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Dept. of Env. Conservation v. Pac-Rim Financial Svcs. (2/4/94), 867 P 2d 797
Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
THE SUPREME COURT OF THE STATE OF ALASKA
ROBERT CANNONE and WILLIAM )
LAMOUREAUX, individually, ) Supreme Court No. S-5669
and THE DEPARTMENT OF )
ENVIRONMENTAL CONSERVATION, ) Superior Court No.
STATE OF ALASKA, ) 3AN-88-7719 CI
Petitioners, ) O P I N I O N
[Op. No.4047 - February 4,
STEPHEN W. NOEY, HELEN H. )
NOEY, and PAC-RIM FINANCIAL )
SERVICES, a partnership, )
Petition for Review of Ruling by the
Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Joan M. Katz,
Appearances: James E. Cantor, Assistant
Attorney General, Anchorage, and Charles E.
Cole, Attorney General, Juneau, for Peti
tioners. Mark S. Bledsoe, Bledsoe & Knutson,
Anchorage, for Respondents.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices.
[Burke, Justice, not participating.]
The Department of Environmental Conservation ("DEC"or
"State") petitioned for review of a ruling by the superior court
that an administrative decision, subsequently overturned as
arbitrary, per se establishes a temporary taking. The superior
court held that under the Alaska and United States Constitutions,
a temporary taking had occurred, and therefore the property
owners were entitled to just compensation. We reverse.
II. FACTUAL AND PROCEDURAL BACKGROUND
Stephen Noey, Helen Noey, and Pac-Rim Financial
Services, a partnership (collectively referred to hereafter as
"Noey"), developed plans to subdivide their land in a remote area
into a recreational subdivision of sixteen one-acre lots. DEC
reviewed Noey's lot configuration plans and rejected them based
on the accompanying wastewater treatment and disposal proposals.
The rejections were affirmed first by an administrative hearing
officer and then by the superior court.
In Noey v. Department of Environmental Conservation,
737 P.2d 796 (Alaska 1987), we reversed the superior court's
decision. With respect to Noey's second, third and fourth
proposals, we held that DEC had "employed inconsistent and
unarticulated subjective standards" and that therefore "the
decisions to reject Noey's plans were made on an arbitrary basis,
or were not in accordance with law." Id. at 806. We remanded
the case for further proceedings.1 Id. at 807.
Our opinion was issued on May 29, 1987. On July 20,
1988, Noey filed suit in superior court, claiming that the State
had violated his civil rights and effected an inverse
condemnation. He moved for partial summary judgment on the
inverse condemnation claim. On February 24, 1989, the superior
court ruled that his claim was not ripe because Noey had failed
to exhaust his administrative remedies, since he had not sought a
decision from DEC specifically relating to a particular disposal
system or systems.
As a result of this ruling, Noey submitted another plan
to DEC in March 1989 proposing treatment and disposal of gray
water by means of a sand filter; alternatively, he proposed a
solar-powered incinerator. These plans were rejected by DEC on
May 23, 1989, for lack of "adequate design and supportive
information to demonstrate that the proposed systems could
reasonably be expected to provide a means of adequate wastewater
disposal for the conditions existing at Bear Cove." Noey
appealed this rejection to a hearing officer, who concluded on
March 31, 1991, that since Noey had failed to provide sufficient
information, DEC should have notified him of the specific
information required and established a deadline for receipt of
the requested information. Only if the information had not been
submitted by the deadline should the application have been
denied. Accordingly, the hearing officer vacated the
application's rejection and remanded it for consideration of
supplemental information. On May 17, 1991, DEC approved the
subdivision and required plat notes concerning waste and
wastewater as follows:
Lots in this subdivision are approved for one
of the following types of waste and wastewater
1. Sealed systems with no
discharge to the land or water.
2. Other systems designed by an
engineer registered to practice in the
state of Alaska. System designs must be
reviewed and approved by the Department
of Environmental Conservation in
accordance with 18 AAC 72.210-72.285
prior to construction.
Following final subdivision approval, Noey renewed his
motion for partial summary judgment. The trial court granted
Noey's motion, ruling that a temporary taking by the State had
occurred during the period from August 15, 1984, when the
administrative hearing officer affirmed the denial of the permit,
until May 29, 1987, when this court issued its decision.2
The trial court also ruled that a temporary taking
might have occurred during a period following our decision. For
the period from May 23, 1989, when DEC denied Noey's new
application, to March 31, 1991, when the denial was vacated by
the hearing officer, the superior court ruled that a temporary
taking might have transpired depending on "whether part or all of
the delay during this period was due to Noey's failure to provide
additional information, or due to arbitrariness on the part of
From these decisions of the superior court, the State
sought review. We granted review and reversed the court's
decisions. This opinion explains our ruling.
