TAKING OF PROPERTY

The authority of government to acquire private property from an involuntary owner (usually called the power of eminent domain) is recognized in the Fifth Amendment to the Constitution, which provides: "nor shall private property be taken for public use, without just compensation." The public use and compensation requirements of the Constitution apply not only to acquisitions by the federal government but—by incorporation in the fourteenth amendment—to acquisitions by the states as well. Similar provisions appear in the state constitutions, and the state and federal requirements are usually identically interpreted. It is, however, possible that a taking would pass muster under the federal Constitution and still be held to violate the state constitutional provision (or vice versa).

The requirement of public use has been liberally interpreted by the courts, which rarely find that a taking is not for a public use. For example, property may be taken for resale to private developers in an urban renewal project, or for the development of an industrial park. Indeed, the courts have permitted authority to take private property to be vested by legislation in privately owned public utilities, such as water companies. The test is not ultimate public ownership, or even direct public benefit, but rather the general benefit to the public from projects that are publicly sponsored or encouraged to promote the economy or the public welfare. The only clear limits on the broad interpretation of "public use" would be (1) the grant of the taking authority to a private company simply to improve its private economic position; or (2) the use of the taking power by the government if government itself were simply seeking to make money by engaging in strictly entrepreneurial activities.

The requirement of "just compensation" has been interpreted to mean the amount a willing seller would get from a willing buyer in the absence of the government's desire to acquire the property. The owner is not entitled to receive more for the property simply because the government has an urgent need for it—as for a military base. Neither may the owner receive less compensation because the government's plan for the area—to install a garbage dump, for example, has depressed neighborhood values. Nor is the owner entitled to increased compensation merely because the property has special value to him, such as sentimental or family value, or because he would not sell the property at any price. Compensation must be given in cash immediately upon the taking; government cannot oblige the owner to accept future promises of payment which may be unmarketable, or marketable only at a discount from the just compensation value.

Ordinarily there is no ambiguity about whether a property has been taken. Nor is there any ambiguity about the principle of takings law, stated at the most general level: if the public wants something, it should pay for it and not coerce private owners into contributing their property to the public. If government wants a site for a post office, for example, it is obliged to institute condemnation proceedings in court, leading to an involuntary transfer of title and possession, at which time it will pay the owner just compensation. But in many instances government legislates or behaves in a way that reduces or destroys the value of private property without formally taking title or possession and without instituting condemnation proceedings. If the owner complains, seeking just compensation for a taking, government may reply that it has simply regulated under the police power, but has not "taken" the property and thus need not compensate. The great bulk of all legal controversies over the taking of property turn on the question whether there has been a "taking" at all.

Plainly government sometimes gets the benefits of a taking without any of the formal incidents of ownership. A celebrated case, Causby v. United States (1946), involved the flight of military planes just above the surface of privately owned farmland adjacent to a military airport. As a result of noise from the overflights the farm was made virtually worthless for agricultural purposes. The farmer claimed that his farm had in practical effect been taken, that government was using it as a sort of extension of the runway, and that government should have to pay for it as it had for the rest of the airport. The Supreme Court agreed that this use of the farmland was a taking in effect, if not in form, and that the farmer was entitled to just compensation for what is called inverse condemnation.

This ruling does not mean that the neighbors of a public airport or highway subjected to noise that reduces their property values will always be compensated. In general such disadvantaged neighbors are not viewed by the courts as having had their property taken in the constitutional sense. The reason is that although a nearly total loss (such as the farmer sustained) is judicially viewed as a taking, some modest diminution of value resulting from neighboring public activities is viewed as one of the disadvantages of modern life that must be accepted by property owners.

The judicial focus on the quantum of loss as a test of a taking is called the diminution of value theory and was put forward many years ago by Justice oliver wendell holmes in Pennsylvania Coal Co. v. Mahon (1922). There is no clear line, Holmes believed, between the formal taking of property by government (in which title and possession are acquired) and the various forms of government regulation (such as zoning and pollution control), which do not transfer ownership formally, but restrict private owners' uses and values for the benefit of the general public. In both cases, according to Holmes, the traditional rights of private owners are being restricted for the benefit of the public. If there were no legal limits on such restrictions, he said, private property would be worthless and wholly at the mercy of government. On the other hand, Holmes said, if every value-diminishing regulation were viewed as a compensable taking of property, government would be unable to function, for essentially all of its regulatory activities (speed limits, liquor control, safety standards, rent control) disadvantage property owners to some degree.

He thus devised a practical test. We must all accept some impairment of property values so that society can function in a civilized way, and government must be permitted to make regulations requiring such impairments. If, however, the losses from such regulations become extreme—nearing total destruction of the property's value for any owner—then the society should compensate the owner and bear the losses of the regulation commonly. Thus, under the Holmesian theory, the amount of the loss and the ability of the owner to continue to earn some return from his property after the regulation has been imposed become the critical determinants of the constitutional question: has there been a taking for which compensation must be paid?

Although Holmes's test continues to dominate taking cases, there are a number of other theories that are widely found in the literature and in judicial opinions. One theory holds that prohibitions of certain socially undesirable uses do not qualify as compensable takings despite considerable loss to the owners, because one cannot be viewed as having a property right to engage in "noxious" conduct, and losses flowing from prohibition of such conduct is not a taking away of property. The illegalization of manufacture and sale of a dangerous drug, or of polluting activity, has been so categorized.

Another theory sometimes advanced is that certain government restrictions imposed on property owners are not a taking of property from the owners by the government, but are the merely regulation by the government of activities by which it mediates between various private uses in conflict with each other. Under this theory compensation is required only when the government as an enterprise itself benefits directly from the regulation (it gets additional space for its military airport, for example). The enterpriseregulation theory has sometimes been used to justify zoning and other land use controls that restrict the amount or type of building permitted to a landowner on his land. Modern historic preservation ordinances as well as safety and environmental controls are sometimes justified on this theory.

Still another view suggests that government may, without compensation, impose much greater restrictions to prevent future additional exploitation of property, while leaving existing uses, than it may cut back on existing uses. Thus, in penn central transportation co. v. new york (1978), an important case, the Supreme Court upheld a historic preservation ordinance prohibiting the owners of Grand Central Station in New York from building a high rise office tower above the railroad station, noting that the existing station did produce some economic return to the owners. The claimed "taking" of a property right to build a bigger building was rejected.

Although no single theory wholly dominates taking law, two guidelines permit safe prediction about the great majority of cases. Courts will find a taking and require just compensation if (1) the government acquires physical possession of the property; or if (2) regulation so reduces the owner's values that virtually no net economic return is left to the proprietor.

Joseph L. Sax
(1986)

(see also: Dames & Moore v. Regan; Hawaii Housing Authority v. Midkiff.)

Bibliography

Ackerman, Bruce A. 1977 Private Property and the Constitution. New Haven, Conn.: Yale University Press.

Bosselman, Fred et al. 1973 The Taking Issue. Washington, D.C.: Council on Environmental Quality.

Michelman, Frank I. 1967 Property, Utility and Fairness: Comments on the Ethical Foundations of "Just Compensation" Law. Harvard Law Review 80:1165–1258.

Sax, Joseph L. 1971 Taking and the Police Power. Yale Law Journal 74:36–76.

——1971 Takings, Private Property and Public Rights. Yale Law Journal 81:149–186.