Supreme Court seems divided in property rights dispute

(REUTERS/Molly Riley)

WASHINGTON – A divided Supreme Court struggled on Monday over a property rights dispute that could make it tougher for state and local governments to limit development in coastal areas.

The case involves a family's effort to sell part of its riverfront land in Wisconsin. The family planned to use the money from a vacant lot they own to pay for improvements on a cabin that sits on the parcel next door.

But county officials nixed the sale for violating local conservation rules and treated the lots as a single property that can't be split up. The family says that's unfair and claims the government should pay what the vacant parcel is worth — up to $400,000. The government argues that when viewed as a whole, the land remains quite valuable and the family is owed nothing.

The case has drawn interest from property rights and business groups that say such rules let the government avoid paying landowners for restricting land use. The Constitution requires compensation if regulations take away a property's economic value.

During a one-hour argument, the court's four liberal justices seemed to side with state and local officials, while conservative justices were generally more skeptical. Justice Anthony Kennedy — often a swing vote in close cases — asked tough questions of both sides.

The court's ruling could affect more than 100 cities and counties across the U.S. that have similar "merger" restrictions.

The Murrs' lawyer, John Groen, told the justices the lots should be viewed as "independent, discrete, and separate parcels" because that is how they originally were drawn up and have been taxed for years.

But Justice Elena Kagan said the Murrs seem to rely on state law as it originally drew up the property lines, but ignore revisions to the law that treat side-by-side lots as a single parcel if they have the same owner.

"If we're looking to state law, let's look to state law, the whole ball of wax," Kagan said.

Wisconsin Solicitor General Misha Tseytlin argued that the two lots "have merged for all relevant purposes under state law." He said state officials also considered the reasonable expectations of the property owners.

Chief Justice John Roberts said it seemed "a little quirky" that the Murrs can't treat the properties separately, but if they had purchased them under separate names they would be in "an entirely different situation."

The case began in 2004, when four siblings in the Murr family wanted to sell the vacant lot on the banks of the St. Croix River. Their father had purchased the two 1.25-acre lots separately in the 1960s. They were later transferred to his children in the 1990s.

County officials blocking the sale point to regulations passed in 1976 that bar new construction on lots in the area to prevent overcrowding and pollution. A "grandfather" clause exempted existing owners. But the county won't apply that exemption to the Murrs' empty lot alone, since it is connected to the family's other land.

A Wisconsin appeals court sided with the county, saying zoning rules did not take away the property's value because the Murrs could still use both lots as a vacation property or sell them as a whole.

The county argues that a ruling against it would undermine its ability to minimize flood damage and maintain property values in the area. It argues that the family has treated both parcels as a single lot and says they could build a new home on either lot.

Justice Anthony Kennedy criticized lawyers on both sides. He said the family's argument seemed to ignore "market factors." But he also said the state should have to consider "the reasonable investment-backed expectations of the owner."

The high court took the case up more than a year ago, but waited several months before scheduling arguments. Property rights issues often divide the high court along ideological lines and the delay prompted speculation the justices were waiting for a ninth justice to join them.

Yet only eight justices heard the case on Monday, the same day that confirmation hearings began for Supreme Court nominee Neil Gorsuch. He could be confirmed in time to sit for arguments in April.

A ruling is expected by June.