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Bubble, Bubble, . . .

April 16th, 2014

A quote from today’s L.A. Times says it all:

“Southern California home prices are surging as the spring buying season heats up, with the median price in March hitting $400,000 for the first time in six years.

“But a deeper look at the market reveals a recovery divided between the rich and everyone else.

“The market for high-dollar homes is hopping, with sales on the rise and buyers launching bidding wars. But sales of low- to medium-priced homes have plummeted during the same period — with many potential buyers priced out….” Tim Logan and Andrew Khoury, Home Prices Surge, Sales Plunge, L.A. Times, April 16, 2014, front page, above the fold.

http://www.latimes.com/business/realestate/la-fi-home-prices-20140416,0,4794538.story#ixzz2z43sCMIL

So y’all think that a home market where half the homes sell for over $400,000 isn’t going to end badly? What do you suppose will happen when interest rates go up?

We again  remind our readers, as we do regularly, that back in 1979, in his dissent in Agins v. Tiburon, California Supreme Court Justice Willam P. Clark, warned that California’s extreme regulatory climate would lead to a cleavage of the population, and its division into the well housed rich and others.

So, Shall We Move from the Suburbs to the Cities Like Those Wonderful Modern Planners Want Us To?

April 15th, 2014

For the past few years we have been getting the new “progressive” planners’ “party line” that suburbs are icky and passé, and that enlightened folk are abandoning them and moving back to cities. Alas, most of that appears to be BS. Bureau of census figures suggest otherwise. As we note in this blog from time to time, that vaunted “return to the cities” is largely a trickle consisting of young, well paid singles, and well-heeled middle aged boomers, both of whom tend to favor hip city neighborhoods, but neither of whom have to contend with the burdens and problems of raising and educating children in today’s shabby American cities.

Now drops the other shoe. Today’s New York Times (front page, below the fold) brings the news that — in the words of the headline — In Many Cities, Rent Is Rising Out of Reach of Middle Class, April 15, 2014, at p. A1. Whereas historically, city residential tenants would pay no more than 30% of their gross income for housing, now it’s more than that, ranging from 47% in — where else? –  Los Angeles, down to 35.8% in Hattiesburg, Mississippi. A Zillow study “found 90 cities where the median rent — not including utilities — was more than 30 percent of the median gross income.” Now that may be cool if you are a well-paid techie living in San Francisco and being transported to work in the Silicon Valley gratis by a luxury bus owned and operated by your employer, but it’s not so good for lesser folk.

Bottom line, “[f]or many middle- and lower-income people, high rents choke spending on other goods and services, impeding the economic recovery.” Developers are building new city apartments, but as long as their product is being snapped up by the affluent yuppie/boomer market, “there is little incentive to build anything other than expensive units.” But to our thinking, how many people can afford $2000+ per month for a dinky one bedroom place (CNN.Money says the median rent in LA — which means that half the dwelling rent for more than that — is $2100)? And be careful about what you read in the papers. CNN.Money.com also says that you can buy a home in the San Fernando Valley for $200,000. Our response: Stuff and nonsense. Should you by some miracle find a Valley home at that price, you wouldn’t want to live in it. Trust us.

And so, as the sun sets in the West, be careful, be very careful before you buy the “new” planners’ pitch that cities are where it’s at. It isn’t. At least not yet; not by a long shot. Current data show that in most cases buying a house is a better economic deal than renting. And if you want to save on rents by moving to more remote parts of the city, you may discover that commuting to your downtown job is a pain in the neck, and that transportation costs erode or negate your rent savings. Bummer.

So in our view, there is no solution in sight as long as developers are prevented from building small, modest and inexpensive suburban ”starter homes” like they used to do in the days of yore. As long as a house is looked upon by buyers as a tax-advantaged investment rather than a dwelling, things are not going to get much better. And talk all you want about the foo-foo fashionable city scene, its existence is not going to attract middle-class families with children, who are indispensable to a healthy city.

