Palazzolo v. Rhode Island

533 U.S. 606 (2001)

Facts

Palazzolo (P) invested in land through a corporation. From the purchase in 1959 until 1966 the corporation made various attempts at developing the land. Most of the property was salt marsh subject to tidal flooding. The wet ground and permeable soil would require extensive and considerable fill to make it property that could be subdivided into building lots for homes. Applications were submitted for development but all were denied. The most promising was a proposal for a more limited fill for use as a private beach club. The Rhode Island Department of Natural Resources gave its initial consent to the beach club but then withdrew citing adverse environmental impacts. The corporation did not contest this ruling. No further attempts were made to develop the land for over a decade. In 1971, Rhode Island enacted legislation creating the Council, which was charged with protecting the State’s coastal properties. Salt marshes like P’s were designated protected coastal wetlands. In 1978, the corporate charter of P’s corporation was revoked for failure to pay corporate income taxes. Because P was the sole shareholder, he was now the sole owner of the property. In 1983, P wanted to develop the property again. P submitted almost exactly the same plans submitted in 1962, and they were rejected because the plans were vague, inadequate and would have significant environmental impacts upon the waters and wetlands. P then hired counsel and prepared a more specific and limited proposal. That was rejected as well. P appealed to the Rhode Island courts, and the Council’s decision was affirmed. P then filed an inverse condemnation action asserting that the wetland regulations had taken his property without compensation in violation of the Fifth Amendment. P alleged a deprivation of all economic use. P sought damages in the amount of $3,150,000. The State (D) prevailed. The Rhode Island Supreme Court affirmed. That court cited the fact that P had no right to challenge regulations predating 1978 prior to his succeeding to ownership from the corporation. The court also cited that there was still $200,000 in value left in a remaining upland parcel of land on the property thus there was no “Lucas” recovery. The court also ruled that P could not recover under the more general Penn Central test as he could have no reasonable investment-backed expectations that were affected by the regulation as it predated his ownership of the land. The Supreme Court granted certiorari.