Opinion ID: 4653904
Heading Depth: 2
Heading Rank: 1

Heading: Eminent Domain Law

Text: The critical issue in this case is whether, and if so to what extent, PennDOT’s activities on Parcel 54 constituted a taking of Parcel 55’s coal estate. The alleged taking in this case centers on the concept of a de facto taking or an inverse condemnation. De facto takings “Inverse condemnation stands in contrast to direct condemnation, in which the government initiates proceedings to acquire title under its eminent domain authority. Pennsylvania, like every other State besides Ohio, provides a state inverse condemnation 7 We did not grant PennDOT’s request to review the Commonwealth Court’s conclusion that Parcel 55 is landlocked and inaccessible via Mud Pike Road. [J-23-2020] - 16 action.” Knick v. Twp. of Scott, ___ U.S. ____, 139 S. Ct. 2162, 2168 (2019) (citing Code). “The Pennsylvania Constitution provides that private property cannot be taken for public use without just compensation.” In re De Facto Condemnation & Taking of Lands of WBF Assocs., L.P., 903 A.2d 1192, 1199 (Pa. 2006) (citing Pa. Const. Art. I, § 10). The Code’s procedure for requesting a board of viewers represents the General Assembly’s implementation of a mechanism to receive compensation for de facto takings. See Conroy-Prugh Glass Co., 321 A.2d at 599 (“The Pennsylvania Legislature recognized the concept of ‘de facto’ taking when it enacted s[ection] 502(e) of the Eminent Domain Code … .“). The de facto taking concept allows parties to recover where governmental action, while falling short of a physical invasion or appropriation, interferes with property rights to the extent that compensation is required under the United States Constitution. See Palazzolo v. Rhode Island, 533 U.S. 606, 617 (2001) (noting that Takings Clause was made applicable to the States through the Fourteenth Amendment). “Prior to Justice Holmes's exposition in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), it was generally thought that the Takings Clause reached only a ‘direct appropriation’ of property or the functional equivalent of a ‘practical ouster of [the owner's] possession,’” Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1014 (1992) (some citations omitted, bracketing in original). The Mahon Court recognized that “the text of the Clause can be read to encompass regulatory as well as physical deprivations.” Id. at 1028 n.15. Regulatory measures are perhaps the most common instance of governmental activity that results in a de facto taking. But the concept extends to any governmental action that interferes with property rights. “We have recognized, however, that no magic [J-23-2020] - 17 formula enables a court to judge, in every case, whether a given government interference with property is a taking.” Arkansas Game & Fish Comm'n v. United States, 568 U.S. 23, 31 (2012). In determining whether a taking has occurred we have looked to United States Supreme Court interpretations of the Fifth Amendment’s Takings Clause.8 “An examination of our case law reveals that this Court has continually turned to federal precedent for guidance in its ‘taking’ jurisprudence, and indeed has adopted the analysis used by the federal courts.” United Artists' Theater Circuit, Inc. v. City of Philadelphia, 635 A.2d 612, 616 (Pa. 1993). Thus, in the absence of an argument that the Pennsylvania Constitution offers greater protections than its federal counterpart, see id., we draw upon the high Court’s law to determine whether a taking has occurred. Accord Machipongo Land & Coal Co. v. DEP, 799 A.2d 751, 763 n.7 (Pa. 2002) (same). Determining whether a taking has occurred almost always turns on the facts, and as a result takings jurisprudence generally rejects per se rules. “In view of the nearly infinite variety of ways in which government actions or regulations can affect property interests, the Court has recognized few invariable rules in this area.” Id. True, we have drawn some bright lines, notably, the rule that a permanent physical occupation of property authorized by government is a taking. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982). So, too, is a regulation that permanently requires a property owner to sacrifice all economically beneficial uses of his or her land. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). But aside from the cases attended by rules of this order, most takings claims turn on situation-specific factual inquiries. See Penn Central, 438 U.S., at 124, 98 S.Ct. 2646. 8 “No person ... shall be ... deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” U.S. Const. amend. V. [J-23-2020] - 18 Arkansas Game & Fish, 568 U.S. at 31–32.9 Those few situations aside, consideration of the relevant factual circumstances includes the economic impact of the action. Penn Central, 438 U.S. at 124. The economic value of the property encompasses both its present and future use. “Property is not to be deemed worthless because the owner allows it to go to waste, or to be regarded as valueless because he is unable to put it to any use.” Mississippi & Rum River Boom Co. v. Patterson, 98 U.S. 403, 408 (1878). This is reflected in the concept of the “highest and best use.” See Olson v. United States, 292 U.S. 246, 255 (1934) (“The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future is to be considered ... .”) (citing Rum River Boom). Determining the highest and best use is often a question of damages as it relates to the owner’s compensation, and when the condemnee asserts a use different than the current use, the burden is on the owner. “There are two requirements, and only two, for proving highest and best use. First, the condemnee must show the physical adaptability of the land to such a use, and