Kirby Forest Industries, Inc. v. United States

PETITIONER:Kirby Forest Industries, Inc.
RESPONDENT:United States
LOCATION:Police Car

DOCKET NO.: 82-1994
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 467 US 1 (1984)
ARGUED: Feb 22, 1984
DECIDED: May 21, 1984

ADVOCATES:
Harriet S. Shapiro – on behalf of the respondent
Joe G. Roady – on behalf of the Petitioner

Facts of the case

Question

Audio Transcription for Oral Argument – February 22, 1984 in Kirby Forest Industries, Inc. v. United States

Warren E. Burger:

We will hear arguments next in Kirby Forest Industries against the United States.

Mr. Roady, I think you may proceed when you are ready.

Joe G. Roady:

Mr. Chief Justice, may it please the Court, this is a Fifth Amendment taking in just compensation case.

It arose under an exercise of the power of imminent domain by the United States under Title 40, Section 257 of the United States Code.

That is the so-called straight condemnation statute.

The purpose of the condemnation was to preserve a wilderness area in Fast Texas in the Big Thicket Forest area of that region of the state.

Authority for that particular condemnation was given by Congress in Title 16, Section 698 of the United States Code.

We want to emphasize at the outset the importance of the purpose of this particular condemnation to the outcome of this case.

The purpose was to preserve a wilderness in its pristine condition.

That is a purpose which is accomplished by affecting a non-use, a non-use for economic purposes, a non-use for any purpose inconsistent with the wilderness preservation, and in this respect we would suggest to the Court that the purpose was accomplished at the time that the condemnation was filed.

William H. Rehnquist:

Mr. Roady–

Joe G. Roady:

Yes, sir.

William H. Rehnquist:

–was it accomplished by virtue of the government exercising dominion over the property from the time you state?

Joe G. Roady:

There were no acts of physical possession, Your Honor.

What we… Excuse me.

Warren E. Burger:

Is there… Excuse me.

Go ahead.

Finish your answer.

Joe G. Roady:

There were no acts of physical possession.

What we are submitting to this Court is that consistent with the takings analysis which this Court has made in the police power cases, the burdens which were placed upon the ownership interests in this property were such that a taking occurred prior to the time of the filing of the award and condemnation.

Sir.

Warren E. Burger:

When the action was taken by the government, could you sell the property to me or to your colleague on the other side of the table?

Joe G. Roady:

As a legal matter, Your Honor, we could sell the property, but it would have to be subject to the condemnation.

As a practical matter–

Warren E. Burger:

As a practical economic matter–

Joe G. Roady:

–you could not, and that is–

Warren E. Burger:

–It would be unlikely that you could find a buyer who would take that chance.

Joe G. Roady:

–Not only unlikely, Your Honor.

We think it would be a practical and economic impossibility.

Warren E. Burger:

Do you think you could borrow money at the bank on it?

Joe G. Roady:

No, sir, Your Honor, we could not.

That is another one of the slices through the bundle of ownership rights that we have in this property that this action made.

Warren E. Burger:

Could this unimproved real estate, could you… do you think you could build a house on it, or a building?

Joe G. Roady:

You could, Your Honor, but you could not recover the cost of it once the United States has completed its condemnation.

You would lose that money.

You could not borrow the money to build the house on it.

You could not borrow the money to develop it.

You could not sell it as far as the timber or any natural resources on it were concerned.

William H. Rehnquist:

But wouldn’t… as a practical matter, if you wanted to borrow money from the bank on the same type of security that that unimproved property would have afforded you for whatever loan a bank might make on it before the condemnation action was filed, couldn’t you borrow money on the strength of the potential award?

Joe G. Roady:

I would submit not, Your Honor, because what the secured interest owner would look to would be the property, and the property is at that time in a state of limbo insofar as the award is concerned.

William H. Rehnquist:

Well, my experience has been that banks aren’t crazy about unsecured property, whether it is… unimproved property, whether they are subject to condemnation proceedings or not, but are you saying the banks in that part of the country would be less likely to treat as security the potential award on the property than the property itself.

Joe G. Roady:

That is my statement, Your Honor.

Byron R. White:

But if there is a lien on the property, and then the property is condemned, surely the lienholder is going to get paid if the award is large enough.

Joe G. Roady:

That is true.

Byron R. White:

And I think a bank would certainly know that.

Joe G. Roady:

The bank, if it had the lien before the condemnation was filed, is protected, but if the bank were… Excuse me.

Byron R. White:

I know, but the bank says before the condemnation, this property has got a market value of X dollars, we’ll loan you X over two dollars on it, and after they know it is going to be condemned, isn’t the property just as good as security?

Joe G. Roady:

Your Honor, the problem with that is–

Byron R. White:

Well, isn’t it just as good as security?

Joe G. Roady:

–It is security to the extent of the value that may be realized in the condemnation, and that is the problem.

There is no certainty that the value which will be realized in the condemnation is the value which the bank had put on it pursuant to its appraisal, because the condemnation–

Byron R. White:

Well, there is no certainty any time about that.

When the bank… if a bank appraises property before a condemnation and says, we think it will bring so much, and so we will loan you half that much, they don’t really know about their… how right they are about the value.

Joe G. Roady:

–Well, in our view, Your Honor, the practical burdens which are placed upon the property by the condemnation process are such that viable economic uses are no longer available.

Byron R. White:

So when do those restraints accrue, in your view?

When the condemnation action is filed?

Joe G. Roady:

That is the position we are taking before this Court as a matter of the legal impact relating to condemnation proceedings.

Lewis F. Powell, Jr.:

Mr. Roady–

Joe G. Roady:

Yes, sir.

