Present: All the Justices
BOARD OF SUPERVISORS OF
PRINCE WILLIAM COUNTY
v. Record No. 960508 OPINION BY JUSTICE ELIZABETH B. LACY
January 10, 1997
OMNI HOMES, INC.
OMNI HOMES, INC.
v. Record No. 960471
BOARD OF SUPERVISORS OF
PRINCE WILLIAM COUNTY
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY
Richard B. Potter, Judge
In this appeal, we consider a property owner's claim that
government action constituted an uncompensated taking of
property in violation of the Fifth Amendment of the United
States Constitution or Article I, § 11 of the Constitution of
Virginia.
In 1986, Omni Homes, Inc. (Omni) executed a contract to
purchase a 72.68-acre parcel of unimproved land located in
Prince William County and, in 1989, bought the parcel for
$436,091. The property was zoned R-10, urban residential
development, and Omni proposed to develop the land as Doves
Landing subdivision with 106 residential lots. The property
was located adjacent to an undeveloped 188-acre parcel owned by
Doves Landing Associates (DLA). DLA planned to develop its
property as Doves Overlook subdivision with approximately 405
residential lots.
Development of Doves Landing as a subdivision required
securing certain road and utility access. The property was
three miles from public water and sewer access, and the only
access to a public road was over a gravel road called Doves
Lane. To obtain adequate access to the public road, Omni could
purchase additional easements along Doves Lane from adjoining
property owners and upgrade the road, or it could design a new
road through Doves Overlook. Similarly, Omni could secure
access to the needed utilities by paying the full three-mile
extension costs or could agree to share the cost of the utility
extension with DLA, the owner of Doves Overlook. Omni decided
to base its R-10 development plan on providing road, sewer, and
water access through and in conjunction with Doves Overlook and
its owner.
DLA and Omni had an informal understanding that if Doves
Overlook was developed as an R-10 subdivision, DLA would permit
Omni to "piggyback" on its plans so that the road access and
public sewer and water could run through Doves Overlook and
into Doves Landing. Omni and DLA also "agreed to agree later"
that they would enter into a cost-sharing agreement in which
Omni would pay its pro rata share of the road and utility
extension cost on a per lot basis. However, there was no
written agreement between Omni and DLA to this effect, and Omni
did not have any easements or other property interests in Doves
Overlook that would permit it to construct the infrastructure
through Doves Overlook.
DLA submitted its preliminary subdivision plan for Doves
2
Overlook in October 1987. In the opinion of the County, the
plan proposed a public facility which was inconsistent with the
County's Comprehensive Plan, and necessitated a review under
Code § 15.1-456. The County's position led to a series of
appeals, culminating in a determination by the Circuit Court of
Prince William County that such review was not necessary. This
Court refused the County's petition for appeal on January 9,
1990. Doves Overlook's preliminary plan was approved on
February 7, 1990.
Meanwhile, in January 1988, Omni submitted its
preliminary subdivision plan for Doves Landing to the County
for approval. On January 12, 1988, the County told Omni that
its plan did not meet minimum requirements because it did not
show access to a public road through Doves Overlook. The
County also informed Omni of the litigation involving DLA's
subdivision plan for Doves Overlook. Omni proceeded with its
plans, completing its contract to purchase the Doves Landing
parcel in January 1989, and re-filing its subdivision plan in
April 1989. The County returned the plan in May, suggesting
that it was premature until the appeals surrounding DLA's
subdivision plan for Doves Overlook were resolved. Omni sued
the County to force it to process Omni's plan. That litigation
was settled by an agreement that the County would process the
plan, but no approval would be given until the conclusion of
the litigation between DLA and the County.
3
The County informed Omni in June 1990, that the Doves
Landing preliminary plan could not be presented to the planning
commission until access to the public road was secured by an
approved, bonded road through Doves Overlook. The Doves
Overlook plan did not show such a road. Omni acknowledged the
requirement and the County agreed to hold the plan open.
