9 ELR 20796 | Environmental Law Reporter | copyright © 1979 | All rights reserved


Spears v. Berle

No. 373 (N.Y. October 18, 1979)

The New York Court of Appeals reverses a lower court's order which directed the state Commissioner of Environmental Conservation either to issue a permit under the state Freshwater Wetlands Act for the extraction of humus and sand from privately owned wetlands or to initiate condemnation proceedings. The court first determines that the Commissioner's denial of the permit was rationally based on substantial evidence that the proposed mining activity would destroy the wetlands and was thus proscribed by the Act itself. The court then proceeds to consider whether the Act, in conjunction with the permit denial, has imposed such an onerous burden on the property that a taking has occurred. A local land use regulation will be deemed a taking if it renders private property unsuitable for any reasonable income or use and thus destroys its economic value. The challenger in such a case bears a heavy burden of demonstrating with economic evidence that the parcel as a whole would be incapable of producing a reasonable return under any permissible use. The record in this case, the court concludes, is insufficient on the taking issue and the matter must therefore be remanded for a hearing on that question.

For summaries of the briefs filed in the state court of appeals, see ELR PEND. LIT. 65623.

Counsel for Plaintiff-Respondent
William A. Glass
Goldman, Glass & Pivovar
P.O. Box 1108, Port Jervis NY 12771
(914) 856-5335

Counsel for Defendants-Appellants
Robert Abrams, Attorney General; Peter G. Crary, Shirley Adelson Siegel, Stanley Fishman
State Capitol, Albany NY 12224
(518) 474-4818

Counsel for Amicus Curiae Natural Resources Defense Council, Inc.
Laurence Rockefeller, Drayton Grant
Natural Resources Defense Council, Inc.
122 E. 42d St., New York NY 10017
(212) 949-0049

[9 ELR 20796]

Cooke, J.:

Petitioners own two parcels of land. One, known as the "Culver" property, contains 38 acres of freshwater wetland out of a total of approximately 51 acres. The second tract has an area of about 43 acres and an 8 acre wetland referred to as "Spears' Bog." Both properties were classified as wetlands, the first because of its size, the second because it was determined by the Commissioner of Environmental Conservation (the Commissioner) to be an area of unusual local importance (ECL § 24-0301, subd. 1 [N.Y. ENVIR. CONSERV. LAW § 24-0301, subd. 1]).

In March of 1977 petitioners applied to the Commissioner for a permit allowing extraction of humus, sand, and stone from the wetlands.1 After a public hearing, where undisputed evidence showed that the proposed mining activities would lead to all but complete destruction of the wetlands, the Commissioner denied the application. Although petitioners conceded during the hearing that a grant of the permit would be inconsistent with the purposes of wetland regulation, Richard A. Spears, the sole witness for petitioners, voiced his opinion that mining was the only use of the property which would produce a reasonable economic return.

Petitioners commenced this proceeding, seeking an order directing the Commissioner to issue the permit, or institute condemnation proceedings. Supreme Court, Sullivan County, transferred the proceeding to the Appellate Division. Finding that petitioners had been deprived of all reasonable return on their property, a divided Appellate Division granted the requested relief. We now reverse and remit to Supreme Court for an envidentiary hearing.

The Freshwater Wetlands Act, enactedin 1975, was designed "to secure the natural benefits of freshwater wetlands, consistent with the general welfare and beneficial economic, social and agricultural development of the state" (ECL § 24-0103 [N.Y. ENVIR. CONSERV. LAW § 24-0103]). Thus, a balance is struck between ecological and economic considerations by preserving and protecting freshwater wetlands while permitting reasonable economic use and development.2 To that end the Commissioner was empowered to identify the freshwater waterlands of the State (ECL § 24-0301 [N.Y. ENVIR. CONSERV. LAW § 24-0301]). Property so designated becomes subject to rigorous regulation, with certain uses permitted as of right and others permissible only by permit. As of right uses include recreational or commercial fishing, shellfishing, aquaculture, hunting, and trapping (ECL § 24-0701, subd. 3 [N.Y. ENVIR. CONSERV. LAW § 24-0701, subd. 3]). Other permitted activities are grazing and watering livestock, harvesting natural products of the land, selective cutting of timber, and draining and other use of the land for growing agricultural products (ECL § 24-0701, subd. 4 [N.Y. ENVIR. CONSERV. LAW § 24-0701, subd. 4]). Activities not expressly permitted may be conducted only if a permit is granted (ECL § 24-0701, subd. 1 [N.Y. ENVIR. CONSERV. LAW § 24-0701, subd. 1]). A permit may issue upon a showing by the applicant that the proposed use is "in accord with the policies and provisions of" the Act (ECL § 24-0703, subd. 3; ECL § 24-0705, subd. 3 [N.Y. ENVIR. CONSERV. LAW § 24-0703, subd. 3; N.Y. ENVIR. CONSERV. LAW § 24-0705, subd. 3]). Until the final wetland classifications are promulgated by the Commissioner, interim permits are available on generally the same basis as final permits (6 NYCRR par. 4662).

