Appendix A — Kelly v. Tahoe Regional Planning Agency

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WILLIAM CODY KELLY, Trustee,

Under Trust Dated December 12, 1962,

Appellant/Cross-Respondent,

v.

TAHOE REGION# © PLANNING AGENCY,

Respondent/Cross-Appellant,

and

The State of California; The State of Nevada;

John K. Van De Kamp, Attorney General of the

State of California, and Frankie Sue Del Papa,

Attorney General of the State of Nevada,

Respondents.

No 22913.

Supreme Court of Nevada

July 8, 1993.

OPINION

PER CURIAM:

Appellant and cross-respondent William Cody Kelly

(“Kelly”) appeals the district court’s judgment concluding

that the Tahoe Regional Planning Agency land-use regula-

tions did not deprive him of all economically viable use of

his property and, therefore, did not effect a taking under the

Fifth and Fourteenth Amendments of the United States

Constitution requiring payment of just compensation. We

affirm the district court’s judgment.

In addition, respondent and _ cross-appeliant Tahoe

Regional Planning Agency (“TRPA”) cross-appeals the

district court’s judgment that a prior federal district court

decision confirming Kelly’s “deemed approved” status of

Uppaway Estates, including its excess land coverage

variance, also exempted Kelly from compliance with the

1987 Pian IPES regulations. We conclude that the district

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court properly confirmed that Uppaway Estates, including

the excess land coverage variance, was “deemed approved”

via the federal district court order; we, however, also con-

clude that the district court erred when it interpreted

“deemed approved” status to mean that Kelly was exempt

from compliance with all current TRPA land-use regulations

and that Kelly could commence building immediately. We

therefore, affirm in part and reverse in part.

The appeal and cross-appeal will be discussed in separate

sections of this opinion.

FACTS

BACKGROUND

Lake Tahoe Basin rests over 6,000 feet above sea level

and occupies approximately 320 square miles along the

Nevada-California border. Lake Tahoe, the focal point of the

basin, is “ultraoligotrophic,” extremely clear with low

concentrations of nutrients which support the growth of

water-clouding algae. Evidence indicates that until recently

Lake Tahoe had a 10,000-year history of near equilibrium in

the gain or loss of nutrients. Surface and subsurface flows

from Lake Tahoe’s numerous watersheds introduce nutrients

to Lake Tahoe. The amount of nutrients, especially nitrogen,

carried to the lake depends upon the soils, vegetation and

land-use within each watershed.

Impervious cover and surface disturbance of soil in the

Lake Tahoe Basin impede the soils natural function as a

medium for growth of vegetation and storage of nutrients.

Vegetation is responsible for removing nutrients, particularly

nitrogen, from precipitation, and therefore, plays an impor-

tant role in the Lake Tahoe Basin ecosystem. Absent vegeta-

tion, erosion increases sediment loads to Lake Tahoe, thus

storing nutrients in the lake rather than in the watershed

where they belong. In addition, impervious cover prevents

~% *

the infiltration of precipitation, which results in heightened

runoff.

Presently, Lake Tahoe is suffering an increase in algal

productivity and a decline in clarity due to an elevated load

of sediments and nutrients. As a result, Lake Tahoe and its

tributaries are experiencing a downward trend in water

quality. Sediment-caused disturbance of the lake’s natural

nutrient-loading equilibrium has resulted in an accelerated

eutrophication of its once-prestine waters: a decline in

annual average depth of visibility, a decline in water clarity,

and a corresponding increase in algae. As the fertility of the

system increases, Lake Tahoe is losing nearly half a meter

per year of transparency.

Appellant and cross-respondent William Cody Kelly owns

seven hilltop lots, the subject of this lawsuit, which overlook

Lake Tahoe at Glenbrook, Nevada. In 1974, in an attempt to

gain approval of the development of Kelly’s Hilltop lots, as

well as thirty-two additional lots on the forty-four acres at

Uppaway Estates (“Uppaway”), Kelly submitted to the

Douglas County Planning Commission a_ subdivision

“information report,” which the Planning Commission

subsequently approved. Thereafter, the Douglas County

Board of County Commissioners approved the tentative map

and issued an administrative permit to allow land coverage in

excess of that permitted by Tahoe Regional Planning Agency

(“TRPA”) Land Capability Districts. Kelly then took the

tentative map and administrative permit to TRPA Governing

Board for review. The Governing Board held three separate

, Uppaway Estates was a thirty-nine lot planned unit development to

be constructed in three phases, of which Lots 33 through 39

(“Hilltop Lots”) comprised Phase III. Kelly described the develop-

ment in the information report as a “sited parcel land sale program.”

