Property in the Constitution 3

I recently wrote about private property in colonial America. Today, I’ll pick up where I left off, with a discussion of protections for property rights codified in the Constitution, and later in the Bill of Rights. This will be the final broad, generalized background post, before we begin marching through Supreme Court cases, starting next time with Barron v. Baltimore.

The Constitution

Reflecting their Revolutionary ideology – which included strands of Enlightenment liberalism and classical republicanism – as well as lessons learned from the failures (real and perceived) of the Articles of Confederation, the men at the Philadelphia Convention were convinced that strong protections of property rights were crucial to the success and stability of the new nation. Thus, the U.S. Constitution provides five explicit protections for property rights:

  1. Article III, Section 3 states, “The Congress shall have Power to declare the Punishment of Treason, but no Attainder of Treason shall work Corruption of the Blood, or Forfeiture except during the Life of the Person attainted.” Relevant to our interest in property, this clause means that Congress can punish treason by confiscating a convicted traitor’s property – but they are forbidden from doing so after the traitor’s death. Thus, if a traitor is executed, Congress could not later take his property from his heirs, and so forth.
  1. Two clauses (later amended) denied Congress the power to levy direct taxes, unless apportioned among the states according to population (Article I, Section 2, clause 3; and Article I, Section 9, clause 4, which states “No Captitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.”). These clauses denied Congress the power to levy “direct taxes” – a broad and somewhat ambiguous category of taxes that include property taxes and taxes on income. The Framers recognized that taxes on property – including income – could be politically abused. They particularly feared sectional rivalries, where, for example, Northern industrial interests might use taxation to thwart Western development, or to tax slaveholding, etc. They also recognized that it would be possible for class interests to abuse one another with direct taxes. The Supreme Court declared America’s first attempt at an income tax unconstitutional on the basis of these clauses in the 1895 case Pollock v. Farmers’ Loan & Trust Co. (157 U.S. 673). This case was overturned, and the above clauses of the Constitution superseded, by the Sixteenth Amendment in 1913.
  1. Article I, Section 8 provides that Congress has the power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Thus, the Constitution gives Congress the power to award copyrights and patents, in recognition of the emerging importance of intellectual property. It was thought that ensuring protecting exclusive use of authors and inventors would increase the incentive for individuals to innovate.
  1. Article I, Section 10 denies the several states any authority to impair “the Obligations of Contracts.” This clause was intended to keep politics from interfering with private agreements (such as mortgages). Events in the months leading up to the Constitutional Convention – such as Shays’ Rebellion – convinced the Framers that state intervention in contracts (such as debtor relief laws) could cause major economic turmoil. This clause would be among the most important in the Constitution for the nation’s first one-hundred years, and was subject to much litigation and construction in the early republic. Its importance continues today, but has been significantly diminished since the Supreme Court upheld a temporary freeze on foreclosures in the case Home Building & Loan v. Blaisdell  during the Great Depression.
  1. Article I, Section 10 also denies the power to “make any Thing but gold and silver Coin a Tender in Payment of Debts.” This clause was designed to prevent states from issuing inflationary paper money (“fiat currency” in economic terms) in order to relieve debts. Similar to the previous clause, this was designed to foster a stable economy.

Another set of provisions touch on property, but less directly than in the clauses discussed above. One of these are the general bans on bills of attainder (Article I, Section 9; Article I, Section 10). A bill of attainder is a law that declares a person or group guilty of some crime without the benefit of a trial. Additionally, Congress is given the power to establish “uniform Laws on the Subject of Bankruptcies throughout the United States” (Article I, Section 8). Further, Article I, Section 9 denies Congress the power to lay duties on exports (“No Tax or Duty shall be laid on Articles exported from any State”) or to give preferential treatment to any port (“No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another”). These clearly fall within a broad category of Congressional powers to regulate the economy (and exemptions to that power) – and thus complement Congress’ Article I, Section 8 power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” The larger purpose of all of these clauses is to create a central government powerful enough to foster a strong economy, but not so powerful as to threaten the liberty (or property) of its citizens.

Note that the original Constitution also contained three protections for property in slaves. Article I, Section 2 states that for the purposes of apportionment in Congress, slaves shall be counted as “three fifths” of persons, thus inflating the representation of slave-holders in Congress. Article I, Section 9 denies Congress the authority to ban the importation of slaves before 1808. Finally, Article IV, Section 2, holds that “No Person held to Service or Labour in one State, under the Laws thereof, escaping into another, shall, in Consequence of any Law or Regulation therein, be discharged from such Service or Labour, but shall be delivered up on Claim of the Party to whom such Service or Labour may be due.”