"Inverse condemnation in its classic form entails a
physical invasion of private property by government without
formally exercising the power of eminent domain." Ehrlander v.
State, Dep't of Transp., 797 P.2d 629, 632 (Alaska 1990). This
case does not fit the classic form because no physical invasion
of Noey's property has occurred. However, inverse condemnations
may also result from government regulatory activity.
As we stated in Ehrlander:
Recently, in Homeward Bound, Inc.
v. Anchorage School District, 791 P.2d 610
(Alaska 1990), we acknowledged that an action
for inverse condemnation might lie where a
land-use planning classification deprives a
private property owner "of the economic
advantages of ownership of the property."
Id. at 614. Other jurisdictions have also
recognized that a regulation or land use
decision may give rise to an inverse
Ehrlander, 797 P.2d at 632-33. In Lucas v. South Carolina
Coastal Council, ___ U.S. ___, 112 S. Ct. 2886 (1992), the United
States Supreme Court traced the concept of regulatory takings to
Justice Holmes' opinion in Pennsylvania Coal Co. v. Mahon, 260
U.S. 393 (1922):
Justice Holmes recognized in Mahon,
however, that if the protection against
physical appropriations of private property
was to be meaningfully enforced, the govern
ment's power to redefine the range of inter
ests included in the ownership of property
was necessarily constrained by constitutional
limits. If, instead, the uses of private
property were subject to unbridled, uncompen
sated qualification under the police power,
"the natural tendency of human nature [would
be] to extend the qualification more and more
until at last private property
disappear[ed]." These considerations gave
birth in that case to the oft-cited maxim
that, "while property may be regulated to a
certain extent, if regulation goes too far it
will be recognized as a taking."
Lucas, 112 S. Ct. at 2892-93 (citations omitted).
Noey claims in this case that the State, in exercising
its authority to approve subdivisions, has gone too far, and that
a temporary regulatory taking was effected. "The United States
Supreme Court has recognized two classes of per se takings: (1)
cases of physical invasion and (2) cases where a regulation
denies a landowner of all economically feasible use of the
property." Anchorage v. Sandberg, 861 P.2d 554, 557 (Alaska
1993) (citing Lucas, 112 S. Ct. at 2892-95). If a case does not
fall into either of these categories, "courts must engage in a
case-specific inquiry to determine whether governmental action
effects a taking." Id. While the fact patterns of regulatory
takings are too varied to be amenable to analysis under a single
formula, we have identified a number of factors which the courts
(1) the character of the governmental
action; (2) its economic impact; and (3) its
interference with reasonable investment-
backed expectations. The legitimacy of the
interest advanced by the regulation or land-
use decision is also relevant to this
Id.; State, Dep't of Natural Resources v. Arctic Slope Regional
Corp., 834 P.2d 134, 139 (Alaska 1991).3
In the present case, the trial court was persuaded that
a per se taking had occurred which had denied Noey all
economically feasible use of his property. This determination is
wholly unsupported in the record.4 No evidence reveals that Noey
was unable to sell this sixteen-acre parcel for a substantial
price to a purchaser who either wished to attempt a subdivision
having larger lots or to use the entire parcel for the
purchaser's own recreational purposes. Further, no evidence
indicates that Noey himself could not have subdivided using
larger lots or used the property for his own recreational
purposes or as a commercial lodge. The United States Supreme
Court has observed that it is an "extraordinary circumstance"
when no productive or economically beneficial use of land is
permitted. Lucas, 112 S. Ct. at 2894. Noey has not established
that this case is an example of such an extraordinary
In deciding Noey's motion for summary judgment, the
trial court stressed this court's determination that certain
actions of the State had been arbitrary and capricious. The
State argues that the trial court seemed to treat this
determination as a substitute for conventional takings analysis.
Some observations by the trial court lend credence to this view.5
If that was the trial court's view, the court erred.
The arbitrary and capricious standard is the customary
standard of review by which this court reviews non-adjudicatory
agency action. State v. 0.644 Acres, More or Less, 613 P.2d 829,
833 (Alaska 1980); Moore v. State, 553 P.2d 8, 34 n.12 (Alaska
1976). This standard of review covers a broad range of activity.6
In the present case, DEC's decision was found to be arbitrary
because DEC used "inconsistent and unarticulated subjective
standards" and reached "conclusions unsupported by the record."
