Petition for Writ of Certiorari — K&K Construction Construction, Inc. v. Michigan Department of Environmental Quality (No. 06-1071)

Supreme Court brief2006

Ask Donna

What actually matters in this document.

Text

I Ou SANA | ms A ‘ iS

961071 JAN 2 9 2007

OFFICE OF THE CLERK

Jn The

Supreme Court of the Anited States

K&K CONSTRUCTION, INC., AND

J.F.K. INVESTMENT COMPANY, L.L.C.,

Petitioners,

Vv.

THE MICHIGAN DEPARTMENT OF

ENVIRONMENTAL QUALITY AND

STATE OF MICHIGAN,

Respondents.

On Petition for Writ of Certiorari to

the Michigan Supreme Court

PETITION FOR A WRIT OF CERTIORARI

with Appendix

o—

* Robert L. Bunting Robert Charles Davis

ATTORNEY AT LAW ATTORNEY AT LAW

P.O. Box 7 20383 Hall Road

Oxford, MI 48371 Macomb, MI 48044

248-628-5150 586-263-9500

* Counsel of Record

Counsel for Petitioners Co-Counsel for Petitioners

January, 2007

LEGAL ADVANTAGE @ 432 Walnut Street © Cincinnati, OH 45202

(800) 581-2252

If.

QUESTIONS PRESENTED FOR REVIEW

Whether the Michigan Court of Appeals erred when

it ruled that if the regulation at issue is

“widespread”, then the impacted property owner

must show the “functional equivalent” of a full

~physical invasion to sustain an actionable regulatory

taking, thus violating the settled Balancing Test rule

of law in Penn Central Transportation Company v.

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

L.Ed.2d 631 (1978).

Whether the Michigan Court of Appeals erred when

it ruled that the character of the government’s action

did not weigh in favor of a taking because the

regulatory action provided a “reciprocity of

advantage” which does not single out the Plaintiffs

even though the statutory scheme of the regulation

expressly allows just compensation for a taking.

PARTIES TO PROCEEDING

Petitioner

K & K Construction, Inc., and J.F.K. Investment

Company, L.L.C.

Respondents

The Michigan Department of Environmental

Quality and State Of Michigan.’

' J.F.K. Investment Company, L.L.C. is successor in

interest to J.F.K. Company, and Resorts and Company, a

Michigan corporation.

> When this case started, the Michigan Department of

Environmental Quality had the title Michigan Department

of Natural Resources, referred to herein as the “DNR”. The

original Defendants were the State of Michigan and the

DNR. The Defendants are now the State of Michigan and

the Michigan Department of Environmental Quality

(collectively “Defendants’’).

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW .............0......... i

PARED FP Fe ovcevisnccccercsrnccoesvecesevornaineusiinsn il

Res Ce. SaaS Sat ie) sanrsesncecnitectecnnsonrigunstncenceiaaieabedediol iil

CPE Fs FIRE EE ettertitin tien eeemcinninaanente 7

PETITION FOR WRIT OF CERTIORARI ....0.0.........2e l

Fe SS OF eicintatecsncvnveniascnishineneiaiendeabsiatammabsiatieion 2

ABs Cir FUR 8 PING weiss cncnsnscccsinntintigcenresniavivevennatiots 5

CONSTITUTIONAL AND STATUTORY

Ae EO CIE ED iiitsiccntlecevtisrntentconeiaiienl 6

EP SEE A BUOY i sctevniviccndcwnsieevcisnedaciparcbeninbeans 7

ARGUMENT SUPPORTING

PEATEs CE FG FOIE vaerenssrecseceserveensvacicsrrnentinnen 13

I. The Michigan Court of Appeals’

Opinion Wholly Contradicts This

Court’s Opinion in Penn Central and

Its Progeny Including Lingle v.

Chevron, 544 U.S. 528; 125 S.Ct.

2074; 161 L.Ed.2d. 876 (2005)

Thereby Destroying the Penn

Central Balancing Test in Michigan........... 13

iil

Il. This Court Is Asked To Provide a

Resolution to the Unsettled

Definition of “Character” of Action

Within the Penn Central Balancing

Ill. | The Question Presented Is Important......... 29

IV. The Decision Of The Michigan

Court Of Appeals Is Erroneous................:. 29

Pe A API cciniscsnsiciniiicihaceubegenivenbiniipneeshaniinaistciianiaidiuiuins 30

APPENDIX

TABLE OF AUTHORITIES

CASES

Armstrong v. U.S.,

364 U.S. 40, 80 S.Ct. 1563,

WL BE2e TESOL GI verrcsnsniseraisvensedsnnsnnven

First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, California,

482 U.S. 304, 107 S.Ct. 2378,

FE ESR BIO IP vik tvcsscosvsssesisdiasescivns

Florida Rock Industries, Inc. v. United States,

OF SA, 28 OFF cates dataenenrcsicinteasoieons

K & K Construction, Inc., J.F.K. Company,

and Resorts and Company v. Department of

Natural Resources,

217 Mich. App. 56,

S51 Ni W2d 413 (1995) ooo cco coseccscsersonseess

K & K Construction, Inc., and J.F_K.

Investment Company, LLC v. Department

of Environmental Quality,

267 Mich. App. 523,

FOS NW 26 365 (2005S) cccsecvsscsrsvecssases |, aw tte Bhs Fas

14, 20, 21, 24

PAGE

K & K Construction, Inc., J.F.K. Company,

Resorts and Company v. Michigan

Department of Natural Resources,

454 Mich. 903,

Be 1G Oe ae Fe CET i wsiencdsinetvcctiticatcctlnaseciencaiinatia 2

K & K Construction, Inc., J.F.K. Company,

and Resorts and Company v. Department

of Natural Resources,

456 Mich. 570,

FE Ae EE CAE hist daleisiceasbseannddtiaiaaa 2

K & K Construction, Inc., and J.F_K.

Investment Company, L.L.C. v.

Department of Environmental Quality,

475 Mich. 856,

713 N.W.2d 268 (2006)................... 1, 3, 4, 5, 12, 20

K & K Construction, Inc., and JFK.

Investment Company, L.L.C. v.

Department of Environmental Quality,

477 Mich. 919,

FE TOW Ae FPR CROOOD cvscseessssverencersnnsecanin 43. 82

K & K Construction Inc., et al. v. Michigan

Department of Natural Resources, et al.,

525 U.S. 1034, 119 S.Ct. 577,

Aes ee PE OU ica scincecsassascerscnerervinnnienieied

K & K Construction, Inc., et al. .v. Michigan

Department of Natural Resources, et al.,

525 U.S. 819, 119 S.Ct. 60,

BAe Sante OF Cr OI tesencsssccctsteceneonnscbicncenapeiens 3, 10

Lingle v. Chevron,

544 U.S. 528, 125 S.Ct. 2074,

161 L.Ed.2d 876 (2005)................. 13, 15, 16, 19, 28

Loretto v. Teleprompter Manhattan

CATV Corporation,

458 U.S. 419, 102 S.Ct. 3164,

Fe Te de HE CED wihcenanecsnictdccctniceeereniniciebunts 14

Lucas v. South Carolina Coastal Council,

505 U.S. 1003, 112 S.Ct. 2886,

120 L.Ed.2d 798 (1992)..................000- 13, 15, 16, 18

Palazzolo v. Rhode Island,

533 U.S. 606, 121 S.Ct. 2448,

Se Gi Fe CE ih cerrccasscetnhicoicnincaiinn 27, 28

Penn Central Transportation Company

v. New York City,

438 U.S. 104, 98 S.Ct. 2646,

$7 L.BG.20 G31 (1GTB) in. .20ccceceseceses i, 10, 11, 14-20,

22, 26-29

Pennsylvania v. Mahon,

260 U.S. 393, 43 S.Ct. 158,

7g ro gk ss 5 PR eeoren 19, 24, 25

Vil

STATUTES

SEUSS A. Bet. CNicvinicowinsiee 5.

ete Foe We USE y | Pe mmmeuelerancemermlre wun rtees her ait 22

os Te | iy, SARs mA EN bee Fue 6

St S| Es | a emt Sd CRE Spm oo LIES, 26

OTA SIA POI cient ee 6

DCN, BO DOIG si issesisiinscnnalica aac cee 22, 26, 27

OTHER AUTHORITIES

U.S. Constitution,

ot TEIN SORE TON Pees oR 6, 8, 10, 12, 14,

17, 22, 24, 26, 27

Fried, Modern Liberty And The

Limits of Government

(New York: W.W. Norton & Company, 2007) ................. 25

Vill

PETITION FOR WRIT OF CERTIORARI

On Petition for Writ of Certiorari to the United

States Supreme Court, K & K Construction, Inc., J.F.K.

Company and Resorts And Company (“Plaintiffs”) pray

that a Writ of Certiorari be issued to review the decision

entered by the Michigan Court of Appeals and the Denial

of Discretionary Review by the Michigan Supreme Court.

K & K Construction, Inc., and J.F_K. Investment Company,

L.L.C. v. Department of Environmental Quality, 475 Mich.

856, 713 N.W.2d 268 (May 17, 2006), K & K Construction,

Inc., and J.F.K. Investment Company, L.L.C. v.

Department of Environmental Quality, 477 Mich. 919, 722

N.W.2d 794 (October 31, 2006) and K & K Construction,

Inc., and J.F.K. Investment Company, L.L.C. v.

Department of Environmental Quality, 267 Mich. App.

523, 705 N.W.2d 365 (2005)

OPINIONS BELOW

The Court of Claims’ Opinion and Order dated

November 2, 1992 finding a compensable taking. (Court of

Claims Opinion and Order, Apx NI—N16).

; The Court of Claims’ Second Opinion and Order

dated May 4, 1993 finding a compensable taking. (Court of

Claims Opinion and Order, Apx M1-M11).

The Court of Claims’ Judgment dated September 8,

1993 of $5,279,178 in favor of Plaintiffs in an amount of

$5,279,178. (Court of Claims Opinion and Order, Apx LI-

L7).

The Michigan Court of Appeals’ Opinion dated

June 4, 1996 affirming the Court of Claims’ finding of a

compensable taking. (K&K Construction, Inc., J.F.K.

Company, and Resorts and Company v. Department of

Natural Resources, 217 Mich. App. 56, 551 N.W.2d 413

(1996), Apx K1-K33).

The Michigan Supreme Court’s Order granting

application for leave to appeal. (K&K Construction, Inc.,

J.FL.K. Company, Resorts and Company v. Michigan

Department of Natural Resources, 454 Mich. 903, 562

N.W.2d 788 (1997), Apx J1-J3).

The Michigan Supreme Court’s Opinion dated

March 24, 1998 reversing the Michigan Court of Appeals

and remanding to the Court of Claims on defined remand

issues. (K&K Construction, Inc., J.F.K. Company, and

Resorts and Company v. Department of Natural Resources,

456 Mich. 570, 575 N.W.2d 531 (1998), Apx [1-136).

This United States Supreme Court’s denial of the

Plaintiffs’ Petition for Writ of Certiorarn. (K & K

Construction, Inc., et al., v. Michigan Department of

Natural Resources et al., 525 U.S. 819, 119 S.Ct. 60, 142

L.Ed.2d 47 (1998), Apx H1-H2).

This United States Supreme Court’s denial of the

Plaintiffs’ Motion for Rehearing. (K & K Construction,

Inc., et al., v. Michigan Department of Natural Resources

et al., 525 U.S. 1034, 119 S.Ct. 577, 142 L.Ed.2d 481

(1998), Apx Gl).

The Court of Claims’ Opinion and Order dated May

24, 2002 finding a compensable taking after tnal on the

remand. (Court of Claims Opinion and Order, Apx F1-F9).

The Court of Claims’ Judgment dated September

30, 2002 for the Plaintiffs. (Court of Claims Judgment, Apx

E1-E4).

The Michigan Court of Appeals’ Opinion dated July

26, 2005 reversing the Court of Claims. (K & K

Construction, Inc., and J.F_.K. Investment Company, LLC v.

Department of Environmental Quality, 267 Mich. App.

523, 705 N.W.2d 365 (July 26,2005), Apx D1-D63).

The Michigan Court of Appeals’ Order Dated

September 16, 2005 denying Plaintiffs’ Motion for

Rehearing. (Court of Appeals Order, Apx C1).

The Michigan Supreme Court’s Order dated May

17, 2006 denying discretionary review. ier ae

Construction, Inc., and J.F.K. Investment Company, L.L.C.

v. Department of Environmental Quality, 475 Mich. 856,

713 N.W.2d 268 (May 17, 2006), Apx B1-B2).

The Michigan Supreme Court’s Order dated

October 31, 2006 denying Plaintiffs’ Motion for Rehearing.

(K & K Construction, Inc., and J.F.K. Investment

Company, L.L.C. v. Department of Environmental Quality,

477 Mich. 919, 722 N.W.2d 794 (October 31, 2006), Apx

Al-A2).

BASIS OF JURISDICTION

The Michigan Court of Appeals’ Order reversing

the trial Court of Claims’ finding of a compensable taking

is dated July 26, 2005. (K & K Construction, Inc., and

J.F.K. Investment Company, LLC v. Department of

Environmental Quality, 267 Mich. App. 523, 705 N.W.2d

365 (July 26, 2005), Apx D1-D63). The Order of the

Michigan Supreme Court denying the Plaintiffs’

Application for Leave is dated May 17, 2006. (K & K

Construction, Inc., and J.F.K. Investment Company, L.L.C.

v. Department of Environmental Quality, 475 Mich. 856,

713 N.W.2d 268 (May 17, 2006), Apx B1-B2). The Order

of the Michigan Supreme Court denying the Plaintiffs’

Motion for Reconsideration is dated October 31, 2006. (K

& K Construction, Inc., and J.F.K. Investment Company,

L.L.C. v. Department of Environmental Quality, 477 Mich.

919, 722 N.W.2d 794 (October 31, 2006), Apx Al-A2).

The jurisdiction of this Court is invoked under 28

U.S.C. Sec. 1257(a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Fifth Amendment to the United States

Constitution provides: “No person shall be held to answer

for a capital, or otherwise infamous crime, unless on a

presentment or indictment of a “rand Jury, except in cases

arising in the land or naval forces, or in the Militia, when in

actual service in time of War or public danger; nor shall

any person be subject for the same offence to be twice put

in jeopardy of life or limb; nor shall be compelled in any

criminal case to be a witness against himself, nor be

deprived of life, liberty, or property, without due process of

law; nor shall private property be taken for public use,

without just compensation.” (United States Constitution

Amendment V.)

The Goemaere-Anderson Wetland Protection Act,

MCL 281.701 et. seq. (MCL 281.701 ect. seq., Apx QI-

Q56) was repealed and later reenacted as Part 303 of the

Natural Resources and Environmental Protection Act —

MCL 324.30301 et. seq.. (“Wetland Protection Act”)

(MCL 324.30301 et. seq. , Apx R1-R46).

STATEMENT OF THE CASE

A. BACKGROUND

l. In 1988, the Plaintiffs started a defined

development of four contiguous parcels of property in

Waterford Township, Oakland County, Michigan.

(“Property”) In January of 1988, the DNR wrote an

official letter to the Plaintiffs saying there are regulated

wetlands within the Property. (Letter, Apx P1-P2). The

DNR letter did not define the location of any wetlands.

The DNR letter stated the need for a DNR Permit before

constructing “anything” anywhere on the Property. The

DNR letter referred to a map saying it was approximating

the wetlands, but the DNR letter failed to even provide any

such map.

y 3 On May 9, 1988, Waterford Township

issued a Cease-and-Desist Order because it was informed

by the DNR that there were wetlands “within the parcel”.

(Cease and Desist Order, Apx O11). The Waterford

Township letter referred the Plaintiffs to the DNR saying

until a DNR Permit is obtained, no work is allowed on the

Property.

3. The Plaintiffs, at the request of the DNR and

with input of the DNR, submitted engineered plans. The

* The Property was made up of four parcels: parcel 1, parcel

2, parcel 3 and parcel 4.

DNR summarily denied the plans for development on any

of the Property.

4. On December 29, 1988, the Plaintiffs filed

suit in the Court of Claims seeking compensation under the

Taking Clause of the Fifth Amendment of the United States

Constitution and Michigan Constitution. After a full trial,

the Court of Claims found a taking of all of parcel | of the

Property and awarded Plaintiffs the amount of five million

nine hundred forty-one thousand dollars ($5,941,000.00)

plus interest, attorney fees and costs under the Michigan

Mediation Rule.

5, Defendants then, on their own initiative and

without input from the Plaintiffs, requested from the trial

Court of Claims an opportunity to “mitigate”. The

Defendants now said the Plaintiffs could have limited

development on the Property pursuant to the Goga Plan

which was an engineered plan submitted by Plaintiffs. The

Goga Plan was a compromise and fully engineered

development plan submitted by the Plaintiffs but previously

flatly denied by the DNR. The Court of Claims then ruled

to incorporate the mitigation into the judgment and ruled to

reduce the net takings money award by $2,237,000.00 to

the Plaintiffs.‘

“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.” (Court

of Claims Opinion and Order, Apx L2).

6. After the “reduced” judgment was entered,

the Defendants then, on September 27, 1993, filed a blanket

appeal on the entire judgment, including an appeal of the

mitigation the Defendants sought, obtained and agreed to

under the Goga Plan.

rf On June 4, 1996, the Michigan Court of

Appeals “unanimously” affirmed the Court of Claims’

‘This is after the Trial Court ruled that the SEV limitation

found in the wetland statute, as designed by the Michigan

legislature, was an unconstitutional legislative provision

unlawfully limiting just compensation. This ruling by the

trial court was never upset on any of the appeals, including

the appeal to the Michigan Supreme Court. The Trial

Courts original net award was $5,941,i181.00. The Final

Judgment of the Trial Court, however, was a reduced net

award of $3,245,256.00 when the DNR mitigated under the

Statute, plus $1,574,522.60 in stipulated interest and

$459,400.00 interim takings for a total of $5,279,178.00

was ultimately awarded pursuant to this Trial.

