The last three Michigan constitutions have had a provision concerning takings. The 1850 constitution stated "The property of no person shall be taken by any corporation for public use, without compensation being first made or secured, in such manner as may be prescribed by law." Const 1850, art 15, § 9. The 1908 constitution stated "Private property shall not be taken by the public nor by any corporation for public use, without the necessity therefor being first determined and just compensation therefor being first made or secured in such manner as shall be prescribed by law." Const 1908, art 13, § 1. Again, the 1963 constitution states "Private property shall not be taken for public use without just compensation therefor being first made or secured in a manner prescribed by law. Compensation shall be determined in proceedings in a court of record." Const 1963 art 10, § 2.
In Hathcock, a physical takings case, this Court’s overturned the Poletown decision, stating that the Poletown court had improperly adopted federal case law that violated the common understanding of 1963 Const art 10, § 2. Hathcock concerned Wayne County’s attempt to condemn, i.e. physically take, a number of properties for the "Pinnacle Project," a business and industrial park near Wayne County Airport. Applying the Hathcock model to regulatory takings, this Court may again need to overturn precedent — in this case K & K Const, Inc, which improperly adopted the federal regulatory-takings model. That regulatory-takings model is inconsistent with the common understanding of 1963 Const art 10, § 2.
In Hathcock, this Court stated: "The primary objective in interpreting a constitutional provision is to determine the text’s original meaning to the ratifiers, the people, at the time of ratification." 471 Mich at 468. This Court explained:
This Court typically discerns the common understanding of constitutional text by applying each term’s plain meaning at the time of ratification. But if the constitution employs technical or legal terms of art, "we are to construe those words in their technical, legal sense."
Id. at 468-69 (footnotes omitted, citing Silver Creek, 468 Mich at 375). This Court explained that the Michigan takings clause is highly technical: "we have held that the whole of art 10, § 2 has a technical meaning that must be discerned by examining the ‘purpose and history’ of the power of eminent domain." Hathcock, 471 Mich at 470. Where there is a technical meaning related to the common understanding of a constitutional provision, the courts must "delve into [the] body of case law." Id. at 471.
In Hathcock, this Court paid particular attention to the views expressed by Justice Cooley, who was described as Michigan’s "patron saint of constitutional interpretation." 471 Mich at 468 n. 48. Writing between the 1850 and 1908 constitutions, Justice Cooley discussed takings at length in his treatise Constitutional Limitations (5th ed, 1998).
He noted that "Every species of property which the public needs may require . . . is subject to being seized." Id. at 651. The government may take "legal and equitable rights of every description." Id. at 652. A taking occurs when any property interest passes from an owner:
Nor would it be material to inquire what quantum of interest would pass from him: it would be sufficient that some interest, the appropriation of which detracted from his right and authority, and interfered with his exclusive possession as owner, had been taken against his will.
Id. at 658. Justice Cooley further discussed what constitutes a taking. First, he discussed things that were not compensable, such as when a turnpike company loses profits because a railway line is built "along the same general line of travel." Id. at 674. Then, Justice Cooley discussed what would entitle an owner to compensation:
On the other hand, any injury to the property of an individual which deprives the owner of the ordinary use of it, is equivalent to a taking, and entitles him to compensation. . . . So a partial destruction or diminution in value of property by an act of the government which directly and not merely incidentally affects it, is to that extent an appropriation.
Id. at 675-76 (emphasis added).
Justice Cooley explained the rationale for requiring compensation when an owner’s property interest is taken:
Eminent domain differs from taxation in that, in the former case, the citizen is compelled to surrender to the public something beyond his due proportion for the public benefit. The public seize and appropriate his particular estate, because of a special need for it, and not because it is right, as between him and the government, that he should surrender it. To him, therefore, the benefit and protection he receives from the government are not sufficient compensation; for those advantages are the equivalent for the taxes he pays, and other public burdens he assumes with the community at large. And this compensation must be pecuniary in its character, because it is in the nature of a payment for a compulsory purchase.
