The WI Supreme Court Just Defended Property Rights?

The Justice System Delivers: Big Win for Private Property Rights

I am admittedly late to the party, but it is incredibly worthwhile to celebrate the Appellate court's reversal, and the Supreme Court's upholding, of a decision that delivered a decisive blow to the centralizing and feudalistic institution of zoning.

In March of this year the Wisconsin Supreme Court refused to take up an appeal pertaining to a lawsuit attempting to halt the development of an apartment complex in Osceola, Wisconsin--a village in Polk County just outside Minneapolis. 

Here's some background on the issue before we get into why this is such a remarkably good decision, and the precedent it establishes in preventing further property rights violations by zoning authorities and third-parties.

When Guaghan Developers was given the go-ahead by the local village and zoning boards to proceed with the construction of a new apartment complex overlooking the St Croix River, a group of petitioners called the St. Croix Scenic Coalition filed a lawsuit against the Village of Osceola in an attempt to terminate the project.

As the Coalition's name suggests, the basis of their lawsuit rested on the grounds that the development wouldn't be pretty enough; that merely looking upon the apartment was an affront to their senses.

In short, they did not object to the development on the grounds that it violated the Coalition member's property rights via the destruction or physical degradation of their property. Nor did they assert that the land sited for development was actually their land, and that it's subsequent development would be tantamount to theft. They argued that lawful owners have no right to the use of their property if other people's aesthetic sensibilities aren't satisfied.

I am not being hyperbolic. This is how the Circuit Court of Polk County explained the complaint in their decision:

In conclusion, the Circuit Court determined that the development was "unreasonable" because its height was too far above the tree canopy. In its decision, the Court Ordered that:

"The Board’s decision on July 25, 2023 to approve the final site plan is REVERSED AND REMANDED to the Board for further review for compliance with the requirements of Osceola Vill. Code and Wis. Admin Code NR § 118" and that;

"The injunction issued by this court due to a finding of irreparable harm continues to allow the parties to appeal this decision."

Fortunately, the Defendants did appeal the decision, and the case was taken up by an appellate court.

The Reversal of the Objector Lawsuit

In the Opinion of the Appellate court reversing and remanding the lower Polk County court's decision, the Appellate judges determined that the Scenic Coalition's lawsuit lacked standing; that is, they did not have the legal right to bring a lawsuit against the Village in the first place. This determination meant that the Appellate court did not even have to consider the arguments made by the Coalition in their lawsuit, since there was no basis for the lawsuit to begin with.

The reason the Appellate court arrived at this conclusion is because of a very important law passed by the state legislature just one month before the lawsuit was filed.

On June 22nd 2023, AB 266 became law in the form of 2023 Wisconsin Act 16. The Act's effect was to modify provision of Wisconsin's zoning code, but the most important aspect of this reform was to limit the ability of individuals and groups to file "Objector Lawsuits."

"Objector Lawsuits" in the context of zoning and building development are lawsuits brought by individuals or groups who object to a development because they don't like it. These lawsuits often cite "aesthetic" and "visual" externalities as reasons to halt developments that they do not want. Mind, these objectors are objecting to supposed negative externalities, not to infringements of their property rights.

In New York, for example, a residential complex was objected to on the grounds that the development would make star-gazing more difficult for the plaintiffs who lived near the proposed development. Other examples of objector lawsuits amount to claims that some proposed development will not match the "aesthetic qualities" of a neighborhood; or that a development changes the "character" of a town (e.g. the development of a manufacturing building in a farming community).

Others still (in what is by far the most common objection) object that additional housing or business will lower property values, or "steal" business from incumbent businesses.

But thanks to Act 16, these sorts of objections can now be dismissed prima facie as lacking legal standing. The relevant portion of Act 16 in this regard is found in Section 20 of the Act under 781.10(2)(c), Judicial Review:

According to the statute, then, the Coalition could only file a lawsuit to "object" if they satisfied any of the six criteria under paragraph (c). But since the Coalition did not qualify under criteria 1, 2, 4, 5 or 6, their only chance of qualifying was by satisfying criterion #3:

"A person that, as a result of the final decision on the application for an approval, sustains actual damages or will imminently sustain actual damages that are personal to the person and distinct from damages that impact the public generally."

