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Another Bleak Supreme Court Decision for Property Rights

Roger Pilon

Property owners have long suffered under the Supreme Court’s
erratic rulings. It got worse last Friday when the court ruled
against owners who wanted simply to sell their property.

Both facts and law in Murr v. Wisconsin are
complicated. But in a nutshell, the Murrs, four siblings, inherited
adjoining lots on the St. Croix River that their parents had
purchased at separate times in the 1960s, building a home on one
and keeping the other as an investment. Deeded and taxed
separately, the two lots remained so to the present.

But in 1975 a local zoning ordinance combined the lots. The
effect, as the Murrs discovered in 2004 when they sought to sell
the investment lot (valued at $410,000), was to prohibit them from
doing so unless they sold the other lot and house with it. So they
sued under the Fifth Amendment’s Takings Clause, which prohibits
the government from taking private property for public use without
just compensation.

In effect, the ordinance had taken their right to sell that lot,
one of the basic rights of property. The case is no more
complicated than that. Under the Constitution’s Takings Clause they
should have been compensated for their loss.

So, why did they lose? Here things get really complicated
because the Court’s “regulatory takings” law is a morass. A 1922
decision, for example, held that if a regulation goes “too far” it
constitutes a taking. Things haven’t gotten much clearer since, and
Friday’s decision, written by Justice Anthony Kennedy, made it only
worse.

In brief, to decide Murr the Court turned mainly to a
1978 decision, Penn Central v. New York, which had
introduced a three-part “balancing test” to determine whether a
taking has occurred. Under it, a court must weigh a regulation’s
economic impact on the property, its interference with
investment-backed expectations, and the character of the government
action. And the crucial point here: Those factors must be applied
to “the parcel as a whole.”

No one knows what those factors mean or how to apply them. But
hold that last point, because a second precedent has to be
considered.

In a 1992 decision, Lucas v. South Carolina Coastal
Council
, the Court held that an ordinance prohibiting the
plaintiff from virtually all rightful uses of his property
constituted a taking because it wiped out all of the property’s
value. The problem with this “wipeout” rule, of course, is that
most regulations leave at least some value in the property. When
the dissent objected to the rule, Justice Antonin Scalia, writing
for the Court, responded tersely, “Takings law is full of these
‘all or nothing’ situations.”

If the state can wipe out
pre-existing rights simply by issuing a later ordinance, and
thereby escape the requirements of the Takings Clause, that
guarantee is a dead letter.

Go back now to the Murrs. If their lots are treated separately,
as the separate deeds and taxes have long implied, then all value
in the investment lot has been wiped out by the 1975 ordinance and
the Murrs, under Lucas, are entitled to compensation for
the taking. But with the two lots combined as one, value remains in
“the parcel as a whole,” under Penn Central. So putting
the two precedents together, the state can escape paying the Murrs
any compensation unless the Penn Central balancing test
saves them.

It did not, said Justice Kennedy in an opinion that muddied the
waters even further. In his dissent for himself and Justices
Clarence Thomas and Samuel Alito (Justice Neil Gorsuch took no
part), Chief Justice Roberts dissected Kennedy’s opinion but did
little more. In fact, Roberts wrote that the Court’s holding “does
not trouble him,” only its reasoning. He would have vacated the
judgment below and sent the case back for that court to identify
the “relevant property” (the single, or the combined lots) using
Wisconsin property law.

But that law is precisely the problem. If the state can wipe out
pre-existing rights simply by issuing a later ordinance, and
thereby escape the requirements of the Takings Clause, that
guarantee is a dead letter.

Only Thomas seemed to appreciate that. He joined the dissent
because, as he wrote, “it correctly applies this Court’s regulatory
takings precedents.” But he went on to say that the Court should
take a fresh look at those.

Only Thomas seemed to appreciate that. He joined the dissent
because, as he wrote, “it correctly applies this Court’s regulatory
takings precedents.” But he went on to say that the Court should
take a fresh look at those.

Therein lies the problem with so many of the Supreme Court’s
decisions, and not only in the area of property rights. There is
all the difference in the world between modern “constitutional law”
and the Constitution itself.

Roger Pilon (@Roger_Pilon) is vice president for legal
affairs at the Cato Institute and director of Cato’s Center for
Constitutional Studies.