Lewis F. Powell, Jr.:

–what economic use was the property put to prior to the filing of the complaint?

Joe G. Roady:

The property was not being put to any economic use, if I understand Your Honor’s question.

It was held by a timber manufacturing company in a reserve capacity.

That is to say, it would look to the property at some future date either for the cutting of the timber, the sale of the timber, the sale of the property for development, some purpose, but those matters had not yet been formulated.

Lewis F. Powell, Jr.:

If your client were to receive interest from the date of the filing of the complaint, would that not be a windfall there?

Joe G. Roady:

Not at all, Your Honor.

Lewis F. Powell, Jr.:

You are not receiving any interest now, are you?

Joe G. Roady:

No, sir, we are not receiving interest on the property, but that is really not the question.

The question is, when did the government take the property.

Lewis F. Powell, Jr.:

I understand, but your argument is, as I understood it, that from the date of the filing of the complaint there was no further economic use to which the property could be put–

Joe G. Roady:

That’s true.

Lewis F. Powell, Jr.:

–and be profitable.

Joe G. Roady:

Well–

Lewis F. Powell, Jr.:

They could still go hunting on it, fishing… what they were doing on it now.

Joe G. Roady:

–Your Honor, respectfully, I wouldn’t say that those were viable economic uses.

They may be recreational uses, but–

Lewis F. Powell, Jr.:

I don’t know.

Joe G. Roady:

–in the language of the Fifth Amendment, we are talking about just compensation, and I think that implies economic uses.

Lewis F. Powell, Jr.:

In Texas, don’t people pay to hunt down there?

Joe G. Roady:

They do, Your Honor.

I am sure that the land could be leased for hunting and some income derived from that.

However, that was not being done in this case, and–

Byron R. White:

Well, you weren’t getting any income off of it.

Joe G. Roady:

–That is my understanding, Your Honor.

That is my understanding.

Byron R. White:

Even for hunting.

Joe G. Roady:

Even for hunting is my understanding.

I don’t know that that’s–

Warren E. Burger:

How about the potential income on inflation?

Capital gains.

Perhaps that is out… off the field, but let me ask you this.

Warren E. Burger:

Could they put… the owner put a timber crew in and start cutting the timber?

Joe G. Roady:

–We submit that that would not have been possible, Your Honor.

First of all, the government would have intervened.

They have suggested as much in their briefs before this Court.

Second of all, and I am not certain that this is in the record, but I think it is a fact which can be noted, the Big Thicket preserve was a cause celebre of the group in Southeast Texas which meant to and wanted to preserve the Big Thicket Forest.

There were people who were constantly, and I would say representing the public in that respect, and certainly after Congress enacted this legislation in 1974, they were closely watching what was happening to these tracts of land to prevent just what… the question involved.

Byron R. White:

Did I read in your brief or in somebody’s brief that your client agreed not to develop the timber?

Joe G. Roady:

Yes, sir.

Byron R. White:

During the process of the passage of the legislation?

Joe G. Roady:

That’s correct, prior–

Byron R. White:

And so I take it that your client was supporting passage of the legislation.

Joe G. Roady:

–Not entirely, Your Honor.

What we did was–

Byron R. White:

Well, why would you agree not to develop any of the timber?

Joe G. Roady:

–As a good faith effort–

Byron R. White:

To what?

Joe G. Roady:

–to demonstrate to Congress that Kirby wanted to be a good citizen and not out–

Byron R. White:

So go ahead and pass the legislation.

Joe G. Roady:

–It did not oppose the legislation, Your Honor.

It did not support it as others did.

Byron R. White:

Now, is this undertaking of yours in the record?

Joe G. Roady:

Which undertaking, Your Honor?

Byron R. White:

Not to develop the timber.

Joe G. Roady:

It is an admitted fact.

I don’t know that it is mentioned in the record specifically.

Sandra Day O’Connor:

Mr. Roady–

Joe G. Roady:

Yes, Your Honor.

Sandra Day O’Connor:

–the facts that you rely on here to constitute a taking, a prepayment taking, wouldn’t those same facts exist in any Section 257 straight condemnation proceeding?

Joe G. Roady:

To a great degree, Your Honor, yes.

Sandra Day O’Connor:

Well, wouldn’t it turn every 257 proceeding into a 258 proceeding, in effect?

Joe G. Roady:

The only distinction, Your Honor, is that in a 257 case involving land which has income-producing capabilities and is producing income, that situation does not fit as readily into this Court’s taking analysis under the police power cases, that is, those cases which say that there is no taking when there is remaining, such as in Agins against City of Tiburon, a viable economic use.

If there is a viable economic use, there may yet be the burden on the title, on the ownership interest, as is present in an unimproved property situation.

And so, yes, there may yet be a taking in an improved property situation as an unimproved.

William J. Brennan, Jr.:

May I get back to when it was you made this agreement?

It was before the passage of the Act, wasn’t it?

Joe G. Roady:

That is correct.

William J. Brennan, Jr.:

And with whom did you make it?

Joe G. Roady:

The Texas Forestry Association, as a group, indicated to–

William J. Brennan, Jr.:

Was this the group supporting the Big Thicket?

Joe G. Roady:

–No, sir.

This was a group of timbermen, owners and manufacturers which indicated to the representatives of the Interior Department and the Congressmen who were involved in pushing the Act through to passage.

William J. Brennan, Jr.:

Did your client expect any compensation for that agreement?

Joe G. Roady:

I would say not, Your Honor, would be my supposition.

John Paul Stevens:

Does your position hinge on that agreement?

Would you make the same arguments if there were no such agreement?