Judgment in favor of the Plaintiffs, found that a taking had

occurred within the meaning of the Fifth Amendment and

found that the Plaintiffs were entitled to just compensation.

“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.” (K&K Construction, Inc.,

J.F.K. Company, and Resorts and Company

v. Department of Natural Resources, 217

Mich. App 56, 58, 551 N.W.2d 413 (1996),

Apx K27). |

8. On July 2, 1996, the Defendants appealed to

the Michigan Supreme Court and the Michigan Supreme

Court reversed and remanded the case back to the Court of

Claims with very defined and limited remand instructions

for trial.

9. On October 5, 1998, this United States

Supreme Court denied the Plaintiffs’ Petition for Writ of

Certioran. (K & K Construction, Inc., et al., v. Michigan

Department of Natural Resources et al., 525 U.S. 819, 119

S.Ct. 60, 142 L.Ed.2d 47 (1998), Apx H1).

10. On May 24, 2002, the Court of Claims, after

another full trial, rendered its Opinion and Order on the

binding remand issues. In addressing the first remand

issue, the Court of Claims ruled factuaily that parcel three

should be included in the denominator parcel. (Court of

Claims Opinion and Order, Apx F1-F9). In addressing the

second remand issue, the Court of Claims ruled that, after

applying the Penn Central Transportation Company v. New

York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631

(1978) “Balancing Test” to the testimony and evidence

presented, there is a taking entitling Plaintiffs to just

compensation. (Court of Claims Opinion and Order, Apx

F1-F8).

11. | On September 30, 2002, the Court of Claims

issued a judgment in favor of the Plaintiffs in the amount of

$16,486,228.00, which includes substantial statutory

interest given the time since filing the Complaint as

allowed by Michigan law. (Court of Claims Judgment,

Apx EI1-E4). On October 21, 2002, the Defendants

appealed to the Michigan Court of Appeals.

12. On July 26, 2005, the Michigan Court of

Appeals issued an Opinion which reversed the Judgment

for the Plaintiffs and, without any remand or additional

trial, entered full Judgment for the Defendants saying there

could be no takings at all as a matter of law. (K & K

Construction, Inc., and J.F.K. Investment Company, LLC v

Department of Environmental Quality, 267 Mich. App.

523, 705 N.W.2d 365 (July 26, 2005), Apx D1-D63).

> The Plaintiffs filed a Cross-Appeal from the Judgment

entered on September 30, 2002 with regard to the Trial

Court using a low and legislatively controlled statutory

interest calculation and not an actual investment loss

interest based on uncontroverted proofs at trial offered by

the Plaintiffs.

13. On August 15, 2005, the Plaintiffs filed a

_ Motion for Rehearing to the Michigan Court of Appeals.

On September 16, 2005, the Michigan Court of Appeals

denied the Plaintiffs’ Motion for Rehearing. (Court of

Appeals Order, Apx C1).

14. On May 17, 2006, the Michigan Supreme

Court issued an Order denying the Plaintiffs’ Application

for Leave to Appeal. (K & K Construction, Inc., and J.F.K.

Investment Company, L.L.C. v. Department of

Environmental Quality, 475 Mich. 856, 713 N.W.2d 268

(May 17, 2006), Apx B1-B2).

15. On June 7, 2006, the Plaintiffs timely filed a

Motion for Reconsideration with the Michigan Supreme

Court on the basis that Michigan by its published opinion

would now require the equivalent of a full physical

invasion of property before a regulatory taking is actionable

and that there could never exist, in reality, a takings claim

in the face of a reciprocity of advantage which the Court of

Appeals invoked as a legal basis to eliminate 5"

Amendment efficacy all together. On October 31, 2006,

the Michigan Supreme Court issued an Order denying the

Plaintiffs’ Motion for Reconsideration. (K & K

Construction, Inc., and J.F.K. Investment Company, L.L.C.

v. Department of Environmental Quality, 477 Mich. 919,

722 N.W.2d 794 (October 31, 2006), Apx Al-A2)

16. This serves as the Plaintiffs’ Petition for

Writ of Certiorari to this Court.

ARGUMENTS SUPPORTING

ALLOWANCE OF THE WRIT

I. The Michigan Court of Appeals’ Opinion

Wholly Contradicts this Court’s Opinion in

Penn Central and Its Progeny Including Lingle v.

Chevron, 544 U.S. 528, 125 S.Ct. 2074, 161

L.Ed.2d. 876 (2005) Thereby Destroying the

Penn Central Balancing Test In Michigan.

The Michigan Court of Appeals’ published

Opinion flatly contradicts this Court’s Opinion in Penn

Central and its progeny including Lucas v. South Carolina

Coastal Council, 505 U.S. 1003, 112 S.Ct. 2886, 120

L.Ed.2d 798 (1992) and Lingle v. Chevron,544 U.S. 528,

125 S.Ct. 2074, 161 L.Ed.2d 876 (2005). According to this

Court, the Penn Central Balancing Test is an ad hoc factual

“balance” of three factors: 1.) economic impact of the

regulation, 2.) investment backed expectations and 3.)

character of government action. Under the Michigan Court

of Appeals’ decision, where there is a “widespread”

regulation at issue, a regulatory taking in Michigan is now

only possible when the economic impact and_ the

interference with distinct investment-backed expectations

are the “functional equivalent” of a “physical invasion”.

Thus, there is no Penn Central Balancing Test in Michigan.

This is current precedent in Michigan.

“Where, as here, the regulation serves an

important public interest and is widespread

and ubiquitous, we conclude that, to sustain

a regulatory takings claim, a plaintiff must

prove that the economic impact and the

extent to which the regulation has interfered

with distinct investment-backed

expectations are the functional equivalent

of a physical invasion by the government

of the property in question.” (K & K

Construction, Inc., and J.F.K. Investment

Company, LLC v. Department’ of

Environmental Quality, 267 Mich. App.

523, 553; 705 NW2d 365 (July 26, 2005),

Apx D17). (Emphasis Added)

This Court has always ruled and consistently

confirmed that a regulatory taking can be established by the

application of the Penn Central Balancing Test. In 2005,

this Court ruled that binding precedents first provide two

categories of regulatory action that establish a per se

taking: a permanent physical invasion and regulations

that completely deprive an owner of all economically

beneficial use of their property.

“Our precedents stake out two categories of

regulatory action that generally will be

deemed per se _ takings for Fifth

Amendment purposes. First, where

government requires an owner to suffer a

permanent physical invasion of her

property-however minor-it must provide just

compensation. See Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419, 102

S.Ct. 3164, 73 L.Ed.2d 868 (1982) (state law

requiring landlords to permit cable

companies to install cable facilities in

apartment buildings effected a taking). A

second categorical rule applies to

regulations that completely deprive an

owner of “all economically beneficial

us[e]” of her property. Lucas, 505 U.S.., at

1019, 112 S.Ct. 2886 (emphasis in original).

We held in Lucas that the government must

pay just compensation for such “total

' regulatory, takings,” cxcept to the extent

that “background principles of nuisance and

property law” independently restrict the

owner's intended use of the property. /d., at

1026-1032, 112 S.Ct. 2886.” (Lingle v.

Chevron USA Inc., 544 U.S. 528, 125 S.Ct.

2074, 2081 (2005).) (Emphasis Added)

Next, and outside of these two “narrow” categories, this

Court again confirmed that regulatory takings are also

viable by application of the Penn Central Balancing Test.

{4} a these two relatively

narrow categories (and the special context

of land-use exactions discussed below, see

infra, at 2085-2087), regulatory takings

challenges are governed by the standards set

forth in Penn Central Transp. Co. v. New

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

L.Ed.2d 631 (1978).” (Lingle v. Chevron

USA Inc., 544 U.S. 528, 125 S.Ct. 2074,

2081 (2005).) (Emphasis Added)

* * .

“Today we correct course. We hold that

the “substantially advances” formula is not a

valid takings test, and indeed conclude that

it has no proper place in our takings

jurisprudence. In so doing, we reaffirm that

a plaintiff seeking to challenge a

government regulation as an uncompensated

taking of private property may procced

under one of the other theories discussed

above-by alleging a “physical” taking, a

Lucas-type “total regulatory taking,” a Penn

Central taking, or a land-use exaction

violating the standards set forth in Nollan

and Dolan.” (Lingle v. Chevron USA Inc.,

544 US. 528, 125 S.Ct. 2074, 2087 (2005).)

Here, the case was narrowly and specifically

remanded to the Trial Court of Claims by the Michigan

Supreme Court to determine the denominator parcel and to

then apply this Court’s Penn Central Balancing Test. The

Trial Court of Claims conducted a new trial on the remand,

weighed the evidence, factually set the denominator parcel

and then found a compensable taking based on the totality

of the trial record. On appeal, and subject to a clear error

standard of review, the Michigan Court of Appeals wholly

rejected the Penn Central Balancing Test, the elaborate and

largely uncontroverted record adduced, and then substituted

its own test and record for a non-categorical regulatory

taking.

The Michigan Court of Appeals ruled that where

there is a “widespread regulation”, a regulatory taking is

only possible where the economic impact and interference

with investment backed expectations are equivalent to a full

physical invasion. This is disquieting and syllogistically

flawed because if there is the equivalent of a full physical

invasion or a total deprivation of all economically

beneficial use, then there is a per se categorical taking

under the precedent of this Court and there is no need to

apply the Penn Central Balancing Test at all!

In effect, the Michigan Court of Appeals has

elevated the character of government action prong to a

level where Fifth Amendment remedies cease to exist.

Pursuant to the Michigan Court of Appeals ruling, if there

isn’t a per se categorical taking and the character of

government action is the application of a “widespread”

regulation, a court is not required to even consider the

economic impact of the regulation or the investment backed

expectations. These other two prongs of the Penn Central

Balancing Test: investment backed expectation and the

economic impact of the regulation, are effectively

destroyed and rendered impotent legal factors. Through its

now published ruling, the Michigan Court of Appeals has

rendered the Penn Central Balancing Test non-existent in

Michigan under the guise of this new absolute standard and

by invoking the legal fiction of reciprocity of advantage

when the character of the government action could not

remotely provide any rational of logical legal basis for the

same. °

° With the Michigan Court of Appeals’ current ruling, the

possibility of recovering for a temporary regulatory taking

As stated by this Court, the Penn Central

Balancing Test is an “ad hoc factual inquiry” requiring an

analysis of the case facts as a whole with particular

significance on the economic impact of the regulation, the

impact on investment backed expectations and the

character of government action. (See: Penn Central

Transportation Company v. New York City, 438 U.S. 104,

124; 98 S.Ct. 2646; 57 L.Ed.2d 631 (1978).)

However, this Court has made it clear that a

landowner does not have to show a complete deprivation to

establish a regulatory taking.

“FN 8 Justice STEVENS criticizes the

"deprivation of all economically 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 2919. 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

as provided for in First English Evangelical Lutheran

Church of Glendale v. County of Los Angeles, 482 US 304,

107 S.Ct. 2378, 96 L.Ed.2d 250 (1987) is similarly

destroyed.

regulation has interfered with distinct

investment-backed expectations" are

keenly relevant to takings analysis

generally. Penn Central Transportation Co.

v. New York City, 438 U.S. 104, 124, 98

S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978). “

(Lucas v. South Carolina Coastal Council,

505 U.S. 1003, 1019, 112 S.Ct. 2886, 120

L.Ed.2d 798 (1992).) (Emphasis Added)

Since this Court’s ruling over 80 years ago in Pennsylvania

v. Mahon, 260 U.S. 393, 43 S.Ct. 159, 67 L.Ed. 322 (1922),

not one Justice has ever suggested that the regulatory

takings doctrine is limited to physical occupation or a total

deprived use. This Court did not rule in Lingle, nor has it

ever ruled, that a regulatory taking is only possible where a

government action is tantamount to a “physical invasion”.

To the contrary, this Court has consistently ruled that when

a regulatory taking is not by a physical invasion or a

complete deprivation of all economically beneficial use of

property, a regulatory taking remains viable after

application of the Penn Central Balancing Test. Michigan

has now rejected this rule of law.

Il. This Court Is Asked To Provide a Resolution to

the Unsettled Definition of “Character” of

Action Within the Penn Central Balancing Test.

When properly applied, the “character” of

government action factor is a significant factor in the Penn

Central Balancing Test. The Michigan Court of Appeals

stopped the balance once it ruled the newly enacted specific

application of wetland regulation to Plaintiffs’ Property

alone was somehow “widespread”. Aside from violating

the Penn Central Balancing Test as directed by the remand,

the Michigan Court of Appeals did not at all understand

this factor.

Since Penn Central, courts have struggled to define

this factor. This Court has provided numerous potential

definitions for “character” of action. One is the concept of

average reciprocity of advantage which focuses on whether

a regulation applies broadly across a governed community.

Michigan Supreme Court Justice Markman

identified the need for resolution as he promoted leave to

consider the Michigan Court of Appeals’ application of the

“average reciprocity of advantage” factor from Penn

Central.

“MARKMAN, J., would grant leave to

appeal in order to further consider the

Court of Appeals application of the

“average reciprocity of advantage" factor

from Penn Central’ (K & K Construction,

Inc., and J.F_K. Investment Company, L.L.C.

v. Department of Environmental Quality,

475 Mich. 856, 713 N.W.2d 268 (May 17,

2006), Apx B1-B2). (Emphasis Added)

Once Michigan is instructed by this Court on the absolute

and binding viability of the Penn Central Balancing Test,

this Court should also use this case as a vehicle to further

resolve the “character” of action factor under Penn Central.

The Michigan Court of Appeals ruled, independent

on the factual record, that the character of government

action at issue provided an “average reciprocity of

advantage” calling the regulation “widespread” and

“ubiquitous”.

“Wetland regulations are, like zoning

regulations, all but ubiquitous.” (K & K

Construction, Inc., and J.F.K. Investment

Company, LLC v. Department of

Environmental Quality, 267 Mich. App.

523, 529; 705 NW2d 365 (July 26, 2005),

Apx D6). (Emphasis Added)

* * *

“Accordingly, we conclude that the

character of the government action was a

wide-reaching, regulatory action that

seeks to protect the rights of the public,

and provides an "average reciprocity of

advantage," and that this factor weighs

heavily against finding that a

compensable’ regulatory taking has

occurred here.” (K & K Construction, Inc.,

and J.F.K. Investment Company, LLC v.

Department of Environmental Quality, 267

Mich. App. 523, 563, 705 N.W.2d 365 (July

26, 2005), Apx D22). (Emphasis Added)

This analysis and holding is flatly wrong. The

regulation of wetlands in Michigan is not remotely akin to

general zoning restrictions. Zoning restrictions may, if

properly enacted, limit and control the uses of property. By

doing so, the zoning restriction potentially diminishes the

value of the property by use restriction and control.

However, any such decrease in value is partially offset by

an increase in value which flows from similar restrictions

as to use on all properties. These zoning restrictions

provide a benefit for the municipality and the property pool

within its boundaries as a whole and a common benefit for

all the property owners in general.

Under Michigan’s Wetland Protection Act, there

is_no such reciprocity. The impacted wetiand area

restricts the affected landowner from using the property

specifically. This loss is borne solely by that individual

landowner and there is no offset by any increase in value

that flows from similar restrictions on surrounding

properties. | Under zoning, the restrictions are developed

by planners and boards of revicw. Wetlands develop by

nature. In fact, there may be no similarly impacted

properties for miles. The cost to the impacted property

owner is substantial and is bore alone. There are no

comparable reciprocal benefits. The loss imposed by the

wetland regulation on the individual landowner is not at all

similar or “akin” to local zoning and there is no average

reciprocity of advantage.

Interestingly, other Federal Courts which have

considered regulatory taking claims involving wetlands

have found a compensable taking. In Florida Rock

Industries, Inc. v. United States, 45 Fed. Cl. 21 (1999), the

plaintiff purchased a parcel of property in Florida largely

composed of wetlands for the purpose of mining limestone.

After the Florida Rock plaintiff purchased the property, the

amendments to the Clean Water Act, 33 U.S.C.A. Sec.

1251 (“Clean Water Act”) were signed into law which

required the Florida Rock plaintiff to obtain permits to

discharge into or dredge wetlands on the Florida Rock

property. The Florida Rock plaintiff was denied its permits

and brought suit seeking just compensation for a regulatory

taking under the Fifth Amendment.

The Court of Claims in Florida Rock applied the

Penn Central Balancing Test and found a regulatory taking.

Specifically, the Court of Claims ruled that the Florida

Rock plaintiff had been made the “unwilling custodian” of

the wetlands on its property for the benefit of the public at

large.’

“Plaintiff has been made the unwilling

custodian of the wetlands on its property

for the benefit of the public at large, at

plaintiff's own risk and expense. Having

analyzed the economic impact of the

regulation, plaintiff's reasonable, distinct

investment-backed expectations, and the

character of the governmental action, the

court concludes that the denial of plaintiff's

section 404 permit application by the Army

’ In looking at whether there is an average reciprocity of

advantage, the Court of Claims ruled that a court must

assess whether the party has been compensated directly

through the regulation itself “Accordingly, when the court

assesses economic impact, it must determine whether

Florida Rock has been compensated through the regulation

itself’ (Florida Rock, 45 Fed. Cl at p. 37.)

Corps of Engineers effected a compensable

partial regulatory taking of plaintiff's 98 acre

property.” (Florida Rock, 45 Fed. Cl at p.

43.)