 

 

The 2014 Brigham-Kanner Prize Goes to Mike Berger

April 14th, 2014

2014 Brigham-Kanner Prize

Why is this man smiling? Because he is Michael M. Berger, a California appellate lawyer par excellence (former president of the California Academy of Appellate Lawyers), and he has good reason to smile. The William & Mary College School of Law in Williamsburg, Virginia,  has just announced that its annual Brigham-Kanner Prize for 2014 will go to Mike, a private practitioner from California. He will thus be the first law practitioner — as opposed to a gaggle of prominent law professors — to be the recipient of the B-K Prize which is awarded annually to an individual who has made an outstanding contribution to the subject of private property rights and their role in society. Berger tops all those professors in that he has an outstanding track record both as an advocate who has won more taking cases in the U.S. Supreme Court, and in the California state courts than any other practitioner we can think of, and whose track record as a legal commentator in the law journals beats the professoriate.

We will have more to say about this subject before long. In the meantime, if you want more details go to www.inversecondemnation.com whose impresario and our fellow blogger, Robert Thomas, has done his usual fine job announcing the award and commenting on Mike Berger’s many professional virtues. Go for it.

Full disclosure: Mike Berger has been your faithful servant’s friend for over 40 years, as well as a co-worker, co-author, and even — once — an adversary in an appellate case. As the local legend goes, we gave him his first job and he gave us our last one.

The Taking Implications of the Federal Circuit’s Decision on the Automobile Makers’ Bankruptcy — What About Those Screwed GM Bondholders?

April 10th, 2014

In case you didn’t catch it, the U.S. Court of Appeals for the Federal Circuit upheld the U.S. Claims Court decision that we commented on a while back (http://gideonstrumpet.info/?p=4727). The ruling was that the automobile industry’s bankruptcy proceedings of a few years ago do not collaterally estop car dealers whose franchises were terminated by the auto makers at the government’s behest from filing an inverse condemnation case in the U.S Court of Federal Claims, claiming a taking of those franchises.   A&D Auto Sales, Inc. v. United States, Nos. 13-5019, 13-1520 (Apr. 7, 2014).  Those dealers will now have to amend their pleadings but their right of action has been upheld. If nothing else, only the U.S. Court of Federal Claims has the jurisdiction to award just compensation for takings against Uncle Sam, so anything along those lines that may have been decided in the bankruptcy court proceedings is not binding.

As usual, our colleague Robert Thomas has the Federal Circuit opinion up on his blog today http://www.inversecondemnation.com/#.dpuf , so if you are minded to go through that opinion he has a link to it, and your faithful servant, being a lazy dude, is not inclined to duplicate Mr. Roberts’ effort which, as usual, is pretty good and is highly recommended by us.

But as far as we are concerned, that decision not only opens the door to claims by solvent car dealers whose franchises were terminated by that bankruptcy, but also those of the folks whose GM bonds were nullified to facilitate that bankruptcy. The bottom line of that aspect of the case is that the UAW made out like a bandit, but the GM bondholders had their bonds de facto confiscated in order to facilitate the public purpose of perpetuating the operations of the American car industry. If it’s a constitutional “public use” to take privately owned land in order to carry water for the likes of General Motors and Chrysler (see the Poletown and Vavro cases respectively), then surely it’s also a taking, albeit an inverse one, to take individual citizens’ GM bonds — which, last we heard, are private property — in order to serve the public purpose of keeping the automobile industry going at their expense. Yes?

We are aware that the principal of the  insurance giant AIG is pursuing a taking action in the Federal Claims Court for an alleged taking of its assets in that bankruptcy. We wrote about that a while back Which may be legally OK, except that in that case AIG was saved by Uncle Sam, so it’s rank ingratitude for it to claim  compensation for a transaction that saved the bacon of the complaining party. Maybe that can be taken care of by the familiar eminent domain doctrine of offsetting benefits against the complaining party’s just compensation. We shall see.