But, as the Appellate court determined, they didn't satisfy criterion #3 either!

The statute requires that objectors must sustain "actual damages" or be in a position to "imminently sustain actual damages" that are "personal to the person." So, what then are actual damages?

Well, as the Appellate court explains, "'[A]ctual damages' and 'imminently sustain actual damages' are not defined by statute. Using the common and accepted meanings, however, it is clear that a petitioner under WIS. STAT. § 781.10(2)(c)3. must experience a real, then-existing, injury or must reasonably be facing such injury in the near future as a result of the local governing body’s decision to approve an application" (p. 8-9, ¶18).

They go on to explain that "'Monetary loss is not the only form of actual damage. One form of actual damage is injury to a legal interest or loss of a legal right,'" and that "'allegations of injury to aesthetic, conservational, recreational, health and safety interests will confer standing so long as the injury is caused by a change in the physical environment'" (p. 9, ¶20).

There's an ambiguity here in the law regarding the meaning of "actual damages" that will be addressed in the next section, but the Appellate court's interpretation of the statute and prior caselaw does a good job of considering the legislative intent of Act 16.

The court considered each of the objections made by the eight members of the Coalition. The Court says that "seven of the members 'believe' that the proposed development will decrease their property values if completed"; others are concerned that "the project will negatively impact their enjoyment of their properties"; another was concerned about "noise and light pollution"; and some alleged that their property taxes would increase (¶21-22).

The Court determined that none of these objections qualified as actual damages.

First, the concern regarding a reduction in property values was found by the Court to be unlikely. They agreed with the defendant's argument that the property as-is (an abandoned hospital) "has seen constant vandalism, a variety of animals living in and around the vacant facility, and [is] a haven for drug and alcohol use... [a]ny improvement to the site is... more likely to increase property values in the area."

And second, the Court determined that none of the other allegations were personal to any one of the plaintiffs, and neither did any of them demonstrate actual damages:

In the concluding paragraph of their decision, the Appellate court declared: "Therefore, we reverse the circuit court’s decision and remand for the court to dismiss the certiorari petition." A big win for freedom lovers everywhere! But naturally, the Coalition appealed their case to the state Supreme Court who simply said this:

"IT IS ORDERED that the petition for review is denied, without costs."

Three cheers for the Appellate and Supreme Courts, I say!

Room for Improvement

Many of the Coalition's concerns could easily have been found to be legitimate by another court, and they often are. The fact that they were not is a testament to the goodness of statute 781.10, but there is still room for improvement to prevent other frivolous objector lawsuits that do not have property rights violations as their basis.

To improve the statute, defining "actual damages" would go a long way to preventing lawsuits like the Coalition's. Most importantly, "actual" must mean that the damage has already occurred; and "damage(s)" must mean that someone's physical property is physically degraded, destroyed, or withheld from them by the alleged offender.

In the areas of pollution and trespass these things are already considered by law. But they should be considered in the areas of zoning, land use and development as well. 

For example, in the case of pollution, a neighbor who dumps or spills motor oil on my lawn pollutes my land and trespasses on my property. His property (the motor oil) physically degrades my grass and soil, and the presence of his property on mine is unwelcome and therefore a trespass.

In the case of trespass, a neighbor who dumps scrap wood in my driveway does not physically degrade my driveway, but the presence of his property denies me access to that portion of my property. I cannot enjoy my driveway because his property physically obstructs me from doing so. 

In each of these examples, lawsuits are more than legitimate because the property and its owner are clearly defined. But not so with the Coalition members.

Another court could have easily determined the Coalition had legal standing if they had a different understanding of who the rightful owner of a thing was. The most important example of this was the Coalition members' complaint that the new development would reduce the value of their property. 

