Chapter 19 Takings: Action for Inverse Condemnation

• Library: The Zoning and Land Use Handbook (ABA) (2016 Ed.)

Chapter 19 Takings: Action for Inverse Condemnation

The term "inverse condemnation" refers to a claim by a landowner that arises when a public agency has adopted a zoning ordinance that substantially limits the use of the landowner's property.¹ The "taking," or the "condemnation," is a rezoning which restricts the use of the property from what was formally permitted or refusing to rezone to a classification that would allow a landowner to carry out a proposed development. The concept has been expressed as follows:

Not only is an actual physical appropriation, under an attempted exercise of the police power, in practical effect an exercise of the power of eminent domain, but if regulative legislation is so unreasonable or arbitrary as virtually to deprive a person of the complete use and enjoyment of his property, it comes within the purview of the law of eminent domain. Such legislation is invalid as an exercise of police power since it is clearly unreasonable and arbitrary. It is invalid as an exercise of the power of eminent domain since no provision is made for compensation.²

The U.S. Supreme Court has wrestled with this concept. In particular, the issue remains when and under what circumstances must a municipality pay damages as a result of having passed a zoning ordinance or engaged in an exercise of its police powers. This issue can become quite complex, as it requires resolution of some of the following questions:

1. When does a taking occur? That is, every regulation in some manner or another restricts or limits the use of property, yet not every regulation constitutes a taking.
2. Under what circumstances may a property owner collect damages? In this regard, it is possible that the property owner will sue to have the zoning ordinance declared invalid. If the ordinance is declared invalid, then whatever taking may have existed as to that property, that is, whatever restriction was placed on that property, is no longer in effect and, therefore, the damage has ceased to exist.

It is also possible that, at one point or another in the proceedings, a court could determine that there has been a taking and could therefore direct the municipality to pay damages for that taking. At that point, it would seem the municipality has the option of either rescinding the ordinance, thereby restoring to the property owner the full value of his property, or paying the damages, in which case title to the property would still remain in the property owner, and the municipality would, in effect, have paid an amount sufficient to allow its ordinance to remain in effect. What if the municipality subsequently passes an ordinance rescinding the prior ordinance? Is it entitled to a refund? Or, what if the municipality passes an ordinance that has the effect of increasing the value of the property? Is it entitled to some comparable compensation?

These are some of the issues the courts have been wrestling with and for which there do not appear to be any clear answers.

San Diego Gas and Electric v. City of San Diego³ involved an action by a property owner who claimed the City had taken its property without just compensation in violation of federal and state constitutions by passing a zoning law that rezoned parts of the property from industrial to agricultural and open space uses. Justice Blackman, writing for a majority, held that there had been no final judgment from which a proper appeal could be taken. Therefore, the appeal to the U.S. Supreme Court was dismissed.⁴ A majority of the Court concurred with the dissent's rationale on the merits. Justice Brennan wrote in dissent:

The constitutional role I propose requires that, once a court finds a police power regulation has effected a "taking," the government entity must pay just compensation for the period commencing on the date the regulation first effected the "taking," and ending on the date the government entity chooses to rescind or otherwise amend the regulation.⁵

Ordinary principles for determining the proper measure of just compensation, regularly applied in cases of permanent and temporary takings involving formal condemnation proceedings, occupations, and physical invasions, should provide guidance to the courts in determining the measure of compensation for a regulatory taking.

Following the holding in San Diego Gas and Electric, the U.S. Supreme Court considered the case of Loretto v. Teleprompter Manhattan CATV Corp.⁶ This case involved a New York law providing that a landlord must permit a cable television company to install its cable facilities upon his property. In this particular case, the cable installation occupied portions of the plaintiff's roof and the side of her building. New York's highest court ruled that the law did not constitute a taking. The U.S. Supreme Court disagreed. Justice Marshall, writing for a majority, pointed out the following:

As Penn Central affirms, the Court has often upheld substantial regulation of an owner's use of his own property where deemed necessary to promote the public interest. At the same time, we have long considered a physical intrusion by government to a property restriction of an unusually serious character for purposes of the Takings Clause. Our cases further establish that when the physical intrusion reaches the extreme form of a permanent physical occupation, a taking has occurred.⁷

The dissent, which, interestingly enough, Justice Brennan joined, pointed out that if the Court's decision in this case does anything, it is to establish that "[t]here is no set formula to determine where regulation ends and a takings begins."⁸ However, Loretto makes clear that a physical invasion is a per se taking of property.

The case of City of Monterey v. Del Monte Dunes at Monterey, Ltd.⁹ makes clear that a claim for a regulatory taking under the federal Constitution does not accrue unless and until a state court denies the landowner compensation under state law. "Whereas in eminent domain proceedings the government admits its liability for the value of the taking, in the inverse condemnation cases litigated under § 1983, it refuses to do so inasmuch as it denies the landowner any state process (or effective process) for litigating his claim."¹⁰

This entire issue has received exhaustive treatment in several U.S. Supreme Court opinions.¹¹ In summary, these cases hold that a landowner is entitled to recover damages in an inverse condemnation action for a temporary taking measured from the time that the regulation restricting the use of the property went into effect; that the government has the legitimate police power to condition the use of land upon some concession by the owner, even a concession of property rights, so long as the condition is related to the particular land use; and that the regulation restricting the use of property is not one requiring compensation unless it can be said that the regulation denies the owner any economically viable use of the land. It is important to note that these cases pick up on the themes already enunciated by the Court distinguishing between a physical intrusion and a regulation, but whether dealing with a physical intrusion or a regulation limiting the use of land, the court still scrutinizes "the basis for governmental action" to determine if it substantially advances legitimate public needs.¹²

In Keystone,¹³ the court considered a challenge by certain coal companies of the Pennsylvania Subsidence Act, which requires that 50 percent of the coal beneath certain structures be kept in place to provide surface support. The Supreme Court upheld the validity of the Pennsylvania Act.¹⁴ In so doing, the five-member majority raised and analyzed certain distinct points.

1. The Public Purpose. The Court analyzed the purpose of the Act in order to measure the State's interest in the regulation. That is, how important is the limitation on the use of the land? Here, the Court found, for example, that the purpose included the protection and safety of the public from open pit or strip mining, which would damage the surface of the land and which could further pose a danger to surface water drainage and public water supplies. In conducting this analysis, the Court went so far as to point out that there have been regulations, which almost totally limited the use to be made of property, that have been held valid and that did not constitute a taking. For example, the Court points out that in Mugler v. Kansas,¹⁵ a Kansas distiller who had built a brewery while it was legal to do so challenged a Kansas constitutional amendment that prohibited the manufacture and sale of intoxicating liquors. Although the Court recognized that the buildings and machinery constituting these breweries were of little value because of the amendment, the Court explained that a

[P]rohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or appropriation of property . . . The power which the states have of prohibiting such use by individuals of their property as will be prejudicial to the health, morals, or the safety of the public, has not . . . and, consistently with the existence and safety of organized society, cannot be—^burdened with the condition that the State must compensate such individual owners for pecuniary losses they may sustain by reason of their not being permitted, by a noxious use of their property, to inflict injury upon the community.¹⁶

The Court made it clear that it recognizes that all property in the country is held "under the implied obligation that the owner's use of it shall not be injurious to the community . . . and the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it."¹⁷ The Court, however, also made it clear that it is necessary to weigh the private and public interests...