So why shouldn’t the [former] bondholders not be the beneficiaries of the same legal reasoning? Alas, we don’t know of any such action being pursued on their behalf, and the limitations clock is ticking. Still, hope springs eternal, and we hope that someone will bring such an action on behalf of the abused GM bondholders to vindicate the Fifth Amendment and the Eighth Commandment.

Steve Anthony’s Fight Against Phony Eminent Domain Revisited

April 4th, 2014

One  of the old, classic California right to take cases is County of Los Angeles v. Anthony, 224 Cal.App.2d 103 (1964). Ostensibly, it was a taking for a site for a new motion picture museum. In reality it was at best a botched up mess, and at worst, and underhanded way of glomming on to some land which the county wanted in order to expand parking at the Hollywood Bowl. The case gained notoriety when Steve Anthony, a homeowner whose house was the subject property resisted the taking both in court and physically: he confronted the Sheriff’s Deputies who came to take possession, with a shotgun.

Steven Anthony, aiming a shotgun, refuses to vacate his home

 

 As you can imagine, this made for a lot of publicity but did not do poor Steve any good. He was arrested and prosecuted.

And the museum? Was it built? Don’t be silly. Of course not. The subject land became part of the Hollywood Bowl parking lot. Rather than giving you our version, we offer the dispatch from  the Central Library blog, which is linked to this post.  It will give you the essential facts compleat with the names of show business personalities behind this caper.

The court of appeal opinion which we cite above was wretched. It held that a taking for a private, profit-making museum was OK when incidental to a valid taking. But in the Anthony case, as you can see by reading the opinion cited above and the background facts, there was nothing in this taking to be “incidental” to – no public works, no blight, no redevelopment to improve the community — nothing like that. It was purely a private caper, that didn’t even accomplish its stated purpose. Rather than us giving you our version, here is the story, pictures and all, as presented by the Central Library Blog. Here it is: http://www.lapl.org/collections-resources/blogs/central-library/here-lies-liberty-steven-anthonys-fight-against-eminent

Afterthought. We note that the subject of this post ties in with the recent spate of stuff in the blogosphere, reflecting on the aftermath of the wretched  2005 Kelo case, where a 92-acre waterfront tract of land was taken supposedly to create a spiffy new neighborhood that would cater to the wants of high-class employees of the nearby Pfizer Pharmaceuticals facility. But it didn’t happen. After displacing a well kept lower middle class neighborhood, and razing the land, nothing, absolutely nothing, has been built on those 92-acres after the waste of millions — over $100 mil, as we recall. And instead of expanding and providing new employment, as represented to the Supreme Court, Pfizer packed up its bags and moved out of New London, taking some 1400 jobs with it.

Follow-up. For a full, detailed story of Anthony’s doomed fight to protect his home for the taking, click on http://paradiseleased.wordpress.com/2012/01/13/the-siege-of-fort-anthony-part-iii-conclusion/

Nullum Prandium Gratis!

April 4th, 2014

That means “No free lunch” in Latin. In accordance with that principle, we learn that (a) our Interstate Highways — a marvelous achievement of our era — are falling into disrepair, but (b) nobody wants to pay the cost of repair and maintenance . Ron Nixon, Agreement on Interstate Repair Needs, but Not on How to Pay for Them, N.Y. Times, April4, 2014, at p. A13.

The simplest and fairest solution would seem to be the imposition of tolls payable by Interstate users, which would place the burden on the recipients of the benefit, but — guess what? — the folks who make heavy use of those freeways are fighting this proposal tooth and nail, and demand that somebody else do the paying, and do so by methods that are invisible — not by forking over money to a highway toll collector, but some other way.

The surprising part is that the opposition includes not just highway users like trucking companies, but aso the likes of McDonald’s and Dunkin Donuts who argue that if — Heaven forfend! — members of the travelling public have to get off the tollway, get their vittles, and then get back on, they’ll avoid interstates instead, and the fast food business will go to hell in a hand basket. We have trouble accepting that because there are states with toll highways, and last time we looked people were using them and duly tossing their money into the toll collectors’ baskets. But, hey man, what do we know? Our inquiry is: where is it written that each of us has an inalienable right to a nonstop trip to wherever we are going, compleat with Big Macs on the way, without paying the full cost of the highways we travel on?

