Courts Grapple with the Challenges of Eminent Domain: Jurists struggle to strike a balance between property rights and public good

Thursday, August 31, 2017 - 12:40

 

The use of eminent domain has gained national attention in recent months. During a Republican primary debate last year, candidate Donald Trump stated, “Eminent domain is an absolute necessity.” During the primary, however, Trump also accused a rival, Jeb Bush, of improperly encouraging the Texas government to use eminent domain to acquire land for a parking lot adjacent to the Texas Rangers’ stadium.

With Trump’s election, new questions have arisen. Will eminent domain be used to acquire the land needed to construct the proposed wall on the country’s southern border? Further, the construction of numerous pipelines for the transportation of oil and natural gas products has raised the question of when and how eminent domain can be used to acquire the easement rights necessary for such projects. Independent of the worthiness or viability of any of these projects, they raise the question of when and how the government can acquire private property.

 

What Is Eminent Domain?

Although eminent domain is often viewed as an example of government overreaching, the power of condemnation actually has a long history of use in democratic forms of government. In the United States, the fundamental precepts of condemnation law predate the Constitution.

Eminent domain is the power of a state or the federal government to take ownership of private property for public use. The government has the ability to acquire the property in the absence of the landowner’s consent when the requisite conditions are met. The law in this field is an attempt to solve a fundamental conflict between the rights of the individual and the needs of the public. Sometimes the government needs to acquire land for a purpose that will benefit the common good. Sometimes the owner of the property needed by the government is unwilling to sell the land. Eminent domain jurisprudence recognizes that a single individual should not have the power to stop necessary public works. Condemnation law also recognizes that the individual whose interests are yielding to the greater good should be made whole.

From these basic ideas come the two fundamental principles of eminent domain law: (1) The condemnation must be for a “public purpose,” and (2) the owner of the land taken must be justly compensated for his loss.

 

Origins in the Magna Carta

The origins of eminent domain date back to the Magna Carta. Signed in 1215, the Magna Carta was a charter between King John and the barons of England that placed certain restrictions on the king’s power. It is regarded as the beginning of constitutional law as we know it today, and it influenced the framers of the U.S. Constitution.

The Magna Carta contains several provisions protecting property rights. In English, Article 39 can be translated as, “no freemen shall be taken or imprisoned or disseised or exiled or in any way destroyed … except by the lawful judgment of his piers or the law of the land.” “Disseised” means to have the land you own taken away. Thus, the Magna Carta prohibited the king from taking a baron’s real property except according to the rule of law.

Although the Magna Carta did not provide for compensation to the individual for the loss of real property, it did establish the principle that there were limitations on the government’s power to acquire property from individuals. Article 28 also contains a provision requiring that the sovereign pay individuals if it seizes their personal property for use by the Crown. In this provision we see the origin of the requirement that a citizen be compensated for the loss of his property. Although in this instance, the payment related to personal property, not realty, it was the beginning of the requirement of payment for the loss of real property as well. These provisions were responses to years of abuses during which landowners were deprived of their property by force.

The use of eminent domain continued throughout British history. In 1765, William Blackstone, in “Commentaries on the Laws of England,” stated that an individual’s private property cannot be taken “for the general good of the whole community” without “giving him a full indemnification and equivalent for the injury thereby sustained.”

Eminent domain was also used in colonial America. The founders of the United States wanted to protect property rights in response to abuses they had seen by the English Crown. The Fifth Amendment to the United States Constitution states, “nor shall private property be taken for public use without just compensation.” This provision of the Bill of Rights has become known as the Takings Clause.

For the first century of the American Republic, the Takings Clause was seldom used and was not interpreted by the U.S. Supreme Court. The court’s first decision on the clause did not come until 1875. In Kohl v. United States, the federal government acquired property for the construction of a customs house and post office, and the landowner challenged the taking. The Supreme Court upheld the government’s power of eminent domain, stating that it was “essential to its independent existence and perpetuity.”

After the Kohl decision, use of eminent domain became more common. Over the next 100 years, its use expanded from acquiring property for public buildings and parks to expanding areas of natural resources and, ultimately, the acquisition of property for development and the elimination of blight. Throughout this period the two requirements that a property be taken for a public purpose and that the landowner be justly compensated for his loss remained important principles of the jurisprudence.

 

Expansion of the Definition of Public Use

Over time, what has been considered a public use for which the government can condemn property has expanded. In the 1984 case Hawaii Housing Authority v. Midkiff, the Supreme Court considered the constitutionality of a law passed by the Hawaiian legislature to combat the problem of real estate ownership throughout the state being concentrated, for historical reasons, in the hands of a very small number of landowners, which artificially raised real estate prices. The statute allowed the government to condemn property and resell it to other private landowners. The court determined that the use of the condemnation power was valid if the legislature rationally believed that the statute would promote the stated governmental objective, in this case the reduction in concentration of landowners. The court found that because the statute was not intended to benefit any particular private individual, but rather was intended to benefit the public as a whole through the reduction of real estate prices, it was constitutional. The Midkiff decision created a relatively low bar – whether the use of eminent domain was rationally related to a stated governmental objective – for determining whether land was being acquired for a public purpose.

