Eminent domain and the proposed amendment to the Virginia constitution

1. Eminent domain and the proposed amendment to the Virginia constitution Joe Viviano

2. INTRODUCTION AND OVERVIEW • We are going discuss: • How the constitutional restrictions limiting eminent domain developed in Virginia; • The Proposed Amendment to the Virginia Constitution and its effect on the law; and • Arguments against the Proposed Amendment.

3. “Eminent Domain” Defined: “The right on the part of the state to take or control the use of private property for the public benefit when public necessity demands it, is inherent in every sovereignty, and is inseparable from sovereignty, unless denied to it by its fundamental law.” City of Roanoke v Berkowitz, 80 Va. 616, 619 (1885) (emphasis added).

4. Most Common Use of Eminent Domain in 18th and 19th Century: • Most common use: award damages when land was taken for private benefit. • Construction of dam for watermill to grind grain into flour. • Flooded neighboring land.

5. Remedy – Writ of Ad Quod Damnum • Damaged land owner petitioned county court. • Writ ordered sheriff to impanel 5 land owners to serve as jur. • Jury viewed property and estimated damages. • Title passes to common wealth.

6. What about roads? • Very few early cases, doesn’t appear to be an issue.(before interstate highway system)

7. Pre-1830 Protections Restriction on Eminent Domain? “All men, hav[ing] the right of suffrage . . . cannot be taxed or deprived of their property for public uses, without their own consent, or that of their representatives.” -Section 6 of the Virginia Constitution of 1776 No.

8. “Indeed, in former days, the eminent domain in the establishment of roads was exercised . . . without compensation; but it is now very wisely and justly provided by the constitution, that in all cases where private property is taken for public uses, just compensation shall be made to the owner for his loss.”Tuckahoe Canal Co. v. Tuckahoe & J.R.R. Co., 38 Va. 42, 76 (1840) • “At common law no damages were recoverable when property was taken for a public improvement”.Iron City Auto. Co. v. City of Pittsburgh, 253 Pa. 478, 494; 98 A. 679, 684 (1916)

9. Constitutional Convention of 1830 • “The Legislature shall not pass any . . . law, whereby private property shall be taken for public uses, without just compensation.” Va. Const. of 1830, § 11 • Mirrors U.S. Constitution. • Added without debate. • 919 page record, only Chief Justice Marshal commented.

10. Everything was great now, right? • Kehrer v. City of Richmond, 81 Va. 745, 747 (1886). • The plaintiff owned a business that fronted a city street. • In the process of grading the road, the City of Richmond had placed the dirt on the plaintiff’s property. • It was lot of dirt - had to build steps and pay to remove dirt. • The plaintiff alleged that as a result of the grading, “ingress and egress to and from . . . his store [was] rendered inconvenient and unsafe, the value of his [property was] greatly diminished, his business serious impaired, [and] rainwater finds easy access into his . . . store causing great damage.”

11. “The Legislature shall not pass any . . . law, whereby private property shall be takenfor public uses, without just compensation.” Va. Const. of 1830, § 11

13. Kehrer Holding - damnumabsqueinjuria (“damage without wrongful act”) • “The result is, that the declaration before us is fatally defective. The property of the plaintiff has not been taken, nor have his rights been unlawfully invaded. And if, in consequence of the acts complained of, he has been obliged, as he avers, to erect a barrier for the protection of his property, or steps, in order to have ingress and egress to and from his premises, or if his business has been injuriously affected, and the value of his property diminished, it is a mere incidental injury, caused by the prosecution in a lawful manner, of a public improvement, for which there is no redress.” • Kehrer, 81 Va. at 750.

14. Supreme Court - Don’t Blame Us! • The Virginia Supreme Court recognized the harshness of this rule, but nevertheless continued to follow it. “The opinion of the court . . . in Kehrer v. City of Richmond, [is] a doctrine that, we admit, appears harsh, and may be really so, when applied to some cases; but it should be remembered that it is not the province of this court to make the law, but rather to enforce it.”

15. Constitutional Convention of 1902 • Argument For: FIX KEHRER Under then-existing law, the landowner “ha[d] no remedy on earth, . . . except . . . to pull down his house and then grade his lot down to the proposed change of grade of the new street.” “It was the design of th[is] amendment to our Constitution under consideration to remove an existing mischief, viz., the damaging of private property for public use without just compensation.” Debates from Constitutional Convention of 1902

16. Constitution of 1902 • “The General Assembly shall not enact any law . . . whereby private property shall be takenor damagedfor public uses, without just compensation” Section 58 of the Virginia Constitution of 1902

17. Constitutional Convention of 1902 • Legislature is best-suited to solve problems; • Will destroy economic development (companies will take capital to other states) • Uncertain application in courts • Will bankrupt state and railroads Arguments Against Proposed Amendment:

18. 1902 Amendment - Intent of the Framers • No Lost Profits • Relied on John Lewis’ Treaty heavily (no support) • Not available in Illinois (leading state) • Intended Compensation of Lost Access • Relied on John Lewis’ Treaty heavily (supported) • Kehrerwas essentially a lost access case

19. 1902 Amendment – Judicial Interpretation • Swift & Co. v. City of Newport News(1906) • A promising start • “City of Newport News raised the grade of a street in front of the plaintiff property owner's beef and cold storage business, which fronted the street.” • The grade of the street was raised at least four inches, which allegedly caused the plaintiff build a new sidewalk to access his property. • Held: “The new Constitution has not taken from the cities of the state the right to raise or lower the surface of a street when necessity requires, nor made it dependent upon the will of the parties affected thereby, but only provides that just compensation shall be made for the damage done.”

20. Town of Galax v. Waugh (1925) • “A city of [sic] has no right to obstruct its streets so as to deprive the property owner of free access to and from his property abutting thereon,” but a property owner is not entitled to damages“[i]f the change of grade of a street causes an enhancement of the market value of property abutting the street greater than that of property not so abutting.” Makes sense, right?

21. Real-World Result Doesn’t • The property owner operated a large retail business in the basement which produced about $50,000 in revenue per year (in 1928). • As a result of the basement’s closure, “this retail business has been practically ruined,” and “that the room [wa]s . . . [rendered] practically valueless.” • The fact that the value of the owner’s property increased “ten to twenty-five percent” was likely of little consolation to the property owner when it came at the expense of his entire business.

22. Wood v. City of Richmond (1927) • One of my favorite cases. • The city issued a permit to the property owner to build two driveways for entrance into his gasoline station. • City issued the permit, and after the driveways had been constructed, the city subsequently ordered one of the driveways to be removed because it was in violation of a city zoning ordinance. • Plaintiff appealed to Supreme Court, arguing his property had been damaged. And the Court told the Plaintiff . . .

24. Lost Profits Are Not Compensable • Why? • Not because they don’t exist, but simply because they “are too speculative and too uncertain to be” awarded.” FonticelloMineral Springs Co. v. City of Richmond, 147 Va. 355, 368; 137 S.E. 458, 462 (1927). • (But they can still be awarded for patent infringement, divorce, and breach of contract cases) Hmmm.

25. Police Power is not A Taking HELD: “[w]hatever restraints the legislature imposes upon the use and enjoyment of property within the reason and principle of this duty, the owner must submit to, and for any inconvenience or loss which he sustains thereby he is without remedy. It is a regulation and not a taking, an exercise of police power, and not of eminent domain.”

26. Wood is Reaffirmed • State Highway Comm’r v. Howard (1973) • State Highway Comm’r v. Easley (1974) • No compensation for installation of median diverting traffic or change in direction of roads. • To recover, the property owner must sustain the nearly impossible burden of proving “that the Commission acted unreasonably, fraudulently, or capriciously.

27. Limit on Wood – Complete Terminiation of Direct Access is Damage • State Highway and Transp. Comm’r v. Linsly(1982) • State Highway Commissioner took land that “resulted in elimination of the landowners’ direct access” to a public highway. • In lieu of direct access, the Commissioner planned to build a service route to the property. • HELD: A “reduction or limitation of direct access to an abutting landowner’s property generally is not compensable,” but the same is not true where “there is a complete extinguishment and termination of all the landowners’ rights of direct access.”

28. S.J. Res 3 (2012) – Proposed Amendment • Broad support from both side of the isle (83-17 pass in the house, 23-17 in Senate. • Main Effects: • Enshrines most of the post-kelo legislative reforms (2007) in the constitution • Changes “just compensation” to include lost access and lost profits • Lost access and lost profits are “to be defined by the legislature”

29. S.J. Res 3 (2012) – Proposed Amendment • “No private property shall be damaged or taken for public use without just compensation to the owner thereof. . . . • Just compensation shall be no less than the value of the property taken, lost profits and lost access, and damages to the residue caused by the taking. The terms ‘lost profits’ and ‘lost access’ are to be defined by the General Assembly.”

30. What the Legislature Giveth, the Legislature Taketh Away • "Lost access" means a material impairment of direct access to property, a portion of which has been taken or damaged” • "Lost profits" means a loss of business profits . . .for a period not to exceed three years from the date of valuation that is suffered as a result of a takingof the property H.B. 1035 (2012)

31. Is this even Constitutional? • Section 58 of Constitution is self-executing. When a constitution provision is self-executing “all statutes existing when such a Constitution is adopted, or which might thereafter be passed, inconsistent with its provisions, are nullified by such constitutional prohibition, though legislation may nevertheless be desirable and valuable for the purpose of defining the right and aiding in its enforcement.” Swift & Co. v. City of Newport News (1906). Make Sense. Imagine if Congress could define “free speech.”

