The U.S. Supreme Court (“SCOTUS”) recently delivered its decision in Horne v. Dept. of Agriculture on the issue of the reserve requirement for raisins under the Agricultural Marketing Agreement Act of 1937 (“AMA”).  Our fellow Owners Counsel colleagues from New York and California, Michael Rikon and Robert Thomas, have kept a close watch on the case and offered a great summary which can be read here and here.

The AMA authorizes the Secretary of Agriculture to promulgate “marketing orders” which help maintain stable markets for a particular agricultural product.  The Raisin Administrative Committee was established to set forth the required allocation of raisins to the Government, free of charge.  Once the raisins are seized by the Government, they may be sold in non-competitive markets, dated, or disposed of in a way consistent with the program, and any profits that are left over after deducting the Government’s expenses is distributed back to the raisin growers (profits are rarely ever left over however).  Relevant to the present case, the Raisin Committee directed raisin growers to set aside 47% of its crop to be allocated to the Government in 2002-2003, and 30% in 2003-2004.  The Hornes, who are raisin handlers and growers, refused to meet the reserve requirement (the Government actually sent trucks to Hornes’ facility one morning to pick up the allocated raisins and the Hornes refused entry).  Needless to say, the Government fined the Hornes the market value of the missing raisins as well as additional civil penalty.

SCOTUS ultimately agreed with the Hornes that the Government’s reserve requirement of raisins was a physical appropriation of personal property which was a “clear physical taking.”  Citing to the Magna Carta (which recently celebrated its 800th birthday in June), SCOTUS reiterated the long-standing principle of just compensation for takings in private property.  SCOTUS noted the historical context of the clause by stating that the “colonists brought the principals of Magna Carta with them to the New world, including that charter’s protection against uncompensated takings of personal property.”  The Takings Clause was “probably adopted in response to the “arbitrary and oppressive mode of obtaining supplies for the army, and other public uses, by impressment, as was too frequently practised during the revolutionary war, without any compensation whatsoever.” Blackstone’s Commentaries, Editor’s App. 305-306 (1803).  SCOTUS found “nothing in this history [which] suggests that personal property was any less protected against physical appropriate than real property.”

The Government contended that raisins are “fungible goods whose value is derived from revenue from their sale” and thus the raisin reserve requirement was not a taking because the raisin growers retain the most important property interest (i.e. the net proceeds).  SCOTUS however was not persuaded.  The Government cannot “avoid the categorical duty to pay just compensation for a physical taking of property by reserving to the property owner a contingent interest in a portion of the value of the property, set at the government’s discretion.”  “The fact that the growers retain a contingent interest of indeterminate value does not mean there has been no physical taking, particularly since the value of the interest depends on the discretion of the taker, and may be worthless. . .”

The Government further claimed that there was no taking here because raisin growers voluntarily participate in the raisin market.  The Government suggested that the raisin growers can either “plant different crops,” or “sell their rain-variety grapes as table grapes or for use in juice or wine.”  SCOTUS flat-out rejected the Government’s argument as a matter of law.  Furthermore, SCOTUS did not deem the reserve requirement to be a voluntary exchange in light of the Government required reserve requirement of 47% for one year, and 30% in the year thereafter.  “Selling produce in interstate commerce, although certainly subject to reasonable government regulation, is similarly not a special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.”

As is the case for any takings under the Fifth Amendment, the Government must pay just compensation.  In the instant matter, measuring just compensation was easily determined by SCOTUS given that the Government had already calculated that amount when it fined the Hornes the fair market value of the raisins when they failed to meet the reserve requirement.  “The Government cannot now disavow that valuation.”

Justice Breyer, joined by Justice Ginsburg and Justice Kagan, dissented the majority’s rejection of the Government’s request for a remand to determine just compensation.  In the dissent, Justice Breyer noted that the purpose of the reserve requirement is to maintain stability in the prices of raisins, and, in part, may enhance the price of the raisins on the open market.  Similar to a partial taking of real property, Justice Breyer argued that the Court should have remanded the case to determine the set off between the value of the raisins taken and the value of any benefits conferred by the reserve requirement.  If “the value of the raisins taken exceed the value of the benefit conferred,” the reserve requirement would be a taking without just compensation.  However, if “the benefit might equal or exceed the value of the raisins taken,” in which case the reserve requirement does not effect a taking without just compensation.

Given the Government’s regulations on various other agricultural products, what sort of fall-out may this decision have on other Government price-support programs?  After fighting the Government for more than a decade, the U.S. Supreme Court’s decision was a victory for plaintiffs.  Raisin growers will no longer have to abide by the reserve requirements and raisin consumers can also rejoice in the fact that the SCOTUS has deemed raisins as a “healthy snack.”  Unfortunately, the Government’s raisin reserve is sure to dry up now.

