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(Reprinted from the New York Property Rights Clearinghouse, Winter 2004)

Southampton Property Owner Wins Takings Compensation for Wetlands Regulation

Stanley Friedburg purchased a 2.5 acre parcel in the Village of Southampton in 1962. At that time the wetlands area on the parcel could legally have been filled in, and there were essentially no restrictions to prohibit the construction of a single family home. In 1973, New York State adopted the Tidal Wetlands Act. The New York State Department of Environmental Conservation (DEC) designated virtually all of the parcel as tidal wetlands. In 1987, Mr. Friedburg applied to the DEC for a tidal wetlands permit to build a single family residence. He also applied to the Village of Southampton. However, in October of 1989, the Village adopted wetlands regulations as part of its zoning code. After extensive administrative proceedings, the DEC in 1995 denied the application. The Village also denied the application on the ground that DEC's denial precluded the Zoning Board from granting their approval.

In 1995, Mr. Friedburg sued in Suffolk County Supreme Court to annul the DEC's determination, and in the alternative, that the DEC's action be regarded as a taking of property without just compensation. The Court dismissed his cause of action seeking to annul the DEC's determination but sustained the taking claims.

In July 1997, the DEC issued a letter to Mr. Friedburg, citing the 1979 Spears v. Berle ruling, indicating certain permitted uses for the property. None of those uses included the construction of a single family residence. At a hearing held in April 2000, Mr. Friedburg's expert witness, a real estate appraiser named Ronald Haberman, stated that "the market value of the property prior to enforcement of the tidal wetlands regulations on April 14, 1995, was $665,000, and after enforcement there was either no market value or the value was nominal." Mr. Haberman "considered the uses enumerated in the Spears letter but could find no competitive market for property with those limitations." The DEC's real estate appraiser countered that "the market value of the petitioner's property never exceeded $50,000."

In its decision, the Supreme Court concluded that the 1995 pre-regulation value of the property was $665,000 and "that the petitioners demonstrated beyond a reasonable doubt that there was a strong probability that most, if not all, of the recreational uses 2 through 6 in the Spears letter would ultimately not be approved." The Supreme Court further decided the property had a return of only $31,500 and as such it "represented a diminishment of the market value of the petitioner's property of over 95% and constituted a compensable taking."

The Appellate Division affirmed the decision, recognizing that:

"In the event that the court may find that the determination of the commissioner constitutes the equivalent of a taking without compensation... it may... either set aside the order or require the commissioner to acquire the tidal wetlands or such rights in them as have been taken, proceeding under the power of eminent domain."

The Appellate Court further noted:

"Where regulatory actions restrict the ability of a landowner to enjoy its property, judicial review follows a two-step process."

"If the court finds that the permit denial is supported by substantial evidence, then a second determination is made in the same proceeding to determine whether the restriction constitutes an unconstitutional taking requiring compensation."

The Appellate Court noted that it "must interpret the word 'taken.'" Much of the case law discusses that an owner must be deprived of "all economically beneficial use of his land" before an actual taking has occurred. However, the Court used the Penn Central Transp. Co. v. City of New York balancing test, which examines various factors such as "the economic impact of the regulation, the extent to which the regulation has interfered with reasonable investment-backed expectations, and the character of the governmental action." The property owner proved that his land was reduced in value by 95% from its non-regulated value, which was considered a "near total or substantial decrease in value." Further, he rebutted the proposed list of uses in the Spears letter, showing that "there is no reasonable probability that the local municipality would approve those uses."

The DEC argued that it had legitimate reasons for regulating tidal wetlands that prevented success on a takings claim. However, the Court rebutted this idea by stating that "the legitimacy of a governmental regulation does not lead to the result that the government has no obligation to pay compensation as a result of that regulation." In furtherance of this point, the Court quoted the 1994 Federal Circuit Court ruling Florida Rock Indus. v. United States:

"That the purpose and function of the regulatory imposition is relevant to drawing the line between mere diminution and partial taking should not be read to suggest that when Government acts in pursuit of an important public purpose, its actions are excused from liability. To so hold would eviscerate the plain language of the Takings Clause, and would be inconsistent with Supreme Court guidance. It is necessary that the Government act in a good cause, but it is not sufficient. The takings clause already assumes the Government is acting in the public interest: 'nor shall private property be taken for public use without just compensation.'"

In conclusion, the Appellate Court found that Mr. Friedburg succeeded in establishing that a taking occurred, according to the appropriate balancing test, because the economic impact imposed upon his property amounted to a burden that benefits the common good to be borne essentially by him. "For these reasons, the petitioners established, beyond a reasonable doubt, that the regulation and denial of the permit destroyed all but a bare residue of the economic value of the property."

In the Matter of Stanley Friedburg v. NYS DEC, et al., 767 NYS 2d 451, (2nd Dept. 2003)

By James E. Morgan
James E. Morgan is a Principal with Galvin & Morgan, Attorneys at Law, Delmar, N.Y.

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