As this Court knows, the Clean Water Act provides for the

protection of wetlands at the federal level just as the

Michigan Wetland Protection Act provides for protection

of wetlands at the state level. In fact, the Michigan Court

of Appeals admitted to this similarity:

‘Wetland regulations are, like zoning

regulations, all but ubiquitous. At the federal

level, the Clean Water Act (CWA)

provides for the regulation and protection of

wetlands, while Michigan's wetland

protection act (WPA) ©™ serves the same

purpose for this _ state.” mK &@ &

Construction, Inc., and J.F.K. Investment

Company, LLC v. Department of

Environmental Quality, 267 Mich. App.

523, 529, 705 N.W.2d 365 (July 26, 2005),

Apx D15).

While the Court of Claims in Florida Rock found a

regulatory taking when permits were denied under the

Clean Water Act, the Michigan Court of Appeals did not

find a taking where permits are denied under the Wetland

Protection Act. The ruling of the Court of Claims in

Florida Rock is in conflict with the Michigan Court of

Appeals ruling illustrating the uncertainty of the definition

of “character” of action and the concept of average

reciprocity of advantage.

As this Court knows, the Fifth Amendment

guarantees that individuals will not suffer public burdens

which should be borne by the public as a whole. Wetland

protection benefits the public as a whole. (Armstrong v.

United States, 364 U.S. 40, 49, 80 S.Ct 1563, 4 L.Ed.2d

1554 (1960).) As Justice Holmes opined in Pennsylvania v

Mahon, 260 U.S. 393, 416; 43 S.Ct. 158 (1922), a strong

public desire to improve the public condition is not enough

to warrant not paying for the change sought.

“We are in danger of forgetting that a

strong public desire to improve the public

condition is not enough to warrant

achieving the desire by a shorter cut than

the constitutional way of paying for the

change.” (Pennsylvania v Mahon, 260 U.S.

393, 416, 43 S.Ct. 158 (1922).) (Emphasis

Added)

Here, the Plaintiffs have suffered a uniquely felt

multi-million dollar loss which is not offset by benefits

flowing from the preservation of other wetlands. The

benefits that flow from the Wetland Protection Act benefit

the State of Michigan as a whole. The Plaintiffs here will

not garner a larger share of these benefits. There is no

average reciprocity of advantage demonstrating that the

Plaintiffs receive benefits in proportion to their losses.

Despite this, the Plaintiffs here are now asked to

individually bear a multi-million dollar public burden

because Michigan now views wetland regulations as

general zoning ordinances. The alleged vision of good

garnered from the Wetland Protection Act ignores the good

of the oppressed, the Plaintiffs. As Charles Fried wrote in

his recent work “Modern Liberty?”

“Those who impose on others are often

convinced that the good they are after is a

good as much for their victims as for

themselves, and so they claim that there are

no victims at all. . . But running through this

history of subjection and enslavement is the

claim of some to coerce the service of

others, whether for a common good, the

good of the oppressor, or some good that is

an abstract from both and applicable to all.”

(“Fried, Modern Liberty And The Limits of

Government (New York: W.W. Norton &

Company, 2007), p 18.

Regardless of the benefit sought by the regulatory scheme,

this violates the foundation of the Fifth Amendment. If a

regulation is imposed on a discrete class of owners solely

for the benefit of a larger class, there is a potential taking.

This should hold true in Michigan and the Penn Central

Balancing Test should serve to establish such takings. The

Michigan Court of Appeals’ current application of the

Michigan Wetland Protection Act is at odds with the Fifth

Amendment as well as its own State’s legislative scheme

providing for just compensation in the Wetland Protection

Act.

The drafters of the Michigan Wetland Protection

Act expressly contemplated a taking. The Wetland

Protection Act states that where a taking is caused by the

Act, the individual will be compensated for “lost value” --

MCL 281.721. The Wetland Protection Act was the

precursor to the Natural Resources and Environmental

Protection Act which provides, at MCL 324.30323, that if a

person suffers a taking by way of the wetland regulation

scheme in Michigan, then the Court can order that the

department or the local unit of government to compensate

the property owner for the full amount of the lost value.

Now, this statute is abolished by the Michigan Courts.

“(3) Lf the court determines that an action

of the department or a local unit of

government pursuant to this part or an

ordinance authorized pursuant to section

30307(4) constitutes a taking of the

property of a person, then the court shall

order the department or the local unit of

government, at the department's or the

local unit of government's option, as

applicable, to do 1 or more of the

following:

(a) Compensate the property owner for

the full amount of the lost value... .”

(MCLA 324.30323) (Emphasis Added)

The Wetland Protection Act and NREPA both

envision compensation for “lost value” under the wetland

protection scheme. To say that the Wetland Protection Act

itself weighs against the finding of a taking contradicts its

controlling language.

The application of the Wetland Protection Act

offers a possible resolution to the unsettled definition of

“character” of action. The application of the Wetland

Protection Act shows that the burdens imposed by the

Wetland Protection Act are particular in their affect and, by

statutory design, potentially violate the Fifth Amendment.

This concept of “generality v. particularity” of regulation is

critical to any proper takings analysis. The Plaintiffs

suggest to this Court that the “character” of action element

of the Penn Central Balancing Test should focus on the

generality versus particularity of regulation.

As this Court said in Palazzolo v. Rhode Island, 533

U.S. 606, 617, 121 S.Ct. 2448, 150 L.Ed.2d. 798 (2001), it

has given some, “but not too specific”, guidance to Courts

for analyzing regulatory takings.

“Since Mahon, we have given some, but

not too specific, guidance to _ courts

confronted with deciding whether a

particular government action goes too far

and effects a regulatory taking.” (Palazzolo

v. Rhode Island, 533 U.S. 606, 617, 121

S.Ct. 2448, 150 L.Ed.2d 798 (2001).)

Given the Michigan Court of Appeals’ recent published

Opinion at issue here, it is clear that more “guidance” is

required and this case offers an opportunity to do so.

It would make little sense in a condemnation case to

suggest that the government is excused from its obligation

to pay for a nght of way for a road on the grounds that the

road serves an important or “widespread” public need.

While the Wetland Protection Act provides a potential

benefit to the public as a whole, the Plaintiffs cannot be

asked to bear this burden by being the honorary custodians

of the State’s wetlands while the Property remains idle and

the Plaintiffs continue to pay the taxes."

Ill. The Question Presented Is Important.

The Michigan Court of Appeals’ published

Opinion now allows the State of Michigan and its agencies

to tread fully and cavalierly on the rights of its citizens by

taking their private property without any chance at all for

relief by applying the Penn Central Balancing Test. This

directly conflicts with this Court’s rulings including the

recent Opinion in Ling/e.

IV. The Decision Of The Michigan Court Of Appeals

Is Erroneous.

The Michigan Court of Appeals’ ruling that a

takings analysis is now sharpened to a question of whether

there has been a taking tantamount to a physical invasion is

clearly erroneous.

This Court long ago ruled, and has consistently

confirmed, that a physical invasion is not the test for a

regulatory taking. If not a taking per se, regulatory takings

are assessed through the Penn Central Balancing Test.

* Plaintiffs to this day faithfully pay annual heavy State

property taxes while the development of the Property

remains idle by virtue of the Court of Appeals’ Opinion.

This is the law in the United States and it should be made

to apply in Michigan.

The Michigan Court of Appeals’ ruling demanding

evidence of a per se categorical taking tantamount to a

“physical invasion” utterly destroys the balancing test.

The Michigan Court of Appeals has no power to

rewrite the State’s statutes. When enacting these regulatory

schemes to address wetland protection, the Michigan

legislature contemplated the regulatory scheme could cause

a taking. The Michigan Court of Appeals has no business

deleting this portion of the statute and ignoring Penn

Central in the process.

The Michigan Court of Appeals’ published

Opinion affects every poiential property developer in

Michigan. The Michigan Court of Appeals’ Opinion

allows the State and its agencies to take private property

without the Penn Central Balancing Test. Michigan is now

left without a regulatory taking remedy.

Certiorari jurisdiction is warranted to correct this

error and clarify the law at issue.

CONCLUSION

For the reasons stated above, the Petitioners

respectfully request that this Court grant the Petition for a

Writ of Certiorari.

Respectfully submitted,

ROBERT L. BUNTING

Counsel of Record for Petitioner

K&K Construction, Inc., and J.F.K.

Investment Company, L.L.C.

P.O. Box 7

Oxford, MI 48371

Telephone (248) 628-5150

Robert Charles Davis

Co-Counsel for Petitioner

K&K Construction, Inc., and J.F.K.

Investment Company, L.L.C.

20383 Hall Road, Suite B

Macomb, MI 48044

Telephone (586) 263-9500

Facsimile (586) 263-9526

APPENDIX

MICHIGAN SUPREME COURT:

Order Denying Motion for Rehearing,

EE iad Sweve an eh onerceunees

Order Denying Discretionary Review,

PGES INO 8 oir 6 ercCFe Ri sexes pebedes

MICHIGAN COURT OF APPEALS:

Order Denying Motion for Rehearing,

Re WOT EITEE ov vc Kédnens see sOi vevnees

Opinion,

ee SE Sa Vase ha devas ob avsen nee

COURT OF CLAIMS:

Judgment,

EE ac cnuceendecevacedese burs

Opinion and Order,

SE nav Sutaceveet) sans ees

UNITED STATES SUPREME COURT:

Order Denying Plaintiffs’ Motion for Rehearing.

SE SE ko idoceoesuee eee nseenenkosees G1 - Gl

Order Denying Plaintiffs’ Petition for

Writ of Certiorari.

CEP bbe cvabunenavaniecewacesedcss H1 - H2

MICHIGAN SUPREME COURT:

Opinion,

PP Pere errr Perr err eT I] - 136

Order Granting Discretionary Review,

NTE vcs es 6 Hed be woe eee ea eeavawer Ji - J3

MICHIGAN COURT OF APPEALS:

Opinion,

Ree pa etree er ee Ki - K33

COURT OF CLAIMS:

Judgment,

ED ox rats ceca 0k baer ederené te tes L1-L7

Second Opinion and Order,

EE, ls pula ta wwe de cae. b a eo ean M1 -MiI

Opinion and Order,

SE RAMEE nad eacu ee ane ad ovae easy eneewe NI - N16

CEASE AND DESIST ORDER:

Cease and Desist Order dated 05/09/88 ......... O1-Ol

LETTERS:

DNR Letter

BN DUPE OP 0 00s a cet oa edd encsdsddecckann Pl - P2

STATUTES:

oe ae tS Se nara rt Q1 - Q56

Ps ST ONeE Oh OOM, icc cccevwnassvenvess R1 - R46

477, Mich. 919, 722 N.W.2d 794

Bniefs and Other Related Documents

Supreme Court of Michigan.

K & K CONSTRUCTION, INC., and

J.F.K. Investment Company, L.L.C.,

Plaintiffs-Appellants,

v. |

DEPARTMENT OF ENVIRONMENTAL QUALITY,

Defendant-Appellee.

Docket No. 129761.

COA No. 244455

Oct. 31, 2006.

On order of the Court, the motion for reconsideration of

this Court’s May 17, 2006 order is considered, and it is

DENIED, because id does not appear that the order was

entered erroneously.

TAYLOR, C.J., not participating.

MARKMAN, J., would grant reconsideration and, on

reconsideration, would grant leave to appeal for the reason

set forth in K & K Construction, Inc. v. Dept of

Environmental Quality, 475 Mich. 856, 713 N.W. 2d 268

(2006).

Mich., 2006

K & K Const., Inc. v.

Department of Environmental Quality

477 Mich. 919, 722 N.W.2d 794

A-]

Briefs and Other Related Documents (Back to top)

e 129761 (Docket) (Oct. 21, 2002)

END OF DOCUMENT

to Orig. U.S. Govt. Works.

A-2

475 Mich. 856, 713 N.W.2d 268

Briefs and Other Related Documents

Supreme Court of Michigan.

K & K CONSTRUCTION, INC., and _,

J.F.K. Investment Company, L.L.C.,

Plaintiffs-Appellants,

DEPARTMENT OF ENVIRONMENTAL

QUALITY,

Defendant-Appellee.

Docket No. 129761.

COA No. 244455.

May 17, 2006.

Prior report: 267 Mich.App. 523.705 N.W.2d 365.

*269 Order

On order of the Court, the application for leave to appeal

the July 26, 2005 judgment of the Court of Appeals is

considered, and it is DENIED, because we are not

persuaded that the questions presented should be revicwed

by this Court.

TAYLOR, C.J., not participating.

MARILYN J. KELLY, J., would grant leave to appeal.

MARKMAN, J., would grant leave to appeal in order to

further consider the Court of Appeals application of the

“average reciprocity of advantage” factor from Penn

B-1

Central Transportation Co. v. City of New York, 438 U.S.

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

Mich., 2006.

K & K Const., Inc. v.

Department of Environmental Quality

475 Mich. 856, 713 N.W.2d 268

Briefs and Other Related Documents (Back to top)

129761 (Docket) (Oct. 21, 2002)

B-2

COURT OF APPEALS, STATE OF MICHIGAN

ORDER

Brian K. Zahra

Presiding Judge

Henry William Saad

Bill Schuette

Judges

K&K Construction Inc v Dept of Environmental Quality

Docket No. 244455

LC No. 88-012120 CM

The Court orders that the motion for reconsideration is

DENIED.

/s/ Brian K. Zahra

Presiding Judge

A true copy entered and certified by

Sandra Schultz Mengel, Chicf Clerk, on

Sep. 16, 2005 /s/ Sandra Shultz Mengel

Chief Clerk

C-1

267 Mich.App. 523, 705 N.W.2d 365

Court of Appeals of Michigan.

K & K CONSTRUCTION, INC.,

and J.F.K. Investment Company, LLC,

Plaintiffs-Appellees,

DEPARTMENT OF ENVIRONMENTAL QUALITY,

Defendant-Appellant.

Docket No. 244455.

Submitted April 20, 2005, at Lansing.

Decided July 26, 2005, at 9:25 a.m.

Released for Publication Oct. 26, 2005.

Background: Land developers whose application for

permit to fill wetlands was denied sought compensation for

regulatory taking. The Court of Claims judgment finding a

compensable taking was affirmed by the Court of Appeals,

217 Mich.App. 56, 551 N.W.2d 413. The Supreme Court,

456 Mich. 570, 575 N.W.2d 531, reversed and remanded.

On remand, the Court of Claims, William E. Collette, J.,

again found that a taking had occurred. Department of

Environmental Quality (DEQ) appealed.

Holding: The Court of Appeals, Saad, J., held that wetland

regulations which led to denial by the DEQ of developers’

application for permit to fill wetlands did not effect a

compensable regulatory taking of developers' property.

Reversed.

D-]

West Headnotes

[1] Eminent Domain 148 > 2.10(1)

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.10 Zoning, Planning, or Land Use;

Building Codes

148k2.10(1) k. In General. Most Cited Cases

No compensable regulatory taking occurs where (1) a land

use regulation is comprehensive and universal so that the

private property owner is relatively equally benefited and

burdened by the challenged regulation as other similarly

situated property owners, (2) the owner purchased with

knowledge of the regulatory scheme so that it is fair to

conclude that the cost to the owner factored in the effect of

the regulations on the return on investment, and (3) despite

the regulation, the owner can make valuable use of his or

her land. U.S.C.A. Const.Amend. 5.

[2] Eminent Domain 148 > 262(1)

148 Eminent Domain

148III Proceedings to Take Property and Assess

Compensation

148k250 Appeal

148k262 Review

D-2

148k262(1) k. In General. Most Cited Cases

Whether the government has effected a taking of one's

property is a constitutional issue which the Court of

Appeals reviews de novo.

[3] Appeal and Error 30 > 1197

30 Appeal and Error

30XVII Determination and Disposition of Cause

30XVII(F) Mandate and Proceedings in Lower Court

30k1196 Powers and Duties of Lower Court

30k1197 k. Jurisdiction of Lower Court After

Remand. Most Cited Cases

Power of the lower court on remand is to take such action

as law and justice may require so long as it is not

inconsistent with the judgment of the appellate court.

[4] Appeal and Error 30 > 1196.1

30 Appeal and Error

30X VII Detcrmination and Disposition of Cause

30XVII(F) Mandate and Proceedings in Lower Court

30k1196 Powers and Duties of Lower Court

30k1196.1 k. In General. Most Cited Cases

Appeal and Error 30 2 1198

30 Appeal and Error

30X VII Determination and Disposition of Cause

30XVII(F) Mandate and Proceedings in Lower Court

D-3

30k1196 Powers and Duties of Lower Court

30k1198 k. Compliance with Mandate or

Directions. Most Cited Cases

When an appellate court remands a case without

instructions, lower court has the same power as if it made

the ruling itself; however, when an appellate court gives

clear instructions in its remand order, it is improper for a

lower court to exceed the scope of the order.

{5] Administrative Law and _ Procedure’ I5A

Cr 09

15A Administrative Law and Procedure

ISAV Judicial Review of Administrative Decisions

LSAV(F) Determination

15Ak820 k. Further Administrative Proceedings.

Most Cited Cases

Appeal and Error 30 2 1198

30 Appeal and Error

30XVII Determination and Disposition of Cause

30XVII(F) Mandate and Proceedings in Lower Court

30k1196 Powers and Duties of Lower Court

30k1198 k. Compliance with Mandate or

Directions. Most Cited Cases

It is the duty of the lower court or tribunal, on remand, to

comply strictly with the mandate of the appellate court.

D-4

[6] Eminent Domain 148 > 2.27(2)

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking: Police and Other

Powers Distinguished

148k2.27 Environmental Protection

148k2.27(2) k. Wetlands and Coastal

Protection. Most Cited Cases

Wetland regulations which led to denial by the Department

of Environmental Quality (DEQ) of developers’ application

for permit to fill wetlands did not effect a compensable

regulatory taking of developers' property; though

diminution of value was significant, the relevant tract

retained substantial value and usefulness, the investment-

backed expectations of the applicants, both experienced

commercial land developers, had to take into account the

extant regulations at time property was acquired, and the

wetland regulations were comprehensive and universal

throughout the state and did not single out the subject

property to bear the burden of a public benefit. U.S.C.A.