Most of Uppaway Estates was considered “high hazard,” Class 1

capability, and limited to one percent land coverage. Kelly proposed

a “variance” of approximately seven percent coverage in the one

percent areas, including the Hilltop lots.

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hearings, and the ensuing vote resulted in a lack of dual

majority,” which, under the language of the 1969 Tahoe

Regional Planning Agency Compact (“1969 Compact”) at

that time, resulted in approval.

In 1975, TRPA filed suit in the United States District

Court in an attempt to annul the Douglas County administra-

tive permit. The United States District court “deemed

approved” the Douglas County administrative permit in a

Court Memorandum and Order. In October 1975, Federal

District Judge Bruce R. Thompson confirmed this “deemed

approved” status in a memorandum and order, in Tahoe Reg.

Planning Agency v. Douglas County, et. al., Civil No.

R-75-130. In the memorandum and order, Judge Thompson

deemed the Uppaway Estates project, including land cover-

age in excess of the maximum amount for the property,

approved by Douglas County through the issuance of a

variance.

* When the TRPA Governing Board reviewed the Uppaway Estates

project, it received five negative votes from the California delegates,

two negative votes and two affirmative votes from the Nevada

delegates. One Nevada delegate was absent.

> Under the 1969 Compact, TRPA enacted a land use regulatory

scheme requiring that local governments issue permits for projects in

accordance with TRPA’s regional standards in order to conserve

resources and maintain an orderly development of the land. Further,

the 1969 Compact required TRPA to review permits for major

developments and variances, and TRPA’s authority to approve or

deny a permit was contingent on its obtaining a dual-majority vote

of the Governing Board. The TRPA Governing Board consisted of

ten members, five from each state, and a majority vote of the

members present representing each state was “required to take action

with respect to any matter.” If TRPA did not “take final action” on a

project within sixty days after the application was delivered to it, the

project was “deemed approved.” Hence, if a project received the

approval of a majority of one state’s delegation to the governing

board but the denial by the other, there would be no “action,” and

the project would be “deemed approved.”

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The TRPA Compact was amended in 1980,* and two

plans, the 1984 Plan and the 1987 Plan, have since been

implemented in an effort to comply with the 1980 Compact.

Since the 1980 Compact, Kelly has been unable to gain

TRPA approval for the development of his Hilltop lots.

On or about Juy 20, 1981, Robert Lahmann (“Lahmann”),

vice-president of Uppaway Development Company, con-

tacted TRPA with proposed modifications to the Hilltop.

Lahmann proposed moving various lots, eliminating some

lots and converting the rail access system (funicular) to the

Hilltop into a roadway.

On October 29, 1981, TRPA specifically notified Kelly of

the fact that the Hilltop portion of Uppaway had been rated

as “in need of further consideration.” TRPA evaluated

Uppaway and determined that Phases I and II were

4 In December 1980, Nevada and California, with Congressional]

approval, extensively amended the 1969 Compact. The amended

compact (“1980 Compact”; Pub.L. 96-551, 94 Stat. 3233 (1980);

NRS 277.200; Cal.Gov.Code § 66801) dramatically changed

TRPA’s composition, functions and duties. Prescribing a governing

board consisting of fourteen members, the 1980 Compact enacted

stricter project-review provisions.

The 1980 Compact mandated that TRPA approve all projects, and

no project could be approved unless found to comply with the

regional plan and the ordinances of TRPA. In addition, the new

compact mandated that TRPA adopt environmental thresholds in

order to protect Lake Tahoe. On August 25, 1981, TRPA Ordinance

81-5 went into effect implementing the Lake Tahoe Regional Water

Quality Management Pian. Under the terms of this ordinance, TRPA

now required a “case-by-case” system of review of single-family

development on land within the State of Nevada. Ordinance 81-5

permitted case-by-case review of lots within subdivisions classified

as “adequate” or “potentially adequate.” The ordinance required a

team of experts to evaluate all subdivisions to determine their

eligibility for either classification. Subdivisions classified as “in

need of further consideration,” those lacking substantial construction

of roads, utilities or drainage structures, were not eligible for the

case-by-case program.

