Property Class Notes 1/9/04

 

The only way you can stop eminent domain is if what the government does is actually illegal, as in beyond their statutory authority.  Absent some statutory restriction on the eminent domain power, pretty much anything is going to satisfy the “public purpose” requirement.  It’s probably not worth the cost and expense of trying to litigate it.

 

Loretto v. Teleprompter Manhattan CATV Corp. et al.

 

This is a much more complicated issue: whether something has been taken at all.  We’ll have a difficult time defining property, and thus we’ll have a hard time saying whether property has been taken.

 

What happened in Loretto?  New York law said that a landowner must allow the cable company to install cables and splitters and stuff on their buildings.  These were really small intrusions in terms of the physical space taken up.  “Smaller than a breadbox.”

 

What does the statute say?  The statute says that the landlord must tolerate this intrusion by a third party, in this case, the cable TV company in Manhattan.

 

Here we have a service that we would group in with “public utilities”.  Why are public utilities given the power of eminent domain?  Is it that these companies function for the public good?  Hospitals don’t have the power of eminent domain, so this isn’t the rule.

 

The thing about public utilities is that they need to be everywhere.  If you don’t have the power of eminent domain, you’ll be subject to being held up by individual property owners.  That can get to be expensive!  You may have to pay more than what the land is worth just to get the right to cross over a piece of land.  These public utilities only have a limited power of eminent domain.  But it’s necessary for them to have it.

 

So we have wires and little boxes being placed on Mrs. Loretto’s apartment building.  She objects, saying it’s unconstitutional.  How does the Court go about analyzing her argument?  Has there been a taking of Mrs. Loretto’s property?  If there has been one, it’s certainly been small.  The Court concludes that this is a taking, and this goes against what the Court of Appeals of New York said.  The Fifth Amendment must be satisfied.

 

What is this case really about?  What is Mrs. Loretto really unhappy about?  It’s money!  The deal used to be that the landlord could charge either the cable company or the tenant for the right to wire up the building.  This statute takes the money from the landlord and puts it in the pocket of the cable company.  She was able to get 5% of the revenue before!

 

The Court doesn’t analyze it that way.  They conclude that there has been a taking, but why?  Marshall announces what he believes to be a bright-line test.

 

In this case, we find that permanent physical occupation constitutes “per se” taking.  Why?

 

·        It deprives the owner of the power to exclude.

·        It deprives the owner of the power to control.

·        The right to alienate is deprived of value.

·        It’s more severe than regulation because there is no control over the timing, extent or nature of the invasion.

·        The rule has a low administrative cost because it’s easy to prove and doesn’t depend on the extent of the occupation.

 

If it’s permanent, if it’s physical, and it occupies a portion of the complainant’s land, then it’s a taking.

 

The Court starts out with the metaphor that property is a “bundle of sticks”…property isn’t just one right, but a series of rights.  Not just one “stick” has been taken in this case.  Instead, the Court claims that this taking “slices” through the whole bundle.

 

The Court goes through and defines what this bundle of rights is.  First, it’s the power to exclude: an important part of ownership of which Mrs. Loretto has been denied in relation to the cable company.  Next, there’s the power to possess: to physically occupy and control the property that you own.  The Court says that at least in a trivial way she has lost the power to control or to “use and enjoy” her property.

 

Then the Court says: “Clearly, one important ‘stick’ in the bundle is the right to sell (‘alienate’) property.  She still has the right to sell, but the value of the property has been eliminated of all value.”  Braunstein thinks this is pretty weird.  Installing cable service might actually increase the value of this property (it’s “cable-ready”).

 

Could Loretto sell her whole building?  Sure, and the price wouldn’t be decreased by much at all, especially if cable is desirable for tenants.  While she can’t charge the tenants for the cable service, the apartments themselves may become more valuable anyway because they’re “cable-ready”.

 

Has Mrs. Loretto lost value?  To answer this question, you must ask “compared to what?

 

Note that if Mrs. Loretto gets out of the landlord business, she can rip out the cable at her pleasure.

 

Private individuals cannot trespass on your property.  However, what we’re talking about here is the government having the power to regulate.  That’s the power that’s being exercised here.  Loretto brings the lawsuit claiming that this power has been abused.  Has the government just regulated what she can do with her land, or have they deprived her of her interest in the land?

