Court Opinion

ID: 9425087
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:13:41.834197+00
Date Added: 2024-06-11T17:19:50.725390
License: Public Domain

Mr. Justice Rehnquist,
with whom The Chief Justice, Mr. Justice White, and Mr. Justice Black-mun join,
dissenting.
Petitioner is entitled to compensation for so much of its private “property” as was taken for public use. *481The parties concede that petitioner's property interest here taken was the unexpired portion of a 20-year lease on land owned by the Oregon-Washington Railroad & Navigation Co. near Colfax, Washington. The Court recognizes the limited nature of petitioner’s interest in the real property taken, but concludes that it was entitled to have its leasehold and improvements valued in such a way as to include the probability that petitioner’s 20-year lease would have been renewed by the railroad at its expiration.
There is a plausibility about’the Court’s resounding endorsement of the concept of “fair market value” as the touchstone for valuation, but the result reached by the Court seems to me to be quite at odds with our prior cases. Even in its sharply limited reading of United States v. Petty Motor Co., 327 U. S. 372 (1946), the Court concedes that the petitioner’s expectation of having its lease renewed upon expiration is not itself an interest in property for which it may be compensated. But the Court permits the same practical result to be reached by saying that, at least in the case of improvements, the fair market value may be computed in terms of a willing buyer’s expectation that the lease would be renewed.
In United States v. Petty Motor Co., supra, the Government acquired by condemnation the use of a structure occupied by tenants in possession under leases for various unexpired terms. The Court held that the measure of damages for condemnation of a leasehold is the value of the tenant’s use of the leasehold for the remainder of the agreed term, less the agreed rent. The Court considered the argument, essentially the same raised by petitioner here, that a history of past renewal of the leases to existing tenants creates a compensable expectancy, but held that the right to compensation should be measured solely on the basis of the remainder *482of the tenant’s term under the lease itself. Id,., at 380. In so deciding, the Court stated:
“The fact that some tenants had occupied their leaseholds by mutual consent for long periods of years does not add to their rights. Emery v. Boston Terminal Co., 178 Mass. 172, 185, 50 N. E. 763 [per Holmes, C. J.]:
“ Tt appeared that the owners had been in the habit of renewing the petitioners’ lease from time to time .... Changeable intentions are not an interest in land, and although no doubt such intentions may have added practically to the value of the petitioners’ holding, they could not be taken into account in determining what the respondent should pay. They added nothing to the tenants’ legal rights, and legal rights are all that must be paid for. Even if such intentions added to the saleable value of the lease, the addition would represent a speculation on a chance, not a legal right.’ ” Id., at 380 n. 9.
The holding in Petty was consistent with a long line of cases to the effect that the Fifth Amendment does not require, on a taking of a property interest, compensation for mere expectancies of profit, or for the frustration of licenses or contractual rights that pertain to the land, but that are not specifically taken and that are not vested property interests. Omnia Commercial Co. v. United States, 261 U. S. 502, 510 (1923); Sinclair Pipe Line Co. v. United States, 152 Ct. Cl. 723, 728, 287 F. 2d 175, 178 (1961); Chicago, M., St. P. & P. R. Co. v. Chicago, R. I. & P. R. Co., 138 F. 2d 268, 270-271 (CA8 1943), cert. denied, 320 U. S. 804 (1944).
While the inquiry as to what property interest is taken by the condemnor and the inquiry as to how that property interest shall be valued are not identical ones, they *483cannot be divorced without seriously undermining a number of rules dealing with the law of eminent domain that this Court has evolved in a series of decisions through the years. The landowner, after all, is interested, not in the legal terminology used to describe the property taken from him by the condemnor, but in the amount of money he is to be paid for that property. It will cause him little remorse to learn that his hope for a renewal of a lease for a term of years is not a property interest for which the Government must pay, if in the same breath he is told that the lesser legal interest that he owns may be valued to include the hoped-for renewal.
The notion of “fair market value” is not a universal formula for determining just compensation under the Fifth Amendment. In United States v. Miller, 317 U. S. 369, 374 (1943), the Court said of market value:
“Respondents correctly say that value is to be ascertained as of the date of taking. But they insist that no element which goes to make up value as at that moment is to be discarded or eliminated. We think the proposition is too broadly stated.”
It is quite apparent that the property on which the owner operates a prosperous retail establishment would command more in an open market sale than the fair value of so much of the enterprise as was “private property” within the meaning of the Fifth Amendment. Yet Mitchell v. United States, 267 U. S. 341 (1925), stands squarely for the proposition that the value added to the property taken by the existence of a going business is no part of the just compensation for which the Government must pay for taking the property:
“No recovery therefor can be had now as for a taking of the business. There is no finding as a fact that the Government took the business, or that what it did was intended as a taking. If the *484business was destroyed, the destruction was an unintended incident of the taking of land.” Id., at 345.