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“potentially adequate” and that Phase III was rated as being

“in need of further consideration” because the subdivision

improvements as to Phase III had not yet been constructed.

TRPA also advised Kelly of the method for appeal of the

determination. On December 23, 1981, TRPA notified

Lahmann by letter that it had reviewed his proposal and that

the proposal would have to be submitted in the form of an

application to modify the Uppaway map and improvement

plans.

On January 21, 1982, TRPA notified Kelly again of the

Phase III evaluation and again advised Kelly of the appeal

procedure. These notifications advised Kelly that he could

not proceed with a case-by-case review of the Hilltop lots

until Phase III received a rating of “adequate” or “potentially

adequate.”

During 1982, TRPA adopted its Environmental Threshold

Carrying Capacities as mandated by the 1980 Compact.

Included in those thresholds were standards for water

quality, both in Lake Tahoe and in its feeder streams, and for

soil conservation, including the amount of impervious

surface that could be created without stress upon the

environment.

On July 27, 1982, Kelly submitted applications for

case-by-case review concerning Lots 33 through 38, in-

clusive, but never filed an appeal concerning Phase III's

rating of “in need of further consideration.” During the fail

of 1982, numerous applications had been filed in the case-

by-case review office. On December 30, 1982, Douglas

County issued residential building permits for Lots 33

through 38. Each building permit, however, was subject to

the explicit condition that the construction plans be approved

by TRPA.

On January 24, 1983, TRPA notified Kelly that on-site

inspection of the lots would have to be delayed due to the

heavy snowfall that year. TRPA continued ils attempts to

complete the case-by-case review of the lots during the

Sen ee eR SIO Se ee eS Oa

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summer of 1983. On July 21, 1983, TRPA offered to work

specifically with Kelly in an attempt to obtain an inspection

of the subdivision during the summer of 1983 and to try to

gain a potentially adequate rating.

On August 26, 1983, however, TRPA Governing Board

adopted a moratorium preventing further evaluations of

case-by-case applications, pending the adoption of an

amended regional plan mandated by the 1980 Compact.>

TRPA did advise Kelly that it would attempt to complete

immediately processing of the Hilltop lots’ case-by-case

applications as soon as the Governing Board lifted the

moratorium.

In October 1983, Kelly’s contractor completed the off-site

improvements and access road to the Hilltop lots. On

December 2, 1983, Kelly’s counsel advised him that, as a

result of a conversation with TRPA staff, applications for the

Hilltop lots were ready to be processed, but would be re-

quired to await TRPA’s adoption of the amended regional

plan.

In 1987, TRPA Governing Board developed a new plan in

an attempt to integrate the adopted environmental threshold

carrying capacities with the policies of the 1980 Compact.

> On April 26, 1984, TRPA adopted an amended regional plan

(“1984 Plan”) in an attempt to comply with the mandates of the 1980

Compact. The 1984 Plan provided that completed case-by-case

applications on file before August 26, 1983, would be processed

under the old procedures. On April 26, 1984, the very day the TRPA

adopted the 1984 Plan, the State of California sued TRPA, alleging

the plan did not comply with the 1980 Compact. On or about May 1,

1984, the federal district court agreed and issued a restraining order

prohibiting TRPA from approving projects under the 1984 Plan. On

August 9, 1984, the district court preliminarily enjoined TRPA from

approving any projects within the basin, subject to certain limited

exceptions not applicable in this case. The Ninth Circuit Court of

Appeals affirmed the preliminary injunction on appeal. People of

California v. Tahoe Reg. Planning Agency, 766 F.2d 1308 (1985).

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In July 1987, the new plan (“1987 Plan”) went into effect. In

an effort to regulate the uncontrolled development that would

likely ensure the permanent loss of Lake Tahoe to

eutrophication in the near future, TRPA Governing Board

developed the Individual Parcel Evaluation System (“IPES”).

TRPA incorporated this new IPES system in the 1987 Plan.

IPES satisfied the 1980 Compact requirements and was

designed to direct residential development first to those areas

most suitable for it, in accordance with the environmental

thresholds and other considerations such as_ infrastructure

- and progress toward accomplishing water quality improve-

ment programs.