Const.Amend. 5; M.C.L.A. Const. Art. 10, § 2; M.C.L.A.

§ 324.30301 et seq.

[7] Eminent Domain 148 3 2.1

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

D-5

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

Governmental regulation that deprives a landowner of all

economically beneficial use of his or her property is a

categorical taking that requires compensation. U.S.C.A.

Const.Amend. 5.

[8] Eminent Domain 148 3 2.1

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

Reduction in the value of the regulated property is

insufficient, standing alone, to establish a compensable

regulatory taking. U.S.C.A. Const.Amend. 5.

[9] Eminent Domain 148 — 2.1

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

In determining whether compensable regulatory taking has

occurred, court must examine the extent to which the

D-6

regulation has interfered with the property owncr's

reasonable investment-backed expectations, with respect to

which owner's notice of the applicable regulatory regime is

a key factor. U.S.C.A. Const.Amend. 5.

[10] Eminent Domain 148 > 2.1

148 Eminent Domain

148] Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

A “taking” may more readily be found when the

interference with property can be characterized as a

physical invasion by government than when interference

arises from some public program adjusting the benefits and

burdens of economic life to promote the common good.

U.S.C.A. Const.Amend. 5.

[11] Eminent Domain 148 3 yp

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Mosi Cited Cases

In looking at character of government action to determine

whether compensable regulatory taking has occurred,

relevant inquines are whether the governmental regulation

D-7

singles plaintiffs out to bear the burden for the public good

and whether the regulatory act being challenged here is a

comprehensive, broadly based regulatory scheme that

burdens and benefits all citizens relatively equally.

U.S.C.A. Const.Amend. 5.

[12] Courts 106 eC 95(1)

106 Courts

106II Establishment, Organization, and Procedure

106II(G) Rules of Decision

106k88 Previous Decisions as Controlling or as

Precedents

106k95 Decisions of Courts of Other State

106k95(1) k. In General. Most Cited Cases

In assessing whether compensable regulatory taking has

occurred, Court of Appeals is not bound by the decisions of

the courts of other states, though it may look to those

regulatory taking decisions as persuasive authority.

**366 Robert L. Bunting, Oxford, Robert Charles Davis,

Sterling Heights, and Richard L. Hoffman, Lake Orion, for

the plaintiffs.

Michael A. Cox, Attorney General, Thomas L. Casey,

Solicitor General, and S. Peter Manning, Assistant Attorney

General, for the defendant.

Before: ZAHRA, P.J., and SAAD and SCHUETTE, JJ.

D-8

SAAD, J.

*526 The trial court entered judgment in favor of plaintiffs

against defendant. Defendant appeals the judgment, and

we reverse and enter judgment in favor of defendant.

**367 I. NATURE OF THE CASE

When a citizen claims that a governmental land-use

regulation, or its regulatory implementation, adversely

affects the value of his or her property, and seeks just

compensation under the Taking Clause of the Fifth

FNI our courts must decide whether the

Amendment,

challenged governmental action, and its consequent effect

on private property, constitutes a “regulatory taking” under

federal and state taking jurisprudence.

FN1. U.S. Const., Am. V; see also Const.

1963, art. 10, § 2.

More specifically, when, as here, the government regulates

land use-as opposed to taking physical possession of land

EN2and where, as here, the challenged *527 regulation is

stipulated to be for the public good, our limited role is to

answer the specific constitutional question: where

implementation of a valid land use regulation ™

negatively impacts a private citizen's valuable property

rights, does the Taking Clause require *528 compensation?

To answer this question, our Supreme Court has instructed

D-9

us to examine the United States Supreme Court's seminal

decision in Penn Central Transportation Co. v. New_York,

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

FN2. As the United States Supreme Court

explained:

The clearest sort of taking occurs when the

government encroaches upon or occupies

private land for its own proposed use. Our

cases establish that even a minimal

“permanent physical occupation of real

property” requires compensation under the

Clause. Loretto v. Teleprompter Manhattan

CATV Corp., 458 U.S. 419, 427, 102 S.Ct.

3164, 73 L.Ed.2d 868 (1982). In

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

393, 43 S.Ct. 158, 67 L.Ed. 322 (1922), the

Court recognized that there will be instances

when government actions do not encroach

upon or occupy the property yet still affect

and limit its use to such an extent that a

taking occurs. In Justice Holmes' well-

known, if tess than _ self-defining,

formulation, “while property may be

regulated to a certain extent, if a regulation

goes too far it will be recognized as a

taking,” Id a 415. 43 S.Ct. 158.

{Palazzolo v. Rhode Island, 533 U.S. 606,

617, 121 S.Ct. 2448, 150 L.Ed.2d 592

(2001).]

FN3. Land-use regulations, such as zoning,

are necessary to protect private property

D-10

nghts and values. Zoning regulations can

be used to prevent, for example, a mining

operation or a factory from being built

within a residential neighborhood. See,

e.g., Euclid v. Ambler Realty Co., 272 U.S.

365, 385-389, 47 S.Ct. 114, 71 L.Ed. 303

(1926). Such a zoning regulation creates

what Justice Holmes termed “an average

reciprocity of advantage,” Mahon, supra _at

415, 43 S.Ct. 158, which both burdens and

benefits landowners relatively equally.

Such regulations are not considered takings,

and thus do not require compensation, in

part because, as Justice Holmes. stated,

“{glovernment hardly could go on if to some

extent values incident to property could not

be diminished without paying for every such

change in the general law.” Jd. at 413, 43

S.Ct. 158. On the other hand, “if regulation

goes too far it will be recognized as a

taking.” Jd. at 415, 43 S.Ct. 158. When the

effect of a regulation goes as far as to

deprive a property owner of ail

economically beneficial value of his or her

land, it results in a “categorical taking.”

See, e.g., Palazzolo, supra at 615-616, 121

S.Ct. 2448, citing Lucas v. South Carolina

Coastal Council, 505 U.S. 1003, 112 S.Ct.

2886, 120 L.Ed.2d 798 (1992); see also

Mahon, supra at 413-416, 43 S.Ct. 158

(regulation forbade coal mining on land for

which the plaintiff was the holder of mineral

rights, thus destroying the plaintiff's entire

interest in the land); see also Tahoe-Sierra

Preservation Council, Inc. _v._ _ Tahoe

D-11

Regional Planning Agency, 535 U.S. 302,

324, 122 S.Ct. 1465, 152 L.Ed.2d 517

(2002) (“Land-use regulations are

ubiquitous and most of them impact

property valucs in some tangential way-

often in completely unanticipated ways.

Treating them all as per se takings could

transform government regulation into a

luxury few governments could afford.”).

FN4. See K_& K Constr., Inc. v. Dep't of

Natural Resources, 456 Mich. 570, 587-588,

575 N.W.2d 531 (1998). Indeed, as we will

discuss further below, our Supreme Court so

instructed the trial court. However, the trial

court, while acknowledging the Penn

Central test and our Supreme Court's

mandate, failed to actually apply the Penn

Central factors during the trial after remand.

**368 The United States Supreme Court in Penn Central

laid out a three-factor test for courts to apply to answer this

important constitutional question:

[1] The economic impact of the regulation on the claimant

and, particularly, {2] the extent to which the regulation has

interfered with distinct investment-backed expectations are,

of course, relevant considerations. So, too, is [3] the

character of the governmental action. A “taking” may

more readily be found when the interference with property

can be characterized as a physical invasion by government

than when interference arises from some public program

adjusting the benefits and burdens of economic life to

D-12

promote the common good. [J/d. at 124, 98 S.Ct. 2646

(citations omitted). |

The taking jurisprudence articulated by the United States

Supreme Court in Penn Central and its progeny oS

requires that our courts consider the following factors in

deciding whether a “regulatory taking” claim is

compensable: (1) what is the average reciprocity of

advantage, in other words, is the aggrieved property owner

singled out to pay for the public good, or is the land-use

regulation so universal and ubiquitous that the benefits and

burdens of the land-use regulation fall relatively equally

among all, including the complaining *529 party; (2) what

use could the landowner reasonably expect to make of the

land given the state of the land-use regulations at the time

of acquisition (as part of this inquiry, it is necessary to take

into account whether the landowner knew, or should have

known, of the land-use regulation at the time of purchase);

and (3) did the specific, challenged application of the land-

use regulation leave the property owner valuable land use

rights or did it instead render the land virtually worthless?

FNS. See, e.g., Tahoe-Sierra, supra;

Palazzolo, supra; Lucas, supra.

[1] Stated another way, if the land-use regulation, like

traditional zoning and wetland regulations: (1) is

comprehensive and universal so that the private property

owner is relatively equally benefited and burdened by the

D-13

challenged regulation as other similarly situated property

owners, and (2) if the owner purchased with knowledge of

the regulatory scheme so that it is fair to conclude that the

cost to the owner factored in the effect of the regulations on

the return on investment, and (3) if, despite the regulation,

the owner can make valuable use of his or her land, then

compensation is not required under Penn Central.

Here, plaintiffs claim that the denial by the Department of

Environmental Quality (DEQ) of a permit to fill in the

wetland on their property constitutes a regulatory taking.

Wetland regulations are, like zoning regulations, all but

ubiquitous. At the federal level, the Clean Water Act

(CWA) FN provides for the regulation and protection of

wetlands, while Michigan's wetland protection act (WPA)

EN’ serves the same purpose for this state. Our Legislature

made clear that it enacted the WPA to benefit all the people

of this state. The act provides that “[t]he legislature finds

that ... [wJetland *530 conservation is a matter of state

concern since a wetland of 1 county may be affected by

acts on a river, lake, stream, or **369 wetland of other

counties.” M.C.L. § 324.30302(1 (a ENS

FN6. 33 U.S.C. § 1251, et seq.

FN7. M.C.L. § 324.30301 et seq.

D-14

FN8. The statute provides that the

Legislature further found that:

(b) A loss of a wetland may deprive the

people of the state of some or all of the

following benefits to be derived from the

wetland:

(i) Flood and storm control by the

hydrologic absorption and storage capacity

of the wetland.

(ii) Wildlife habitat by providing breeding,

nesting, and feeding grounds and cover for

many forms of _ wildlife, waterfowl,

including migratory waterfowl, and rare,

' threatened, or endangered wildlife species.

(111) Protection of subsurface water resources

and provision of valuable watersheds and

recharging ground water supplies.

(iv) Pollution treatment by serving as a

biological and chemical oxidation basin.

(v) Erosion control by serving as a

sedimentation area and filtering — basin,

absorbing silt and organic matter.

(vi) Sources of nutnents in water food

cycles and nursery grounds and sanctuaries

for fish.

resource for the production of food and

D-15

fiber, including certain crops which may

only be grown on sites developed from

wetland. [M.C.L. § _324.30302(1)(b)-

(1)(c).]

Clearly, all people, including property owners, are the

intended beneficiaries of the regulation of wetlands. Like

zoning regulations, wetland regulations place a burden on

some property owners, but this burden ultimately benef**

all property owners, including those who claim they are

unfairly burdened.

As we will discuss in detail later, we reject plaintiff's claim

because (1) wetland regulations are, much like *531 zoning

regulations, comprehensive, universal, and ubiquitous, and

provide an “average reciprocity of advantage” for all

property owners, including plaintiffs; (2) plaintiffs have

developed and retain the ability to develop a significant

amount of their property, and thus plaintiffs' property

retains a significant value even after the permit denial; and

(3) plaintiffs are experienced commercial land developers

who clearly had or were on notice of the wetland

regulations promulgated under the WPA, and, therefore,

plaintiffs’ distinct, investment-backed expectations would

reasonably have been tempered with the knowledge that

their development of the property would be restricted

because of the presence of wetlands.

ll. FACTS AND PROCEDURAL HISTORY

A. Procedural History

This case was originally filed in the Court of Claims on

December 29, 1988. Plaintiffs, K & K Construction, Inc.,

the J.F.K. Company, and Resorts and Company, alleged

that defendant, then the Michigan Department of Natural

Resources (DNR) (currently the Department of

Environmental Quality),)™? had effected a regulatory

taking of plaintiffs' property when it designated part of that

property as wetland and denied a permit to fill in the

wetland and build on the property. Following a nonjury

trial, the trial court entered judgment in favor of plaintiffs.

The tral court found that the DEQ's failure to issue the

requested permit constituted a categorical taking of

plaintiffs’ property.

FN9. For the sake of consistency, though the

Department of Environmental Quality was

known as the Department of Natural

Resources at the outset of this case, we will

refer to defendant as “DEQ” throughout our

opinion.

*532 The DEQ appealed to this Court, which, as it turns

out, erroneously affirmed the trial court's judgment. K & K

Constr., Inc. v. Dep't of Natural Resources, 217 Mich.App.

56, 551 N.W.2d 413 (1996) (K & **370 K), rev'd 456

Mich. 570, 575 N.W.2d 531 (1998). The DEQ then

D-17

appealed to our Supreme Court, which reversed this Court's

- @ecision and the trial court's judgment. K_& K Constr., Inc.

v. Dep't of Natural Resources, 456 Mich. 570, 575 N.W.2d

531 (1998) (K & K IJ). Our Supreme Court held that (1)

the trial court erred when it considered only the parcel of

land that contained wetland (parcel one) and did not

include two other contiguous parcels of land owned by

plaintiffs (parcels two and four) and (2) plaintiffs were not

deprived of all economic use of the land and thus there was

no “categorical taking.” Jd. at 586, 575 N.W.2d 531.

Further, our Supreme Court remanded to the trial court with

instructions (1) to include the value of the two other

parcels, (2) to make a finding of fact regarding whether a

third parcel (parcel three) should be included in the value,

and (3) to apply the balancing test articulated by the United

States Supreme Court in Penn Central to determine

whether plaintiffs proved their regulatory taking claim. K

& K Il at 588, 575 N.W.2d 531.

On remand, plaintiffs LEK. Company and Resorts and

Company were succeeded by J.F.K. Investment Co., LLC

(JFK). The parties stipulated that parcel four was not to be

included in the trial court's determination, and the trial

court held that parcel three would be included with parcels

one and two when it determined whether a takir 1ad

occurred because of the wetland regulation. The trial court

then held that under Penn Central, a taking had occurred

and entered judgment in favor of plaintiffs.

D-18

The DEQ once again has appealed to this Court, and

plaintiffs have cross-appealed.

*533 B. Factual History

1. Overview

This case involves four contiguous parceis of land with a

total area of approximately eighty-two acres in Waterford

Township in Oakland County (parcels one through four).

In 1988, a partnership was formed between J.F.K.

Company and Resorts and Company, with each holding a

fifty percent interest, for the purpose of developing the land

FNIO

in issue. At some point, plaintiff J.F.K. Investment

Company, LLC, replaced J.F.K. Company and Resorts and

Company as a successor in interest. Plaintiff K & K

Construction is a Michigan corporation in which Kosik

owns fifty percent of the shares of stock.““U

FN10. Joseph Kosik, Sr. (Kosik), and his

wife Elaine acquired the land, which was

originally farmland, in 1976. A series of

often confusing real estate transactions

ensued, as well as reorganizations of various

business entities. The Kosiks quitclaimed

the land in 1977 to Kosik and Leon Blachura

as individual guarantors, and to Waterford

Mall, a partnership consisting of the J.F.K.

Company, a Michigan limited partnership

consisting of their five sons; Alpine Valley

D-19

Ski Area, Inc., a Michigan corporation;

Alpine Valley Resort, Inc., a Wisconsin

corporation; and the North Oakland

Development Corporation. In 1983, Kosik;

Alpine Valley Ski Area, Inc.; and Alpine

Valley Resorts, Inc., conveyed their interests

in the land to J.F.K. Company. In the

meantime, litigation, through which the

Kosiks and J.F.K. Company sought to quiet

title to the land in their favor because of the

North Oakland Development Corporation's

default on its obligations, was resolved in

1986 with a circuit court warranty deed

conveying the entire interest in the land to

the Kosiks and J.F.K. Company. Because

of the Kosiks' and Alpine Valley's

conveyances, J.F.K. Investment Company

ultimately held title to the land.

FN11. While K & K Construction, Inc., does

not own any interest in the land, it was under

contract to develop a part of it. It appears

that to date there is no dispute with respect

to whether K & K is a proper party to this

case. Yet, both K & K J, and K & K II,

acknowledge that K & K Construction has

no ownership interest in the land, and for

reasons that remain unclear, K & K was

permitted to continue as a party to this suit.

**371 *534 Parcel one is zoned for commercial use,

consists of approximately fifty-five acres, and

approximately twenty-seven of those acres are wetland.

Parcel two consists of sixtcen acres directly south of parcel

D-20

one and has a small area of wetland. Parcel three is 9.34

acres of land directly south of parcel two, with no wetland.

Parcel four is 3.4 acres of land bordering the south side of

parcel one and the east side of parcel two, and it has no

wetland. Parcels two, three, and four are zoned for

multiple-family housing. The parcels are bounded by

Highland Road (M-59) on the north, North Oakland Drive

on the east, Hospital Road on the west, and Pontiac Lake

Road on the south.

Plaintiffs began work on a “C.J. Barrymore's Restaurant” in

1988, which was to occupy forty-two acres on parcel one

and to consist of a restaurant and a sports complex,

including a baseball diamond. Waterford Township issued

plaintiffs a cease-and-desist letter that stated that part of

parcel one contained wetland and that plaintiffs would need

to get a permit from the DEQ. Plaintiffs then filed a permit

application with the DEQ dated May 28, 1988, which was

received by the DEQ on June 21, 1988. On June 7, 1988,

plaintiffs filed an “administrative complaint” with the DEQ

and sought a ruling from the department that would remove

a “designation of wetland” from plaintiffs’ property.

