Amdt5.9.8 Calculating Just Compensation

Fifth Amendment:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

The Supreme Court has held that the Fifth Amendment’s just compensation requirement provides for “a full and perfect equivalent for the property taken.” 1 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.’” 2 The general standard thus is the market value of the property, i.e., what a willing buyer would pay a willing seller.3 If fair market value does not exist or cannot be calculated, resort must be had to other data which will yield a fair compensation.4 However, the Court has resisted alternative standards, having repudiated reliance on the cost of substitute facilities.5 Just compensation is especially difficult to compute in wartime, when enormous disruptions in supply and governmentally imposed price ceilings totally skew market conditions. In an early case concerning a takings case under the Pennsylvania constitution, the Court required that the equivalent be in money, not in kind,6 but in its 1974 decision, Regional Rail Reorganization Act Cases, the Court provided for greater flexibility in the form of compensation recognized.7

In two postwar decisions, the Court held that the rule of market value applies even where value is measured by a government-fixed ceiling price. Thus, owners of cured pork and of black pepper could recover only the ceiling price for their commodities despite findings by the Court of Claims that the products had value in excess of their regulatory price ceilings.8 However, the Court has also ruled that the government was not obliged to pay the market value of a tug when the present value had been greatly enhanced as a consequence of the government’s wartime needs, instead requiring the government only to pay the value prior to the events that necessitated its use.9

The difficulties in applying the fair market standard of just compensation are illustrated by two cases decided in the same year by 5-4 votes, one in which compensation was awarded and one in which it was denied. One decision held that a company was 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 that had no renewal option, because the company occupied the land for nearly fifty 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.10 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.11

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. Brown v. Legal Found. of Wash., 538 U.S. 216, 236 (2003); United States ex rel. TVA v. Powelson, 319 U.S. 266, 281 (1943); United States v. Miller, 317 U.S. 369, 375 (1943). 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).

Applying the owner’s-loss standard, the Court addressed a state program requiring lawyers to deposit client funds that cannot earn net interest in a pooled account generating interest for indigent legal aid. Brown, 538 U.S. at 237. Assuming a taking of the client’s interest, his pecuniary loss is nonetheless zero; hence, the just compensation required is likewise. Brown is in tension with the Court’s earlier treatment of a similar state program, where it recognized value in the possession, control, and disposition of the interest. Phillips v. Wash. Legal Found., 524 U.S. 156, 170 (1998).

Chi., Burlington & Quincy R.R. v. City of Chicago, 166 U.S. 226, 250 (1897); See 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). back
Miller, 317 U.S. at 374; Powelson, 319 U.S. at 275. 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). back
Miller, 317 U.S. at 374. back
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. back
Van Horne’s Lessee v. Dorrance, 2 U.S. (2 Dall.) 304, 315 (C.C. Pa. 1795) ( “No just compensation can be made except in money.” ); Miller, 317 U.S. at 373 ( “Such compensation means the full and perfect equivalent money of the property taken.” ). back
Reg’l Rail Reorganization Act Cases, 419 U.S. 102, 150–51 (1974) ( “No decision of this Court holds that compensation other than money is an inadequate form of compensation under eminent domain statutes.” ). back
United States v. Felin & Co., 334 U.S. 624 (1948); United States v. Commodities Trading Corp., 339 U.S. 121 (1950). See also Vogelstein & Co. v. United States, 262 U.S. 337 (1923) back
United States v. Cors, 337 U.S. 325 (1949). See also United States v. Toronto Navigation Co., 338 U.S. 396 (1949). back
Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470 (1973). back
United States v. Fuller, 409 U.S. 488 (1973). back