True, all motorists pay taxes, but not all of them are freeway users. So if those who are, are called upon to throw some money into the toll collectors’ basket, that would seem only fair since they are the ones receiving a special benefit of speedy, uninterrupted travel. If doing so isn’t worth is, that means that these folks don’t think the freeways are worth their true cost. If so, it’s time for the responsible government officials to do their job, confront the would-be public free lunch consumers, and remind them that there is no such thing as a free lunch.

If you won’t do that, you run the hazard that — as Margaret Thatcher put it — sooner or later you run out of other people’s money, and in this case,  you wind up with lousy, unsafe roads.

 

Who Owns Grand Central Terminal and Why? Once More With Feeling.

March 31st, 2014

A week or so ago, we posted the question of who owns the Grand Central Terminal, but so far, nobody came up with the answer. This is not surprising once you learn the answer. No, it isn’t Penn Central; though it is still around – it’s now an insurance company or something unexpected like that. And it isn’t the City of New York or any other government/transportation entity. You might think that after all the sturm und drang of the Penn Central Transp. Co. v. City of New York litigation, that would be the case. But it isn’t.

According to the New York Times (Sam Roberts, Grand Central’s Flesh-and-Blood Landlord, N.Y. Times, Jan. 29, 2013), it’s “the balding 52-year old” fellow named Andrew S. Penson who  — in the words of www.crainsnewyork.com of June 13, 2013, “quietly snapped up ownership of one of the most famous train stations in the world, Grand Central Terminal” some eight years ago. He is said to have done that “with dreams of minting hunderds of millions of dollars by selling off the landmark’s more than 1 million square feet of unused development rights.”

“Developments rights”? You mean those air rights above Grand Central? It would so appear. But in a familiar repetition of a familiar story, Penson’s plan “was broadsided by Mayor Michael Bloomberg’s proposal to create out of whole cloth millions of square feet of development rights in midtown east and sell them off to jump-start a new generation of bigger, smarter office towers.” So “Mr. Penson is fighting back,” and has hired none other than David Boies of Bush v. Gore fame, as Crain’s puts it, ”to press his case in court if need be.”

We admire Mr. Boies’ forensic accomplishments, but somehow his name does not leap to mind when the subject of inverse regulatory takings comes up. In fact, we would like to know how many inverse condemnation cases Mr. Boies has actually tried, or handled on appeal as lead counsel. Still, a big-shot New York lawyer is a big-shot New York lawyer, and he may just pull it off. Then again, he may not. We await the event with bated breath.

But be that as it may, we recall how in the days of the Penn Central litigation the police power hawks in New York and elsewhere, carried on how valuable those Grand Central terminal air rights were, and how their existence — if only on paper — should keep Penn Central content in the belief that it could use those “rights” to build elsewhere, even on lots that were already occupied by substantial buildings  — like the Biltmore Hotel, if memory still serves.

If you are interested in a detailed autopsy of the earlier Grand Central/Penn Central litigational fiasco, we invite you to read our efforts in Making Laws and Sausages: A Quarter-Century Retrospective on Penn Central Transportation Co. v. City of New York, 13 William & Mary Bill of Rights Journal 679 (2005).*  It’s all there, but if you aspire to claiming any mavenhood on this subject, at least do read the description of the Penn Central litigation in the lower courts (the SCOTUS part has been commentaried on to death), plus footnote 56, and of course, our article’s Conclusion.

The Penn Central litigation is noteworthy for the largely unnoticed fact that of the three appellate courts that decided it, no two agreed on the nature of the legal issues being litigated, so each decided issue(s) that had nothing to do with the issues decided by the other two appellate courts. Honest, folks.

Anyway, it looks like we may get to see another chapter in the Grand Central terminal litigational wars — sort of like the Punic Wars. We can’t wait.