Id. at 693-94.
Justice Cooley indicated that the proper amount of compensation is the change in valuation:
When, however, only a portion of a parcel of land is appropriated, just compensation may perhaps depend upon the effect which the appropriation may have on the owner’s interest in the remainder, to increase or diminish its value."
Id. at 701.
There is considerable case law support for the proposition that takings short of a physical taking require compensation. In Grand Rapids Booming Co v Jarvis, 30 Mich 308 (1874), a tort case, this Court discussed whether a taking would occur when a property was flooded as a result of a government action:
If the land of a riparian owner may be overflowed, and he may, for such purposes, be deprived of its beneficial use and enjoyment, I confess I can see no reason why, upon the same principle, his land may not equally be used for the storing of logs upon it. It is a transparent fallacy to say that this is not a taking of his property, because the land itself is not taken, and he utterly excluded from it, and because the title, nominally, still remains in him, and he is merely deprived of its beneficial use, which is not the property, but simply an incident of property. Such a proposition, though in some instances something very like it has been sanctioned by courts, cannot be rendered sound, nor even respectable, by the authority of great names. Of what does property practically consist, but of the incidents which the law has recognized as attached to the title, or right of property? Is not the idea of property in, or title to lands, apart from, and stripped of all its incidents, a purely metaphysical abstraction, as immaterial and useless to the owner as "the stuff that dreams are made of?" Is it not a much less injury to him, if it can injure him at all, to deprive him of this abstraction, than of the incidents of property, which alone render it practicably valuable to him? And among the incidents of property in land, or anything else, is not the right to enjoy its beneficial use, and so far to control it as to exclude others from that use, the most beneficial, the one most real and practicable idea of property, of which it is a much greater wrong to deprive a man, than of the mere abstract idea of property without incidents? This use, or the right to control it with reference to its use, constitutes, in fact, all that is beneficial in ownership, except the right to dispose of it; and this latter right or incident would be rendered barren and worthless, stripped of the right to the use. Property does not consist merely of the right to the ultimate particles of matter of which it may be composed,--of which we know nothing,-- but of those properties of matter which can be rendered manifest to our senses, and made to contribute to our wants or our enjoyments.
Id. at 319-20.
In Pearsall v Eaton Cnty Bd Supervisors, 74 Mich 558 (1889), a landowner, Mrs. Pearsall, challenged a governmental decision to discontinue maintenance of a road. The landowner claimed that the discontinuation of that road would cause a diminution of the value of her property. This Court stated:
The value of Mrs. Pearsall’s property may have become very greatly enhanced by the location of her buildings and orchard where they are now situate, upon this road. Of this enhanced value she may become completely deprived by taking up this road, and, if so, she will be deprived of her property to that extent, and it will have been taken from her by the authorities for public use and necessity. Certainly on no other ground could she be deprived of such property rights. "The constitutional provision is adopted for the protection of and security to the rights of the individual as against the government," and the term "taking" should not be used in an unreasonable or narrow sense. It should not be limited to the absolute conversion of property, and applied to land only; but it should include cases where the value is destroyed by the action of the government, or serious injury is inflicted to the property itself, or exclusion of the owner from its enjoyment, or from any of the appurtenances thereto. In either of these cases it is a taking within the meaning of the provision of the constitution.
Id. at 561 (emphasis added).
In the "Address to the People," which explained the proposed changes from the 1850 constitution to the 1908 constitution, there was no indication that the convention delegates proposed to fundamentally alter the law regarding takings. The 1908 Address to the People discussed the changes related to the proposed 1908 Const, art 13 § 1:
This section is a substitute for Secs. 9 and 15, Art XV of the present constitution. The amendment consists in the insertion of the language "without the necessity therefore being first determined" and the requirement for "just compensation."