To render the Act free from constitutional infirmities, the Legislature included § 24-0705 which affords a property owner judicial review of a decision denying a permit. Within the context of the review proceeding, a court is authorized to determine whether denial of the permit was proper and, if so, whether the regulation of the particular land has become so rigorous as to amount to a taking without just compensation (ECL § 24-0705, subd. 7 [N.Y. ENVIR. CONSERV. LAW § 24-0705, sub. 7]). Hence, each aggrieved landowner is entitled to a day in court, at which time it may be determined if application of the Act to the land is consistent with constitutional strictures. If application of the wetland regulations to a particular parcel would result in a taking, [9 ELR 20797] the remedy is to direct the Commissioner to either grant the requested permit or institute condemnation proceedings. Given this remedy, a formal declaration as to the constitutionality of the act in any particular instance is unnecessary (compare French Investing Co. v. City of New York, 39 N.Y.2d 587, 594-595).

A proceeding by a wetlands owner under § 24-0705 (subd. 7) is somewhat novel and possesses a dual nature. First, the reviewing court must determine whether the denial of the permit had a rational basis and was supported by substantial evidence (cf. Matter of Fuhst v. Foley, 45 N.Y.2d 441, 444; Matter of Cowan v. Kern, 41 N.Y.2d 591, 598-599). If the administrative decision is sustained, it then becomes necessary to evaluate whether the wetlands regulations, considered together with the denial of the permit, would work an unconstitutional taking of petitioner's property. For the latter aspect of the proceeding, there must be an evidentiary hearing at which the landowner and the State may produce expert testimony and other evidence bearing upon the regulation's effect on the value of the subject parcel3 (see, e.g., Matter of Charles v. Diamond, 41 N.Y.2d 318, 326-328 [7 ELR 20434]). It is only after such a hearing that the extent of the financial hardship, if any, may be meaningfully assessed.

On the merits, then, the threshold issue is whether the denial of the interim permit had a rational basis and was supported by substantial evidence. In the present case, little discussion of this point is necessary. At the hearing, petitioners conceded, in essence, that the proposed mining activity would virtually destroy the wetlands. Thus, issuance of a permit by the Commissioner was proscribed by the Act itself (ECL § 24-0705, subd. 3 [N.Y. ENVIR. CONSERV. LAW § 24-0705, subd. 3]). But even if this were not so, petitioners' failure to supply the data required to support its application might have constituted an independent ground for the denial. In these circumstances, therefore, we cannot conclude that the Commissioner's decision was unwarranted or improper.

Proceeding to the second tier of analysis, it must be determined whether the wetlands act, coupled with the denial of the interim permit, has placed such an onerous burden on the property that a taking must be deemed to have occurred. The notion that there are limits beyond which even the most exemplary regulatory scheme may not tread is not new. Indeed, this court has not hesitated to condemn statutes or ordinances which completely deprive the owner of the beneficial use of private property under the guise of regulation (see, e.g., Lutheran Church in Amer. v. City of New York, 35 N.Y.2d 121, 130; Vernon Park Realty v. City of Mount Vernon, 307 N.Y. 493, 498-499). The evil in such a case, although often referred to as a taking, lies not in an actual physical entry but rather in regulation which results in economic destruction (see, e.g., French Investing Co. v. City of New York, 39 N.Y.2d 587, 594-597, supra). At the same time, of course, it is important to recognize the breadth of the State's police power and the means by which that power may be exercised. In view of these conflicting considerations, courts have encountered difficulty in formulating a bright-line standard for differentiating permissible police power measures from overly vigorous and hence unconstitutional impositions (see, e.g., Penn Central Transp. Co. v. New York City, 438 U.S. 104, 123-124 [8 ELR 20528], aff'g 42 N.Y.2d 324 [7 ELR 20579]; compare penna. Coal Co. v. Mahan, 260 U.S. 393, with Goldblatt v. Hempstead, 369 U.S. 590; see, generally, Sax, Takings and the Police Power, 74 YALE L.J. 36).

