Because the courts have placed such a high degree of importance on how much of a piece of property has been affected in its takings determinations, defining the property to be analyzed in that determination is critical. If the relevant property is only the portion affected by the regulation, the impact of the regulation will seem much greater than if the court looks at that portion as only part of a larger relevant whole. The key question in current takings jurisprudence is whether the affected portion constitutes a separate segment of property. Thus, defining the relevant parcel of property for determining whether or not a taking occurred is central to a judge’s analysis in a takings claim.
The courts have consistently held that, as between the entire property and the portion of property subject to regulation, the appropriate parcel for takings analysis is the entire property. In Penn Central Transportation Co. v. New York, the U.S. Supreme Court stated that, " ‘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." In Andrus v. Allard, the Court found that, "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." Similar to the argument that a taking does not occur if only one "use" of property is restricted and other "strands" of "use" remain, one physical portion of a property cannot be considered in isolation from an owner’s entire holding.
Take the example of a logger restricted from cutting down a portion of his tree lot because of an Endangered Species Act regulation protecting the spotted owl. Though 100 percent of the logging "use" of the land has been prevented, the court will find that other uses such as hiking, camping, etc. may remain. Therefore, only ten percent of all economically viable uses are restricted and the owner is not entitled to compensation. Similarly, if the logger is only prevented from cutting down 30 percent of his entire tree lot, the court will generally consider only 30 percent of his entire parcel of land to be affected by the regulation though 100 percent of the southwest corner which constitutes that 30 percent cannot be cut down. This parcel determination is critical, for if the court were to determine that the southwest corner constituted the relevant parcel, the impact of the regulation would necessarily appear much greater.
In Keystone Bituminous Coal Ass’n v. DeBenedictus, the plaintiff coal mining company was required to leave dormant a support estate of coal, resulting in the inability to mine 27 million tons of coal. The U.S. Supreme Court found that those 27 million tons were not a separate segment for takings law purposes. Subsequently, the court found no taking because, though large, 27 million tons was only a small portion of the entire mining operation.
The Keystone decision followed Andrus and Penn Central in refusing to consider anything but the whole property when deciding if a taking had occurred. It even argued that separate deeds or tax identification numbers were "artificial" and therefore not controlling in takings analysis. The Keystone decision also underscored the importance of the relevant parcel determination to today’s takings jurisprudence:
Because our test for regulatory taking requires us to compare the value that has been taken from the property with the value that remains in the property, one of the critical questions in determining how to define the unit of property "whose value is to furnish the denominator of the fraction."
Though the Court has argued that an exact standard does not exist, as the controlling precedent, Keystone indicates a hostility towards considering individual portions of property separately from their surroundings.
Michigan has followed a similar analysis. For example, in Bevan v. Township of Brandon, the Michigan Supreme Court found that two contiguous residential lots, purchased and taxed separately, which had been subdivided by the plaintiff’s predecessor, consisted of one parcel for the purpose of the takings analysis. The local zoning ordinance, and resulting easement problems, limited the Bevans to building only one single family residence on the two lots.
The Bevan decision held that, "As a general rule, a person’s property should be considered as a whole when deciding whether a regulatory taking has occurred." The key considerations of the court in finding the two lots to be one parcel were contiguity, unity of ownership and unity of purpose (both were zoned for residential use). The court explained that, "contiguous lots under the same ownership are to be considered as a whole for determining the reasonableness of zoning ordinances, despite the owner’s division of the property into separate identifiable lots." The court was following the analysis of Keystone in finding that the Bevans did not have separate property interests in each of the two segments.
The most recent statement of law by the Michigan Court of Appeals on this subject indicates a continued adherence to the Bevan standard. In October of 1995, that court decided the case of Volkema v. Department of Natural Resources. A Michigan wetland regulation passed years after the purchase of their land prevented Russell and Lois Volkema from developing six acres, destroying $212,000 of their land’s worth. Because these six acres, now valueless, are only a part of a 24.6 acre parcel, the Michigan Court of Appeals refused to find a compensable taking. Even after finding that the regulation interfered with the Volkemas’ investment-backed expectations, part of the Volkemas’ retirement investment was destroyed on the basis that some value remained in the parcel as a whole. The Volkemas have applied to the Michigan Supreme Court for appellate review.
Out of a number of cases conducting ad hoc inquiries on the relevant parcel, a list of factors can be compiled which are weighed by judges in making their determinations: degree of contiguity, dates of acquisition, unity of ownership, unity of use, extent to which the protected lands contribute to the value of the remaining lands, value of affected parcel, and countless others. There is no doubt that the lack of an established formula for deciding the importance of these various factors creates a great deal of confusion and makes the determination of the relevant parcel a difficult task for any judge.
Although the result of weighing these factors has almost always resulted in an owner’s entire property being deemed the relevant parcel, one notable exception emerged in Loveladies Harbor, Inc. v. United States. The U.S. Court of Claims was faced with 12.5 acres of wetlands affected by regulation. These 12.5 acres were originally part of a 250-acre parcel formerly owned by the plaintiff. The court of claims here found that the 12.5 acres was the only parcel at issue.
Similarly, in the 1994 case of Miller Brothers v. Department of Natural Resources, The State of Michigan, the Michigan Court of Appeals made a distinction from its Bevan standard. The director of the Department of Natural Resources had designated a 4,500-acre area in Mason County as the Nordhouse Dunes Area. That designation resulted in the prohibition of oil and gas development in the area. The court rejected the argument that the adjoining property must necessarily be included in its taking analysis and found a compensable taking of the segment.
The Miller Brothers decision did not, however, clearly announce the reasoning for this distinction. It stated, "This case is not similar to the cases defendants cite wherein development of a portion of a parcel of land was limited or restricted. In this case, development of thousands of acres of property was totally prohibited." The distinction seems to lie in the fact that the court found the plaintiff’s mineral interests to have one, and only one, economically viable use. This lone use was prohibited by the DNR’s designation. This more liberal approach to defining the relevant parcel is encouraging; but its impact is limited, for the decision comes out of Michigan’s appellate division, and the weight of Michigan and U.S. Supreme Court precedents falls against it.
Given the importance of the relevant parcel determination to the outcome of a takings case, confusion resulting from the lack of a clear standard has a tremendous impact on property owners. Judge Sawyer’s dissent in the Volkema case provides valuable guidance as to the standard that should be applied:
[I]n light of the strong historical protection of private property in this country and the constitutional mandate that the government may put private property to public use only after compensating the owner of that property, I believe that the question posed in Lucas is best answered by concluding that a taking occurs where a regulation precludes the use of an identifiable, discreet piece of property, even if that property forms only a portion of a larger parcel. I do not find it relevant how large a portion of property the owner possesses. What is relevant is that the government has determined that a public purpose would be served by denying the rightful owner of the property, the use of that property and requiring it to be used, or in this case not used, in accordance with that public purpose. While the government is permitted to do this, it must compensate the property owner for putting the property to public use. Our historical protection of private property in the constitution allows no less.
The Michigan courts should embrace a standard similar to the one posed by Judge Sawyer in order to prevent a large number of affected owners from being disabled by the current government-favoring standard. A legislative response which alleviates the problems in this area will also go a long way toward simplifying the takings law system and, if properly crafted, toward protecting private property rights.