The Fifth Amendment

During the debates over the Constitution’s ratification in the several states, many parties, including the so-called “Anti-Federalists” (those who were opposed to the Constitution’s ratification, generally because they felt it created too strong a national government) demanded the inclusion of a Bill of Rights. The Constitution’s supporters, called Federalists, agreed to propose articles for a bill of rights pursuant to the Article V process during the First Congress. Congress passed twelve amendments, and sent them to the states for ratification. The states approved ten of these, which came to be known as the Bill of Rights. The Bill of Rights contains two more provisions explicitly protecting property, both in the Fifth Amendment:

  1. The Fifth Amendment states, “nor shall private property be taken for public use, without just compensation.” True to Constitutional form, this clause marks out another limit on government power. It states that no property can be taken by the government, except for public use (that is, it cannot take property for private use). Further, it states that when government must take property for public use, it must compensate the owner for the taken property.
  1. The Fifth Amendment states, “No person shall… be deprived of life, liberty, or property, without due process of law.” This “Due Process Clause” has been hugely important in American history. It states that no person can be deprived of his property except after established procedures. Until the 1910s or so, it was generally believed that this clause also placed a substantive limitation on Congress’ ability to regulate economic rights (see Gillman 1993).

Additionally, there are important connections between the explicit protections in the Fifth Amendment with portions of the Fourth, especially its limitations on seizures of peoples’ “houses” and “effects.” In both the Fourth and Fifth Amendments, civil juries of ordinary citizens would be central to ensuring that government (at this time, the national government) would not be abuse the people, as it would be juries that would decide whether searches were “reasonable,” how much compensation justice required, and whether punitive damages should be awarded in light of outrageous governmental conduct (Amar 1998, 80). Further, several scholars have noted that the Takings Clause builds on the Third Amendments limitations of the military, arguing that the Takings Clause was motivated at least in part by a desire to prevent impressment by the military without governmental approval (recall the above mentioned practice of impressing horses and other property into service during the Revolution).

What I’m hoping you’ll take away from all this discussion can be summarized as follows:

  1. Americans have long history of protecting a wide variety of property rights – but those rights have always been understood to be limited.
  2. The Constitution and Bill of Rights contains a number of explicit protections or property rights.
  3. Protection against uncompensated appropriation of property is only one of the many property protections in the Constitution (but this one protection will be the focus of this series of posts).

Moving forward we’ll be focusing entirely on that portion of the Fifth Amendment that states “nor shall private property be taken for public use, without just compensation.” This clause seems straightforward, but raises a number of questions. For starters, it clearly implies that the government may take property for public use, but it does not tell us what qualifies as a public use. Thus we must ask: what qualifies as a “public use”? who gets to decide what a qualifies as a public use? how much compensation is “just” – and who gets to decide that question? These are the sorts of questions that occupy the Supreme Court’s attention when it adjudicates claims in physical takings cases. [By physical takings, I mean takings in which the government actually takes title to property; this distinguishes from “regulatory” and “judicial” takings, in which regulations, etc., deprive owners of the value of their property.] And, as a result, these are the sorts of questions we’ll be exploring in future posts in this series.

Suggested Reading:

Amar, Akhil Reed. 1998. The Bill of Rights. Yale University Press.

Ely, James W. 2008. The Guardian of Every Other Right, 3rd ed. Oxford University Press.

Gillman, Howard. 1993. The Constitution Besieged: The Rise and Demise of Lochner Era Police Powers Jurisprudence. Duke University Press.

Gillman, Howard, Mark A. Graber, and Keith E. Whittington. 2013. American Constitutionalism, Volume II: Rights and Liberties. Oxford University Press.

Horowitz, Morton J. 1977. The Transformation of American Law 1780-1860. Harvard University Press.

Ketcham, Ralph. 1993. Framed for Posterity: The Enduring Philosophy of the Constitution. University Press of Kansas.

Treanor, William Michael. 1985. “The Origins and Original Significance of the Just Compensation Clause of the Fifth Amendment.” Yale Law Journal 94: 694-716.

Regulatory Takings: Pennsylvania Coal Co. v. Mahon

Why, precisely, did I have so much trouble with takings cases, particularly regulatory takings all those years ago? Why do I still heave a heavy sigh whenever I am faced with a new one? Well, back in the 1980s, when property movements were really getting their litigative feet under them, Carol Rose of Yale Law School wrote a wonderful essay titled, “Mahon Reconstructed: Why the Takings Issue is Still a Muddle.” (52 S. Cal. L. rev. 561, 1983-1984). After I reading this essay I ended up reading a lot of Professor Rose’s work. This essay, and one of her books in particular, Property and Persuasion: Essays on the History, Theory, and Rhetoric of Ownership, shaped my thinking about takings quite a lot. It was published by Westview Press, 1994 — it’s out of print now, but if you can find a used copy, I recommend it!