Waterford Township sent a letter to plaintiffs informing

them that their permit for lowland filling would be denied

pending the outcome of the DEQ permit process. In

November 1988, the DEQ issued a letter that denied

plaintiffs’ permit application"™’ Plaintiffs. filed this

action*535 in December 1988.'™

D-21

FN12. The letter stated, among other things,

that the proposed development was “not

wetland dependent,” that plaintiffs had

“alternatives available in the avoidance of

the wetland,” and that there had been no

public need for the development

demonstrated. The letter went on to note

that DEQ representatives saw “drainage

ditches present[,] which cut through the

wetland area, as well as large amounts of

sand fill deposited over much of the site,”

and ordered plaintiffs to cease and desist

from any further excavation of ditches and

placement of sand fill in the wetland area.

FN13. Though we need not comment on

plaintiffs’ failure to seek administrative

relicf, we note that the Legislature provided

for an extensive administrative appeal

process and for judicial review of the

administrative appeal. See M.C.L. §

324.30307.

In May 1990, plaintiffs filed another application for a

permit, under what is called the “Goga Plan.” ™'* The

Goga Plan would have allowed plaintiffs to fill three acres

of wetland, convert five acres of “upland” property to

wetland, and develop the upland ring around the wetland.

This permit application was also denied. At some point,

both an office building for J.PF.K. Investment Company and

D-22

a Ram's Horn Restaurant were built on upland portions of

parcel one./'S

FN14. This alternative plan for development

was apparently named for an engineer who

devised the plan for plaintiffs. We will

hereafter refer to this permit as the “Goga

permit.”

FN15. Though pursuant to our Supreme

Court's holding in K & K Il, we are to

consider the entire denominator parcel,

which consists of parcels one, two, and

three, we find it necessary at times to refer

to the constituent parcels individually.

Nevertheless, our ultimate analysis under

Penn Central is applied, as our Supreme

Court has mandated, to the denominator

parcel as a whole.

This matter was originally tried in December 1991, and the

only issue before the trial court was whether the permit

denials constituted a taking of plaintiffs' property. The

trial court held that only parcel one **372 was relevant to

its analysis of whether a taking had occurred and concluded

that the permit denials had rendered the parcel, which was

worth approximately $6 million before the permit denial,

completely worthless after the denial. Having found a

categorical taking, the trial court ordered the DEQ to

compensate plairtiffs for this $6 million loss in value.

D-23

*536 After the trial court's ruling, the DEQ opted to

mitigate the loss under M.C.L. § 324.30323, which

requires a trial court to give the DEQ the option, once a

taking has been found, to mitigate its damages by doing

one of the following: compensate the property owner for

the lost value, purchase the property, or “/m/odify its action

or inaction with respect to the property so as to minimize

the detrimental affect [sic] to the property's value”

(emphasis added).™© The DEQ chose to reverse its

previous decision and issue the Goga permit. The trial

court entered judgment in favor of plaintiffs against the

DEQ for a “temporary taking” “” of the land that was

*537 subsequently allowed to be developed under the Goga

Plan for the full value of the wetland on parcel one. The

judgment was for approximately $450,000 plus interest for

the alleged temporary taking, and approximately $3.25

million plus interest for the alleged wetland taking. At the

original tnal, the trial court took into account the mitigating

effect of the DEQ's issuance of the Goga permit when it

calculated the amount of the judgment.

FN16. M.C.L. § 324.30323(3) provides:

If the court determines that an action of the

department or a local unit of government

pursuant to this part or an ordinance

authorized pursuant to section 30307(4)

constitutes a taking of the property of a

person, then the court shall order the

department or the local unit of government,

at the department's or the local unit of

D-24

government's option, as applicable, to do 1

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 as determined before its value was

affected by this part or the local ordinance

authorized under section 30307(4) or the

action or inaction of the department pursuant

to this part or the local unit of government

pursuant to its ordinance.

to the property so as -to minimize the

detrimental affect [sic] to the property's

value.

FN17. We note that the United States

Supreme Court rejected a “temporary

taking” claim in 7ahoe-Sierra, supra at 330-

335, 122 S.Ct. 1465. The Court reasoned

that requiring a governmental agency to

compensate a property owner for the loss of

value while considering applications for

permits and variances under a_ land-use

regulatory scheme would either become

cost-prohibitive or lead to governmental

agencies making hasty, presumably

haphazard, decisions. Jd. at_ 334-335, 122

S.Ct. 1465.

D-25

The DEQ appealed the trial court's ruling to this Court.

Another panel of this Court affirmed the trial court's

judgment and agreed with the trial court that plaintiffs had

been denied all economically beneficial use of their land,

which resulted in a categorical taking. Our Supreme Court

reversed, and reasoned (1) that the trial court erred in only

considering parcel one and in not including parcels two and

four in its valuation of plaintiffs’ property, ENIS and (2) in

considering parcels one, two, and four, “it is clear that there

was not a categorical taking...” “™!? The Court then

remanded to the trial court, and instructed it to calculate the

total value of the property using parcels one, two, and four,

and to make a finding regarding whether parcel three

should be considered part of the “denominator parcel.”

Additionally, the **373 Court held that, while the record

was not clear regarding whether the trial court had failed to

include the value of the two developed portions of parcel

one in its valuation, there was no'reason for the trial court

not to do so. The Court then held that, once the trial court

determined whether parcel three should also be included,

and the total value including all relevant parcels (either

parcels one, two, and four, or all four parcels) was

calculated, the trial court was to apply the *538 three-part

balancing test from Penn Central to determine whether the

DEQ's administrative decision had constituted a regulatory

taking." ~— After _plaintiffs' unsuccessful petition for

certiorari in the United States Supreme Court, the case

returned to the trial court. ~S”!

property.

estate appraiser.

FN18. K & K II, supra at 578-582, 575

N.W.2d 531.

FN19. Jd. at 586, 575 N.W.2d 531.

FN20. After remand, at the second trial, the

parties stipulated that parcel four would not

be considered in the trial court's

determination of the value of plaintiffs’

property, because that parcel was purchased

after the denial of the permits.

FN21. Plaintiffs assert that throughout the

pendency of this litigation, their attempts to

develop or sell parcel one have been

thwarted by the DEQ's appeal of this case.

Of course the DEQ has the absolute right to

appeai and, indeed, the duty to appeal an

erroncous damage award because the DEQ

is the appropnate state agency to protect

both public funds and wetlands. Plaintiffs

had the right to pursue development under

the Goga permit that plaintiffs themselves

proposed.

Unsurpnisingly, during trial, plaintiffs and the DEQ offered

conflicting deposition testimony relating to the value of the

At the first trial, plaintiffs presented the

testimony of Edward Cheyz, who is not a licensed real

approximately $5.94 million before the denial of the

permit. The trial court accepted this figure while rejecting

D-27

He testified that parcel one was valued at

the testimony of the DEQ's appraiser. As discussed

previously, the trial court found the value of these parcels

to be zero after the first trial. On remand, plaintiffs offered

the deposition testimony of James Mawson, a licensed

appraiser, who initially testified that the pre-denial value of

$5.94 million calculated by Cheyz was correct. This figure

apparently represented a figure of $1.50 per square foot

used by Cheyz in calculating the total value. However, on

cross-examination, Mawson testified that he did not believe

that Cheyz would be correct in valuing wetland at $1.50 per

square foot and that a more appropriate figure might be

$0.05 per square foot of wetland.

*539 On the other hand, the DEQ offered its own expert

testimony and evidence in an attempt to show that the

property's “before” value had been overestimated and that

its “after” value had been grossly underestimated. The

DEQ also submitted evidence that, contrary to plaintiffs’

arguments that the non-wetland (upland) portion of parcel

one was too shallow for development, other similar

“shallow” lots had been developed in the area.

Regardless, the trial court, in its opinion and order issued

after the second trial, stated incorrectly that, because our

Supreme Court “did not disturb” its initial valuation of

parcel one, it would reaffirm that value, and the trial court

again concluded that parcel one had no value after the

denial of the permit. The tral court did so despite the fact

D-28

that our Supreme Court held that a categorical taking EN22

had not occurred. K & K JI, supra at 585-587, 575 N.W.2d

531. Furthermore, the trial court reaffirmed its finding that

parcel one had zero value despite the existence of the

**374 Ram's Horn and the JFK office building, and despite

the fact that our Supreme Court stated that it saw “no

reason for [the office building and the Ram's Horn] to be

excluded from the taking analysis. They were both part of

parcel one ... and neither was sold or developed before the

enactment of the regulations in question.” K & K J/, supra

at 584 n. 9, 575 N.W.2d 531. It further concluded that the

value of parcels two and three, which totaled over $3

million, was not enough to offset this loss, and that the total

value before the denial was just over $9 million, while the

value after the denial was just over $3 million, representing

a sixty-seven percent *540 loss. The trial court then

briefly addressed each of the three Penn Central factors

before concluding again that the DEQ's permit denial

constituted a taking. The trial court's opinion stated that it

would reaffirm its previous award.

FN22. As we will discuss in greater detail

later, when a governmental regulation

deprives a landowner of “ ‘all economically

beneficial use’ ~ of his or her property, a

categorical taking occurs, which requires

compensation. Palazzolo, supra at 615-616,

121 S.Ct. 2448, quoting Lucas, supra.

D-29

At a hearing on plaintiffs' posttrial motion for entry of

judgment, the trial court found that the DEQ's issuance of

the Goga permit had not been a valid or effective way of

mitigating its damages as required by M.C.L. § 324.30323

and entered judgment in September 2002 against the DEQ

in the amount of $16,486,228, which included

compensation for a taking of plaintiffs’ property in the

amount of $5.9 million, the value the trial court allocated to

parcel one, together with interest, costs, and attorney fees.

The judgment further imposed interest on the entire

judgment, including fees and costs.

Plaintiffs moved the trial court to reconsider the judgment

rate of interest. They argued ©” that the statutory rate of

interest was insufficient, because plaintiffs were

experienced real estate developers who could easily earn

several times greater returns on their investment. The trial

court rejected this argument and denied plaintiffs’ motion

for a greater rate of interest. Plaintiffs have filed a cross-

appeal to challenge the denial of this motion.

FN23. Interestingly, plaintiffs raised this

argument for the first time on remand.

2. Damages and the Goga Permit EN24

D-30

FN24. The appendix to our opinion is a

chart that summarizes the trial court's award

of damages after both trials.

After the first trial, the DEQ faced a judgment in excess of

$6 million for what the trial court wrongly *541 held to be

a categorical taking of plaintiffs’ property. As permitted

by statute, M.C.L. § 324.30323, the DEQ decided to

mitigate these damages and opted to issue the Goga permit

pursuant to the permit application submitted by plaintiffs.

The trial court then issued a written opinion that

acknowledged that the DEQ's election of this option had

reduced the amount of the taking award to approximately

$3.25 million. © The trial court additionally awarded

approximately $450,000 for the temporary taking of

plaintiffs’ property up to the issuance of the Goga permit.

FN25. This amount reflects the trial court's

calculation of the value of the percentage of

parcel one that constituted wetland based

upon its valuation of the entire parcel at

approximately $5.94 million, plus interest

up to the time of the judgment.

However, plaintiffs did not build on parcel one as they

were entitled to do pursuant to the Goga permit.‘™°

Instead, plaintiffs insisted that the DEQ's appeal of the

nearly $4 million judgment against it also constituted an

appeal of the permit and that the DEQ intended to revoke

the permit if it prevailed on appeal. The DEQ **375 sent

D-31

plaintiffs a letter in which it stated that it did not believe

that there should have been a judgment entered against the

DEQ, and, therefore, that there should not have been

damages assessed that the DEQ needed to mitigate by

issuing the Goga permit. More importantly, however, the

DEQ stated that the permit was valid and could be used by

plaintiffs to begin development of parcel one. Yet

plaintiffs continued in their assertion that the permit was

subject to revocation because of the DEQ's appeal.

JFK office building were constructed on the

non-wetland (upland) portion of parcel one;

plaintiffs did not require the Goga permit to

build these structures.

As stated above, after this Court heard this case, and after

our Supreme Court reversed the decisions of the *542 tral

court and this Court, the case returned to the trial court after

the United States Supreme Court denied a wmit of certiorari.

In the meantime, the Goga permit expired. After the case

returned to the trial court in 1999, plaintiffs attempted to

amend their complaint to raise claims in relation to the

Goga permit and their claim that the permit was essentially

an empty gesture. And the tnal court originally, correctly,

rejected plaintiffs’ argument and stated that plaintiffs could

not raise new claims centered on the DEQ's alleged failure

to comply with the trial court's judgment. The trial court

said that, instead of waiting six years to try and bring new

D-32

claims, plaintiffs should have gone before the trial court to

address the alleged noncompliance.

Notwithstanding plaintiffs' attempt to mischaracterize their

rights and the DEQ's conduct regarding the Goga permit,

the DEQ reissued the expired Goga permit for five years.

Nonetheless, plaintiffs continued to insist that the Goga

permit was essentially worthless because the DEQ could

revoke it if it prevailed on appeal. Plaintiffs made this

assertion despite yet another letter from the DEQ in which

it was stated that the DEQ had no intention of revoking the

permit regardless of the outcome of the case.*? Instead of

developing the land as they clearly could have under the

newly reissued permit, plaintiffs continued to maintain that

the Goga permit was an empty gesture. On the other hand,

the DEQ maintains that plaintiffs’ actions are not motivated

by a fear that the Goga permit might be revoked as much as

they are by a desire to continue to accrue damages related

to the alleged inability to develop their land.

FN27. This letter stated, in relevant part,

“As I have repeatedly expressed, it is not

now and never was the intention of [the

DEQ] to seek to revoke or otherwise limit

the “Goga Plan” permit through appeal.”

*543 After the second tnal, the tnal court reversed its

initial decision and agreed with plaintiffs regarding the

Goga permit. The trial court issued a brief opinion in

D-33

which it stated that it essentially was reaffirming its first

judgment. After the trial court issued its opinion, plaintiffs

moved for the entry of an order of judgment that included

an award for the full value of parcel one. During a hearing

on the motion, the DEQ reminded the trial court of the

reissuance of the Goga permit and asked the trial court to

take this into account, pursuant to M.C.L. § 324.30323,

when it entered judgment, as the court had done after the

first trial. However, this time, the trial court erroneously

refused to take the Goga permit into account. _ Indeed,

during the hearing, the trial court stated, in response to the

DEQ's request, that it “{found] the state's handling of the

Goga permit personally offensive.”

Ultimately, the trial court entered judgment in the amount

of the entire value of parcel one, approximately $5.94

million, plus interest, costs, and attorney fees, **376 which

resulted in a total judgment in excess of $16 million, with

additional interest payable from the date of judgment at the

statutory rate. On appeal, plaintiffs continue to assert that

the Goga permit's issuance by the DEQ was a hollow

gesture that did not, in reality, mitigate any damages, while

the DEQ insists that plaintiffs’ claims that the permit is

ineffective constitute a pretense for an attempt to accrue

further damages.

D-34

We review a trial court's findings of fact for a clear error

and disturb the trial court's findings only where we are “left

with the definite and firm conviction that a *544 mistake

has been made.”

Inc., 259 Mich.App. 257, 265, 673 N.W.2d 815 (2003)./™8

lil. STANDARDS OF REVIEW

Essexville v. Carrollton Concrete Mix,

[2] Whether the government has effected a taking of one's

property is a constitutional issue, U.S. Const., Am. V;

FN28. The DEQ urges us to set aside the

clearly erroneous standard in favor of a

review de novo. The DEQ argues that the

trial court's findings are not entitled to

deference because the trial court conducted

the trial solely on the submission of de

benne esse depositions, exhibits, and oral

argument. However, the DEQ stipulated

the entry of an order that specified exactly

that procedure for tral. The DEQ cannot

claim an error to which it contributed. arm

Credit Services of Michigan's Heartland,

PCA vy. Weldon, 232 Mich.App. 662, 683-

684, 591 N.W.2d 438 (1998). Accordingly,

we will not set aside the clearly erroneous

standard here.

Const. 1963, art. 10, § 2, which we review de novo.

People v. Cain, 238 Mich.App. 95, 111, 605 N.W.2d 28

(1999).

D-35

IV. ANALYSIS

A. Trial Court's Compiiance with the Supreme Court's

Remand Order

{3}[4][5] The DEQ correctly asserts that the tral court

disregarded the specific remand instructions of our

Supreme Court. “ ‘The power of the lower court on

remand is to take such action as law and justice may

require so long as it is not inconsistent with the judgment of

the appellate court.’ ” People v. Fisher, 449 Mich. 441,

446-447, 537 N.W.2d 577 (1995) (citations omitted);

Waatti & Sons Electric Co. v. Dehko, 249 Mich.App. 641,

646, 644 N.W.2d 383 (2002). When an appellate court

remands a case without instructions, a lower court has the

“same power as if it made the ruling itself.” Fisher, supra

at 447, 537_N.W.2d 577. However, when an appellate

court gives clear instructions in its remand order, it is

improper for a lower court to exceed the scope of the order.

Waatti & Sons, supra at 646, 644 N.W.2d 383. “It is the

duty of the lower court or *545 tribunal, on remand, to

comply strictly with the mandate of the appellate court.”

Rodriguez _v. Gen. Motors Corp. (On Remand), 204

Mich. App. 509, 514, 516 N.W.2d 105 (1994).

D-36

1. The Trial Court's Findings of Fact on Remand Regarding

the Value of the Denominator Parcel

During the first trial, the trial court considered only the

value of parcel one in making its decision whether the

DEQ's denial of a wetland permit constituted a taking.

