Supreme Court Determines Wetlands Landowner Development Rights

Palazzolo v. Rhode Island, 121 S. Ct. 2448 (2001).

Roy A. Nowell, Jr., 3L

In late June, the United States Supreme Court issued a ruling in the case of Palazzolo v. Rhode Island, in which the Court rejected Anthony Palazzolo’s claim that his land was taken in violation of the Fifth Amendment. The Court addressed three issues in the case: first, whether the case was ripe for adjudication; second, whether Palazzolo had the right to sue based on his successive ownership of the property; and third, whether the Rhode Island Resources Management Council’s (Council) rejection of Palazzolo’s development proposal constituted an illegal taking under the Fifth Amendment.

Background
Anthony Palazzolo owns waterfront property in Rhode Island which the law of the state designates as wetlands. The saga behind his ownership of the property in question dates back to 1959, when he and associates formed Shore Gardens, Inc. (SGI) and purchased the property. Eventually, Palazzolo purchased the other associates’ interest in the property, thus rendering him the sole owner of the property. Over the next few years, he made several attempts to develop the property, but all proposals were denied by the Rhode Island Department of Natural Resources.

In 1971, the land was deemed coastal wetlands by laws enacted by the Council. In addition, SGI’s corporate charter was revoked in 1978 for failure to pay taxes. As a result of the revocation, Palazzolo became the corporation’s sole shareholder. In 1983, he resumed his efforts to develop the land, and again, the Council rejected the proposal. Subsequently, Palazzolo brought a takings action against the Council. In 2000, the Rhode Island Supreme Court determined that Palazzolo’s takings claim was not ripe, he had no right to bring the claim, and that he had not been deprived of all economically beneficial uses of his property, thus rendering his takings claim ineffective. As a result, Palazzolo chose to continue his fight and appealed the decision to the United States Supreme Court.

Palazzolo’s Right to Sue
The owner of an interest in property is deemed to be aware of previously enacted laws regarding that property and cannot later bring a takings claim. In other words, a landowner is considered to have notice of any restrictions or limitations on the property. However, as the Rhode Island Supreme Court noted, the Takings Clause of the Fifth Amendment provides an exception if the government action is “so unreasonable or onerous as to compel compensation,” subsequent owners may be allowed to bring a takings claim.1 In effect, this concept prevents governmental entities from taking action that is normally deemed an unconstitutional taking simply because the ownership of property has changed hands. In this case, the U.S. Supreme Court ruled that Palazzolo held the right to sue even though he was a subsequent owner of the wetland property, finding that unconstitutional state action should not be ignored merely because title to the property passed to another landowner. Instead, the nature of the government action should be determinative of whether a taking has occurred. Therefore, even though Palazzolo was a subsequent owner of the property, he still had the right to sue. The Court did not state that every subsequent landowner has the right to sue, but it clearly stated that no blanket rule exists prohibiting a subsequent landowner from bringing suit simply because she was not the owner of the property when the legislation was enacted.2

The Ripeness Doctrine
The doctrine of ripeness prevents courts from hearing cases that are too premature for a court to make a ruling. The U.S. Supreme Court has held that a claim is not ripe unless a final decision has been reached by the government agency in charge of enforcing the regulation.3 The Court determined that the Rhode Island Supreme Court improperly ruled that Palazzolo’s claim was not ripe for the Court to make a ruling. The Rhode Island Supreme Court had determined that Palazzolo had not used every possible avenue to seek a use of his property and still had options for development to pursue. The Court held that the state agency had addressed the issues presented concerning Palazzolo’s proposal, and by rejecting the proposal, had made a final decision, thereby satisfying the requirements of the ripeness doctrine. In addition, the Council cited no instances in which Palazzolo failed to comply with the requirements of the application process and, as a result, determined that Palazzolo’s claim was ripe for adjudication.

The Taking Determination
The purpose of the Takings Clause is to prevent the government from requiring individual landowners to bear a burden that should be shared by the entire public.4 A regulatory taking has occurred if all economically beneficial uses of the property have been stripped by the government action.5 Courts are split on the issue of whether the deprivation of economic value should be considered in light of the entire property or the specific parcel in dispute. If only the parcel in dispute is used for determination of a taking, it is likely that a court will rule that the property has been rendered valueless, but if the property is viewed as a whole, a court will probably hold that the property still has value.
The Court did not address the issue of whether the prohibition on the property should be viewed in light of the entire property or just the parcel at issue, but found that because he still had $200,000 in development value on his property and could still build a large residence on 18 acres of the land, that Palazzolo still had economic use of a considerable amount of his property. Thus, the Court ruled that the Council’s rejection of Palazzolo’s development proposal did not constitute a taking because Palazzolo was not deprived of all economically beneficial use of his land.

Where a regulation falls short of eliminating all economically beneficial use, a taking nonetheless may have occurred, depending on a complex of factors including the regulation’s economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations, and the character of the government action. The Supreme Court remanded the case for an analysis of these factors.

Conclusion
Although a majority of the Court concluded that the government had not taken all economically beneficial use of Palazzolo’s property, the resulting concurrences and dissents exemplified the differing opinions of the Court. For instance, Justices Ginsburg and Breyer dissented arguing that the decision of the Rhode Island Supreme Court should have been affirmed. Regardless of the differences, Palazzolo must now await the determination of the Rhode Island Supreme Court to determine if a taking has occurred on his property.

ENDNOTES
1. Palazzolo v. Rhode Island, 121 S. Ct. 2448 (2001).
2. The question remains, then, whether Palazzolo’s claim can be distinguished because of his claim on the property title dating back to 1959.
3. Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985).
4. Armstrong v. United States, 364 U.S. 40, 49 (1960).
5. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).