Fifth Amendment:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

If the government condemns real property, the government must pay the market value of that property to the owner. Likewise, the Supreme Court held in Tyler v. Hennepin that when government seizes property from a taxpayer in order to recover unpaid taxes, the government may not retain more of the proceeds from the sale of such property that the taxpayer owed.1 But there are many kinds of property and many uses of property which cause problems in computing just compensation. It is not only the full fee simple interest in land that is compensable “property,” 2 but also such lesser interests as easements3 and leaseholds. If only a portion of a tract is taken, the owner’s compensation includes any element of value arising out of the relation of the part taken to the entire tract.4 Government action that does not encroach on private property does not result in a taking requiring just compensation, even if the action impairs the use of the private property.5

If the taking has in fact benefited the owner in some way, however, the benefit may be set off against the value of the land condemned,6 although any supposed benefit which the owner may receive in common with all from the public use to which the property is appropriated may not be set off.7 For example, when certain lands were condemned for park purposes, with resulting benefits set off against the value of the property taken, the Court held that the subsequent erection of a fire station on the property instead did not deprive the owner of any part of his just compensation.8 The Supreme Court has also held that civil forfeitures do not constitute a taking even if the owner of the property is not alleged to have committed a crime, as property is considered to be the offender in forfeiture actions.9

The Court has made clear that the prohibition on taking property without compensation extends to Indian lands held in trust by the United States government.10 The Court has also held that the government has a “categorical duty to pay just compensation” when it physically takes personal property, just as when it takes real property.11 For example, in Horne v. Department of Agriculture, the Court held that a raisin marketing order issued under a Depression-era statute requiring raisin growers to reserve a percentage of their total crop for the federal government to dispose of in its discretion constituted “a clear physical taking” because, even though the scheme was intended to benefit growers by maintaining stable markets for raisins, the “[a]ctual raisins are transferred from the growers to the Government.” 12 The Court further held the government could not avoid paying just compensation for this physical taking by providing for the return to the raisin growers of any net proceeds from the government’s sale of the reserve raisins.13 The majority also rejected the government’s argument that the reserve requirement was not a physical taking because raisin growers voluntarily participated in the raisin market.14 In so doing, the Court reasoned that selling produce in interstate commerce is not a “special government benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.” 15 In addition, the Court determined that the value of the raisins for takings purposes was their fair market value, with no deduction for the offsetting benefits of the overall statutory scheme, which was intended to maintain stable markets for raisins.16

Interests in intangible, as well as tangible property, are subject to protection under the Taking Clause. Thus compensation must be paid for the taking of contract rights,17 patent rights,18 and trade secrets.19 The franchise of a private corporation has also been deemed property that cannot be taken for public use without compensation. For example, on condemning a lock and dam system belonging to a navigation company, the government was required to compensate the company for taking its authority to take tolls as well as for the tangible property.20

Takings challenges to requisitions present their own valuation challenges for the government and the courts. The Court has held that frustrating a private contract by requisitioning the entire output of a steel manufacturer is not a taking for which compensation is required,21 but requisitioning from a power company all the electric power which could be produced by using water diverted through its intake canal and thereby cutting off the supply of a lessee which had a right, amounting to a corporeal hereditament under state law, to draw a portion of that water, entitles the lessee to compensation for the rights taken.22 When a ship builder defaulted and the government took title to the builder’s uncompleted boats pursuant to a contract, the Court found that the builder’s suppliers, who had liens under state law, had a compensable interest equal to the value the liens when the government “took” or destroyed them in perfecting its title.23

As a general rule, there is no property interest in the continuation of a rule of law.24 For example, even though state participation in the social security system was originally voluntary, a state had no property interest in its right to withdraw from the program when Congress had expressly reserved the right to amend the law and the agreement with the state.25 Similarly, there is no right to the continuation of governmental welfare benefits.26

Footnotes

1

See Tyler v. Hennepin Cnty., No. 22–166, slip op. (U.S. May 25, 2023). The Court distinguished Tyler from Nelson v. City of New York, 352 U.S. 103 (1956), a case where a property owner was denied a surplus, on the grounds that in Nelson, the city had adopted a process through which property owners could recover the surplus and the owner had not followed the process. Tyler, supra, at 10–11.

2

United States v. Gen. Motors Corp., 323 U.S. 373 (1945).

3

United States v. Welch, 217 U.S. 333 (1910).

4

Bauman v. Ross, 167 U.S. 548 (1897); Sharp v. United States, 191 U.S. 341, 351–52, 354 (1903). Where the taking of a strip of land across a farm closed a private right-of-way, an allowance was properly made for the value of the easement. Welch, 217 U.S. 333.

5

Transp. Co. v. Chicago, 99 U.S. 635 (1878) (construction of a tunnel by the city that limited access to a particular dock did not amount to a taking).

