No Damages for Procedurally Defective Ordinance

Earlier litigation between these parties centered around denial of building permits based on a growth management ordinance that was enacted by the Town of Fremont when there was no properly enacted capital improvement plan (CIP) in place. The issue addressed by this opinion is whether or not the plaintiffs are entitled to recover damages (money) for loss of economic use of their property due to the town’s enforcement of a procedurally defective ordinance.

The trial court ruled that the plaintiffs should recover damages and that there need not first be a finding that the growth management ordinance was unconstitutional and/or that an unconstitutional “taking” had occurred in order for the plaintiffs to recover.

The Supreme Court disagreed stating, “Absent a determination that the ordinance is unconstitutional and constitutes a taking, this case presents merely the type of municipal error for which judicial reversal of the erroneous action is the only remedy.” While the Court has certainly recognized the requirement for just compensation in the case of a substantial deprivation of economic use due to an arbitrary or unreasonable zoning ordinance, the Court cites two cases supporting the proposition that where no “taking” is found or “unconstitutionality” is claimed, there will be no entitlement to damages. Soares v. Town of Atkinson, 129 N.H. 313 (1987); Smith v. Town of Wolfeboro, 136 N.H. 337 (1992). The Court also highlighted a prior decision stating that an erroneous board decision based upon a valid regulation does not constitute a compensable taking where the application of an invalid regulation might. Dumont v. Town of Wolfeboro, 137 N.H. 1 (1993).

What all of this boils down to is that, if there is no determination that the town’s action constituted and unconstitutional taking, the plaintiff cannot receive damages (“just compensation”). The proper remedy is to issue the wrongfully denied building permits.