CRS Annotated Constitution
|Amendment 5 Table of Contents|
History and Scope
“It is now the settled doctrine of this Court that the Due Process Clause embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our whole history. Due Process is that which comports with the deepest notions of what is fair and right and just.”1 The content of due process is “a historical product”2 that traces all the way back to chapter 39 of Magna Carta, in which King John promised that “[n]o free man shall be taken or imprisoned or disseized or exiled or in any way destroyed, nor will we go upon him nor send upon him, except by the lawful judgment of his peers or by the law of the land.”3 The phrase “due process of law” first appeared in a statutory rendition of this chapter in 1354. “No man of what state or condition he be, shall be put out of his lands or tenements nor taken, nor disinherited, nor put to death, without he be brought to answer by due process of law.”4 Though Magna Carta was in essence the result of a struggle over interest between the King and his barons,5 this particular clause over time transcended any such limitation of scope, and throughout the fourteenth century par-liamentary interpretation expanded far beyond the intention of any of its drafters.6 The understanding which the founders of the American constitutional system, and those who wrote the due process clauses, brought to the subject they derived from Coke, who in his Second Institutes expounded the proposition that the term “by law of the land” was equivalent to “due process of law,” which he in turn defined as “by due process of the common law,” that is, “by the indictment or presentment of good and lawful men . . . or by writ original of the Common Law.”7 The significance of both terms was procedural, but there was in Coke’s writings on chapter 29 a rudimentary concept of substantive restrictions, which did not develop in England because of parliamentary supremacy, but which was to flower in the United States.
The term “law of the land” was early the preferred expression in colonial charters and declarations of rights, which gave way to the term “due process of law,” although some state constitutions continued to employ both terms. Whichever phraseology was used, the expression seems generally to have occurred in close association with precise safeguards of accused persons, but, as is true of the Fifth Amendment here under consideration, the provision also suggests some limitations on substance because of its association with the guarantee of just compensation upon the taking of private property for public use.8
Scope of the Guaranty.— Standing by itself, the phrase “due process” would seem to refer solely and simply to procedure, to process in court, and therefore to be so limited that “due process of law” would be what the legislative branch enacted it to be. But that is not the interpretation which has been placed on the term. “It is manifest that it was not left to the legislative power to enact any process which might be devised. The article is a restraint on the legislative as well as on the executive and judicial powers of the government, and cannot be so construed as to leave congress-free to make any process ‘due process of law’ by its mere will.”9 All persons within the territory of the United States are entitled to its protection, including corporations,10 aliens,11 and presumptively citizens seeking readmission to the United States,12 but States as such are not so entitled.13 It is effective in the District of Columbia14 and in territories which are part of the United States,15 but it does not apply of its own force to unincorporated territories.16 Nor does it reach enemy alien belligerents tried by military tribunals outside the territorial jurisdiction of the United States.17
Early in our judicial history, a number of jurists attempted to formulate a theory of natural rights—natural justice, which would limit the power of government, especially with regard to the property rights of persons.18 State courts were the arenas in which this struggle was carried out prior to the Civil War. Opposing the “vested rights” theory of protection of property were jurists who argued first, that the written constitution was the supreme law of the State and that judicial review could look only to that document in scrutinizing legislation and not to the “unwritten law” of “natural rights,” and second, that the “police power” of government enabled legislatures to regulate the use and holding of property in the public interest, subject only to the specific prohibitions of the written constitution. The “vested rights” jurists thus found in the “law of the land” and the “due process” clauses of the state constitutions a restriction upon the substantive content of legislation, which prohibited, regardless of the matter of procedure, a certain kind or degree of exertion of legislative power altogether.19 Thus, Chief Justice Taney was not innovating when in his opinion in the Dred Scott case he pronounced, without elaboration, that one of the reasons the Missouri Compromise was unconstitutional was that an-act of Congress which deprived “a citizen of his liberty or property merely because he came himself or brought his property into a particular territory of the United States, and who had committed no offence against the laws, could hardly be dignified with the name of due process of law.”20 Following the War, with the ratification of the Fourteenth Amendment’s due process clause, substantive due process interpretations were urged on the Supreme Court with regard to state legislation; first resisted, the arguments came in time to be accepted, and they imposed upon both federal and state legislation a firm judicial hand which was not to be removed until the crisis of the 1930’s, and which today in non–economic legislation continues to be reasserted.
“It may prevent confusion, and relieve from repetition, if we point out that some of our cases arose under the provisions of the Fifth and others under those of the Fourteenth Amendment to the Constitution of the United States. While the language of those Amendments is the same, yet as they were engrafted upon the Constitution at different times and in widely different circumstances of our national life, it may be that questions may arise in which different constructions and applications of their provisions may be proper.”21 The most obvious difference between the two due process clauses is that the Fifth Amendment clause as it binds the Federal Government coexists with a number of other express provisions in the Bill of Rights guaranteeing fair procedure and non–arbitrary action, such as jury trials, grand jury indictments, and nonexcessive bail and fines, as well as just compensation, whereas the Fourteenth Amendment clause as it binds the States has been held to contain implicitly not only the standards of fairness and justness found within the Fifth Amendment’s clause but also to contain many guarantees that are expressly set out in the Bill of Rights. In that sense, the two clauses are not the same thing, but insofar as they do impose such implicit requirements of fair trials, fair hearings, and the like, which exist separately from, though they are informed with, express constitutional guarantees, the interpretation of the two clauses is substantially if not wholly the same. Save for areas in which the particularly national character of the Federal Government requires separate treatment, discussion of the meaning of due process is largely reserved for the section on the Fourteenth Amendment. Finally, it should be noted that some Fourteenth Amendment interpretations have been carried back to broaden interpretations of the Fifth Amendment’s due-process clause, such as, e.g., the development of equal protection standards as an aspect of Fifth Amendment due process.
Procedural Due Process
In 1855, the Court first attempted to assess its standards for judging what was due process. At issue was the constitutionality of summary proceedings under a distress warrant to levy on the lands of a government debtor. The Court first ascertained that Congress was not free to make any process “due process.” “To what principles, then are we to resort to ascertain whether this process, enacted by congress, is due process? To this the answer must be twofold. We must examine the constitution itself, to see whether this process be in conflict with any of its provisions. If not found to be so, we must look to those settled usages and modes of proceedings existing in the common and statute law of England, before the emigration of our ancestors and which are shown not to have been unsuited to their civil and political condition by having been acted on by them after the settlement of this country.” A survey of history disclosed that the law in England seemed always to have contained a summary method for recovering debts owned the Crown not unlike the law in question. Thus, “tested by the common and statute law of England prior to the emigration of our ancestors, and by the laws of many of the States at the time of the adoption of this amendment, the proceedings authorized by the act of 1820 cannot be denied to be due process of law. . . .”22
This formal approach to the meaning of due process could obviously have limited both Congress and the state legislatures in the development of procedures unknown to English law. But when California’s abandonment of indictment by grand jury was challenged, the Court refused to be limited by the fact that such proceeding was the English practice and that Coke had indicated that it was a proceeding required as “the law of the land.” The meaning of the Court in Murray’s Lessee was “that a process of law, which is not otherwise forbidden, must be taken to be due process of law, if it can show the sanction of settled usage both in England and in this country; but it by no means follows that nothing else can be due process of law.” To hold that only historical, traditional procedures can constitute due process, the Court said, “would be to deny every quality of the law but its age, and to render it incapable-of progress or improvement.”23 Therefore, in observing the due process guarantee, it was concluded, the Court must look “not [to] particular forms of procedures, but [to] the very substance of individual rights to life, liberty, and property.” The due process clause prescribed “the limits of those fundamental principles of liberty and justice which lie at the base of all our civil and political institutions. . . . It follows that any legal proceeding enforced by public authority, whether sanctioned by age and custom, or newly devised in the discretion of the legislative power, in furtherance of the general public good, which regards and preserves these principles of liberty and justice, must be held to be due process of law.”24
Generally.— The phrase “due process of law” does not necessarily imply a proceeding in a court or a plenary suit and trial by jury in every case where personal or property rights are involved.25 “In all cases, that kind of procedure is due process of law which is suitable and proper to the nature of the case, and sanctioned by the established customs and usages of the courts.”26 What is unfair in one situation may be fair in another.27 “The precise nature of the interest that has been adversely affected, the manner in which this was done, the reasons for doing it, the available alternatives to the procedure that was followed, the protection implicit in the office of the functionary whose conduct is challenged, the balance of hurt complained of and good accomplished—these are some of the considerations that must enter into the judicial judgment.”28
Administrative Proceedings: A Fair Hearing.— With respect to action taken by administrative agencies, the Court has held that the demands of due process do not require a hearing at the initial stage, or at any particular point in the proceeding, so long as a hearing is held before the final order becomes effective.29 In Bowles v. Willingham,30 the Court sustained orders fixing maximum rents issued without a hearing at any stage, saying “where Congress has provided for judicial review after the regulations or-orders have been made effective it has done all that due process under the war emergency requires.” But where, after consideration of charges brought against an employer by a complaining union, the National Labor Relations Board undertook to void an agreement between an employer and another independent union, the latter was entitled to notice and an opportunity to participate in the proceedings.31 Although a taxpayer must be afforded a fair opportunity for hearing in connection with the collection of taxes,32 collection by distraint of personal property is lawful if the taxpayer is allowed a hearing thereafter.33
When the Constitution requires a hearing it requires a fair one, held before a tribunal which meets currently prevailing standards of impartiality.34 A party must be given an opportunity not only to present evidence, but also to know the claims of the opposing party and to meet them. Those who are brought into contest with the Government in a quasi–judicial proceeding aimed at control of their activities are entitled to be fairly advised of what the Government proposes and to be heard upon the proposal before the final command is issued.35 But a variance between the charges and findings will not invalidate administrative proceedings where the record shows that at no time during the hearing was there any-misunderstanding as to the basis of the complaint.36 The mere admission of evidence which would be inadmissible in judicial proceedings does not vitiate the order of an administrative agency.37 A provision that such a body shall not be controlled by rules of evidence does not, however, justify orders without a foundation in evidence having rational probative force. Hearsay may be received in an administrative hearing and may constitute by itself substantial evidence in support of an agency determination, provided that there are present factors which assure the underlying reliability and probative value of the evidence and, at least in the case at hand, where the claimant before the agency had the opportunity to subpoena the witnesses and cross–examine them with regard to the evidence.38 While the Court has recognized that in some circumstances a “fair hearing” implies a right to oral argument,39 it has refused to lay down a general rule that would cover all cases.40
In the light of the historically unquestioned power of a commanding officer summarily to exclude civilians from the area of his command, and applicable Navy regulations which confirm this authority, together with a stipulation in the contract between a restaurant concessionaire and the Naval Gun Factory forbidding employment on the premises of any person not meeting security requirements, due process was not denied by the summary exclusion on security grounds of the concessionaire’s cook, without hearing or advice as to the basis for the exclusion. The Fifth Amendment does not require a trial–type hearing in every conceivable case of governmental impairment of private interest.41 Since the Civil Rights-Commission acts solely as an investigative and fact–finding agency and makes no adjudications, the Court, in Hannah v. Larche,42 upheld supplementary rules of procedure adopted by the Commission, independently of statutory authorization, under which state electoral officials and others accused of discrimination and summoned to appear at its hearings, are not apprised of the identity-of their accusers, and witnesses, including the former, are not accorded a right to confront and cross–examine witnesses or accusers testifying at such hearings. Such procedural rights, the Court maintained, have not been granted by grand juries, congressional committees, or administrative agencies conducting purely fact–finding investigations in no way determining private rights.
