Monthly Archives: August 2007

Book ’em, Danno!

We highly recommend that you read Debra Pogrund Stark, How Do You Solve a Problem Like in Kelo? 40 John Marshall L. Rev. 609, particularly the part at 624-630 (2007). Unlike most academics who confine themselves to expounding on  what the law would be if they ran the zoo, Prof. Stark tells the factual story of what the situation was like on the ground when the U.S. Supreme Court decided the notorious Hawaiian land redistribution case, Hawaii Housing Authority v. Midkiff (1984) 467 U.S. 229.

It turns out that the big, bad lessor trust whose land was taken in that case for redistribution to its downtrodden residential tenants, was the Bishop Estate, a charitable entity that used the land rents for support of the Kamehameha schools that provide a quality education to underprivileged Hawaiian children. The tenants who owned homes on the leased land were the beneficiaries of low land rents but were not satisfied with that and wanted their lessor’s title too. Hawaiian politicians obliged by passing the Land Reform Act authorizing the condemnation of the lessors’ title and its conveyance to the lessees. Thus, the beneficiaries of this land grab were upper middle-class and wealthy haoles who got a good deal by ripping off a charitable trust, at the expense of native Hawaiian children.

Moreover, contrary to what the Court said, there was no “oligopoly” in buildable land on the Island of Oahu. The market in fee simple residential land consisted of over 70 participants and according to what we were taught by our kindly Econ 101 professor, a market like that is no oligopoly. An example of oligopoly was the American car business around 1960 — you had GM, Ford, Chrysler, American Motors, and Studebaker and that was that. That was an oligopoly. Anyway, originally the Hawaiian legislation required that there be a showing of land scarcity before the condemnation of the lessor’s titles could proceed, but that requirement was dropped from the statute in 1976.

Moreover, the Hawaiian legislation authorizing this taking in no way prevented the tenants from acquiring their landlords’ titles and then becoming land lessors themselves, thus effecting no change whatever. Originally, there had been a requirement in the law that to gain fee simple title the erstwhile tenants would have to reside in the homes acquired by them in the redistribution, but that provision was dropped in 1978. So the upshot was that under the statutory scheme used in justification of the Midkiff condemnation, nothing would change, except that the favored lessees would gain fee simple title with no beneficial effect on the Island land economy. And, to state the obvious, the legislation-cum-condemnation added not a square inch to the available supply of buildable land on Oahu, so it could not achieve the stated legislative purpose of lowering housing prices. Adding insult to injury, the state and federal governments owned the majority of land on Oahu, but they had no intention of allowing any of it to be developed for needed housing. On the contrary, Hawaiian government land-use regulations have been notoriously restrictive and they limited severely new construction of housing.

Prof. Stark rightly concludes that “Through a [closer] scrutiny of the facts in Midkiff, the Court would have discovered that the alleged public benefit from the forced takings of private property under the [Hawaiian] Land Reform Act as amended and as in operation in 1984 when the case was argued before the Court did not exist in reality. A powerful argument could be made that the public was more harmed by the Land Reform Act as amended than benefitted by it.” 40 John Marshall L. Rev. at 630. Right on, Professor.

And was that the end of that sorry saga? Not on your life. For a summary of what happened after the Midkiff condemnation, and how its aftermath benefitted Japanese investors who snapped up newly minted fee simple titles to the best residential properties in Oahu, and made fortunes reselling them to Japanese corporate executives as vacation homes, thus adding to the housing shortage, see Gideon Kanner, Kelo v. New London, Bad Law, Bad Policy and Bad Judgment, 38 The Urban Lawyer 201, 212-215 (2006). The net effect of Midkiff was a sharp rise, not  a decline, in prices of housing on Oahu. And who cleaned up on this deal? Apart from the Japanese, none other than the erstwhile lessees who made fortunes selling their newly minted fee simple titles to those Japanese investors for seven figures, thus adding to the housing shortage on Oahu. See Tom Furlong, Yen for Paradise: Hawaii Hit by Wave of Speculation, L.A. Times, Apr. 26, 1988, at A1 (“Though some [Japanese ] buyers want vacation homes, many are speculators looking for fast profits. In either case, many of the properties they buy are left vacant much of the time, a painful condition in a city where housing is already in short supply.”) The champion of this activity was a Japanese investor named Genshiro Kawamoto who snapped up some 100 East Oahu homes without leaving the back seat of his limousine. Check it out.

So much for “public benefit,” and so much for the government fixing the “malfunctioning” residential land market in Hawaii.

