March 2, 2016 – A family cabin on the shores of the St. Croix Scenic Riverway in Hudson, Wis., is making national news among eminent domain practitioners.
In January, the U.S. Supreme Court accepted review of Murr v. Wisconsin to explore the “parcel as a whole” concept and whether two commonly owned lots must be considered a single property for purposes of determining whether a taking occurred.
It all started in the 1960s, when the Murr family purchased two adjacent riverfront lots. They built a family cabin on one of the lots and kept the other as a retirement nest egg.
Because the Murr property is located on a National Scenic Riverway managed by the National Park Service, it’s not surprising that it is heavily regulated, with overlapping areas of riverway, floodplain, shoreland preservation, and slope preservation zones.
But the regulations at the center of this dispute are a St. Croix County land use ordinance and a parallel state regulation governing development of “substandard lots.”
Turning Two Lots into One
Under the regulations, two contiguous substandard (i.e. small) lots in common ownership are effectively merged into one single lot.
The purpose of the regulations is to limit the density of development along the river, but without depriving single lot owners of the use of their properties. In the state and county’s view, the regulations are a variation on a minimum lot size.
Sara K. Beachy is an eminent domain and commercial litigation attorney at Axley Brynelson LLP, Madison. As an assistant attorney general with the Wisconsin Department of Justice, she represented the state in Murr v. State before returning to private practice in 2016. Reach her by email or by phone at (608) 283-6763.
According to the state and county, this case is really about whether the Murrs can have two houses on a single property. Since the 1960s, the Murrs kept the lots in separate ownership: the parents owned one lot, and the Murrs’ business owned the other.
The state and county enacted the substandard lot regulations in the 1970s. And in 1995, the Murr parents deeded both lots to their adult children, effectively and legally creating one property.
Had the Murrs deeded one lot to a subset of their adult children, and the other lot to the remaining offspring, they could have sidestepped this problem. But that’s not what happened. Instead, the Murr children took common title to both parcels, triggering the substandard lot regulations that merged the two lots into one single lot.
The Murrs continued to use the family cabin, using the second lot for an occasional volleyball game or camp fire, until the early 2000s, when the Murrs decided to explore selling the second lot. The Murrs quickly realized that the St. Croix County and state law regulations prohibit the separate subdivision and development of the second lot. The Murrs sought a variance, which the county zoning board denied.
The Murrs unsuccessfully challenged the zoning board’s decision, and in a separate lawsuit, sued the state and county seeking compensation for a taking of property under Wis. Stat. section 32.10 and the Wisconsin Constitution. With the second lawsuit, the Murrs started on the path to the U.S. Supreme Court.
In the Murrs’ view, they have been wholly deprived of the use of their second lot, and the government owes them just compensation. The state and county respond that the Murrs can use the second lot. The second lot has a flat area at the top of the bluff overlooking the river where the Murrs could build a home without running afoul of any land regulations. According to the state and county, the Murrs can either keep the family cabin or construct a new home.
Wisconsin’s lower courts sided with the government. Under Wisconsin’s regulatory taking law, no taking occurs unless an owner has been deprived of all or substantially all beneficial use of the whole property. The St. Croix County Circuit Court found that the Murrs did not meet this test, and the Wisconsin Court of Appeals affirmed.
The Whole Property
For purposes of the takings analysis, the courts treated the Murr property as one single property. There was no dispute that the Murrs could continue to use the property as a single residential property, either by using the existing cabin or building a new home on the second lot atop the bluff. The Murrs could decide where to put their home.
Interestingly, the Court of Appeals opinion was unpublished per curiam, and the Wisconsin Supreme Court declined review. Since unpublished per curiam opinions are binding only on the parties and cannot be cited even for persuasive authority, the case seemed destined to end quietly. And it probably would have, until the California-based Pacific Legal Foundation (PLF) offered to pick it up pro bono.
PLF describes itself as “America’s first freedom-based public interest legal organization.” PLF’s attorneys represented landowners in several takings cases that have become staples in law school property classes, including Nollan v. California Coastal Commission1 and Palazzolo v. Rhode Island2.
Now, at PLF’s urging, the U.S. Supreme Court will address the “whole property” question: if the Takings Clause of the U.S. Constitution’s Fifth Amendment requires compensation when government prohibits all economic use of private property, what is “the property”?
The Murrs initially raised only a claim under state takings law. But state law cannot conflict with established U.S. Supreme Court precedent interpreting the federal Takings Clause. As the Murrs’ petition for certiorari noted, the state appeals court “determined the takings analysis based on federal takings law, and most particularly this Court’s decision in Penn Central.”
In Penn Central Transp. Co. v. New York City3, the Court ruled that a takings analysis does not segment contiguous properties, but looks at a private property owner’s rights in “the parcel as a whole,” or the whole property.
The Wisconsin Appeals Court viewed “contiguousness” as a key fact when determining that the government did not deprive the Murrs of all economic use of their property.
But PLF argued that federal takings jurisprudence lacks clear guidance on what is “the parcel as a whole,” state and federal courts substantially conflict on this, and Murr is the perfect case to clarify the concept with contiguous lots under common ownership.
“If any person other than the Murrs owned Lot E, that owner would be able to construct a home under the grandfather clause in the ordinance,” PLF wrote in its petition for certiorari. “It is only the Murrs, as the abutting owners, who are forced into the merger of these otherwise discrete and separate lots. This significant issue warrants review.”
Of course, Wisconsin and St. Croix County disagreed on the question presented. They also argue that the Murrs’ claim was time-barred, the Murrs failed to exhaust their administrative remedies, and the Murrs lacked a vested property right to subdivide their property when they took title subject to the existing regulations. The Murrs sidestepped those issues in their petition for certiorari, but the government is unlikely to abandon those arguments without a fight.
The significance of the U.S. Supreme Court’s review is uncertain. The Court could rule on the basis of one of the secondary issues above and never reach the federal takings question. The Court could also craft a narrow decision based on the unique facts presented here. But other Wisconsin counties with similar substandard lot regulations are watching the case closely. A decision could also have broader implications for government regulations that limit use of portions of a property.
Wisconsin’s new Solicitor General, Misha Tseytlin, will argue the case on behalf of the state. Remzy Bitar of Arenz, Molter, Macy, Riffle & Larson represents St. Croix County.
Briefing will be complete by summer, with oral argument sometime after October. With the passing of Justice Antonin Scalia, it’s unclear when the Court will issue a decision.
1 483 U.S. 825 (1987).
2 533 U.S. 606 (2001).
3 438 U.S. 104 (1978).