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Unless U.S. Supreme Court Reverses, Towns Can Compel Perpetual Encumbrances

New York's Top Court Upholds Town's Right to Impose Conservation Easement

Dissenting Judges Deem Imposition an Arbitrary and Capricious "Taking"

By Carol W. LaGrasse
January 2005

Paul and Janet Smith's property in the town of Mendon, not far from Rochester, has become the center of a court dispute over whether government can compel an owner to donate a perpetual conservation easement in return for receiving a permit. On December 21, New York's highest court, the Court of Appeals, ruled against the Smiths in a closely split decision. Undaunted after a four-year battle, the couple is preparing a petition to the United States Supreme Court.

The Smiths own 9.7 acres of undeveloped land that was once part of a farm owned by Paul's family for over 50 years. He remembers working on the land with his father planting trees that became forest over the years. When the couple acquired the property, much of it was highly restricted by the town's environmental protection overlay districts, or "EPODs" — the Steep Slope EPOD, Water Course Protection EPOD, Wood Lot and Timber Harvesting EPOD—where those trees he planted have matured, and Flood Damage Protection EPOD. The rules restrict the use of the property so severely that it was only feasible to build the single family house the Smiths had in mind on land entirely outside the EPODs. This they planned to do.

When the Smiths applied to Mendon for a permit for site plan approval, the town granted approval only on the condition that they agree to file at the County Clerk's Office a conservation restriction affecting the land within the EPODs. The restriction largely mirrors the conditions imposed under the EPOD rules, but provides that the restrictions exist in perpetuity. The town reasoned that such a restriction "will provide the most meaningful and responsible means of protecting the environmental resources" located in the EPOD areas of the Smiths' property.

The Smiths were willing to live with the very restrictive conditions imposed on their property on account of the EPODs, but they balked at this new condition, which was not authorized in any of the town's laws. They also soon realized that the town's conservation restriction was a compulsory conservation easement. They went to court to object to the imposition of the easement and for compensation for an unconstitutional "taking" of their property.

At the first court they faced, the Monroe County Supreme Court, they won a declaration partly in their favor. In fact, the town conceded the point that the conservation restriction was a conservation easement.

"Petitioners are entitled to a declaratory judgment that the 'Conservation Restriction' required by the Planning Board as a condition to final site plan approval is both a conservation easement and a form of negative easement," wrote Judge Lunn in his decision. He also agreed with Smiths that the town's conservation easement was an "exaction."

But the judge did not accept the arguments that the imposition was an unconstitutional taking, or that it was arbitrary and capricious. The case went to Appellate Court 4th Department, which affirmed the lower court. The opponents finally came before New York's highest court, the Court of Appeals. There, both State Attorney General Eliot Spitzer and the Association of Towns of the State of New York submitted amicus curiae, or "friend of the court," briefs in opposition to the Smiths.

In late December, the New York State Court of Appeals handed down its 4-3 decision against the Smiths. The majority opinion, written by Judge Albert Rosenblatt, is inscrutable. Incredibly, the high court held that in order to qualify for takings compensation under either the Supreme Court's Nollan (the nexus test) or Dolan (the rough proportionality test) rulings, the right to exclude others had to be removed from the bundle of rights. The court stated that only for this imposition or a fee imposed in lieu of physical dedication of property to public use (meaning public occupation) could an exaction under these rulings occur. In summary, the decision made the remarkable assertion, "Outside of these two narrow contexts, neither the Supreme Court nor this Court has classified more modest conditions on development as exactions."

The high court called the difference between the Smiths' rights under the EPOD ordinance and the conservation restriction "subtle." In further reasoning, the court concluded that economic injury to the Smiths was nil because the property was already encumbered by the EPODs. The imposition could not be a taking, the court said, because it substantially advanced legitimate government interests, the town's aim to preserve environmentally sensitive areas in perpetuity, to place future buyers on notice of the development limitations on the Smiths' property, and to furnish the town with a more effective means of ensuring compliance with its regulatory objectives.

