In the Matter of Joseph F. Gazza, Appellant,
v.
New York State Department of Environmental Conservation, Respondent.
Court of Appeals of the State of New York.
Esseks, Hefter & Angel, Riverhead (Steven R. Angel and John M. Wagner of counsel), for appellant.
Dennis C. Vacco, Attorney-General, New York City (Gregory J. Nolan, Barbara Gott Billet, Peter H. Schiff, John J. Sipos and Michael Belohlavek of counsel), for respondent.
Bracken & Margolin, Islandia (John P. Bracken of counsel), James S. Burling and Stephen E. Abraham, of the California Bar, admitted pro hac vice, for Pacific Legal Foundation, amicus curiae.
John A. Humbach, White Plains, for Audubon Council of New York State and others, amici curiae.
Wilmer, Cutler & Pickering (William A. Butler, David A. Westbrook and James F. O'Reilly, of the District of Columbia Bar, admitted pro hac vice, of counsel), and James T.B. Tripp, New York City, for Environmental Defense Fund, amicus curiae.
Chief Judge KAYE and Judges BELLACOSA, LEVINE and CIPARICK concur with Judge SMITH; Judge WESLEY concurs in result in a separate opinion; Judge TITONE taking no part.
*608SMITH, J.
The primary issue in this case is whether the denial of a building variance pursuant to environmental regulation effects an unconstitutional taking (US Const Fifth Amend; NY Const, art I, § 7) for which the landowner must be justly compensated. Petitioner argues that the denial of a variance due to legislation enacted to preserve wetlands is a taking despite the fact that the legislation was fully enacted and in force when he purchased the property. We disagree and affirm the dismissal of the petition.
Petitioner purchased property located in a residentially zoned district in the Village of Quogue, Town of Southampton, Suffolk County, for $100,000. Approximately 65% of the 43,500-square-foot parcel had previously been inventoried as tidal wetlands by the New York State Department of Environmental Conservation (DEC). As Supreme Court found, the purchase price reflected the fact that a variance would be required to build a residence on the property due to its incorporating tidal wetlands. Petitioner estimates that, assuming a variance were granted and a residence could be constructed on the property, the parcel would be worth $396,000.
Petitioner applied to the DEC for two setback variances from the requirements of 6 NYCRR 661.6 to enable him to construct a single-family home on the parcel. The first variance request was from the minimum 75-foot setback required between the tidal wetlands boundary and the dwelling. The second variance *609 request was from the 100-foot setback required between the wetlands boundary and the planned septic system.
The matter was heard by an Administrative Law Judge (ALJ) who recommended that the application be denied. Nevertheless, the ALJ suggested the construction of a dock, catwalk, and/or a small parking lot as possible uses for the property. The Hearing Report of the ALJ was adopted as the decision in the matter by the DEC Commissioner.
In concluding that the petitioner had not sustained his burden of showing that the variances would have no adverse impact on the tidal wetlands contained on the property, the DEC concluded:
"The proposed project and all of the many alternatives that were considered require a variance from the development restrictions of 6 NYCRR 661.6. To receive the variance, the Applicant has the burden to show that, among other things, the granting of a variance would not have an undue adverse impact on the present or potential value of the tidal wetland (6 NYCRR 661.12 (a) [sic]).[[1]] The record clearly demonstrates that the Applicant has not sustained this burden. The proposed project and any of the alternatives would eliminate or diminish several tidal wetland benefits, in particular, values related to flood control, wildlife habitat, marine food production and silt/organic material absorption. Exacerbating these impacts is the fact that losses would occur in one of the few functioning wetlands remaining in an otherwise developed area."
Moreover, the DEC made findings of fact that the proposed construction of a sanitary system threatened both marine life and humans, that other contaminants threatened the area and that flooding problems would be increased.
Because the property was located in a residentially zoned area, none of the uses suggested by the ALJ and adopted by the DEC were allowable without a variance from the Town's Zoning Board. Rather than apply for such a variance, petitioner filed this action pursuant to ECL 25-0404 and CPLR article 78.
In Supreme Court, petitioner did not contend that the DEC's determination was not supported by substantial evidence. *610 Rather, petitioner argued that the decision of respondent, the DEC, constituted a taking without just compensation of petitioner's real property.[2] A hearing was held to determine petitioner's claim.
