Four siblings — Joseph, Michael, and Donna Murr, and Peggy Heaver — are forbidden from selling 1.5 acres they own in Troy, Wisconsin, along the Lower St. Croix River, according to a recent 5-3 U.S. Supreme Court ruling. Legal analyst Ilya Somin calls the ruling “a setback for constitutional property rights.” It is not only bad news for the siblings, Somin points out, because it is “likely to create confusion and uncertainty going forward.”
In 1994 and 1995, the siblings received two adjacent parcels from their parents, who had bought them separately under different names of record in the 1960s. One had a cabin on it; the other was an undeveloped investment property. The parcels were taxed separately. In 2004, the siblings, now the common owners of both parcels, contemplated selling the undeveloped one, valued at $410,000, and using the proceeds to improve the cabin. But they were thwarted by a 1975 zoning ordinance that forbade development or sale of parcels less than one acre. (The parcel is larger than an acre, but the ordinance excludes certain land features from the calculation.) Ironically, the Pacific Legal Foundation notes, if anyone else owned the property, there would be no legal problem, because the ordinance exempts certain parcels if “in separate ownership from abutting lands.”
The authorities said the siblings could sell only the combined parcels (with house) but not just the one. They sued for “just compensation” under the Fifth Amendment to the U.S. Constitution, which requires payment when the government takes private property for “public use.” (Incidentally, under the infamous Kelo case, “public use” has been expanded to include private commercial development.) Even though their parcel was not literally taken, as in the typical eminent-domain case, the Supreme Court has ruled that if government restrictions reduce the value of a parcel to zero (though that would be rare), “just compensation” must be paid for the “regulatory taking.”
This is where the controversy flares. If the zoning ordinance treated the property as two parcels, the one the siblings wished to sell indeed had its value wiped out and compensation would be due. But since the parcels are treated as one, the zoning restriction cannot be said to have destroyed the whole property’s value. Thus, the state says, compensation is not due. The court agreed.
As legal analyst Roger Pilon observes, “If the state can wipe out pre-existing rights simply by issuing a later ordinance, and thereby escape the requirements of the Takings Clause, that [Fifth Amendment] guarantee is a dead letter.” The compensation rule, which requires spending taxpayer money, tends to restrain government takings and thus land-use restrictions.
Somin adds, “In at least some cases, [the] ruling allows the government to avoid compensating property owners for the taking of their land, merely because they also own the lot next door. But the vague nature of the test established by the Court makes it very hard to figure out exactly when that might happen.” For example, the five justices in the majority “rejected the state of Wisconsin’s position that the courts should simply treat contiguous parcels as one anytime state law indicates they should be. But they also rejected the opposite view: that there should be a strong presumption in favor of analyzing each parcel separately.”
The rule of law is supposed to enable people to form reasonable expectations about what conduct is forbidden. But the court’s majority said, “A central dynamic of the Court’s regulatory takings jurisprudence … is its flexibility.” Thus, this decision further erodes the rule of law.
The siblings are certainly victims of an injustice at the hands of the state: it has wiped out the value of their property. But the fundamental injustice is not that they were not compensated, the money for which would have been taken by force from the taxpayers. Rather, the injustice is that the government passed a law restricting the siblings in the peaceful use of their property. Unfortunately, such usurpation has long been permitted by the courts. The Fifth Amendment to the Constitution indeed requires “just compensation” for takings (note that the eminent-domain power is not expressly delegated in the Constitution), but that raises a logical question: if a taking (literal or regulatory) is accomplished by force, how can compensation in any amount be just? We know market transactions are just because both parties consent. The just price is not objective. Rather, it’s whatever a seller and buyer agree to. But in a takings case, property owners are not consenting sellers, for if they were, eminent domain would not be required. A forced sale is per se unjust. Therefore, no amount of compensation can be just.
The free market — indeed, a free society — is founded on individual rights, including the right to one’s justly acquired property. If the government’s rules regarding the use and disposal of property are “flexible,” a free society is doomed.