The trial court held that the DEQ's action deprived parcel

one of all its economic value and that the DEQ had taken

plaintiffs’ property. Our Supreme Court, however, held,

consistently with Lucas v. South Carolina Coastal Council,

505 U.S. 1003, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992),

that a categorical taking had not occurred. K & K II, supra

at 585-587, 575 N.W.2d 531. The Court then remanded the

case to the trial court and clearly directed the trial court to

make a new finding of fact with respect to the value of

**377 plaintiffs’ property and to include parcel two with

parcel one when doing so. Furthermore, the trial court was

clearly directed to make a finding of fact regarding whether

parcel three should also be included in its analysis. Jd. at

588, 575 N.W.2d 531. After the trial court made these

new findings of fact, the trial court was to apply the three

Penn Central factors, as mandated by our Supreme Court,

to determine whether the DEQ's action here constituted a

taking.

Unfortunately, on remand, the trial court failed to adhere to

the Supreme Court's mandates. The trial court did make a

finding of fact that parcel three should be included in its

analysis during the new trial. Furthermore, the trial court

D-37

purportedly considered parcels one, two, and three together

in its analysis, as our Supreme Court's decision required.

However, the court *546 rationalized its ruling by

contending that our Supreme Court had not specifically

disturbed its valuation of plaintiffs' property before and

after the permit denial, simply reaffirmed its finding that

the value of parcel one had diminished from nearly $6

million to zero. The court did this despite the fact that our

Supreme Court essentially foreclosed any possibility of a

finding that parcel one had a value of zero:

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 had if all of it could be developed.”

(Emphasis added.) Thus, while the regulations may have

diminished the value of plaintiffs' land, this diminution in

value would not give rise to a categorical taking.... [K & K

Il, supra at 587 n. 13, 575 N.W.2d 531 (emphasis in the

original). |

After a careful review of the trial proceedings, it is clear

that the trial court failed to include the values of a Ram's

Hom Restaurant and plaintiff JFK's office bu:iding, both

located on upland portions of parcel one. Our Supreme

D-38

Court stated that it saw “no reason for [the office building

and the restaurant} 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.” Jd. at 584 n. 9, 575 N.W.2d

531. The evidence presented during the trial after remand

shows that the Ram's Horn and the JFK office building

have a combined value of at least $1 million. Furthermore,

our Supreme Court explicitly stated that “plaintiffs were

not prohibited from developing the remaining upland on

parcel one....” K_& K JI, supra at 587, 575 N.W.2d 531.

Were the trial court to have complied *547 with our

Supreme Court's remand instructions, the trial court could

not reasonably have reaffirmed its previous finding that the

value of parcel one had been reduced to zero. For this

reason alone, the trial court's holding must be reversed.

Additionally, the trial court then found that parcels two and

three had a value of approximately $3 million. The trial

court reasoned that this value was not high enough to

“offset” the diminution in value that the court ruled parcel

one had sustained. While the trial court held that the value

of the entire “denominator parcel,” consisting of parcels

one, two, and three, had been diminished in valuc by sixty-

seven percent, from approximately $9 million to just over

$3 million, the trial court's analysis here centered on the

value of parcel one. Rather than treating the three parcels

as a single denominator parcel**378 as our Supreme Court

D-39

mandated, the trial court erroneously continued to treat

parcel one as the relevant parcel, and only considered the

values of parcels two and three to the extent that they might

“offset” the diminution in the value of parcel one. This

directly contradicts our Supreme Court's holding that any

taking analysis here must look beyond the value of parcel

one, and include the value of the entire denominator parcel.

Accordingly, we conclude that the trial court did not

comply with our Supreme Court's remand instructions with

respect to determining the value of the denominator parcel.

Because we so conclude, we hold that the trial court's

findings of fact with respect to the value of the denominator

parcel are clearly erroneous, and its decision is reversed.

2. Compliance with the Supreme Court's Order to Apply

the Facts to Penn Central

The trial court's Penn Central analysis also failed to

comply with the Supreme Court's remand instructions.*548

EN2? A trial court must “ comply strictly” with our Supreme

Court's mandate. Rodriguez, supra at 514, 516 N.W.2d

105. Here, the trial court, without an explanation of what

the factors mean, and, indeed, without so much as a *549

citation of Penn Central, devoted not much more than a

page of its analysis to this difficult, crucial, and dispositive

analysis that was clearly mandated by our Supreme Court's

remand order. Moreover, and dispositively, the tral

court's ruling simply failed to properly apply the law to the

facts.

D-40

FN29. The trial court's conclusions

regarding the three factors read, in its

entirety:

1. What is the Character of the Government

Action in this Case?

In this case, the government activity, as

noted, has taken the entire value of parcel

one with the exception of two small areas

that were developed prior to the wetland

determination in this case. Thus the

declaration of a wetland has taken, for all

intents, the entire value of the parcel as

previously found.

2. The Economic Effect of the Regulations.

This Court finds that the regulations in this

case have deprived the Plaintiffs of the

entire economic value of parcel one which is

approximately two-thirds of the value of the

entire denominator parcel.

3. The Interference with Investment-Backed

Expectations.

Clearly, Plaintiffs intended to develop parcel

one for economic gain. There is no

question from the facts of this case that

Plaintiffs have always intended to develop

parcel one. They applied for zoning and

dutifully paid commercial taxes on this

parcel for many years. In addition, this

D-41

property is not a characteristic wetland

where an owncr would likely be on notice of

potential difficulties with development.

The record showed an investment of several

millions of dollars and the loss of a huge

commercial development on parcel one.

Applying the law to these facts demonstrates

that the loss of parcel one far overshadows

parcels two and three in area and in value.

This Court finds that applying the test as

required to the entire parcel under

consideration shows a taking. This Court

reaffirms its award as previously entered for

Plaintiff [sic] together with costs and

attorney fees. Interest shall run in the

proscribed [sic] manner from the date of

taking.

For these reasons and reasons we will discuss in greater

detail below, we hold that the trial court did not comply

with our Supreme Court's remand instructions with respect

to its purported Penn Central analysis.

3. The Goga Permit and Mitigation

As outlined above, our Legislature, following the lead of

the United States Congress, passed comprehensive

legislation to protect Michigan's wetlands for the benefit of

its citizens. This represents a clear public policy

determination and statement of the importance to the

citizens of this **379 state, including property owners, of

D-42

preserving wetlands for public welfare. M.C.L. §

324.30302. Moreover, the Michigan Constitution provides

that “[t]he Jegislature shall provide for the protection of the

air, water and other natural resources of this state....”” Const.

1963, art. 4, § 52. In keeping with this mandate, the

Legislature enacted the Natural Resources and

Environmental Protection Act (NREPA), M.C.L. §

324.101 et seq., which contains the WPA. The Legislature

vests the DEQ with the responsibility for guarding our

state's valuable natural resources on behalf of the citizens

of this state. M.C.L. § 324.501.

In keeping with this constitutional and statutory scheme,

our Legislature also expressed its intent that the DEQ

should act to preserve public funds as well as public

resources by establishing a statutory framework to mitigate

damages to the state should a court find that the DEQ

“went too far” in implementing the wetland *550

regulations in a particular case. M.C.L. § 324.30323(3)

represents our Legislature's well-considered plan to serve

the dual purpose of having the DEQ protect the

environment while also protecting the pocketbooks of our

citizens by creating a mechanism to mitigate damages in

those cases where courts find that the DEQ may have gone

too far. Here, the DEQ, as our Legislature envisioned,

acted properly under the statute to mitigate damages. The

trial court should not have disregarded this legislative

mandate where the DEQ, acting to preserve the citizens’

D-43

financial resources, agreed to an alternative use of the land,

as proposed by plaintiffs, that would have allowed

substantial development of the property at issue.

The courts of this state must recognize that our

constitutionally and statutorily mandated agencies, like the

DEQ, have a difficult duty in administering complex laws

to preserve the environment for all citizens while respecting

the important private property rights of those directly

affected by the regulations. Our Legislature clearly saw

the wisdom of anticipating that, in balancing these

competing, important interests, the DEQ might err, at least

in the judgment of a judge who is asked to review a specific

application of the wetland regulations to a specific piece of

property. And, when a judge rules against the DEQ, the

state agency has the further task of again deciding how best

to preserve taxpayer dollars and the environment by

choosing the legislative options of purchasing the property,

paying the amount of the lost economic value, or taking

some other action, such as the issuance of an alternative

permit that allows greater development, but with minimal

damage to wetlands. Our courts should not ignore this

complex, important statutory mitigation scheme. This

legislative mandate is an important application of

constitutional, statutory, and administrative law that *551

must be resected and administered by our courts in the

best interests of the public. This, the trial court simply

failed to do. The statute does not allow a trial court to

D-44

deny the state a chance to mitigate a regulatory taking

judgment on the basis of the trial court's views of the DEQ.

Moreover, we agree with the trial court's original ruling

with respect to the Goga permit, and further hold that

plaintiffs waived this claim that the DEQ's appeal rendered

the Goga permit invalid. If plaintiffs truly believed that

the DEQ disobeyed that portion of the trial court's original

order regarding the Goga permit, then plaintiffs should

have sought the appropriate relief. Our review of the

record reveals no attempt by plaintiffs to seek declaratory

or other relief with respect to the Goga permit. Any claim

that the DEQ's appeal rendered the Goga permit invalid

here was waived by plaintiffs’ own **380 conduct.”

Lewis v. LeGrow, 258 Mich.App. 175, 210, 670 N.W.2d

675 (2003) (“[E]rror requiring reversal may only be

predicated on the trial court's actions and not upon alleged

error to which the aggrieved party contributed by plan or

negligence.”).

FN30. We hold only that plaintiffs have

waived any claim that the DEQ's appeal

rendered the Goga permit invalid. Nothing

in our holding prevents plaintiffs from

pursuing their right to seck issuance of a

Goga-type permit in the future.

D-45

B. The Penn Central Factors as Applied to This Case

[6] In Penn Central, the United States Supreme Court noted

that “[t}he question of what constitutes a ‘taking’ ... has

proved to be a problem of considerable difficulty.” Penn

Central, supra at 123, 98 S.Ct. 2646. The constitutional

requirement that the state provide just compensation for the

taking of one's property is “ ‘designed to bar Government

from forcing some people alone to bear public *552

burdens which, in all fairness and justice, should be borne

by the public as a whole.’ ” Jd. at 123-124, 98 S.Ct. 2646,

quoting Armstrong v. United States, 364 U.S. 40, 49, 80

S.Ct. 1563, 4 L.Ed.2d 1554 (1960). The Court stated that

taking determinations are “essentially ad hoc, factual

inquiries...."" Penn Central, supra at 124, 98 S.Ct. 2646.

{7] Since the United States Supreme Court's decision in

Penn Central, and, indeed, since our Supreme Court's

decision in K & K JI, the United States Supreme Court has

further explained its holding in Penn Central. A

governmental regulation that deprives a landowner of “all

economically beneficial use” of his or her property, is a

categorical taking that requires compensation. Palazzolo v.

Rhode Island, 533 U.S. 606, 615-616, 121 S.Ct. 2448, 150

L.Ed.2d 592 (2001), citing Lucas, supra. Here, our

Supreme Court rejected the trial court's ruling that the DEQ

had effected a categorical taking of plaintiffs’ property and

remanded the case to the trial court with the instruction to

D-46

determine, pursuant to Penn Central, whether a taking had

occurred despite the fact that plaintiffs’ property had some,

but because of the trial court's error, a yet to be determined,

remaining value. The United States Supreme Court in

Penn Central identified three factors to be examined when

a court makes such a determination:

[1] The economic impact of the regulation on the claimant

and, particularly, [2] the extent to which the regulation has

interfered with distinct investment-backed expectations are,

of course, relevant considerations. So, too, is [3] the

character of the governmental action. A “taking” may

more readily be found when the interference with property

can be characterized as a physical invasion by government

than when interference arises from some public program

adjusting the benefits and burdens of economic life to

promote the common good. [Penn Central, supra at 124,

98 S.Ct. 2646 (citations omitted). ]

*553 As we will discuss in greater detai} below, while no

one of the three factors is dispositive in and of itself, a key

factor in terms of wetland regulations is the third, the

character of the government action. Where, as here, the

regulation serves an important public interest and is

widespread and ubiquitous, we conclude that, to sustain a

regulatory taking claim, a plaintiff must prove that the

economic impact and the extent to which the regulation has

interfered with distinct investment-backed expectations are

D-47

the functional equivalent of a physical invasion by the

government of the property in question.

1. Economic Impact of the Regulation

[8] A reduction in the value of the regulated property is

insufficient, standing **381 alone, to establish a

compensable regulatory taking. Penn Central, supra at

131, 98 S.Ct. 2646. Indeed, the Supreme Court in Penn

Central cited two of its previous opinions in which the

Court refused to hold that there was a regulatory taking:

Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S.Ct. 114, 71

L.Ed. 303 (1926), in which a zoning regulation resulted in a

seventy-five percent diminution in value, and Hadacheck v.

Sebastian, 239 U.S. 394, 36 S.Ct. 143, 60 L.Ed. 348

(1915), in which the regulation resulted in an 87.5 percent

diminution.

Here, the DEQ's initial refusal to grant the requested permit

unquestionably caused some decrease in the value of the

property. After the second tnal, the trial court held,

erroneously, that the value had declined from a value

before the denial of the permit of approximately $8.94

million to a value after denial of approximately $3 million,

which represents a diminution of value of approximately

sixty-seven percent. Even under this incorrect, inflated

“damage calculation,” plaintiffs *554 failed to demonstrate

a sufficient decrease in value to constitute a compensable

D-48

regulatory taking under Penn Central; Euclid, and

Hadacheck.*™?'

FN31. Indeed, in Lucas, the Court noted that

it is quite possible for a landowner to suffer

a ninety-five percent diminution in value as

the result of a regulatory action and

nevertheless be unable to establish a

regulatory taking. Lucas, supra at 1019 n. 8,

ea 112 S.Ct. 2886.

However, as we discussed above, the trial court not only

failed to account for the substantial value of the land that

could have been developed pursuant to the Goga permit,

worth at least $2.8 million, as it had after the first trial, but

it also did not include the approximate $1 million value of

the Ram's Horn and JFK office building. Accordingly, the

proper value after denial for the denominator parcel would

-be approximately $5.8 to $6.8 million, which represents a

decrease in value of approximately twenty-four to thirty-

three percent. While this diminution of value is significant,

we conclude that this figure most certainly does not weigh

in favor of a finding that the DEQ's actions constitute a

FN32

compensable regulatory taking.

FN32. This conclusion is supported by the

fact that far greater diminutions of value

have been found not to give nse to taking

claims. See Euclid, supra, and Hadacheck,

supra; see also William C. Haas & Co., Inc.

v. City & Co. of San Francisco, 605 F.2d

D-49

1117, 1120 (C.A.9, 1979) - (ninety-five

percent diminution in value). Moreover,

the Supreme Court has held time and again

that even a significant diminution in value is

not enough on its own to establish a

regulatory taking. See Penn Central, supra

at_131, 98 S.Ct. 2646; Concrete Pipe and

Products of California, Inc. v. Constr.

Laborers Pension Trust, 508 U.S. 602, 645,

113 S.Ct. 2264, 124 L.Ed.2d 539 (1993).

Moreover, as we discussed above, plaintiffs could have

developed the land pursuant to the Goga permit, and could

possibly have increased the value of the land, or, at the very

least further mitigated any loss in value but for their

unjustifiable inaction.

*555 2. Plaintiffs’ Distinct Investment-Backed Expectations

{9] A court must also examine the extent to which the

regulation has interfered with the property owner's

“reasonable investment-backed expectations.” Palazzolo,

supra at 618, 121 S.Ct. 2448, citing Penn Central, supra at

124, 98 S.Ct. 2646. A key factor is notice of the

applicable regulatory regime, here wetland regulations.

The Supreme Court in Palazzolo rejected the principle that

the purchase of property after the enactment of a wetland

regulation absolutely bars a taking claim. Palazzolo, supra

at 626-630, 121 S.Ct. 2448.*™*3 However, notice of such

regulations**382 should nevertheless be taken into

D-50

account. EN3:

In her separate concurrence in Palazzolo,

Justice O'Connor explained the importance of notice:

FN33. Indeed, the Court stated, “A blanket

rule that purchasers with notice have no

compensation right when a claim becomes

ripe is too blunt an instrument to accord with

the duty to compensate for what is taken.”

Id. at 628, 113 S.Ct. 2264.

FN34. See Cordes, The Effect of Palazzolo

v. Rhode- Island on _ Takings and

Environmental Land Use Regulation, 43

Santa Clara L. R. 337, 376 (2003), citing the

concurring opinion of Justice O'Connor in

Palazzolo, supra at 635, 121 S.Ct. 2448;

Justice Stevens, dissenting in part and

concurring in part, id. at 637-645, 121 S.Ct.

2448; and Justice Ginsburg's dissent, id. at

645 n. 3, 121 S.Ct. 2448.

As the Court holds, the Rhode Island Supreme Court erred

in effectively adopting the sweeping rule that the

preacquisition cnactment of the use restriction ipso facto

defeats any takings claim based on that use restriction...

The more difficult question is what role the temporal

relationship between regulatory enactment and_ title

acquisition plays in a proper Penn Central analysis.

Today's holding does not mean that the timing of the

regulation's enactment relative to the acquisition of title is

immaterial to the Penn Central analysis. Indeed, it would

be just as much error to expunge this consideration from

D-51

the takings inquiry as it would be to accord it exclusive

significance. Our polestar instead remains the principles

set forth in Penn Central itself and our other cases that

govern partial *556 regulatory takings. Under these cases,

interference with investment-backed expectations is one of

a number of factors that a court must examine. Further,

the regulatory regime in place at the time the claimant

acquires the property at issue helps to shape the

reasonableness of those expectations. {Palazzolo, supra at

632-633, 121 S.Ct. 2448 (O'Connor, J., concurrmng)

(emphasis added). ]

In other words, equity is no better served by ignoring a

claimant's knowledge of existing land-use regulations than

it would be by holding that the claimant's knowledge of

those regulations absolutely barred recovery regardless of

how inequitable those regulations might be.