Joe G. Roady:

I would make the same arguments if there were no such agreement, Your Honor.

I have referred–

John Paul Stevens:

You would make the same arguments even if you had this vast timber land that was not economically being developed, but you had a right to cut down the trees any time you wanted to.

Joe G. Roady:

–Yes.

John Paul Stevens:

You would still say that as soon as they filed the complaint, you are entitled to interest.

Joe G. Roady:

Correct.

Yes, sir.

I would indeed say that.

William H. Rehnquist:

What was it about the filing of the complaint that prevented you from cutting down the trees if it had not been for your prior agreement?

Joe G. Roady:

Your Honor, our position relating to the filing of the complaint is based upon the fact that that was the moment when the federal government asserted in a positive public way its intent to take the property.

William H. Rehnquist:

But this was not a declaration of taking proceeding.

This was straight condemnation, and that case that Justice Feed wrote a number of years says that one of the things the government is entitled to look to in straight condemnation is whether it wants to buy the property at the price the jury or the commissioners fix.

Joe G. Roady:

That is true.

We do not question the right of the government to back out of a condemnation once it has been filed under Section 257.

William J. Brennan, Jr.:

Well, maybe I am asking the same question my brother Rehnquist did, but I don’t understand how the institution of the condemnation proceedings deprived you of anything when you had agreed before the proceeding was begun not to use it.

Joe G. Roady:

This, Your Honor, was the impediment on the legal interests which had not existed before.

At the same time, the government filed a notice of lis pendence.

The effect of those two circumstances was to place a barrier around the titles, around the economic uses which might be made of this property.

It was at that moment, looking at the line of cases that have said there may be a series of events which, once there is a certainty that the government is going to move forward in this respect, reaches a taking level.

William H. Rehnquist:

Well, I don’t know what the effect of a lis pendence is in Texas, but I know that when I practiced in Arizona, it simply was to say, advise everyone that the property was subject to a condemnation action.

Now, that does not impair the use of the property, the filing of a lis pendence, any more than the filing of a condemnation action.

All that does it give the public notice of the filing of the condemnation action.

So what has the lis pendence got to do with it?

Joe G. Roady:

Your Honor, the lis pendence is the confirmation in the public record in addition to the condemnation petition itself that the government is going forward with its intent to take.

William H. Rehnquist:

But it is going forward and proceeding by straight condemnation.

Joe G. Roady:

Correct.

William H. Rehnquist:

But I am still not satisfied with what you have said, that there were any other impediments on the use of the land.

I think you agree that if you haven’t entered into this other agreement, you would have been free to cut the timber on the land.

Certainly you are free to place a security interest on the land, if you could have gotten somebody to give you a security interest on the land.

I don’t see how you are impaired in the use of the land except the way anybody is impaired in that you can’t really sell land after a condemnation action has been filed because people are just waiting to see what the commissioners find.

Joe G. Roady:

Our position, Your Honor, is that the practical impediments to the economic use of the property were such that after the filing of the complaint and after the posting of the lis pendence notice rendered all economic use unavailable, and this within this Court’s police power taking analysis demonstrates that the burdens which the property has not borne before had reached the level that a taking occurred.

Now, one of the vital questions in this case, and one which I don’t believe this Court has addressed before authoritatively is the question of what is a taking in a Section 257 case absent physical possession?

Is it the accrual of the title of the government, or, on the other hand, is it the deprivation of the interest of the landowner?

We submit to the Court that it is the deprivation of the interest of the landowner.

In this case, and this is the reason I emphasized the purpose of the condemnation here, is it the effective accomplishment of the purposes of the condemnation which is the taking?

In this case, that is what we contend.

If the taking occurred at the time of the payment of the award, then that is tantamount to saying that it is the accrual of the title of the government rather than the deprivation of the interest of the landowner which is the test of the taking.

As the Court is aware, there is a conflict on this question between the Fifth and the Ninth Circuits, the Fifth Court in our case, the Ninth Circuit in two separate cases.

The Ninth Circuit has held that in one case the date of the judgment was the date of taking, and in the other case that the date of evaluation of the property was the date of taking.

The Court in our case followed the Danforth decision, the 1939 decision of this Court, in holding that it was the date of the payment of the award.

The problem with that situation as applied to this case is that property was valued in March of 1979.

The award was not paid until March of 1952, a three-year gap.

When was judgment?

Joe G. Roady:

Judgment was in August of 1981, seven months prior to the payment of the award.

William H. Rehnquist:

Why was the property valued in whatever month it was in ’79?

Joe G. Roady:

Your Honor, because that was the date of the beginning of the hearings before the commission.

William H. Rehnquist:

Was it stipulated?

Joe G. Roady:

There was a stipulation that the beginning date of the hearings before the commission was the date of taking.

Yes, sir.

William H. Rehnquist:

Was it the date of taking or the date of evaluation?

Joe G. Roady:

Date of taking was the language used.

Yes, sir.

John Paul Stevens:

But it wasn’t a taking for the purpose of having a fixed point of reference for valuation purposes?

Joe G. Roady:

Well, there is disagreement–

John Paul Stevens:

I mean, I don’t understand.

You don’t really argue that they are committed to that as the date from which interest must run.

You don’t even argue that primarily.

You argue the complaint date.

Joe G. Roady:

–We do, Your Honor.

There is disagreement not only among the parties, but among the courts as to the effect of the stipulation.

The Fifth Circuit rejected it as being merely an agreement as to the date of valuation rather than date of taking.

The District Court ignored it and found that the date of the filing of the complaint was the date of taking.

William J. Brennan, Jr.:

Well, I take it you stipulated to the date of taking that you did stipulate to because you didn’t think you could argue for any earlier date?

