Recent Legal Developments
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By Basil (“Bill”) Shiber
In Murr v. Wisconsin, No. 15-214, 137 S.Ct. 1933 (June 23, 2017), the United States Supreme Court held that the question of whether two adjacent parcels under common ownership may be viewed as one parcel for purposes of a takings analysis is not answered by a bright line rule, but rather by a fact specific inquiry. Murr addresses the threshold and sometimes dispositive question in a regulatory taking case, which is to identify the relevant parcel at issue: “because our test for regulatory taking requires us to compare the value that has been taken from the property with the value that remains in the property, one of the critical questions is determining how to define the unit of property whose value is to furnish the denominator of the fraction.”
The Murrs argued the parcel lines approved by the State defined the relevant parcel. Wisconsin argued the merger ordinance treating the two commonly owned and adjacent parcels as one controlled. The Court did not adopt the bright lines proposed by the parties. Rather, the Court held that in identifying the “denominator” property, courts should consider “the treatment of the land under state and federal law; the physical characteristics of the land; and the prospective value of the regulated land” as well as “whether reasonable expectations about property ownership would lead a land owner to anticipate that his holdings would be treated as one parcel, or, instead, as separate tracts.”
Many commentators have bemoaned the fact that Murr layers additional uncertainty on already murky regulatory takings jurisprudence. Bright lines provide comfort and predictability to lawyers and their clients; “multi-factor” tests do not.
But bright lines are not a feature of the Supreme Court’s regulatory takings jurisprudence except in two extreme circumstances: where a regulation results in the government physically occupying private property, or where a regulation operates to permanently eliminate all economically beneficial use of property. In those circumstances, there is a “per se” taking requiring compensation under the Fifth Amendment.
In situations short of a per se taking, the Court has avoided bright line rules. This is the middle ground most land use regulations inhabit: they burden the use of property to one degree or another, but do not preclude all economic uses (think a height, density, or use restriction). The question in those cases is at what point does the regulation – in the words of Justice Holmes – go “too far,” and cross the line separating permissible regulation from uncompensated taking. In Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), the Court announced a multi-factor test to answer that question, requiring consideration of the economic impact of the regulation on the claimant, the extent to which the regulation has interfered with distinct investment-backed expectations and the character of the governmental action. As Justice Alito has observed, the rule has been “difficult and uncertain” in application.
However, it may be that the deliberate ambiguity adopted by the Court in Penn Central and more recently in Murr deserves a second look. The Supreme Court has long recognized that land use regulations are a proper exercise of police powers because localities must have the ability to regulate development and land use to reflect local values and objectives. (See, e.g., Village of Euclid v. Ambler Realty (1926)272 U.S. 365.) The Penn Central test is designed to discern when a regulation has gone “too far,” beyond the proper exercise of police power, to which courts defer, and into an uncompensated taking, which the Fifth Amendment forbids. Penn Central reflects that the question of whether a regulation “goes too far” is inextricably bound up in the notion that such regulations are an essentially local exercise of police power.
Murr announces another multi-factor test to be applied at the outset to identify the relevant parcel, before even getting to the Penn Central question of whether there has been a taking. Adding an additional multi-factor test at the threshold appears to add more murkiness to the analysis. However, some scholars including Professor Rick Hills argue that property rights advocates should not be so quick to despair of the Supreme Court’s approach in Murr v. Wisconsin. Professor Hills notes that had the Supreme Court adopted the bright line rule suggested by Justice Roberts in his dissent – that parcel boundaries always define the relevant parcel for purposes of takings law – it would invite states to manipulate the rule to avoid takings liability, and to “slow-walk all efforts to subdivide parcels.” Moreover, such subdivision, when approved, may be conditioned on payments and incentives to provide “insurance” to the state against later takings claims. More broadly, Professor Hills argues that “state courts and state legislatures should pull the laboring oar in defining and protecting private property.”
It is often difficult to discern a uniform and universally applicable federal regulatory taking standard from the dozen words of the Fifth Amendment’s just compensation clause. Most would agree that the Fifth Amendment forbids a regulation that involves physical occupation or eliminates the value of property without payment of just compensation. And in those “per se” takings cases, the Supreme Court has provided a bright line – the Fifth Amendment requires compensation.
But how about the vast majority of regulations that do not rise to the level of a “per se” taking? What may be considered a regulation that “goes too far” in rural Texas may be viewed differently in the urban Northeast. Similarly, identifying the relevant parcel for purposes of a regulatory takings analysis may differ depending on factors related to local custom, regulation and expectations. A locality that has “slow-walked” parcel subdivision in an area where future acquisition or regulation is planned should not be able to take advantage of that manipulation by virtue of a “bright line” rule. To account for those differences, the question whether a regulation has gone “too far”, as well as identification of the relevant parcel, should take into account local regulations, customs and expectations.
Multi-factor tests such as those in Penn Central and Murr don’t provide easy answers or bright lines, but they do allow for individualized considerations based on factual findings grounded in local sensibilities and considerations, which in turn are given deference on appeal. Does that ambiguity – or flexibility – do violence to the Fifth Amendment? Only if the Fifth Amendment is read to provide an invariable “federal” standard applicable to all regulatory takings. While the lack of bright lines may encourage litigation, it also opens the courthouse door to litigants to make their case. Giving local judges latitude to decide regulatory takings questions based on local considerations may be more consistent with the notion that land use regulation is a local, not federal, endeavor.