Over the 20 years that followed, the use of eminent domain continued to expand. Governments began to use it to seize property for urban renewal projects, a process that was blessed by the courts. Then came Kelo v. City of New London and the Supreme Court’s famous decision in 2006.

The New London Corporation was created to devise a plan to revitalize the distressed town. Its plan included acquiring 90 acres of land, including non-blighted areas, to create a mixed-use development of public parks, private office spaces and townhomes. When some landowners refused to sell their properties for this project, the government sought to condemn properties that were not blighted in order to transfer them to another private property owner who would put them to a higher economic use. The Supreme Court determined that there was no reason to distinguish economic development from other public uses allowed in the condemnation field.

Many commentators felt that the Kelo decision went too far in determining a constituted public use for the purpose of eminent domain takings. In its decision, the court stated “nothing in our opinion precludes any state from placing further restrictions on its exercise of the taking power.” Nearly every state has since taken advantage of this language and enacted restrictions to limit the use of eminent domain for the benefit of private property owners. For example, Pennsylvania enacted the Property Rights Protection Act in 2006, in direct response to the Kelo decision. The act prohibits “the exercise by any condemnor of the power of eminent domain to take private property in order to use it for private enterprise.”

The Kelo decision resulted in the highpoint (or perhaps nadir, depending on your viewpoint) of the definition of “public purpose” in eminent domain cases. Since then, the trend has been to restrict what qualifies as a public use for purposes of determining the validity of a taking.

 

Determining Just Compensation

The jurisprudence of the definition of just compensation has also undergone some changes over time. During the early years of our nation, the Bill of Rights applied only to the federal government, and eminent domain was initially rarely used. Determinations of compensation were much more common under the various state law definitions of the term. But states characterized the compensation requirement differently. Some called for “true worth,” or “due satisfaction” or “just satisfaction.” The Massachusetts Constitution of 1780 provided for “reasonable compensation,” and the Northwest Ordinance of 1787 required “full compensation.” The Takings Clause established the standard of “just compensation” but provided no definition of the term.

When the 14th Amendment was passed, the Bill of Rights was expanded to apply to the states, and the just compensation element gained more attention. In 1893, in Monongahela Navigation Company v. United States, the Supreme Court established the Takings Clause as an integral part of the Bill of Rights, stating, “when an individual surrenders to the public something more and different from [that] which is exacted from other members of the public, a full and just equivalent shall be returned to him.” The court further held that “compensation must be a full and perfect equivalent for the property taken” and that “no private property shall be appropriated to public uses unless a full and exact equivalent for it be returned to the owner.” The court’s strong statements regarding just compensation held in balance the rights of the private property owner and the needs of the public.

The full and just equivalent that is returned to the property owner is generally measured as the fair market value of the property that is acquired as determined on the date of the taking. The intent of the standard is to place the landowner in a similar position financially as he would have been prior to the taking. The landowner receives the value that he would have obtained from the land had he sold it on the open market.

The standard does not capture the subjective value of the land to the property owner. This is understood to be the case for multiple reasons. First, it is very difficult to quantify the particular sentimental or emotional value a landowner may attach to his unique property. Moreover, although that sentimental attachment might make the landowner unlikely to sell the property, it is not something he would recover in an arms-length transaction should he choose to divest himself of the land. Thus, it would be making the landowner more than whole to pay for that emotional component of his attachment to the land. Further, the principal of paying the fair market value ensures the landowner is made whole while also ensuring that the public fisc is not burdened by overpayment for real property.

Courts today continue to struggle with the question what constitutes just compensation. Questions regarding compensation include whether a property owner can be paid for the potential future use of his land if that future is likely to lead to a higher value. Typically, in order to receive such compensation, the landowner must have taken some steps to make this future use a reality, and the compensation cannot be based on mere speculation or conjecture. Many courts have also wrestled with determinations of compensation in instances where the government has taken only a portion of the property, potentially rendering the remainder less valuable, in addition to depriving the landowner of the acreage actually condemned.

As recently as June of this year, the Supreme Court issued a decision exemplifying how complicated issues of compensation can become. In Murr v. Wisconsin, the court laid out a new test for determining whether separate parcels of land should be evaluated as a single parcel for purposes of determining compensation. While laying out a multipart test, the court determined essentially that the question should be answered by asking “whether reasonable expectations about property ownership would lead a landowner to anticipate that his holdings would be treated as one parcel, or, instead, as separate tracts.” The case shows a continued concern for making the landowner whole based on a reasonable, not subjective, value of the property.

The future of both the public use and just compensation provisions of the Takings Clause continue to be interpreted by the courts. Both have evolved over time, but they remain the two principles by which individual property rights are balanced against the public good. Keen observers of these cases will note how the pendulum swings back and forth between the two competing interests. It will be interesting to see how the balance tips as courts weigh in on underground pipelines, border walls and more progressive public works projects. Eminent domain jurisprudence has been, and will continue to be, a fascinating example of the determination of property rights in a just society.