second it must be demonstrated that this use is needed in the area.” Pennsylvania Gas & Water Co. v. Pennsylvania Tpk. Comm'n, 236 A.2d 112, 116 (Pa. 1967). As a result, the “highest and best use” inquiry includes consideration of whether the proffered use is reasonably possible. “In determining its value the trial court is required to consider all reasonably possible uses for which the property is adaptable 9 The Coal Companies seem to suggest that this case triggers a per se rule because PennDOT’s activities required them to sacrifice the economic value of their coal estate. “Obviously, cutting off all access to a property is the direct and immediate cause of the loss of not only the present use but any potential use.” Coal Companies’ Brief at 24. Cf. Lucas, 505 U.S. at 1017 (“[F]or what is the land but the profits thereof[?]”) (quoting 1 E. Coke, Institutes, ch. 1, § 1 (1st Am. ed. 1812)). [J-23-2020] - 19 and might if reason be applied.” Bolus v. Cnty. of Monroe, 650 A.2d 1188, 1191 (Pa. Commw. 1994). But the “highest and best use” inquiry may be considered at the takings stage as well. See WBF Assocs., 903 A.2d at 1210–11 (“The actual issue, the highest and best use of the property, was the same in both instances, and the highest and best use of property for purposes of ascertaining a taking is the same as the highest and best use for purposes of setting the fair market value.”). Consequential damages The Commonwealth Court did not address the Coal Companies’ consequential damages claim because of its resolution of the de facto taking claim. The consequential damages statute states: All condemnors, including the Commonwealth, shall be liable for damages to property abutting the area of an improvement resulting from change of grade of a road or highway, permanent interference with access or injury to surface support, whether or not any property is taken. 26 Pa.C.S. § 714 (emphases added). Cases from both this Court and the Commonwealth Court have stated that the availability of consequential damages is a separate and distinct issue from whether a taking has occurred. In Colombari v. Port Auth. of Allegheny Cnty., 951 A.2d 409 (Pa. Commw. 2008), the Commonwealth Court held that the phrase “whether or not any property is taken” means that liability for consequential damages exists regardless of whether a taking has occurred. “Speculative and conjectural” takings The assertion that the Coal Companies were required to establish a reasonable likelihood of obtaining a mining permit as a condition of establishing a de facto taking was [J-23-2020] - 20 derived from three Commonwealth Court cases examining whether a taking occurred when the governmental interference precludes a use of the land that is alleged to be “speculative or conjectural.” We thus examine those cases in more detail to lend context to the parties’ arguments. In In re Borough of Blakely, 25 A.3d 458 (Pa. Commw. 2011), landowner John Williams had purchased property in 1966 abutted by a tract of land containing a functioning railroad bed bordering Virginia Avenue. In 1986, he purchased that abutting property, which became the subject of the taking claim. Starting in the late 1960s, the railroad tracks were removed and the land was mined for coal to a depth of ten feet. Over time the property flattened into a ravine, leading to substantial flooding problems that formed a ditch. In 1989, the borough placed a plastic drainage pipe in the ditch and covered it with dirt. A few years later, the borough installed a replacement pipe that extended over the length of the subject property. The borough covered the pipe with twelve feet of fill, which could not support vehicular traffic. This pipe cut off access to Virginia Avenue. In the early 2000s, William developed an intention to build homes and townhomes on Virginia Avenue. Sometime in 2005 or 2006, Williams asked the borough council to build up the land so that it could support traffic. The borough council did not respond favorably, at which time Williams filed a petition asserting that the borough had effectuated a de facto taking in 1989 when the pipe cut off his access to Virginia Avenue. Williams alleged that the pipe “resulted in a diminution in the value and use of the property.” Id. at 462. The trial court dismissed the petition on ripeness grounds. Williams appealed. On appeal, the borough argued that [J-23-2020] - 21 the trial court had ruled correctly because Williams could still develop the property if he accounted for storm water runoff. The Commonwealth Court affirmed, indicating that “the trial court properly rejected his de facto taking claim as premature and insufficient” because his “claims of injury and substantial deprivation of the use of his property” were speculative and conjectural. Id. at 467. Williams “never presented any formal plans to the Borough Planning Commission,” did not file any formal requests before that commission, and never spoke to anyone about the zoning permits he would need for developing the lots. Id. at 466. The court cited Williams’ own testimony from the evidentiary hearing, where he confirmed that his project “hadn’t gotten far enough along” to reach the Planning Commission or Zoning Hearing Board stages. Id. The appellate court noted that “[t]he Borough never told Owner he cannot build homes on these lots” and the owner “did not explain why access is not possible from another road abutting his property.” Id. Williams had not taken any concrete steps to develop the properties, including submitting plans to the borough or investigating necessary storm water improvements. Id. Blakely favorably cited Petition of 1301 Filbert Ltd. P'ship, 441 A.2d 1345, 1346 (Pa. Commw. 