Hi, everybody. Welcome back. Last time, I outlined what I call the Bright Red Line, that for the framers of the Fifth Amendment. Characterize the distinction between an eminent domain taking that requires compensation and a police power regulation that doesn't. The red line was drawn at physical taking of the object. So, if the government takes actual physical or legal possession of the object, that's an eminent domain taking that requires compensation. But on the other side of the bright red line, if government merely regulates the use of an object, while leaving possession of the object in the owner, then it's not a, an eminent domain taking, instead it's a non-compensable police power regulation. Let me offer an example of the way in which the courts enforced the bright red line through the nineteenth century. It's a famous Constitutional case called Mugler v. Kansas, and it concerns a brewery that was built by Peter Mugler in 1877 in Salinas, Kansas. Here on the slide you can see a picture of several operations in a 19th-century brewery. We might imagine that Mugler's brewery in Salinas looked something like Like this. When Mugler built the plant and got it running, evidence of his trial more in just a moment, showed that the brewery was worth $10,000, quite a bit of money, I might say, in 1877. But in 1881 Kansas went dry, that is. it prohibited the production and sale of beer, wine and spirits anywhere in the state of Kansas but it did not take title or ownership of the brewery itself. But because the brewery now couldn't be used to brew beer and indeed couldn't be used for many much in its stead, most of the equipment in the brewery had to be sold for scrap and the property lost a great deal of its value. So once the prohibition statute was in place, the brewery that had been worth $10,1877 had now been reduced in value. Down to a mere $2500 or head loss 75% of it's value. Mugler argued that taking so large a proportion of a value of his property essentialy amounted to a taking. He argued that the fifth amendment was put in place precisely to guard against the situation that had happened to him. That is that the state, in pursuit of what might be its lawful and proper objectives, had taken action against Mugler's property and reduced the value of that property substantially by 75%. Mugler argued that states ought not to be able to pursue their aims in this way, and that the only way to protect people like himself from ruin as the state pursued its lawful objectives, was to provide that when, in fact Value is diminished at such a level as it was in his particular case by what would ostensibly be a regulation, that to protect Mugler and others like him, the state ought to pay compensation. In this case, $7,500 for the lost value of Mugler's property. But when Mugler's case came before the Supreme Court, the court denied his claim in an opinion by Justice John Marshall Harlan the first, who is the grandfather of the Justice John Marshall Harlan II, whom we saw writing the majority opinion in the MacArthur versus California. Harlan I was a famous and great judge, he's most famous for his opinion, his lone dissent in Plessy versus Ferguson. A case dealing with segregated railroad cars in the South, in the early part of the 20th cent, excuse me in the late part of the 19th century 1896. And Harlan is famous in his dissent for writing that the constitution is color blind. That in fact it can not count in then separate facilities for African-American people and for white people, an opinion that was 50 to 70 years ahead of it's time. But in this particular case Harlan wrote, that despite the destruction of three quarters of the value of Mugler's quiver, since Kansas did not physically or legally take Mugler's property from him. This was not a compensable taking, but it was instead a non-compensable police power regulation, and that in principle Mugler would have to suffer the loss of three quarters of the value of his property so that the state of Kansas could pursue its prohibition policy. A very harsh ruling, one would think. Indeed, after the Mugler ruling,I think not because of the Mugler ruling, but after the Mugler ruling as we said earlier in the course, a newer theory of property rights, the one associated with the metaphor of a quiver of arrows was being developed. In the United States, one of the principle theoreticians behind the new view of property, was the economist Richard T.Ely, who was the first president of the American Economic Association, a progressive economist, a christian socialist, and a utilitarian, a benthamite. But despite being a utilitarian, he was no friend of aggressive government. [UNKNOWN] idea of conceptualizing property as a bundle of sticks or quiver of arrows has now been giving the game conceptional severance. That is we sever each of the different property rights associated with an argument. Conceptually from each of the other property rights that are associated with the object which allows us conceptually to treat the arrows as separate pieces of property, if you will. This was Ely's idea and Ely argued that every regulation of use of property amounts to the taking of an arrow. The value of which, he argued, should be fully compensable. So indeed, though he was a utilitarian, he argued for view of property that would make it more difficult for the state to use the police power without compensation and would tend to push them toward the emminent domain power. which requires compensation, even when the State's regulation can be said only to have taken a single arrow, however valuable it might be, from the quiver of a, of a property owner. Ely was a friend of the great Supreme Court Justice Oliver Wendell Holmes. And when Ely wrote his theory in a book published in 1914, while the book was still in manuscript, he sent a copy to his friend Oliver Wendel Holmes, who was then sitting on the Supreme Court. And Holmes read Ely's treatise and was much impressed by it and thought it was fiulled generally with good sense. And so not too many years later, Justice Holmes got the opportunity to put Ely's theory of conceptual severance and its relation to the takings clause to the test, in a very famous case called Pennsylvania Coal Co. v. Mahon, decided in 1922. Here's a diagram that indicates what the problem in the Pennsylvania Coal case was. The Pennsylvania Coal case owned a piece of land, which I've delineated in the, in the drawing as lying between these two dotted lines. Under an ancient commomn law doctrine, ownership of land was assumed to include ownership of everything that was beneath that plot of land all the way down to the center of the earth. And everythig that was above that plot of land all the way to the edge of the universe. So if you bought a plot of land, you got more than simply the right to walk on the surface. You also got rights to everything that was below the land down to the center of the earth, and you got rights to the airspace above the land, in principle out to the edge of the universe. And