Aliens: Entry and Deportation.— To aliens who have never been naturalized or acquired any domicile or residence in the United States, the decision of an executive or administrative officer, acting within powers expressly conferred by Congress, with regard to whether or not they shall be permitted to enter the country, is due process of law.43 Since the status of a resident alien returning from abroad is equivalent to that of an entering alien, his exclusion by the Attorney General without a hearing, on the basis of secret, undisclosed information, also is deemed consistent with due process.44 The complete authority of Congress in the matter of admission of aliens justifies delegation of power to executive officers to enforce the exclusion of aliens afflicted with contagious diseases by imposing upon the owner of the vessel bringing any such alien into the country a money penalty, collectible before and as a condition of the grant of clearance.45 If the person seeking admission claims American citizenship, the decision of the Secretary of Labor may be made final, but it must be made after a fair hearing, however summary, and must find adequate support in the evidence. A decision based upon a record from which relevant and probative evidence has been omitted is not a fair hearing.46 Where the statute made the decision of an immigration inspector final unless an appeal was-taken to the Secretary of the Treasury, a person who failed to take such an appeal did not, by an allegation of citizenship, acquire a right to a judicial hearing on habeas corpus.47
Deportation proceedings are not criminal prosecutions within the meaning of the Bill of Rights.48 The authority to deport is drawn from the power of Congress to regulate the entrance of aliens and impose conditions upon their continued liberty to reside within the United States. Findings of fact reached by executive officers after a fair, though summary deportation hearing may be made conclusive.49 In Wong Yang Sung v. McGrath,50 however, the Court intimated that a hearing before a tribunal which did not meet the standards of impartiality embodied in the Administrative Procedure Act51 might not satisfy the requirements of due process of law. To avoid such constitutional doubts, the Court construed the law to disqualify immigration inspectors as presiding officers in deportation proceedings. Except in time of war, deportation without a fair hearing or on charges unsupported by any evidence is a de-nial of due process which may be corrected on habeas corpus.52 In contrast with the decision in United States v. Ju Toy53 that a person seeking entrance to the United States was not entitled to a judicial hearing on his claim of citizenship, a person arrested and held for deportation is entitled to a day in court if he denies that he is an alien.54 A closely divided Court has ruled that in time of war the deportation of an enemy alien may be ordered summarily by executive action; due process of law does not require the courts to determine the sufficiency of any hearing which is gratuitously afforded to the alien.55
Judicial Review of Administrative Proceedings.— To the extent that constitutional rights are involved, due process of law imports a judicial review of the action of administrative or executive officers. This proposition is undisputed so far as questions of law are concerned, but the extent to which the courts should and will go in reviewing determinations of fact has been a highly controversial issue. In St. Joseph Stock Yards Co. v. United States,56 the Court held that upon review of an order of the Secretary of Agriculture establishing maximum rates for services rendered by a stockyard company, due process required that the court exercise its independent judgment upon the facts to determine whether the rates were confiscatory.57 Subsequent cases sustaining rate orders of the Federal Power Commission have not dealt explicitly with this point.58 The Court has said simply that a person assailing such an order “carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.”59-
There has been a division of opinion in the Supreme Court with regard to what extent, if at all, proceedings before military tribunals should be reviewed by the courts for the purpose of determining compliance with the due process clause. In In re Yamashita,60 the majority denied a petition for certiorari and petitions for writs of habeas corpus to review the conviction of a Japanese war criminal by a military commission sitting in the Philippine Islands. It held that since the military commission, in admitting evidence to which objection was made, had not violated any act of Congress, a treaty, or a military command defining its authority, its ruling on evidence and on the mode of conducting the proceedings were not reviewable by the courts. Again, in Johnson v. Eisentrager,61 the Court overruled a lower court decision, which in reliance upon the dissenting opinion in the Yamashita case, had held that the due process clause required that the legality of the conviction of enemy alien belligerents by military tribunals should be tested by the writ of habeas corpus.
Without dissent, the Court, in Hiatt v. Brown,62 reversed the judgment of a lower court which had discharged a prisoner serving a sentence imposed by a court–martial because of errors whereby the prisoner had been deprived of due process of law. The Court held that the court below had erred in extending its review, for the purpose of determining compliance with the due process clause, to such matters as the propositions of law set forth in the staff judge advocate’s report, the sufficiency of the evidence to sustain conviction, the adequacy of the pre–trial investigation, and the competence of the law member and defense counsel. In summary, Justice Clark wrote: “In this case the court–martial had jurisdiction of the person accused and the offense charged, and acted within its lawful powers. The correction of any errors it may have committed is for the military authorities which are alone authorized to review its decision.”63 Similarly, in Burns v. Wilson,64 the Court denied a petition for the writ to review a conviction by a military tribunal on the Island of Guam wherein the petitioners asserted that their imprisonment resulted from proceedings violative of their basic constitutional rights. Four Justices, with whom Justice Minton concurred, maintained that judicial review is limited to determining whether the military tribunal, or court–martial, had given fair consideration to each of petitioners’ allegations, and does not embrace-an opportunity “to prove de novo” what petitioners had “failed to prove in the military courts.” According to Justice Minton, however, if the military court had jurisdiction, its action is not reviewable.
Substantive Due Process
Justice Harlan, dissenting in Poe v. Ullman,65 observed that one view of due process, “ably and insistently argued . . . , sought to limit the provision to a guarantee of procedural fairness.” But, he continued, due process “in the consistent view of this Court has ever been a broader concept . . . . Were due process merely a procedural safeguard it would fail to reach those situations where the deprivation of life, liberty or property was accomplished by legislation which by operating in the future could, given even the fairest possible procedure in application to individuals, nevertheless destroy the enjoyment of all three. . . . Thus the guaranties of due process, though having their roots in Magna Carta’s ‘per legem terrae’ and considered as procedural safeguards ‘against executive usurpation and tyranny,’ have in this country ‘become bulwarks also against arbitrary legislation.”’
