Opinion ID: 2585381
Heading Depth: 3
Heading Rank: 4

Heading: The Penn Central Test

Text: Twenty-one years ago in Penn Central, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631, the United States Supreme Court adopted an analytical protocol for assessing takings. In affirming a New York Court of Appeals decision upholding as against a regulatory taking challenge the City Landmarks Preservation Commission's denial of permission to build a 50-story office building over Grand Central Terminal, the Court noted its regulatory takings jurisprudence had not been based on fixed rules: In engaging in these essentially ad hoc, factual inquiries, the Court's decisions have identified several factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. See Goldblatt v. [Town of] Hempstead , [369 U.S. 590, 594, 82 S.Ct. 987, 990, 8 L.Ed.2d 130 (1962) ]. So, too, is the character of the governmental action. A taking may more readily be found when the interference with property can be characterized as a physical invasion by government, see, e. g., United States v. Causby, 328 U.S. 256[, 66 S.Ct. 1062, 90 L.Ed. 1206] (1946), than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. Id. at 124, 98 S.Ct. 2646 (emphasis added). Accord Eastern Enterprises, 118 S.Ct. at 2146. Thus, to determine whether a regulatory taking has occurred, the United States Supreme Court looks to the character of the regulation, the economic impact on the landowner, and the extent of interference with investment-backed expectations. Until today, we have followed the Penn Central three-part balancing test. Presbytery of Seattle, 114 Wash.2d at 334, 787 P.2d 907. The majority offers no reason why we should now overrule Presbytery and Guimont and abandon the Penn Central test. In any event, the park owners cannot meet the three-part Penn Central balancing test: 1. Character of the Regulation. Looking first to the character of the regulation, one can hardly deem it oppressive or burdensome. Unlike the statute we struck down in Guimont, the Act requires no financial contribution from the park owners. In fact, it may actually provide a benefit to the owners by helping improve the market for the mobile home park. A prospective third-party purchaser is more likely to offer a higher price for the park, knowing the home owners may match the offer. The statute, by providing notice to tenants and giving them a chance to bid the fair market value for a park, thus has the effect of promoting and encouraging a free and efficient market. An efficient market should work to the financial advantage of park owners. Moreover, the United States Supreme Court has repeatedly upheld regulations adjusting the benefits and burdens of economic life to promote the social good, even though those regulations may have destroyed or adversely affected property interests. [15] See, e.g., Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 225, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) (provisions of Multi-Employer Pension Plan Amendments Act of 1980, requiring withdrawing employers to pay proportionate share of plan's unfunded vested benefits, did not violate Fifth Amendment taking clause); Penn Cent. Transp. Co., 438 U.S. at 125, 98 S.Ct. 2646 (owners of historic building could not establish a taking merely by showing landmark preservation ordinance prevented them from exploiting airspace above the building); City of Eastlake v. Forest City Enterps., Inc., 426 U.S. 668, 674, n. 8, 96 S.Ct. 2358, 49 L.Ed.2d 132 (1976) (By its nature, zoning `interferes' significantly with owners' uses of property. It is hornbook law that `[m]ere diminution of market value or interference with the property owner's personal plans and desires relative to his property is insufficient to invalidate a zoning ordinance or to entitle him to a variance or rezoning.' 8 E. McQuillin, Municipal Corporations § 25.44, p. 111 (3d ed.1965).); Goldblatt v. Town of Hempstead, 369 U.S. 590, 592, 82 S.Ct. 987, 8 L.Ed.2d 130 (1962) (Concededly the ordinance completely prohibits a beneficial use to which the property has previously been devoted. However, such a characterization does not tell us whether or not the ordinance is unconstitutional. It is an oft-repeated truism that every regulation necessarily speaks as a prohibition. If this ordinance is otherwise a valid exercise of the town's police powers, the fact that it deprives the property of its most beneficial use does not render it unconstitutional.); Vill. of Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S.Ct. 114, 71 L.Ed. 303 (1926) (zoning ordinances not unconstitutional takings). As the Supreme Court said in Connolly, 475 U.S. at 223, 106 S.Ct. 1018: In the course of regulating commercial and other human affairs, Congress routinely creates burdens for some that directly benefit others. For example, Congress may set minimum wages, control prices, or create causes of action that did not previously exist. Given the propriety of the governmental power to regulate, it cannot be said that the Taking Clause is violated whenever legislation requires one person to use his or her assets for the benefit of another. But the majority's new approach to takings would appear to hold any effect on a use of property by a governmental regulation is sufficient to meet this prong of the test. While there is at least some superficial attraction to the park owners' assertion they have the right to sell their own property to anybody they might want to sell it to for whatever beneficial or whimsical or even capricious reason that occurs to them, our law has never said the right to dispose of property is so fundamental as to be an unfettered right. Such a view is entirely unsupported in our law. Washington law limits the disposition of property in a legion of ways. [16] A person may legally own a large supply of bottled liquor, but cannot go into a retail business to sell it in Washington because liquor sales are permitted only at