2 Proceedings & Debates, Constitutional Convention 1907, p 1585.
In Allen v Detroit, 167 Mich 464 (1911), a private owner had placed a restrictive covenant on a group of contiguous properties. The restriction allowed for the construction only of single-family residences. The city bought one lot and one-half of another one and set about to build a firehouse on that property. This Court construed the 1908 constitution and held that the city of Detroit could not destroy the property right (the building restriction) without compensation, even when the city was acting under its police power:
Building restrictions are private property, . . . go with the land, and are a property right of value, which cannot be taken for the public use without due process of law and compensation therefor; the validity of such restriction not being affected by the character of the parties in interest.
The contention that the city under its general police power may ignore this building restriction, and erect its fire engine house within the restricted district because it is necessary for the public good and to protect the lives and property of citizens in that locality, is not tenable. When such action deprives the individual of a vested right in property, it goes beyond regulation under police power, and becomes an act of eminent domain governed by the appropriate condemnation laws.
Id. at 473-74 (citations omitted and emphasis added).
In Big Rapids v Big Rapids Furniture Mfg Co, 210 Mich 158 (1920), this Court held that a landowner could recover for diminution of value related to the grade of a street being changed despite the fact that his property was not physically invaded. Citing Pearsall, this Court stated that "takings" should be construed broadly and that diminution of value constituted a proper legal claim.
In the 1962 "Address to the People," which explained the proposed changes from the 1908 to the 1963 constitution, there was no indication that the convention delegates proposed to fundamentally alter the law regarding takings. The 1962 Address to the People discussed the changes related to the proposed 1908 Const, art 10 § 2: "This is a revision of Sec. 1, Article XIII, of the present constitution which, in the judgment of the convention, is sufficient safeguard against taking of private property for public use." 2 Official Record, Constitutional Convention 1961, p 3403.
In Thom v State, 376 Mich 608 (1965), a plurality of the Michigan Supreme Court discussed what constituted a taking under the 1908 Constitution. At the time that Thom was decided, there were still eight Michigan Supreme Court justices, instead of the current seven. Justice Souris wrote the plurality opinion, which was joined by two other justices. Justice Kelly concurred in the result and did not write an opinion. Justice Black concurred in the result and wrote an opinion. Finally, Justice O’Hara, joined by two other justices, concurred in the result and wrote an opinion.
Thom concerned whether a farmer could receive compensation when a highway grade was changed. The change in grade made it dangerous for the farmer to operate his farm machinery. The farmer’s case had been dismissed by the court of claims.
Justice Souris’ plurality stated:
[T]he term "taking" should not be used in an unreasonable or narrow sense. It should not be limited to the absolute conversion of property, and applied to land only; but it should include cases where the value is destroyed by the action of the government, or serious injury is inflicted to the property itself, or exclusion of the owner from its enjoyment, or from any of the appurtenances thereto. In either of these cases it is a taking within the meaning of the provision of the constitution. "A partial destruction or diminution in value is a taking." Mills, Em. Dom. § 30; Grand Rapids Booming Co v Jarvis, 30 Mich 308 [(1874)]. "If the public in taking any action which becomes necessary to subserve public use, and valuable rights of an individual are thereby interfered with, and damaged or destroyed, he is entitled to the compensation which the constitution gives therefor, and such damage or destruction must be regarded as a ‘taking.’"
Id. at 612 (quoting [Pearsall, 74 Mich at 561-62]). Justice Souris’ plurality indicated that it was impermissible for society to "benefit itself at the expense of an individual by failing to compensate him for damage done to him in order to procure society’s benefit." Id. at 623. It stated "If the work is of great public benefit, the public can afford to pay for it." Id. (citation omitted).
The concurring opinions did not contain any criticism of the plurality’s view of what constitutes a taking. Instead, the main point of contention was whether a particular precedent needed to be overruled (the plurality’s view) or was factually distinguishable (the concurring opinions’ view).