Under IPES, TRPA sends a team of experts to evaluate

each vacant single family parcel, primarily for erosion

hazard and runoff potential. Each evaluated lot receives a

score, and then, in each of the five counties around the Tahoe

Basin, each such lot is ranked against its counterparts.

Basted upon a Statistical formula, TRPA then establishes an

initial minimum score. Those lots with scores above that

minimum were eligible for development, subject to other

conditions not at issue in this case; on the other hand those

with scores “below the line” were required to wait for |

eligibility. The numerical level defining top-ranked parcels |

may be lowered in any local jurisdiction on an annual

basis.° On or about January 1, 1989, TRPA Governing |

|

|

Board established 725 as the initial, numerical score, above

which are the top-ranked parcels eligible to receive building

permits.

Under the 1987 Plan, Kelly was required to have his

Hilltop lots evaluated under the 1987 Plan, which included

. Lowering of the line is dependent upon findings by TRPA, inter

alia, that the jurisdiction has a monitoring program in place pursuant

to Chapter 32 of the TRPA Code, that demonstrable progress is

being made there on capital improvements for water quality and that

there is a satisfactory level of compliance with conditions upon

project approvals in the jurisdiction.

3

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IPES. Kelly’s Hilltop lots were evaluated under IPES’ and

Lot 36 received a score above 725. Since Lot 36 received a

passing score, it became eligible immediately.

Prior to the commencement of the trial, Kelly appealed

the remaining scores. Under the appeal procedure, Kelly’s

lots with scores below 725 were reevaluated under IPES by a

new team, and new scores were issued. The appeal process

completed during the course of the trial, resulted in all but

four of Kelly’s lots becoming immediately eligible.®

On July 24, 1987, Kelly filed suit for “Specific Per-

formance, Inverse Condemnation, Declaratory, Injunctive

and Monetary Relief and Punitive Damages” against respon-

dent and cross-appellant TRPA, respondent State of Nevada

(“Nevada”), and respondent State of California (“Califor-

nia”). Kelly alleged seven claims for relief.” On August

7 yp ’ , ;

Kelly’s lots received the following scores:

Lot No. Score

7 De 679

| Ferre:

35 . 629

ee ate 758

7 Pe ee 615

. See 635

S The re-evaluated scores were as follows:

Lot No. Score

ee re 725

ee 694

737

Be + eexnveus 702

er 693

’ Kelly alleged the following: 1) temporary taking of the lots since

February 26, 1981, without compensation in violation of unspecified

constitutional provisions; 2) estoppel against TRPA “from denying

approval” of building permits for the lots; 3) vested rights as a

result of assurances by TRPA staff and an agreement, dated July 22,

1982; 4) permanent taking of the lots without just compensation in

violation of the Fifth and Fourteenth Amendments to the United

(continued)

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23, 1989, the district court granted in part and denied in part

defendants’ motions for summary judgment. In February

1990, Kelly proceeded to trial against TRPA on the two

remaining issues: takings and substantive due process. After

a five-week trial, the district court concluded the following

in a tripartite ruling: 1) TRPA based the IPES system on

solid scientific principles and rationally and evenly applied

it, 2) TRPA’s 1987 Plan and TRPA Code had not deprived

Kelly of his property without compensation; and 3) although

Kelly does not possess a vested right for building approvals

for the Hilltop lots, only routine aspects of the 1987 Plan and

TRPA Code apply to Kelly because of Uppaway’s “deemed

approved” status. In addition, the district court “ratified and

confirmed” the legal conclusions in its order partially

granting and partially denying motions for summary judg-

ment, except as they were inconsistent with the decision.

On July 13, 1990, the district court filed its 128-page

Decision.'° On November 5, 1991, the district court filed

(fn. continued)

States Constitution and Article 1, Section 8, of the Nevada State

Constitution, resuliing from TRPA’s 1984 and 1987 Plans and

implementing ecvdimances’ 5) deprivation of economic use of

Kelly’s property without due process of law in violation of said

constitutional previsyoms, 6) denial of equal protection of the laws

as a result of the ewactmment of TRPA’s 1987 Plan and implementing

ordinances; and 7) violation of the Federal Civil Rights Act, 42

U.S.C. Section 1982.