Or later.

Joe G. Roady:

That is true, Your Honor.

There was consideration made of arguing that the date of the passage of the Act was the date of taking.

However, in the legislative history, it was clear that there had been a provision providing for a declaration of taking which was removed during the legislative process, even though the Act itself states that there is hereby created the Big Thicket National Preserve, which would indicate an intent on the part of Congress to legislatively declare that this property was going to be taken and preserved.

There are a number of constitutional principles involved in this particular matter.

We want to emphasize four.

The first is that the word “property” in the Fifth Amendment refers to ownership interest, and not to the physical property itself.

This question was authoritatively decided in United States against General Motors.

The second is that a taking does not require physical invasion or appropriation or passage of title.

This proposition has, we think, also been affirmatively and authoritatively decided, most recently in Penn Central Transportation against the City of New York, and Justice Brennan’s dissent, which may very well have represented a majority point of view in that case, and San Diego Gas and Electric against City of San Diego.

The third, and the one… one of the two which we want to emphasize to the greatest extent, is that value is to be determined as of the date of taking.

That is a constitutional mandate much supported by and announced by the decisions of this Court, but not, very candidly, observed in practice.

Joe G. Roady:

The problems are, you must have a date of valuation at some point during the process of condemnation.

That date will always be before the date of the payment of the award.

If the date of the payment of the award is determined then to be the date of taking, you cannot have a coincident date of valuation and date of taking.

Byron R. White:

And that may be very good for some people and very bad for others.

Joe G. Roady:

That is true, Your Honor, depending on the fluctuations in the marketplace, but we contend before this Court that what should be the rule is a fair rule to all landowners irrespective of the fluctuations in the marketplace.

Byron R. White:

Tell me, what is the significance of the date of payment?

Joe G. Roady:

The significance, Your Honor, is in reliance on the Danforth decision.

The Danforth case held that the date of the payment of the award was the date of taking unless there had been some taking prior to that time.

Byron R. White:

Right.

What happens… Why is that the date of payment?

Does title pass then?

Joe G. Roady:

That’s when title passes.

That’s when–

Byron R. White:

How do you know that?

Is that under case law, or is that–

Joe G. Roady:

–That title passes?

Byron R. White:

–Uh-huh.

Joe G. Roady:

That is the universal practice.

That’s when title passes, when the–

Byron R. White:

Well, that’s just as a result of case law?

That’s when the United States title accrues, not at judgment, but at payment?

Joe G. Roady:

–Yes, Your Honor, because of the constitutional–

Byron R. White:

Is that a statute, or is that a decision?

Joe G. Roady:

–No, it is a constitutional requirement, Your Honor.

The Fifth Amendment says that no taking shall occur without just compensation, meaning that the government cannot take the title until it pays just compensation.

Byron R. White:

And so up until that time, you are the owner, and the judgment really doesn’t enjoin you from doing anything.

Joe G. Roady:

Not so, Your Honor.

It doesn’t enjoin in the legal sense.

It certainly enjoins in the practical sense.

We may have the ownership rights, but they have been sliced through by the actions of the government in prohibiting or preventing, rather, the economic use of the property.

Harry A. Blackmun:

Could the United States still back out after the date of judgment and before the date of payment?

Joe G. Roady:

Yes, it could, Your Honor.

Rule 71(a) provides that at any time before the payment of the award, the government may withdraw.

However, if it is after the evaluation, it is subject to court approval, and subject to the court adjusting the situation for a just compensation.

Harry A. Blackmun:

I take it property taxes–

Joe G. Roady:

Sir?

Harry A. Blackmun:

–are assessed in the interim?

Joe G. Roady:

I beg your pardon?

Harry A. Blackmun:

I take it property taxes, state property taxes are assessed in the interim.

Joe G. Roady:

In the interim, and they are paid by the landowner rather than the government.

Harry A. Blackmun:

That would be by Kirby?

Joe G. Roady:

Yes.

Harry A. Blackmun:

And this would be true for the period between judgment and payment.

Joe G. Roady:

That is… That continues to be true, yes, because title does not pass until the payment of the award.

Sandra Day O’Connor:

Well, Mr. Roady, that is exactly the Congressional scheme, isn’t it, to give the government an opportunity to have value determined before it decides whether in fact it wants to spend that much money to acquire something in condemnation, and in fact the government has provided a speedier way for… the Congress has provided a speedier way for the government to acquire property if the government is willing to go ahead with the purchase no matter what the valuation might be.

Joe G. Roady:

Your Honor’s analysis is correct.

There are two methods whereby the government is authorized to proceed in condemnation.

However–

Sandra Day O’Connor:

Sure, and if we are to agree with you, it just means Congress’s separate schemes for condemnation won’t be upheld.

You would force the government into immediate acquisition.

Joe G. Roady:

–Not necessarily, Your Honor.

What we are suggesting is, as Justice Brennan suggested in his dissent in San Diego Gas and Electric, that when a taking occurs, there is an automatic duty on the part of the government to pay just compensation.

That taking may be temporary.

The government may in that respect back out of the condemnation before it pays the award, and in that respect, it has had the opportunity to test the marketplace, to see whether it wants to condemn this property at the price that has been determined.

Warren E. Burger:

But if it is dealing with a large public project, a dam or a highway system, there isn’t really any backing out.

The government has committed itself to the project at whatever price they have to pay, even though they can litigate it.

I suppose the experience is varied.

In some of these public projects, it may be six, eight, or more years before… from the time of filing to the time when the government actually wants to flood the land or take it for a highway or a bridge, and your argument, I take it, is that there has been something like a constructive taking as soon as they filed.