Thus, both before 1963 and in the years immediately following it, there is ample case law indicating that diminution of value leads to a takings claim. It must be admitted, however, that this was not the rule in all cases. Regarding zoning, for instance, this Court has held that diminution in value does not necessarily lead to a compensable takings claim.
In Scholnick v Bloomfield Hills, 350 Mich 187 (1957), a property owner challenged a zoning ordinance that allegedly diminished the value of his property from $100,000 to $50,000. The property owner did not seek compensation for the difference; rather, he sought an injunction against the enforcement of the ordinance. This Court held that the zoning ordinance was a valid exercise of the police power and could be enforced.
In Robinson v Bloomfield Hills, 350 Mich 425 (1957), property owners brought suit to build an office building on a lot that was zoned as residential. This Court held that the regulation was proper and did not constitute a taking:
One of plaintiffs’ witnesses testified that the office building site was worth $32,400 for commercial use but only $15,000 for multiple dwelling use. . . . It is urged . . . that "such zoning is confiscatory," that it is unreasonable, and that the property is not being put to its best use. Disparity in values between residential and commercial uses will always exist. In the leading case of [Village of Euclid, Ohio v Ambler Realty Co, 272 US 365 (1926)] Mr. Justice Sutherland, in upholding the ordinance, noted that the property involved was worth about $10,000 per acre for industrial use, as compared with $2,500 per acre for residential use. If such a showing serves to invalidate an ordinance the efforts of our people to determine their living conditions will be hopeless. To avoid ‘confiscation’ in this sense (the obtaining of the highest dollar for one particular lot) will result in confiscation of far greater scope in property values in the municipality as a whole due to its inability to control its growth and development.
Id. at 433-34.
Post-1963 case law also supports an argument that losses due to zoning regulations are not compensable. In Bevan v Brandon Twp, 438 Mich 385 (1991), a property owner challenged a zoning restriction related to the need for a right of way of a particular width. This Court discussed regulatory takings and zoning:
Zoning laws are a classic example of regulation that may amount to a "taking," if application "goes too far" in impairing a property owner’s use of his land. [Mahon, 360 US at 415]. Generally speaking, however, zoning regulation has been upheld where it promotes the health, safety, morals, or general welfare even though the regulation may adversely affect recognized property interests. As the United States Supreme Court has explained, "Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." Id. at 413.
Bevan, 438 Mich at 390-91. This Court then broadened the discussion to include all land-use regulations (not just zoning), and it intimated that a property owner is only entitled to compensation when the regulation leaves no economically viable use of the land:
The [U.S.] Supreme Court has declared that "land-use regulation does not effect a taking if it "‘substantially advance[s] legitimate state interests’ and does not ‘den[y] an owner economically viable use of his land.’" [Nollan v California Coastal Comm, 483 US 825, 834-85 (1987), citing Agins v Tiburon, 447 US 255 (1980)]. Although the Supreme Court has provided little guidance regarding what it considers a legitimate state interest and the type of connection required between that interest and the regulation, Nollan, 483 US at 834], it has made clear that the question whether a regulation denies the owner economically viable use of his land requires at least a comparison of the value removed with the value that remains. [Keystone Bituminous Coal Ass’n v DeBenedictis, 480 US 470, 497 (1987)].
Bevan, 438 Mich at 391. This Court held that the Bevan plaintiffs’ two lots would both be considered, i.e. would not be segmented, in determining whether any value remained. This Court stated "we conclude that plaintiffs’ land, and the full bundle of property rights associated with it, must be viewed in its entirety." Id. at 397. Citing Penn Central, but not any Michigan cases, this Court also rejected a claim based on diminution of value:
The United States Supreme Court has ruled that a mere diminution in property value which results from regulation does not amount to a taking, [Penn Central, 438 US at 131], and that a property owner must prove that the value of his land has been destroyed by the regulation or that he is precluded from using the land as zoned.
Bevan, 438 Mich at 402.
