Opinion ID: 2393810
Heading Depth: 3
Heading Rank: 2

Heading: Just Compensation Takings Claim

Text: Our conclusion that the Town's action substantially advances a legitimate state interest does not end the takings inquiry, however. A compensable regulatory taking can also occur when governmental agencies impose restrictions that either (1) deny landowners of all economically viable use of their property, or (2) unreasonably interfere with landowners' rights to use and enjoy their property. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015-19 & n. 8, 112 S.Ct. 2886, 2893-95 & n. 8, 120 L.Ed.2d 798 (1992); see also Taub v. City of Deer Park, 882 S.W.2d 824, 826 (Tex.1994), cert. denied, 513 U.S. 1112, 115 S.Ct. 904, 130 L.Ed.2d 787 (1995); City of Austin v. Teague, 570 S.W.2d 389, 393 (Tex.1978). A restriction denies the landowner all economically viable use of the property or totally destroys the value of the property if the restriction renders the property valueless. See, e.g., Dolan v. City of Tigard, 512 U.S. 374, 385, 114 S.Ct. 2309, 2316-17, 129 L.Ed.2d 304 (1994); Lucas, 505 U.S. at 1015-16, 1020, 112 S.Ct. at 2893-94; Taub, 882 S.W.2d at 826; City of College Station v. Turtle Rock Corp., 680 S.W.2d 802, 806 (Tex. 1984); Teague, 570 S.W.2d at 393. Determining whether all economically viable use of a property has been denied entails a relatively simple analysis of whether value remains in the property after the governmental action. In contrast, determining whether the government has unreasonably interfered with a landowner's right to use and enjoy property requires a consideration of two factors: the economic impact of the regulation and the extent to which the regulation interferes with distinct investment-backed expectations. See Lucas, 505 U.S. at 1019 n. 8, 112 S.Ct. at 2895 n. 8; Penn Central, 438 U.S. at 124, 98 S.Ct. at 2659. The first factor, the economic impact of the regulation, merely compares the value that has been taken from the property with the value that remains in the property. Keystone, 480 U.S. at 497, 107 S.Ct. at 1248. The loss of anticipated gains or potential future profits is not usually considered in analyzing this factor. Andrus v. Allard, 444 U.S. 51, 66, 100 S.Ct. 318, 327, 62 L.Ed.2d 210 (1979); see also Moore v. City of Costa Mesa, 886 F.2d 260, 263 (9th Cir.1989), cert. denied, 496 U.S. 906, 110 S.Ct. 2588, 110 L.Ed.2d 269 (1990). The second factor is the investment-backed expectation of the landowner. The existing and permitted uses of the property constitute the primary expectation of the landowner that is affected by regulation. Penn Central, 438 U.S. at 136, 98 S.Ct. at 2665; see also Lucas, 505 U.S. at 1017 n. 7, 112 S.Ct. at 2894 n. 7 (owner's reasonable expectations shaped by uses permitted by state law); Esposito v. South Carolina Coastal Council, 939 F.2d 165, 170 (4th Cir.1991), cert. denied, 505 U.S. 1219, 112 S.Ct. 3027, 120 L.Ed.2d 898 (1992)(the courts have traditionally looked to the existing use of property as a basis for determining the extent of interference with the owner's `primary expectation concerning the use of the parcel.') (quoting Penn Central, 438 U.S. at 136, 98 S.Ct. at 2665). Knowledge of existing zoning is to be considered in determining whether the regulation interferes with investment-backed expectations. See Pompa Construction Corp. v. City of Saratoga Springs, 706 F.2d 418, 424-25 (2d Cir.1983). The Town urges that its rejection of the Mayhews' application did not unconstitutionally deprive them of their property. The Town first contends that the district court found that the Mayhews' property retained a value of at least $2.4 million following the denial of the planned development application; thus, according to the Town, the property's value was not totally destroyed. The Town next urges that the denial of the development request did not unreasonably interfere with the Mayhews' property rights because the Mayhews had no right to have their property up-zoned for a greater density of development. In other words, the Town asserts that the Mayhews had no reasonable investment-backed expectation to lose. The Town also maintains that the Mayhews were not singled out unfairly through the denial of the planned development proposal. Instead, the Town claims that the zoning applied evenly to all property owners in the Town and the Town denied applications other than just the Mayhews' proposal. [4] The Mayhews counter, however, that this is not the typical denial of an up-zoning application. The Mayhews point out that the district court found that the only economically viable use of this property was to construct 3,600 residential units. The district court also found that agriculture was not an economically viable use of the property. Finally, the district court found that, with one-acre zoning, it would take a minimum of 150 years before the Mayhews could completely develop their property. Accordingly, the district court found that no reasonable investor would purchase the Mayhews' property. We first must consider the effect of these fact-findings relied on by the Mayhews. As discussed previously, the ultimate determination of whether the facts are sufficient to constitute a taking is a question of law, but we depend on the district court to resolve disputed facts regarding the extent of the governmental intrusion on the