In November 1990, the County adopted regulations required
for implementation of the Chesapeake Bay Preservation Act.
Code §§ 10.1-2100 through -2116. These regulations affected
Doves Overlook, and DLA sued the County for inverse
condemnation. That litigation was settled by a consent decree
entered on October 6, 1993, in which the County paid DLA $3.7
million for Doves Overlook under a three-year lease/purchase
agreement.
On April 4, 1994, Omni filed the instant litigation
alleging that the County's various actions amounted to a taking
of Omni's property without compensation in violation of the
Fifth Amendment to the United States Constitution (Fifth
Amendment), 42 U.S.C. § 1983, and Art. I, § 11 of the
Constitution of Virginia (Art. I, § 11). Following an ore
tenus hearing, the trial court determined that the purchase of
Doves Overlook by the County qualified as regulatory action and
constituted a compensable taking or damaging of Omni's property
for purposes of the Fifth Amendment and Art. I, § 11. The
trial court entered an order requiring the County to pay Omni
4
$850,000. The trial court denied Omni's request for attorneys'
fees and dismissed Omni's claim under 42 U.S.C. § 1983 on
ripeness grounds. The County and Omni filed separate appeals
challenging a number of the trial court's rulings. We awarded
both appeals and combined them for argument and disposition
here.
Omni argues, and the trial court held, that the property
interest in issue was Omni's right "to use its property, and to
do so at a density permitted under the R-10 zone." 1 The trial
court determined that, at the time the County purchased Doves
Overlook, development of Doves Landing by using Doves Overlook
for road, water, and sewer access was the only remaining
economically viable use of Omni's land. Consequently, the
County's purchase of Doves Overlook, according to the trial
court, caused Omni to lose all economically viable uses of its
property. Thus, the trial court held that the County's action
was an uncompensated taking in violation of the Fifth Amendment
and Art. I, § 11.
The trial court also held that, even if the County's
action did not preclude all economically viable uses, an
1
The parties disagree over the property right at issue in
this case. The County asserts that the interest affected by
its purchase of Doves Overlook was Omni's ability or right to
develop its property with and through Doves Overlook.
Resolution of these conflicting views is unnecessary in light
of our disposition of the case. For purposes of this opinion,
we utilize the trial court's description of the right at issue.
5
uncompensated taking occurred under both the federal and state
constitutions. The trial court found that the economic impact
of the County's actions on Doves Landing went beyond mere
diminution of the value of the land and that Omni's reasonable
investment-backed expectations were frustrated by the County's
action. Finally, the trial court held that Omni suffered
damage, as that term is used in Art. I, § 11, because the right
to develop Doves Landing as an R-10 subdivision was a right
appurtenant to the land, and the County's purchase of Doves
Overlook directly and specially decreased the value of Omni's
property.
Principles of appellate review require that the judgment
of the trial court be upheld unless it is plainly wrong or
without evidence to support it. Carter v. Carter, 223 Va. 505,
508-09, 291 S.E.2d 218, 220 (1982). However, we are not bound
by the trial court's view of the law. See City of Richmond v.
Braxton, 230 Va. 161, 163-64, 355 S.E.2d 259, 261 (1985). In
this case, the trial court erred in its interpretation of the
relevant legal standards used to determine whether property has
been taken under the federal and state constitutions. Applying
these standards, we conclude that the facts do not support a
finding of a compensable taking or damage under either the
federal or state constitutions and, accordingly, we will
reverse the judgment of the trial court. We first review
Omni's Fifth Amendment claim.
6
FIFTH AMENDMENT
The Fifth Amendment prohibits the government from taking
private property for public use without just compensation.