32. Supreme Court Might Be Forced to Broaden Definition of Lost Acces • “[A] change in the organic law of the state [i]s not meaningless. But it would be meaningless if it should be adjudged that the Constitution . . . gave no additional or greater security to private property sought to be appropriated to public use than was guarantied [sic] by the former Constitution.” Swift & Co., 52 S.E. 821 at 825

33. Little Change if Definitions are Upheld • Lost Access– “a material impairmentof direct access to property, which has been taken or damaged.” • Dep't of Pub. Works & Bldgs. v. Wilson (1975). • Illinois case cited by Virginia S. Ct. • The Illinois Court held that a “material impairment” exists if direct access to a public street is completely eliminated. • A “material impairment” does not exist where the flow of traffic along the public road is affected by: • (1) “the installation of [a] median as a traffic control device,” • (2) regulations limiting the direction of traffic, or • (3) the diversion of traffic to another road. This holding substantially parallels the law as it currently exists in Virginia. Sound Familiar?

34. Constitutionality of Definitions, Cont. Although not clear, it appears that Lost Profits will only awarded when property is taken (not damaged). Lost profits" means a loss of business . . . that is suffered as a result of a taking of the propertyon which the business or farm operation is located, provided (i) the business is owned by the owner of the property taken, or by a tenant whose leasehold interest grants the tenant exclusive possession of substantially all the property taken, or (ii) the farm operation is operated by the owner of the property taken, or by a tenant using for a farm operation the property taken. . . . Va. H.B. 1035 (2012) (emphasis added).

35. Definition of Lost Profits is Not Consistent with Proposed Amendment • No private property shall be damaged or taken for public use without just compensation to the owner thereof. - Va. S.J. Res. 3 (2012). • As discussed supra, there is a line of Virginia cases holding that, albeit in limited circumstances, one type of “damage” is a loss of access. • Just compensation shall be no less than the value of the property taken, lost profits and lost access, and damages to the residue caused by the taking. - Va. S.J. Res. 3 (2012).

36. Better approach to lost profits:

37. The Debate Continues - Same Arguments, Different Century Pro Amendment: • Circa 1902 – • Is there ever, under any circumstances, so imperative a demand for a public improvement as that it shall be done at the expense of one or two individuals of the city? . . . I ask you, in that or any case the gentleman can ever cite, any reason why these improvements should be made at the expense of a few individuals, instead of at the expense of the general public? In whose behalf are they made? • Circa 2012– • Ensure that “the cost of taking property [are] be borne by the public, not by the individual property owner” and that “[f]air and full compensation [is] be given when property is taken or damaged.” - Virginia Attorney General

38. Arguments Against Proposed Amendment • Circa 2012 • Not properly vetted by Legislature; • Uncertain application in courts • Unnecessary after Legislature enacted post-kelorefroms • Will destroy economic development (companies will take capital to other states) • Circa 1902 • Legislature is best-suited to solve problems; • Uncertain application in courts • Will destroy economic development (companies will take capital to other states) • Will bankrupt state and railroads

39. Argument 1 - Not properly vetted by Legislature. This is completely ridiculous.

40. Argument 2 - Uncertain application in courts • Amendment in 1928 allowed legislature to define “public uses.” • New Amendment does not allow. • County attorney Rives is worried this will create uncertainty. • Legislature never had the power to begin with (but had a presumption in its favor). • Existing definition will be upheld.

41. Argument 3 - Unnecessary after Legislature enacted post-kelorefroms • “Since 2007, not a single bill has been proposed by legislators to weaken these additional protections for property rights.” BIG DEAL. • The Proposed Amendment is designed protect residents over the next hundred years, not the preceding five. The purpose of the constitution is to protect the rights described therein from interference by the General Assembly. • “Th[is] is a constitutional right, not to be intermeddled with by the ordinary legislature. If they can interfere at all, they may perpetually change and alter it, so as to suit party purposes and views. . . . The constitution of every state in the union defines the right, . . . as does, also, that of the United States, leaving nothing to the discretion” Custisv. Lane, 17 Va. 579, 581 (1813).

42. Argument 4 – Proposed Amendment is Too Costly to Enact • “[H]ere in our Constitution it is proposed to put in something which, in my humble judgment, will have a tendency to prevent capital from coming into this State.” – 1902 Debates • Virginia’s 2013 Budget totals over $41 billion. However, the Virginia Department of Planning and Budget estimated that the Proposed Amendment would cost the Virginia Department of Transportation only $36 million annually – less than one-tenth of one-percent of the State’s entire budget. • Almost all of the provisions of the Proposed Amendment have existed in current law since 2007. These reforms have had no impact on the business environment in Virginia. The state was ranked first by annual survey CNBC’s of the Top States for Business in 2007, 2009, and 2011, and was ranked second in 2008 and 2010.

43. Conclusion • Good to put rights in the Constitution. • Limited changes from existing law. • Questionable constitutionality of legislative definitions. • Courts will determine where this goes.