______________________________________________

*     The kids running that law journal screwed up big time and mis-paginated the printed copy of the article; it starts either on p. 653 or 679. But since the article is, er, on the long side, you should have no trouble finding it in Volume 13 of the William & Mary Bill of Rights Journal. Do try.

 

 

Bubble, Bubble — Is That the Sound of the post-Bubble Bubble beginning to Pop?

March 29th, 2014

This one is serious, folks, so pay attention. As we noted in this blog from time to time, the California housing market has been goosed upward recently by big-buck folks buying up distressed homes cheaply en masse in order to rent them out, and make a buck that way, as well as score some capital gains as the California housing market recovers.

According to today’s L.A. Times — front page, no less — it looks like that gravy train is slowing to a halt. Tim Logan, Investors Curb Home Buying, L.A. Times, March 29, 2014, at p. A1. “Companies are dialing back their purchases of houses to rent out, a signal prices hit a ceiling in SoCal.” The peak  in the numbers of such sales was reached in 2013, when it hit 613 homes being bought by the 20 largest single-family home buyers. This year it came down to 96. Sounds like a peak in numbers has indeed been reached.

But this isn’t all. Markets have this habit whereby they rarely stand still — they either move up or down. And given these figures and the economy generally, we don’t see how home prices can keep going up. Other than the big-boy cash home buyers, we don’t see how Mom-and-Pop homebuyers — the kind of folks who want a nice roof over their heads — can pay more than the current median prices of $385,000. And the other thing about big-buck professional homebuyers, is that they are not likely to sit there and watch the market value of their investments go down — they’ll bail when the market turns hinky and do their best to sell and collect whatever gain they managed to accumulate – and move on to other investments.

Still, some of big-time buyers are still at it. The L.A. Times reports that Starwood Waypoint Residential Trust is still buying homes in Southern California, and just popped $144 million on “a portfolio of 707 homes, ” which according to our calculator comes to $203,000 per home. We should also note that should you be able to find a $200-grand home around here, you wouldn’t want to live in it. So those $200-grand bargains must be in highly disfavored parts of the state.

So stay tuned, and see how it turns out. Being a congenital pessimist we have a hunch that this isn’t going to end well.

“Zoning Grand Muftis” — Judicial Policy or Judicial Hypocrisy?

March 29th, 2014

We came across a quote from Robert Thomas’ blog www.inversecondemnation.com that has inspired some thinking on our part. Quoth Mr. Thomas:

“[F]ederal judges constantly tell us that they want no part of land use and takings cases — despite their plain textual basis in the Fifth and Fourteenth Amendments — because federal courts don’t want to be “super zoning boards” or second-guess local governments. Yet, they have the time, apparently, to go into great detail about how an employee puts on and takes off his or her clothing, with an entire body of case law developed that second-guesses employers, with nary a question raised about federal jurisdiction, or ripeness, or other things that we takings lawyers are so used to. http://www.inversecondemnation.com/#sthash.EYK63yg5.dpuf

Actually, if we may wax pedantic for a moment, federal judges also have it that they abhore being cast in the role of  “zoning Grand Muftis” and — so they say — they are therefore not much interested in passing on land-use controversies. What’s wrong with that, you ask? Answer: it isn’t true — not a word of it. Local land-use issues are litigated in federal courts all the time. There is even a respected treatise on federal land-use law. Judges do get involved in zoning controversies with gusto and at length when the land-use controversy involves constitutional issues other than regulatory takings. In fact when it comes to land-use cases that give rise to First Amendment issues, their Lordships are  all over those. We were once tempted to create whole new land-use category of cases falling under the heading of “Nudie Cuties” — i.e. land-use cases involving zoning controlling nude dancing in saloons, thereby giving rise to First Amendment constitutional issues. And that isn’t all. Federal courts get involved on all sorts of land-use issues.

Even worse is the situation where outright eminent domain is involved. The law of condemnation often requires that in addition to establishing “public use,” public necessity must also be shown. This is usually required by statute. But — statute, shmatute — outside of Florida where a limited degree of judicial review of necessity is allowed, courts tell us that necessity is not subject to review by them unless the owner can establish fraud on the part of the condemnor.