Joe G. Roady:

Yes, sir, that is our position.

Warren E. Burger:

Especially if it is an irrevocable–

Joe G. Roady:

If it is irrevocable, then it is clear that the government is not going to back out, but we do not deny or contest the right of the government to back out.

William H. Rehnquist:

–This case was not irrevocable.

Joe G. Roady:

Well, Your Honor, in a larger sense it was irrevocable, because Congress directed that the property be taken.

This particular property was isolated as being of the highest wilderness value in the entire Big Thicket Forest.

William H. Rehnquist:

Well, all the government did with respect to your client’s specific property was to file a straight condemnation action against it, which allows it to elect after the value has been fixed whether to go ahead or not, so in your case there was no commitment prior to valuation.

Joe G. Roady:

Respectfully, Your Honor, I would disagree.

As a practical matter, there was a commitment.

William H. Rehnquist:

Then you say, as Justice O’Connor pointed out, that the distinction between straight condemnation and declaration of taking and that the old opinion in the flood control case by Justice Reed are just no longer good law, that the government can’t elect after it finds out what the value is to back off.

Joe G. Roady:

No, Your Honor.

What I say is that if there is a temporary taking, then the government must pay the cost of that temporary taking.

It does not… It is not compelled to complete the taking if it chooses Section 257.

I would like to reserve the remainder of my time.

John Paul Stevens:

May I just ask one question?

Would you take the position that if they had backed out here after… right at the last moment, they had backed out and changed their minds, that your client could have received damages from them under the theory in Justice Brennan’s dissent?

Joe G. Roady:

Yes, that is–

John Paul Stevens:

So you are entitled either to interest or damages?

Joe G. Roady:

–Yes, that is consistent with our position.

I would like to reserve the remainder of my time for rebuttal.

Warren E. Burger:

Mrs. Shapiro.

Harriet S. Shapiro:

Mr. Chief Justice, and may it please the Court, the basic procedure that the government uses in exercising its power of eminent domain is the straight condemnation or complaint procedure.

Under that procedure, the government files a complaint stating that it wants to take specific property, and asking the court to establish its price.

That is just compensation.

A hearing is held, and the condemnation award is issued.

That award establishes the price of the property.

If the government wants the property at that price, it pays the condemnation award, and at that moment takes both the title and the right to possession of the property.

The sale, the taking occurs when the property and the money change hands.

This straight condemnation procedure is the one involved in this case.

It is ordinarily the procedure that is least intrusive from the landowner’s point of view, because it permits him to remain in possession until the price is determined and paid in full.

In 1931, Congress added a provision permitting the government to obtain immediate title and possession by filing a declaration of taking.

When that declaration is filed, usually at the same time as the complaint but not necessarily, that establishes the sale date.

Harriet S. Shapiro:

In rare instances when the government has entered into possession before it files a declaration of taking, the date that it assumes possession is the date of the sale.

Thurgood Marshall:

Isn’t there one procedure where the money is paid in and deposited in a bank?

Harriet S. Shapiro:

That’s the declaration of taking.

What happens in the declaration of taking situation is that the… since the date of sale is the date of the taking, the… when the declaration of taking is filed, the owner gets the estimated sale price.

As part of the declaration of taking, we have to pay into court the estimated sale price.

Warren E. Burger:

To the court, but may they take it out and put it in their own bank account?

Harriet S. Shapiro:

Yes.

Warren E. Burger:

That is the important thing.

Harriet S. Shapiro:

Yes.

Thurgood Marshall:

I thought the court deposited it in the bank.

Harriet S. Shapiro:

It is deposited into the court, but Rule 71(a) provides that it shall be paid out to the landowner promptly.

That’s the reason why he doesn’t get interest on the amount that has been deposited, because he has that amount to use.

He gets interest only on the extent to which the actual award and condemnation is higher than the estimated amount.

Warren E. Burger:

You mean on the deferred payment.

Harriet S. Shapiro:

Yes, on the difference between the amount that is deposited–

Warren E. Burger:

–deferred.

Harriet S. Shapiro:

–Yes.

Warren E. Burger:

They get interest at… is it the statutory rate?

Harriet S. Shapiro:

There is a statutory rate.

We have agreed that since interest is part of just compensation in this context, he is entitled to the interest calculated at the actual interest rate.

That is not an issue in this case.

Sandra Day O’Connor:

Mrs. Shapiro, the petitioner is arguing that the effects on it of the government’s condemnation action here were such as to give cause to… a cause of action to them for what amounts to inverse condemnation, in effect, to force payment and damages or alternatively by way of interest for their loss suffered before date of payment.

Harriet S. Shapiro:

Um-hm.

Sandra Day O’Connor:

Now, in your brief, you indicate that a landowner can get damages on an inverse condemnation theory for adverse effects on the property caused by the condemnation proceedings, but only for effects over and above collateral consequences.

Harriet S. Shapiro:

Right.

Sandra Day O’Connor:

Now, what do you mean by collateral consequences?

What are those?

It wasn’t clear to me.

Harriet S. Shapiro:

Well, there are… In the eminent domain jurisprudence, it is fairly well established that there are collateral consequences that are… that may be suffered by the landowner when eminent… when his property is taken.

A couple of–

Sandra Day O’Connor:

What are they?

Harriet S. Shapiro:

–A couple of examples would be if he… his business is destroyed, if–

Sandra Day O’Connor:

Could there be any collateral consequences for unimproved realty that you can think of?

Harriet S. Shapiro:

–Yes, I suppose financing problems, or… I mean, the collateral consequences really are the… they relate to the particular value of this property to the landowner.

