Inverse Condemnation Actions Present Unique Problems When Determining "Just Compensation"

I. INTRODUCTION The concept of eminent domain has existed for centuries;1 "[tjhe first formal declaration of the related just compensation principle occurred in France's 1789 Declaration of the Rights of Man and of the Citizen."2 Today, the Fifth Amendment of the Constitution requires just compensation.3 In order to determine just compensation, a court must first decide the date from which the taken property will be valued ( "date of valuation").4 There are many different methods that courts employ when determining the date of valuation in inverse condemnation actions. Some courts look to the date of possession while others look to a much later date. Having different methods for determining a date of valuation creates perverse incentives for both condemnors and condemnees. Improper valuation dates create perverse incentives because, depending on what the real estate market is doing, either party can manipulate the system, or lack thereof, in order to achieve an unjust result. If property values are depreciating, then using a date of valuation that comes after the date of taking unfairly penalizes the condemnee.5 Conversely, if property values are appreciating, then using a date of valuation subsequent to the date of taking unfairly penalizes the condemnor.6 In addition to the date of valuation problem, the date that courts decide when interest begins to accrue is also important when determining just compensation.7 There is no literature that describes the problems that courts face when determining just compensation in inverse condemnation actions. This Comment discusses those problems and proposes workable solutions. Part II of this Comment discusses the various methods used to determine the date of valuation in inverse condemnation actions and concludes by proposing a consistent solution. There are three methods that courts typically use to determine the date of valuation in inverse condemnation actions. The first method uses the date of possession or trespass as the date of valuation, the second method uses the date of trial, and the third method uses the date that the condemnor's actions substantially affected the landowner's use and enjoyment of his property. These methods all have their shortcomings and cannot produce just results in all cases. Nevertheless, a valuation date produces the most just results when the property is valued at the time of taking because compensation is required when the property is taken. When the condemnor takes property by physical occupation or trespass, the property should be valued from the date of occupation. When the condemnor takes property due to its substantial interference, the property should be valued from the date that the interference became a taking. Part III of this Comment discusses the methods that courts use in determining the date that interest begins to accrue. Courts use various methods for determining the date that interest accrues in an inverse condemnation action. The most just method is to set the date that interest accrues, the date of taking, and the date of valuation as the same date. II. METHODS OF DETERMINING THE DATE OF VALUATION Broadly speaking, there are two types of eminent domain actions. They are commonly referred to as direct condemnation actions and inverse condemnation actions. Direct condemnation actions occur when the condemnor8 initiates a condemnation action before taking property.9 Inverse condemnation actions are "[ajctions brought by landowners alleging that a taking of their property has resulted from activities of the public agencies or private bodies vested with authority to condemn."10 Furthermore, there are three different types of inverse condemnation actions. The first type is when a condemnor physically invades or trespasses on private property without bringing condemnation proceedings, and the property owner is forced to bring the condemnation action.11 The second type happens when "the landowner's land has been taken and the action is brought to recover damages to the land not taken that the property owner alleges have not been compensated in the original and formal eminent domain proceeding. …