Volkema v. Department of Natural Resources

• Decision Date: 20 October 1995
• Docket Number: No. 159820,159820
• Citation: 542 N.W.2d 282,214 Mich.App. 66
• Parties: Russell H. VOLKEMA and Lois J. Volkema, husband and wife, Plaintiffs-Appellants/Cross-Appellees, v. DEPARTMENT OF NATURAL RESOURCES, Defendant-Appellee/Cross-Appellant, and Michigan Association of Realtors, Amicus Curiae.
• Court: Court of Appeal of Michigan — District of US

Page 282

542 N.W.2d 282

214 Mich.App. 66

Russell H. VOLKEMA and Lois J. Volkema, husband and wife Plaintiffs-Appellants/Cross-Appellees, v. DEPARTMENT OF NATURAL RESOURCES, Defendant-Appellee/Cross-Appellant and Michigan Association of Realtors, Amicus Curiae.

No. 159820.

Court of Appeals of Michigan.

Submitted Feb. 16, 1995, at Grand Rapids.

Decided Oct. 20, 1995, at 9:10 a.m.

Released for Publication Jan. 23, 1996.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Thomas J. Emery, Assistant in Charge, and Kevin T. Smith, Assistant Attorney General, for defendant.

Dickinson, Wright, Moon, Van Dusen & Freeman by Gregory L. McClelland and David E. Pierson, Lansing, for amicus curiae Mich. Ass'n of Realtors.

Before NEFF, P.J., and SAWYER and MARKEY, JJ.

NEFF, Presiding Judge.

Plaintiffs appeal, and defendant cross appeals, from an order of the circuit court denying plaintiffs relief with respect to their inverse condemnation claim. We affirm.

I

Plaintiffs purchased approximately forty-five acres of commercial property in Kentwood in 1963 and an additional contiguous five-acre parcel in 1979. Plaintiffs made various improvements to the property, sold parcels of the property, and leased a ten-acre parcel to a water park operator. After the sales and lease, 24.6 acres remained, which are the subject of the present litigation. Plaintiffs sought to have the water park developed on the remaining 24.6 acres in conjunction with the leased ten acres. The water park has a plan that eventually calls for the purchase of the property. However, the 24.6-acre parcel includes some lowlands, which have been classified as protected wetlands under the Wetland Protection Act, M.C.L. § 281.701 et seq.; M.S.A. § 18.595(51) et seq., which was enacted in 1980. Defendant denied plaintiffs' request for a permit to fill 4.3 acres of wetlands. Plaintiffs now seek compensation for the six acres they claim are rendered useless by the denial of the fill permit.

The trial court determined that the relevant parcel to consider in determining whether there was a taking is the remaining 24.6-acre parcel. The trial court determined that because only approximately one-quarter of the property was affected, there was no taking.

II

On appeal, the parties present a number of arguments, all of which essentially raise the same issue, namely, whether there was a taking. Because we conclude there was none, we affirm the trial court's decision.

A

It is now well-established under constitutional doctrine that a taking of property requiring just compensation may occur if a landowner's property is either physically invaded or regulated "too far." See Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). Although the Supreme Court has declined to definitively state what "too far" is, two circumstances exist in which compensation is afforded the property owner without a case specific inquiry. Id. at 1015, 112 S.Ct. at 2893.

The first category in which compensation is automatically awarded is when the government physically invades a landowner's property. Id. This case, however, does not present such a circumstance, and thus any case law or arguments of the parties based on a physical invasion of property are irrelevant to this appeal.

The second distinct category in which compensation is automatically awarded is where a regulation denies all economically beneficial or productive use of one's land. Id. In other words, the Fifth Amendment right to just compensation is violated when a land-use regulation either (1) does not substantially advance a legitimate state interest, or (2) denies a landowner all economically viable use of his land in contravention of the property owner's investment-backed expectations. ¹ Id. at 1016, 112 S.Ct. at 2894.

This is not to suggest that compensation is always awarded. When a land-use regulation merely results in diminution in a property's value, the property owner is not entitled to compensation. Id. at 1016, 112 S.Ct. at 2894. The justification for this rule is often stated as being that

[g]overnment 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.... [Id.]

