Citation. 409 U.S. 470, 93 S. Ct. 791, 35 L. Ed. 2d 1,1973 U.S.
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The government took private property that was on an unexpired lease, and a dispute arose on how much compensation should be given.
Synopsis of Rule of Law.
In determining just compensation, the owner is entitled to the fair market value of his property at the time of the taking, which is what a willing buyer would pay to a willing seller.
Facts.
Almota Farmers Elevator & Warehouse Co. (Petitioner) conducted grain elevator operations near a railroad. The government (Respondent) instituted an eminent domain proceeding to acquire Petitioner’s property interest by condemnation. At that time, there were extensive buildings and other improvements that had been erected on the land by Petitioner, and the current lease still had over seven years on it. Respondent contends that just compensation for the property should be the fair market value of the legal rights possessed as of the date of the taking, and no consideration should be given to any additional value based on the expectation that the lease might be renewed. Petitioners urge that just compensation should be measured by what a willing buyer would pay in an open market for Petitioner’s leasehold.
Issue.
When determining the value of just compensation, should the value be ascertained form what a willing buyer would have paid for the improvements on the land?
Held.
Yes.
Private property shall not be taken for public use without just compensation, which is the full monetary equivalent of the property taken. The owner is to be put in the same position monetarily as he would have occupied if his property had not been taken. The owner is entitled to the fair market value of his property at the time of the taking, which is normally ascertained from what a willing buyer would pay in cash to a willing seller.
If there had been no condemnation, Petitioner would have continued to use the improvements during a renewed lease term, or it could have sold the improvements to another owner and so would have been compensated for the buyer’s ability to use the improvements in place over their useful life. Petitioner seeks only the fair market value of improvements it constructed.
At the time of the taking in this case, there was an expectancy that the improvements would be used beyond the lease term. Respondent asked that the improvements be valued as though there were no possibility of continued use. That is not how the market would have valued such improvements; it is not what a private buyer would have paid Petitioner.
Dissent.
The property interest taken was only the unexpired portion of the lease. The Court purports to follow the well-established principle that destruction of value by itself affords no occasion for compensation by requiring the compensation paid to be determined on the basis of private property actually taken. But in actuality, it departs form this doctrine because it endorses a valuation computed in part on an expectancy that is no part of the property taken.
Discussion.
When the government takes property, they must provide the owner with compensation. Using the value of what a willing buyer would pay for the property allows the owner to be put in the same monetary position as he would have occupied if his property had not been taken. So, the market decided what a fair value would be.
