Submitted by: Doris Parker
Dubious DomainJon Roland
One would think that, after more than two millennia of development and
debate in almost every country on Earth, the law of eminent domain would
be settled. But leave it to the State of California and the City of
Richmond to muddy the subject by seeking to seize home mortgages under
its alleged power of "eminent domain". Not the parcels of land. The
mortgages on the land, which the City intends to extract out of any
securitization bundles they may be, and renegotiate them to bring the
amounts owing on the real estate down to current market value or below.
It is not just the nonperforming loans for which Richmond is seeking to
acquire the mortgages, but performing loans as well. Of course, once
they own the mortgages, if the loans are in default, the City could just
take the real property without having to compensate the homeowners for
their equity. Richmond would only have to pay the discounted fair market
price for the mortgage, and it would control the factors that would
make the mortgages not worth their unpaid balances. A consortium of
lenders have joined to file suit to enjoin this effort.
Richmond
seems to be arguing that since they would be taking the mortgages "for
public use", that makes the taking an exercise of the eminent domain
power of the state and its agencies. But that is not correct. The Fifth
Amendment to the U.S. Constitution restricts the
power of eminent domain to be "for public use", but it is not the
purpose of a taking that makes the taking an exercise of the eminent
domain power.
The U.S. Constitution does not use the term minent domain ,
nor do most state constitutions. The U.S. Constitution does not
delegate the power using any terms that might be deemed synonymous. It
seems to presume a power to take, if only in an emergency, but does not
delegate it. In Kohl v. United States , 91 U.S.
367, 373 (1876) the U.S. Supreme Court decided against a claim that the
Union government had to go though a state condemnation process in state
court to take a parcel of state land, and then only with the consent of
the state legislature, and sustained a direct use of an eminent domain
power by the Union government on state territory, as a "attribute of
sovereignty".
The problem is that the original thirteen states, as sovereign nations, held sovereign dominion over their land, that is, their domain ,
under the theory of law that the sovereign is the true ultimate owner
of all land over which it has legislative jurisdiction. The word "real"
in real property means "royal, not "actual". The
power to make laws governing land is ownership of it, regardless of what
rights or interests private parties might have for the possession and
use of parcels of it, called estates in the land.
When the U.S. declared independence from Britain and its sovereign
monarch, it replaced the monarch with the people as sovereign, even
though the people were a dormant sovereign when
not actually ratifying a constitution or amendments to it. When the
Constitution was adopted, some of the powers of sovereignty were
transferred to the Union, some remained in the states, and others
remained with the people. The Union was not made sovereign over state
land once a state was admitted into the Union. The Kohl case was wrongly decided.
The states did cede legislative jurisdiction over the territories
outside their boundaries to the Union, and thus made that non-state
territory the domain of the Union, but there was no such cession for
land within the states, except under terms set forth in Article I
Section 8 Clause 17, for federal enclaves like the District of Columbia
and things like forts and dockyards, but that clause provided that
Congress had to obtain the consent of the state legislature before it
could acquire such land.
The Constitution also provides that new
states be established on the same basis as the original states, so that
means when a new state is created, the sovereign dominion over its land
passes to the state and its people as the sovereign of that state. The
Union might hold back tracts of land as now a sole proprietor, but not
as the dominion sovereign of it.
Although it is common to mistakenly classify the rights in the bundle called an estate in real property as real
property itself, it is more accurate to classify them as
personal property .
They are claims on the land, but are not themselves real property. They
may be split apart, distributed, and redistributed, among multiple
parties. It is the market value of these rights that is the proper
measure for compensation, not of the land on which they constitute
claims.
The proper theory of eminent domain power is that that
the sovereign has the power to repossess what it already owns, provided
that it compensate the stakeholders in the estate for that land. Those
estate rights, such as mortgages, are personal property.