Until 1992, the United States Supreme Court had enunciated
various criteria to be applied by the courts in considering
whether a compensable taking had occurred. These criteria did
not provide a bright line test but required courts to engage in
a case-by-case, ad hoc analysis. Florida Rock Industries, Inc.
v. United States, 18 F.3d 1560, 1570 (Fed. Cir. 1994), cert.
denied, ___ U.S. ___, 115 S.Ct. 898 (1995). A compensable
taking occurred if government regulation went "too far,"
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922), based
on consideration of: (1) the character of the government's
action; (2) the economic impact of the regulation on the
claimant; and (3) the extent to which the regulation has
interfered with distinct investment-backed expectations. Penn
Cen. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978).
In 1992, Justice Scalia, writing for the majority in Lucas
v. South Carolina Coastal Council, 505 U.S. 1003 (1992),
explained that this "case-specific inquiry" is not necessary
when the government physically takes possession of property or
regulatory action deprives property of "all economically
beneficial or productive use." Id. at 1015. Such
governmental action goes "too far" and constitutes a
categorical taking for purposes of the Fifth Amendment. Id. at
7
1015, 1019.
The Court in Lucas also set out a new test for determining
whether a take is compensable, even in categorical takings: if
the "owner's estate shows that the proscribed use interests
were not part of his title to begin with," the owner is not
entitled to compensation. Id. at 1027. Stated another way,
the limitation imposed by the government which constitutes the
taking "must inhere in the title itself, in the restrictions
that background principles of the State's law of property and
nuisance already place upon land ownership." Id. at 1029. The
regulation must "do no more than duplicate the result that
could have been achieved in the courts - by adjacent landowners
. . . under the State's law of private nuisance, or by the
State under its complementary power to abate nuisances that
affect the public generally, or otherwise." Id.
The facts in Lucas involved a categorical taking and thus
did not require further discussion of whether regulatory action
which results in less than a per se or categorical taking can
be a compensable taking. Nothing in Lucas, however, indicated
an intent to limit compensable takings under the Fifth
Amendment to such instances. Courts considering the issue
since Lucas have continued to resolve Fifth Amendment claims
involving less than a categorical taking of property by
utilizing the traditional three-part test. See e.g., Concrete
Pipe and Products of California, Inc. v. Construction Laborers
8
Pension Trust for Southern California, 508 U.S. 602, 643-47
(1993); Multi-Channel TV Cable Co. v. Charlottesville Quality
Cable Corp., 65 F.3d 1113, 1123 (4th Cir. 1995); Creppel v.
United States, 41 F.3d 627, 631 (Fed. Cir. 1994); Loveladies
Harbor, Inc. v. United States, 28 F.3d 1171, 1179 (Fed. Cir.
1994).
A.
In this case, the trial court first determined that the
action of the County in purchasing Doves Overlook was a
categorical taking as described in Lucas because it resulted in
denying Omni all economic use of its property.
In reaching this conclusion, the trial court limited its
consideration of the property's uses to those uses considered
economically viable by Omni. Acknowledging that the property
could be developed without using Doves Overlook either at the
R-10 density, if Omni paid the full cost of the off-site roads
and utility access, or at a lesser density, the trial court
nevertheless concluded that neither of these plans was
"economically feasible for Omni," because "by the time the
County purchased Doves Overlook Omni had expended thousands of
dollars to engineer, plan and develop the property, as well as
attorney fees in litigation."
The constitutional inquiry, however, is not whether the
remaining uses are economically feasible to the owner. The
loss of the ability to develop or use the land as originally
9
intended is not a categorical taking if another economic use
for the land is available, even if the value of the use is less
than the value attached to the owner's desired use. Andrus v.
Allard, 444 U.S. 51, 64-67 (1979); Goldblatt v. Hempstead, 369
U.S. 590, 593-94 (1962). Thus, action which limits the ability
to develop or use land as originally intended or in a manner
producing the largest return on investment does not qualify as
a categorical taking if another economic use for the land is
available. The proper inquiry is whether the action complained
of stripped the land of all economic uses. Lucas, 505 U.S. at
1015; Whitney Benefits, Inc. v. United States, 926 F.2d 1169,
1172 (Fed. Cir.), cert. denied, 502 U.S. 952 (1991).