Since I am not a lawyer, I have never been particularly interested in making arguments about what I think a particular litigant deserves as relief or why they should receive it. I am interested, as a social scientist, in the way law develops over time; and in particular, how society is shaped by whatever the law says. I’m curious to know the degree to which the identity of actors such as property owners, lawyers, or administrative agency officials, is formed (sometimes impacted, sometimes indirectly influenced) by the law. Sometimes all this becomes very focused on whether the development of the law provides not only opportunities for making claims but also actually constructs the interests and issues that individuals (most likely owners in my research) are confronted with in their day-to-day experience with the government. The interest in government is the political scientist coming out, but the rest is all thanks to my training in sociolegal studies.

At any rate, takings proved especially complicated in this regard because property exists at such a very deep and fundamental level in our society. What I found so interesting about Carol Rose’s work was that, at least in this essay, she did not try to expound a new theory of takings that if adopted would solve all takings woes. Instead, she took a step back and asked why “takings” in law had become difficult to define. Put in her own words: she wondered the “possible reasons for the elusiveness of the meaning of ‘taking’ in our law” (p. 561). Instead of following a worn route through a law review article, one that would involve making an argument about what the courts “should” do, Professor Rose raised a question that was much more empirical in nature: how? How does the confusion concerning what a “takings” is actually arise out of the law? In formulating an answer, she had to take a look at the doctrine around what we today call regulatory takings to see when and where the “muddle” began. Her answer began with a case decided in 1922, Pennsylvania Coal Company v. Mahon (260 US 393, 1922).

Mahon is a case I love to teach, not least of all because my undergraduates and graduate students come to have a much better understanding of the term “undermine” after they become familiar with the facts of the case. Let me explain…

The decision in the court case, authored by the eminent Justice Oliver Wendell Holmes, came to the Supreme Court on appeal from the Supreme Court of the Commonwealth of Pennsylvania. Pennsylvania had passed the Kohler Act in 1921. The Act was designed to address a problem the state had long had: soil subsidence from mining coal. Large stretches of Pennsylvania are rich in anthracite coal deposits and so mining companies, including Pennsylvania Coal, had long been mining these areas. However, mining practices at the time often involved mining under (or undermining) roads, towns, and other areas, creating what some would call “surface support problems,” or what others might see as big, giant holes. The surface of the land when it lost too much of its support below would fall into the ground creating big holes. If a house, for example, were sitting on the pocket that collapsed then the house would fall, crashing into the hole. Whole towns, in fact, had been subject to subsidence — that is to say, they had begun to fall into holes created by undermining the surface to such an extent that there was not enough earth to hold it up anymore. If you’re trying to picture this, here’s a link that may help.

Mrs. Mahon’s father had purchased the surface of a residential lot in 1878 from Pennsylvania Coal. The company had retained the subsurface mineral rights. In the deed her father had waived all claims against Pennsylvania Coal due to subsidence of the surface. This meant that the coal company had retained both the subsurface mineral rights as well as the support rights to the land. This was perfectly acceptable in Pennsylvania law because the common law recognized three “estates” in mining property. An “estate” in land law means, in essence, an interest you can own. In Pennsylvania, as Professor Rose explains what the three interests were in Pennsylvania law: “first, an estate in the surface, second, an estate in the minerals below, and finally an estate in the support of the surface (the third estate)” (p. 563). In other words, if you purchased land from a mining company, you purchased only an interest in the surface, while the interests in the minerals and support of the surface remained with the original owner, i.e., mining company. This was intended to enable mining to continue, even as use of the surface was given to a new owner.

After a few decades of undermining (and watching citizens and local governments suffer its consequences) the state legislature attempted a remedy through legislation. The Kohler Act addressed the danger of subsidence by making it impossible to sever the surface estate from the estate in the support. Thus, the act passed by the state legislature was attempting to change a common law right in property that had long been recognized in Pennsylvania law.

Though Professor Rose does not make much of this, the political scientist in me is always fascinated by attempts made by one branch of government to change something another branch of government has maintained for a long time. The fact that the subsidence problem was widespread and was a major social and economic problem in Pennsylvania strikes me as clear from the court records, particularly given that the trial court had found that the act was likely unconstitutional, while the commonwealth’s Supreme Court found that the statute was “a legitimate exercise of the police power.” Again, the political scientist in me perks up: not only is one branch of state government attempting to change a longstanding position of another, but we have economic interests in mining going toe-to-toe with reformist attempts in the state legislature to exercise a power that is clearly given to the states in the federal constitution.

Wanna guess what happens? Here’s a hint, based on my anecdotal observations (not empirical research and data collection): when you have major economic interests doing battle with the police power in a state, the economic interests tend to win. Not always, but most of the time.

