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.

Regulatory Takings: Annicelli v. Town of South Kingstown

Rhode Island

Rhode Island, our littlest state.

A couple of weeks ago I mentioned that I would be writing about Annicelli v. South Kingstown. Not a lot of people have heard of this case, except those of us geeky enough to spend our time reading regulatory takings law. Yet it’s an interesting case to think about today because, over thirty years ago, the state of Rhode Island grappled with issues concerning barrier beaches and flood zones that remain with us today. Ultimately, I think the case is a reminder that the very specific circumstances an owner finds himself or herself in determines whether a regulatory taking has occurred. Not all regulations result in takings, after all.

What, you might ask, is a “regulatory taking”? Maybe we should back up… What is a “taking”?

In its most basic form, a taking occurs when the government takes possession of privately owned land for public use. Under the Fifth Amendment of the US Constitution, such an event can occur, but the government is required to provide just compensation for the taking. Many states have similar property protections written into their constitutions.

A regulatory taking happens when a regulation (zoning ordinance, for example, or some other ordinance or law) takes the value of privately owned property even if the property itself remains physically in the possession of the owner. The regulatory taking is a legal category that, while the concept existed earlier, really emerged during the twentieth century. Moreover, in the late twentieth century, several different property rights movements developed the category in the law through litigation.

We’ve had several important US Supreme Court cases involving the definition of a regulatory taking and how to determine when property has been taken through regulation. One of the most famous regulatory takings cases, Lucas v. South Carolina Coastal Council, involved the issue of how far a regulation could go in decreasing the value of private property before a taking had occurred. The U.S. Supreme Court found that, essentially, if a regulation takes away all economic viability, the courts will find a taking.

At some point, I’ll write more about this. For the moment keep in mind that at the time it was decided, many thought it would be mobilized (i.e., used by activists) to deregulate land in many communities throughout the US. However, over the years Lucas has posed a special challenge to anyone who attempts to use it: it requires that the regulation totally wipes out the economic viability of the land. There can be no beneficial use left to the owner. It is rare that a regulation does this, but when one does Lucas does provide that plaintiff an opportunity to recover losses as a result.

Buried inside the Lucas decision is a reference to Annicelli, which is really the topic of today’s post. When I began studying regulatory takings, I read right past it in the case (on that snowy, cold day I wrote about recently). Then, while living in Rhode Island, an environmental lawyer pointed it out to me. I went and hunted down the case, and quickly realized something that really should have been obvious to me already: state-level regulatory takings issues were both very widespread in the middle of the twentieth century and had long been an issue for state courts. In fact, reading through Annicelli, I realized that the Lucas doctrine had been a part of state law for quite some time.

At the state level, however, the issue seemed a little more complicated because states have police powers to regulate for the health and safety of their citizens. The question, then, was where the line between a regulation for the public good and a regulation designed to prevent a public harm? This line matters greatly. For states, it is the line between a constitutional exercise of state police powers (which do not require compensation and are designed to prevent public harms) and an exercise of eminent domain (that do require just compensation as the property is being taken for the public use to advance the public good).

This question became more complex in the twentieth century as scientific evidence mounted indicating both that the sea level was rising and that the coast was eroding. As state officials struggled with the realities of what this meant for the land, they began to experiment with state and local ordinances designed to protect what we now call wetlands and barrier beaches in the hopes of slowing down erosion, protecting property inland from sea surges, and providing protection from serious storms. In theory, these ordinances are generally designed to protect the public from a harm — in this case, storm surges and beach erosion. That states have the powers to enact such ordinances has always been true. But at what point does such an ordinance cross the line into the realm of eminent domain taking?

Rhode Island is a little state — it’s about 37 miles wide and 48 miles long. Yet if you look closely at it (see the photo from Google Earth), you’ll see that relatively speaking, it has a lot of coastline: 400 miles, in fact. And, if you look at the maps you can locate here you’ll see that it is mostly watershed to one river or another. The maintenance of its coastline has long been an issue for this little state. After all, if its coast erodes it not only loses economic development possibilities, it loses land — that is, beach erosion means its territory is diminishing… And a state can’t exist without a territory to govern. Well, I suppose, in one’s imagination it could exist… But it won’t exist as a state in the United States. So the state does what it can to maintain that land as best it can both to protect its residents and to maintain its identity; and the communities along the 400 miles of coastline tend to make how that land is developed and what it is used for a priority in their policymaking in order to both advance economic development and protect their communities.