At the hearing, petitioner's appraiser testified that the value of the property without the wetlands restriction would be $396,000. Respondent's appraiser testified that under the wetlands restrictions, the property was still worth $80,000. There was also testimony from a local resident that in 1991 he offered petitioner $50,000 for the property, an offer that had not been withdrawn.
Supreme Court found that no taking had occurred and dismissed the proceeding. In so holding, the court found that petitioner had failed to demonstrate that his property had "but a bare residue of [its] value" due to the denial of a building permit and the application of the wetlands regulation. (Matter of Gazza v New York State Dept. of Envtl. Conservation,
"The issue is whether petitioner offered sufficient proof to sustain his heavy burden of showing that the property, as restricted, has lost its economic value, or all but a bare residue of it. The answer is no. The whole focus of the testimony of his own real estate expert was that the property was not as valuable as it would be without the regulations. That is not enough, particularly when there was testimony from a real estate expert called by respondent to show the property, as restricted, had a value of approximately $80,000, which was not too much less than what petitioner `paid' for it ($100,000)." (Id., at 594.)
Supreme Court went on to explicate an alternative basis to deny petitioner relief. Citing Lucas v South Carolina Coastal Council (
The Appellate Division affirmed the dismissal of the petition and noted that "[c]entral to this appeal is the fact that at the time he purchased the property, the petitioner knew of the wetland regulations that `burdened' it" (Matter of Gazza v New York State Dept. of Envtl. Conservation,
"that where, as here, a landowner does not have a reasonable investment-backed expectation that he would be able to build a residence on his parcel, he cannot claim a regulatory taking when his application for a permit to allow the construction of a building is denied" (217 AD2d 202 , 203, supra).
In other words, the Appellate Division, citing Lucas v South Carolina Coastal Council (supra) stated that at the time petitioner purchased this property, he did so knowing that wetlands restrictions were in place. He thus knew that he was purchasing property with limitations on its use. It followed that he took title to the property with restrictions and no compensation was warranted.
Petitioner appeals the determination of his claim that his property has been taken without compensation. He also argues that this Court should review its decision in de St. Aubin v Flacke (
In 1973, the Legislature concluded that "tidal wetlands constitute one of the most vital and productive areas of our natural *612 world, and that their protection and preservation are essential." (L 1973, ch 790, § 1.) The Legislature also noted its concern that much of the State's tidal wetlands had already been irreparably destroyed or despoiled and the remaining wetlands were in imminent danger of the same fate (id.). Pursuant to these findings, the Legislature enacted the Tidal Wetlands Act and struck a balance between ecological and economic considerations by preserving and protecting tidal wetlands while permitting reasonable economic use and development (L 1973, ch 790; cf., Spears v Berle,
To implement this policy, the Legislature directed the Commissioner of Environmental Conservation to inventory all tidal wetlands in the State of New York (ECL 25-0201). The Commissioner was also empowered to regulate the use of inventoried wetlands as well as the areas immediately adjacent thereto (ECL 25-0202, 25-0301, 25-0302; de St. Aubin v Flacke,
The Legislature also enacted strict guidelines for the application and granting of permits to landowners desiring to conduct regulated activities in and around inventoried wetlands (ECL 25-0402, 25-0403). The applicant has the "burden of demonstrating that the proposed activity will be in complete accord with the policy and provisions" of the Tidal Wetlands Act (ECL 25-0402 [1]). Judicial review pursuant to CPLR article 78 is available to "[a]ny person aggrieved by the issuance, denial, suspension, or revocation of a permit" (ECL 25-0404). Here, the petitioner initiated an article 78 proceeding challenging the denial of his permit by the DEC.
As provided under section 25-0404:
"In the event that the court may find that the determination of the commissioner constitutes the equivalent of a taking without compensation, and the land so regulated otherwise meets the interest and objectives of this act, it may, at the election of the commissioner, either set aside the order or require the commissioner to acquire the tidal wetlands or such rights in them as have been taken, proceeding under the power of eminent domain" (ECL 25-0404).