property. Under substantive law, a regulatory taking occurs when governmental regulations deprive the owner of all economically viable use of the property or totally destroy the property's value. Dolan, 512 U.S. at 385, 114 S.Ct. at 2316-17; Lucas, 505 U.S. at 1015-16, 112 S.Ct. at 2893; Taub, 882 S.W.2d at 826. Some courts have made an alternative pronouncement that a taking occurs when the government does not allow any use of the property that is sufficiently desirable to permit the property owner to sell the property. See, e.g., Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422, 1433 (9th Cir.1996), petition for cert. filed, 66 U.S.L.W. 3509 (U.S. Jan. 26, 1998) (No. 97-1235); Park Ave. Tower Assoc. v. City of New York, 746 F.2d 135, 139 (2d Cir.1984), cert. denied, 470 U.S. 1087, 105 S.Ct. 1854, 85 L.Ed.2d 151 (1985). The district court's findings that there was no economically viable use of the property and that no reasonable investor would purchase the property purport to decide the ultimate legal issue of whether a taking has occurred. This, however, involves a question of law, and we therefore owe no deference to the trial court's findings in this regard. We will instead focus on the district court's underlying factual determinations regarding the extent of the governmental intrusion and the diminution in the property's value in determining whether the Town has taken the Mayhews' property without just compensation. The relevant factual findings demonstrate that the Town has not totally destroyed all value of the property by denying the Mayhews' planned development proposal. In Lucas, the Supreme Court clarified that a taking occurs when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle. Lucas, 505 U.S. at 1019, 112 S.Ct. at 2895 (emphasis in original). Because the trial court found that Lucas's property was rendered completely and wholly valueless by the regulations at issue, the Supreme Court concluded that a taking had occurred. Id. at 1019-20, 112 S.Ct. at 2895-96. In contrast, the district court in this case determined that, even after the denial of the Mayhews' planned development proposal, the property retained a value of $2.4 million. In such a situation, the governmental regulation has not entirely destroyed the property's value. Even if the governmental regulation has not entirely destroyed the property's value, a taking can occur if the regulation has a severe enough economic impact and the regulation interferes with distinct investment-backed expectations. See Lucas, 505 U.S. at 1019 n. 8, 112 S.Ct. at 2895 n. 8 (takings are to be measured by the economic impact of the regulation on the claimant and ... the extent to which the regulation has interfered with distinct investment-backed expectations); Penn Central, 438 U.S. at 124, 98 S.Ct. at 2659 (same); see also Taub, 882 S.W.2d at 826 (sufficiently severe economic impact can constitute a taking). The reasonable investment-backed expectation of the claimant is critical to this analysis because it distinguishes this concept from those situations in which the landowner's property has been totally destroyed. Because we conclude that the Mayhews had no reasonable investment-backed expectation to build 3,600 units on their property, we hold that the Town has not unreasonably interfered with their right to use and enjoy their property by denying their planned development proposal. When the Mayhews first began purchasing their property, the Town did not have a zoning ordinance in place. It is undisputed that the Mayhews originally purchased their property for ranching, not for development. They then used their property for ranching for nearly four decades. Historical uses of the property are critically important when determining the reasonable investment-backed expectation of the landowner. See Esposito, 939 F.2d at 170 (the courts have traditionally looked to the existing use of property as a basis for determining the extent of interference with the owner's `primary expectation concerning the use of the parcel.')(quoting Penn Central, 438 U.S. at 136, 98 S.Ct. at 2665). After four decades of ranching their property in a Town with a population of no more than 2,000 people, the Mayhews did not have a reasonable investment-backed expectation that they could pursue an intensive development of 3,600 units that would more than quadruple the Town's population. The Mayhews' subsequent purchases of property in 1985 and 1986 were for purposes of development. However, at this time, the Town's zoning ordinances had restricted development to one unit per acre for the preceding twelve years. The existing zoning of the property at the time it was acquired is to be considered in determining whether the regulation interferes with investment-backed expectations. See Pompa Construction Corp., 706 F.2d at 424-25. We do not believe that the Mayhews had a reasonable investment-backed expectation to build 3,600 units on their 1,200 acres when the Town's zoning ordinances had for twelve years limited development to one unit per acre. Accordingly, we render judgment against the Mayhews on their regulatory takings claims. The Town's denial of the planned development substantially advanced legitimate state interests and did not totally destroy the value of the Mayhews' property or unreasonably interfere with their rights to use and enjoy their property.