Arguing that, in a Regulatory Taking case, Penn Central Does Not Establish a Rule that Two Legally and Economically Distinct Parcels Must be Combined as the “Parcel as a Whole” in the Takings Analysis Simply Because They are Contiguous and Commonly Owned.
This case presents the Supreme Court with an opportunity to take a first step toward clarifying, and hopefully setting some limits to, the “parcel as a whole,” a key concept in regulatory takings law. Since the phrase first appeared in the Court’s 1978 decision Penn Central Transportation Co. v. City of New York, 438 U.S. 104, the term has been adapted to a variety of circumstances. As used in Penn Central, it meant that the economic impact of a government regulation should be evaluated in terms of the entire piece of property in question and not solely in terms of the specific property right targeted by the regulation. The Court observed, “‘Taking’ jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated.” Penn Central, 438 U.S. at 130.
Since Penn Central, the concept has been extended by analogy to account for the great diversity of factual circumstances met with in regulatory takings cases. Now, when some or all of a parcel is affected by a regulation, the “parcel as a whole” concept is sometimes invoked as reason for evaluating the impact of the regulation on that parcel by grouping the parcel with other, related parcels, as if the parcels, on analogy with the situation in Penn Central, were “discrete segments” that must not be considered separately from the larger parcel of which they are part. While a wide variety of factors has been employed by courts in determining when to aggregate parcels in this manner, the most common major factors probably are: (i) common ownership, (ii) contiguity with each other, and (iii) unity of use.
This case focuses on the extended application of the concept and asks whether the mere contiguity of commonly owned parcels requires, as a rule of takings law, that such parcels be considered together as the parcel as a whole, even when unity of use or any other factor is absent. NELF has filed an amicus brief in the case, on the merits, supporting the Murrs in their contention that the proposed rule of law should be rejected because it is overly inclusive and unfair to property owners.
The petitioners in this case are the Murrs, four siblings. In 1960, their parents purchased a certain Lot F in rural St. Croix County, Wisconsin. Their father owned a plumbing business, and he placed title to Lot F in his business. Soon after the purchase, the parents built a three-bedroom recreational cabin on the lot. Recognizing the growth potential of the area, in 1963 they purchased a second parcel, Lot E, as investment property. They held the title to Lot E in their own names. Lot E is adjacent to Lot F; both are waterfront parcels approximately 100 feet wide and somewhat over one acre in size. Since its purchase, Lot E has remained vacant and undeveloped. There is no dispute that, as created and as originally purchased, the parcels were separate, distinct legal lots, and that each could have been separately developed, used, and sold.
In the 1990s, the parents made donative transfers to their children, the present petitioners, of developed Lot F and investment Lot E, and for the first time the adjacent lots came under common ownership. In 2004, when the Murr children wanted to sell Lot E and use the proceeds to finance improvements to Lot F, they discovered from officials that they could not develop or sell Lot E separately. Twenty years earlier, in 1975, while the lots were still owned separately by their parents and the plumbing business, local environmental regulations had been adopted requiring a “net project area” of at least one full acre as a prerequisite to development of any lot in that lakeside, environmentally sensitive area of the county.
Lot E has a net project area of only 0.5 acres. The regulations do contain a grandfather provision for any substandard lot created before 1976, as Lot E was, but it permits the separate development and sale of such a lot only if the lot “is in separate ownership from abutting lands.” Because Lots E and F abut and are now both owned by the Murr siblings, the grandfathering exception does not apply to Lot E; the two lots are treated as merged, and the Murrs cannot sell Lot E, although it was acquired by their parents specifically as an saleable investment.
The Wisconsin Court of Appeals rejected the Murrs’ takings claim, ruling that the “parcel as a whole” rule requires combining the two parcels for takings analysis “under a well-established rule that contiguous property under common ownership is considered as a whole regardless of the number of parcels contained therein.” Murr v. State of Wisconsin, 2014 WL 7271581, at *4 (Wis. App. Ct. Dec. 23, 2014) (per curiam) (unpublished). After the Wisconsin Supreme Court denied further review, the Murrs petitioned the U.S. Supreme Court for certiorari, and the petition was granted on January 15, 2016.
In its amicus brief supporting the Murrs, NELF argues that the Court should strike a fair and just balance when identifying the “parcel as a whole.” Invoking the principles of fairness and justice on which the Court has avowedly founded its takings jurisprudence, NELF expresses its concern that the tendency of courts to unduly expand the parcel as a whole creates an unfair risk of undercompensation to property owners. NELF then goes on to illustrate the insufficiency of the two factor rule (adjacency and common ownership) applied by the Wisconsin court. NELF argues that these factors alone are too tenuous, and that the Court should require at least “unity of use” as a third factor in deciding whether to aggregate legally separate. NELF’s argument draws a close analogy to the principles on which severance damages are awarded in eminent domain cases.