Discrimination.— “Unlike the Fourteenth Amendment, the Fifth contains no equal protection clause and it provides no guaranty against discriminatory legislation by Congress.”66 At other times, however, the Court assumed that “discrimination, if gross enough, is equivalent to confiscation and subject under the Fifth Amendment to challenge and annulment.”67 The theory that was to prevail seems first to have been enunciated by Chief Justice Taft, who observed that the due process and equal protection clauses are “associated” and that “[i]t may be that they overlap, that a violation of one may involve at times the violation of the other, but the spheres of the protection they offer are not coterminous. . . . [Due process] tends to secure equality of law in the sense that it makes a required minimum of protection for every one’s right of life, liberty and property, which the Congress or the legislature may not withhold. Our whole system of law is predicated on the general, fundamental principle of equality of application of the law.”68 Thus, in Bolling v. Sharpe,69 a companion case to Brown-v. Board of Education,70 the Court held that segregation of pupils in the public schools of the District of Columbia violated the due process clause. “The Fifth Amendment, which is applicable in the District of Columbia, does not contain an equal protection clause as does the Fourteenth Amendment which applies only to the states. But the concepts of equal protection and due process, both stemming from our American ideal of fairness, are not mutually exclusive. The ‘equal protection of the laws’ is a more explicit safeguard of prohibited unfairness than ‘due process of law,’ and, therefore, we do not imply that the two are always interchangeable phrases. But, as this Court has recognized, discrimination may be so unjustifiable as to be violative of due process.
“Although the Court has not assumed to define ‘liberty’ with any great precision, that term is not confined to mere freedom from bodily restraint. Liberty under law extends to the full range of conduct which the individual is free to pursue, and it cannot be restricted except for a proper governmental objective. Segregation in public education is not reasonably related to any proper governmental objective and thus it imposes on Negro children of the District of Columbia a burden that constitutes an arbitrary deprivation of their liberty in violation of the Due Process Clause.
“In view of our decision that the Constitution prohibits the states from maintaining racially segregated public schools, it would be unthinkable that the same Constitution would impose a lesser duty on the Federal Government.”
“Equal protection analysis in the Fifth Amendment area,” the Court has said, “is the same as that under the Fourteenth Amendment.”71 So saying, the court has applied much of its Fourteenth Amendment jurisprudence to strike down sex classifications in federal legislation,72 reached classifications with an adverse impact upon illegitimates,73 and invalidated some welfare assistance pro-visions with some interesting exceptions.74 However, almost all legislation involves some degree of classification among particular categories of persons, things, or events, and, just as the equal protection clause itself does not outlaw “reasonable” classifications, neither is the due process clause any more intolerant of the great variety of social and economic legislation typically containing what must be arbitrary line–drawing.75 Thus, for example, the Court has sustained a law imposing greater punishment for an offense involving rights of property of the United States than for a like offense involving the rights of property of a private person.76 A veterans’ law which extended certain educational benefits to all veterans who had served “on active duty” and thereby excluded conscientious objectors from eligibility was held to be sustainable, it being rational for Congress to have determined that the disruption caused by military service was qualitatively and quantitatively different from that caused by alternative service, and for Congress to have so provided to make military service more attractive.77
“The federal sovereign, like the States, must govern impartially. . . . [B]ut . . . there may be overriding national interests which justify selective federal legislation that would be unacceptable for an individual State.”78 The paramount federal power over immigration and naturalization is the principal example, although-there are undoubtedly others, of the national government being able to classify upon some grounds—alienage, naturally, but also other suspect and quasi–suspect categories as well—that would result in invalidation were a state to enact them. The instances may be relatively few, but they do exist.
Congressional Police Measures.— Numerous regulations of a police nature, imposed under powers specifically granted to the Federal Government, have been sustained over objections based on the due process clause. Congress may require the owner of a vessel entering United States ports, and on which alien seamen are afflicted with specified diseases, to bear the expense of hospitalizing such persons.79 It may prohibit the transportation in interstate commerce of filled milk80 or the importation of convict–made goods into any State where their receipt, possession, or sale is a violation of local law.81 It may require employers to bargain collectively with representatives of their employees chosen in a manner prescribed by law, to reinstate employees discharged in violation of law, and to permit use of a company–owned hall for union meetings.82 Subject to First Amendment considerations, Congress may regulate the postal service to deny its facilities to persons who would use them for purposes contrary to public policy.83
Congressional Regulation of Public Utilities.— Inasmuch as Congress, in giving federal agencies jurisdiction over various public utilities, usually has prescribed standards substantially identical with those by which the Supreme Court has tested the validity of state action, the review of agency orders seldom has turned on constitutional issues. In two cases, however, maximum rates prescribed by the Secretary of Agriculture for stockyard companies were sustained only after detailed consideration of numerous items excluded from the rate base or from operating expenses, apparently on the assumption that error with respect to any such item would render the rates confiscatory and void.84 A few years later, in FPC v. Hope Gas Co.,85 the Court adopted an entirely dif-ferent approach. It took the position that the validity of the Commission’s order depended upon whether the impact or total effect of the order is just and reasonable, rather than upon the method of computing the rate base. Rates which enable a company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed cannot be condemned as unjust and unreasonable even though they might produce only a meager return in a rate base computed by the “present fair value” method.
Orders prescribing the form and contents of accounts kept by public utility companies,86 and statutes requiring a private carrier to furnish the Interstate Commerce Commission with information for valuing its property87 have been sustained against the objection that they were arbitrary and invalid. An order of the Secretary of Commerce directed to a single common carrier by water requiring it to file a summary of its books and records pertaining to its rates was also held not to violate the Fifth Amendment.88
Congressional Regulation of Railroads.— Legislation or administrative orders pertaining to railroads have been challenged repeatedly under the due process clause but seldom with success. Orders of the Interstate Commerce Commission establishing through routes and joint rates have been sustained,89 as has its division of joint rates to give a weaker group of carriers a greater share of such rates where the proportion allotted to the stronger group was adequate to avoid confiscation.90 The recapture of one half of the earnings of railroads in excess of a fair net operating income, such recaptured earnings to be available as a revolving fund for loans to weaker roads, was held valid on the ground that any carrier earning an excess held it as trustee.91 An order enjoining certain steam railroads from discriminating against an electric railroad by denying it reciprocal switching privileges did not violate the Fifth Amendment even through its practical effect was to admit the electric road to a part of the business being adequately handled by the steam roads.92 Similarly, the fact that a rule concerning the allot-ment of coal cars operated to restrict the use of private cars did not amount to a taking of property.93 Railroad companies were not denied due process of law by a statute forbidding them to transport in interstate commerce commodities which have been manufactured, mined or produced by them.94 An order approving a lease of one railroad by another, upon condition that displaced employees of the lessor should receive partial compensation for the loss suffered by reason of the lease95 is consonant with due process of law. A law prohibiting the issuance of free passes was held constitutional even as applied to abolish rights created by a prior agreement whereby the carrier bound itself to issue such passes annually for life, in settlement of a claim for personal injuries.96 A non–arbitrary Interstate Commerce Commission order establishing a non–compensatory rate for carriage of certain commodities does not violate the due process or just compensation clauses as long as the public interest thereby is served and the rates as a whole yield just compensation.97
Occasionally, however, regulatory action has been held invalid under the due process clause. An order issued by the Interstate Commerce Commission relieving short line railroads from the obligation to pay the usual fixed sum per day rental for cars used on foreign roads for a space of two days was held to be arbitrary and invalid.98 A retirement act which made eligible for pensions all persons who had been in the service of any railroad within one year prior to the adoption of the law, counted past unconnected service of an employee toward the requirement for a pension without any contribution therefor, and treated all carriers as a single employer and pooled their assets, without regard to their individual obligations, was held unconstitutional.99
Taxation.— In laying taxes, the Federal Government is less narrowly restricted by the Fifth Amendment than are the States by the Fourteenth. The Federal Government may tax property belonging to its citizens, even if such property is never situated within the jurisdiction of the United States,100 and it may tax the income of a citizen resident abroad, which is derived from property located at his residence.101 The difference is explained by the fact that pro-tection of the Federal Government follows the citizen wherever he goes, whereas the benefits of state government accrue only to persons and property within the State’s borders. The Supreme Court has said that, in the absence of an equal protection clause, “a claim of unreasonable classification or inequality in the incidence or application of a tax raises no question under the Fifth Amendment. . . .”102 It has sustained, over charges of unfair differentiation between persons, a graduated income tax,103 a higher tax on oleomargarine than on butter,104 an excise tax on “puts” but not on “call,”105 a tax on the income of business operated by corporations but not on similar enterprises carried on by individuals,106 an income tax on foreign corporations, based on their income from sources within the United States, while domestic corporations are taxed on income from all sources,107 a tax on foreign–built but not upon domestic yachts,108 a tax on employers of eight or more persons, with exemptions for agricultural labor and domestic service,109 a gift tax law embodying a plan of graduations and exemptions under which donors of the same amount might be liable for different sums,110 an Alaska statute imposing license taxes only on nonresident fisherman,111 an act which taxed the manufacture of oil and fertilizer from herring at a higher rate than similar processing of other fish or fish offal,112 an excess profits tax which defined “invested capital” with reference to the original cost of the property rather than to its present value,113 an undistributed profits tax in the computation of which special credits were allowed to certain taxpayers,114 an estate tax upon the estate of a deceased spouse in respect of the moiety of the surviving spouse where the effect of the dissolution of the community is to enhance the value of the survivor’s moiety,115 and a tax on nonprofit mutual insurers although such insurers organized before a certain date were exempt inas-much as a continuing exemption for all insurers would have led to their multiplication to the detriment of other federal programs.116
Retroactive Taxes.— It has been customary from the beginning for Congress to give some retroactive effect to its tax laws, usually making them effective from the beginning of the tax year or from the date of introduction of the bill that became the law.117 Application of an income tax statute to the entire calendar year in which enactment took place has never, barring some peculiar circumstance, been deemed to deny due process.118 “Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. It is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Since no citizen enjoys immunity from that burden, its retroactive imposition does not necessarily infringe due process, and to challenge the present tax it is not enough to point out that the taxable event, the receipt of income, antedated the statute.”119 A special income tax on profits realized by the sale of silver, retroactive for 35 days, which was approximately the period during which the silver purchase bill was before Congress, was held valid.120 An income tax law, made retroactive to the beginning of the calendar year in which it was adopted, was found constitutional as applied to the gain from the sale, shortly before its enactment, of property received as a gift during the year.121 Retroactive assessment of penalties for fraud or negligence,122 or of an additional tax on the income of a corporation used to avoid a surtax on its shareholder,123 does not deprive the taxpayer of property without due process of law.