The fact that… Well, I suppose if you have a profitable business that is condemned because it is in the way of a throughway.

The condemnation award for that business is exactly the same whether the business is profitable or whether it is a losing business.

Obviously, if the landowner is losing money, the value to him of the business is going to be smaller than if it is a very profitable business.

On the other hand, since eminent domain deals with transferrable value, what the government gets is the property.

Sandra Day O’Connor:

Well, could there be any so-called collateral consequences in this type situation for unimproved realty?

Harriet S. Shapiro:

I find it very hard to think of any, and–

Harry A. Blackmun:

What if access were cut off?

Would that be a collateral consequence?

Harriet S. Shapiro:

–I suppose that could be a… Well, no, that’s the kind of consequence… I mean, that could be a situation where you would have a taking by inverse condemnation.

William H. Rehnquist:

But there would have to be a remainder there for taking access.

If you take the whole parcel, by definition, the taking of access isn’t going to be any harm to the person whose entire property is taken.

Harriet S. Shapiro:

Well, what I was thinking of was if the landowner owns property in the middle of a project, and the government takes the property… takes the property all around it so that he can’t get into his property.

Harry A. Blackmun:

As is so often the case in highway construction.

Out right through the middle of a farm or a corner of it.

Harriet S. Shapiro:

But our basic point really is that those kinds of damages are… they are damages that are unrelated to the standard procedures for inverse condemnation, where the government comes in and says, we’re going to take the property, and files their complaint, and then the commission determines the value of the property.

The government then takes the property at the… when it pays the judgment.

It may be that the landowner says, look, you’ve taken an interest in my land, you’ve cut off access, you’ve taken… you have affected my interest in the property.

That is a completely different suit.

The Tucker Act provides… That is a suit that rests on a claim arising under the Constitution.

That is a Tucker Act suit.

Sandra Day O’Connor:

Is that an inverse condemnation suit?

Harriet S. Shapiro:

That’s an inverse condemnation claim.

Sandra Day O’Connor:

And the property owner has to file an entirely separate suit?

Harriet S. Shapiro:

In the… in the–

Sandra Day O’Connor:

And the court in the condemnation action can’t take account of those damages in any away?

Harriet S. Shapiro:

–That’s–

Sandra Day O’Connor:

That’s your position?

Harriet S. Shapiro:

–That is our suggestion, yes.

Sandra Day O’Connor:

Has that been determined?

That seems like a great burden to impose on a landowner.

Harriet S. Shapiro:

Well, in some sense yes, it is… I mean, it is… this is a tough question.

As I say, it is not in this case, because in this case there is no legitimate claim of any inverse condemnation.

William H. Rehnquist:

I am confused by your answer to Justice O’Connor’s question.

Perhaps I shouldn’t be.

But I have understood the collateral consequences doctrine in the law of just compensation to be much like the law of remote and consequential damages in law of contracts, not that those kind of damages could be recovered somewhere else, but that they simply could not be recovered at all.

Harriet S. Shapiro:

That’s right.

William H. Rehnquist:

That just compensation did not include that kind of damages.

Harriet S. Shapiro:

That’s–

William H. Rehnquist:

So why talk about bringing an action under the Tucker Act for collateral consequences?

They wouldn’t be recoverable anyway.

Harriet S. Shapiro:

–That is absolutely right.

My only point is that what–

Sandra Day O’Connor:

But your brief said they could be.

So I don’t… you know, I just don’t understand this exchange at all.

Harriet S. Shapiro:

–Our point is that when… what you have in the… under your Tucker Act, you go into the Court of Claims, and the Court of Claims then has to decide what you are asserting… whether what you are asserting are legitimate inverse condemnation claims or whether they are simply collateral consequences, and that, if they are collateral consequences, you don’t get any recovery for them.

If they are legitimate inverse condemnation claims, then you do get a recovery.

Sandra Day O’Connor:

But you are quite certain that they’d have to file a separate suit, the landowner, which seems so unfair.

Harriet S. Shapiro:

Well, the problem is that Congress has said that claims arising under the Constitution against the United States are to be tried in the Court of Claims only if they are over $10,000.

That is a jurisdictional decision that Congress has made.

On the other hand, if you did say that under some kind of a pendent jurisdiction notice, and conceivably you could, what this would do would be to complicate your condemnation proceeding very substantially, and in some sense the fact that these two kinds of claims involve the same property is really coincidental, that what the condemnation suit is is a pricing action.

The government is looking to get a price for the property.

What the inverse condemnation suit is is a claim by the landowner that you have done things to my property, or you have done things to my interests that affect my rights with the property.

That is what has happened beforehand.

The eminent domain proceeding is for the government to find out how much it is going to cost for them to purchase the property.

They are two separate questions.

William H. Rehnquist:

You are saying all the commissioners value is the full fee interest–

Harriet S. Shapiro:

Well, or whatever–

William H. Rehnquist:

–If you are talking about a temporary taking or something like that, you are talking about something that is measured by quite a different measure–

Harriet S. Shapiro:

–Yes, it is simply a valuation situation.

William H. Rehnquist:

–It does seem kind of difficult to me if you are talking about the same piece of property, if there is a claim of another kind of taking, of a taking of a less than a full fee interest, that the landowner would have to file an action separately in the Court of Claims.

Harriet S. Shapiro:

Well, as I say, it may be that there is some kind of a pendent jurisdiction, but my main point is that what the landowner has to show in his inverse condemnation suit is something that is far beyond anything that the landowner here has even started to show.

It is something beyond these consequential damages.