1982), in support. Therein, the 1301 Filbert Limited Partnership purchased the Essex Hotel in June of 1974. The hotel “had been closed for several years and was in a state of serious disrepair.” Id. at 1348. The partnership intended to renovate the building and open a hotel and began renovations in early 1975. The hotel never opened, leading to a de facto taking claim. Around the time of purchase, the City of Philadelphia had been exploring a largescale tunnel project. In July of 1975, the federal government began granting funding for [J-23-2020] - 22 projects such as land acquisition, and the city’s Department of Public Property authorized, but did not require, the acquisition of the Essex Hotel. The partnership had been told the Essex was not in the right of way and would not be condemned. The partnership attempted to obtain a short-term construction loan for renovations, but the bank declined the loan, citing the tunnel’s construction and predicted interference with the hotel’s operation as the reason. The partnership alleged a de facto taking of the hotel occurred as a result of the construction, because the Essex abutted the route officially designated for the tunnel and an estimated four years of construction was expected to turn the area in front of the hotel into a giant pit, precluding access. The partnership claimed that the tunnel project caused it to lose the needed financing, leading to mortgage foreclosure and the loss of the property. The partnership also offered an expert witness, who opined that the hotel could not have stayed in business anyway due to the construction noise and dust. The trial court dismissed the petition and the Commonwealth Court affirmed. The court stated that “an important element in the lower court's decision was the determination that the Partnership had not met its proof burden of showing that the alleged detriment, underlying the claim of de facto taking, was the direct and necessary consequence of the Tunnel project and its concomitants.” Id. at 1359. The Filbert panel found that the partnership failed to establish that the construction would have made the hotel financially unviable. While the partnership presented expert testimony on that point, the trial court rejected it. “However, the weight and credibility of the Partnership's testimonial evidence, concerning the impact of the Tunnel work on the prospective or hoped-for patrons of the hotel, was for the determination of the lower court sitting as the finder of fact.” Id. at 1360. [J-23-2020] - 23 The court agreed that the construction project would affect the quality of access, but it would not preclude access. “The case at bar is one in which the claim of de facto taking is linked to an alleged injury that is not only prospective but is also speculative and conjectural.” Id. at 1360. The final case is Parker Ave., L.P. v. City of Philadelphia, 122 A.3d 483, 491 (Pa. Commw. 2015) (en banc), which rejected an allegation that discretionary inaction constituted a taking. There, developer Parker Avenue acquired in 2005 a parcel of land zoned as residential permitting construction of homes by right. This parcel was situated in a park where the local community was known to have strong opposition to development. Parker Avenue nonetheless began planning the construction of forty-eight single family homes along Cinnaminson Street, which bisected the subject property. Cinnaminson Street extended beyond the parcel onto Philadelphia-owned land and had already been improved with sewer lines, fire hydrants, manhole covers, and water basins but was unpaved. Cinnaminson was merely a paper street and was “essentially an unimproved trail.” Id. at 485. Parker Avenue began acquiring the necessary clearances from the water department and various environmental agencies. The tract to the rest of Philadelphia required paving, and Parker Avenue submitted to the City Council two ordinances to have the street paved. When these proposed ordinances were not approved, Parker Avenue filed a petition for an appointment of viewers, alleging a de facto taking through deprivation of the property’s beneficial use and enjoyment as a residential development. The trial court overruled the city’s preliminary objections, concluding that the city’s actions “have [J-23-2020] - 24 rendered [Parker Avenue’s] property virtually useless, and has completely precluded the highest and best use of the property.” Id. at 487 (citing trial court order). The Commonwealth Court reversed, ruling that the inherently discretionary act of failing to pave roads could not qualify as a taking. The Parker Avenue Court recognized that a failure to issue a document required for construction could qualify as a de facto taking if the petitioning party were otherwise entitled to its issuance. However, “Parker Avenue is not entitled to the ordinances it proposed. ... The City’s decision whether to enact said ordinances requires weighing competing interests of multiple stakeholders and the best interests of Philadelphia-at-large.” Id. at 489. The court next addressed the claim that Parker Avenue had relied on the residential zoning regulations in place at the time it purchased the property, which had permitted the construction of residential buildings as of right. The Commonwealth Court rejected this argument by emphasizing that the parcel was already landlocked at purchase because no legally-open street connected the property to the rest of Philadelphia, and thus the developer knew that it needed governmental support to develop the property. The clear import of the court’s analysis was that Parker Avenue’s expectations at the time of purchase undercut the finding of a taking. See Penn Central, 438 U.S. at 124 (“The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations.”).