An additional excise tax imposed upon property still held for sale, after one excise tax had been paid by a previous owner, does not violate the due process clause.124 Similarly upheld were a transfer tax measured in part by the value of property held jointly-by a husband and wife, including that which comes to the joint tenancy as a gift from the decedent spouse125 and the inclusion in the gross income of the settlor of income accruing to a revocable trust during any period when the settlor had power to revoke or modify it.126
Supplement: [P. 1364, substitute for last paragraph in section:]
Although the Court during the 1920s struck down gift taxes imposed retroactively upon gifts that were made and completely vested before the enactment of the taxing statute,30 those decisions have recently been distinguished, and their precedential value limited.31 In United States v. Carlton, the Court declared that “[t]he due process standard to be applied to tax statutes with retroactive effect . . . is the same as that generally applicable to retroactive economic legislation”— retroactive application of legislation must be shown to be “justified by a rational legislative purpose.” 32 Applying that principle, the Court upheld retroactive application of a 1987 amendment limiting application of a federal estate tax deduction originally enacted in 1986. Congress’ purpose was “neither illegitimate nor arbitrary,” the Court noted, since Congress had acted “to correct what it reasonably viewed as a mistake in the original 1986 provision that would have created a significant and unanticipated revenue loss.” Also, “Congress acted promptly and established only a modest period of retroactivity.” The fact that the taxpayer had transferred stock in reliance on the original enactment was not dispositive, since “[t]ax legislation is not a promise, and a taxpayer has no vested right in the Internal Revenue Code.” 33
Deprivation of Property: Retroactive Legislation.— Federal regulation of future action, based upon rights previously acquired by the person regulated, is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not ordinarily condemn it. The imposition upon coal mine operators, and ultimately coal consumers, of the liability of compensating former employees, who had terminated work in the industry before passage of the law, for black lung disabilities contracted in the course of their work, was sustained by the Court as a rational measure to spread the costs of the employees’ disabilities to those who had profited from the fruits of their labor.129 Legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations, but it must take account of the realities previously existing, i.e., that the danger may not have been known or appreciated, or that actions might have been taken in reliance upon the current state of the law; therefore, legislation imposing liability on the basis of deterrence or of blameworthiness might not have passed muster. The Court has applied Turner Elkhorn in upholding retroactive applica-tion of pension plan termination provisions to cover the period of congressional consideration, declaring that the test for retroactive application of legislation adjusting economic burdens is merely whether “the retroactive application . . . is itself justified by a rational legislative purpose.”130
Rent regulations were sustained as applied to prevent execution of a judgment of eviction rendered by a state court before the enabling legislation was passed.131 For the reason that “those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end,” no vested right to use housing, built with the aid of FHA mortgage insurance for transient purposes, was acquired by one obtaining insurance under an earlier section of the National Housing Act, which, though silent in this regard, was contemporaneously construed as barring rental to transients, and was later modified by an amendment which expressly excluded such use.132 An order by an Area Rent Director reducing an unapproved rental and requiring the landlord to refund the excess previously collected, was held, with one dissenting vote, not to be the type of retroactivity which is condemned by law.133 The application of a statute providing for tobacco marketing quotas, to a crop planted prior to its enactment, was held not to deprive the producers of property without due process of law since it operated, not upon production, but upon the marketing of the product after the act was passed.134
In the exercise of its comprehensive powers over revenue, finance, and currency, Congress may make Treasury notes legal tender in payment of debts previously contracted135 and may invalidate provisions in private contracts calling for payment in gold coin,136 but rights against the United States arising out of contract-are more strongly protected by the due process clause. Hence, a law purporting to abrogate a clause in government bonds calling for payment in gold coin was invalid,137 and a statute abrogating contracts of war risk insurance was held unconstitutional as applied to outstanding policies.138
The due process clause has been successfully invoked to defeat retroactive invasion or destruction of property rights in a few cases. A revocation by the Secretary of the Interior of previous approval of plats and papers showing that a railroad was entitled to land under a grant was held void as an attempt to deprive the company of its property without due process of law.139 The exception of the period of federal control from the time limit set by law upon claims against carriers for damages caused by misrouting of goods, was read as prospective only because the limitation was an integral part of the liability, not merely a matter of remedy, and would violate the Fifth Amendment if retroactive.140
Bankruptcy Legislation.— In acting pursuant to its power to enact uniform bankruptcy legislation, Congress has regularly authorized retrospective impairment of contractual obligations,141 but the due process clause (by itself or infused with takings principles) constitutes a limitation upon Congress’ power to deprive persons of more secure forms of property, such as the rights secured creditors have to obtain repayment of a debt. The Court had long followed a rule of construction favoring prospective–only application of bankruptcy laws, absent a clear showing of congressional intent,142 but it was not until 1935 that the Court actually held unconstitutional a retrospective law. Struck down by the Court was the Frazier–Lemke Act, which by its terms applied only retrospectively, and which authorized a court to stay proceedings for the foreclosure of-a mortgage for five years, the debtor to remain in possession at a reasonable rental, with the option of purchasing the property at its appraised value at the end of the stay. The Act offended the Fifth Amendment, the Court held, because it deprived the creditor of substantial property rights acquired prior to the passage of the act.143 However, a modified law, under which the stay was subject to termination by the court and which continued the right of the creditor to have the property sold to pay the debt, was sustained.144
Without violation of the due process clause, the sale of collateral under the terms of a contract may be enjoined, if such sale would hinder the preparation or consummation of a proposed railroad reorganization, provided the injunction does no more than delay the enforcement of the contract.145 A provision that claims resulting from rejection of an unexpired lease should be treated as on a parity with provable debts, but limited to an amount equal to three years rent, was held not to amount to a taking of property without due process of law, since it provided a new and more certain remedy for a limited amount, in lieu of an existing remedy inefficient and uncertain in result.146 A right of redemption allowed by state law upon foreclosure of a mortgage was unavailing to defeat a plan for reorganization of a debtor corporation where the trial court found that the claims of junior lienholders had no value.147
Right to Sue the Government.— A right to sue the Government on a contract is a privilege, not a property right protected by the Constitution.148 The right to sue for recovery of taxes paid may be conditioned upon an appeal to the Commissioner and his refusal to refund.149 There was no denial of due process when Congress took away the right to sue for recovery of taxes, where the claim for recovery was without substantial equity, having arisen from the-mistake of administrative officials in allowing the statute of limitations to run before collecting a tax.150 The denial to taxpayers of the right to sue for refund of processing and floor stock taxes collected under a law subsequently held unconstitutional, and the substitution of a new administrative procedure for the recovery of such sums, was held valid.151 Congress may cut off the right to recover taxes illegally collected by ratifying the imposition and collection thereof, where it could lawfully have authorized such exactions prior to their collection.152
Congressional Power to Abolish Common Law Judicial Actions.— Similarly, it is clearly settled that “[a] person has no property, no vested interest, in any rule of the common law.”153 It follows, therefore, that Congress in its discretion may abolish common law actions, replacing them with other judicial actions or with administrative remedies at its discretion. There is slight intimation in some of the cases that if Congress does abolish a common law action it must either duplicate the recovery or provide a reasonable substitute remedy.154 Such a holding seems only remotely likely,155 but some difficulties may be experienced with respect to legislation that retrospectively affects rights to sue, such as shortening or lengthening statutes of limitation, and the like, although these have typically risen in state contexts. In one interesting decision, the Court did sustain an award of additional compensation under the Longshoremen’s and Harbor Workers’ Compensation Act, made pursuant to a private act of Congress passed after expiration of the period for review of the original award, directing the Commission to review the case and issue a new order, the challenge being made by the employer and insurer.156
Deprivation of Liberty: Economic Legislation.— The proscription of deprivation of liberty without due process, insofar as substantive due process was involved, was long restricted to invoca-tion against legislation deemed to abridge liberty of contract.157 The two leading cases invalidating federal legislation, however, have both been overruled, as the Court adopted a very restrained standard of review of economic legislation.158 The Court’s “hands–off” policy with regard to reviewing economic legislation is quite pronounced.159
“The Fifth Amendment to the Constitution says ‘nor shall private property be taken for public use, without just compensation.’ This is a tacit recognition of a preexisting power to take private property for public use, rather than a grant of new power.”160 Eminent domain “appertains to every independent government. It requires no constitutional recognition; it is an attribute of sovereignty.”161 In the early years of the nation the federal power of eminent domain lay dormant,162 and it was not until 1876 that its existence was recognized by the Supreme Court. In Kohl v. United States163 any doubts were laid to rest, as the Court affirmed that the power was as necessary to the existence of the National Government as it was to the existence of any State. The federal power of eminent domain is, of course, limited by the grants of power in the Constitution, so that property may only be taken for the effectuation of a granted power,164 but once this is conceded the ambit of national powers is so wide– ranging that vast numbers of objects-may be effected.165 This prerogative of the National Government can neither be enlarged nor diminished by a State.166 Whenever lands in a State are needed for a public purpose, Congress may authorize that they be taken, either by proceedings in the courts of the State, with its consent, or by proceedings in the courts of the United States, with or without any consent or concurrent act of the State.167
“Prior to the adoption of the Fourteenth Amendment,” the power of eminent domain of state governments “was unrestrained by any federal authority.”168 The just compensation provision of the Fifth Amendment did not apply to the States,169 and at first the contention that the due process clause of the Fourteenth Amendment afforded property owners the same measure of protection against the States as the Fifth Amendment did against the Federal Government was rejected.170 However, within a decade the Court rejected the opposing argument that the amount of compensation to be awarded in a state eminent domain case is solely a matter of local law. On the contrary, the Court ruled, although a state “legislature may prescribe a form of procedure to be observed in the taking of private property for public use, . . . it is not due process of law if provision be not made for compensation. . . . The mere form of the proceeding instituted against the owner . . . cannot convert the process used into due process of law, if the necessary result be to deprive him of his property without compensation.”171 While the guarantees of just compensation flow from two-different sources, the standards used by the Court in dealing with the issues appear to be identical, and both federal and state cases will be dealt with herein without expressly continuing to recognize the two different bases for the rulings.