In Justice Thomas’s characteristically cryptic dissent, he suggested the Court may need to reexamine whether its regulatory takings jurisprudence is properly grounded in the finite words of the Fifth Amendment, or the more elastic and possibly state-centric concepts of the Fourteenth Amendment. This observation may itself foreshadow a shift from a “federalized” regulatory takings standard, to one more oriented to local authority.
Following are California real property law tweets and case links for July 6-August 1, 2017, provided courtesy of CEB. See California, U. S. Supreme Court, and 9th Circuit daily case tweets on Twitter.com at CEB_CA:
Mountain Air Enterprises, LLC v. Sundowner Towers (Supreme Court, 7/31/17) [Real Property]
Although affirmative defense did not trigger the attorney fees provision in agreement, attorney fees were nonetheless available to defendants under the provision.
Rush v. White Corp. (First Dist., Div. Two, 7/27/17) [Civil Procedure, Real Property]
Trial court properly granted summary judgment to defendants based on plaintiffs' failure to file adequate separate statement.
Conroy v. Wells Fargo Bank, N.A. (Third Dist., 7/27/17) [Banking Law, Contract Law, Real Property, Tort Law]
Plaintiffs could not state valid claim for intentional or negligent misrepresentation when they did not plead actual reliance or damages caused by lender.
The Estuary Owners Assn. v. Shell Oil Co. (First Dist., Div. Two, 7/26/17) [Real Property, Tort Law]
CCP §337.15's ten-year statute of repose only bars claims based on construction defects and thus did not apply to nuisance claim based on contamination.
Crossroads Investors, L.P. v. Federal National Mortgage Assn. (Third Dist., 7/26/17) [Banking Law, Civil Procedure, Real Property]
Lender's actions during borrower's bankruptcy proceedings constituted protected activity for anti-SLAPP purposes.
Cummings v. Dessel (First Dist., Div. Four, 7/19/17) [Real Property]
Trial court erred in ordering partition by appraisal when parties had not agreed to that method.
Sleep EZ v. Mateo (Appellate Division Of The Superior Court, 7/13/17) [Real Property]
Tenants did not default in paying rent, when tenants mailed rent as directed and played no part in fact that landlord did not receive it.
Deutsche Bank v. Pyle (Fourth Dist., Div. One., 7/13/17) [Banking Law, Real Property]
Void default judgment nullified subsequent transfer to purported bona fide purchaser.
Cleveland National Forest Foundation v. San Diego Association of Governments (Supreme Court, 7/13/17) [Environmental Law, Real Property]
Environmental impact report's failure to explicitly analyze whether plan's projected 2050 greenhouse gas emissions were consistent with state's goals as stated in 2005 executive order did not violate CEQA.
Lynch v. California Coastal Commission (Supreme Court, 7/6/17) [Environmental Law, Real Property]
Owners forfeited their challenge to mitigation conditions by accepting the benefits the seawall and beach access permit conferred.
Tustin Field Gas & Food, Inc., v. Mid-Century Ins. Co. (Second Dist., Div. Two, 7/3/17) [Insurance Law, Real Property]
Where a property insurance policy did not define "collapse" of all or part of a building, the split of a gas station's storage tank sheath was not a collapse.
Courtesy of CEB, we are bringing you selected legal developments in areas of California real property law that are covered by CEB’s publications. This month’s feature is from the June 2017 update to CA Title Insurance Practice (Cal CEB). References are to the book’s section numbers. See CEB’s RPLS landing page for special discounts for section members.
Policies and Endorsements:
Event: Southern California Real Estate Symposium (RES)
Date: Friday, October 27, 2017
Time: 1 pm to 5:30 pm. Registration begins at 12 noon. A hosted networking reception takes place from 5:30 pm to 7 pm.
Location: The Irvine Marriott.
Highlights: Earn MCLE credit and learn from Wayne Bell, the California Commissioner of the Bureau of Real Estate, an Orange County Superior Court Judge, and leading attorneys, economists, and other residential real estate professionals on the trends and opportunities in the Southern California residential real estate market and how to navigate the unique challenges facing real estate practitioners in the current market rebound from the Great Recession.
1. Dormant Subdivisions: The Forgotten Housing Supply
2. Housing and the Economy: State, Regional, and Local Perspectives
3. Common Contract Claims: Strategies for Preventing and Resolving Them
4. Keynote: Insights from the Commissioner of the California Bureau of Real Estate
Sponsor: Real Property Law Section
The California State Bar Real Property Law Section (“RPLS”) and the RPLS Journal Committee are proud to announce the Third Annual RPLS Journal Law Student Writing Competition open to all California law students. The California Real Property Journal (“Journal”) is the official publication of the RPLS. The Journal is distributed free to over 6,000 members of the RPLS, has been described as “the flagship of State Bar publications,” and is an invaluable resource for the real property practitioner. The RPLS Journal Law Student Writing Competition is meant to encourage California law students to explore California’s wide array of real property practice areas, and showcase the scholarship of law students interested in real property law. See more details here.
We are delighted to publish legal cartoons from one of our own -- Scott Miller. Scott is Of Counsel to Dudnick Detwiler Rivin & Stikker LLP in San Francisco. His practice focuses on commercial real estate and environmental law. Check out http://www.blurb.com/bookstore/detail/2646318 to order Scott’s book on real estate cartoons, entitled A New Lease on Life. If you have any suggested topics for Scott, please feel free to contact him at firstname.lastname@example.org, and who knows? You might get your idea immortalized in the next E-Bulletin!
© 2017 Scott H. Miller
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