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CRS Annotated Constitution

CRS Annotated Constitution

Fifth Amendment -- Table of ContentsPrev | Next

Just Compensation

“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[p.1375]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[p.1376]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[p.1377]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[p.1378]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’[p.1379]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[p.1380]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

Footnotes
190 Backus v. Fort Street Union Depot Co., 169 U.S. 557, 573, 575 (1898).
191 Armstrong v. United States, 364 U.S. 40, 49 (1960). “The political ethics reflected in the Fifth Amendment reject confiscation as a measure of justice.” United States v. Cors, 337 U.S. 325, 332 (1949). There is no constitutional prohibition against confiscation of enemy property, but aliens not so denominated are entitled to the protection of this clause. Compare United States v. Chemical Foundation, 272 U.S. 1 (1926) and Stoehr v. Wallace, 255 U.S. 239 (1921), with Silesian– American Corp. v. Clark, 332 U.S. 469 (1947), Russian Fleet v. United States, 282 U.S. 481 (1931), and Guessefeldt v. McGrath, 342 U.S. 308 (1952).
192 Monongahela Navigation Co. v. United States, 148 U.S. 312, 326 (1893). The owner’s loss, not the taker’s gain, is the measure of such compensation. United States ex rel. TVA v. Powelson, 319 U.S. 266, 281 (1943); United States v. Miller, 317 U.S. 369, 375 1943); Roberts v. New York City, 295 U.S. 264 (1935). The value of the property to the government for its particular use is not a criterion. United States v. Chandler–Dunbar Co., 229 U.S. 53 (1913); United States v. Twin City Power Co., 350 U.S. 222 (1956). Attorneys’ fees and expenses are not embraced in the concept. Dohany v. Rogers, 281 U.S. 362 (1930).
193 Van Horne’s Lessee v. Dorrance, 2 U.S. (2 Dall.) 304, 315 (C.C. Pa. 1795); United States v. Miller, 317 U.S. 369, 373 (1943).
194 Regional Rail Reorganization Act Cases, 419 U.S. 102, 150– 51 (1974).
195 Chicago B. & Q. R.R. v. Chicago, 166 U.S. 226, 250 (1897); McGovern v. City of New York, 229 U.S. 363, 372 (1913). See also Boom Co. v. Patterson, 98 U.S. 403 (1879); McCandless v. United States, 298 U.S. 342 (1936).
196 United States v. Miller, 317 U.S. 369, 374 (1943); United States ex rel. TVA v. Powelson, 319 U.S. 266, 275 (1943). See also United States v. New River Collieries Co., 262 U.S. 341 (1923); Olson v. United States, 292 U.S. 264 (1934); Kimball Laundry Co. v. United States, 338 U.S. 1 (1949). Exclusion of the value of improvements made by the Government under a lease was held constitutional. Old Dominion Land Co. v. United States, 269 U.S. 55 (1925).
197 United States v. Miller, 317 U.S. 369, 374 (1943).
198 United States v. 564.54 Acres of Land, 441 U.S. 506 (1979) (condemnation of church–run camp; United States v. 50 Acres of Land, 469 U.S. 24 (1984) (condemnation of city–owned landfill). In both cases the Court determined that market value was ascertainable.
199 United States v. Felin & Co., 334 U.S. 624 (1948); United States v. Commodities Trading Corp., 339 U.S. 121 (1950). And see Vogelstein & Co. v. United States, 262 U.S. 337 (1923).
200 United States v. Cors, 337 U.S. 325 (1949). And see United States v. Toronto Navigation Co., 338 U.S. 396 (1949).
201 Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470 (1973). The dissent argued that since upon expiration of the lease only salvage value of the improvements could be claimed by the lessee, just compensation should be limited to that salvage value. Id. at 480.
202 United States v. Fuller, 409 U.S. 488 (1973). The dissent argued that the principle denying compensation for governmentally created value should apply only when the Government was in fact acting in the use of its own property; here the Government was acting only as a condemnor. Id. at 494.
203 Danforth v. United States, 308 U.S. 271, 284 (1939); Kirby Forest Industries v. United States, 467 U.S. 1 (1984) (no interest due in straight condemnation action for period between filing of notice of lis pendens and date of taking).
204 United States v. Klamath Indians, 304 U.S. 119, 123 (1938); Jacobs v. United States, 290 U.S. 13, 17 (1933); Kirby Forest Industries v. United States, 467 U.S. 1 (1984) (substantial delay between valuation and payment necessitates procedure for modifying award to reflect value at time of payment).
205 Albrecht v. United States, 329 U.S. 599 (1947).