6

Bauman, 167 U.S. 548.

7

Monongahela Navigation Co. v. United States, 148 U.S. 312, 326 (1893).

8

Reichelderfer v. Quinn, 287 U.S. 315, 318 (1932).

9

Calero-Toledo v. Pearson Yacht Leasing, 416 U.S. 663 (1974).

10

See, e.g., United States v. Creek Nation, 295 U.S. 103 (1935) (government error in surveying that carved out tribal land requires just compensation); Shoshone Tribe v. United States, 299 U.S. 476 (1937) (requiring tribe to share its land with another tribe constitutes taking); Chippewa Indians v. United States, 305 U.S. 479 (1939) (creation of national forest inside land held in trust for tribe is a taking); United States v. Sioux Nation of Indians, 448 U.S. 371 (1980) (statute that abrogated Indian land interest established by treaty constitutes a taking). But see Tee-Hit-Ton Indians v. United States, 348 U.S. 272 (1955) (taking of timber from Indian-occupied lands not a taking, Court found that the tribe’s claims of occupancy did not amount to possession of the land and the timber).

11

See Horne v. Dep’t of Agric., 135 S. Ct. 2419, 2426 (2015). In deciding this case, the Court presumably intended to leave intact established exceptions when the government seizes personal property (e.g., confiscation of adulterated drugs). See, e.g., Bennis v. Michigan, 516 U.S. 442, 452 (1996) ( “Petitioner also claims that the forfeiture in this case was a taking of private property for public use in violation of the Takings Clause of the Fifth Amendment, made applicable to the States by the Fourteenth Amendment. But if the forfeiture proceeding here in question did not violate the Fourteenth Amendment, the property in the automobile was transferred by virtue of that proceeding from petitioner to the State. The government may not be required to compensate an owner for property which it has already lawfully acquired under the exercise of governmental authority other than the power of eminent domain.” ).

12

Horne, 135 S. Ct. 2419, 2422 (2015).

13

Id. at 2428–30.

14

The government’s argument might have carried more weight had the marketing order been viewed as a regulatory taking. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 321–22 (2002) ( “The text of the Fifth Amendment itself provides a basis for drawing a distinction between physical takings and regulatory takings. Its plain language requires the payment of compensation whenever the government acquires private property for a public purpose, whether the acquisition is the result of a condemnation proceeding or a physical appropriation. But the Constitution contains no comparable reference to regulations that prohibit a property owner from making certain uses of her private property.” ); Bowles v. Willingham, 321 U.S. 503, 519 (1944) (rent control cannot be a taking of premises if “[t]here is no requirement that the apartments be used for purposes which bring them under the [rent control] Act” ).

15

Horne, 135 S. Ct. at 2430–31. Here, the Court expressly rejected the argument that the raisin growers could avoid the physical taking of their property by growing different crops, or making different uses of their grapes, by quoting its earlier decision in Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 439 n.17 (1982) ( “[A] landlord’s ability to rent his property may not be conditioned on his forfeiting the right to compensation for a physical occupation.” ). The Court also distinguished the raisin reserve provisions from the requirement that companies manufacturing pesticides, fungicides, and rodenticides disclose trade secrets in order to sell those products at issue in Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984). It did so because the manufacturers in Ruckelshaus were seen to have taken part in a “voluntary exchange” of information that included their trade secrets, recognized as property under the Takings Clause, in exchange for a “valuable Government benefit” in the form of a license to sell dangerous chemicals. No such government benefit was seen to be involved with the raisin growers because they were making “basic and familiar uses” of their property.

16

Horne, 135 S. Ct. at 2431–32.

17

Omnia Com. Corp. v. United States, 261 U.S. 502, 508 (1923); Brooks-Scanlon Corp. v. United States, 265 U.S. 106 (1924); Lynch v. United States, 292 U.S. 571, 579 (1934).

18

James v. Campbell, 104 U.S. 356, 358 (1882). See also Hollister v. Benedict Mfg. Co., 113 U.S. 59, 67 (1885).

19

Ruckelshaus, 467 U.S. 986.

20

Monongahela Navigation Co. v. United States, 148 U.S. 312, 345 (1893).

21

Omnia, 261 U.S. 502.

22

Int’l Paper Co. v. United States, 282 U.S. 399 (1931).

23

Armstrong v. United States, 364 U.S. 40, 50 (1960).

24

Duke Power Co. v. Carolina Envt. Study Group, 438 U.S. 59, 88 n.32 (1978).

25

Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41 (1986).

26

“Congress is not, by virtue of having instituted a social welfare program, bound to continue it at all, much less at the same benefit level.” Bowen v. Gilliard, 483 U.S. 587, 604 (1987).