 (1991), similar facts were

addressed:

“In the case of a land owner who owns both wetlands

and adjacent uplands, it would clearly be unrealistic to

focus exclusively on the wetlands, and ignore whatever

rights might remain in the uplands. If a governmental

entity required a buffer, for example, around a housing

development, a court would not entertain a separate

claim for the land dedicated to buffer. It would no

doubt take into consideration the extent to which the

whole parcel could be developed. Factors such as the

degree of contiguity, the dates of acquisition, the extent

to which the protected lands enhance the value of

remaining lands, and no doubt many others would

Appendix E-5

enter the calculus. The effect of a taking can obviously

be disguised if the property at issue is too broadly

defined. Conversely, a taking can appear to emerge if

the property is viewed too narrowly. The effort should

be to identify the parcel as realistically and fairly as

possible, given the entire factual and regulatory

environment.”

The Court noted that:

“The Supreme Court has ‘eschewed the development

of any set formula for identifying a ‘taking’ forbidden

by the Fifth Amendment, and have relied instead on ad

hoc, factual inquiries into the circumstances of each

particular case.’ Connolly v Pension Benefit Guar

Corp.. 475 US 211, 224, 106 S Ct 1018, 1026, 89 L Ed

166 (1986). To aid in this determination, certain

significant factors have been identified. One that is of

particular relevance is “[t]he economic impact of the

regulation on the claimant and, particularly, the extent

to which the regulation has interfered with distinct

investment-backed expectations . . .~ Penn Central

Transp, 438 US at 124, 98 S Ct at 2659.”

This Court concludes that we must look at more than just

the regulated area. The question presented here is: “How much

more?”

Defendant takes the position that the Court must include not

only all of Parcel One in the analysis, but also Parcels Two.

Three and Four. In support of this view, Defendant cites the fact

that J.F.K. Company has an ownership interest in all the parcels,

the parcels are contiguous, and Parcels Two, Three, and Four

have significant present or potential economic value apart from

the wetland areas.

In making a determination as to whether or not these three

parcels can be considered in making a taking analysis as to

Parcel One, this Court must follow the principals set forth in

Appendix E-6

Bevan v Braden Township, 438 Mich 385 (1991). In Bevan, the

Michigan Supreme Court ruled that two contiguous parcels of

property, owned by one person, with a unity of use were to be

considered as one parcel in a taking analysis.

After analyzing this case under the above factors, it is this

Court's opinion that there is not a unity of ownership between

Parcel One and Parcels Two, Three and Four for the reasons set

forth herein. While it is true that J.F.K. Company has an interest

in all four parcels of property, only Parcels Two and Four are

owned solely by J.F.K. Company or held for its benefit. Parcel

Three is owned jointly by the J.F.K. Company and Plaintiff

Resort and Company.

It is true that the title to Parcel One is currently in the name

of J.F.K. company. However. there is an equitable lien on the

title to the property in favor of Mr. and Mrs. Kosik. The uncon-

troverted testimony at trial was that title to this parcel was trans-

ferred to J.F.K. Company by quit-claim deed for the sole

purpose of obtaining mortgage financing. Mr. Kosik testified

further that a deed to reconvey title would be required of J.F.K.

Company if the financing could not be obtained. It is obvious

that there can be no unity of ownership with the other parcels

due to the different interests that have title or equitable interest

in Parcel One.

In analyzing the unity of use of the four parcels, one obvious

fact is clear. Parcel One has commercial zoning, while Parcels

Two, Three and Four are zoned residential. It is apparent that

parcels with differing zoning ordinarily have differing legal uses.

No evidence to the contrary was submitted, and this Court there-

fore finds no unity of use as to the four parcels.

While on the map all four parcels are contiguous with each

other, the fact that Parcel One has different zoning from the

other three parcels renders this factor less significant than it

might ordinarily be.

Appendix E-7

As noted above, applying the tests in Bevan, supra, to the

facts of this case, it is this Court’s opinion that Parcel One

should be considered as a separate parcel in assessing the

economic impact on the subject parcel due to the wetland desig-

nation.