Back to the case: Mrs. Mahon and her husband took up residence on the lot her father had purchased, claiming title through the 1878 deed. When, in September 1921, the Mahons were informed that the company intended to undermine their land the Mahons sued under the recently passed Kohler Act. They were hoping to keep the company from mining in such a way that would cause their residence to fall into a hole created through soil subsidence. Here we have an attempt by individual owners to call directly upon a newly passed state statute in order to claim a brand new version of property rights in Pennsylvania in order to save a home from the damaging effects of behavior acted out by a corporate entity exercising its common law right. This is the sort of legal drama we make movies out of — if only we could understand the case…

So what happened? Justice Holmes wrote for the majority. He was a writer of some of the most cogent, eloquent, and interesting decisions of all time at the Supreme Court level, but in this case he wrote one of the most muddled, farcical and complicated decisions that has plagued us ever since. I recently told a student that all writers have a bad day from time to time. Frankly, I think Justice Holmes was having a very bad writing day (and his good friend, Justice Louis Brandeis, seemed to think so as well given his dissent — which will be subject of my post in two weeks).

Justice Holmes came up with what we call today the “diminution of value” test for regulatory takings of property. He said that exercises of the police power could devalue property without being a takings under the Fifth Amendment. Some diminution was okay, he said, but when that value is diminished too greatly it triggers the takings clause and that requires there be some sort of just compensation. How much is too much? Well, here is his sense of the situation:

“When it reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to sustain the act.” It’s my favorite line in the whole case. In her essay, Professor Rose also quotes a second restatement of the rule as it occurs at the end of the same paragraph: “[W]hile property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”

Pausing for a minute, let’s recap Justice Holmes’s views: how much of value must be taken to trigger the takings clause? “A certain magnitude”. Must there be compensation in every case? No… But more often than not since “in most if not all” suggests that it might be most, but it may well not be all cases that trigger the takings clause. And in the second restatement of this rule, how much regulation is allowable? The answer is “to a certain extent”. When is there a taking? “if regulation goes too far”.

Clear as mud!

But let’s look at the full passage from the case where Justice Holmes makes these statements — it’s the last paragraph of the case, and the most important one:

“The general rule at least is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. It may be doubted how far exceptional cases, like the blowing up of a house to stop a conflagration, go — and if they go beyond the general rule, whether they do not stand as much upon tradition as upon principle. In general it is not plain that a man’s misfortune or necessities will justify his shifting the damages to his neighbor’s shoulders. We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change. As we already said, this is a question of degree — and therefore cannot be disposed of by general propositions.”

If we parse that paragraph a little, it’s easy to conclude that Justice Holmes, while determining to strike down the Pennsylvania statute was also intentionally vague. It’s really the only explanation for a writer — any writer, let alone one so eminent — to be so very ambiguous. He steps away from creating a “general proposition” that can guide us in understanding “to what extent” a regulation must diminish value; and, he also steps away from saying “when” compensation may be required. He really only says that if it goes “too far”, then it triggers the takings clause and just compensation. The question arises, of course, who gets to decide what constitutes “too far” if we have no clear understanding of it from this decision? Clearly not the state legislature since their law was just struck down. It appears as though J. Holmes, intentionally or unintentionally, made this a question for the courts.

In her essay Professor Rose also pointed out something that is easily missed in this discussion: “what property is relevant in a takings discussion?” (566-567). Remember that we have, here, mineral rights, support rights and surface rights. Three different parts of the land that could be used and sold as separate bits of property. For Holmes, the only property that seemed to matter was the right to the support, which under the Kohler Act became part of the surface rights the Mahons possessed. In his view, the Kohler Act worked a takings of all the rights the company had — a complete diminution of value, as Professor Rose points out. That the act was designed to protect the surface rights of individuals living, working, and using the land in various ways what mattered to the Court was only the reduction in value to the mining company of its rights under the act. This meant that the changing value of the house on top of the land when it fell into the hole caused by subsidence was not really a part of his calculation.

Justice Holmes’ good friend, Justice Louis Brandeis dissented in this case. In my next post, I’ll give you a sense of what divided these two good friends on this particular issue. Mahon, however, became the basis for a long list of regulatory takings cases in the twentieth century, and if you look back at my discussion of Annicelli, you can see it lurking there in the background. But as you can see in Annicelli in the late twentieth century, as courts sought a principle that was easier to apply, they considered a complete diminution of value (which Holmes believed had occurred for the mining company) key to determining when a regulatory takings had occurred. That he left the door open to something less than complete becomes increasingly less important as the century wears on. After I’ve written about the dissent in this case, and as we move forward in time in regulatory takings cases, I’ll show you how this developed.