10 On February 20, 1991, the district court also filed a decision on

post-trial motions which, with one exception, denied both Kelly’s

and defendants’ motions for attorney’s fees. The district court did

allow California $7,500.00 because of Kelly’s “hide and seek

tactics” with respect to an expert witness. Although the district

court denied Kelly’s request for costs, it granted defendants’ similar

request, but limited those costs to costs in defense of the IPES

system. On November 5, 1991, after further hearings, the district

court entered an explanatory order concerning the award of costs and

Uppaway land coverage, in which, inter alia, the district court

awarded defendants costs in the sum of $241,836.69.

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its findings of fact, conclusions of law and judgment consis-

tent with its Decision.

THE KELLY APPEAL

On direct appeal, Kelly’s principal argument is that the

district court erred in concluding that TRPA land-use regula-

tions did not deprive him of all economically viable use of

his property and therefore, did not effect a taking under the

Fifth’! or Fourteenth’? Amendments of the United States

Constitution requiring payment of just compensation.

Specifically, Kelly contends that the evidence does not

Support the district court’s conclusion that “[n]either the

1987 Regional Plan for the Lake Tahoe Basin nor the code of

Ordinances, nor any predecessor plan or ordinance, have

[sic] deprived Mr. Kelly of his interest in property in a

manner requiring compensation under the Fifth and Four-

teenth Amendments to the United States Constitution.”

“The district court’s findings of fact will not be set aside

unless clearly erroneous.” Burrows v. Progressive Casualty

Ins., 107 Nev. 779, 782, 820 P.2d 748, 750 (1991) (citing

Hermann v. Varco-Pruden Buildings, 106 Nev. 564, 566, 796

P.2d 590, 592 (1990)). Further, “[w]here the trial court,

Sitting without a jury, makes a determination predicated upon

conflicting evidence, that determination will not be disturbed

on appeal where supported by substantial evidence.” Trident

Construction Corp. v. West Electric, Inc., 105 Nev. 423, 427,

776 P.2d 1239, 1242 (1989) (citing Dickstein v. Williams, 93

Nev. 605, 608, 571 P.2d 1169, 1171 (1977)).

Il uno 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.” U.S. Const. amend. V.

12

“No state shall ... deprive any person of life liberty or property

without due process of law... .” U.S. Cost. amend. XIV.

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Before we can determine whether the district court

properly concluded that TRPA regulations did not constitute

a taking, this court must first examine whether the district

court erred in making an “ad hoc factual inquiry” regarding

Kelly’s takings claim.

Kelly contends that the district court erred in making an

ad hoc factual inquiry in light of the “late-breaking”

Supreme Court decision Lucas v. S. Carolina Coastal Coun-

cil, _ _U.S. __, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1920), and

that Lucas is “dispositive” of this issue because the facts in

Lucas allegedly “mirror those at hand.” Kelly argues that he

has been deprived of all economic use of his property and,

therefore, is entitled to “categorical” compensation, regard-

less of the state’s interests.

As Kelly points out, in June 1992, the United States

Supreme Court published Lucas, a decision that held, under

certain circumstances, an ad hoc factual inquiry was not

required and a landowner could “categorically” receive

payment as compensation for a taking in violation of the

Fifth and Fourteenth Amendments. /d. at _, 112 S.Ct. at

2893. The Supreme Court stated the general rule regarding

“takings” violations: The “Fifth Amendment is violated

when a land-use regulation ‘does not substantially advance

legitimate state interests or denies an owner economically

viable use of his land.”” /d. at _, 112 S.Ct. at 2894

(quoting Agins v. Tiburon, 447 U.S. 255, 260, 100 S.Ct.

2138, 2141, 65 L.Ed.2d 106 (1980)). The Court went on to

say that “when the owner of real property has been called

upon the sacrifice all 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 _, 112

S.Ct. at 2895 (footnote omitted).

The Supreme Court then discussed the history of

“regulatory takings” jurisprudence. The Court noted that

there is no set formula’” for determining whether a

“ «6

regulatory action constitutes taking, and that in the past, the

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Court has preferred to “ ‘engagie] in ... essentially ad hoc,

factual inquiries.’” Jd. at _, 112 S.Ct. at 2893 (quoting

Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124,

98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978)). The Court,

however, did point out two situations where regulatory

actions are “compensable without case-specific inquiry into

the public interest advanced in support of the restraint”: 1)

“regulations that compel the property owner to suffer a

physical ‘invasion’ of his property ... no matter how minute

the intrusion, and no matter now weighty the public purpose

behind it .... [; and 2)] where regulation[s] den[y] all

economically beneficial or productive use of land.” /d. __

U.S. at__, 112 S.Ct. at 2893.

