Defendant sought compensation for 920 acres of land condemned by Plaintiff. The trial court ruled in favor of Defendant. The court of appeals affirmed. Plaintiff appealed.
When the government condemns land, it need not compensate the landowner for value that it could remove by revoking the landowner’s permit to use adjacent public land.
Fuller (Defendant) operated a large cattle ranch in Arizona. Defendant owned 1,280 acres of the ranchland in fee simple (fee land). The remaining 43,488 acres lay on state and federal land. Defendant used the federal land with a permit issued under the Taylor Grazing Act. Permits issued under the Taylor Grazing Act can be revoked by the government at any time, and do not create any interest or estate in the lands. The United States (Plaintiff) condemned 920 acres of Defendant’s fee land. Defendant challenged Plaintiff’ determination of just compensation for the fee land, and the matter went to a jury. The parties disagreed on the method of valuation: Defendant claimed that the jury could consider the additional value of the fee land that resulted from its potential to be used together with the Taylor Grazing Act permit land, while Plaintiff claimed that it could not. The trial court agreed with Defendant, and the jury considered the additional value in determining the amount of just compensation. Plaintiff appealed, and the Ninth Circuit affirmed the trial court’s judgment. Plaintiff then appealed to the Supreme Court.
Whether the Fifth Amendment requires the government to compensate the landowner for the added value the government condemns land that is made more valuable by the landowner’s permit to use adjacent public land.
No. The court of appeals’ ruling is reversed and the case is remanded to the trial court for a new determination of the compensation owed to Defendant. When the government condemns land, it need not compensate the landowner for value that it could remove by revoking the landowner’s permit to use adjacent public land.
Owners of condemned land are constitutionally entitled to just compensation, which is generally based on the property’s fair market value. The amount of just compensation is ultimately based on the equitable principle of fairness as much as it is based on property laws. Courts must therefore determine what amount of compensation will do substantial justice to the landowner’s interests in each individual case. Landowners are usually entitled to compensation for any value added to the property by its potential for use in conjunction with adjoining parcels. There is an exception, however, when the added value is created by the government and could be removed by the government without payment. The Fifth Amendment does not require the government to provide compensation for such added value when the land is condemned. To hold otherwise would be to create private property interests in the public domain. In this case, the government could have revoked the Taylor Grazing Act permits at any point, because the only interest Defendant had to the permits arose from the Act, and the Act expressly states that the permits were revocable. Defendant was not constitutionally entitled to compensation for the additional value to his fee land resulting from the permits because the government could have removed the value at any point by revoking the permits.