Hodel, Sec. of the Interior v. Irving

Brief Fact Summary.

The Indian Land Consolidation Act provided that all ownership interests constituting less than two percent of the area of a tract or earning less than $100 in the previous year would escheat to the tribe when the owner died. Plaintiff sued Defendant, claiming that the statute effected takings without just compensation, in violation of the Fifth Amendment. The trial court ruled the Act constitutional. The court of appeals reversed on the grounds that controlling disposition of the property at death represented a taking. Defendant appealed.

Synopsis of Rule of Law.

A statute that completely abolishes the rights of property owners to devise their property interests by will or allow the interests to descend to their heirs effects takings that require just compensation.

Facts.

In the late 19th century, Congress enacted a series of laws dividing the ownership of Indian reservations. Under those laws, portions of the reservations were allotted to individual tribe members with restrictions on how they could dispose of the property: the tribe members could dispose of their property interests by will in accordance with regulations promulgated by the Secretary of the Interior (Defendant); otherwise the interests would pass to the tribe members’ descendants. The laws did not work as Congress had intended. The property ownership interests became divided among increasing numbers of heirs in increasingly complex ways. Because most of the properties were rented out and the rent needed to be divided proportionally among the owners, the administrative costs skyrocketed. For example, one Sioux tribe averaged 196 owners per allotted tract of land, and many owners received only pennies per year in rent because their shares were so small. In 1983, Congress passed the Indian Land Consolidation Act, which provided that all ownership interests constituting less than two percent of the area of a tract or earning less than $100 in the previous year would escheat (pass) to the tribe when the owner died. Several members of the Oglala Sioux tribe (Plaintiffs) sued the Defendant, claiming that the statute effected takings without just compensation, in violation of the Fifth Amendment. The district court ruled the Act constitutional. This was reversed by the court of appeals on the grounds that controlling disposition of the property at death represented a taking. The Secretary appealed to the Supreme Court.

Issue.

Whether a statute providing that certain interests in Indian lands held by tribe members will pass to the tribe upon their deaths effects takings that require just compensation.

Held.

Yes. The court of appeals’ ruling is affirmed. A statute that completely abolishes the rights of property owners to devise their property interests by will or allow the interests to descend to their heirs effects takings that require just compensation.

Discussion.

A statute that completely abolishes the rights of property owners to devise their property interests by will or allow the interests to descend to their heirs effects takings that require just compensation. To determine whether a regulation of property amounts to a taking, courts consider several factors, including the economic impact of the regulation, any interference with reasonable investment-backed expectations and the character of the government action. These factors are equivocal when applied to this statute: while the economic impact on the property owners is in some cases substantial, there is little evidence of interference with reasonable investment-backed expectations or any particular character of the government action. However, this statute goes beyond the statutes considered in precedent decisions because it abolishes the right of the property owners to pass their property interests to their heirs. The right to pass on property interests to heirs is a longstanding and important right. This statute abolishes that right even in cases where it is not necessary to further the government’s goal of ending the fractionation of Indian lands: the affected shares cannot be devised to individual heirs even if the effect of the devise would be to consolidate ownership of the land. The government has a legitimate interest in ending the fractionation of ownership of Indian lands, and thus may restrict the ability of the owners of Indian lands to further divide their ownership interests among their heirs. The government may not, however, go so far as to completely abolish the ability of property owners to pass on their interests to their heirs without paying just compensation.