Two scathing dissents were attached to the decision. Pointing to the overarching significance of the high court's decision, Judge Susan Phillips Read opened her eighteen-page dissent, which was joined by Judge Robert S. Smith, with the words: "Today the majority decides that the Fifth Amendment takings analysis of Nollan v. California Coastal Commission… and Dolan v. City of Tigard … does not apply to a permit condition compelling dedication of a conservation easement." She went through a review of takings jurisprudence which had a far more accurate comprehension than that of the majority.

She closed her dissent with, "As a result of today's decision, the State and localities may compel conveyance of conservation easements as a condition for issuance of all sorts of routine permits, and, for purposes of determining whether just compensation is due, these conditions will not be subject to the heightened scrutiny of Nollan/Dolan. This will no doubt come as unexpected and unwelcome news to many New York property owners."

Judge Read went to New York's statute for the definition of a conservation easement, which "imposes restrictions on the landowner for purposes generally of 'conserving, preserving and protecting' the State's 'environmental assets and natural and man-made resources' for the benefit of the public." She stated, "The majority is therefore simply wrong when it asserts that the Town is not requiring a dedication of property to public use by mandating that the Smiths grant it a conservation easement, which is perpetual in duration, runs with the land and is recorded."

Disproving the court's ruling that public access was required for an exaction under Nollan/Dolan, Judge Read wrote, "Indeed the majority seems to derive the notion that public access is the sina qua non for an exaction not from, any commonly accepted definition, but from a gloss on dictim in the Supreme Court's decision in City of Monterey v. Del Monte Dunes…"

She wrote, "…the phrase 'public use' does not unambiguously equate with public access. Indeed, in takings jurisprudence 'public use' has come to mean something more akin to a public purpose or public benefit." Over several pages, she meticulously disposed of the majority's narrow reasoning of Nollan/Dolan, and then proved that the Smith's case "falls squarely within Nollan/Dolan." Since the house would be outside the EPODs and there was no suggestion in the record that it would create any significant environmental harm, there was no nexus between the exaction and harm created by the proposed development.

Her dissent also disposed of the argument that the conservation easement imposition was not a taking because it had little, if any, economic impact on the Smiths. "Nor is it relevant (or even certain) that this particular conservation easement may be worth little. The Town is compelling the Smiths to convey an interest in real property that the Town would otherwise have to pay for, or which the Smiths might choose to donate for whatever tax advantages they would enjoy as a result," she wrote.

Judge Victoria Graffeo wrote a separate dissent, concluding that it was not necessary to decide whether the Supreme Court's 1994 Dolan v. Tigard ruling applied, because the town's action fell under Agins v. City of Tiburon, where the Supreme Court held in 1980 that a regulatory action may effect a taking where it "does not substantially advance legitimate state interests." She pointed out that potential buyers are already on constructive notice that the property contains the environmentally sensitive areas, considering that the EPODs are subject to the town code; that the town already has the availability of legal means to enjoin any activity on the property that would violate the land-use restrictions; and that the argument that the easement would restrict the property in perpetuity even if the EPODs ceased to exist is unreasonable and unfair because in that situation the restrictions would no longer be in the public interest.

"Even if the conservation restriction does not effect a taking as the majority holds, I would still rule in favor of the Smiths because the Town's determination to demand such a condition in exchange for site plan approval was, contrary to the conclusion of the courts below, arbitrary and capricious," wrote Judge Graffeo.

She concluded that, because the town had found that the proposed site plan would not cause any environmental detriments that needed to be mitigated, the permit condition "was not necessary to mitigate any demonstrable defects," and was therefore arbitrary and capricious.

Delmar attorney James E. Morgan, who appeared before the Court of Appeals for the Smiths, recently expressed their intention to petition the United States Supreme Court. Reflecting the national significance of this case, Pacific Legal Foundation is expected to file a "friend of court" brief in support of the Smiths.

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