206 Henkels v. Sutherland, 271 U.S. 298 (1926); see also Phelps v. United States, 274 U.S. 341 (1927).
207 United States v. Welch, 217 U.S. 333 (1910).
208 United States v. General Motors, 323 U.S. 373 (1945).
209 Bauman v. Ross, 167 U.S. 548 (1897); Sharp v. United States, 191 U.S. 341, 351–52, 354 (1903). Where the taking of a strip of land across a farm closed a private right–of–way, an allowance was properly made for the value of the easement. United States v. Welch, 217 U.S. 333 (1910).
210 Bauman v. Ross, 167 U.S. 548 (1897).
211 Monongahela Navigation Co. v. United States, 148 U.S. 312, 326 (1893).
212 Reichelderfer v. Quinn, 287 U.S. 315, 318 (1932).
213 Lynch v. United States, 292 U.S. 571, 579 (1934); Omnia Commercial Corp. v. United States, 261 U.S. 502, 508 (1923).
214 James v. Campbell, 104 U.S. 356, 358 (1882). See also Hollister v. Benedict Mfg. Co., 113 U.S. 59, 67 (1885).
215 Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984).
216 Monongahela Navigation Co. v. United States, 148 U.S. 312, 345 (1983).
217 Omnia Commercial Co. v. United States, 261 U.S. 502 (1923).
218 International Paper Co. v. United States, 282 U.S. 399 (1931).
219 Armstrong v. United States, 364 U.S. 40, 50 (1960).
220 Duke Power Co. v. Carolina Envtl. Study Group, 438 U.S. 59, 88 n.32 (1978).
221 Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986).
222 “Congress is not, by virtue of having instituted a social welfare program, bound to continue it at all, much less at the same benefit level.” Bowen v. Gilliard, 483 U.S. 587, 604 (1987).
223 Mitchell v. United States, 267 U.S. 341 (1925); United States ex rel. TVA v. Powelson, 319 U.S. 266 (1943); United States v. Petty Motor Co., 327 U.S. 372 (1946). For consideration of the problem of fair compensation in government–supervised bankruptcy reorganization proceedings, see New Haven Inclusion Cases, 399 U.S. 392, 489–95 (1970).
224 United States v. General Motors Corp., 323 U.S. 373, 382 (1945).
225 United States v. General Motors Corp., 323 U.S. 373 (1945). In Kimball Laundry Co. v. United States, 338 U.S. 1 (1949), the Government seized the tenant’s plant for the duration of the war, which turned out to be less than the full duration of the lease, and, having no other means of serving its customers, the laundry suspended business for the period of military occupancy; the Court narrowly held that the Government must compensate for the loss in value of the business attributable to the destruction of its “trade routes,” that is, for the loss of customers built up over the years and for the continued hold of the laundry upon their patronage. See also United States v. Pewee Coal Co., 341 U.S. 114 (1951) (in temporary seizure, Government must compensate for losses attributable to increased wage payments by the Government).
226 United States v. Miller, 317 U.S. 369, 375–76 (1943). “On the other hand,” the Court added, “if the taking has in fact benefitted the remainder, the benefit may be set off against the value of the land taken.” Id.
227 United States v. Jones, 109 U.S. 513 (1883); Bragg v. Weaver, 251 U.S. 57 (1919).
228 28 U.S.C. Sec. 1403 . On the other hand, inverse condemnation actions (claims that the United States has taken property without compensation) are governed by the Tucker Act, 28 U.S.C. Sec. 1491 (a)(1), which vests the Court of Federal Claims (formerly the Claims Court) with jurisdiction over claims against the United States “founded . . . upon the Constitution.” See Presault v. ICC, 494 U.S. 1 (1990).
229 Bauman v. Ross, 167 U.S. 548 (1897). Even when a jury is provided to determine the amount of compensation, it is the rule at least in federal court that the trial judge is to instruct the jury with regard to the criteria and this includes determination of “all issues” other than the precise issue of the amount of compensation, so that the judge decides those matters relating to what is computed in making the calculation. United States v. Reynolds, 397 U.S. 14 (1970).
230 Rule 71A(h), Fed. R. Civ. P. These commissions have the same powers as a court–appointed master.
231 Monongahela Navigation Co. v. United States, 148 U.S. 312, 327 (1893).
232 Long Island Water Supply Co. v. Brooklyn, 166 U.S. 685 (1897). In federal courts, reports of Rule 71A commissions are to be accepted by the court unless “clearly erroneous.” Fed. R. Civ. P. 53(e)(2).
233 Backus v. Fort Street Union Depot Co., 169 U.S. 557, 569, (1898).
234 McGovern v. City of New York, 229 U.S. 363, 370–71 (1913).
235 Id. at 371. And see Provo Bench Canal Co. v. Tanner, 239 U.S. 323 (1915); Appleby v. City of Buffalo, 221 U.S. 524 (1911).
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