It should be borne in mind that while the power of eminent domain, though it is inherent in organized governments, may only be exercised through legislation or through legislative delegation, usually to another governmental body, the power may be delegated as well to private corporations, such as public utilities, railroad and bridge companies, when they are promoting a valid public purpose. Such delegation has long been approved.172
Explicit in the just compensation clause is the requirement that the taking of private property be for a public use; the Court has long accepted the principle that one is deprived of his property in violation of this guarantee if a State takes the property for any reason other than a public use.173 The question whether a particular intended use is a public use is clearly a judicial one,174 but the Court has always insisted on a high degree of judicial deference to the legislative determination. “The role of the judiciary in determining whether that power is being exercised for a public purpose is an extremely narrow one.”175 When it is state action being challenged under the Fourteenth Amendment, there is the additional factor of the Court’s willingness to defer to the highest court of the State in resolving such an issue.176 As early as 1908, the Court was obligated to admit that notwithstanding its retention of the power of judicial review, “no case is recalled where this Court has condemned as a violation of the Fourteenth Amendment a taking upheld by the State court as a taking for public uses. . . .”177 How-ever, in a 1946 case involving federal eminent domain power, the Court cast considerable doubt upon the power of courts to review the issue of public use. “We think that it is the function of Congress to decide what type of taking is for a public use and that the agency authorized to do the taking may do so to the full extent of its statutory authority.”178 There is some suggestion that “the scope of the judicial power to determine what is a ‘public use”’ may be different as between Fifth and Fourteenth Amendment cases, with greater power in the latter type of cases than in the former,179 but it may well be that the case simply stands for the necessity for great judicial restraint.180 Once it is admitted or determined that the taking is for a public use and is within the granted authority, the necessity or expediency of the particular taking is exclusively in the legislature or the body to which the legislature has delegated the decision, and is not subject to judicial review.181
At an earlier time, the factor of judicial review would have been vastly more important than it is now, inasmuch as the prevailing judicial view was that the term “public use” was synonymous with “use by the public” and that if there was no duty upon the taker to permit the public as of right to use or enjoy the property taken, the taking was invalid. But this view was rejected some time ago.182 The modern conception of public use equates it with the police power in the furtherance of the public interest. No definition of the reach or limits of the power is possible, the Court has said, because such “definition is essentially the product of legislative determinations addressed to the purposes of government, purposes neither abstractly nor historically capable of complete definition. . . . Public safety, public health, morality, peace and quiet, law and order—these are some of the . . . traditional application[s] of the police power. . . .” Effectuation of these matters being within the authority of the legislature, the power to achieve them through the exercise of eminent domain is established. “For the power of-eminent domain is merely the means to the end.”183 Traditionally, eminent domain has been utilized to facilitate transportation, the supplying of water, and the like,184 but the use of the power to establish public parks, to preserve places of historic interest, and to promote beautification has substantial precedent.185
The Supreme Court has approved generally the widespread use of the power of eminent domain by federal and state governments in conjunction with private companies to facilitate urban renewal, destruction of slums, erection of low–cost housing in place of deteriorated housing, and the promotion of aesthetic values as well as economic ones. In Berman v. Parker,186 a unanimous Court ob-served: “The concept of the public welfare is broad and inclusive. The values it represents are spiritual as well as physical, aesthetic as well as monetary. It is within the power of the legislature to determine that the community should be beautiful as well as healthy, spacious as well as clean, well–balanced as well as carefully patrolled.” For “public use,” then, it may well be that “public interest” or “public welfare” is the more correct phrase. Berman was applied in Hawaii Housing Auth. v. Midkiff,187 upholding the Hawaii Land Reform Act as a “rational” effort to “correct deficiencies in the market determined by the state legislature to be attributable to land oligopoly.” Direct transfer of land from lessors to lessees was permissible, the Court held, there being no requirement “that government possess and use property at some point during a taking.”188 “The ‘public use’ requirement is . . . coterminous with the scope of a sovereign’s police powers,” the Court concluded.189
“When . . . [the] power [of eminent domain] is exercised it can only be done by giving the party whose property is taken or whose use and enjoyment of such property is interfered with, full and adequate compensation, not excessive or exorbitant, but just compensation.”190 The Fifth Amendment’s guarantee “that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”191
The just compensation required by the Constitution is that which constitutes “a full and perfect equivalent for the property taken.”192 Originally the Court required that the equivalent be in-money, not in kind,193 but more recently has cast some doubt on this assertion.194 Just compensation is measured “by reference to the uses for which the property is suitable, having regard to the existing business and wants of the community, or such as may be reasonably expected in the immediate future,’. . . [but] ‘mere possible or imaginary uses or the speculative schemes of its proprietor, are to be excluded.”’195 The general standard thus is the market value of the property, i.e., what a willing buyer would pay a willing seller.196 If fair market value does not exist or cannot be calculated, resort must be had to other data which will yield a fair compensation.197 However, the Court is resistent to alternative standards, having repudiated reliance on the cost of substitute facilities.198 Just compensation is especially difficult to compute in wartime, when enormous disruptions in supply and governmentally imposed price ceilings totally skew market conditions. Holding that the reasons which underlie the rule of market value when a free market exists apply as well where value is measured by a government–fixed ceiling price, the Court permitted owners of cured pork and black pepper to recover only the ceiling price for the commodities, despite findings by the Court of Claims that the replacement cost of the meat exceeded its ceiling price and that the pepper had a “retention value” in excess of that price.199 By a five–to–four decision, the Court ruled that the Government was not obliged to pay-the present market value of a tug when the value had been greatly enhanced as a consequence of the Government’s wartime needs.200
Illustrative of the difficulties in applying the fair market standard of just compensation are two cases decided by five–to–four votes, one in which compensation was awarded and one in which it was denied. Held entitled to compensation for the value of improvements on leased property for the life of the improvements and not simply for the remainder of the term of the lease was a company that, while its lease had no renewal option, had occupied the land for nearly 50 years and had every expectancy of continued occupancy under a new lease. Just compensation, the Court said, required taking into account the possibility that the lease would be renewed, inasmuch as a willing buyer and a willing seller would certainly have placed a value on the possibility.201 However, when the Federal Government condemned privately owned grazing land of a rancher who had leased adjacent federally owned grazing land, it was held that the compensation owed need not include the value attributable to the proximity to the federal land. The result would have been different if the adjacent grazing land had been privately owned, but the general rule is that government need not pay for value that it itself creates.202
Interest.— Ordinarily, property is taken under a condemnation suit upon the payment of the money award by the condemner, and no interest accrues.203 If, however, the property is taken in fact before payment is made, just compensation includes an increment which, to avoid use of the term “interest,” the Court has called “an amount sufficient to produce the full equivalent of that value paid contemporaneously with the taking.”204 If the owner and the Government enter into a contract which stipulates the purchase price for lands to be taken, with no provision for interest, the Fifth-Amendment is inapplicable and the landowner cannot recover interest even though payment of the purchase price is delayed.205 Where property of a citizen has been mistakenly seized by the Government and it is converted into money which is invested, the owner is entitled in recovering compensation to an allowance for the use of his property.206
Rights for Which Compensation Must Be Made.— If real property is condemned the market value of that property must be paid to the owner. But there are many kinds of property and many uses of property which cause problems in computing just compensation. It is not only the full fee simple interest in land that is compensable “property,” but also such lesser interests as easements207 and leaseholds.208 If only a portion of a tract is taken, the owner’s compensation includes any element of value arising out of the relation of the part taken to the entire tract.209 On the other hand, if the taking has in fact benefited the owner, the benefit may be set off against the value of the land condemned,210 although any supposed benefit which the owner may receive in common with all from the public use to which the property is appropriated may not be set off.211 When certain lands were condemned for park purposes, with resulting benefits set off against the value of the property taken, the subsequent erection of a fire station on the property instead was held not to have deprived the owner of any part of his just compensation.212
Interests in intangible as well as tangible property are subject to protection under the Taking Clause. Thus compensation must be paid for the taking of contract rights,213 patent rights,214 and trade secrets.215 So too, the franchise of a private corporation is property which cannot be taken for public use without compensation. Upon condemnation of a lock and dam belonging to a navigation company, the Government was required to pay for the fran-chise to take tolls as well as for the tangible property.216 The frustration of a private contract by the requisitioning of the entire output of a steel manufacturer is not a taking for which compensation is required,217 but government requisitioning from a power company of all the electric power which could be produced by use of the water diverted through its intake canal, thereby cutting off the supply of a lessee which had a right, amounting to a corporeal hereditament under state law, to draw a portion of that water, entitles the lessee to compensation for the rights taken.218 When, upon default of a ship– builder, the Government, pursuant to contract with him, took title to uncompleted boats, the material men, whose liens under state laws had attached when they supplied the shipbuilder, had a compensable interest equal to whatever value these liens had when the Government “took” or destroyed them in perfecting its title.219 As a general matter, there is no property interest in the continuation of a rule of law.220 And, even though state participation in the social security system was originally voluntary, a state had no property interest in its right to withdraw from the program when Congress had expressly reserved the right to amend the law and the agreement with the state.221 Similarly, there is no right to the continuation of governmental welfare benefits.222