So is
the sovereign the ultimate true owner of personal property as well? In
some countries with a tradition of absolute monarchy, it is. In those
countries the monarch asserted ownership over everything, including the
people. But England and its dominions was not one of them. Through the
tax and police powers a state may tax and regulate the use
of personal property, but until fairly recently, in some states, there
was no holding that the state was the sovereign owner of personal
property. Some states do impose ad valorem taxes on tangible
personal property, but not intangible personal property, and all but
Oklahoma exempt most personal property from taxation that is for
personal use. Many states have no such tax, or a very minimal one on
tangible personal property used for business, and more and more are
abandoning such taxation.
It seems only California is outright
asserting an eminent domain power over intangible personal property for
itself and its municipalities. It has tried that once before when the
City of Oakland tried to take a baseball franchise as an exercise of
eminent domain. The California Supreme Court struck it down, but not on
the grounds that the city had no eminent domain power to do that kind of
thing. It claims the power of eminent domain over personal property is
ancient and universal, but it is not. It is arguably unconstitutional.
The argument that such taking is authorized by the Necessary and Proper
Clause is not consistent with original understanding of that clause,
which is only for "carrying into execution" the explicit powers, that
is, to take actions of an incidental administrative nature. That could
include the purchase of land or other property, but not the coercive
taking of it, even with compensation. That would be a different kind of
power, requiring a separate constitutional authorization.
There
are other kinds of takings than through eminent domain. A common kind
that the Framers probably had in mind was destruction or appropriation
of personal property by an army in the field. The Union government also
had the option of retaining parcels of land when it admitted new states,
even if none of the states consented to purchases of land for military
bases and seaports. In practice it has only retained fee simple title
like any private owner, which makes such federal land subject to state
eminent domain. The western states could take all the federal lands
within their territories now used for national forests and parks, if its
state legislature had not ceded them explicitly.
The nonspecific "consents" made by many states in the 1940s are unconstitutional, in that the consent must be for a specific parcel defined by metes and bounds. I have proposed a
Jurisdiction Boundary Marking Act
that would require all federal enclaves to have their boundaries
clearly marked, so that anyone would have notice of which laws he was
subject to as he crossed the boundaries. If not marked, the enclaves
would revert to the states.
There is a fundamental
constitutional problem with the uncompensated taking of personal
property. It is an assertion of dominion over personal property by the
state, for which there is no authority under any state or federal
constitution. States have superior dominion over land, which provides
the basis for eminent domain, but not over personal property, which
includes estates in tangible property. They might assert dominion over
tangible property, but when they extend the claim to rights in tangible
property, which are also personal property, they are essentially
extinguishing rights to compensation for taking, and that means of
rights generally.
The "takings" contemplated by the 5th
Amendment was not just about taking title to land, which is what happens
with eminent domain. Most of the takings of concern during that era was
takings of personal property and the use of land by soldiers in the
field, who sometimes but not always give the owners receipts which were
to be treated as debts by Congress, but most of which were never fully
paid to the original injured parties. The "power" involved was not of
eminent domain but of war.
When the Constitution was adopted in
1788 the states ceded their claims on land in what came to be the
territories to the federal government, but retained their sovereignty
over their own land, which is recognized in Art. I Sec. 8 Cl 17 with the
requirement that to take state land the federal government must have
the consent of the state legislature, presumably of a specific defined
parcel, not just whatever the feds might claim.
The only
ambiguity arises for states created out of those territories, over which
Congress initially had land sovereignty, and therefore eminent domain
power. Art. IV Sec. 3 provides that Congress may admit new states, but
is silent about what happens to land sovereignty when a new state is
thus admitted, or what would happen to it if an admission were rescinded
and a state reverted to territorial status (or in the case of Texas, to
national independence). Art. I Sec. 8 Cl. 17 presumably applies to all
newly admitted states, and thus implies that land sovereignty would pass
to the newly admitted state. (It would also imply that a rescission of
admission would render the state an independent nation, and not just a
territory, but that is another article.)
There is nothing in all
this that would prevent the federal government from retaining (upon
admission) or acquiring fee simple title on parcels of state territory
like any private party, but that would not be accompanied by legislative
jurisdiction. State law would still govern, although the federal
government would have the powers of a private owner.
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