Noey, 737 P.2d at 804-06.7 We need not decide in this case
whether, or to what extent, a finding that an agency's conduct is
arbitrary may be relevant in conducting the multi-factor inquiry
into whether a regulatory taking has been accomplished in non-per-
se cases. It is enough to observe that an arbitrary finding is
not a substitute for the takings inquiry.8
For the above reasons we have REVERSED the grant of
partial summary judgment to the plaintiff. This case is REMANDED
to the superior court for further proceedings.
1 Although Noey requested that this court order DEC to
approve his subdivision, we did not grant that relief. Instead,
we ordered that the case be remanded to DEC "with directions that
it afford Noey an opportunity to supplement his soil data
information if necessary, and to revise his proposal to include
an underdrain in regard to his proposed sand filtration system."
Noey v. Department of Envtl. Conservation, 737 P.2d 796, 806
(Alaska 1987). We noted that the relevant statutes and
regulations required a developer "to submit a waste disposal
proposal that will be generally adequate for meeting reasonably
foreseeable waste disposal needs." Id. at 807. We concluded:
DEC should approve those proposed
systems which are shown to be generally
adequate for the site conditions. A plat
notice restricting individual lot owners from
employing a different system without DEC
approval is a reasonable means of giving DEC
another opportunity to review individual
proposals in the future as conditions or
technology may change. Thus, DEC should
approve any of Noey's proposals which
includes the use of systems shown to be
generally adequate for treating and disposing
of waste under site conditions.
2 Excluded from this period was the time from February
18, 1985 until March 10, 1986, a period of slightly more than a
year, during which Noey sought and obtained extensions of time to
file his brief.
3 These factors mirror those employed by the United
States Supreme Court in determining whether a permanent taking
has occurred. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005
(1984) (quoting PruneYard Shopping Ctr. v. Robins, 447 U.S. 74,
83 (1980)). When the question is whether there has been a
temporary taking the Court has employed its permanent taking
methodology, determining whether the challenged governmental
action would amount to a permanent taking if uncorrected or
unlimited in time from the outset. Lucas, 112 S. Ct. at 2901
n.17; First English Evangelical Lutheran Church of Glendale v.
County of Los Angeles, 482 U.S. 304, 318 (1987) ("'[T]emporary'
takings which, as here, deny a landowner all use of his property,
are not different in kind from permanent takings . . . .").
Without implying that this is all that may be involved in the
determination of temporary takings, we suggest that it is a
4 A summary judgment movant bears the burden of demon
strating the absence of any genuine issue of material fact and
entitlement to judgment as a matter of law. Alaska R. Civ. P.
56(c); McGee Steel Co. v. State ex rel. McDonald Indus. Alaska,
Inc., 723 P.2d 611, 615 (Alaska 1986).
5 The court stated:
[A]ll those cases seem to suggest to me
that . . . if there is a regulatory decision-
making process, it takes more than a usual
period of time that deprives a property owner
of the use of its land and we have the
situation here where the Court has found that
it was arbitrary on the part of the
government agency, then you have a taking,
and that's my finding.
6 We have held that failing to consider important
information may make a decision arbitrary, 0.644 Acres; S.E.
Conservation Council v. State, 665 P.2d 544, 549 (Alaska 1983),
and have suggested that a decision based on irrelevant factors
may be arbitrary. 0.644 Acres, 613 P.2d at 833 n.13.
7 DEC's determinations did not necessarily indicate
malice or an intent to harm Noey. We do not suggest that malice
or an intent to harm necessarily is relevant to the question
whether a given governmental action is a taking. If an owner is
denied productive use of his or her property, that may be a
taking regardless of the mental state of the involved government
official, whether it be malicious, negligent, non-negligent but
mistaken, or non-negligent and not mistaken.
8 In 1902 Atlantic Ltd. v. United States, 26 Cl. Ct. 575
(1992), the district court found that the administrator's denial
of an amended application for a permit was arbitrary and capri
cious. Nonetheless, the court denied the developer's claim for a
temporary taking, reasoning that the period between the
administrator's arbitrary conclusion and the time that it was
corrected by the district court on appeal under the federal
Administrative Procedure Act was merely part of the process of
government decision making: "The temporary harms suffered by
Atlantic during the period its permit was denied were certainly
significant, but the government cannot be charged with the delay
necessary to complete the review process." Id. at 581.
The delay which commonly occurs when a permit or
regulatory approval is sought is not regarded as a regulatory
taking. Steinberg v. City of Cambridge, 604 N.E.2d 1269, 1274
(Mass. 1992). Thus, in First English, 482 U.S. at 321, the Court
distinguished compensable temporary takings, which would result
if an ordinance were held invalid under the Takings Clause, from
"the quite different questions that would arise in the case of
normal delays in obtaining building permits, changes of zoning
ordinances, variances, and the like, which are not before us."