Ownership-a system of laws governing the relationship among people with respect to resources. A social construct



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property

be taken

for public use

without just compensation.

The takings clause protects owners with a liability rule; the power of eminent domain is the power to force the transaction

Eminent Domain is an inherent power of government; even if the takings clause doesn't empower the government to take property, the clause assumes the right and limits it.

Justifications for power of eminent domain

Inidividual possession derives from state grants and implies a power by the state to retake ownership

Taking power is a remnant of feudal tenures

Eminent domain is an inherent attribute of sovereignty, necessary to the very existence of government.

It is necessary to prevent bi-lateral monopoly.

Posner argues that the the government should use its taking power only in "high transactions" settings and should otherwise purchase land in through the market

Justifications for the duty to compensate

Fairness


Prevents unfair distribution of burdens

Protects against exploitation of politically powerless groups and indiviuals

Efficiency

Risk-premiums--An owner may not make the most proudctive use of the land because of the risk of an uncompensated taking. People are generally risk averse, so they will not invest the efficient amount in their property.

Risk spreading: To spread risk, people by insurance. Compensation can act like insurance: taxes constitute the premium; when property is taken owner is compensated. A system of privatized insurance would not be likely to work:

Moral hazard--People will overinvest; if we are fully insured, we will not take full account of the risk of a taking. But the systematic undercompensation will force owners to take account of some of the risk

Adverse Selection--Property owners may be in a better position than an insurance company to evaluate the probability that a taking will take place.

Condemnations are generally localized events, frequently made necessary by community or regional needs

With private insurance, only people who know they're at risk will buy insurance, sticking it to insurance companies

Government should interalize its costs--Fiscal illusion. If the government doesn't realize costs, it will take whatever it wants, even if it is inefficient to do so.

Liberty enhancing function--Inherent dignity interest is protected through compensation

Takings clause fosters conservatism by limiting what government can do (i.e. it can't take all land and divide it up equally).

If the government were not required to pay compensation when it condemned property, it is not certain that the private sector would step into the void and provide insurance

Adverse selection

Isn't collecting taxes a taking without compensation?

Fill in method for attacking takings questions ***

Public Use requirment

Hawaii Housing Authority v. Midkiff (1984 at 1146)

Purpose of government taking is to break up land oligopoly in Hawaii; the condemned land goes to private tenants--where is the public use?

Public use requirement is coterminous with the scope of a sovereign's police powers (1149)

Test for public use: Is the taking rationally related to a conceivable public purpose (1150)

The police power requires no compensation when legitimately exercised. Thus, if public use is truly coterminous with the police power, a state could freely choose between compensation and non-compensation any time its actions served a "public use" (1154).

While all the federal cases hound a public use, one in six of the state decisions found no public use. This might be explained by the ability of state governments to be subject to capture by small factions (1156)



Poletown v. City of Detroit (1981 at 1156)

Tearing down a neighborhood for a GM plant serves the conceivable public purpose of employment.

"Where the condemnation power is exercised in a way that benefits specific and identifiable private interests, a court inspect with heightened scruitny the sclaim that the public interest is the predominant interest being advanced. Such public benefits cannot be speculative or marginal, but must be clear and significant if it is to be within the legitimate purpose as stated by the Legislature" (1158).

City of Oakland v. Oakland Raiders (1982 at 1160)

Taking of the team by the city serves the conceivable public purpose of recreation--[Denied on alternative grounds--taking would violate the commerce clause]

Checks on the government's broad takings power

Procedural due process for property owners

Incentive for the government not to actively take, because people won't move in or invest there

Voters can "throw the bums out"

Owners are fully compensated for the loss

The remedy for a taking not for public use is invalidation of the exercise of eminent domain.

Computing Just Compensation

United States v. 564.54 Acres of land (1979 at H305)

Condemnees wanted "substitute facilities" costs ($5.8M); government was offering fair market value ($740K). If camp goes to new site, they will have to follow new building codes, and will have to pay $5.8M.

Substitute facilities could result in a windfall where there's no obligation to rebuild (unlike public parties)--the indemnitee could take the money and run.

Proper measure is fair market value--"what a willing buyer would pay in cash to a willing seller" at the time of the taking (1163)

It is easier to figure out fair market value (FMV) than replacement costs.

However, were FMV is diffcult to find, or "when its application would result in manifest injustice to owner or public," replacement value may be more appropriate (H307)

Ex. infrequently traded property such as roads or sewers

In United States v. 50 Acres (1984 at H305 n.17), Supreme Court held that public entities are also only entitled to fair market value, even if they have a duty to rebuild.

After 50 Acres, public condemnees are treated just like private ones.

Empirical studies suggest that high-value parcels condemned under eminent domain receive more than fair market value, while low-value parcels systematically receive less (1163 at n.15)

What is not compensible under the 5th amendment

Personhood value of property

Lost profits

Goodwill


Removal costs

Lawyer's fees

Thus, the government systematically undercompensates for its takings

Protects against overinvestment by forcing people to realize the risk of a taking

What is a taking?

Physical invasion test



Loretto v. Teleprompter Manhattan CATV Corp. (1982 at 1165)

A permanent physical occupation authorized by government is a taking without regard to the public interests that it may serve (1169)

Conceptualization of ownership as a bundle of rights--"property rights in a physical thing have been described as the rights to posess, use and dispose of it." (1172).

"The power to exclude has traditionally been considered one of the most treasured stands in an owner's bundle of property rights" (1172).

"An owner suffers a special kind of injury when a stranger directly invades and occupies the owner's property" (1172).