state-run stores under the authority of the Liquor Control Board. A person may have a license to sell liquor at a restaurant or bar, but cannot sell liquor between the hours of 2:00 a.m. and 6:00 a.m. WAC 314-16-050. We have long upheld the authority of the Liquor Control Board to set the hours of operation of establishments that sell liquor. State ex rel. Thornbury v. Gregory, 191 Wash. 70, 70 P.2d 788 (1937). Such prohibitions and restrictions on liquor sales survived takings challenges as long ago as 1877. See, e.g., Mugler v. Kansas, 123 U.S. 623, 8 S.Ct. 273, 31 L.Ed. 205 (1887) (upholding Kansas statute prohibiting sale of alcoholic beverages as against a takings challenge based on the loss of value of property devoted to beer production). A person certainly has no right to sell tobacco products to whomever he or she wishes. It is a gross misdemeanor in Washington to sell tobacco products to those under 18. RCW 26.28.080. This statute, carrying a criminal penalty for its violation, is in derogation of one's right to dispose of one's property. Would the majority declare it a taking for that reason? If not, how would the majority distinguish its holding here? One may legally own a cache of firearms, but cannot sell them free of an armada of federal and state laws. See 18 U.S.C. § 921 (firearms); RCW 9.41.110 (unlawful to sell pistols without a license); RCW 9.41.190 (unlawful to sell machine guns and short-barreled shotguns). Would the majority declare these laws takings and facially unconstitutional derogations of one's right to dispose of property? Our antidiscrimination law specifically and in no uncertain terms limits the right of a property owner to dispose of property in any way he or she may desire. RCW 49.60.030(1) bars discrimination in real estate transactions. RCW 49.60.222 declares it to be an unfair practice for any person, whether acting for himself, herself, or another, to discriminate because of sex, marital status, race, creed, color, national origin, families with children status, the presence of any sensory, mental, or physical disability, or the use of a trained dog guide or service animal by a disabled person[.] Unfair practices include refusing to engage in a real estate transaction, refusing to negotiate for a real estate transaction, misrepresenting the availability of real property for sale or rental, and expelling a person from real property, with heavy civil penalties for violations enumerated at section .225. Of particular note is the prohibition against expelling someone from occupancy of real property for discriminatory reasons. RCW 49.60.222(1)(i). This statute implicates the right to exclude others, another fundamental attribute of property. The remedy for these violations may be a forced sale to the discrimination victim. RCW 49.60.250(5). Under the majority's analysis, these antidiscrimination statutes are facially unconstitutional and void because they destroy or derogate the right to dispose of property. How would the majority distinguish its holding here? All zoning laws would be abrogated under the majority's analysis as well because they interfere with the possession and use of private property. The majority chooses to consider each stick in the bundle of sticks and concludes any effect on any aspect of property is a taking. It cites Ackerman v. Port of Seattle, 55 Wash.2d 400, 409, 348 P.2d 664 (1960), for the following proposition: [17] Property in a thing consists not merely in its ownership and possession, but in the unrestricted right of use, enjoyment and disposal. Anything which destroys any of these elements of property, to that extent destroys the property itself. The substantial value of property lies in its use. If the right of use be denied, the value of the property is annihilated and ownership is rendered a barren right. The majority's analysis is further flawed because there is no such thing in Washington as an unrestricted right of use of property, and there never has been. We said in State v. Lawrence, 165 Wash. 508, 517, 6 P.2d 363 (1931), All property is held subject to such restraints and regulations as the state may constitutionally make in the exercise of its police power. [18] Moreover, the United States Supreme Court has never allowed property in takings cases to be assessed in a disaggregated sense and has never accorded essential status to the fundamental attribute of property asserted in this case, the right to dispose of property. In a seminal case that ought to be dispositive of the issue here, Andrus v. Allard, 444 U.S. 51, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979), the Court considered a federal statute that prohibited commercial transactions in parts of birds legally killed before the birds came under the protection of the Bald Eagle Protection Act, 16 U.S.C. § 668(a). The issue reached the Court on the petition of persons engaged in the trade of Indian artifacts. They had in their possession for the purpose of sale at the time the Act went into effect artifacts partly composed of feathers from protected birds. They argued the enactment deprived them of property without just compensation because they could no longer sell the artifacts for profit. The Court rejected the argument. At the outset, the Court noted: [G]overnment 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. To require compensation in all such circumstances would effectively compel government to regulate by purchase. Andrus, 444 U.S. at 65, 100 S.Ct. 318 (emphasis omitted). The Court recognized the Act placed a significant restriction on the owners' right to dispose of the artifacts. But this was not enough: [T]he denial of one traditional property right does not always amount to a taking. At least where an owner possesses a full bundle of property rights, the destruction of one strand of the bundle is not a taking, because the aggregate must be viewed in its entirety. Id. at 65-66, 100 S.Ct. 318. Thus, the Court concluded, the