Landowners and developers across the United States are hoping that a court case from California will soon settle the issue of whether governments should be required to reimburse landowners when regulations, such as building density limits, go too far in reducing the development potential of land.
The case, accepted by the Supreme Court last week for a hearing next spring, concerns a group of developers who have been denied local approvals for a residential subdivision on 44 acres in Yolo County, Calif. A decision from the court is expected by next July.
While the real estate industry prepares its support for the developers' case, government officials from small-town mayors to state attorneys general are scurrying to prepare legal briefs in support of the local governments that are the defendants in the case, claiming that a ruling in favor of the developers would cripple governmental zoning powers and potentially cost taxpayers millions of dollars.
This is not the first time the nation's highest court has considered this question. Since 1980, the Supreme Court has heard three land-use cases contending that regulations diminishing the development potential on land constituted a "taking" of private property under the Fifth Amendment to the Constitution, and that local governments therefore should be required to compensate the landowners.
As more and more local governments across the country adopt regulations designed to limit or control growth, landowners and developers have grown increasingly anxious to get a clear legal decision from the Supreme Court that would require federal, state and local governments to pay landowners for the lost development potential of land.
Each time it has taken up such a case, however, the Supreme Court has skirted the compensation question, choosing instead to focus on other legal issues or to dismiss the case on procedural grounds.
Real estate experts say, though, that this newest case, MacDonald, Sommer & Frates v. County of Yolo and City of Davis, is different.
"Our case has the simplest type of record, which means there are no questions of fact, and it is clear that under California law we have exhausted all our administrative remedies," said Scott C. Verges, one of the San Francisco attorneys representing the landowners. "It is our case that the actions of the city and county absolutely prohibits any development on the parcel."
The MacDonald case started in 1971 when a partnership bought a parcel in Yolo County adjacent to the county boundary with the city of Davis, with plans to develop the parcel as a residential subdivision.
The partnership submitted a proposed development plan to Yolo County in 1976, but was denied approval by the county board of supervisors. The landowners claim that Yolo County denied them their development rights by rejecting the proposed development plan on the grounds that it did not provide access, sewer or water to the proposed subdivision.
The landowners cannot get access, sewer or water to the subdivision, they say, because the city of Davis has decided not to extend services to the parcel. The city, which under California law has some rights to adopt planning measures for land contiguous with its boundaries, has adopted a resolution that the parcel should remain agricultural land.
But the landowners claim they cannot feasibly farm the land because the state, under a threat of filing condemnation proceedings, skimmed the topsoil off the land for use as fill for a nearby highway.
All of which, they say, amounts to a taking of their development rights by both the city and county.
In an effort to win compensation for the loss of those rights, the partnership sued the city and the county in 1981. The local trial court dismissed the case, which the developers then appealed to the California Supreme Court.
The California court upheld the lower court's dismissal on the basis of a 1980 Supreme Court decision on another land-use and compensation case. In that case, Agins v. the City of Tiburon, the Supreme Court stated that regulations blocking intensive development, but not prohibiting all valuable development, did not constitute a taking of private property.
The city and the county filed a motion asking the U.S. Supreme Court to refuse to hear the case. In that motion, they said that the case did not present the court with a clear opportunity to settle the issue of compensation, because the California Supreme Court ruled that -- as in Agins v. Tiburon -- there had not been an actual "taking."
The city and county said that if the Supreme Court rules that the local governments should compensate the developer in this case, local governments will have only two options when a developer submits a plan: either approve it as submitted or pay the developer damages.
The landowners, however, contend they would have to submit many different proposals to be able to prove the city and county had denied any development on the land. "If you couldn't sue until you had had every possible development plan rejected by the local government, you would never get to court," Verges said.
Another issue in the case is whether the Supreme Court should rethink its decision in Agins v. Tiburon on what to do about regulations that do constitute a "taking" of private property. In its decision on Agins, the court said the remedy should be to invalidate the regulation rather than to require the government entity to pay money damages.
Developers and landowners have argued, however, that such a remedy does not prevent a local government from simply establishing another regulation that will continue to limit development on a parcel, even if an earlier regulation has been invalidated by the courts.
"Compensation is necessary to lessen the likelihood that a community will continue to play freely with the constitutional rights of its citizenry, be they property owners or housing consumers," said Jon Smock, a lawyer for the National Apartment Association, which has supported landowners in other compensation cases before the Supreme Court.
In a case heard by the court four years ago, a dissenting minority of four justices said that a particular zoning action had amounted to a taking that should have been compensated. Justice William J. Brennan, who wrote that dissent, said that damages should be awarded in a temporary taking that results from overregulation, to prevent subsequent unconstitutional regulations by the governmental body.
In that case, San Diego Gas & Electric v. San Diego, the majority of the court decided against issuing a ruling because of procedural issues, but because one other justice indicated he agreed with the minority on the compensation issue, several circuit courts around the country have used the minority opinion as a guide in deciding similar cases.