We conclude that Lucas is inapplicable because the two

cases, Lucas and the instant case, are clearly distinguishable;

13 between this case and Lucas are far less

significant than the differences. In Lucas, the Act flatly

the similarities

prohibited any permanent structures on Lucas’ residential

lots; in Kelly’s case, TRPA regulations do not flatly prohibit

development. TRPA regulations temporarily limit, rather

than forever preclude, development in environmentally

sensitive areas: if a particular parcel meets the minimum

IPES standard, that parcel becomes immediately eligible for

development. Moreover, Kelly’s Lots 35 and 36 have each

received IPES scores high enough to make them immediately

eligible for development, and Lots 33, 34, 37 and 38 may be

eligible in the future when TRPA exercises its statutorily

approved authority and lowers the IPES standard. We,

therefore, conclude that Lucas is not controlling in this case

and that the district court properly conducted the required ad

13 Both parties purchased undeveloped land with the intent to

develop it further and for eventual resale. Also, in both cases, the

states enacted the regulations in order to protect environmentally

sensitive areas, and the regulations were enacted after the purchase

of the property. Lastly, in both cases, the states enacted the regula-

tions in order to advance a legitimate state interest.

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hoc factual inquiry weighing the state’s interest against

Kelly’s interests.

In light of the fat that Lucas is inapplicable to the case at

hand, this court must then determine whether the district

court erred in concluding that TRPA regulations did not

effect a “temporary taking” of Kelly’s Hilltop lots. In

Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S.

470, 495, 107 S.Ct. 1232, 1247, 94 L.Ed.2d 472 (1987), the

Supreme Court noted that it has been unable to develop a set

formula for the resolution of takings claims and, therefore, it

has mandated an “ad hoc factual inquiry” process to resolve

takings issues. /d. at 495, 107 S.Ct. at 1247. Under this

inquiry, this court must evaluate 1) whether the district court

properly concluded that TRPA regulations substantially

advanced a legitimate government interest and 2) whether

that government interest outweighed Kelly’s private interest

in developing the Hilltop lots.

First, the district court properly concluded that TRPA

regulations substantially advanced a legitimate government

interest: the protection of Lake Tahoe Basin — a national

treasure. In its findings of fact, the district court noted that

the 1969 Compact’s stated purpose was “to maintain an

equilibrium between the region’s natural endowment and its

manmade environment” and to establish an “areawide

planning agency [TRPA] with power to adopt and enforce a

regional plan of resource conservation and orderly develop-

ment.” The district court concluded that TRPA regulations

are a “valid exercise of police power.” We conclude that

such governmental purposes have long been recognized as

legitimate governmental interests. See Agins. v. Tiburon,

447 U.S. 255, 261, 100 S.Ct. 2138, 2141, 65 L.Ed.2d 106

(1980); Penn Cent. Transp. Co. v. New York City, 438 U.S.

104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978).

Second, the district court, after weighing the competing

interests of both Kelly and TRPA, properly determined that

TRPA land-use regulations did not deprive Kelly of all

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economically viable use of his property. See Agins, 447

U.S.A at 260-61, 100 S.Ct. at 2141 (“Although no precise

rule determines when property has been taken ... the

question necessarily requires a weighing of private and

public interests.”) In order to determine whether Kelly has

been deprived of all economically viable use of his property,

three essential factors must be considered in the weighing

process: 1) economic impact of land-use regulations, which

includes a valuation analysis; 2) interference of land-use

regulations with landowner’s reasonable investment-backed

expectations, and 3) character of government action.

Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S.

470, 495, 107 S.Ct. 1232, 1247, 94 L.Ed.2d 472 (1987)

(quoting Hodel v. Virginia Surface Mining and Recl. Assn.,

452 U.S. 264, 294-95, 101 S.Ct. 2352, 2369-70, 69 L.Ed.2d 1

(1981)).

When considering the first factor, we note that Kelly's

lots remain valuable assets. !4 Kelly’s own appraiser

testified to the fact that the Hilltop lots maintained substan-

tial value during the period of time in question. Further-

more, Uppaway must be viewed as a whole, not as thirty-nine

individual lots when determining whether Kelly has been

deprived of all economic use. See Penn Cent. Transp, Co. v.

