U.S. Supreme Court rules against Wisconsin cottage owners

The U.S. Supreme Court on Friday upheld Wisconsin court rulings that the owners of a family cottage on Lake St. Croix were not entitled to compensation over development regulations that bar the sale of the family's adjacent lot.

The Murrs wanted to sell the lot to finance an upgrade to the cottage their parents built 56 years ago, and argued that  St. Croix County has essentially taken their land through strict shoreline development and conservation rules and should pay just compensation for that loss under the Fifth Amendment.  

But the county and the state say the family's two adjacent parcels, taken together, would easily accommodate a single modern home, and so they have not really lost any value. The government also noted that the original owners were aware of the development restrictions when they sold the lots to their children.

The U.S. Supreme Court, in a 5-3 decision, agreed that the Wisconsin courts correctly analyzed the issue as one concerning a single parcel. Justice Neil Gorsuch, who was not on the court during arguments in the case, did not participate.

John Groen, executive vice president and general counsel of the Pacific Legal Foundation, which took the Murrs' case for free and got the Supreme Court to hear it, called the decision unfortunate for all property owners.

“We are disappointed that the court did not recognize the fundamental unfairness to the Murrs of having their separate properties combined, simply to avoid the protection of the Takings Clause," Groen said.

Donna Murr said her family was disappointed but had no regrets and hoped others would learn from the ruling and "not take their property rights for granted."

Closely watched decision

The decision did not provide the clear guidance many in the development industry had hoped.

"The court declined to develop a 'bright line' test or even a presumption as to what constitutes the 'property' for purposes of a regulatory taking decision," said Janet Johnson, a veteran property lawyer at Schiff Hardin in Chicago.

The case had been closely watched by both property rights advocates and governments. Nine states plus industry groups and legal foundations filed friend-of-the-court briefs opposing Wisconsin's position on the matter.

Wisconsin Attorney General Brad Schimel called the  decision "a victory for the rule of law in Wisconsin and I’m glad our litigation has provided additional clarity for the citizens of our state.”

Justice Anthony Kennedy wrote the majority opinion that concluded no Fifth Amendment taking had occurred. The lots had merged into one when they transferred from the plaintiffs' parents to their children in the mid-1990s, well after the development regulations had been in place.

Kennedy said the Murrs' argument that original lot lines should always define the parcel in a takings claim was wrong, but so was the state's position that laws about merging lots should always control.

The proper approach, he said, is to consider a number of factors when determining if a property owner should expect their property to be treated as one parcel or separate tracts. For the Murrs, that analysis concluded they owned a single parcel that retained plenty of value.

Wisconsin courts had upheld the restrictions. The Pacific Legal Foundation heard about the Murrs' case and persuaded the U.S. Supreme Court to hear it even though Wisconsin's own high court had refused. The foundation took the Murrs' case for free to seek legal clarity in such "parcel as a whole" takings claims.

The frustration to the Murrs was that someone who had owned a single lot dating to before the regulations would still be allowed to build on it.  Each of the Murrs' lots is roughly 1.25 acres, but because of the water and a steep bluff, neither, alone, has a whole acre of buildable area.

The family has said they did not want to build a new cottage on the combined parcel, preferring to keep the current cottage's location close to the water. They hoped to sell the empty lot to finance a renovation. 

The majority said the lot mergers along Lake St. Croix were "a classic way" of gradually reducing substandard lots as part of reasonable land-use regulations that still respect property owners' rights.

Justice Roberts dissents

Chief Justice John Roberts dissented, joined by Justices Clarence Thomas and Samuel Alito. Roberts wrote that he's not troubled by the majority's holding.

"The Murrs can still make good use of both lots, and that the ordinance is a commonplace tool to preserve scenic areas, such as the Lower St. Croix River, for the benefit of landowners and the public alike."

But Roberts took issue with the majority's "ad-hoc, case specific" way of defining property in takings cases, which he felt will give too much advantage to one side.

"Whenever possible, governments in regulatory takings cases will ask courts to aggregate legally distinct properties into one 'parcel,' solely for purposes of resisting a particular claim," he wrote.

 He would let state law define the boundaries of parcels in all but the most exceptional circumstances.