Coming to you from Virginia – care of our Owner’s Counsel colleague Robert Thomas – is the case of Ramsey v. Commissioner of Highways, which involves Virginia DOT’s attempt to change its valuation position at trial. Thomas’ Blog entry here.  In a nutshell, DOT offered the owner $246,292 before trial (based on an appraisal prepared by Mr. Savage), but by the time of trial, Savage had retired and the State proffered a new appraiser who opined that the property was only worth $92,127.  It appears that the trial court condoned the practice, and also precluded the owner from introducing the Savage appraisal at trial on the basis that the initial offer was a non-admissible settlement offer.  The jury awarded $234,032.00 and the property owners’ appealed.

The owners argue on appeal that under Virginia law, the initial offer is jurisdictional and must be considered by the jury in the condemnation valuation proceedings.

The case is now pending before the Virginia Supreme Court.

The good news for Virginia property owners is that New Jersey law provides a yuletide blessing in the form of a case right on point. State v. Fairweather, 298 N.J. Super. 421 (App. Div. 1997).  In that case, the State initially offered $23,000 for the taking, but at the time of trial, offered evidence that the property was only worth $21,000 (the State’s original appraiser had died before trial).  The property owner appealed the verdict complaining of, inter alia, the court permitting evidence of value at less than the State’s original jurisdictional offer.  The Appellate Court agreed.  “Although it is clear that the offers themselves are not evidential under the statute, judicial estoppel prevents the State from taking a different position at trial concerning the value of the property from that which it had assumed when it made its offers and deposited with the court clerk what it considered to be the property’s fair market value.”  (at 425).  The New Jersey courts routinely and consistency apply Fairweather to prevent a condemnor from engaging in such litigation tactics clearly designed to reduce a property owner’s constitutional just compensation.

Hopefully, the Virginia Supreme Court will do the same, and reaffirm what we all know to be true:  Yes, Virginia, there is a Santa Claus.

Merry Christmas and Happy Holidays to all.

Almost twenty years ago, a new neighbor moved in across from Sophie Bubis’ house at 1 Ocean Place in Loch Arbour.  At that time, in 1995, the new neighbors, Jack and Joyce Kassin bought the entire beachfront lot consisting of four + acres.  Soon thereafter, the Kassins erected an eight foot high sand berm covered with bushes and trees reaching heights of eighteen feet in some areas.  All of a sudden, Sophie Bubis could no longer see the ocean.

So, what did Sophie Bubis do? She sued the Kassins to enforce a local zoning ordinance restricting fences heights and a restrictive covenant in the Kassin’s title that restricted the height of fences to four feet.  And ten years later, the New Jersey Supreme Court said that Sophie Bubis was right. Bubis v. Kassin, 184 N.J. 612 (2005).  (The outcome of the case fell on whether the sand berm/dune was – in fact – a “fence.”)

The Kassins had to remove the berm and trees and comply with the local fence ordinance.

Six years later both properties were destroyed by Superstorm Sandy. But Sophie Bubis has no regrets.  As recounted in an article by nj.com:  “Despite the destruction that Sandy wrought, Bubis said she has “not an ounce of regret” about her legal battle to remove the barrier.”  The article also notes that even if the berm were in place at the time of the storm, it would have been overtopped and Bubis’ house would have been destroyed.  LIkewise, the Kassin’s property was severely damaged by Sandy.

And perhaps, in a twist of fate, the bulk of the Kassin’s property was later conveyed to the Village of Loch Arbour by way of settlement in lieu of eminent domain.

Sophie Bubis waged a ten-year legal battle to preserve one of the most important aspects of ownership of shoreline property; an ocean view.  And even after having her house destroyed by Mother Nature, she did not regret having waged a ten-year legal battle to maintain her ocean view.  And why would she?  In real estate it’s all about location.  You can always build a new house, but you can’t get a better location to see the ocean.

So when the State comes along to erect an 18-25 high sand dune on your neighbors’ property, don’t be surprised if they expect to be compensated for their loss in value as required by our State and federal Constitutions.

Updating our recent entry on the Property Reserve case (here), the California Supreme Court has decided to review the Appellate Court’s finding that the Water Resource Board’s preliminary entry constituted a taking under California’s law of the eminent domain.  The appellate court ruling meant that the State was going to have to pay just compensation to thousands of property owners in order to conduct invasive preliminary testing on the viability of a tunnel to transport fresh water from Northern California to the arid South.  The California Supreme Court limited review to the following questions:

(1) Do the geological testing activities proposed by the Department of Water Resources constitute a taking? (2) Do the environmental testing activities set forth in the February 22, 2011, entry order constitute a taking? (3) If so, do the precondemnation entry statutes (Code Civ. Proc., §§ 1245.010-1245.060) provide a constitutionally valid eminent domain proceeding for the taking?