New York City, 438 U.S. 104, 130, 98 S.Ct. 2646, 2662, 57

L.Ed.2d 631 (1978) (“Takings jurisprudence does not divide

a single parcel into discrete segments and attempt to deter-

mine whether rights in a particular segment have been

entirely abrogated.”). When viewed as a whole, we conclude

that Kelly has not been deprived of all economic use, only

the seven Hilltop lots have been affected by TRPA’s regula-

tions, not the entire Uppaway subdivision. Moreover, at this

point in time, the current IPES standard only precludes four

of the seven lots from being eligible for development, and

a During oral argument, Kelly’s counsel estimated the value of the

Hilltop lots to be between two and four million dollars.

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those lots are expected to receive approval within the next

few years. !>

When considering the second factor, Kelly’s reasonable

investment-backed expectations have been satisfied. At the

time Kelly purchased Uppaway Estates in 1966, he had

adequate notice that his development plans might be

frustrated. At the time of the land purchase, the Lake Tahoe

Regional Planning Commission had published the Report of

the Lake Tahoe Joint Study Committee, and it discussed

California amd Nevada's concerns over rapid growth in the

Lake Tahoe Basin and the need for land-use planning regula-

tions. Moreover, Kelly’s financial expectations have also

been met because he purchased the original estate for

$500,000.00, lived in the main house for nearly twenty years

and then sold the main house alone for $1,100,000.00. Kelly

also developed and sold most, if not all, of the parcels, with

the exception of the seven Hilltop lots, yielding him a

substantial profit e

When considering the third factor, the district court

properly found that the actions of TRPA were not only for

the public benefit, but for Kelly’s benefit as well. Specifi-

cally, the district court stated in its decision that “every

single one of Mr. Kelly’s lots will eventually diminish in

value if Lake Tahoe is despoiled. IPES is a burden, surely,

but it also conveys significant personal benefits to each

landowner it serves.”

In weighing these three factors, we conclude that the

district court properly determined that TRPA can postpone

1S TRPA regulations contain a provision that allows the IPES

“cut-off” level to be lowered on an annual basis which, if the IPES

“cut-off”? number was lowered, the remaining three lots would

receive building approval.

. During oral argument, Kelly’s counsel admitted that Kelly had

already received approximately 5.6 million dollars from prior sales

within Uppaway.

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building in critical areas for a “reasonable period of time” as

long as the “benefit received by the property from the

ordinances is direct and substantial and the burden imposed

is proportional.” Further, there was substantial evidence to

support the district court’s conclusion that TRPA regulations,

past or present, did not “deprive [ | Mr. Kelly of his interest

in property in a manner requiring compensation.” We,

therefore, will not disturb the district court’s determination

on appeal. Trident Construction Corp. v. West Electric, Inc.,

105 Nev. 423, 427, 776 P.2d 1239, 1241 (1989).

We have considered Kelly’s other contentions and con-

clude that they also lack merit.

THE TRPA’S CROSS APPEAL

TRPA cross appeals and argues that the district court

erred when it determined that the federal district court's

order granting Kelly “deemed approved” status!’ of

Uppaway Estates exempted Kelly from compliance with the

1987 Plan IPES regulations. Specifically, TRPA argues that

the district court erred in concluding that Kelly “does not

have to obtain an allocation under Chapter 33 of TRPA

ordinances for [the Hilltop] lots” and that there is “no legal

impediment to Mr. Kelly preventing him from proceeding

immediately to build or sell his seven (7) hilltop lots.”

The underlying question for this court to decide on the

“deemed approved” issue is whether, in light of the federal

district court decision, Uppaway Estates could be subjected

1? The federal district court order regarding the status of Kelly’s

Uppway project stated the following in pertinent part: In the present

case, the tentative map [including the variance for land coverage in

excess of the maximum allowed for the property] for Uppaways [sic]

Estates was approved by defendant agencies [Douglas County] and

was submitted to TRPA for action. No action was taken within sixty

days and it is deemed approved. (Emphasis added.)

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to subsequent regulations governing aspects of timing of

construction, such as the 1987 Plan’s IPES system. The

district court answered the question negatively. We disagree.