Warren E. Burger:

Well, is it the government’s position that the filing of the papers doesn’t inflict any injury on the–

Harriet S. Shapiro:

It certainly is.

The–

Warren E. Burger:

–But we must know as a practical matter that that… that it does damage the property owner.

Harriet S. Shapiro:

–Well, what the petitioner is claiming is that he has got a cloud on his title, that the cloud really kind of arises gradually, it starts at the point when the interest in acquiring the land focuses and, you know, before the statutes passed it kind of increases as the statute is passed, and then when the land is identified and finally when the condemnation suit proceeds.

Warren E. Burger:

Let’s take a practical situation in this area recently, Highway 66, which was seven, eight, nine years in construction.

The people whose homes and land was being taken waited probably a long time from the date when they knew they were going to lose the property, lose it in the sense that it was going to the government for compensation, until the date when they got their money, and–

Harriet S. Shapiro:

And they remained in possession all that time.

Warren E. Burger:

–No, many of them were torn down by the governmental action, demolished long before payment was made.

Harriet S. Shapiro:

Well, if in fact they were… the government entered into possession and filed a declaration of taking, it had to make a payment at that point, and to the extent that that payment didn’t cover the amount that was actually ultimately determined, then the landowners were entitled to interest, but absent any such payment or entry into possession, the landowners under the federal scheme remain in possession.

They retain all the rights to use their property.

Warren E. Burger:

You don’t thank their prospects of selling the property are impaired?

Harriet S. Shapiro:

Well, the point is, this cloud on the title, it may as a practical matter affect what the landowner can do, but that will be simply because of the subjective reactions of the landowner and the people that he wants to deal with.

William J. Brennan, Jr.:

Well, is that necessarily true, Mrs. Shapiro?

Doesn’t the mere institution of the condemnation proceedings have the effect of limiting the use of the land?

You don’t think so?

Harriet S. Shapiro:

No, I really–

William J. Brennan, Jr.:

In the real world, you don’t think so?

Harriet S. Shapiro:

–Well, in the real world, it may, and the–

Warren E. Burger:

That’s the one your friend thinks he is in.

0 [Generallaughter.]

Harriet S. Shapiro:

–But… well, as far as he is concerned, in his real world, he has held this property since at least 1949, and the only difference… he has never cut the timber.

He has never tried to develop it.

As far as he is concerned, any interest or use he has made of the land is exactly the same until we take the title and the possession.

Harriet S. Shapiro:

Of course, his point that all we want is to preserve the land is quite incorrect, because what we want is to establish a public park in which there will be public access, and we don’t achieve that purpose until we pay the money and get the possession and the title.

Thurgood Marshall:

Ms. Shapiro, one point.

You say there is no damage, but you do admit there is a cloud on the title.

Harriet S. Shapiro:

There is a cloud on the title.

Thurgood Marshall:

Well, isn’t that a damage?

Harriet S. Shapiro:

Well, in some cases–

Thurgood Marshall:

Or am I just playing with words?

Harriet S. Shapiro:

–In some cases, it may be a damage, but the point is that in other cases, the landowner may vastly prefer to remain in possession rather than to be put out of possession.

Thurgood Marshall:

Well, suppose somebody comes to him and says, I would like to buy your property for $18 million, but it has to be done today.

Harriet S. Shapiro:

Well, he can sell it.

Thurgood Marshall:

You think anybody would buy it?

Harriet S. Shapiro:

Well, I doubt that anybody would come to him.

Thurgood Marshall:

That’s right.

Harriet S. Shapiro:

But–

Thurgood Marshall:

But if they did come, then he could sell it?

Harriet S. Shapiro:

–Sure he could sell it.

Absolutely.

And–

William H. Rehnquist:

Ms. Shapiro, a moment ago Justice Marshall asked you if there weren’t a cloud on the title as a result of the condemnation proceeding, and you said yes, there was.

What do you understand in that sense a cloud on the title to mean?

Harriet S. Shapiro:

–What I understand it to mean is that there is going to be… people are going to act as though the landowner can’t… I mean, they will be less willing to buy and sell, or they will be less willing to deal with it.

William H. Rehnquist:

People will do what they do when they know a condemnation action is–

Harriet S. Shapiro:

Yes.

William H. Rehnquist:

–You don’t understand the cloud on the title in that sense to suggest any question about the owner’s ability to pay fee title?

Harriet S. Shapiro:

Oh, no, no, no, absolutely not.

The other point is that since under our theory and under the established principles the title to the land and the value… the valuation date is the date that the taking occurs, we agree that if in fact between the date of valuation here in 1979 and the date that the land was actually taken there has been an increase in the value of the land, then the landowner is entitled to show that increase, either by a motion under Rule 60(b) asking for relief from the judgment, or he can also go in under Rule 71(a) and ask that it is no longer equitable because of the delays to permit the judgment to be executed.

But the point is, if you have… and you can… if the land has increased in value, he can show that, because he is entitled to just compensation at the date of taking, but to say that, well, interest is kind of a rough equivalent of that is just wrong, because what you have to look at in deciding whether he has gotten just compensation is whether land prices have increased, not what has happened to the value of money.

Interest rates have got nothing to do with his just compensation claim, which is to recover the current value of the property.

William H. Rehnquist:

So long as he recovers interest from the date of taking, if the judgment isn’t paid.

Harriet S. Shapiro:

Well, if the government is taking, but our point is that in straight condemnation cases of course we haven’t taken until we pay the judgment.

Harriet S. Shapiro:

But what he is saying is, look, I’ve got… back in ’79 the land may have been worth less than it was in ’82, so I am entitled to interest to make up the difference between what the land was worth in ’79 and what it was worth in ’82, but if he can show that the land was worth more in ’82, then indeed he is entitled to what the land is worth in ’82, when we take it, and interest is totally unrelated to that.