Invasion by a third party is distinguished from other regulatory statutes. If the statute required the landlord to provide cable herself, that would not be a taking because the landlord would "own" the instalation. Court needs to make this distinction because of statutes requiring fire alarms, fire escapes, etc.

Where the landlord has "ownership", the landlord may have some control over the "timing, extent, or nature of the invasion" (1173)--here, the landlord may want to install the wire elsewhere.

Are rent control tenants a "permenant physical invasion?"



Seawall Assocs. v. City of NY (1989 [at 558])

Statute prohibiting owners of Single Room Occupany hotels (SROs) from holding them vacant until they could demolish was a taking.

Ordinary rent controls are different because they do not force owners, in the first instance, to make their properties available (559); landlord chooses to rent to tenants; they are not an invasion because they are invited.

Yee v. Escondido (1992 [at 558, 1180])

Ordinance regulating rents of mobile home plots and making it difficult to evict them was not a taking. The landlord voluntarily leased plots, and they could evict, even though it was difficult.

"Element of required acquiesence is at the heart of the concept of occupation." (1181 n.27)

Overflight cases



United States v. Causby (1946 [at 1170])

Frequent flights caused chickens to kill themselves. Owner of property owns the surface, the mineral rights below, and as much air above as he can reasonably use. So the court found the government has "taken" an easement of flight over the land.



Batten v. United States

Planes did not fly directly over the land, so no taking no matter what the damage.

Bright line standard is easy to administer, but may insulate the government from interalizing the costs of its activities

Owner could argue that smoke and soundwaves are physcial invasions on his property



Kaiser Aetna v. United States (1979 [at 1171])

Private pond was connected to publicly navigable water.

Government required that the owner of the pond make it accessible to the public

Government's action constituted a taking--it exacted a "navigational servitude"



Pruneyard Shopping Center v. Robins (1980 [at 1171])

Shopping center was open to the public

Requiring the shopping center to permit invited individuals to exercise their right of free speach was not a taking

How to reconcile Loretto and Kaiser-Aetna from Pruneyard?

Invitation

Residential v. Commercial (demorilization costs to private individuals are higher?)

Frist Amendment in Pruneyard may be more important (although the court does not say that this is a factor)

Why a physical invasion standard at all?

Bright line standard reduces transactions costs of decision making

Allows government to limit its liability

Inherent demoralization of being physically invaded

Michelman argues that takings impose a "demoralization cost" on you by invading your space. The privacy issue is more onerous than restriction on use (i.e. zoning) (1179?)

Physical invasions are probably what the Framers intended to protect against by the 5th Amendment (think prohibition against forced housing of militia, etc.) (see also, 1261 n.74)

Harm/Benefit test



Hadacheck v. Sebastian (1915 at 1181)

Ordinance prohibiting brickyards as a danger to the health of the public (public nuisance).

Harm/benefit test

When the government acts to stop a public harm it is a valid exercise of its police power and is not a taking, no matter how large the injury to the property owner.

When the government is extracting a public benefit from the regulation it is a compensible taking.

The test is infinitely manipulable--something that prevents a harm could be seen as extracting a benefit, and vice-versa (Coase reciprocality)--Think Miller v. Schoene!

WHERE IS THE NEUTRAL BENCHMARK?

Justifications for not compensating all regulation:

Intollerable costs to government would lead to no regulation

Reciprocity of advantages/benefits

Moral Hazard (but compensation rule can be adjusted)

Transactions costs of finding every single effected owner

Diminution in value test

Pennsylvania Coal Co. v. Mahon (1922 at 1189)

Penn Coal owned mineral rights under D's property. The Court held that a statute prohibiting mining which causes a subsidence of the surface was a taking.

Diminution in value test

If (Loss / Value of property before regulation) > Too Far => Taking

Denominator is infinitely manipulable--WHAT IS THE PROPER DENOMINATOR?

In Penn Coal, Homes uses the coal taken. As such the regulation exacts a 100% taking.

BUT the denominator could be all of Penn Coal's coal, the net worth of Penn Coal Company, etc.

There is less likely to be a taking when there is a reciprocity of advantage (1192). Regulation is not necessarily a net harm because everyone else is limited. Reciprocity reduces the value lost (numerator).



Plymouth Coal--mining companies have to leave a pillar of coal in order to ensure worker safety.

Regulation affects all mining companies

Where cost is spread by large number of actors, justification for compensation is weak--5th amendment protects against an individual from paying for the public's benefit

While your burden is a loss, the fact that everyone else is burdened is a benefit.

Statute may confer other benefits (i.e. less risk of liability for safety hazard)

Why not compensate for even small diminution in value

Transactions costs

Reciprocity of advantage



Keystone Bituminous Coal Ass'n v. DeBenedictis (1987 at 1199)

Subsidence act required coal miners to leave some coal in the ground.

Reciprocity of advantage--"while each of us is burdened somewhat by such restrictions, we in turn, benefit greatly from the restrictions that are placed on others" (1200).

"Takings jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. Instead, the Court considers rights in the parcel as a whole" (1201)

Big denominator = no taking.

"When the coal that must remain beneath the gound is viewed in the context of any reasonable unit of petitioners' coal maining operations and financial-backed expectations, it is plain that petitioners have not come close to satisfying their burden of proving that they have been denied the economically viable use of that property" (1201).

Distinguishing Keystone from Penn coal

Broader public purpose

Mines could still be operated at a profit

Penn Central Transportation Co. v. City of NY (1978 at 1203)

Grand Central is designated a landmark by the city. UGP wants to pay Penn Central $3M a year for a tower above the terminal.

NEW TESTS:

Economic impact of the regulation on the claimant--in particular, the extent to which the regulation has interfered with distinct investment-




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