Property Law Developments—Joseph William Singer

The Supreme Court held in Horne v. Dep’t of Agric., 133 S.Ct. 2053, — U.S. — (2015), that the takings clause applies to physical takings of personal property (like cars) as well as to real property. Thus a government program designed to shore up the price of raisins by requiring farmers to hand over a certain percentage of the raisin crop to the government effected a categorical physical taking of personal property.

The limit on supply of raisins for sale was intended to increase the price farmers receive for the raisins they sell, thus promoting the profitability of their businesses. The expropriated raisins are given away or sold by the government and if any profits remain they are returned to the farmers. The Court held any economic benefits farmers received from increased raisin prices or moneys from sales of the raisins turned over to the government do not affect the question of whether a taking has occurred. When physical property is seized by the government, a taking has occurred even if it is is personal property and just compensation is due.

The Court also held that the government cannot condition participation in a price-support program on the condition that the farmer turn over a portion of the crop to the government.

At the same time, the Court made a sharp distinction between physical taking of personal property and regulation of its use. The takings clause does not prohibit regulation of personal property; nor does it prevent the state from prohibiting creation or possession of certain dangerous forms of property such as drugs like heroin. Thus it would not be a per se or categorical taking to limit the production of raisins (although it might be a regulatory taking). But it is a per se or categorical taking for the government to force the owner to hand the raisins over to the government. Justice Sotomayor dissented on the ground that this is a distinction without a difference.

Justice Thomas concurred on the ground that the taking was not for “public use.”

Justice Breyer concurred along with Justices Ginsburg and Kagan on the ground that a remand should have been ordered to determine if any compensation would have been due had the owner complied with the regulation. Breyer noted that the takings clause does not prohibit takings; it just requires just compensation when property is taken for public use. There was therefore a question of whether compliance with the government’s mandate would have resulted in just compensation being paid and if so it is not clear why a constitutional violation occurred since the obligation is to compensate not to refrain from taking. Part of the complication is that the requirement of handing over some raisins to the government effectively raises the price of those that are kept by the farmer. If that amount is sufficient to compensate for the value of the raisins handed over to the government then no more compensation should be due.

The California Supreme Court has upheld the inclusionary zoning ordinance of the City of San Jose against a challenge that it constitutes an illegal exaction and violates the state constitution’s takings clause or the federal constitution’s takings clause. Cal. Bldg. Indus. Ass’n v. City of San Jose, 2015 Cal. LEXIS 3905 (Cal. 2015). The ordinance required all new development projects containing 20 housing units or more to reserve 15 percent for sale at affordable prices to low- or moderate-income families. San Jose Mun. Code, §§ 5.08.010 to 5.08.730. The Court held that the municipal government had the power to enact reasonable land use regulations designed to increase the amount and dispersion of affordable housing and that this ordinance served those ends. Because it regulated land use, it did not constitute an “exaction” or forced donation of land to public use. The Court held that so long as a land use regulation does not deprive the owner of all economically viable use of the property or mandate a forced physical taking, there is no violation of the takings clause when restrictions govern an owner’s use of property. The Court also interpreted the Supreme Court’s requirements in the cases of Dolan v. City of Tigard, 512 U.S. 374 (1994) & Nollan v. Cal. Coastal Comm’n, 483 U.S> 825 (1987), that mitigation fees must bear a reasonable relationship to externalities caused by the development of land did not apply when the law simply regulates the uses to which land can be put.

The Michigan Supreme Court overturned a lower court ruling that had held it to be unconstitutional for a city to demolish a structure that the city believes is financially unreasonable to repair even if the owner claims to want to make the repairs. The court held that it does not constitute a deprivation of due process of law to require the demolition given the fact that the owner allowed the property to become dilapidated and the city could rationally believe that demolition was the best remedy to remove the public nuisance. Bonner v. City of Brighton, 848 N.W.2d 380 (Mich. 2014).