When the proper standard for determining whether there was
a categorical taking of property under the Fifth Amendment is
applied, it is evident that no such taking occurred in this
case. The property was originally purchased for $436,000, or
approximately $6,000 per acre. The value of the land after the
County's purchase of Doves Overlook, according to the appraisal
relied on by the trial court, was $4,200 to $5,000 an acre,
based on comparable sales of lots consisting of approximately
ten acres each. There was no evidence of a lack of market for
such lots. The trial court itself recognized that the property
could be developed in this manner. Therefore, the County's
purchase of Doves Overlook did not deprive Doves Landing of all
economic or beneficial use and did not constitute a categorical
10
taking of Omni's property.
B.
Similarly, the trial court erred in its alternate holding
that a Fifth Amendment violation occurred even if the County's
action did not eliminate all economic use of the property. In
reaching this conclusion, the trial court considered the
criteria traditionally applied prior to Lucas - character of
the government's action, economic impact of the action, and
frustration of investment-backed expectations.
We begin with the trial court's analysis of the
investment-backed expectations frustrated by the County's
action. While this criterion embraces a number of factors, a
primary purpose is to ensure that owners seeking compensation
for an alleged taking "bought their property in reliance on a
state of affairs that did not include the challenged regulatory
regime." Loveladies, 28 F.3d at 1177; see also Ruckelshaus v.
Monsanto Co., 467 U.S. 986, 1009-10 (1984); Connolly v. Pension
Benefit Guaranty Corp., 475 U.S. 211, 226-27 (1986); Robert M.
Washburn, "Reasonable Investment-Backed Expectations" as a
Factor in Defining Property Interest, 49 Wash. U.J. Urb. &
Contemp. L. 63, 76 (1996).
The trial court described Omni's investment-backed
expectation as purchasing Doves Landing with the expectation
that it could be developed at an R-10 density. This
expectation was not speculative, the trial court concluded,
11
because Omni's feasibility studies showed such development was
possible, the zoning was in place, plans had been submitted,
"DLA had established its legal rights and thereby Omni's legal
right to proceed with the plan," and DLA's preliminary plan had
been approved. Thus, the trial court concluded, "Omni clearly
had abundant reason to believe that its investment-backed
expectations were reasonable and accurate and to expect the
County to approve the plans for Doves Landing."
What the trial court failed to consider in its description
of Omni's expectations was that the "state of affairs" relative
to R-10 development of Doves Landing at all times included the
requirement of adequate road and utility access. Omni was
always aware of this requirement. Securing this access was not
an expectation under the "state of affairs" but a risk which
Omni was aware of and accepted when it purchased Doves
Landing. 2 Omni's hope or optimism that it could secure the
required access cannot transform a risk of development into an
investment-backed expectation supported by the "state of
[regulatory] affairs" at the time of purchase. One who buys
with knowledge of a restraint must assume the risk of economic
loss. Loveladies, 28 F.3d at 1177; Creppel, 41 F.3d at 632.
2
Testimony at trial indicated the price paid for Doves
Landing was low for R-10 land, reflecting the need "to do
things" including acquiring the access rights.
12
"A party may not undertake a calculated business risk and then
seek reimbursement from the Government when the party's gamble
does not result in its favor." Atlas Enters. Ltd. Partnership
v. United States, 32 Fed. Cl. 704, 708 (1995).
