THE GUTS OF TAKINGS

BY ANTHONY J. FEJFAR, ESQ., COIF

© COPYRIGHT 2004 BY ANTHONY J. FEJFAR, ESQ., COIF

In my mind, the most interesting aspect of Land Use is the Takings

clause of the United States Constitution. The Fifth Amendment provides that

private property shall not be taken by the government except for public use and

upon the payment of just compensation. Interestingly, the origin of the Takings

clause has been traced to the English Constitution, Magna Charta, of the year 1250,

or so. In that document, Warin Fitzgerald, presumably a royal, and his

supporters, required that Prince John of England agree to the requirements of

Magna Charta. Prince John only agreed after having been defeated in the Battle of

Runnymeade. In Magna Charta is found the Freeman’s clause, which states that a

Freeman cannot be divested of property without a judgment of his peers sitting as a

jury, at law. Both the American Constitution’s due process clause, as well as the

taking clause, find their origin in this document.

 Now, in the typical case, say where the government wants to build a road, the

government brings an eminent domain action against the private property owners

whose land they need for the construction of the road. Expert witnesses are called

upon to assess the value of the real property in question, and then a judge or a jury

decides, in accordance with the United States Constitution, that reasonable

compensation must be paid to those giving up their property.

It is possible, however, that in an extraordainary case, the government takes

a piece of someone’s real property without paying for it. In such a case, the

landowner must bring an action, essentially in quantum meriut, under the takings

clause, for the reasonable value of the property taken. In the old days, such an

action for damages was typically captioned an “inverse condemnation” proceeding.

The idea was that the government had to be forced in a sense to “condemn” the

property, and then pay for that taking. However, since the Lucas case, where the

term “taking” was used, and the phrase “inverse condemnation” was not, it is my

judgment that an action for the reasonable value of property taken, under the United

States Constitution, can be denominated a “takings” action, without the older

phraseaology.
 Interestingly, if the taking action is brought against state or local

government, there is some case authority (the Hamilton Bank case) for the

proposition that the claimant must exhaust hae local and state remedies first, before

bringing an action in Federal Court. It appears that in Federal Court, the claim

must be pursued in either the local Federal District Court, or in the Federal Court of

Claims, in Washington, D.C.

Given this possibility of not being able to initially pursue a takings claim in

Federal Court, initially, I suggest that the takings claimant file simultaneously in

both State and Federal Court, and then file a motion for a stay of proceedings in

Federal Court until the matter is dealt with one way or another in State court. In

this way, if for some reason the statute of limitation was in danger of running, the

claimant would have protection from that possibility in Federal Court by the prompt

joint filing of the claim.

 The standard for a taking is a very interesting one. The early cases only

allowed compensation for a taking when there was an actual physical invasion of

the real property itself. While in the latter part of the nineteenth century, the early

takings cases, Mugler and Hadachek, both seemed to indicate the possibility of a

taking based on governmental regulatory action, in fact in both those cases the

governments action was upheld as not constituting a taking on the ground that the

state had the right to reasonably regulate real property to avoid harmful uses or

effects, under its police powers.

In the Mahon coal case, Justice Holmes, however, stated that while the

state may regulate real property, when a regulation has gone “too far” then a taking

requiring reasonable compensation must be found. In Mahon, the Commonwealth

of Pennsylvania through its legislature, had enacted a statute which regulated the

tunnel mining of coal with the intent to stop “subsidence,” that is, the caving in of

property below ground which then results in the collapse of surface buildings into

the chasm created by the subsidence.

 Holmes held that a legally seperable interest, the subsidence estate, was

completely taken, and therefore compensation had to be paid. Justice Brandeis,

dissenting, on the other hand, argued that the entire fee simple estate, including

surface, mineral, and other rights, had to be taken into account when looking at the

severity of the regulation, not just the subsidence estate.

The law didn’t change all that much until the Lucas case. In Lucas,

Justice Scalia wrote that if there was a total deprivation of economic value, and, the

regulation in question did not fit into the category of a tradition tort of nuisance,

then a taking was present, and reasonable compensation must be paid.

Interestingly enough, the Court suggested that the common law of nuisance might

possibly develop, or put another way, perhaps be discovered as already existing

anew. In this way, state nuisance law or the equivalent thereof, could still be

applied in such a way as to provide an exception to a takings claim.

 The thing to remember about Lucas, however, is that it only applies in

the narrow instance of a complete and total deprivation of economic value.

Ironically, I suspect that such an occurrence was not present even in the Lucas case

itself. For some reason the trial court held that a environmentally regulated beach

front lot had a value of zero dollars, period. I, on the other hand, suspect that the

lot was worth at least $15,000 to $20,000, for recreational purposes, or, certainly

to expand the area available for beach and swimming use by either of the adjoining

houses on the beach.

In the absence of a Lucas case, I suspect that the appropriate standard to

be applied is that found in the Penn Central case. In Penn Central the Court

balanced economic harm and reasonable investment backed expectations of the

claimant against the governmental interest to be accomplished. In other words, the

greater the government’s need, and the importance of that need, the more likely it

is that the government will not have to pay compensation. On the other hand, the

greater the harm to the claimant, the more likely that compensation would have to

be paid.
 Now, keep in mind, consistent with earlier case law, that when a zoning

regulation as applied to an undeveloped piece of land, does not completely zone the

use of the land out of existence, then there is no taking. As long as the land can be

viably used for anything, there is no taking, even if there is a loss in value relative

to what was originally paid.

Now, the interesting thing about a taking, is that under the B & O

railroad case, the government is only required to pay reasonable compensation.

The Court did not specify any particular formula for such a determination. But

what about this. Say Joe buys a lot for $1,000,000. Then the government comes

along as zones the land for conservation, so that no development is possible. Joe

then argues to the court that he was planning to build a house on the lot, and the fair

market value of the lot with the house would have been $2,000,000.
 Now, Joe says that he is entitled to the full $2,000,000, as a taking,

representing the highest and best use of the property. Joe has an interesting

argument, and I suppose a lot of lawyers make such an argument, and a lot of

judges buy into it. It is my position, however, that in this case, Joe has

miscalculated his damages for the taking. Keep in mind that the lot in question in

empty. Obviously, if the zoning allowed development, the owner of the lot would

be paying the price of construction, not the government. Naturally, the situation

should be exactly the same in the case of a taking. Thus, if the cost of building

the house was $800,000, then the two million dollar final fair market value of the

lot with house must be discounted by the cost of construction, therefore leaving a

net compensable value for takings purposes of $1, 200,000, not the higher two

million dollar amount

Now, more could be said about takings, but I suspect this is enough.

Pleasant Dreams.

Bibliography: Wright and Gitelman, Land Use