Posted by: Patricia Salkin | January 19, 2013

SC Supreme Court Finds No Takings After Council Denies Rezoning for Golf Club Property

In 2002, John Weiland, a principal of Dunes West Golf Club, purchased undeveloped residential lots and the master development rights to the Dunes West Development, a 4,518-acre golf course development in Mount Pleasant, South Carolina.  Weiland believed that the unused land around the golf course could be used for residential development, and he instructed an employee to walk the property and identify areas for potential development in the out-of-bounds areas of the golf course.  The employee identified 57 such acres of property, but Weiland took no further steps at the time to formally pursue residential development there.  After making substantial repairs to the Development’s infrastructure and amenities, in 2005 Dunes West Golf Club also acquired the Dunes West Golf Course, related and surrounding properties, comprising 256 acres (hereinafter Golf Course Property).  At that time, the 256-acre Golf Course Property was in the Dunes West Planned Development zone, which permitted flexible land use by the owner/developer.

Meanwhile, developers had begun converting a number of other golf courses around South Carolina into residential developments, capitalizing on the flexible zoning provisions typically applied to those properties.  Concerned that this development skirted local oversight, the Town of Mount Pleasant created a new zoning district, the Conservation Recreation Open Space zone, to be applied to golf courses, which would permit only recreational and conservation uses on that property and not residential development.  In order to pursue residential development, landowners in the new zone would need to request that the Town rezone the property for that use.

During hearings held on the creation of Conservation Recreation Open Space zone, Dunes West Golf Club opposed the change, especially for an unenumerated, unmapped 60.4 acres of open space it was not “part of the golf course” and should be able to maintain its existing zoning designation.  Dunes West did not provide the Town with a clear description of which acres it wished to keep under the old zoning designation until after the new zoning was approved by the Town.  To identify the property impacted by the new zoning, the Town used tax map parcel boundaries; the Dunes West properties rezoned under the change entailed the entire 256-acre Golf Course Property.

Dunes West submitted a rezoning petition seeking to pursue residential development, this time on 17.93 noncontiguous acres of the Golf Course Property.  In order to develop these acres for residential use, Dunes West would have had to extensively alter their golf course, fill wetlands, and pursue another party to abandon an easement.  At the time, approximately 1,200 other nearby lots were available for residential development, sparking public debate on the proposal.  After reviewing the application, the Town planning commission recommended to the Town Council that Dunes West’s request be denied on the basis that it did not comply with the rezoning.  Before the Town Council could consider the request, Dunes West withdrew the application.

Dunes West submitted another application in April 2009 seeking to rezone 16.48 acres of noncontiguous land for residential development, again in the golf course’s areas of play, where wetlands would need to be filled and easements owned by others would need to be abandoned.  Again opposition to the proposal was raised, and the Town Council denied the petition to rezone.  Dunes West filed suit claiming that the rezoning was taking of the 60.4 acres of the Golf Course Property it had hoped to use for residential development, as well as a violation of their due process and equal protection rights.  The Circuit Court granted summary judgment for the Town, and Dunes West here appeals.

On the matter of equal protection, Dunes West claimed that despite introducing evidence that a rezoning petition had been granted to a substantially similar property, and that it had been disparately treated, the lower court had improperly granted summary judgment on the matter.  In the years following the Town’s rezoning of golf courses to the Conservation Recreation Open Space zone, another golf course, the Snee Farm Country Club sought to rezone 20 acres of their property to develop 58 single homes.  In order to gain approval for their project, Snee Farm gave the Town a comprehensive development proposal and detailed impact assessment, outlining a plan to use money from the sale of residential properties to make recreational improvements and stating that it did not intend to alter the existing golf course.  The Town granted the request and rezoned the 20 acres for Snee Farm.