An Enlightening Decision

Can shining lights onto a privately owned parcel of land amount to a taking? Yes, says the Ohio Court of Claims, on the unusual facts of this case. Newell v. Ohio D.O.T (Ohio Ct. Cl. 2007) 870 N.E.2d 813.

DOT installed lights on high poles to illuminate a highway at night. The light from those lights shone on an adjacent parcel of land on which Newell grew soybeans. As a result of the illumination, the soybeans failed to mature and Newell’s crop was lost. The court found that this constituted a taking of the soybean crop and awarded compensation of $2,235.

Under Ohio law the property owner must establish substantial and unreasonable interference with his property to sustain a taking claim. And since a claim of this sort is constitutionally based, the usual government immunities do not apply. Nor did the fact that the placement of the lights was based upon discretionary engineering judgment, or as a policy decision provide a defense.

The lights were not a nuisance and therefore Newell’s claim was not subject to the “coming to the nuisance” defense, a discredited archaic defense under which the perpetrator of a nuisance would somehow have a “right” to force his neighbors to bear the burdens of the nuisance perpetrated by him, by having to forego lawful use of their land.

To establish a taking, the owner must show that the harm suffered by his land is different in kind, not just in degree, from that suffered by other landowners in the area. On these facts, this standard was met.

We are advised by a reader (see comment 1) that this decision (which under Ohio practice was made by a clerk) has been vacated and judgment was entered for the state DOT.  The court thought that this was a damaging rather than a taking of property, and the Ohio constiturion only guarantees just compensation for takings of private property, not damaging.

William & Mary College Property Rights Conference

The William & Mary College School of Law will hold its annual Brigham-Kanner conference on property rights on October 5-6, 2007, in Williamsburg, Virginia.

This year’s recipient of the Brigham-Kanner prize is Professor Margaret Jane Radin of the University of Michigan Law School. The award is given annually to a person who has made outstanding contributions to discourse on property rights. Previous recipients of the prize include Professor Frank Michelman of Harvard (2004), Professor Richard A. Epstein of the University if Chicago (2005), and Professor James W. Ely, Jr. of Vanderbilt University (2006).

The symposium will include a program on property rights and the work of Professor Radin. Speakers will include distinguished academics from several law schools as well as practicing lawyers with substantial experience and accomplishments in handling eminent domain litigation in various parts of the country. 

To obtain further information on the conference and registration for it, contact Kathy Pond at William & Mary, 757-221-3796.

Another Anti-Kelo Decision. This One from New Jersey

Speaking in the context of a lengthy opinion interpreting the term “blight,” the New Jersey Supreme Court struck down a Borough’s attempt to take largely vacant land for for redevelopment. The Borough argued unsuccessfully that under its interpretation of the statute, the land was “blighted” because it was “stagnant and not  fully productive.”  The court held that it was for the judiciary, not the legislature to interpret the term “blight,” and to determine whether the subject land was actually blighted. On these facts, no blight existed. Gallenthin Realty Dev., Inc. v. Borough of Paulsboro (N.J. 2007) 924 A.2d 447. 

In the court’s words: “We recognize that government redevelopment is a valuable tool for municipalities faced with economic deterioration in their communities. As noted, our Constitution expressly authorizes municipalities to engage in redevelopment of ‘blighted areas.’  However, Paulsboro interprets subsection 5(e) to permit redevelopment of any property that is ‘stagnant or not fully productive’ yet potentially valuable for ‘contributing to and serving’ the general welfare. Under this approach, any property that is operated in a less than optimal manner is arguably ‘blighted.'” If such an all-encompassing definition of ‘blight’ were adopted, most property in the state would be eligible for redevelopment. We need not examine every shade of gray coloring a concept as elusive as ‘blight’ to conclude that the term’s meaning cannot extend as far as Paulsboro contends. At its core, ‘blight’ includes deterioration or stagnation that has a decadent effect on surrounding property. We therefore conclude that Paulsboro’s interpretation . . . which would equate ‘blighted areas’ to areas that are not operated  in an optimal manner, cannot be reconciled with the New Jersey Constitution.” 524 A.2d at 460.

The court relied in part on the California Supreme Court’s decision in Sweetwater Valley Civic Ass’n. v. City of National City (Cal. 1976) 555 P.2d 1099, which struck down an attempt to condemn a golf course for redevelopment, holding that to justify a finding of blight there had to be something affirmatively wrong with the property, and the fact that the condemnor thought it could put the golf course to a higher and more productive use did not justify such a finding.

And so, even as the New Jersey Supreme Court characterized the Constitution as a “living-charter,” in this case it held that  its bite cut against the condemning agency for a change. So maybe this case should be filed under the heading MAN BITES DOG.  It’s about time.