First, a brief review of the federal district court order is

necessary. Judge Thompson held in his order that the

tentative subdivision map for Uppaway Estates was “deemed

approved” under Article VI(k) of the 1969 Compact. Judge

Thompson found that Kelly’s project was “deemed ap-

proved” as a matter of law because TRPA Governing Board

had failed to attain a “dual-majority vote” for approval or

denial under Article III(g). Judge Thompson relied on

Younger v. Tahoe Reg. Planning Agency, 516 F.2d 215 (9th

Cir. 1975), cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46

L.Ed.2d 97 (1975), and observed that in light of Younger,

TRPA board’s vote on Kelly’s project “constituted no action

by TRPA and brought into operation the provisions of Article

VI(k) of the [1969] Compact with the effect that the proposal

was deemed approved.”

When interpreting the meaning of “deemed approved,”

this court is cognizant of the policy implications of such a

decision. TRPA implemented the IPES regulation scheme as

a means to address equitably the pressing demand to develop

thousands of single-family lots in a lake basin suffering

rapidly diminishing environmental quality. IPES directs

development to the areas most able to withstand it in an

attempt to attain and maintain environmental threshold

carrying capacities. Essentially, IPES determines “what”

lots may be built on, “where” those lots may be located,

“how” a developer may distribute land coverage, and most

importantly, “when” those lots may be eligible for develop-

ment. We conclude that a district court cannot ignore the

environmental concerns of TRPA and cannot reject IPES out

of hand. The Lake Tahoe Basin appears to be in an environ-

mental tailspin which will eventually destroy it permanently

unless preventative measures can be implemented and

enforced immediately. Further, if Kelly is not required to

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follow the IPES regulatory scheme, that decision could cause

irreparable harm to the Basin because all other landowners in

Kelly’s position, those whose permits were approved prior to

the implementation of the IPES system, would be allowed to

develop their land immediately. If this court allows this

decision to stand, the development of less-than-ideal lots

could precipitate the degradation of the water quality of Lake

Tahoe and Lake Tahoe Basin’s natural beauty.

In conclusion, the district court properly determined that

Uppaway Estates, including its excess land coverage

variance, was “deemed approved” via Judge Thompson’s

federal district court order. The district court, however,

erred when it interpreted “deemed approved” status to mean

that Kelly was exempt form Chapter 33 of TRPA Ordinances,

that he was exempt from all non-routine requirements of the

1987 Plan and that Kelly could commence building im-

mediately. We conclude that the federal district court order

that “deemed approved” Uppaway Estates as a matter of law

only referred to “where” (plat map approval with all appro-

priate designations) and “how” (approval of the amount of

land coverage for each parcel), not to “when” Kelly can

commence building on his lots. Judge Thompson’s order did

not address “when” the lots could be developed, and we

conclude that this question can only be answered in light of

the 1980 Compact including the current IPES standards. We,

therefore, affirm the “deemed approved” status of Uppaway

Estates, but reverse the district court’s conclusion that Kelly

“does not have to obtain an allocation under Chapter 33 of

TRPA ordinances for [the Hilltop] lots” and that there is “no

legal impediment to Mr. Kelly preventing him from proceed-

ing immediately to build or sell his seven (7) hilltop lots.”

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CONCLUSION

With respect to appellant Kelly’s appeal, we affirm the

district court’s judgment in all respects; and with respect to

TRPA’s cross-appeal, we reverse the trial court’s judgment-

exempting Kelly from compliance with the 1987 Plan IPES

regulations.

18 ty February 1993, TRPA moved to strike Appendix B from

Kelly’s reply brief. Appendix B is the minutes of a September 22,

1992, TRPA Governing Board Meeting that demonstrate that TRPA

had not lowered the IPES lot line since 1987. In turn, Kelly filed an

opposition and motion for this court to take judicial notice of the

contents of Appendix B. We grant TRPA’s motion to strike Appen-

dix B. Goldman v. Nevada Comm’n on Judicial Discipline, 108

Nev. 251, 272 n. 20, 830 P.2d 107, 121 n. 20 (1992) (“[O]ur review

is properly confined to the record made and considered ....”); see

also In Re Marriage of Holder, 137 Ii!.App.3d 596, 91 Ill.Dec. 926,

931, 484 N.E.2d 485, 490 (1985) (Appellate courts should not use

judicial notice to expand scope of review where matters subject of

judicial notice were “matters which were highly disputed at trial and

not properly part of the record on appeal.”)