The Rise of the “Takings” Clause, Part One

by | Aug 12, 2000

While the "takings" clause does not actually protect the right to property, it often serves as an effective deterrent.

By Larry Salzman

There is no absolute right to property protected by any court in America today. Nor has that right ever in our history been consistently so protected. The primary cause of this failure is philosophic. Hardly anyone understands the concept of individual rights, but there were periods during which it was better understood than it is today.

As a legal matter, the movement against property rights owes its success largely to judicial irresponsibility—to the refusal of judges to stand against popular majorities and legislatures aiming to violate individual rights. Despite that history, it has recently become common for lawyers of all political stripes to state that property rights—at least in land—are making a comeback, that, in key respects, the rights are better protected by courts today than at any time during the past 60 years.

That sweeping conclusion is not warranted, but it does have some basis. In the last two decades, there has been a trend in U.S. Supreme Court cases giving new importance to the “takings” clause of the Fifth Amendment and new attention to the right to property. Thus, some victims of terrible abuse—who previously were refused entry into court—now stand at least a chance of winning their cases. But the reforms are not enough—and will not succeed—unless the deeper premises behind the failure to protect property are examined and discredited.

During the 19th century, property was well guarded against both official and majoritarian tyranny in two ways. First, courts routinely denied governments the power to seize or significantly regulate property, declaring such actions beyond the authority of legislatures. For example, in Fletcher v. Peck,1 the Court held that a state legislature could not deprive an owner of his property by repealing the statutes which had originally granted him his title. And in Citizens Savings & Loan Association v. Topeka2, the Court found illegal an issuance of public bonds, the proceeds of which were turned over to a bridge company.

Second, when courts acquiesced, they ordered the government to compensate property owners according to the “takings” clause of the Fifth Amendment. That clause states that “private property” shall not “be taken for public use, without just compensation.” This clause is the Constitutional source of eminent domain—the government’s power to lawfully seize property with payment—from private owners. This clause has been interpreted by courts as containing two distinct, obvious protections: property may not be taken by the state unless 1) it is for a public use and 2) compensation is paid. At one time, the state had to show clearly that its intended use was public and the government had to pay for it in order to wrest control of property from its owner.

While the “takings” clause does not actually protect the right to property, it often serves as an effective deterrent.3 In practice, the clause was rarely raised by lawyers of the 19th century because courts regularly prohibited the state from taking property thus mooting the issue of compensation.

By the 20th century, however, courts generally refused to stand against a seizure or regulation of property, arguing only over what payment the “takings” clause demanded. And increasingly they ruled that the “takings” clause demanded nothing.

In an important 1915 case, for instance, the city of Los Angeles shut down the brick-making business of entrepreneur J.C. Hadacheck, wiping out three-quarters of a million dollars in equity, by outlawing brick-making on all land within the city limits. The court raised no objection, stating that “there must be progress, and if in its march private interests are in the way, they must yield to the good of the community.”4 (The imposition of city-wide zoning was the “progress” spoken of here). In hundreds of cases thereafter, as long as some “rational relationship” existed between a regulation and a vaguely-defined notion of the “health, safety or welfare of the community,” no court would rise to defend an owner of land.5 And “rational,” according to courts, came to mean virtually any relationship a legislator wasn’t too embarrassed to state publicly.6

Casebooks reporting history between then and now record the ever declining, and near extinction of, judicial protection for the right to property in nearly all its forms.7 Much of deprivation of property rights comes under the title of “regulation.” The legislature, it is said, can regulate property at will within its “police powers” and risk no liability for a “taking.”

Justice Oliver Wendall Holmes is widely credited with developing the first judicial test for determining whether a property regulation was within the “police power” or outside it. A “taking” occurs, he wrote, when a regulation “goes too far” in burdening the landowner.8 Too far? By reference to what? Justice Holmes provided no answer—and trapped 20th century “takings” law in a swamp of unprincipled debate.

Through the decades, justices have continued to ask whether a regulation “goes too far”—whether it crosses the bounds of the “police power” or whether a “taking” occurred.

As one commentator observed, the Court has used “at least four different tests for determining when a ‘taking’ occurs, without explaining why its inquiry should differ from one ‘takings’ case to the next or providing clear guidelines as to when each ‘takings’ test should be applied.”9 Each test provided a different analysis. No member of the Court agreed on the precise scope of the “police power.” As applied by each justice, no single test could be counted upon to reach the same result among them. Sometimes the determination would rely on the percentage of the property taken; sometimes on the type of property; sometimes on the type of government action—most often it wasn’t particularly clear.

The “standards” are used to determine whether a government act falls within the “police power” or outside of it. Where the court finds that the state acted within the power, it will rule that no “taking” has occurred, and no compensation is due to the owner. Where the court rules that the government’s actions fall outside the “police power,” it will order the government to compensate the landowner for depriving him of his property rights.

The concept “police power” can rationally be defined only by reference to Ayn Rand’s theory of government. Government is formed to prevent the initiation of force among individuals in society. Where a use of property is an objective threat, nuisance, or harm to others, the government can properly put an end to that use. No “taking” of property has occurred because what has been lost was never within the rights of the landowner to begin with.

This view has almost never been explicitly recognized or embraced by judges. Even where it is implicitly relied upon, lawyers and judges—as thoroughly as philosophers—have misunderstood or distorted the concept of “force.” As a result, nearly the whole of 20th century “takings” jurisprudence is marred by an ever-expanding conception of what government actions fall within the “police power.” So much so that by 1978 the Court ruled that New York City was well within its “police power” when it prevented the company that owned Grand Central Station from erecting a skyscraper in the train station’s place. The destruction of Grand Central—the loss of aesthetic and historical value to the general public—was described as so great a harm that the city had the lawful power to prohibit it.10 By judgment of the U.S. Supreme Court, Grand Central Station remained and no compensation was paid.

