Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

Back in December, I discussed the Florida Supreme Court’s decision in Stop the Beach Renourishment, and guessed that the United States Supreme Court would affirm the Florida court’s decision, but duck the novel constitutional question of whether there could be a “judicial taking.” I ended up being a little more than half right. The United States Supreme Court did affirm 8-0, but were hardly unanimous about what to do with the concept of a “judicial taking.”

Justice Scalia, writing for Justices Thomas, Roberts and Alito, concluded that there could be such a thing as a “judicial taking” “if a court declares that what was once an established right of private property no longer exists.” However, they concluded that the Florida Supreme Court’s decision did nothing to abolish property rights. Instead, the decision merely clarified that the property rights were not implicated by the project due to the doctrine of avulsion. Basically, Florida law allowed the State to fill in its own seabed, and the State still owned the suddenly exposed land, even though the State itself caused the avulsion.

As I thought would be the case, the other four justices did not want to reach the issue of whether there could be a “judicial taking.” Justices Kennedy and Sotomayor concluded that the “judicial taking” analysis was unnecessary because the Florida decision did not terminate property rights. They suggested that if a true “judicial taking” case were to come along, the Court could tackle the issue then, and should perhaps look to the Due Process Clause.

Justices Breyer and Ginsburg agreed that there was no taking, but felt it was “better left to another day” to determine the issues of when a federal court could review whether a state court decision amounted to a taking, and if so, what the proper test would be. Unlike Justices Kennedy and Sotomayor, Justices Breyer and Ginsburg did not hint at what kind of analysis they might use.

So the question becomes – what impact will this case have on cleaning up after the BP oil spill crisis? Perhaps there was no better time than now to re-affirm the government’s right to protect our beaches.
 

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In 2004, 515 Granby, LLC proposed a $180.5 million condo development. With 34 stories and 327 units, Granby Towers would be the tallest building in Norfolk and would revitalize the northern part of the city. The following year, the federal government threatened to condemn the property, causing just enough of a delay for the ebbing economic tide to overtake the Granby Tower project and thwart 515 Granby’s ability to secure financing.

Fortunately for 515 Granby, the prime contract with Turner Construction Company had the following language:

This Agreement and any liability and obligations of the Owner…shall be subject to and expressly conditioned upon the closing by the Owner, and the initial funding by its lender, of the construction loan… and Owner shall have no obligation or liability to Construction Manager for any costs for the Construction Phase under this Agreement unless such construction loan closing is completed.

Turner and its subcontractors, who were owed over $13 million for construction on the project, challenged this language in a two-day evidentiary hearing in the Circuit Court for the City of Norfolk. In a letter opinion issued by Judge Martin, Judge Martin rejected this challenge, finding that 515 Granby “made great efforts to secure financing for the project,” but was unable to do so due to the current conditions of the credit market. Judge Martin concluded that 515 Granby would have had to pay Turner only if and when it had received initial funding of the construction loan.  For an in-depth look at the court's reasoning, and what you can do if you face such a contractual provision, go to Yes, Virginia, Contract Terms Do Matter:  Financing Term Offers Owner an Escape Hatch, by my colleague, Tim Hughes, guest blogging on Construction Law Musings. 

Fortunately for Turner, its subcontracts contained the following language:

The obligation of Turner to make a payment under this Agreement, whether a progress or final payment, or for extras or change orders or delays to the Work, is subject to the express condition precedent of payment therefor by the Owner.

One of the subcontractors, Suburban Grading & Utilities, claimed this language was unenforceable. In a second letter opinion, Judge Martin upheld this provision as well, noting that the Supreme Court of Virginia finds “pay if paid” clauses enforceable “where the language of the contract in question is clear on its face.” This language was an unambiguous “pay if paid” clause that Judge Martin had no choice but to uphold, leaving Suburban to eat the costs of $575,928 for labor and materials and another $245,662 for dewatering.  For a great and very timely discussion of this opinion and advice about "pay if paid" clauses, I urge you to read Chris Hill's Construction Law Musings post, Pay if Paid, Pay Attention Subs.