“HAS THERE BEEN A TAKING

OF PARCEL ONE?”

In deciding if a taking has occurred, the Court must review

each case solely on its own merits. Penn Central Trans Co v

New York, supra. In making this determination, two general

lines of inquiry have been developed to guide the reviewing

Court. In Loveladies Harbor, Inc v US, 31 ERC 1848 (1990)

the Court noted:

“First, a taking can occur where the imposition of a

government regulation fails to substantially advance a

legitimate governmental interest . . . Second, a taking

can occur where the imposition of a governmental

regulation has the effect of depriving the owner’s land

of all economic value.” (citations omitted)

Obviously, we are not concerned in this case with the first

analysis since the preservation of wetland areas has been deter-

mined by the legislature to be of prime importance to the people

of Michigan. MCL Section 281.703.

In determining whether a government regulation so perva-

sively affects an owner's land to the extent that it is deprived of

all economic value so as to constitute a “taking,” the Appellate

Courts look to three factors:

1) The character of the government action:

2) The economic impact of the regulation on the claimant;

and

Appendix E-8

3) The extent to which the regulation has interfered with

reasonable investment-backed expectations.

Loveladies, supra, at 391, citing Keystone Bituminous Coal

Ass'n v DeBenedictus, 480 US 470, 495 (1987).

A. The Character of the Government Action.

The designation of property as a wetland regulates the

ability of an owner to use the property. Under the Wetland

Protection Act, certain activities are prohibited without a special

permit. These include:

. Placing fill;

b. Removal of soil or minerals:

c. Any use or development; and

. Draining of surface waters.

Such restrictions, much like zoning laws that regulate

building set backs, interfere with the ability to use property to

the fullest extent. However, such regulation does not constitute

a physical invasion or destruction of the property by government.

Much like the lawns we grow on the restricted set-back areas of

our residences, one is still free to enjoy many of the inherent

rights of ownership. These include, among others, walking on

the property, excluding others from it; hunting and fishing:

harvesting and so on.

Clearly, the government regulation in this case, standing

alone, does not so severely hamper the owners’ use of this

property as to constitute a total destruction or complete taking of

Plaintiffs’ property.

B. The Economic Impact on ihe Plaintiffs.

As pointed out above, the designated wetland area is an

extremely irregular-shaped piece, comprised of 27 acres, carved

out of the very heart of this property. The configuration of the

wetland creates shallow strips along the edges of the parcel

Appendix E-9

where it would be possible to build. With the setback

requirements of commercial property and the required parking.

very little of the remaining land, along the roadway will be lefi

for actual construction. The necessary act of evening off the

edges of the buildable property where it abuts the wetlands will

reduce the available acreage even more. The owners will be left

with narrow strips of prime frontage with no prospect for any

substantial economic development. While it is true that some

financial value will remain, this court finds that what little eco-

nomic value remains is but a small fraction of the economic

value the property would have if all of it could be developed.

This parcel is the last large commercial piece of property

remaining on M-59 in Waterford Township and was bought long

ago for investment purposes. This Court concludes from the

evidence presented that the property is essentially worthless as

commercial real estate.

C. The Extent That the Regulation Has Interfered with

Reasonable Investment-backed Expectations.

Unlike many cases, this property was purchased specifically

for commercial development in 1976. This was several years

prior to the passage of the Wetland Protection Act. As can best

be determined, this property has long been zoned and valued as

desirable commercial real estate by Mr. Kosik and everyone else.

including county and township government. The record dis-

closes that over $20,000 per year in taxes are paid on this

property. Over $2,455,000 has been invested in it since 1976

The evidence disclosed that, unlike many protected proper-

ties, this land is not a characteristic wetland. The testimony

indicates that heavy equipment has been driven all over it. It is

mowed regularly without any problems. Numerous test borings

done a Mr. Kosik’s directions indicated that much of the

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.