Consequential Damages.— The Fifth Amendment requires compensation for the taking of “property,” hence does not require payment for losses or expenses incurred by property owners or tenants incidental to or as a consequence of the taking of real property, if they are not reflected in the market value of the property taken.223 “Whatever of property the citizen has the Government may take. When it takes the property, that is, the fee, the lease, whatever, he may own, terminating altogether his interest, under the established law it must pay him for what is taken, not more; and he must stand whatever indirect or remote injuries are properly comprehended within the meaning of ‘consequential damage’-as that conception has been defined in such cases. Even so the consequences often are harsh. For these whatever remedy may exist lies with Congress.”224 An exception to the general principle has been established by the Court where only a temporary occupancy is assumed; then the taking body must pay the value which a hypothetical long–term tenant in possession would require when leasing to a temporary occupier requiring his removal, including in the market value of the interest the reasonable cost of moving out the personal property stored in the premises, the cost of storage of goods against their sale, and the cost of returning the property to the premises.225 Another exception to the general rule occurs with a partial taking, in which the government takes less than the entire parcel of land and leaves the owner with a portion of what he had before; in such a case compensation includes any diminished value of the remaining portion (“severance damages”) as well as the value of the taken portion.226
Enforcement of Right to Compensation.— The nature and character of the tribunal to determine compensation is in the discretion of the legislature, and may be a regular court, a special legislative court, a commission, or an administrative body.227 Proceedings to condemn land for the benefit of the United States are brought in the federal district court for the district in which the land is located.228 The estimate of just compensation is not required to be made by a jury but may be made by a judge or entrusted to a commission or other body.229 Federal courts may ap-point a commission in condemnation actions to resolve the compensation issue.230 If a body other than a court is designated to determine just compensation, its decision must be subject to judicial review,231 although the scope of review may be limited by the legislature.232 When the judgment of a state court with regard to the amount of compensation is questioned, the Court’s review is restricted. “All that is essential is that in some appropriate way, before some properly constituted tribunal, inquiry shall be made as to the amount of compensation, and when this has been provided there is that due process of law which is required by the Federal Constitution.”233 “[T]here must be something more than an ordinary honest mistake of law in the proceedings for compensation before a party can make out that the State has deprived him of his property unconstitutionally.”234 Unless, by its rulings of law, the state court prevented a complainant from obtaining substantially any compensation, its findings as to the amount of damages will not be overturned on appeal, even though as a consequence of error therein the property owner received less than he was entitled to.235
When Property Is Taken
The issue whether one’s property has been “taken” with the consequent requirement of just compensation can hardly arise when government institutes condemnation proceedings directed to it. Where, however, physical damage results to property because of government action, or where regulatory action limits activity on the property or otherwise deprives it of value, whether there has been a taking in the Fifth Amendment sense becomes critical.
Government Activity Not Directed at the Property.— The older cases proceeded on the basis that the requirement of just compensation for property taken for public use referred only to “direct appropriation, and not to consequential injuries resulting from-the exercise of lawful power.”236 Accordingly, a variety of consequential injuries were held not to constitute takings: damage to abutting property resulting from the authorization of a railroad to erect tracts, sheds, and fences over a street;237 similar deprivations, lessening the circulation of light and air and impairing access to premises, resulting from the erection of an elevated viaduct over a street, or resulting from the changing of a grade in the street.238 Nor was government held liable for the extra expense which the property owner must obligate in order to ward off the consequence of the governmental action, such as the expenses incurred by a railroad in planking an area condemned for a crossing, constructing gates, and posting gatemen,239 or by a landowner in raising the height of the dikes around his land to prevent their partial flooding consequent to private construction of a dam under public licensing.240
But the Court also decided long ago that land can be “taken” in the constitutional sense by physical invasion or occupation by the government, as occurs when government floods land.241 A later formulation was that “[p]roperty is taken in the constitutional sense when inroads are made upon an owner’s use of it to an extent that, as between private parties, a servitude has been acquired either by agreement or in course of time.”242 It was thus held that the government had imposed a servitude for which it must compensate the owner on land adjoining its fort when it repeatedly fired the guns at the fort across the land and had established a fire control service there.243 In two major cases, the Court held that the lessees or operators of airports were required to compensate the owners of adjacent land when the noise, glare, and fear of injury occasioned by the low altitude overflights during takeoffs and landings made the land unfit for the use to which the owners had applied it.244 Eventually, the term “inverse condemnation” came to-be used to refer to such cases where the government has not instituted formal condemnation proceedings, but instead the property owner has sued for just compensation, claiming that governmental action or regulation has “taken” his property.245
Navigable Waters.— The repeated holdings that riparian ownership is subject to the power of Congress to regulate commerce constitute an important reservation to the developing law of liability in the taking area. When damage results consequentially from an improvement to a river’s navigable capacity, or from an improvement on a nonnavigable river designed to affect navigability elsewhere, it is generally not a taking of property but merely an exercise of a servitude to which the property is always subject.246 This exception does not apply to lands above the ordinary high–water mark of a stream,247 hence is inapplicable to the damage the Government may do to such “fast lands” by causing overflows, by erosion, and otherwise, consequent on erection of dams or other improvements.248 And, when previously nonnavigable waters are made navigable by private investment, government may not, without paying compensation, simply assert a navigation servitude and direct the property owners to afford public access.249
Regulatory Takings.— While it is established that government may take private property, with compensation, to promote the public interest, that interest also may be served by regulation of property use pursuant to the police power, and for years there was broad dicta that no one may claim damages due to a police regulation designed to secure the common welfare, especially in the-area of health and safety regulations.250 “The distinguishing characteristic between eminent domain and the police power is that the former involves the taking of property because of its need for the public use while the latter involves the regulation of such property to prevent the use thereof in a manner that is detrimental to the public interest.”251 But regulation may deprive an owner of most or all beneficial use of his property and may destroy the values of the property for the purposes to which it is suited.252 The older cases flatly denied the possibility of compensation for this diminution of property values,253 but the Court in 1922 established as a general principle that “if regulation goes too far it will be recognized as a taking.”254
In the Mahon case, Justice Holmes for the Court, over Justice Brandeis’ vigorous dissent, held unconstitutional a state statute prohibiting subsurface mining in regions where it presented a danger of subsidence for homeowners. The homeowners had purchased by deeds which reserved to the coal companies ownership of subsurface mining rights and which held the companies harmless for damage caused by subsurface mining operations. The statute thus gave the homeowners more than they had been able to obtain through contracting, and at the same time deprived the coal companies of the entire value of their subsurface estates. The Court observed that “[f]or practical purposes, the right to coal consists in the right to mine,” and that the statute, by making it “commercially impracticable to mine certain coal,” had essentially “the same effect for constitutional purposes as appropriating or destroying it.”255 The regulation, therefore, in precluding the companies from-exercising any mining rights whatever, went “too far.”256 However, when presented 65 years later with a very similar restriction on coal mining, the Court upheld it in Keystone Bituminous Coal Ass’n v. DeBenedictis.257 Unlike its precursor, the Court explained, the newer law “does not merely involve a balancing of the private economic interests of coal companies against the private interests of the surface owners.”258 Instead, the state had identified “important public interests” (e.g., conservation, protection of water supplies, preservation of land values for taxation) and had broadened the law to apply regardless of whether the surface and mineral estates were in separate ownership. A second factor distinguishing Keystone from Mahon, the Court explained, was the absence of proof that the new subsidence law made it “commercially impracticable” for the coal companies to continue mining.259 The Court rejected efforts to define separate segments of property for taking purposes—either the coal in place under protected structures, or the “support estate” recognized under Pennsylvania law.260 Economic impact is measured by reference to the property as a whole; consideration of the coal placed off limits to mining as merely part of a larger estate and not as a separate estate undermined the commercial impracticability argument.
