On December 7, 2016, the Appellate Division, Second Department handed down Monroe Equities, LLC v State of New York, 2016 NY Slip Op 08206.  The decision affirmed the dismissal of a claim for damages based on the contention that the application of watershed regulations precluding the right to install a septic system constituted a per se taking under Lucas v South Carolina Coastal Council, 505 US 1003, requiring compensation under the Takings Clause of the United States Constitution because claimant was deprived of all economically beneficial use of its property.

The Court acknowledged that the Takings Clause is not limited to physical takings, noting that the Supreme Court has recognized that “government regulation of private property may, in some instances, be so onerous that its effect is tantamount to a direct appropriation or ouster – and that such regulatory takings may be compensable under the Fifth Amendment.”  Lingle v Chevron U.S.A. Inc., 544 US 528, 537.

The decision will be discussed in detail in a forthcoming article I wrote which will be published in the New York Law Journal, but for this blog I would like to focus on what I perceive as a fundamental error in the decision.

Unfortunately, the Court took a wrong turn in its legal analysis.  It wrote, “[a] threshold inquiry in any regulatory takings claim is whether the proscribed use was part of the landowner’s title to begin with.”  It held that the claimant never possessed the right to install a septic system on its property and the watershed regulations “inhere(d) in the title itself.”

While there were procedural problems in the way the claim was presented, the decision was clear error.

The Appellate Division’s holding that the right to install a septic system was never part of the “bundle of rights” the claimant acquired with title to the property is absolutely contrary to the Law of the Land.  In Palazzolo v Rhode Island, 533 US 606 (2001), the Supreme Court held that a claimant does not waive his right to challenge a regulation as an uncompensated regulatory taking by purchasing property after the enactment of the regulation.

The Appellate Division was compelled to follow the holding of Palazzolo by virtue of the Supremacy Clause.  Which reads:

This Constitution, and the Laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, any thing in the Constitution or laws of any state to the contrary notwithstanding.  U.S. Const., Art. VI, Sec. 2.

Thus a Supreme Court ruling is binding on state courts if involving a constitutional issue.

The Supreme Court of the United States has appellate jurisdiction over federal questions arising either in state or federal proceedings, and, by reason of the Supremacy Clause, the decisions of that court on national law have binding effect on all lower courts whether state or federal.  United States ex. rel. Lawrence v Woods, 432 F2d 1072, 1075-1076 (7th Cir. Ct. 1970) cert. den. 402 US 903.

The Second Department was bound to follow the holding of Palazzolo, not Matter of Gazza v New York State Dept. of Envtl. Conservation, 89 NY2d 603, and Kim v City of New York, 90 NY2d 1.  (There were two more decisions decided by the Court of Appeals at the same time, Basile v Town of Southampton, 89 NY2d 974, and Anello v Zoning Board of Appeals, 89 NY2d 535.)  But these decisions have been criticized as being inconsistent with the nature of property rights and inconsistent with United States Supreme Court precedent and the Rule of Law.

To be absolutely clear, Gazza and the other decisions were overruled by the United States Supreme Court which controls by virtue of the Supremacy Clause.  Simply put, there is no time limit on the Taking Clause.


Posted in Recent cases, Regulatory Taking
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