K & K Const., Inc. v. Department of Natural Resources

• Decision Date: 04 June 1996
• Docket Number: Docket No. 168393
• Citation: 551 N.W.2d 413,217 Mich.App. 56
• Parties: K & K CONSTRUCTION, INC., J.F.K. Company, and Resorts and Company, Plaintiffs-Appellees, v. DEPARTMENT OF NATURAL RESOURCES, Defendant-Appellant, and Michigan Association of Home Builders, Amicus Curiae.
• Court: Court of Appeal of Michigan — District of US

Page 413

551 N.W.2d 413

217 Mich.App. 56

K & K CONSTRUCTION, INC., J.F.K. Company, and Resorts and Company, Plaintiffs-Appellees, v. DEPARTMENT OF NATURAL RESOURCES, Defendant-Appellant and Michigan Association of Home Builders, Amicus Curiae.

Docket No. 168393.

Court of Appeals of Michigan.

Submitted Dec. 13, 1995, at Lansing.

Decided June 4, 1996, at 9:00 a.m.

Released for Publication July 29, 1996.

Robert L. Bunting, Oxford, and Karen Russell, Mt. Clemens, for the plaintiffs.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, A. Michael Leffler and Kevin T. Smith, Assistant Attorneys General, for the defendant.

Dickinson, Wright, Moon, Van Dusen & Freeman, Lansing (by Gregory L. McClelland, David E. Pierson, and Jeffery V. Stuckey), for Amicus Curiae Michigan Association of Home Builders.

Before JANSEN, P.J., and TAYLOR and J.P. NOECKER, ^* JJ.

JANSEN, Presiding Judge.

This is a regulatory takings case. Defendant Department of Natural Resources appeals as of right from a September 8, 1993, judgment of the Court of Claims in plaintiffs' favor. The Court of Claims determined that a taking had occurred as a result of defendant's decision to deny plaintiffs' application for a permit to build a restaurant on a parcel of land on the basis that the land was protected wetlands. The Court of Claims awarded $3,245,256 for the property taken, plus interest of $1,574,522.60, and $459,400 for a temporary taking of part of the land. We affirm.

I

Plaintiffs own approximately eighty-two acres of property in Waterford Township in Oakland County. The property was acquired in 1976 by Joseph and Elaine Kosik. J.F.K. Company is a Michigan limited partnership consisting of the five children of the Kosiks. J.F.K. Company is a part owner of the property through a quit-claim deed executed by the Kosiks. K & K Construction is a Michigan corporation, of which Joseph Kosik and one of his sons are the sole shareholders. K & K Construction has no ownership interest in the property involved in this case. Resorts and Company is a Michigan copartnership and is a part owner of the eighty-two-acre property.

The Court of Claims concluded that the property consisted of four distinct parcels. The parcel at issue was parcel 1, on which J.F.K. Company wished to build a C.J. Barrymore's Restaurant. Parcel 1 covered approximately fifty-five acres of the entire property. On May 28, 1988, plaintiffs applied for a permit to develop the property. On November 7, 1988, defendant denied the permit on the basis of a determination that approximately twenty-eight acres of the property was protected wetlands under the Wetland Protection Act (WPA), M.C.L. § 281.701 et seq.; M.S.A. § 18.595(51) et seq.

Plaintiffs then filed the present action on December 29, 1988, in the Court of Claims. Plaintiffs initially sought a declaratory ruling that the area is not wetlands and also sought injunctive relief against defendant's enforcement of the WPA and damages under the WPA. Plaintiff's sought a determination that defendant's actions constituted a taking of their property for which they were entitled to just compensation. On May 1, 1990, plaintiffs submitted a second application for a permit to fill approximately 3.17 acres of wetlands and to convert 5.36 acres of upland to wetlands. This plan was known as the "Goga Plan" and involved a total of over seventy-two acres of property on parcels 1, 2, and 4. This second application was also denied on July 26, 1990.

Trial was held before the Court of Claims, sitting as the factfinder, on December 17, 1991. The only issue before the court was whether there was a taking because of the permit denial such that plaintiffs were entitled to just compensation. On November 2, 1992, the Court of Claims issued its opinion and order determining that a taking occurred because the wetlands restrictions rendered the property essentially worthless as commercial real estate, and that plaintiffs were therefore entitled to just compensation. After various postjudgment motions and consideration of the Goga Plan, the Court of Claims awarded a total of $5,279,178 in favor of plaintiffs.