Nonetheless, there has evolved from our decisions a standard which, while retaining an element of flexibility, is capable of practical application. Under this test, a land use regulation — be it a universally applicable local zoning ordinance or a more circumscribed measure governing only certain designated properties — is deemed too onerous when it "renders the property unsuitable for any reasonable income[,] productive or other private use for which it is adapted and thus destroys its economic value, or all but a bare residue of its value" (French Investing Co. v. City of New York, 39 N.Y.2d 587, 596, supra; see, e.g., Marcus Assoc. v. Town of Huntington, 45 N.Y.2d 501, 506; Penn Central Transp. Co. v. City of New York, 42 N.Y.2d 324, 329-331, 336 [7 ELR 20579], aff'd 438 U.S. 104 [8 ELR 20528], supra; McGowan v. Cohalan, 41 N.Y.2d 434, 436; Williams v. Town of Oyster Bay, 32 N.Y.2d 78, 82; see also, Lutheran Church in Amer. v. City of New York, 35 N.Y.2d 121, 130, supra). Although the particulars of this rule have been considered elsewhere (see, e.g., Penn Central Transp. Co. v. City of New York, supra, at pp. 330-331, 333; McGowan v. Cohalan, supra, at pp. 432-438; Matter of National Merritt v. Weist, 41 N.Y.2d 438, 445-446; see generally, 1 ANDERSON, NEW YORK ZONING LAW AND PRACTICE, §§ 2.13 to 2.16), a few points bear emphasis. A petitioner who challenges land regulations must sustain a heavy burden of proof, demonstrating that under no permissible use would the parcel as a whole be capable of producing a reasonable return or be adaptable to other suitable private use (see Penn Central Transp. Co. v. New York City, 438 U.S. 104, 130-131, supra; McGowan v. Cohalan, supra, at pp. 436-438; Williams v. Town of Oyster Bay, supra, at p. 82). To carry this burden, the landowner should produce "dollars and cents" evidence as to the economic return that could be realized under each permitted use (Matter of National Merritt v. Weist, 41 N.Y.2d 438, 445-446, supra; see Megin Realty Corp. v. Baron, 46 N.Y.2d 891, 892-893; Marcus Assoc. v. Town of Huntington, 45 N.Y.2d 501, 506, supra). Only when the evidence shows that the economic value, or all but a bare residue of the value, of the parcel has been destroyed has a "taking" been established (e.g., French Investing Co. v. City of New York, 39 N.Y.2d 587, 596, supra). This is not to say, of course, that the State may blithely sit back in every instance and rely upon the burden of proof. Rather, if the landowner adduces proof of sufficient quality and weight to make out his case, the burden falls upon the State to go forward and rebut petitioner's evidence or otherwise justify application of the statute. Thus, should the State fail to put in any evidence, it may, in some cases, run an appreciable risk.4

In the present circumstances, the record is insufficient on the taking issue. Perhaps this is a result of the novelty of the procedure, and the fact that no judicial hearing has yet been held. Indeed, the only relevant evidence is testimony at the permit hearing,5 given at a time when the taking issue had not even emerged. In essence, the testimony consists of petitioner Richard A. Spear's bare conclusions that no activity, other than the proposed mining, would afford a reasonable return on the property. Standing alone, this is insufficient to make out a case of confiscatory application of the Act (see Matter of Charles v. Diamond, 41 N.Y.2d 318, 327-328, supra). Conspicuously absent from the record is any evidence concerning the value of the properties, their purchase price, the uses to which they may be adapted, or the return which may be realized from permitted uses or even from the proposed mining. In view of the inadequacy of the record, and the lack of a trial or hearing on the taking question, there should be a remittal. In this manner, the parties can be afforded a reasonable opportunity to litigate the issue in the proper forum.