Actually, the courts have never explained that anomaly. They offer the transparently insincere excuse that  they lack the competence to review decisions involving engineering, traffic, hydrology, and similar technical matters  that go into decisions of whether a public project meets the criteria of public necessity — i.e., whether the project is necessary, whether the subject property is necessary for it, and — here comes the good part — whether the project is so located as to be most compatible with the greatest public good and least private harm. Sounds good, but just you try litigating that question! No way, Jose.

But wait until a case walks in involving review of environmental issues arising out of public projects (like a highway, or a dam for instance). Presto, chango! It’s then a whole other story, and the same judges who just told us they lack competence to determine all those technical engineering matters that go into issues of highway necessity, come alive and in environmental review matters, freely review and frequently throw out engineering decisions. Why? Check out a series of federal cases captioned Keith v. Volpe and you’ll get an idea of what we mean.  How is it possible that judges are incapable of reviewing these factors when questions of public necessity are involved in an eminent domain case, but can handle them without raising a sweat when they come up in the context of an environmental review case? Thus, there are famous cases in which judges have disapproved designs of highways (and other public works) because in those judges’ opinions they were not so designed as to meet environmentally proper engineering, hydrological, ecological and other standards. Yet, those same judges profess to be incompetent to do the very same thing when a condemnee raises the issue of public necessity in an eminent domain case. See the quote from the Illinois case provided infra.

For an oldie but goodie in that category read William Tucker’s article in Harper’s magazine, entitled Environmentalism and the Leisure Class, Dec. 1977, at p. 49, which describes in detail how wealthy New York environmentalists killed a major, badly needed project (an emergency standby reservoir on top of a mountain, that would be available to provide an alternative source of power in case of failure of conventional power generation facilities). How did they do it? By endless litigation before federal administrative agencies and federal courts. No problem reviewing all that technical engineering stuff there.

Or, take a look at a much more recent Illinois case involving a taking of a cemetery for expansion of the Chicago airport where the Illinois Appellate Court said:

“Judicial interference in the actual plan to be implemented would lead to interminable delays, as there is always a different way to configure the use of land, especially a plan as massive as the expansion of an airport. Even if the overall expansion plan has changed such that the planned runway could be built on land other than the cemetery land, the fact remains the runway is planned to be built there, and the trial court would have no authority to scuttle the plan or require the City to redraw the plan to place the runway elsewhere.” City of Chicago v. St. John’s United Church of Christ, 935 N.E.2d 1158 (Ill.App. 2010).

So are courts competent to review questions of public necessity in eminent domain? Heavens, no. That would lead to “interminable delays,” don’t you know. But when it comes to environmental issues the same courts can take decades nitpicking to death public project opposed by a determined environmentalist groups — take a look at that Keith v. Volpe litigation if you want an example; make sure you count up the published cases, and the years it took to litigate them.

It all brings to mind the old saw that it all depends on whose ox is getting gored. But hey man, it’s the law, and we must respect it. Or must we?

California Choo Choo (Cont’d.)

March 28th, 2014

This is one of those items where a newspaper headline and subheading  tell it all and require no comment. From today’s L.A. Times:

Bullet Train Won’t Meet Target Travel Times, Panel Says

“Regular trips are likely to take longer than the anticipated two hours and 40 minutes.”

But in case you are a non-California flatlander, here is an explanation:

“The faster trips were held out to voters in 2008 when they approved $9 billion in borrowing to help pay for the project. Since then, a series of political compromises and planning changes designed to keep the $68-billion line moving ahead have created slower track zones in urban areas.” Ralph Vartabedian, Bullet Train Won’t Meet Target Travel Time, Panel Says, L.A. Times, March 28, 2014, at p. AA1.

 

 


The purpose of this blog is to provide a forum for people, whether eminent domain professionals or not, for exchange of ideas and a discussion of eminent domain news and issues. It does not provide legal advice. Questions concerning actual cases should be directed to the readers' own legal, appraisal and real estate advisers.

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