Tuesday, July 17, 2001

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WASHINGTON (Reuters) - The Supreme Court ruled on Thursday a developer may bring a lawsuit claiming an unconstitutional taking of private property over an environmental regulation that barred development of oceanfront wetlands in Rhode Island.

The 5-4 decision was a victory for the developer in Westerly, who had been barred from building 74 houses on an 18-acre salt marsh that had been designated a protected area by Rhode Island state agencies.

The justices overturned the key parts of a decision by the Rhode Island Supreme Court that it did not amount to an unconstitutional taking of private property. The developer, Anthony Palazzolo, took title as sole owner of the property in 1978, and the regulations had gone into effect in 1971.

The state court ruled property owners were foreclosed from challenging the application of land use regulations adopted before they acquired their property.

The 80-year-old Palazzolo, who had sued for more than $3 million in damages as just compensation from the government, had appealed to the U.S. Supreme Court.

LOTS PURCHASED IN '59, '60

In 1959 and 1960, Palazzolo purchased the 74 lots, but the actual purchaser of record was a corporation in which he was the sole shareholder. After the wetlands regulations took effect, the corporation went defunct and Palazzolo personally acquired the property.

Justice Anthony Kennedy said for the majority that Palazzolo's acquisition of title after the regulations' effective date does not bar his claims.

If the court were to rule that a land buyer could not challenge an earlier-enacted restriction, it would absolve the state of its obligation to defend any restriction on land use, no matter how extreme or unreasonable, Kennedy said.

The justice said ``future generations'' also have a right to challenge unreasonable limitations on the use and value of land.

Rhode Island argued Palazzolo acquired the property knowing development in a wetlands area was restricted. Its position drew support from the Justice Department, states and the National League of Cities.

The Justice Department said Palazzolo could not establish a taking of property simply by proving his land would dramatically increase in value if development restrictions that predate his acquisition of the land were eliminated.

Kennedy said the Rhode Island Supreme Court was correct in holding that Palazzolo failed to show a deprivation of all economic use, because it was undisputed that his parcel still retained significant development value.

The justices sent the case back to the state courts for further proceedings.

Justices John Paul Stevens, David Souter, Ruth Bader Ginsburg and Stephen Breyer dissented, saying they would uphold the state high court decision in its entirety.

Jim Burling, a Pacific Legal Foundation lawyer who represented Palazzolo, said the ruling ``sends a clear message to state and federal regulators across the country that, no matter how well-intentioned their environmental goals, they cannot simply put a freeze on the use of private property without giving the owner a fair price for it.''

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