[1]f existing regulations do nothing to inform the analysis,

then some property owners may reap windfalls and an

important indicium of fairness is lost. As I understand it,

our decision today does not remove the regulatory

backdrop against which an owner takes title to property

from the purview of the Penn Central inquiry. It simply

restores balance to that inquiry. [Jd. at 635, 121 S.Ct.

2448.)

D-52

The WPA was originally enacted as the Goemaere-

Anderson Wetland Protection Act in 1979.F8* Here,

plaintiffs acquired title to the property in 1986. And, as

plaintiffs themselves point out, JFK and Kosik are

experienced commercial land developers with extensive

knowledge of land-use regulations. *° This knowledge

and experience logically must be taken into account when

determining what plaintiffs’ reasonable, investment-backed

expectations were with respect to the denominator parcel

and in determining the extent of the WPA's effect on those

expectations. Despite this admitted extensive commercial

land development and *557 legal expertise, plaintiffs

nonetheless claim that they were unable to discover a

EN37 Given _ the

significant **383 area of wetland on the denominator

twenty-seven-acre area of wetlands.

parcel and plaintiffs’ experience in commercial land

development, together with their notice of wetland

regulations, we conclude that a reasonable person with the

extensive expertise that plaintiffs possess would have

notice of the existence of both the wetlands and the WPA.

FN35. The WPA was later reenacted as Part

303 of the Natural Resources and

Environmental Protection Act of 1994.

FN36. Indeed, Kosik is a lawyer by training.

FN37. Plaintiffs claim that the wetland was

“not characteristic” because it was sandy;

however, there is evidence, in the form of

D-53

the DEQ's initial permit denial letter, that

the wetland consisted of sand because

“someone” had filled it in with sand. We

also note that plaintiffs had begun

attempting to develop the wetland area over

an unspecified time before Waterford

Township officials sent them a cease-and-

desist letter.

As Palazzolo teaches us, the mere fact that plaintiffs had

notice of the WPA does not end the inquiry with respect to

their reasonable, investment-backed expectations and the

effect of the governmental regulation challenged here.

However, as Justice O'Connor explained, plaintiffs’ notice

of the WPA does help shape the analysis of whether

plaintiffs’ expectations were reasonable. Plaintiffs’ alleged

actual expectations involved building a_ forty-two-acre

restaurant/sports complex on parcel one. However, with

their experience, notice of the WPA, and the fact that

twenty-seven acres of wetland existed on parcel one, this

expectation was not reasonable. Looking at the

denominator parcel as a whole, a reasonable expectation

would be that plaintiffs would be able to develop the

upland areas of the denominator parcel that are not

wetlands. Indeed, there has been significant development

on parcels two and three. On parcel one, there has been

some development on the upland, including the

construction of an office building and a restaurant. And

the Goga permit allows plaintiffs to utilize the remaining

upland, as well as *558 some of the wetland acreage

D-54

(contingent upon the conversion of other, non-wetland

acreage to wetland). The fact that plaintiffs have chosen

not to make use of the Goga permit is wholly irrelevant to

our analysis. | However, when we consider the actual

development of the entire denominator parcel, together

with the development potential afforded plaintiffs by the

Goga permit, it is clear that there has not been a significant

negative effect on plaintiffs’ reasonable investment-backed

expectations.

Plaintiffs acquired the denominator parcel for the purpose

of commercial development. On this parcel, they have

constructed apartment homes, a restaurant, and an office

building, with a total value of at least $5.8 million.

Furthermore, the record shows that, while a significant

portion of the parcel consists of wetland, there is

nevertheless a significant area of upland that may be

commercially developed. Plaintiffs claim, but failed to

prove, that the DEQ's refusal to allow plaintiffs to fill in the

entire wetland portion of the denominator parcel has

thwarted their reasonable, investment-backed expectations.

This simply is not supported by the evidence.

Accordingly, we hold that the effect of the governmental

regulation on plaintiffs’ reasonable, investment-backed

expectations weighs against a conclusion that a taking has

occurred.

D-55

3. Character of the Government Action

[10}[11]{12] This factor requires a court to place the

challenged regulatory action along a spectrum ranging from

an actually physical taking on one extreme, to a far-

reaching, ubiquitous governmental regulation that provides

all property owners with an “average reciprocity of

advantage” on the other. As the United States *559

Supreme Court explained, “A ‘taking’ may more readily be

found when the interference with property can be

characterized as a physical invasion by government than

when interference arises from some public **384 program

adjusting the benefits and burdens of economic life to

promote the common good.” Penn Central, supra at 124,

98 S.Ct. 2646. Clearly, this case does not involve a

physical taking. The relevant inquiries are whether the

governmental regulation singles plaintiffs out to bear the

burden for the public good and whether the regulatory act

being challenged here is a comprehensive, broadly based

regulatory scheme that burdens and benefits all citizens

relatively equally. See Walcek v. United States, 49 Fed.Cl.

248, 270 (2001); R & Y, Inc. v. Anchorage, 34 P.3d 289,

298 (Alaska, 2001). *® In Penn Central, the Supreme

Court rejected the plaintiffs’ argument that the New York

City law that designated certain property as historic, and

thus restricted the use and development of that property,

served to single out the plaintiffs to carry the burdens of the

regulation:

D-56

FN38. We are not bound by the decisions of

the courts of other states; however, we may

look to these regulatory taking decisions as

persuasive authority. See Farm Bureau

Mut. Ins. Co. v. Buckallew, 246 Mich.App.

607, 614 n. 6, 633 N.W.2d 473 (2001).

{[A]ppellants' repeated suggestions that they are solely

burdened and unbenefited is factually inaccurate. This

contention overlooks the fact that the New York City law

applies to vast numbers of structures in the city in addition

to the Terminal-all the structures contained in the 31

historic districts and over 400 individual landmarks, many

of which are close to the Terminal. Unless we are to reject

the judgment of the New York City Council that the

preservation of landmarks benefits all New York citizens

and all structures, both economically and by improving the

quality of life in the city as a whole-which we are unwilling

to do-we cannot conclude that the owners of the *560

Terminal have in no sense been benefited by the

Landmarks Law. [Penn Central, supra at_134-135, 98

S.Ct. 2646. ]

Indeed, even the dissent in Penn Central noted in language

equally applicable to this state's wetland regulations, that

regulation in and of itself does not constitute a taking if it

applies to a widespread group of landowners:

D-57

[A] taking does not take place if the prohibition applies

over a broad cross section of land and thereby “secure[s] an

average reciprocity of advantage.” It is for this reason that

zoning does not constitute a “taking.” While zoning at

times reduces individual property values, the burden is

shared relatively evenly and it is reasonable to conclude

that on the whole an individual who is harmed by one

aspect of the zoning will be benefited by another.

... For the reasons noted in the text, historic zoning, as has

been undertaken by cities such as New Orleans, may well

not require compensation under the Fifth Amendment. [Jd.,

supra at 147, 98 S.Ct. 2646 (Rehnquist, J., dissenting)

(citations deleted; emphasis in the onginal).]

Michigan's wetland regulations, like zoning regulations, are

comprehensive and universal throughout this state. The

federal government enacted the CWA, which permits the

regulation-of wetlands, and our Legislature enacted the

WPA to protect wetlands in_ this state -N? Our

Legislature**385 made clear, within the very text of the

WPA, that the regulation and protection of Michigan's *561

wetlands is intended to benefit the people of this state in a

variety of ways. All property owners in this state share

these benefits relatively equally, and all property owners

and, all prospective owners are relatively equally subject to

the burdens placed on much of the property in this state by

the wetland regulations.

D-58

FN39. See K_& K JI, supra at 61, 551

N.W.2d 413 (“[T]he state has a legitimate

interest in preserving and_ protecting

wetlands.”), citing Attorney General ex rel

Dep't of Natural Resources v. Huron Co. Rd.

Comm., 212 Mich.App. 510, 516, 538

N.W.2d 68 (1995) (“ ‘[t]he primary purpose

of the WPA is to ensure that wetland

habitats are preserved and protected’ ”);

Brace v. United States, 48 Fed Cl 272, 278,

279 (2000) (noting that Congress passed the

CWA in part to protect wetlands. The court

noted that “[t]here is no question that the

systemic destruction of the Nation's

wetlands is causing serious, permanent

ecological damage.”).

Applying a similar analysis, the Alaska Supreme Court

held that the regulatory action being challenged in R & Y,

Inc. was a “wetlands preservation scheme which applies

broadly to all landowners and which benefits both the

public generally and the landowners in particular.” R & Y,

Inc., supra at 298. The court then noted that, as in this

state, “[s]cientists and legislators have recognized the

unique ecological and economic value that wetlands

provide in protecting water quality, regulating local

hydrology, preventing flooding, and preventing erosion.”

Id FN40

FN40. It is worth noting that the Alaska

Supreme Court held that the Alaska state

D-59

constitution provides greater protections for

property owners than the United States

Constitution does under the Fifth

Amendment. R & Y, Inc., supra at 293.

Our Supreme Court has adopted the United

States Supreme Court's Penn Central test,

signaling that our Supreme Court has

decided that the Michigan Constitution

provides no greater protection for property

owners than that provided by the Fifth

Amendment. Though Alaska's constitution

provides greater property protections than

do the United States Constitution and the

Michigan Constitution, the Alaska Supreme

Court nevertheless held that enforcement of

the challenged wetlands regulations did not

effect a compensable taking of the plaintiff's

property. /d. at 300.

The United States Court of Claims has similarly stated that

“Congress attempted to protect wetlands while dealing with

the concerns of private individuals.” Brace v. United

States, 48 Fed Cl 272, 279 (2000). The court also

expiained that “the existence of the wetland regulations in

question ... indisputably *562 serve an important public

purpose-one which benefits plaintiffs as members of the

public at large.” Walcek, supra at 270.

Similarly, plaintiffs here cannot establish that the WPA's

enforcement has the effect of singling out plaintiffs to bear

the burden of a public benefit. What the federal Court of

Claims said about federal wetland regulations is equally

D-60

applicable to Michigan: “the [CWA] and the wetlands

regulations issued thereunder are generally applicable to all

similarly situated property owners and can in no way be

viewed as being directed at plaintiffs.” Walcek, supra at

270.

Again, the Alaska Supreme Court's reasoning in rejecting

the plaintiff's taking claim in R & Y, Inc., applies here:

[T]he landowners were not singled out and made to suffer

unduly burdensome economic loss. Instead, they incurred

only relatively minor economic loss due to generally

applicable wetlands restrictions which govern all land use

... and benefit all landowners, including these landowners,

by preserving the ecologically and economically valuable

functions of wetlands. [R & Y, Inc., supra at 300.] LENAI}

FN41. Though the alleged economic effect

in R & Y is less than the alleged economic

effect here, the reasoning and analysis of R

& Y are equally applicable here.

Here, plaintiffs are simply not being singled out by the

WPA. The WPA provides a regulatory framework that

applies to all property owners in this state for the benefit of

all landowners. Indeed, were we to **386 uphold the trial

court's award, we would, in effect, single out plaintiffs to

their benefit, because compensating plaintiffs for the loss of

value of their property, especially when it has a significant

D-61

amount of value and development potential remaining,

would be tantamount to *563 making the plaintiffs exempt

from the regulation of wetlands, to the detriment of others

who bear the burden of wetland regulations throughout the

state.

Accordingly, we conclude that the character of the

government action was a wide-reaching, regulatory action

that seeks to protect the rights of the public and to provide

an “average reciprocity of advantage,” and that this factor

weighs heavily against finding that a compensable

regulatory taking has occurred here."

FN42. Indeed, we note that the historical

district preservation regulations upheld in

Penn Central were far less universal and

ubiquitous, and much closer to singling out

individual property owners, than the wetland

regulations challenged here. The Supreme

Court in Penn Central nevertheless held that ;

the regulation benefited the public as a

whole, which weighed heavily against

finding that a taking had occurred. Sce

Penn Central, supra at 134-135, 98 S.Ct.

2646.

V. CONCLUSION

Because the challenged land-use regulation here, like

traditional zoning, is comprehensive and universal so that

plaintiffs are relatively equally benefited and burdened by

D-62

the challenged regulation as other similarly situated

property owners, because plaintiffs purchased the land with

knowledge of the regulatory scheme, and because plaintiffs

have made and can make valuable use of their land despite

the application of this regulation, we conclude that

compensation is not required under Penn Central.

Therefore, we hold that plaintiffs have failed to establish

that the DEQ's regulatory action here constituted a

compensable regulatory taking of their property.

Consequently, we reverse the trial court's judgment in favor

of plaintiffs and enter judgment in favor of the DEQ. See

MCR 7.216(A)(7).

**387 *564 APPENDIX

Tabular or graphic material set at this point is not

displayable.

Mich.App.,2005.

K & K Const., Inc. v.

Department of Environmental Quality

267 Mich.App. 523, 705 N.W.2d 365

END OF DOCUMENT

D-63

STATE OF MICHIGAN

COURT OF CLAIMS

K & K CONSTRUCTION, INC.

JFK INVESTMENT CO., L.L.C.,

(Successors-in-interest to Resorts and

Company and the JFK Company)

Plaintiffs,

File No. 88-012120-CM

Honorable William E. Collette

VS.

Court of Appeals No. 168393

Supreme Court No. 106712

THE MICHIGAN DEPARTMENT OF

ENVIRONMENTAL QUALITY,

(Successor-in-interest to the DNR)

and STATE OF MICHIGAN,

Defendants.

ROBERT L. BUNTING (P24212)

Attorney for Plaintiffs

3550 Hosner Rd.

P.O. Box 7

Oxford, MI 48371

(248) 628-5150

RICHARD L. HOFFMAN (P60159)

Of Counsel to Robert L. Bunting

436 S. Broadway, Ste. C

Lake Orion, MI 48362

(248) 693-6245

E-]

ROBERT CHARLES DAVIS (P40155)

The Davis Law Group, P.C.

Of Counsel to Robert L. Bunting

12900 Hall Rd., Ste. 350

Sterling Heights, MI 48313 -1151

S. PETER MANNING (P45719)

Assistant Attorney General

Natural Resources Division

Attorney for Defendants

Knapp's Office Centre, Ste. 530

300 S. Washington Square

Lansing, MI 48913

(517) 335-1488

JUDGMENT OF THE COURT

At a session of said Court held in the

Courthouse located in the City of _Mason

State of Michigan on _Sept. 30 , 2002.

PRESENT: HONORABLE ;

COURT OF CLAIMS JUDGE

The Court being duly advised in the premises, and

having reviewed the Plaintiffs’ Motion for Entry of Judgment;

NOW THEREFORE, IT IS HEREBY ORDERED

AND ADJUDGED that judgment shall enter in favor of the

Plaintiffs and against the Defendants, the State of Michigan

and Department of Environmental Quality, jointly and

severally, in the amount of Five Million Nine Hundred Forty-

E-2

One Thousand One Hundred Eighty-One Dollars

($5,941,181.00), together with interest, costs and attorney fees

as set forth herein.

The Court orders that statutory interest pursuant to

MCL 438.31 from the date of taking November 3, 1998, until

the date of the Complaint was filed shall be taxed and

statutory interest pursuant to MCL 600.6455 shall be taxed

and compounded annually from the date of filing the

Complaint until the Judgment is satisfied in full; the Court

finds that interest appropriately taxed compounded annually

on the judgment makes the judgment plus interest in favor of

the Plaintiffs and against the Defendants, jointly and

severally, in the amounts of Fifteen Million Eight Hundred

Five Thousand Three Hundred Eighty-Eight Dollars and

Eighty-Three cents ($15,805,388.83) through June 30, 2002,

and such interest will continue to accrue and be taxed on the

judgment until the judgment is satisfied in full.

The Court further finds pursuant to MCR 2.403(0)8

that Mediation/Case Evaluation sanctions are awardable in

favor of the Plaintiffs and against the Defendants thereby

entitling Plaintiffs to reasonable attorney fees and costs.

IT IS THEREFORE ORDERED AND ADJUDGED

the Court taxes costs in the amount of One Hundred Fifteen

Thousand Nine Hundred Seven Dollars and Ninety-Seven

cents ($115,907.97) and attorney fees at the rate of Two

Hundred Twenty-Five Dollars ($225.00) per hour for attorney

Robert L. Bunting, and One Hundred Eighty Dollars

E-3

($180.00) per hour for attorney Richard L. Hoffman, One

Hundred Eighty Dollars ($180.00) per hour for attorney

Robert C. Davis and reduced to One Hundred Dollars

($100.00) per hour for Robert C. Davis and Richard L.

Hoffman while assisting Mr. Bunting which total amount is

Five Hundred Thirty-Eight Thousand Five Hundred Forty

Dollars and Twenty-Five cents ($538,540.25) plus Seventy

Thousand Three Hundred Dollars ($70,300.00) Dollars for

attorney fees taxed in the first trial for a total amount of Six

Hundred Eighty Thousand Eight Hundred Forty Dollars and

Twenty-Five cents ($680,840.25). The costs and attorney

fees are awarded to Plaintiffs against the Defendants, jointly

and severally, with interest accruing from entry of judgment.

THEREFORE, the Court enters judgment in favor of

the Plaintiffs and against the Defendants ordering the

Defendants, jointly and severally to pay Sixteen Million Four

Hundred Eighty-Six Thousand Two Hundred Twenty-Eight

($16,486,228.00) with interest accruing until judgment is

satisfied in full.