Dunes West claimed that it had been subjected to disparate treatment at the hands of the Town because Snee Farm’s rezoning application had been approved and Dunes West’s substantially similar application had been denied.  However, the South Carolina Supreme Court noted that Dunes West had not provided an impact assessment as Snee Farm had done, and that putting Dunes West’s plan into practice would have involved controversial impacts—filling in wetlands, substantial alterations to the golf course—which Snee Farm’s proposal did not.  Under South Carolina equal protection law, the court should determine “(1) whether the law treats similarly situated entities differently; (2) if so, whether the legislative body has a rational basis for the disparate treatment; and (3) whether the disparate treatment bears a rational relationship to a legitimate government purpose.”  The trial court found that there were significant differences between Dunes West’s and Snee Farm’s petitions, as well as their development plans, meaning that the two zoning petitions were not similarly situated as a matter of law.  Further, Dunes West failed to enter any evidence of discriminatory intent on the part of the Town.  The trial court thus granted summary judgment in the Town’s favor on the equal protection matter, and the South Carolina Supreme Court affirmed that judgment.

Next, regarding substantive due process, Dunes West claimed that the trial court had applied the incorrect test in analyzing its claim under the arbitrary and capricious standard, rather than the substantially advances test it claimed was introduced in Lingle v. Chevron USA Inc., 544 US 528 (2005) and by awarding summary judgment to the Town on that claim.  However, both the trial and Supreme Court held that Dunes West had failed to state a genuine issue for trial because Dunes West lacked a cognizable property right in its zoning classification prior to the rezoning. On the question of whether the trial court had applied the incorrect standard, the South Carolina Supreme Court declined to hold that Lingle required application of a different standard, and held instead that the arbitrary and capricious standard was appropriate.  Thus, the lower court’s grant of summary judgment for the Town on the substantive due process claim was upheld.

Finally, Dunes West claimed both a per se taking under Lucas v. South Carolina Coastal Council and, in the alternative, a regulatory taking under Penn Central Transportation Co. v. New York City.  Further, Dunes West claimed the trial court erred in considering its entire 256-acre Golf Course Property when engaging in its takings analysis, rather than the discrete portion Dunes West sought to develop.  On the discrete portion challenge, the Supreme Court emphasized that Dunes West had never been clear, in the case or in its interactions with the Town, about exactly what portion of the land it intended to develop.  Proposals ranged from 16.48 acres to 17.86 acres to 25 acres raised at trial to 60.4 acres listed in the takings complaint.  In order to determine whether a taking has occurred, the Court noted that it is necessarily to determine the precise property at issue.  Not being able to do that in this case, the lower court had opted to consider the entire Golf Course Property as a whole, a choice which the South Carolina Supreme Court did not find to be an error.

On the per se or categorical takings issue, Dunes West claimed that the rezoning precluded development and thereby eliminated all economically beneficial use of the developable land not being used for the golf course itself.  The Court disagreed, holding that the Conservation Recreation Open Space zoning district still allowed for recreational or conservation uses, which Dunes West had not proved would not be economically beneficial.  In fact, the golf course itself already generated income for Dunes West.  Thus, there was no evidence that all economically beneficial use of the Golf Course Property was eliminated by the Town’s rezoning decision.  Summary judgment in the Town’s favor on the per se takings claim was proper.

To the regulatory takings claim, the Court applied the Penn Central Balancing Test to determine whether the Town had taken regulatory action which ousted Dunes West from its property.  In this case, because the property could still be used as a golf course, or for other recreational or conservation uses, or for recreational purposes with the Town’s permission to rezone, and because the Town had based its rezoning decision on legitimate land use concerns and applied it to all golf courses, there was no taking under Penn Central.  Further, in terms of the economic impact of the rezone, the Court noted that the Golf Course Property was still worth at least $3.5 million to Dunes West—significant value retained despite the additional difficulties in pursuing residential development.  In addition, evidence in the record showed that the property has only ever been used as a golf course, thus, Dunes West’s investment-backed expectations were primarily as a golf course—expectations which were not impaired by the rezoning.  There was no evidence that Dunes West made significant investments with the expectation that it could use the property for residential development, which tended to show that there were not significant investment-backed expectations of residential development opportunities.  For all of those reasons, the Court rejected Dunes West’s regulatory takings claim, upholding the lower court’s grant of summary judgment for the Town on that issue as well.

On all of Dunes West’s claims, the Court affirmed the lower court’s summary judgment for the Town.

Dunes West Golf Club LLC v. Town of Mount Pleasant, 2013 WL 90419 (S.C. 01/09/13)

The opinion can be accessed at: http://sccourts.org/opinions/HTMLFiles/SC/27208.pdf


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