Don’t go away thinking there will be no winners in this debacle! The federal government has since conveniently renewed its desire to condemn the property in order to expand the federal courthouse next door.  It offered a paltry $6.1 million to seize the Granby Tower property, an offer that no one is jumping at yet.  If you’re interested in reading more on this very likely end to the Granby Towers saga, take a look at Harry Minium and Tim McGlone’s recent article in The Virginian-Pilot.  
 

Image by:  Hyunsoo Leo Kim/The Virginian-Pilot 

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No state has a longer shoreline than Florida – over 2,000 miles of shoreline, with 825 miles of beaches.  These beaches define Florida's top industry of tourism and are in a constant state of erosion.  Understandably, Florida has embraced the “public trust doctrine,” which dictates that tidal lands are held in trust for the people of Florida. The boundary between state-owned tidal lands and upland properties has traditionally been the “mean high water line” (“MHWL”). The MHWL may move inland due to erosion or seaward when land gradually forms (through accretion). However, the boundary will not shift due to a sudden change in the shoreline (through avulsion).

Recognizing the need to protect Florida’s beaches, Florida’s legislature enacted the Beach and Shore Preservation Act (“BSPA”) in 1965. Since then, Florida has restored approximately 200 miles of beaches through sixty actively managed projects.

The BSPA was amended in 1970 to define the property boundary for restoration projects along critically eroded beaches as the “erosion control line” (“ECL”). By adopting a fixed boundary for restoration projects, the BSPA meant to avoid boundaries that were constantly shifting due to coastal dynamics. Under the BSPA, the state would pump sand into the restoration area primarily on the state side of the ECL, creating a buffer of “sacrificial sand” that would protect the beaches and upland property. The 1970 amendments preserved, and arguably supplemented, the rights of landowners whose properties under the Act extended to the ECL rather than the MHWL.

With the devastating hurricane and storm damage we have seen over the last decade, Florida realized that it could no longer focus solely on its southern beaches. Florida decided to spend a total of $15 million – $4 million of state money and the rest paid by the local community and the town of Destin – to restore approximately seven miles of beach in Walton County, a jurisdiction located in Florida’s panhandle. In keeping with the BSPA, the state set the property line at the wet sandy beach.  The project was designed to create a narrow strip of dry beach by piling new sand where water – and therefore sovereign state land – once was.  What the project also created was a legal quagmire between government officials and private landowners that has now made its way to the United States Supreme Court.

State and local officials argue that the restoration project provides the private landowners with storm damage and erosion protection without taking land or property rights from the landowners. The officials note that, consistent with the BSPA, the project preserves all upland owners’ rights of view, access and use of the waters. You can read more on these arguments in the state’s brief and the brief for Walton County and the City of Destin.

Private landowners instead see a “land grab” that robs them of their right to gain land by accretion and their right to have their property in continuous and direct contact with the water. They complain that the officials dumped sand in their backyard to create what is now considered a public beach. To read more on the landowner’s arguments, read Stop the Beach Renourishment, Inc.’s brief and reply brief.

The Florida Supreme Court’s lengthy opinion concluded that the beach restoration program reflected “the state’s constitutional duty to protect Florida’s beaches in a way that reasonably balances public and private interests.” The court found that landowners maintained their rights to access and view the water, but that Florida law provides no basis for the landowners to own the new narrow strip of dry sand as private property, and therefore no basis for the property owners to demand compensation.

The United States Supreme Court has previously addressed whether a legislative or executive decision can amount to a constitutional taking. But now this case – Stop The Beach Renourishment, Inc. v. Florida, Case No. 08-1151 – raises the question of whether a state court decision can amount to an unconstitutional taking of property.  Based on comments from the Justices during oral argument last week, the opinion will likely not be unanimous, as noted in NPR’s December 2, 2009 article, High Court Appears Divided on Beach-Property Case.  Complicating things is the fact that Justice Stevens, who owns a Florida beachfront apartment, was absent from the oral argument, making it possible that the Justices will not have the votes one way or the other to reach a majority opinion.

My guess is that the United States Supreme Court will find a way to avoid deciding the novel issue of whether the Florida Supreme Court's decision can be considered a taking, and will not disrupt the Florida Supreme Court's determination that the beach preservation project did not take any legally cognizable state property right from the land owners.  Any other thoughts or predictions out there?

Image by:  Melissa Nelson/AP
 

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