After a review of the parties' appeal and cross appeal, it is apparent that neither party here is arguing that the land-use regulation at issue does not substantially advance a legitimate state interest. Accordingly, we express no opinion with regard to that matter and assume, for the purposes of this appeal, that the regulation does advance a legitimate state interest. ²

Thus, the only question that must be answered here is whether plaintiffs were denied all economically viable use of their land. The answer to this question depends on what parcel of land is used to compare plaintiffs' before and after property values. ³ In other words, if we focus only on the six acres that plaintiffs claim were rendered economically useless by the Wetland Protection Act, then plaintiffs have established that they were deprived of all the economically beneficial use of their land. If, however, we use some larger parcel, say the 24.6-acres that encompasses the six acres, or the fifty acres that previously made up all of plaintiffs' property, then all plaintiffs have established is a mere diminution in value, and although they still might be eligible to obtain compensation for the loss, they would fall outside the categorical entitlement to such compensation. ⁴ See Lucas, supra at 1019, n. 8, 112 S.Ct. at 2895.

We have found two cases to be instructive in making this determination.

B

In Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (C.A.Fed.1994), ⁵ Loveladies originally owned 250 acres of land adjacent to wetlands. In 1972, after Loveladies developed approximately 199 acres, § 404 of the Clean Water Act, 33 U.S.C. § 1344, was enacted, and Loveladies was forced to obtain a permit to fill in the remaining land in accordance with their overall development plan. In the following years, New Jersey, the state in which the land was located, and Loveladies entered into negotiations to allow Loveladies to develop the remaining fifty-one acres. Ultimately, Loveladies agreed to essentially donate 38.5 acres to the state, in order to allow 12.5 acres to be filled and developed. The state accepted this plan.

Unfortunately for Loveladies, the permit process also required obtaining approval from the Army Corps of Engineers. Apparently the corps traditionally follows the state's recommendation, and, although New Jersey had previously granted the state permit, it recommended to the corps that it deny the federal permit. The corps followed New Jersey's recommendation. Id. at 1174.

Loveladies sued the United States, claiming that a compensable regulatory taking had occurred because it was denied all economically feasible use of the 12.5 acres of land. The United States disagreed, arguing that Loveladies merely suffered a diminution in its property's value, comparing the 12.5 acres with either the original 250 acres, or the fifty-one acres remaining after the 1972 amendment in the law. Thus, as here, one of the main issues before the court was how much of Loveladies' land to use as a comparison to the affected parcel to determine the extent of Loveladies' loss. Otherwise stated, the court in Loveladies was called on to determine the denominator parcel. ⁶ Id. at 1179.

The court of appeals began its discussion by eschewing any bright-line test to determine the denominator parcel and instead held that a flexible approach designed to account for factual nuances of each individual case should be used. Id. at 1181.

The court then examined the factual nuances of the case before it and held that the 199 acres that had been developed before the enactment of § 404 of the Clean Water Act should not be considered as part of the denominator because no effort had been made by the state to regulate that land. Id. The court then determined that the 38.5 acres that had, in essence, been dedicated to the state should not be part of the denominator because it had no value to Loveladies. Id. Thus, the court was left with the 12.5 acres of land affected by the corp's permit denial. Because the court found the remaining value to be so small as to be useless, it concluded that Loveladies was denied all economically viable use of the property, thus entitling it to compensation under Lucas, supra.

Here, employing a similar analysis, we conclude that the denominator should not consist of the entire forty-five acres originally owned by plaintiffs because approximately half of that land already had been developed before the enactment of the Wetland Protection Act.

Examining the remaining 24.6 acres, we see no reason to exclude some eighteen acres of that land as part of the denominator in determining plaintiffs' loss. This case is in stark contrast with Loveladies, supra, to the extent the court in Loveladies determined that only the affected 12.5 acres in question had value to Loveladies. Here, the entire 24.6 acres is admittedly of high value to the plaintiffs. In other words, although plaintiffs lost the use of approximately six acres of the remaining 24.6-acre parcel, the land, when viewed as a whole, continues to have substantial value and may still be used in the manner intended by plaintiffs, i.e., it may be developed for commercial purposes.

Accordingly, the trial court properly concluded that plaintiffs' loss should be considered in light of the 24.6 acres, not merely the affected six acres.

C

Bevan v. Brandon Twp., 438 Mich. 385, 475 N.W.2d 37 (1991), also supports our conclusion here. In Bevan, the plaintiffs owned two parcels of lakefront property but were restricted by a zoning ordinance to being able to develop only one house on the two parcels. Although the plaintiffs argued that because of the restriction they were denied...