 

So we have a pretty good working definition of what property is.  It’s the right to exclude, control (or use and enjoy) and alienate (sell).  If we accept what the Court says, then Mrs. Loretto certainly has lost a property right in this case.  Do we accept, however, that she has lost all these rights that the majority says she has?

 

What about mailboxes and fire extinguishers and stuff like that?

 

The majority says that the difference between a permanent physical occupation and a regulation is that a permanent physical occupation is more severe.  They say it’s more severe because there’s no control over the timing, extent and nature of the invasion.

 

If the government says that your building is dangerous to the health and safety of your tenants because you have no emergency stairs and they force you to build them, that seems pretty severe.  But the majority says that any permanent physical occupation is more severe than any regulation.  Is this so convincing?

 

The Court also says that this rule has a low administrative cost.  We know a permanent physical occupation when we see one.  That makes it easy to enforce the rule.  What’s more, we won’t inquire (initially) as to the extent of the permanent physical occupation.  The Fifth Amendment gets into play whenever there is the least permanent physical occupation.  You still have to deal with the amount of just compensation, and at that point you’ll have to consider how serious the interference is.

 

The essence of property rules is that they can’t be taken from you from other individuals.  However, they can be taken from you by the sovereign.  The Fifth Amendment limits the sovereign’s power.  The sovereign can delegate that power to another entity like the cable company, phone company or power company.  If the cable company was not granted this power, there would be no question that a trespass had occurred.

 

The key to the case is that a physical occupation by a third party is a taking.  But who is the third party?  The first party is Mrs. Loretto, and the third party is the cable company.  We probably mean “another party” other than Mrs. Loretto.

 

Nobody has interpreted this case to be limited to delegated power of eminent domain.  It may be open to that interpretation, though.

 

What shall we do with mailboxes, fire extinguishers, fire escapes and the like?  How are these items distinguished?  If we force landlords to have fire escapes on their building, is that a taking?  It’s argued that if you’re required to have a fire escape, you still have control over when, where, and how you put up the fire escape.  There is also no third party coming onto your property.  No one is invading your property or invading your right to exclude.

 

The decision in this case seems to hold that the New York statute is either unconstitutional, or compensation is required because a taking has occurred.  But wasn’t compensation paid here?  She got $1.  What’s wrong with that?

 

An aside: don’t get confused between “condemnation” in the property law sense and “unfit for human occupation”-type condemnation.

 

If we say an action is a taking, it doesn’t mean the government can’t do it, it just means that the government must pay for.  The measure of just compensation is not the value to the taker, but the change in value to the property in question.

 

It turns out this is more of a procedural thing than a substantive thing.  You can’t set a $1 standard for all cases.  You must take it on a case-by-case basis.  So Loretto actually loses, even though she appears to win: she’s going to end up with pretty much exactly what she would have had if she had never worked her way to the United States Supreme Court.

 

The Loretto dissent

 

The dissent says that the per se rule is too hard-edged, and that takings should be judged on a case-by-case basis instead.

 

The dissent says: not so fast!  What is permanent?  In five billion years, the Milky Way is going to collapse.  So is anything really permanent?  The building won’t be there forever.  It also doesn’t have to be used as an apartment building forever.  It’s certainly going to last for a while, but nothing’s permanent.  And why shouldn’t a temporary physical invasion constitute a taking?  The significance of permanence seems to be hard to understand, and the definition of permanence is hard to grasp.

 

The dissent also claims that the involvement of a third party is not determinative.  It’s not enough.

 

The dissent also asks: What is an invasion?  What is a physical touching?  How minimal of an interference is going to trigger litigation?  The dissent says that no one of these factors alone is enough.  In other words, you could have a permanent invasion by a third party that could still not have a physical touching that would rise to the level of a taking.

 

Why is it that we protect the owner and compensate them in trivial cases like this while we don’t compensate landowners for regulations that place a severe burden on them?

 

Two kinds of “takings” analysis

 

We’re left with two different kinds of analysis.  One analysis has to do with per se takings, which exist in three circumstances:

 

1.     The garden-variety eminent domain case – the government says that they want to acquire title to your land or an easement to your land.  The government brings suit for the purpose of establishing just compensation and its right to take the property.

2.     A permanent physical occupation, as in Loretto

3.     Regulation depriving a property owner of all use of property – for example, vacant land that must stay vacant

 

On the other hand, there are regulatory takings.  We will go through a complex process to determine whether compensation is due.

 

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