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Formanek v. United States

ELR Citation: 22 ELR 20893
Nos. No. 764-86L, 26 Cl. Ct. 332/35 ERC 1406/(Cl. Ct., 05/14/1992)

The court holds that the Army Corps of Engineers' denial of landowners' Federal Water Pollution Control Act §404 permit application to develop property containing wetlands constitutes a Fifth Amendment taking entitling the landowners to just compensation. The landowners' property included 12 acres of uplands, over which the Corps has no jurisdiction, and 99 acres of wetlands. After the Corps exerted control over all but the upland acres of the landowners' property, the landowners applied for a §404 permit, which the Corps denied. The court first finds that the Corps' denial of the landowners' §404 permit application had a severe economic impact on the value of the property. The landowners' appraiser determined that the highest and best use for the property would have been as a multiple-lot industrial park with a value of $1.2 million, based on valuations of 14 comparable sites, adjusted for time, location, and size. The landowners' property was zoned industrial, had excellent access to major highways and utilities, and was located in an area enjoying rapid industrial development. Although soil testing indicated that considerable soil corrections would be required for development of the land, this was factored into the appraiser's final valuation. The record further shows that although Minnesota and the U.S. Environmental Protection Agency would have probably intervened to prevent development of the wetlands, no other federal or state agency had asserted any jurisdiction over the property at the time of the permit application. Moreover, although development of the property would have required variances of city ordinances, the record shows that the city was enthusiastic over industrial development, the landowners' proposed development was consistent with the city zoning ordinance, and a contractor had the materials and capabilities to prepare the soil for development.

The court next finds that development of only the upland acres in the midst of undevelopable wetlands is impracticable. Although the land was appraised at $490,000 as a nature preservation area, no incentive exists to purchase the land for that purpose, because the government's denial of the permit ensures that the land will be maintained in its natural state. Thus, no competitive market exists for the landowners' property without the possibility of development. The court concludes that the difference between $933,921, the highest fair market value based on the best use of the land prior to permit denial, and $112,000, the best probable value after permit denial, exceeds the "mere diminution in value" standard established in Loveladies Harbor, Inc. v. United States, 20 ELR 21207, for determining a compensable taking. Thus, the government must pay the landowners $933,921 plus interest from the date of the taking.

Counsel for Plaintiffs
Robert L. Schnell
Faegre & Benson
2200 Norwest Center, 90 S. 7th St., Minneapolis MN 55402
(612) 336-3000

Counsel for Defendant
Susan V. Cook
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000