In 1975, Ida Annicelli signed a purchase-and-sale agreement with the owner of real estate in Green Hill Beach. Her plan was to construct a single-family dwelling there. There are a lot of vacation homes in the area, and Mrs. Annicelli was, in fact, an out-of-state resident. The agreement she signed, according to court documents, stipulated that she would “relieve the seller of any responsibility toward successfully obtaining ‘all necessary buildings, sanitation, and coastal resources permits.’” Mrs. Annicelli did, in fact, file for the requisite permits to build a single-family dwelling. The purchase price for the land was $16,750.

Green Hill Beach with Roads

A map (with roads) of Green Hill Beach today — note that Annicelli purchased her land in 1975. The area would have looked different, but there would have been development in the area even then.

Three weeks after she signed the purchase-and-sale agreement and before she could actually take title and possession of the land, the town passed a zoning ordinance creating a “High Flood Danger” zone (HFD). The ordinance in part provided, “No residential dwelling designed or used for overnight human occupancy shall be constructed within the HFD Zoning District as defined herein. This prohibition shall apply even if the land within said HFD Zoning District is above the base flood elevation.”

In other words, the classification of the land as an HFD zone meant that Mrs. Annicelli would not be able to construct a single-family dwelling. In fact, the uses that were left available to Mrs. Annicelli included several possibilities such as “a horticultural nursery or greenhouse, a park or playground, a wildlife area or nature preserve, or a golf course or marina… raising of crops or animals, the storing of commercial vehicles, and the repairing of boats” (p. 4).

Importantly, all these potential uses would have required a much larger tract of land that she had agreed to purchase. Also, there were 30 other homes in the area already. She was joining a small community, not attempting to build in an undeveloped area.

The court noted that none of the uses the ordinance allowed were available to Mrs. Annicelli because the lot size was too small to make use of the land in these ways. Annicelli’s appraiser testified that he believed the land was worth very little because none of these uses were practical. The RI court quoted him as stating that, “the most anyone would pay…for a spot to sit on the beach to go swimming” was $1,000. And sitting on the beach, he strongly suggested, was the only use available to Mrs. Annicelli given the language of the ordinance.

The town’s appraiser figured the land was worth about $8,500. According to the court, “he conceded that several of the uses were impractical while denying that Annicelli was deprived of all reasonable or beneficial use of her property.” There’s no indication that he had other ideas for her, so we don’t know whether he made other suggestions. However, given the court’s careful parsing of his testimony in their decision, I would guess that he simply did not want to concede that all reasonable or beneficial use of her property was gone because, under Rhode Island law, Mrs. Annicelli would have a valid claim of a taking.

The aim of the HFD designation was to protect the barrier beach in the area. The Green Hill Beach, which is a barrier beach, stretches along the coast. Like all barrier beaches, it is a narrow strip of unconsolidated material made up of sand or cobble. It runs mostly parallel to the shoreline, extending to it and a little below it. Barrier beaches are formed through wave and current action. They are generally separated from the mainland by a swampy area or a a salt pond (sometimes a freshwater pond).

Again, looking at the Google Map of Green Hill Beach, you can see that there is, indeed, a pond behind that strip of sandy land. In fact, if you look at the Google Earth Map of Rhode Island (above), you’ll see that there are swampy salt ponds all along the south coast of the state. The Rhode Island court commended South Kingstown for its efforts and recognized the scientific findings that barrier beaches needed to be managed to protect inland areas. However, ultimately, they determined that the circumstances here resulted in a taking of Mrs. Annicelli’s land.

As mentioned earlier, at the time that Mrs. Annicelli signed the agreement to purchase the land, there were already 30 houses built in the area. This mattered to the Rhode Island court because it meant the barrier beach had already been compromised. They also found that, in fact, the regulation had wiped all value from her land because the parcel was so small she would not be able to put it to any of the uses available in the ordinances. She had signed the agreement before the ordinance was passed, and thus she did not know she had purchased land that would be zoned in a way that would not allow her to fulfill her purpose. For these reasons, the Rhode Island court felt that an unconstitutional taking had occurred — unconstitutional in Rhode Island law as well as under the federal constitution.

Note that the final decision was handed down in July of 1983. In all, it took 8 years before Mrs. Annicelli was told that either she could build her house or she would have to be fully compensated for her losses. Though I could not find documentation of it, my understanding is that Mrs. Annicelli finally built her house. Regardless, years later when I was working on research related to Palazzolo v. Rhode Island (another regulatory takings case that occurred along the south coast), I learned that Mrs. Annicelli’s case was well-known to Mr. Palazzolo. This connection has always intrigued me given that Mr. Palazzolo began his litigation odyssey while her’s was underway. Unlike her’s, his case made it all the way to the US Supreme Court — and that means his story will be another blog post on some future day.