Judicial review is a two-step process. As noted in de St. Aubin, "If the court finds that the permit denial is supported *613 by substantial evidence, then a second determination is made in the same proceeding to determine whether the restriction constitutes an unconstitutional taking requiring compensation" (
Turning to the first step in the process, the DEC's denial of the setback variances in this case is supported by substantial evidence. We have previously noted the findings and conclusions of the DEC which petitioner does not dispute.
It must next be "determined whether the wetlands act, coupled with the denial of the * * * permit, has placed such an onerous burden on the property that a taking must be deemed to have occurred" (Spears v Berle,
In Lucas, the Supreme Court stated:
"Where the State seeks to sustain regulation that deprives land of all economically beneficial use, we think it may resist compensation only if the logically antecedent inquiry into the nature of the owner's estate shows that the proscribed use interests were not part of his title to begin with. This accords, we think, with our `takings' jurisprudence, which has traditionally been guided by the understandings of our citizens regarding the content of, and the State's power over, the `bundle of rights' that they acquire when they obtain title to property" (505 US, at 1027 ).
Our courts have long recognized that a property interest must exist before it may be "taken" (United States v Willow Riv. Co.,
Under a State's power of eminent domain, the legitimate exercise of police power to advance the general welfare may result in the redefinition of property interests in favor of the public. It is that redefinition of a landowner's title that can *614 serve as the basis of a takings claim. Indeed, the United States and New York State Constitutions both provide that a private party must be compensated when such interests are "taken" away so a landowner may look to the government for just compensation upon the destruction of a formerly owned property interest.
However, once taken, those property interests are no longer owned by the private landowner and may not be sold by such party. Rather, a promulgated regulation forms part of the title to property as a preexisting rule of State law. While the remaining property interests may still be freely transferred by the landowner, a purchaser's title is necessarily limited to and by those property interests alone.[4]
Of course, the State may exercise its police power of eminent domain only upon a showing of a valid legislative purpose. Thus, it has been recognized that a subsequent purchaser may attack previously enacted regulations that affect the purchased property as beyond government's legitimate police power (see, e.g., Pennsylvania Coal Co. v Mahon,
While any party adversely affected by government action may attack such action as unconstitutional and illegitimate, petitioner does not claim that wetlands regulation is beyond the State's power. Rather, petitioner simply claims that the property interest he had in building a dwelling on his land was taken by the State through the denial of the setback variance.
The determination of whether a property interest exists to support a taking claim is typically the threshold inquiry (see, Lucas v South Carolina Coastal Council,
We have previously noted that the subject regulations were implemented to balance ecological and economic considerations (ECL 25-0102). The regulations of the DEC expressly provide that it must examine a permit request "taking into account the social and economic benefits which may be derived from the proposed activity" (6 NYCRR 661.9 [b] [1] [i]). In connection with its review of a permit request under its regulations, the DEC has the authority to "modify the application of any provisions in such a manner that the spirit and intent of the pertinent provisions shall be observed, that public safety and welfare are secured and substantial justice done" (6 NYCRR 661.11 [a]).
However, petitioner does not dispute that the DEC's determination is supported by substantial evidence. Thus, whatever claim petitioner may have had that his application was not decided in accordance with DEC regulations, must fail.
Although petitioner's permit application was entitled to due consideration, petitioner's claim that the denial of his variance was a "taking" must fail because he never owned an absolute right to build on his land without a variance. As stated in French Investing Co. v City of New York (
Although an analysis of the petitioner's title is dispositive, it should be noted that petitioner's taking claim would be infirm under the alternative analysis found by Supreme Court to which we now turn.