II

Plaintiffs contend that defendant's actions of denying the permit to fill the wetlands constitute an unconstitutional taking of property without just compensation. The Fifth Amendment of the United States Constitution provides in part: "nor shall private property be taken for public use, without just compensation." Similarly, the Michigan Constitution provides: "Private property shall not be taken for public use without just compensation therefor being first made or secured in a manner prescribed by law." Const.1963, Art. 10, § 2. The Takings Clause of the Fifth Amendment has been made applicable to the states through the Fourteenth Amendment. Dolan v. City of Tigard, 512 U.S. 374, ---- - ----, 114 S.Ct. 2309, 2315-2316, 129 L.Ed.2d 304, 315 (1994); Peterman v. Dep't of Natural Resources, 446 Mich. 177, 184, n. 10, 521 N.W.2d 499 (1994).

A

Property may be taken only when an essential nexus exists between a legitimate state interest and the taking. If the nexus exists, then there must be a "rough proportionality" between the manner of the taking and the actual state interest involved. Dolan, supra, p. ----, 114 S.Ct. p. 2317, 129 L.Ed.2d p. 317; Peterman, supra, p. 201, 521 N.W.2d 499. The parties do not dispute that the state has a legitimate interest in preserving and protecting wetlands. See Attorney General ex rel. Dep't of Natural Resources v. Huron Co. Rd. Comm'n, 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"). Further, there is no dispute that an essential nexus exists between the legitimate state interest in this case (the preservation and protection of wetlands) and the taking (the land-use regulation). See Harkins v. Dep't of Natural Resources, 206 Mich.App. 317, 324, 520 N.W.2d 653 (1994) ("the WPA unquestionably advances a legitimate state interest"). The crucial issue we face is whether there is a taking within the meaning of the Fifth Amendment to require just compensation.

The United States Supreme Court has explained that the Fifth Amendment is violated when land-use regulation does not substantially advance legitimate state interests or denies an owner economically viable use of the owner's land. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015, 112 S.Ct. 2886, 2893, 120 L.Ed.2d 798 (1992). In land-use regulation cases, it has been recognized that while property may be regulated to a certain extent, if the regulation goes too far it will be recognized as a taking. Id., p. 1014, 112 S.Ct. p. 2893; Volkema v. Dep't of Natural Resources, 214 Mich.App. 66, 69, 542 N.W.2d 282 (1995). The Supreme Court has not set a formula regarding what constitutes going "too far," but has engaged in ad hoc factual inquiries. Lucas, supra, p. 1015, 112 S.Ct. p. 2893.

However, there are two distinct categories of regulatory action that require compensation without case-specific inquiry. The first category encompasses regulations that compel the property owner to suffer a physical invasion of the property. The second category is where regulation denies all economically beneficial or productive use of the land. Id., pp. 1015-1019, 112 S.Ct. pp. 2893-2895. The Court of Claims concluded that application of the WPA denied plaintiffs all economically beneficial or productive use of the land.

The United States Supreme Court has noted that "affirmatively supporting a compensation requirement ... [are] regulations that leave the owner of land without economically beneficial or productive options for its use--typically ... by requiring land to be left substantially in its natural state." Id., p. 1018, 112 S.Ct. pp. 2894-2895. In Lucas, the Court held that where the state seeks to sustain regulation that deprives property of all economically beneficial use, the state may resist compensation only if an inquiry into the nature of the owner's property shows that the interests behind the proscribed use were not part of the title to begin with. Id., p. 1027, 112 S.Ct. p. 2899. Thus, a regulation that prohibits all economically beneficial use of land cannot be newly legislated or decreed without compensation, but must inhere in the owner's title itself, with the restriction that background principles of state property or nuisance law may already place on land ownership. Id., pp. 1028-1029, 112 S.Ct. p. 2900.

In the case before us, we reject defendant's claim that the permit denial was based on a fundamental principle of Michigan property law. Defendant claims that such a principle is found in our state constitution:

The conservation and development of the natural resources of the state are hereby declared to be of paramount public concern in the interest of the health, safety and general welfare of the people. The legislature shall provide for the protection of the air, water and other natural resources of the state from pollution, impairment and destruction. [Const.1963, Art. 4, § 52.]

In Lucas, the Supreme Court made clear that the state must do more than proffer the legislature's declaration that the uses the landowner desires are inconsistent with the public interest. Rather, the state must identify background principles of nuisance and property law that prohibit the uses the landowner intends in the circumstances in which the property is found. Lucas, supra, pp. 1030-1031, 112 S.Ct. p. 2901.

The constitutional provision quoted above is not a principle of nuisance and property law. The decision to build a restaurant on land, or a request to fill in wetlands, does not constitute a nuisance that the government may abate. See id., p. 1029, 112 S.Ct. p. 2900; Miller Bros v. Dep't of Natural Resources, 203 Mich.App. 674, 682, 513 N.W.2d 217 (1994). We are not aware of any common-law principle preventing the building of a...