Year by year the court eked out opinions, relying on “common sense”—sometimes reaching just results, more often not.

By the 1970’s nearly everyone—the Court, the bar, and the scores of scholars who wrote books and papers seeking to make sense of the cases—perceived that “takings” law had totally collapsed. The Court began to declare openly, in its opinions, that lawyers could not rely on any one method of adjudication, that the Court’s decisions were formed on an “ad hoc” and “case-by-case” basis. 11

Then, almost suddenly, the Court turned. In a seminal case, it surprised New York regulators by ordering them to pay landlords for a seizure of less than 2 square feet of property. The regulators were enforcing a law that allowed cable TV companies to install electrical equipment on New York apartment buildings even over the protest of the buildings’ owners.12 In years past, no one would have doubted that such a law would go unopposed by the court.

The court’s message was clear and often repeated afterwards: the state will be made to pay when it physically deprives a landowner of his property—no matter how small the parcel involved. With this, the hope for reform was spurred.

The reformers’ first target was set: to rein in the wildly expanding concept of the “police power.” They sought, and are still seeking, to push property laws of all kinds—zoning, rent control, wetlands legislation—outside the boundary of the “police power.” These types of government activities are now commonplace. If courts determine that they are not within the “police power,” then, to the extent that the regulations deprive individuals of legitimate uses of property, the state will be made to make restitution to the owners. If the state must pay for its regulation, the reformers (rightfully) argue, less regulation will occur.

The Court’s 1992 ruling in Lucas v. South Carolina Coastal Commission15 was an early, explicit cashing-in on the reform. The question in Lucas was whether a South Carolina regulatory agency should be ordered to pay more than a million dollars to a landowner when it prohibited him from building two homes on the edge of his eroding beachfront lot.14 The law preventing the development was motivated largely by an environmentalist concern for the “health” of the coastline. Similar laws had been enacted in many states by 1992. The case was judged so important that more than 50 lawyers or public interest firms filed amicus briefs in defense of Mr. Lucas, and more than 100 in support of the government.

A definite trend has since emerged: governments will be made to pay not only for physical “takings” but for regulations that trample so far upon property rights as to be the equivalent of a “taking.” The court’s rulings since 1992 have slowly expanded the number of circumstances in which this proposition will be applied.

This has not returned us to the 19th century; almost no court will actually prevent a “taking” today. In fact, a vast movement among cities is now expanding the use of eminent domain for spurious “urban renewal” projects. But more and more the Court is willing to use the “takings” clause to exact sizeable payments from the government; as a result, a deterrent against some common forms of abuse is returning.

Writing for the majority in Lucas, Justice Antonin Scalia, was prepared to provide a principled way out of Holmes’ morass—and put a cap on the “police power.” Beginning with the source, Justice Scalia wrote an opinion acknowledging the unprincipled nature of Justice Holmes’ standard. He dismissed the expansionary concepts of the “police power” as misguided “early attempts” at understanding. For his own standard, he reached back to the legal tradition celebrated for its protection of individual rights: the common law.

His answer was considered so radical that Justice John Paul Stevens, dissenting, began his opinion: “Today the Court launches a missile to kill a mouse.”

Hailed as a near revolution in property law—by dozens of articles by both critics and proponents alike—the decision provided welcome relief for Mr. Lucas. And the response by regulators, environmentalists, and the court’s dissenters to their curtailment was near shock.

In its context, it was a bold ruling—and a just result—but it was no revolution. Rather, at the deepest level, the opinion is fully in line with the judiciary’s 100-year failure to secure property rights.

[To Be Continued ]

__________________________________

References and Notes:

  1. 10 U.S. 87 (1810)
  2. 87 U.S. 655 (1874) “There are limitations on such power which grow out of the essential nature of all free governments. Implied reservations of individual rights . . . which are respected by all
    governments entitled to the name.”
  3. There is debate among defenders of property rights as to whether eminent domain regarded in the 18th century as an inherent—if dangerous—power of government, with the “takings” clause added as a prudent limit on that power, or whether the due process clause barred eminent domain and therefore, the “takings” clause was thought by the Founders to be required as a grant of power to preserve it. For the case for the latter, see, Bernard Siegan, “Majorities May Limit People’s Liberties Only When Authorized To Do So By The Constitution.” S.D.L. Rev 27 (1991). See also Bernard Siegan, Property and Freedom, Transaction Books (1997).
  4. Hadacheck v. Sebastian, 294 U.S. 394 (1915).
  5. Dennis J.Coyle, Property Rights and the Constitution, 166.
  6. See Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984) (The “public use” requirement is thus coterminous with the scope of a sovereign’s police powers . . . In short, the Court has made clear that it will not substitute its judgment for a legislature’s judgment as to what constitutes a public use “unless the use be palpably without reasonable foundation.”)
  7. Examples of this fact will be included in part II of this article.
  8. Pennsylvanian Coal v. Mahon, 260 U.S. 393 (1922).

#26 Spring 2000 Page 5

  1. James E. Krier, The Takings-Puzzle Puzzle, 38 Wm. & Mary L. Rev. 1143. 1144 (1997).
  2. Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978).
  3. Penn Central Transp. Co. v. New York City, 438 U.S. at 125.
  4. Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S, 419 (1982).
  5. Id.
  6. 505 U.S. 1003 (1992).

 

Copyright © The Association for Objective Law. All rights reserved. Republished in Capitalism Magazine by permission of TAFOL.

The Association for Objective Law is a non-profit corporation whose purpose is to advance Objectivism, the philosophy of Ayn Rand, as the basis of a proper legal system.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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