The Court had been early concerned with the imposition upon one or a few individuals of the costs of furthering the public interest.261 But it was with respect to zoning that the Court first experienced some difficulty in this regard. The Court’s first zoning case-involved a real estate company’s challenge to a comprehensive municipal zoning ordinance, alleging that the ordinance prevented development of its land for industrial purposes and thereby reduced its value from $10,000 an acre to $2,500 an acre.262 Acknowledging that zoning was of recent origin, the Court observed that it must find its justification in the police power and be evaluated by the constitutional standards applied to exercises of the police power. After considering traditional nuisance law, the Court determined that the public interest was served by segregation of incompatible land uses and the ordinance was thus valid on its face; whether its application to diminish property values in any particular case was also valid would depend, the Court said, upon a finding that it was not “clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.”263 A few years later the Court, again relying on due process rather than taking law, did invalidate the application of a zoning ordinance to a tract of land, finding that the tract would be rendered nearly worthless and that to exempt the tract would impair no substantial municipal interest.264 But then the Court withdrew from the land–use scene for about 50 years, leaving the States and their municipalities mostly free to develop increasingly more comprehensive zoning techniques.265
As governmental regulation of property has expanded over the years—in terms of zoning and land use controls, environmental regulations, and the like—the Court never developed, as it admitted, a “set formula to determine where regulation ends and taking begins.”266 Rather, as one commentator remarked, its decisions constitute a “crazy quilt pattern” of judgments.267 Nonetheless, the-Court has now formulated general principles that guide many of its decisions in the area.
In Penn Central Transportation Co. v. City of New York,268 the Court, while cautioning that regulatory takings cases require “essentially ad hoc, factual inquiries,” nonetheless laid out general guidance for determining whether a regulatory taking has occurred. “The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with reasonable investment–backed expectations are . . . relevant considerations. So too, is the character of the governmental action. A ‘taking’ may more readily be found when the interference with property can be characterized as a physical invasion by government than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.”269
At issue in Penn Central was the City’s landmarks preservation law, as applied to deny approval to construct a 53–story office building atop Grand Central Terminal. The Court upheld the landmarks law against Penn Central’s takings claim through application of the principles set forth above. The economic impact on Penn Central was considered: the Company could still make a “reasonable return” on its investment by continuing to use the facility as a rail terminal with office rentals and concessions, and the City specifically permitted owners of landmark sites to transfer to other sites the right to develop those sites beyond the otherwise permissible zoning restrictions, a valuable right which mitigated the burden otherwise to be suffered by the owner. As for the character of the governmental regulation, the Court found the landmarks law to be an economic regulation rather than a governmental appropriation of property, the preservation of historic sites being a permissible goal and one which served the public interest.270
Justice Holmes began his analysis in Mahon with the observation that “[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every . . . change in the general law,”271 and Penn Central’s economic impact standard also leaves ample room for recognition of this principle. Thus, the Court can easily hold that a mere permit requirement does not amount to a taking,272 nor does a simple rec-ordation requirement.273 The tests become more useful, however, when compliance with regulation becomes more onerous.
Several times the Court has relied on the concept of “distinct (or “reasonable”) investment–backed expectations” first introduced in Penn Central. In Ruckelshaus v. Monsanto Co.,274 the Court used the concept to determine whether a taking had resulted from the government’s disclosure of trade secret information submitted with applications for pesticide registrations. Disclosure of data that had been submitted from 1972 to 1978, a period when the statute guaranteed confidentiality and thus “formed the basis of a reasonable investment–backed expectation,” would have destroyed the property value of the trade secret and constituted a taking.275 Following 1978 amendments setting forth conditions of data disclosure, however, applicants voluntarily submitting data in exchange for the economic benefits of registration had no reasonable expectation of additional protections of confidentiality.276 Relying less heavily on the concept but rejecting an assertion that reasonable investment backed–expectations had been upset, the Court in Connolly v. Pension Benefit Guaranty Corp.277 upheld retroactive imposition of liability for pension plan withdrawal on the basis that employers had at least constructive notice that Congress might buttress the legislative scheme to accomplish its legislative aim that employees receive promised benefits.
Supplement: [P. 1387, add to text at end of sentence containing n.277:]
However, where a statute imposes severe and “substantially disproportionate” retroactive liability based on conduct several decades earlier, on parties that could not have anticipated the liability, a taking (or violation of due process) may occur. On this rationale, the Court in Eastern Enterprises v. Apfel 34 struck down the Coal Miner Retiree Health Benefit Act’s requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that spun off its mining operation in 1965 before collective bargaining agreements included an express promise of lifetime benefits.
In the course of its opinion in Penn Central the Court rejected the principle that no compensation is required when regulation bans a noxious or harmful effect of land use.280 The principle, it had been contended, followed from several earlier cases, including Goldblatt v. Town of Hempstead.281 In that case, after the town had expanded around an excavation used by a company for mining sand and gravel, the town enacted an ordinance that in effect terminated further mining at the site. Declaring that no compensation was owed, the Court stated that “[a] prohibition 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 an appropriation of property for the public benefit. Such legislation does not disturb the owner in the control or use of his property for lawful purposes, nor restrict his right to dispose of it, but is only a declaration by the State that its use by any one, for certain forbidden purposes, is prejudicial to the public interests.”282 In Penn Central, however, the Court denied that there was any such test and that prior cases had turned on the concept. “These cases are better understood as resting not on any supposed ‘noxious’ quality of the prohibited uses but rather on the ground that the restrictions were reasonably related to the implementation of a policy—not unlike historic preservation—expected to produce a widespread public benefit and applicable to all similarly situated property.”283 More recently, in Lucas-v. South Carolina Coastal Council,284 the Court explained “noxious use” analysis as merely an early characterization of police power measures that do not require compensation. “[N]oxious use logic cannot serve as a touchstone to distinguish regulatory ‘takings’—which require compensation—from regulatory deprivations that do not require compensation.”285
Penn Central is not the only guide to when a regulatory taking has occurred; other criteria have emerged from other cases before and after Penn Central. The Court has long recognized a per se takings rule for physical invasions: when government permanently286 occupies or authorizes someone else to occupy property, the action constitutes a taking and compensation must be paid regardless of the public interests served by the occupation or the extent of damage to the parcel as a whole.287 The modern case dealt with a law that required landlords to permit a cable television company to install its cable facilities upon their buildings; although the equipment occupied only about 1 1/2 cubic feet of space on the exterior of each building and had only de minimis economic impact, a divided Court held that the regulation authorized a permanent physical occupation of the property and thus constituted a taking.288
A second per se taking rule is of more recent vintage. Land use controls constitute takings, the Court stated in Agins v. City of Tiburon, if they do not “substantially advance legitimate govern-mental interests,”289 or if they deny a property owner “economically viable use of his land.”290 This second Agins criterion creates a categorical rule: “when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.”291 The only exceptions, the Court explained in Lucas, are for those restrictions that come with the property as title encumbrances or other legally enforceable limitations. Regulations “so severe” as to prohibit all economically beneficial use of land “cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State’s law of property and nuisance already place upon land ownership. A law or decree with such an effect must, in other words, do no more than duplicate the result that could have been achieved in the courts— by adjacent land owners (or other uniquely affected persons) under the State’s law of private nuisance, or by the State under its complementary power to abate [public] nuisances . . . , or otherwise.”292 Thus, while there is no broad “noxious use” exception separating police power regulations from takings, there is a much narrower exception based on the law of nuisance and related principles.
