“The State may not put so potent a Hobbesian stick into the Lockean bundle.” Palazzolo v. Rhode Island, 533 U.S. 606, 627 (2001). That was the United States Supreme Court’s response thirteen years ago to Rhode Island’s argument that property owners could claim no loss from legislation shaping and defining property rights enacted prior to acquiring title. In Palazzolo, the Court examined whether Rhode Island’s denial of a request to fill a tidal salt marsh exacted a taking of private property without just compensation. Explaining further, “[w]ere we to accept the State’s rule, the post-enactment transfer of title would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable. A State would be allowed, in effect, to put an expiration date on the Takings Clause. This ought not to be the rule. Future generations, too, have a right to challenge unreasonable limitations on the use and value of land.”
Which brings us to the present. This month, a panel of the Superior Court of New Jersey, Appellate Division upheld the dismissal of a complaint alleging a regulatory taking due to DEP’s refusal to grant a permit that would have allowed the property owner to fill his tidelands property in Atlantic City. Scot Netherlands, Inc. v State, Dep’t of Environmental Protection (Docket A-5156-11T3)(April 7, 2014, unpublished). The moving rationale behind the decision was that the owner was aware of the regulation at the time of acquisition and therefore could not have had any reasonable investment backed expectation at the time of acquisition. The ruling is directly contrary to the Palazzolo holding.
In March of 2007, 30 years after acquiring the property, the owner submitted an application to fill about 18 acres of wetlands in order to develop the property with a parking lot. The application was denied in June of 2007. Property owner appealed the agency decision and appeared before the Office of Administrative Law. The parties stipulated that DEP regulations prohibited the proposed development. Permit denial affirmed.
Instead of focusing on “whether an existing, general law can limit all economic use of property” and (i.e., whether the owner was left with any economically beneficial use without a permit), the trial court essentially criticized the owner for purchasing the property with notice of the regulation and therefore cannot now claim when the regulation was enforced against him to his extreme disadvantage. The Appellate Division endorsed that rationale. In addition, and significantly, the court found that the owner did have a beneficial use of the property – a billboard which produced rent for the owner, making the property worth approximately $200,000. We wonder whether this fact, or the court’s apparent ignorance of holding in Palazzolo, led to its ruling.
A copy of the Scot Netherlands v. NJDEP opinion is available here.
Returning to Palazzolo: “The Takings Clause is not so quixotic. 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.” (at 628).