This Judgment resolves the last pending claim and

closes the case.

9/30/02 /s/ William Collette

JUDGE WILLIAM COLLETTE

COURT OF CLAIMS JUDGE

E-4

STATE OF MICHIGAN

COURT OF CLAIMS

K & K CONSTRUCTION, INC., et al.,

Plaintiffs,

File No. 88-12120-CM

OPINION AND ORDER

Judge William E. Collette

MICHIGAN DEPARTMENT OF

ENVIRONMENTAL QUALITY

and the STATE OF MICHIGAN,

Defendants.

This matter is on remand from the Michigan Supreme

Court. This Court has been asked to review two questions:

1. Should parcel three be included in the

denominator parcel for taking evaluation?

2. Applying the balancing analysis to the

overall final parcel determined above has

there been a taking requiring the payment of

compensation to the Plaintiffs?

F-]

What is the Denominator Parcel for Takings Analysis?

This Court previously ruled that only parcel one

should be considered when determining the denominator for

takings analysis. After review, the Supreme Court overruled

this Court and determined that parcels two and four must be

included in the denominator. Further, that this Court should

determine from the facts on the record whether or not parcel

three should also be included in the denominator.

After this case was remanded to this Court, the parties

have stipulated that parcel four should not be included in the

denominator parcel since it was purchased after November 3,

1988, which has been already fixed as the date of taking in

this matter.

While the above fact, in and of itself, does not swing

the balance in Plaintiffs’ favor in this Court’s analysis, it does

demonstrate the manner in which this case has been handled

by the Defendants. Clearly, parcel four should never have

been argued to be part of the denominator in this Court or the

appellate courts, yet it was until recently so presented. The

facts demonstrate that parcel four was purchased so that

parcel two could be fully developed. Under the zoning laws

of Waterford Township, Plaintiffs needed to have more

acreage in order to build apartments on parcel two.

Obviously, parcel one, being contiguous with parcel two,

could have been used for this purpose if its zoning were

compatible and if the township found a unity of use between

F-2

parcels one and two. Because this was not the case, Plaintiffs

needed parcel four, bought after 1988, to make an economic

use of parcel two.

Getting back to the issue posed by the Supreme Court,

this Court must review the facts to determine if parcel three

should be included with parcels one and two.

The facts demonstrate that parcels one, two and three

were, at one time, part of a larger parcel of what was

originally farm land along M-59 in Oakland County. Through

a series of often confusing real estate transactions, the

ownership of these three parcels came into the hands of Mr.

Kosik and his wife. Through various means, the zoning of

these parcels was altered to make parcel one commercial.

Parcels two and three are zoned multiple family residential.

Parcel one is located along M-59, and is one of the last

(if not the last) undeveloped pieces of land along that highway

in Waterford Township. Obviously, its retail value in 1988

was tremendous. Previously this Court determined that the 55

acres were worth $5,941,181 as of November 3, 1988. This

valuc has not been disturbed by the Supreme Court, therefore,

this Court will continue to rely upon that figure for a takings

analysis of parcel one.

This Court also determined previously that the

configuration of the wetlands on parcel one is such that,

except for some rather limited areas around the edges, the

entire 55 acres is rendered unusable for any meaningful

commercial devclopment by the Plaintiffs.

F-3

On the other hand, testimony has demonstrated that

both parcel two and parcel three are developed with

significant apartments constructed on them. These parcels,

because of their location, have been and are commercially

viable. This Court has previously held that a part of parcel

two is also a wetland that connects with parcel one. There are

no wetlands on parcel three.

Testimony has been clear that all three parcels, while

adjoining each other, have been developed along distinctly

differing paths. Obviously, it would have been commercially

unreasonable to contemplate apartments along M-59 both

economically and esthetically. The record also demonstrated

that parcel three was in the stages of development well before

November 3, 1988, and thus it is clear that the developer

treated it as a separate unit well before any determination of

the extent of the wetlands on parcel one occurred. This is

important here since if the Plaintiffs had been aware of the

potential wetland problems with parcel one before work on

parcel three had began, it may have been possible to develop

a plan to use at least some of parcel one in conjunction with

parcels two and three. Also, later some part may well have

been usable to add acreage to the overall land area of parcel

two to avoid the need to buy parcel four.

This Court also notes that parcel three was really part

of another complex of apartments built across a major street

and were never part of a plan to develop parcel one. Also,

when parcel three was sold it was sold with another parcel

across the street.

While the above factors are important, it is apparent

that in looking at the overall prior ownership of parcels one,

two and three, it is this Court's opinion that all should be

considered together for the takings analysis ordered by the

Supreme Court. The facts clearly show that the Plaintiffs here,

in one way or another, were continually involved in the

purchase and development of each of the parcels. Each was

once part of a larger whole and were developed at least in part

by Plaintiffs. Thus, for a takings analysis of economic

viability, this Court will consider them as onc.

The facts have shown that parcel one has huge

economic value even in its undeveloped state, given its prime

location along M-59 in Waterford Township. Throughout its

ownership by the Plaintiffs it has been considered as such and

maintained with development in mind. The facts demonstrate

that for over 25 years Plaintiffs have dutifully paid

commercial taxes on it They also sought and were granted

commercial zoning on the parcel and often mowed it to keep

the area from being unsightly.

Plaintiff presented expert testimony before this Court

on remand that has demonstrated that the apartments on

parcels two and three, while substantial do not overshadow

the economic impact on the overall losses to Plaintiff by the

taking of parcel one.

This Court has been directed to apply a balancing

analysis to this case. Our Supreme Court has wisely

determined that there must be an examination of three factors:

1) The character of the government 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. In making analysis, this

Court has to compute the actual value of all of the property

and determine and apply the above test.

In determining the value to be applied to the overall

parcels one, two and three combined, this Court is mindful

that there has been significant changes in some of the property

since the original taking and trial in this case. Parcel four has

been bought. Apartments have been constructed on parcel

two. Parcels two and three have been sold. This Court

believes that these transactions should be considered by this

Court in determining the value to be placed on parcels two

and three. Thus, if Plaintiffs had realized significant economic

profit from the sales of these properties, that higher value

might well off-set substantially the loss of viability of parcel

one.

The evidence demonstrates that the apartments on

parcel three, which were already built in 1988, were sold

along with those on parcel two for little or no actual profit. It

would seem to this Court that we must then take the land

value for parcel two as of 1988 which this Court believes to

be $398,000 based on the testimony of Mr. Stoppert and Mr.

F-6

Mawson. This Court also determines that the apartments on

parcel three had a value of $3,000,000 in 1988 based on the

testimony of the same experts. Thus, to compute the actual

value of the overall parcel in 1988, we add together the values

above to the $5,941,181 this Court has already fixed as to

parcel one. This total is $9,339,181. This Court finds this to

be the overall value of the property.

1. What is the Character of the Government Action

in this Case?

In this case the government activity, as noted, has

taken the entire value of parcel one with the exception of two

small areas that were developed prior to the wetland

determination in this case. Thus the declaration of a wetland

has taken, for all intents, the entire value of the parcel as

previously found.

2. The Economic Effect of the Regulations.

This Court finds that the regulations in this case have

deprived the Plaintiffs of the entire economic value of parcel

one which is approximately two-thirds of the value of the

entire denominator parcel.

3. The Interference with Investment-Backed

Expectations.

Clearly, Plaintiffs intended to develop parcel one for

economic gain. There is no question from the facts of this

case that Plaintiffs have always intended to develop parcel

one. They applied for zoning and dutifully paid commercial

taxes on this parcel for many years. In addition, this property

F-7

is not a characteristic wetland where an owner would likely be

on notice of potential difficulties with development. The

record showed an investment of several millions of dollars

and the loss of a huge commercial development on parcel one.

Applying the law to these facts demonstrates that the loss of

parcel one far cvershadows parcels two and three in area and

in value.

Conclusion

This Court finds that applying the test as required to

the entire parcel under consideration shows a taking. This

Court reaffirms its award as previously entered for Plaintiff

together with costs and attorney fees. Interest shall run in the

proscribed manner from the date of taking.

Dated: _ 5/24/02 /s/ William E. Collette

William E. Collette (P 12056)

F-8

STATE OF MICHIGAN

COURT OF CLAIMS

K & K CONSTRUCTION, INC., et al.,

Plaintiffs,

File No. 88-12120-CM

PROOF OF MAILING

Judge William E. Collette

MICHIGAN DEPARTMENT OF

ENVIRONMENTAL QUALITY

and the STATE OF MICHIGAN,

Defendants.

I certify that on this date copies of the Opinion and

Order dated May 24, 2002 were served upon S. Peter

Manning and Robert L. Bunting by ordinary mail.

/s/ Shawn Collins

Shawn Collins, Judicial Assistant

Dated: _May 24, 2002

525 U.S. 1034, 119 S.Ct. 577,

142 L.Ed.2d 481 67 USLW 3363

Supreme Court of the United States

K & K CONSTRUCTION, INC., et al., petitioners,

MICHIGAN DEPARTMENT OF

NATURAL RESOURCES, et al.

No. 97-1957.

Nov. 30, 1998.

Former decision, 525 U.S. 819, 119 S.Ct. 60.

Petition for rehearing denied.

Copr. (C) West 2006 No Claim to Orig.

U.S. Govt. Works U.S., 1998

K & K Const., Inc. v.

Michigan Dept. of Natural Resources, et al.

525 U.S. 1034, 119 S.Ct. 577, 142 L.Ed.2d 481,

67 USLW 3363

Bnefs and Other Related Documents (Back to top)

0 1998 WL 34103491 (Appellate Petition, Motion and Filing)

Petition for Writ of Certiorari (Jun. 03, 1998) Original Image

of this Document with Appendix (PDF)

END OF DOCUMENT

G-]

525 U.S. 819, 119 S.Ct 60, 142 L.Ed.2d 47,

66 USLW 3790, 67 USLW 3230,

67 USLW 3213, 67 USLW 3009

Briefs and Other Related Documents

Supreme Court of the United States

K & K CONSTRUCTION, INC., et al., petitioners,

MICHIGAN DEPARTMENT OF NATURAL

RESOURCES, et al.

No. 97-1957.

Oct. 5, 1998

Rehearing Denied Nov. 30, 1998

See 525 U.S. 1034, 119 S.Ct. $77.

Case below, 456 Mich. 570, 575 N.W.2d 531.

Petition for writ of certiorari to the Supreme Court of

Michigan denied.

Copr. (C) West 2006 No Claim to Orig.

U.S. Govt. Works U.S., 1998

K & K Const., Inc. v.

Michigan Dept. of Natural Resources

525 U.S. 819, 119 S.Ct 60, 142 L.Ed.2d 47,

66 USLW 3790, 67 USLW 3230,

67 USLW 3213, 67 USLW 3009

Briefs and Other Related Documents (Back to top)

H-]

* 1998 WL 34103491 (Appellate Petition, Motion and

Filing) Petition for Writ of Certiorari (Jun. 03, 1998)

Original Image of this Document with Appendix (PDF)

END OF DOCUMENT

456 Mich. 570, 575 N.W. 24 531,

28 Envtl. L. Rep. 251,156

Briefs and Other Related Documents

Supreme Court of Michigan.

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

and Resorts and Company,

Plaintiffs-Appellees,

DEPARTMENT OF NATURAL RESOURCES,

Defendant-Appellant.

Docket No. 106712.

Calendar No. 13.

Argued Nov. 5, 1997.

Decided March 24, 1998.

Landowners filed action against Department of Natural

Resources (DNR), alleging that denial of their application

for permit to fill wetlands constituted a taking. The Court

of Claims, William E. Collette, J., ruled that DNR was

required to compensate owners. DNR appealed. The

Supreme Court, Michael F. Cavanagh, J., held that: (1) at

least three parcels, rather than one parcel, were to be

included in denominator parcel; (2) owners’ land was not

categorically taken; and (3) trial court was required to

determine if taking had occurred under balancing test.

Reversed in part and remanded.

West Headnotes

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

(Formerly 148k2(1))

In case of a categorical taking, which is a taking that

deprives owner of all economically beneficial or productive

use of land, reviewing court need not apply case-specific

analysis, and owner should automatically recover for taking

of his property. U.S.C.A. Const.Amend. 5; M.C.L.A.

Const. Art. 10, § 2.

148 Eminent Domain

148] Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

(Formerly 148k2(1))

Eminent Domain 148 <=2.10(1)

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

[-2 :

Powers Distinguished

148k2.10 Zoning, Planning, or Land Use;

Building Codes

148k2.10(1) k. In General. Most Cited Cases

(Formerly 148k2(1))

Person may recover for categorical taking in case of

physical invasion of his property by government, or where

regulation forces owner to sacrifice all economically

beneficial uses of his land in name of common good.

U.S.C.A. Const.Amend. 5; M.C.L.A. Const. Art. 10, § 2.

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2-What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.10 Zoning, Planning, or Land Use; Building

Codes

148k2.10(1) k. In General. Most Cited Cases

(Formerly 148k2(1))

In analyzing whether categorical taking has occurred in

situation in which owner has not been deprived of all

economically beneficial or productive use of land,

reviewing court must engage in an ad hoc, factual inquiry,

centering on three factors: (1) character of government’s

action, (2) economic effect of regulation on property, and

(3) extent by which regulation has interfered with distinct,

[-3

investment-backed expectations. U.S.C.A. Const.Amend.

5; M.C.L.A. Const. Art. 10, § 2.

[4] Eminent Domain 148 2.1

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

(Formerly 148k2(1))

In conducting takings analysis, courts should not divide a

single parcel of land into discrete segments and attempt to

determine whether rights in a particular segment have been

entirely abrogated. U.S.C.A. Const.Amend. 5; M.C.L.A.

Const. Art. 10, § 2.

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.2 k. Particular Acts and Regulations. Most

Cited Cases

(Formerly 148k2(1))

Three contiguous parcels, rather than one parcel alone,

were part of the denominator to be considered in

conducting takings analysis; same party was the title owner

of all three parcels, and comprehensive development plan

1-4

existed encompassing all three parcels. U.S.C.A.

Const.Amend. 5; M.C.L.A. Const. Art. 10, § 2.

{6] Eminent Domain 148 €=>221

148 Eminent Domain

148III Proceedings to Take Property and Assess

Compensation

148k213 Assessment by Jury

148k221 k. Questions for Jury. Most Cited Cases

Determining size of denominator parcel to be analyzed in

takings analysis is inherently a factual inquiry. U.S.C.A.

Const.Amend. 5; M.C.L.A. Const. Art. 10, § 2.

148 Eminent Domain

148I Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

(Formerly 148k2(1))

Failure to include parcel of land in development plan

should not, by itself, exclude that parcel from consideration

as part of the denominator in conducting takings analysis.

U.S.C.A. Const.Amend. 5; M.C.L.A. Const. Art. 10, § 2.

I-5

[8] Eminent Domain 148 2.2

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.2 k. Particular Acts and Regulations. Most

Cited Cases

(Formerly 148k2(1))

Although there is no single set of factors or “test” that trial

court should apply when determining extent of the

denominator parcel in conducting takings analysis, court

should consider extent of plaintiffs’ ownership interest in

relevant parcels, contiguity of parcels, and extent to which

parcels have been treated as a single unit; some other

factors that may be instructive include whether relevant

parcels were part of original parcel purchased, date of

parcels’ purchase and extent of development relative to

date of enactment of challenged regulations, and zoning of

parcels. U.S.C.A. Const.Amend. 5; M.C.L.A. Const. Art.

10, § 2.

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.1 k. In General. Most Cited Cases

1-6

(Formerly 148k2(1))

Eminent Domain 148 €2.10(1)

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.10 Zoning, Planning, or Land Use;

Building Codes

148k2.10(1) k. In General. Most Cited Cases

(Formerly 148k2(1))

Regulatory taking exists when: (1) regulation fails to

advance a legitimate state interest, or (2) regulation denies

an owner economically viable use of his land. U.S.C.A.

Const.Amend. 5; M.C.L.A. Const. Art. 10, § 2.

{10] Eminent Domain 148 €=2.27(2)

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.27 Environmental Protection

148k2.27(2) k. Wetlands and Coastal

Protection. Most Cited Cases

(Formerly 148k2(10))

Denial of permit to fill wetlands on owners’ property, on

ground that portion of property was protected under

Wetland Protection Act (WPA), did not constitute a

1-7

categorical taking of property; owners were not prohibited

from developing remaining upland on property, and

owners’ second permit application clearly contemplated

such development. U.S.C.A. Const.Amend. 5; M.C.L.A.

Const. Art. 10, § 2; M.C.L.A. § 281.701 et seq.

[11] Eminent Domain 148 &72.10(1)

148 Eminent Domain

1481 Nature, Extent, and Delegation of Power

148k2 What Constitutes a Taking; Police and Other

Powers Distinguished

148k2.10 Zoning, Planning, or Land Use;

Building Codes

148k2.10(1) k. In General. Most Cited Cases

(Formerly 148k2(1))

Question whether regulation denies owner economically

viable use of his land, and thus constitutes a taking,

requires at least a comparison of value removed with value

that remains. U.S.C.A. Const.Amend. 5; M.C.L.A. Const.

Art. 10, § 2.

**533*571 Robert L. Bunting, Oxford, for plaintiffs-

appellees.

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 Lansing, for defendant-appellant.

1-8

John F. Rohe and Gail S. Gruenwald, Petoskey, amicus

curiae for Tipp of the Mitt Watershed Council.

Chris A. Shafer, Lansing, amicus curiae for Michigan

Natural Areas Council.

Olson, Noonan, Ursu & Ringsmith, P.C. by James_M.

Olson, John _D. Noonan, and Christopher M. Bzdok

-Traverse City, amicus curiae 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 *572 Resources D

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.