The “or otherwise” reference, the Court explained in Lucas,293 was principally directed to cases holding that in times of great public peril, such as war, spreading municipal fires, and the like, property may be taken and destroyed without necessitating compensation. Thus, in United States v. Caltex,294 the owners of property de-stroyed by retreating United States armies in Manila during World War II were held not entitled to compensation, and in United States v. Central Eureka Mining Co.,295 the Court held that a federal order suspending the operations of a nonessential gold mine for the duration of the war in order to redistribute the miners, unaccompanied by governmental possession and use or a forced sale of the facility, was not a taking entitling the owner to compensation for loss of profits. Finally, the Court held that when federal troops occupied several buildings during a riot in order to dislodge rioters and looters who had already invaded the buildings, the action was taken as much for the owners’ benefit as for the general public benefit and the owners must bear the costs of the damage inflicted on the buildings subsequent to the occupation.296
The first prong of the Agins test,297 focusing on whether land use controls “substantially advance legitimate governmental interests,” was applied in Nollan v. California Coastal Commission.298 There the Court held that extraction of a public access easement across a strip of beach as a condition for a permit to enlarge a beachfront home did not “substantially advance” the state’s legitimate interest in preserving public view of the beach from the street in front of the lot. The easement instead was designed to allow the public to walk back and forth along the beach between two public beaches. “[U]nless the permit condition serves the same governmental purpose as the development ban,” the Court concluded, “the building restriction is not a valid regulation of land use but ‘an out–and–out plan of extortion.”’299
Supplement: [P. 1391, delete remainder of paragraph after n.299 and substitute the following:]
“If [the government] wants an easement across the Nollans’ property, it must pay for it.” 35 Because the Nollan Court found no essential nexus between the permit condition and the asserted government interest, it did not address whether there is any additional requirement when such a nexus does exist, as is often the case with land dedications and other permit conditions.36 Seven years later, however, the Court announced in Dolan v. City of Tigard 37 that exaction conditions attached to development permits must be related to the impact of the proposed development not only in nature but also in degree. Government must establish a “rough proportionality” between such conditions and the developmental impacts at which they are aimed.38 The Court ruled in Dolan that the city’s conditioning of a building permit for expansion of a hardware store on the store owner’s dedication of a portion of her land for a floodplain/recreational easement and for an adjacent pedestrian/bicycle pathway amounted to a taking. The requisite nexus existed between the city’s interest in flood control and imposition of the floodplain easement, and between the interest in minimizing traffic congestion and the required bike path dedication, but the Court found that the city had not established a rough proportionality of degree. The floodplain/recreational easement not only prevented the property owner from building in the floodplain—a legitimate constraint—but also deprived her of the right to exclude others. And the city had not adequately demonstrated that the bike path was necessitated by the additional vehicle and bicycle trips that would be generated by the applicant’s development.39
Nollan and Dolan occasioned considerable debate over the breadth of what became known as the “heightened scrutiny” test. The stakes were plainly high, in that the test, where it applies, lessens the traditional judicial deference to local police power and places the burden of proof as to rough proportionality on the government. In City of Monterey v. Del Monte Dunes at Monterey, Ltd.,40 the Court unanimously confined the Dolan rough proportionality test—and, by implication, the Nollan nexus test—to the exaction context that gave rise to those cases. For certain, then, is that City of Monterey bars application of rough proportionality to outright denials of development. Still unclear, however, is whether the Court meant to place outside Dolan exactions of a purely monetary nature, in contrast with the dedication conditions involved in Nollan and Dolan.41
Following the Penn Central decision, the Court grappled with the issue of the appropriate remedy property owners should pursue in objecting to land use regulations.304 The remedy question arises-because there are two possible constitutional objections to be made to regulations that go “too far” in reducing the value of property or which do not substantially advance a legitimate governmental interest. The regulation may be invalidated as a denial of due process, or may be deemed a taking requiring compensation, at least for the period in which the regulation was in effect. The Court finally resolved the issue in First English Evangelical Lutheran Church v. County of Los Angeles, holding that, when land use regulation is held to be a taking, compensation is due for the period of implementation prior to the holding.305 The Court recognized that, even though government may elect in such circumstances to discontinue regulation and thereby avoid compensation for a permanent property deprivation, “no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective.”306
Supplement: [P. 1393, add to text following n.306:]
Outside the land–use context, however, the Court has now recognized a limited number of situations where invalidation, rather than compensation, remains the appropriate takings remedy.42
The process of describing general criteria to guide resolution of regulatory taking claims, begun in Penn Central, has reduced to some extent the ad hoc character of takings law. It is nonetheless true that not all cases fit neatly into the categories delimited to date, and that still other cases that might be so categorized are explained in different terms by the Court. The overriding objective, the Court frequently reminds us, is to vitalize the Fifth Amendment’s protection against government “forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”307 Thus a taking may be found if the effect of regulation is enrichment of the government itself rather than adjustment of the benefits and burdens of economic life in promotion of the public good.308 Similarly, the Court looks-askance at governmental efforts to secure public benefits at a landowner’s expense—“government actions that may be characterized as acquisitions of resources to permit or facilitate uniquely public functions.”309
On the other side of the coin, the nature as well as the extent of property interests affected by governmental regulation sometimes takes on importance. The Court emphasizes that the taking of one “strand” or “stick” in the “bundle” of property rights does not necessarily constitute a taking as long as the property as a whole retains economic viability,310 but some strands are more important than others. The right to exclude others from one’s land is so basic to ownership that extinguishment of this right ordinarily constitutes a taking.311 Similarly valued is the right to pass on property to one’s heirs.312
Supplement: [P. 1394, add to text after n.312:]
Nor must property have realizable net value to fall under the Takings Clause.43
Even though takings were found or assumed in the recent decisions in First English, Nollan, and Lucas, considerable obstacles remain for future litigants challenging regulatory restrictions on land use. As suggested above, regulatory takings will most likely remain difficult to establish in spite of Nollan. The Lucas fact situation, in which governmental regulation rendered property “valueless,” may prove to be relatively rare (although how the “segmentation” issue313 is handled may prove pivotal in this regard). And even if a taking can be established, the Court cautioned in First English that its holding was limited “to the facts presented [a taking was assumed] and [did] not deal with the quite different questions that would arise in the case of normal delays in obtaining building per-mits, changes in zoning ordinances, variances, and the like.”314
Supplement: [P. 1395, delete remainder of paragraph after n.314 and substitute the following new paragraph:]
Failure to incur such administrative (and judicial) delays can result in dismissal of an as–applied taking claim based on ripeness doctrine, an area of takings law that the Court has developed extensively since Penn Central. In the leading decision of Williamson County Regional Planning Commission v. Hamilton Bank,44 the Court announced the canonical two–part ripeness test for takings actions brought in federal court against state and local agencies. First, for an as–applied challenge, the property owner must obtain from the regulating agency a “final, definitive position” regarding how it will apply its regulation to the owner’s land. Second, the owner must exhaust any possibilities for obtaining compensation from state fora before coming to federal court. Thus, the claim in Williamson County was found unripe because the plaintiff had failed to seek a variance (first prong of test), and had not sought compensation from the state courts in question even though they recognized inverse condemnation claims (second prong). Similarly, in MacDonald, Sommer & Frates v. County of Yolo,45 a final decision was found lacking where the landowner had been denied approval for one subdivision plan calling for intense development, but that denial had not foreclosed the possibility that a scaled–down (though still economic) version would be approved.46 In a somewhat different context, a taking challenge to a municipal rent control ordinance was considered “premature” in the absence of evidence that a tenant hardship provision had ever been applied to reduce what would otherwise be considered a reasonable rent increase.47 Facial challenges dispense with the Williamson County final decision prerequisite, though at great risk to the plaintiff in that without pursuing administrative remedies, a claimant often lacks evidence that a statute has the requisite economic impact on his or her property.48
Supplement: [P. 1358, add to n.75 following Richardson v. Belcher citation:]
FCC v. Beach Communications, 508 U.S. 307 (1993) (exemption from cable TV regulation of facilities that serve only dwelling units under common ownership).
Supplement: [P. 1365, add to n.130:]
Concrete Pipe & Products v. Construction Laborers Pension Trust, 508 U.S. 602, 636–41 (1993) (imposition of multiemployer pension plan withdrawal liability on an employer is not irrational, even though none of its employees had earned vested benefits by the time of withdrawal). In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) , the challenge was to a statutory requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that had placed its mining operations in a wholly owned subsidiary three decades earlier, before labor agreements included an express promise of lifetime benefits. In a fractured opinion, the justices ruled 5 to 4 that the scheme’s severe retroactive effect offended the Constitution, though differing on the governing clause. Four of the majority justices based the judgment solely on takings law, while opining that “there is a question” whether the statute violated due process as well. The remaining majority justice, and the four dissenters, viewed substantive due process as the sole appropriate framework for resolving the case, but disagreed on whether a violation had occurred.
Supplement: [P. 1366, add to n.138:]
The Court has addressed similar issues under breach of contract theory. United States v. Winstar Corp., 518 U.S. 839 (1996) .
Supplement: [P. 1387, add to n.277 after initial citation:]
Supplement: [P. 1394, change n.312 to read:]
Hodel v. Irving, 481 U.S. 704 (1987) (complete abrogation of the right to pass on to heirs fractionated interests in lands constitutes a taking); Babbitt v. Youpee, 519 U.S. 234 (1997) (same result based on “severe” restriction of the right).
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