Any takings analysis involves the resolution of whether the government legislation is "supported by a substantial State interest and close nexus" (Manocherian v Lenox Hill Hosp.,
Once it has been established that the regulations at issue are a legitimate exercise of police power, we must next determine whether the regulations result in a taking of petitioner's property by depriving the landowner of his property rights. Oftentimes, this question may be answered by examining the character of the government action (Penn Cent. Transp. Co. v New York City,
The Supreme Court has noted that "government regulation by definition involves the adjustment of rights for the public good. Often this adjustment curtails some potential for the use or economic exploitation of private property" (Andrus v Allard,
However, the outer limit of regulation needed to support a takings determination has not been amenable to firm demarcation (see, Spears v Berle,
Courts have enunciated several tests to resolve the fact-intensive question of the impact of regulation upon a landowner (Andrus v Allard,
The Supreme Court in Penn Cent. Transp. Co. v New York City (
While such tests may be used as an aid in determining the merits of a takings claim, it has been noted that "[r]esolution of each case * * * ultimately calls as much for the exercise of judgment as for the application of logic" (Andrus v Allard,
Furthermore, whatever the analysis used to determine the impact of regulation on a landowner, the fact that a regulation "deprives the property of its most beneficial use does not render it unconstitutional" (Goldblatt v Hempstead,
Supreme Court found, and there is support in the record for the conclusion that the economic value of the property had not been extinguished since it could still be used for recreational purposes and that petitioner's reasonable expectations were reflected by his consideration of the inherent limitations on the property when he made the purchase offer for thousands less than its worth without the restrictions. Thus, his "reasonable" expectations were not affected when the property remained restricted. Petitioner argues that the finding of value does not take into account the fact that the nonresidential uses proposed by DEC that add value to his land may not be undertaken without a variance from the Village.
In such circumstances, we have stated that petitioner has the burden of showing that it is unreasonable to expect relief from a zoning restriction (de St. Aubin v Flacke, supra,
Here, no per se taking occurred. Moreover, even if petitioner's "bundle of rights" included the "stick" he claims was taken, any burden resulting from the denial of the setback variances would not rise to the level of a taking (Lucas v South Carolina Coastal Council,
*620Accordingly, the order of the Appellate Division should be affirmed, with costs.
WESLEY, J. (concurring).
I agree that petitioner has not established a taking because the economic value of his property has not been extinguished. For the reasons set forth in my dissenting opinion in Matter of Anello v Zoning Bd. of Appeals (
If, as the majority reaffirms, "a subsequent purchaser may attack previously enacted regulations that affect the purchased property as beyond government's legitimate police power" (majority opn, at 614), then a subsequent purchaser should also be able to challenge an otherwise valid regulation if it results in a taking without compensation. There are many reasons why a prior owner might not have pursued a taking claim. For example, a prior owner may have lacked the financial resources to develop the property or to commence an action on a taking claim. Under the reasoning of the majority, the prior owner would nonetheless have had to keep abreast of regulatory enactments and, if an enactment appeared to deprive the property of its economic value, to challenge the statute. Otherwise, the property may have been rendered worthless without the government paying any compensation for the property. By conveying the property to another party who may be willing and able to develop it or to seek compensation for the taking of its value, the prior owner has instead, under the majority's holding, ensured the destruction of the property's economic value.
There is no need to create a rule of law that restricts the alienability of property in New York in this manner, when we all agree that petitioner has no taking claim for a different reason. Supreme Court determined, and the Appellate Division agreed, that petitioner had not met his burden of proving that the economic value of the property had been destroyed by the denial of a variance. I would affirm on that ground alone.
Order affirmed, with costs.
NOTES
Notes
[1] 6 NYCRR 661.11 (a) provides that "[t]he burden of showing that a variance to such provisions should be granted shall rest entirely on the applicant."
[2] The Fifth Amendment to the United States Constitution provides in relevant part that "[n]o person shall * * * be deprived of * * * property, without due process of law; nor shall private property be taken for public use, without just compensation." The Takings Clause of the Fifth Amendment applies to State action through the Fourteenth Amendment (Dolan v City of Tigard,
[3] We conclude that whether the petitioner must prove his claim beyond a reasonable doubt or by a lesser standard such as a preponderance of the evidence, there has been no taking and we decline to review the de St. Aubin decision.
[4] The entirely separate inquiry of whether an existing taking claim may be donated, sold, inherited or otherwise assigned is not before this Court. Petitioner does not base his claim on such grounds and we decline to reach the question.
[5] We note that although the issue must be addressed in every taking claim, the absence of an extended discussion does not indicate an erroneous omission. A court is not required to list every consideration upon which its decision is based. The existence of a protectible property interest may be clear (see, Lucas v South Carolina Coastal Council,
[6] We have noted that State law may be examined "whatever its source" (Soon Duck Kim v City of New York,