More recently, in United States ex rel. TVA v. Powelson, 319 U. S. 266, 283 (1943), the Court generalized further:
“That which is not 'private property’ within the meaning of the Fifth Amendment likewise may be a thing of value which is destroyed or impaired by the taking of lands by the United States. But like the business destroyed but not 'taken’ in the Mitchell case it need not be reflected in the award due the landowner unless Congress so provides.”
In either Mitchell or Powelson, the result would in all probability have been different had the Court applied the reasoning that it applies in this case. Here, too, the improvements on the property are not desired by the Government for the project in question, but the taking of petitioner’s leasehold interest prevents its continuing to have their use for the indefinite future as it had anticipated. The Court says that although its “property” interest would have expired in 7% years, the market value of that interest may be computed on the basis of expectancies that do not rise to the level of a property interest under the Fifth Amendment.
If permissible methods of valuation are to be thus totally set free from the property interest that they purport to value, it is difficult to see why the same standards should not be applied to a going business. Although the Government does not take the going business, and although the business is not itself a “property” interest within the Fifth Amendment, since purchasers on the open market would have paid an added increment of value for the property because a business was located on it, it may well be that such increment of value is *485properly included in a condemnation award under the Court’s holding today. And it will assuredly make no difference to the property owner to learn that destruction of a going business is not compensable, if he be assured that the property concededly taken upon which the business was located may be valued in such a way as to include the amount a purchaser would have paid for the business.
The extent to which the Court’s decision in this case will unsettle condemnation law is obscured by the fact that the parties, motivated no doubt by condemnation lawyers’ well-known propensity to enter into factual stipulations that present abstract questions of valuation theory for decision, have stipulated as to amounts to be awarded depending on which party prevails. But the underlying difficulty with petitioner’s theory was lucidly demonstrated by the late Judge Madden in his opinion for the Court of Appeals in this case, referring to the similar holding of the Court of Appeals for the Tenth Circuit in Scully v. United States, 409 F. 2d 1061 (1969):
“If the law were to go into the business of awarding compensation for an expectancy which never materialized, because the sovereign 'took’ the subject of the expectancy, should, in Scully, supra, e. g., the one year lessees be compensated for the loss of a five year occupancy, a 60 year occupancy, a perpetual occupancy? In our instant case, was the stipulation based upon some actuarial computation such as the prospective life of the buildings and machinery, or the life of the railroad, or upon free-ranging guesswork?” United States v. 22.95 Acres of Land, 450 F. 2d 125, 129 (CA9 1971).
The Court’s conclusion gains no support from its citation of the recognized principle that the Government *486may not take advantage of any depreciation in the property taken that is attributable to the project itself, United States v. Reynolds, 397 U. S. 14 (1970); United States v. Miller, 317 U. S. 369 (1943). The value of petitioner’s property taken could not be diminished by the fact that the river improvement and navigation for which the Government took its property might have had a depressing effect on pre-existing market value. But the Government makes no such contention here. While, under existing principles of constitutional eminent domain law, the value of petitioner’s property was not subject to diminution resulting from the effect on market value of the improvement that the Government proposed to construct, it was subject to the hazard of non-renewal of petitioner’s leasehold interest. The fact that the Government has condemned the underlying fee for the same project, and has therefore made the risk of nonrenewal a certainty, undoubtedly diminishes the market value of petitioner’s leasehold interest. But the diminution results, not from any depressing effect of the improvement that the Government will construct after having taken the leasehold, but from a materialization of the risk of transfer of ownership of the underlying fee to which its value was always subject.
In at least partially cutting loose the notion of “just compensation” from the notion of “private property” that has developed under the Fifth Amendment, the Court departs from the settled doctrine of numerous prior cases that have quite rigorously adhered to the principle that destruction of value by itself affords no occasion for compensation. United States v. Fuller, post, p. 488; United States v. Rands, 389 U. S. 121 (1967). “[Djamage alone gives courts no power to require compensation where there is not an actual taking of property.” United States v. Willow River Power Co., 324 U. S. 499, 510 (1945). “[T]he existence of value alone *487does not generate interests protected by the Constitution against diminution by the government Reichelderfer v. Quinn, 287 U. S. 315, 319 (1932). While the Court purports to follow this well-established principle by requiring the compensation paid to be determined on the basis of private property actually taken, its endorsement of valuation computed in part on an expectancy that is no part of the property taken represents a departure from this settled doctrine. I therefore dissent.