Omni's gamble here went beyond merely securing road and
utility access. Omni's proposed development depended on such
access coming through Doves Overlook. There was no assurance
that such access would be available. Omni's ownership of Doves
Landing did not carry with it any right or assurance that Omni
could utilize access through Doves Overlook. There were no
easements or contracts giving Omni road or utility access
through or with Doves Overlook. At best, Omni and DLA had an
"agreement to agree" at some future time regarding the access
issues. There is no evidence in the record that any of the
money Omni invested in Doves Landing was spent to secure the
needed access. Had DLA sold Doves Overlook to a party other
than the County, Omni would be in the same position in which it
finds itself now: having an R-10 development plan and hoping
to secure the required road and utility access through and
3
together with Doves Overlook. Omni was always dependant on
3
Reasonable investment-backed expectations are also
subject to the government's power to reasonably regulate for
the public interest. Lucas, 505 U.S. at 1023; Pace Resources,
Inc. v. Shrewsbury Township, 808 F.2d 1023, 1033 (3d Cir.),
13
the willingness of the owner of Doves Overlook to accommodate
its development plan.
The trial court erred to the extent that it considered
Omni's ability to achieve the required access through Doves
Overlook as a reasonable investment-backed expectation. The
trial court further erred in omitting consideration of the risk
of securing road and utility access when analyzing Omni's
investment-backed expectation in R-10 development of the
property. Taking these matters into consideration, we conclude
that the "state of affairs" upon which Omni relied when it
purchased Doves Landing included the risk of not securing
adequate road and utility access. The County's purchase of
Doves Overlook did not impose this risk, did not change the
requirements for R-10 development, and did not interfere with
or frustrate any enforceable arrangement or right Omni had
cert. denied, 482 U.S. 906, reh'g denied, 483 U.S. 1040 (1987).
In the absence of a vested interest, Omni was not entitled to
rely on continued R-10 zoning of its own property or Doves
Overlook. Snow v. Amherst County, 248 Va. 404, 408, 448 S.E.2d
606, 608-09 (1994); Vienna Council v. Kohler, 218 Va. 966, 976,
244 S.E.2d 542, 548 (1978). Regulatory action required by the
Chesapeake Bay Act affected the Doves Overlook property and
ultimately resulted in the change of ownership from DLA to the
County.
14
regarding road or utility access. Therefore, Omni's
investment-backed expectation in R-10 development does not
support a claim for a compensable taking of property under the
Fifth Amendment.
The access requirement for R-10 development is also
relevant to consideration of the economic impact of the
County's action. This criterion is measured by the difference
between the fair market value of land before and after the
alleged take. Florida Rock, 18 F.3d at 1563. The trial court
characterized the economic impact of the County's purchase as a
significant diminution of the property's value. Although the
trial court reached this conclusion by considering the change
in the property's fair market value, its finding was based on a
pre-purchase value which assumed the existence of access rights
through Doves Overlook.
The appraisal report relied on by the trial court placed
the pre-purchase value of Doves Landing at $1.2 million
"assuming the functional unity" of Doves Overlook and Doves
Landing. The "functional unity," or access through Doves
Overlook, was always a contingency, not a right attached to
Doves Landing or a right which could be enforced by Omni. To
base a property value on a factor which is required to develop
the property, but which never existed in fact or in law,
distorts the fair market value analysis in this case.
The economic impact of the County's action must be
15
measured without regard to the illusory "functional unity"
between the two parcels. The value of the property absent
"functional unity" prior to the County's purchase of Doves
Overlook was set at $436,000, the 1989 purchase price, and at
$450,000, based on an April 11, 1989 assessment, which was
reaffirmed on March 6, 1991. The fair market value immediately
following the County's purchase without the "functional unity"
was $350,000. The economic impact, therefore, was at most a
decrease of $100,000 in value, or somewhat less than one-third
of the fair market value of the property prior to the County's
purchase of Doves Overlook.
No single criterion or combination of criteria is
dispositive in a Fifth Amendment taking analysis. See Lucas,
505 U.S. at 1071; Hodel v. Irving, 481 U.S. 704, 714-16 (1987).
Here, we conclude that the trial court erred in its
identification of relevant investment-backed expectations and
in the factors it considered in determining the economic impact
of the County's purchase of Doves Overlook on Doves Landing.