Full text of the Order is available here.

Looking forward to the briefs and decision.

As reported by the Washington Post here, a bill that would have increased the annual “tax credit” budget for production companies filming in Maryland (like Netflix’s House of Cards and HBO’s Veep) from $15M to $18.5M failed to pass last week in Maryland’s General Assembly. House of Cards Cast(2) The fate of House of Cards filming in Maryland remains uncertain, but there was no talk of eminent domain this time around (maybe the Legislators figured out that if they took “House of Cards” they would actually have to pay just compensation for what they took.  That might just break the budget). Our prior blog on topic is here.

On March 10, 2014, the United States Supreme Court issued its almost unanimous (8-1) decision in Brandt Revocable Trust v United States.  The question presented is detailed in our prior blog here, but simply stated, the government argued that it owned the ground underneath an abandoned railroad right-of-way that permitted it to continue the Medicine Bow Rail-Trail across private property owned by Brandt without payment of just compensation.

The core question was whether the 1875 Railroad Right of Way Act granted easements or limited fee interests to railroad companies to spur America’s growth west-ward.  The answer, disappointing to rails to trails advocates, was that the original grant was only an easement.  Therefore when the railroad right-of-way was abandoned, the underlying land returned to the fee owner, here Brandt.  Thus, in order to reopen that portion of the Medicine Bow Rail-Trail, the government would have to utilize its eminent domain power to acquire the private property along with the constitutional duty to pay just compensation.

It will be interesting to see whether the government actually condemns private property to create new trails and/or legitimize existing trails, or whether property owners will claim that creation of a trail was a temporary taking requiring payment of compensation.

More information about this case is available on the Inverse Condemnation Blog by our Owners’ Counsel of America colleague, Robert Thomas, who submitted an amicus curiae brief in the Brandt matter.

Hudson County Assignment Judge Peter Bariso recently rejected a property owner’s argument that the date of value should be a date earlier than the commencement of condemnation action on August 23, 2012.  City of Hoboken v. Ponte Equities, Inc. (Docket No. HUD-L-4095-12).  The property owner argued that the date of value should have been June 11, 2008, the date the City of Hoboken allegedly took action that substantially affected the owners’ use and enjoyment of the property consistent with N.J.S.A. 20:3-30, which requires the court to set the date of value as the “earliest” of four possible dates.  On that date, the City introduced an ordinance(Dr-366), and adopted two resolutions.  That ordinance recommended rezoning certain properties to open and recreational space, including Ponte’s property.  Dr-366 was never adopted.

Resolution 08-206 was a “Resolution Supporting Acquisition of Block 11 for Open Space,” and recommended that the zoning board of adjustment post-pone all pending variance applications for properties within Block 11 or identified in Ordinance Dr-366.

Resolution 08-207 authorized retention of an appraiser to value several properties to be used in support of a future City application to obtain Open Space Trust Funds to acquire the properties appraised, including Ponte’s.  The City’s 2009 appraisal valued the Ponte property at $10,070,000 for residential development.

On March 16, 2011, the City adopted the 2010 Master-Plan Re-Examination Report, which recommended park use for the subject.  The City re-appraised the subject in 2011 at $2,350,000 for continued use as a public parking lot.   The City offered Ponte this amount to acquire the property.  Upon rejection a condemnation complaint was filed on August 23, 2012.

Ultimately a bench trial was held in January of 2014 to determine the appropriate date of value.  The owner presented two expert witnesses; a professional planner and an appraiser.  The court was critical of the planner because he did not provide any factual support for his opinion that a variance application to build residential on the subject property as of the date of complaint (2012) was any less likely than as of the earlier date (2008).  The court also criticized the appraiser for failing to bring any examples of variance denials after the June 2008 municipal actions, and also for failing to offer an opinion on whether the municipal action affected the property value other than to generally agree with the City’s appraisal valuation for residential ($10M) and parking ($2.3M).

Without recounting the entirety of the opinion, the Court found the lack of factual foundation for the experts’ opinions fatal.   Since the planners and the appraisers “testimony lacked any factual basis, they constitute net opinions for failing to meet the threshold requirements of N.J.R.E. 702 and N.J.R.E. 703. Consequently, Hoboken’s motion in limine to exclude Ponte’s experts’ testimony is granted. As a result, Ponte has failed to offer sufficient evidence to find June 11, 2008 as the appropriate valuation date pursuant to N.J.S.A. 20:3-30(c).” [Slip op. at 27].

The apparent lack of factual support for the property owner’s contentions might ultimately assist in determining just compensation because there is an argument that a buyer and seller would take into consideration the probability of a variance to build residential as of the date of the commencement of the action.

A copy of the court’s opinion in this matter is available here.

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