Opinion ID: 2206678
Heading Depth: 1
Heading Rank: 5

Heading: Deprivation of All Beneficial Use

Text: The trial justice properly began his consideration of Palazzolo's claim by examining whether there had been a per se taking under the rubric of Lucas. Because both parties acknowledged that the regulations in question did not compel Palazzolo to suffer a physical invasion of his property, there could only be a per se taking if Palazzolo has been deprived of all beneficial and reasonable use of his land. The trial justice found that Palazzolo had not demonstrated such a deprivation. Based on our de novo review of the record, we agree. Palazzolo presented evidence at trial indicating that he would not be granted permission to fill eighteen acres of wetlands on the subject property. There was undisputed evidence, however, that had he developed the upland portion of the land, its value would have been $200,000. Further, there was testimony that the wetlands would have value in the amount of $157,500 as an open-space gift. It is true that these sums are significantly lower than the speculative $3,150,000 profit that Palazzolo alleged he could earn from filling and developing the wetlands, [7] but [t]he mere fact that [the landowner] may not have received the anticipated return on his investment does not render nugatory the remaining value of the land. Alegria, 687 A.2d at 1253. In the face of this evidence, the trial justice was not clearly wrong in finding that Palazzolo had not been deprived of all beneficial use of his property. Even if Palazzolo had been denied all beneficial use of his property, he would not be able to demonstrate a per se taking on the facts of this case. In Lucas, the Supreme Court noted that the government 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 [or her] title to begin with. Lucas, 505 U.S. at 1027, 112 S.Ct. at 2899, 120 L.Ed.2d at 820. In applying this rule, the trial justice found that Palazzolo could not have become the owner of the property before 1978, at which time the regulations limiting his ability to fill the wetlands were already in place. The trial justice thus determined that the right to fill the wetlands was not part of Palazzolo's estate to begin with, and that he was therefore not owed any compensation for the deprivation of that right. The trial justice's finding that Palazzolo did not acquire the parcel until 1978 is a mixed question of law and fact that does not implicate constitutional matters. We will not overturn that finding unless there was clear error, oversight, or misconception of material evidence. Hawkins, 708 A.2d at 182. However, the trial justice's determination that a regulatory takings claim may not be maintained where the regulation predates the acquisition of the property is a question of law that we review de novo. In making these findings, the trial justice did not overlook or misconceive any material evidence, nor did he misapply the law. During trial, the trial justice described the conveyance history of this parcel as a title examiner's nightmare. The evidence was clear, however, that in 1959 the land was acquired by SGI, not Palazzolo. Further, all transactions since 1959 have been conducted and recorded in the name of SGI. During the time that SGI was a valid Rhode Island corporation, SGI was clearly the owner of this property, despite the fact that Palazzolo was SGI's sole shareholder for most of that time. See Rhode Island Hospital Trust Co. v. Doughton, 270 U.S. 69, 81, 46 S.Ct. 256, 258, 70 L.Ed. 475, 479 (1926) ([t]he owner of the shares of stock in a company is not the owner of the corporation's property). See also Brotherton v. Department of Environmental Conservation, 252 A.2d 498, 675 N.Y.S.2d 121, 122 (1998) (having received the benefits of corporate ownership for many years    [claimant] may not now disregard the corporate form of ownership merely because it no longer serves his interests); City of Virginia Beach v. Bell, 255 Va. 395, 498 S.E.2d 414, 418, cert. denied, 525 U.S. 826, 119 S.Ct. 73, 142 L.Ed.2d 57 (1998) (corporation, not stockholder, was owner of property for purposes of takings analysis). Palazzolo did not become the owner of the property until 1978 because only at the time the corporation's charter was revoked did the property pass by operation of law to Palazzolo, its sole shareholder. Friendly Home v. Shareholders & Creditors of Royal Homestead Land Co., 477 A.2d 934, 938 (R.I.1984). Thus, there was sufficient evidence to support the trial justice's finding that Palazzolo did not become the owner of the parcel until 1978. [8] Palazzolo argued that if in fact he became deprived of all beneficial use of the land, then under Lucas, it is irrelevant when he became owner of the property. Under his reasoning, if a regulation deprives an owner of all beneficial use, it is immaterial whether the regulation predates the claimant's ownership of the land. However, Palazzolo was unable to cite a single case in which a court has ordered compensation for a regulatory taking when the claimant became the owner of the property after the regulation became effective. Not only is this argument unsupported by precedent, it is flawed. First, it violates the Supreme Court's dictate in Lucas, instructing reviewing courts to determine whether a landowner originally possessed the right to engage in a particular use. Here, when Palazzolo became the owner of this land in 1978, state laws and regulations already substantially limited his right to fill wetlands. Hence, the right to fill wetlands was not part of the title he acquired. See Brotherton, 675 N.Y.S.2d at 122-23 (takings claim failed because [the landowner] failed to demonstrate that, at the time he acquired title, he possessed the right to develop and use the property in the manner which he proposes); City of Virginia Beach, 498 S.E.2d at 417 (where the regulation predated the landowner's acquisition of the property, the `bundle of rights' which [the landowner] acquired upon obtaining title to the property did not include the right to develop the lots without restrictions). Moreover, Palazzolo's argument that the time of acquisition is irrelevant could lead to pernicious takings claims based on speculative purchases in which an individual intentionally purchases land, the use of which is severely limited by environmental restrictions, and then seeks compensation from the state for that taking. Additionally, regulatory takings would be treated differently from physical takings, a result that is clearly contrary to the Lucas Court's statement that the two types of takings should be accorded similar treatment by courts. Lucas, 505 U.S. at 1028-29, 112 S.Ct. at 2900, 120 L.Ed.2d at 821. For instance, under Palazzolo's interpretation, any new purchaser of land would be able to claim that a pre-existing regulation resulted in a taking for which that new owner was owed compensation. This is clearly different from the treatment given to physical takings, in which only the owner at the time of the taking is owed compensation. See id. (noting that a permanent easement that was a pre-existing limitation upon the landowner's title would not amount to a compensable taking). Regardless of whether the government physically takes property in the form of an easement or promulgates regulations restricting the property's use, all subsequent owners take the land subject to the pre-existing limitations and without the compensation owed to the original affected owner. Thus, the record here provided sufficient evidence to support the trial justice's findings that Palazzolo had not been deprived of all beneficial use of his property and that he had no inherent development rights derived from any rights that existed prior to his acquiring title to the land in 1978. Therefore, there was no per se taking.