The landowner… petitioner relies largely on this Court’s decisions involving the police power on land use regulation.

As we explain in our brief, in those cases the Court has required a far more serious invasion of property rights than petitioner has suffered before it has found a constitutional taking.

It is worth emphasizing that even if the question were closer than we think it is, there are serious practical problems in carrying out the case by case analysis used in land use cases in the context of condemnation proceedings, so that the date of taking must be litigated in each case.

That brings in idiosyncratic values and potential complications in determining the date of valuation that would seriously complicate an already complex process.

There is a constitutionally significant difference between the two kinds of cases that justifies treating them differently.

When the government is exercising its eminent domain powers, it recognizes the landowner’s right to just compensation.

The dispute is simply over how that just compensation should be calculated, not over whether the property owner is entitled to any payment at all.

The government should be allowed more leeway when it is establishing parks and preserving scenic values by condemning land and paying for it than when it tries to achieve the same results by zoning and imposing the burdens on the landowner without paying him anything.

Mayen and Dow recognize that, and the dissent in Penn Central certainly sounds as though the dissenters would have agreed with the majority that there was no taking if the complaint there had involved simply temporary interferences in the course of a condemnation proceeding.

Long delays in paying condemnation awards of course may hurt landowners, but they are not the helpless victims that petitioner portrays.

First, because the landowner is entitled to the fair market value at the time his land is taken, he is entitled to show that the land has increased in value since the original valuation date.

That showing shouldn’t require a complicated supplementary hearing.

Indeed, it is probably going to be possible often to negotiate a stipulation because all that will be involved is whether comparable real estate values have gone up.

Warren E. Burger:

But that doesn’t lay down any rule, the government’s situation, the fact that they can agree on something.

Harriet S. Shapiro:

That’s true, but the point is that it’s… what you have to be concerned about is the market value of the land, and not the interest rate, and our point is that the proceeding is not probably going to be a very complicated one.

What you are talking about is land values.

You don’t have to… Petitioner suggests that you are going to have to start the whole proceeding over again.

Warren E. Burger:

Courts can’t deal with the value.

That is determined by a fact-finding process, isn’t it?

Harriet S. Shapiro:

It is the commission’s–

Warren E. Burger:

Yes.

Harriet S. Shapiro:

–Yes.

So that… but as I say, it shouldn’t be a complicated determination to make.

And the other point is that if the land values have gone up very steeply, the payment of interest isn’t going to afford the landowner just compensation.

On the other hand, where the land values have dropped, as it may well be they have here, the interest will give the landowner a windfall.

If the landowner can’t show that the land has appreciated, he can also move to dismiss the condemnation suit under Rule 71(a).

If the District Court agrees that the government’s delay has been unreasonable, it can dismiss the suit, and the government must then pay the landowner’s litigation costs, including attorneys’ fees.

That is under the Uniform Relocation Assistance and Land Acquisition Policies Act.

A landowner in petitioner’s position has a third alternative.

Harriet S. Shapiro:

It is pretty clear that if the Park Service had concluded that he was seriously considering cutting his timber, the government would have filed a declaration of taking, and at that point, of course, we would have had to deposit the estimated value of the property, and he would then have become entitled to interest, just as he claims now that he is, so that he had it within his power to get an immediate taking if that was what he wanted.

Unless there are further questions.

Warren E. Burger:

Very well.

Do you have anything further, Mr. Roady?

Joe G. Roady:

Yes, please, Your Honor.

Warren E. Burger:

You have three minutes remaining.

Joe G. Roady:

Thank you.

May it please the Court, what we are talking about here is the paramount power of the government to take property.

The position of the government is that that does not occur until it exercises possession or control over the landowner’s property.

That position, we submit to the Court, is totally contrary to this Court’s own analyses of the takings questions in police power cases.

We have suggested to the Court that a separate analysis might well be given to eminent domain cases, as I think is appropriate, but in that separate analysis it would be clear that the character of the taking, the character of the government action which was being analyzed is this paramount power to take.

Mr. Justice Brennan in his dissent in San Diego Gas and Electric noted in a footnote that where the property is to remain unused, undisturbed, and in its natural state, paraphrasing, in this sense, the property is being used by the public.

We submit to the Court that the principles which were announced in Justice Brennan’s dissent in that case are applicable to the analysis which should be made of the power of the government to take in eminent domain cases.

The Court… excuse me.

The government relies on the Danforth decision.

Danforth does not support the absolutist position taken by the government.

Danforth held that a taking could occur in actuality before the payment of the award.

It also held that in order for an act of the government to amount to a taking, it must result in an appropriation of the property to the uses of the government.

That is precisely what has happened here.

This property was appropriated to the uses of the government, was being, in effect, used by the public because of its preservation in a natural state.

The government suggests that we should go through an inverse condemnation process.

I submit that that is totally inappropriate.

What we have is a just compensation question under the Fifth Amendment.

To relegate the taxpayer, the landowner to the Court of Claims is to divide the just compensation issue.

If the government withdraws its condemnation, and is allowed to do so by the District Court, then there may be an inverse condemnation question, but once the–

Byron R. White:

What if we agree with you that interest does run?

What about the rate?

Joe G. Roady:

–We have submitted to the Court that the rate is a question which should be discussed in this case.

It should be a market rate.

I think the government–

Byron R. White:

Do you think the Constitution requires that?

Joe G. Roady:

–I do indeed, Your Honor.

Thank you very much.

Warren E. Burger:

Thank you, counsel.

The case is submitted.