so, some time well before the case itself arose, the coal company which owned all of the rights to its pieces of land, to this particular piece of land, decided that it was not interested in mining the coal underneath the surface of the land for several years. As a result, it sold the surface rights of the land to a couple called the Mahons, who built a house on the surface of the land. This means, as we've seen, that the coal company had full property rights to all of the land below the surface down to the center of the earth. What had now severed the property rights relating to the land from the surface until the edge of the universe. It had severed those property rights to the land, and sold them to the Mahons. Presumably the Mahons [COUGH] knew what they were purchasing. And they got a better price on the surface rights then they would of had to pay, if they were purchasing the entirety of the quiver of arrows relating to that plot of land that was owned by the coal company. But the Mayans knew that the coal company might someday enter its land underneath their house, mine the coal, and that this would put the Mayan's house in some danger. So this situation obtained for many dec, not many decades I suspect for, but for several years until the state of Pennsylvania toward the end of the nineteenth century experience some growth And many cities in pennsylavnia began to expand out into the edges of coal fields. If the coal were mined under these expanding cities, then houses or other buildings which were built over the coal mines which were now being used, were in some danger of collapsing due to the subsitives. As it were, that is, when the coal was dug out from the, from the land underneath the buildings. The land is weaker and can't support the buildings. And so in 1921 the legislature of Pennsylvania passed the aptly named Kohler Act which prohibited the mining of coal below dwellings or other related buildings. And by prohibiting the mining of coal underneath the dwelling, the Kohler Act reduced the value of the coal company's mining rights, the property rights that it retained to the land beneath the surface, to zero but it did leave the ownership of those subsurface rights in the company. Notice that this is not a reduction of the rights of the coal company close to zero. It's a reduction of the rights of the coal company to zero. Because under the terms of the act, it's not possible for the coal company even to enter its land. That is to say to dig in the land underneath the man's house. So whether they mine coal, or not. The coal company can't do anything with its land because it can't physically enter the land at all. And if it tried to sell that land, that's the right that it would sell to any buyer. So any buyer would not have the right to enter the land at all either. So the ownership in this case, in, in practice, turns out to be completely abstract. The coal company owns the mining rights, that is, the right to enter the land from below, but now the coal company has said it can't use those rights. And since there are no other rights of value associated with that land, then in fact the company has lost the full value of its land. And so, much like Mugler, but with what the coal company thought was an even stronger case, it went to the Supreme Court and argued that although ownership of the land had been left in the company by the Cohler act, the effect of the Cohler act was to completely destroy the value of the land. And the Kohl company argued, as Muggler had argued, that the state, in pursuit of it's legitimate objectives, ought not to be able to use the police power in this way. If they use the power that they have to destroy the value of someone property completely, the Kohl company argued, then this should elevate the action to a compensable taking, within the emminent domain power. And when he went to the Supreme court with his claim, the court agreed with him. In opinion written by Justice Holmes, the court accepted Ely's theory of conceptual severance. It noted that the Act effectively destroyed all of the value of the company's property right, just as if the legal title to that land had actually been taken by the government. Even though in this particular case that had not in fact occurred. And, agreeing with the coal company Holmes wrote that in such a case the police power cannot shield the people from paying for the value of the rights they take. Holmes didn't doubt that the Kohler Act was a wise piece of legislation. He didn't doubt that the benefits for the people of the state of Pennsylvania, that would flow from the polar act, exceeded the costs that would be imposed upon others in Pennsylvania by the imposition of the polar act. But despite this balance of greater benefits over lesser costs, Holmes argued that it was unfair to concentrate those costs on the coal company and its small number of fellows in the way that this act actually did. And, therefore, this act, despite the fact that it left the ownership of the Sub surface rights in the coal company, this act would not be characterized as a mere regulation in the police power. But as a taking in the imminate domain power, that would require full compensation to the company for the value of the mining rights that it had lost. As a general rule Homes said, in place of the bright red line, if a regulation goes too far, it will be re, recognized as a taking . In this case, the regulation took 100% of the value of the coal company's property. Holmes however doesn't say how far the legislation has to go before it will be recognized as a taking. So we don't know for example, whether Holmes would have decided Mugler verses Kansas differently than the court actually did. Did the 75% diminution of value of Mugler's property go too far? And thus would it be characterized as an imminent domain taking? Or, does eminent domain in cases like this require a complete or almost complete deprivation of the value of the property rights, as was the case in the actual Pennsylvania coal situation? Holmes doesn't say he simply has risk case decided as an eminent domain taking. And puts out the general vague rule that if a regulation goes too far, it will be recognized as a taking. And so, in doing this Holmes erases the bright red line, and offers no clear alternative rule in it's place. After 1922 it was no longer the case, that an imminent domain taking would require the actual physical or legal possession of the property by the government. After Pennsylvania Coal it was possible for an imminent domain taking to be found, even in a situation where the individual obtained his property. But there was no clear rule any longer after the erasure of the bright red line to allow courts, and indeed citizens in general, to distinguish those government actions that would generate a requirement of compensation And those government actions that wouldn't. And as we'll see, this generated decades of chaos in the supreme court's decisions in cases involving the 5th Amendment's takings clause.