When viewed properly, we find that Omni's expectation of using
Doves Overlook to develop Doves Landing did not qualify as an
investment-backed expectation, as that term is used in an
analysis under the Fifth Amendment, and that the economic
impact of the County's action was not one of significant
diminution in value. In this case, based on the conclusions we
have reached on two criteria, we believe it unnecessary to
16
consider the third criterion, the character of the County's
action, because regardless of the legality or merit of the
County's action, Omni did not establish a regulatory taking of
Omni's property under the Fifth Amendment. 4
ARTICLE I, § 11 OF THE CONSTITUTION OF VIRGINIA
Article I, § 11 prohibits the government from taking or
damaging private property for public uses without just
compensation. Code § 15.1-276 defines the constitutional term
"public uses" to embrace "all uses which are necessary for
public purposes." Property is considered taken for
constitutional purposes if the government's action deprives the
property of all economic use. City of Virginia Beach v.
4
Omni claimed a total loss of the economic use of its
property or alternatively a constitutionally significant
economic loss of its total property. Thus, we do not address
whether the total loss of "one of the sticks" in the bundle of
property rights qualifies as a compensable taking under the
Fifth Amendment. Lucas, 505 U.S. at 1016 n.7. Compare
Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470
(1987) and Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922);
Florida Rock Industries, Inc. v. United States, 18 F.3d 1560
(Fed. Cir. 1994), cert. denied, ___ U.S. ___, 115 S.Ct. 898
(1995); and Clajon Production Corp. v. Petera, 70 F.3d 1566
(10th Cir. 1995).
17
Virginia Land Inv. Ass'n No. 1, 239 Va. 412, 416-17, 389 S.E.2d
312, 314 (1990).
As we have previously discussed, the purchase of Doves
Overlook by the County did not eliminate all economic uses of
Doves Landing. Therefore, the County's action did not
constitute a taking of Omni's property under Art. I, § 11. Id.
Property is damaged for Virginia constitutional purposes
when an appurtenant right connected with the property is
directly and specially affected by a public use and that use
inflicts a direct and special injury on the property which
diminishes its value. City of Lynchburg v. Peters, 156 Va. 40,
49, 157 S.E. 769, 772 (1931). Virginia law holds partial
diminution in the value of property compensable only if it
results from dislocation of a specific right contained in the
property owner's bundle of property rights. Lambert v. City of
Norfolk, 108 Va. 259, 268, 61 S.E. 776, 778-79 (1908).
Omni argues, and the trial court held, that the right to
develop one's property is an "appurtenant right connected to
the property" and that such right was directly and specially
affected by the County's actions resulting in the loss of the
"only viable economic use of the property." However, Omni has
not lost the right to develop its property. The R-10 density
classification has not been altered. Omni seeks to transform a
risk attached to the development of its land at R-10 density
into a right to do so. As discussed above, Omni had not
18
acquired the rights necessary to realize its preferred method
of development either as a matter of contract or easement.
There was no right appurtenant to Doves Landing which would
allow Omni to develop it with and through Doves Overlook. The
action of the County in purchasing Doves Overlook could not
damage a non-existent right. Accordingly, we conclude that the
County's purchase of Doves Overlook did not damage Omni's
property within the contemplation of Art. I, § 11.
For these reasons we will reverse the judgment of the
trial court and enter judgment in favor of the County in Record
No. 960508. 5 In light of this holding, we will dismiss Omni's
separate appeal, Record No. 960471, challenging the trial
court's disposition of its claims under 42 U.S.C. § 1983 and
for attorneys' fees because it is moot.
Record No. 960508 - Reversed and final judgment.
Record No. 960471 - Dismissed.
5
Our disposition of the case makes consideration of the
County's assignments of error regarding whether the County's
purchase qualified as regulatory action and Omni's retention of
the fee interest in Doves Landing unnecessary.
19