If a judge or judges hearing their case was under the impression that a person owns the value of their property, then the Coalition would have won their case. In every objector lawsuit I am familiar with, judges have always determined property value reductions to be legitimate grounds for granting injunctions and prohibiting development. But that mistake is just another reason why they must study economics.

What value is is decided by the field of economics. And in economics, value is subjective. That means, as the famous aphorism goes, "One man's trash is another man's treasure." The value of a thing is decided by individuals who are all likely to disagree on what something is worth. So if there is disagreement, what is any thing really worth?

Since the appraisal of what a thing is worth is just a matter of opinion, a thing cannot have an "objective" value––a "real", "true", "actual" value. As an opinion, a valuation is a judgment that exists within the mind of a particular individual, and the only person who can ever make any legitimate legal or ethical claim to the content of a person's mind is the individual who possesses the mind. In other words, I own my thoughts and you own yours.

But the Coalition's argument that development should be stopped is just an attempt to assert that their opinion of their property's value is the correct one; that they decide their property's "true" value and that they have a property right to the content of other people's thoughts. This is nonsense. You cannot own "the" valuation, first, because it does not exist objectively outside the minds of men, but secondly because valuation is neither scarce nor excludable. There can be infinitely many valuations of a thing and individuals can change their valuation at any time. And since many people can possess––in their minds and all at the same time––the valuation (opinion) of a thing, it is impossible to assign anyone a property right to "the" valuation. Valuation, therefore, is non-excludable.

Intuitively, everyone knows all of this already. A seller can value his home very highly and ask for $1 million for his 2 bed, 1 bath house but that doesn't mean he'll get it. He'll probably get $120K. And if he accepts that offer, then what he said it was worth to him wasn't true to begin with. If he really thought it was worth a million bucks he wouldn't accept anything less.

Taken to its logical conclusion, accepting lawsuits made on the grounds that someone's property has or may change in value due the development of property that has neither physically degraded or obstructed the use of the plaintiff's property would mean that anyone anywhere could object to any development. As proof, ceteris paribus, the construction of just one more house in the northernmost part of Wisconsin will put downward pressure on the market price of homes in the southernmost part of the state. Therefore, I, a resident of Burlington, hereby formally submit my demand that all residential construction in the state of Wisconsin be terminated immediately. IT IS AN INFRINGEMENT ON MY RIGHTS!

Anyway, as a final comment, and to put the Coalition's position in a different way, the Coalition was essentially arguing that they had a right to money that was not theirs. When one of the members claimed that an offer on his house was withdrawn due to the proposal to develop the new property, in essence he was saying that money that had not yet been legally and rightfully transferred to him was already his; that he would have gotten that money otherwise, and so can essentially charge the developers with theft and take away their real property by halting development.

And sure, maybe that is why the buyers backed out. But consider this: what if a buyer's real estate agent had come to them and said "Hey, I know you already put an offer in on this house, but I found your dream home two blocks down the road and the seller is asking for way less than this guy"? Why couldn't the Coalition member sue the real estate agent? It's the same principle!

In closing, the issue with zoning, land use regulations and objector lawsuits is that private property rights are either held by the public (a contradiction) or not clearly defined. There is confusion as to who owns a thing, what can be owned, and therefore limits on what people can do. And as a result, 

• housing is more expensive, 
• the rate at which millennials live at home with their parents is the highest of any generation ever, 
• marriage and birth rates are down, 
• housing expenses as a proportion of income are the highest ever, 
• the time required to save for a downpayment is the highest ever, 
• the cost of housing is so prohibitively expensive that those who want to downsize have nowhere to move, 
• and most importantly of all, people are not free.

It is a failure of the legislature and a failure of justice, and a betrayal of the American ideal that the people of the several states in this "Land of Liberty" have nowhere to enjoy that liberty; nowhere where they can be free from the tyranny of the government and the masses who insert themselves into our very homes. There is no reprieve from the tiring regulation of the state or the malevolent self-interest of the local busybodies who object to the betterment of hundreds because it crushes their petty kingdom.

But it doesn't have to be that way. We can protect private property rights. And limits on the objector lawsuit are a good start. But let it end with the abolition of land use regulation.