Act did not effect a taking, because even though the artifact owners could no longer sell the artifacts, they retain the rights to possess and transport their property, and to donate or devise the protected birds. Id. at 66, 100 S.Ct. 318. [19] The situation in Andrus parallels the situation in the present case, except the effect on the park owners is less onerous because the challenged statute does not destroy their right to sell, as in Andrus; it merely restricts and conditions sale for a short period of time. But the park owners retain every other right of ownership to their property: the right to possess it; the right to use it; the right to manage it; the right to income from it; the right to consume or destroy it at the conclusion of the leasehold terms; the right to modify it; the right to devise it. See Robert J. Goldstein, Green Wood in the Bundle of Sticks: Fitting Environmental Ethics and Ecology into Real Property Law, 25 B.C. ENVTL. AFF. L.REV. 347, 375 (1998) (discussing the rights to property). Pursuant to Andrus, there is no taking in this case where the interference to rights to ownership is so minimal compared to the full panoply of ownership rights the park owners retain. Other Supreme Court cases in addition to Andrus inveigh against disaggregating property rightsconsidering only single sticks from the bundleand hold the proper approach is to consider the effect of a regulation on the property as a whole: `Taking' jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 130, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978); Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 498, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987). In a more recent case, Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for So. Cal., 508 U.S. 602, 644, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993), the Court said a parcel of property could not first be divided into what was taken and what was left for the purpose of demonstrating the taking of the former to be complete and hence compensable. That is also the law of Washington: Similarly, our own state case law demonstrates that a regulatory scheme's economic impact is to be determined by viewing the full bundle of property rights in its entirety. Presbytery of Seattle, 114 Wash.2d at 335, 787 P.2d 907 (quoting Penn Cent. and citing Washington cases). Thus, until today, Washington takings jurisprudence has looked to the entirety of the property allegedly taken, not just to one stick in the bundle of property rights. The majority opinion changes that principle without acknowledging what it is doing or justifying the change. If we did not look at the effect of a regulation on property in its entirety, every land use restriction could be disaggregated from the entirety of the property and challenged as a taking. Examples would include the diminution in value from side yard and setback requirements on individual lots. A requirement that a building occupy no more than a specified percentage of the lot on which it is located could be characterized as a taking of the vacant area. Keystone, 480 U.S. at 498, 107 S.Ct. 1232. [20] In summary, the character of the regulation here challenged is in the mainstream of regulation that has been constitutionally permissible for most of the twentieth century. There is nothing novel or oppressive enough about the Act to suggest the character of the regulation here fails constitutional muster. 2. Economic Impact on the Owner. Because this case is a facial taking claim, there is no evidence in the record of economic impact. As discussed above, however, a regulation that has no economic effect other than to create the potential for a bidding war over the sale of a mobile home park, thereby assuring a sale at fair market value, can hardly work to a park owner's economic disadvantage. 3. Interference with Investment-Backed Expectations. This inquiry typically arises in the downzone context, where a jurisdiction might attempt to downzone property from a more intensive use, and therefore more lucrative use, to a less intensive use, such as a change from industrial or commercial to single-family residential or park. We addressed a like issue in Estate of Friedman v. Pierce County, 112 Wash.2d 68, 78-79, 768 P.2d 462 (1989) (quoting Junji Shimazaki, Comment, Land Use Takings and the Problem of Ripeness in the United States Supreme Court Cases, 1 B.Y.U. J. Pub.L. 375, 381-82 (1987)): Unlike eminent domain proceedings where the government actually acquires fee title, land use regulations only limit actual or potential use and enjoyment of private property. Consequently, when land use ordinances are challenged, courts must ascertain the remaining value of the regulated property to determine the amount of economic impact caused by the regulation. This is done largely by determining what remaining use of the property the ordinance permits. If substantial use remains, the amount of diminution in value or the effect upon the reasonable investment-backed expectations of the landowner are normally not significant enough to warrant a takings judgment. If, on the other hand, nearly all uses are depleted, a taking under the fifth amendment may exist. One cannot easily detect any interference with investment-backed expectations brought about by the challenged statute in this case, let alone such a reduction in the value of a mobile home park that nearly all uses are depleted[.] In summary, under all of the United States Supreme Court's tests for a taking, tests we have also adopted in Guimont, there is no taking here. [21] The Act permits the park owners to continue to use their property exactly as they had been using it, both as to rents and profits, and as to possible capital gains upon sale. As Justice Holmes noted: Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law. Pa. Coal, 260 U.S. at 413, 43 S.Ct. 158. Here, where there is not even a diminution in value, there can be no taking.