Finally, we note that the Appellate Division in this case had remitted to the Commissioner for further proceedings as to costs, rendering its order nonfinal (cf. COHEN & KARGER, POWERS OF THE NEW YORK COURT OF APPEALS, § 11, at p. 43). Thus, although [9 ELR 20798] the appeal taken as of right must be dismissed, the court, on its own motion, grants leave to appeal.

Accordingly, the appeal taken as of right is dismissed, without costs, upon the ground that the order appealed from does not finally determine the proceeding within the meaning of the Constitution. On the court's own motion, leave to appeal is granted (CPLR § 5602[a][2] [N.Y. CIV. PRAC. § 5602]a[]2[]). The order of the Appellate Division should be reversed, without costs, and the matter remitted to Supreme Court, Sullivan County, for a hearing in that court on the taking issue.

Appeal taken as of right dismissed, without costs, upon the ground that the order appealed from does not finally determine the proceeding within the meaning of the Constitution.

On the Court's own motion, leave to appeal granted (CPLR § 5602[a][2] [N.Y. CIV. PRAC. § 5602]a[]2[]). Order reversed, without costs, and the matter remitted to Supreme Court, Sullivan County, for a hearing in accordance with the opinion herein.

1. Petitioners admitted that their application was not accompanied by the detailed plans and maps contemplated by statute (ECL § 24-0703, subd. 1 [N.Y. ENVIR. CONSERV. LAWS § 24-0703, subd. 1]) and regulation (6 NYCRR § 662.5, subd. 6).

2. The legislative findings underlying the Act state that "[t]he freshwater wetlands of the state of New York are invaluable resources for flood protection, wildlife habitat, open space and water resources" (ECL § 24-0105, subd. 1 [N.Y. ENVIR. CONSERV. LAW § 24-0105, subd. 1]). The Legislature concluded that loss of freshwater wetlands would deprive the people of the State of some or all of the following benefits: flood and storm control; wildlife habitat; protection of subsurface water resources; recreational areas for hunting, fishing, boating, camping and other uses; natural pollution treatment; erosion control; open space for aesthetic appreciation; and sources of nutrients in freshwater food cycles (ECL § 24-0105, subd. 7 [N.Y. ENVIR. CONSERV. LAW § 240-0105, subd. 7]).

3. Evidence pertaining to the taking issue would not be relevant to the question to be decided at the permit hearing and thus would not be contained on the record made at the administration level. This is especially so since an applicant no longer needs to demonstrate hardship, i.e., economic damage, to obtain an interim permit (see L. 1977, ch. 654, p. 951).

4. One difficulty faced under the Act by both the landowner and the Commissioner should be identified. Since the statute contains a catalogue of uses permitted as of right, and also allows the Commissioner to issue permits for other uses, the landowner may not initially know the full spectrum of possible uses to which his evidentiary proof must be addressed.The availability of uses not permitted as of right will depend upon the scope of permits which the Commissioner is willing to grant. While the property owner should not, for this reason, be relieved of his heavy burden of proof, he should be afforded a reasonable opportunity to obtain notice of the uses, if any, for which the Commissioner would issue a permit. The manner in which this notice may be provided will vary with the circumstances of each case, and the hearing court should, in the first instance, be free to fashion an acceptable remedy. In some instances, it may be appropriate, for example, to require the Commissioner to come forward prior to the hearing with some indication of the uses which he would permit. In other cases, where the extent of permitted uses becomes evident at the hearing, it may suffice to grant the landowner a continuance, if otherwise warranted, to allow him an opportunity to address his burden of proof.

5. At the hearing, in attempting to establish eligibility for an interim permit, petitioners endeavored to show financial hardship. Hardship had been a statutory prerequisite to theissuance of an interim permit, but has since been eliminated (L. 1977, ch. 654, § 9). The State did not rebut the evidence of hardship, concentrating instead on the merits of the application.


9 ELR 20796 | Environmental Law Reporter | copyright © 1979 | All rights reserved