This Court’s reliance on federal case law, particularly federal case law that postdated 1963, continued in K & K Const, Inc, which was a wetlands case, not a zoning case. This distinction is relevant, since the concept of zoning predates 1963, while both wetlands regulation (the issue in K & K Const, Inc) and sand dune regulation (the issue in the instant case) came into existence after 1963. As noted above, the Sand Dune Management and Protection Act was enacted in 1995. The current wetlands statutes, MCL 324.30301 et seq, were enacted in 1995; the prior versions of the wetlands laws, MCL 281.701 et seq (repealed in 1995), were enacted in 1970.
There is some support for an argument that zoning regulations are noncompensable under the common understanding regarding art 10, § 2. But even if that is the case, a point that is not conceded, it does not necessarily follow that these newer types of regulation are also noncompensable.
In K & K Const, Inc, this Court intimated that the takings analysis under both the U.S. Constitution’s Fifth Amendment and the Michigan constitution’s art 10, § 2 is the same. K & K Const, Inc, 456 Mich at 576-77. This Court accepted the federal regulatory takings framework that was developed after the 1978 Penn Central case. There was no analysis regarding the common understanding of art 10, § 2. This Court adopted the test from the 1991 Ciampitti v United States case, a federal court of claims decision, for determining the denominator parcel.
This Court’s recent Hathcock decision, which concerned physical takings, highlights the flaw in the K & K Const, Inc court’s assumption that takings analysis under the federal and Michigan constitutions is indistinguishable.
Hathcock was concerned with the propriety of a use of eminent domain that allowed private property to be taken from one private party and given to another. The stated "public use" was that the new private owner would put the property to a better economic use, which would lead to more jobs being created and to enhanced tax revenue for the municipality. This Court began by noting that while there may have been at one time an absolute bar preventing condemned property being transferred to private entities, by 1963 that was no longer the case.
This Court recognized three categories where condemned property could be transferred to a private entity:
(1) where "public necessity of the extreme sort" requires collective action; (2) where the property remains subject to public oversight after transfer to a private entity; and (3) where the property is selected because of "facts of independent public significance," rather than the interests of the private entity to which the property is eventually transferred.
Hathcock, 471 Mich at 476. But the fact that some transfers to a private entity were permissible did not make all such transfers permissible. This Court held that economic development is not a public use and thus does not justify the transfer of condemned property to a private entity.
In making this ruling, this Court overturned a 23-year old precedent, Poletown, that had relied on federal case law. Poletown accepted the federal model first articulated in Berman v Parker, 348 US 26 (1954), that courts should defer to almost any legislative determination that a taking is for a public use. In Hathcock, this Court stated that the Poletown Court’s reliance on Berman was "disingenuous." Hathcock, 471 Mich at 480. While also rejecting the holding of a Michigan Supreme Court plurality decision, this Court in Hathcock indicated that it was not bound to mirror federal interpretations of the Fifth Amendment when construing art 10, § 2:
The majority derived this principle from a plurality opinion of this Court [Gregory Marina, Inc v Detroit, 378 Mich 364 (1966)] and supported the application of the principle with a citation of an opinion of the United States Supreme Court [Berman] concerning judicial review of congressional acts under the Fifth Amendment of the federal constitution. Neither case, of course, is binding on this Court in construing the takings clause of our state Constitution, and neither is persuasive authority for the use to which they were put by the Poletown majority.
Hathcock, 471 Mich at 479-80.
Having rejected the federal model that courts should defer to almost any legislative claim that a taking is for a public use, this Court addressed the specific question of whether economic development takings were permissible. Relying in large part on Justice Cooley, this Court held that such takings were not a public use.
This Court also made its decision retroactive, despite the reliance that Wayne County had put on Poletown. Because property rights are so fundamental, correcting past judicial missteps like Poletown must occur immediately:
In the process of determining that the proposed condemnations cannot pass constitutional muster, we have concluded that this Court’s Poletown opinion is inconsistent with our eminent domain jurisprudence and advances an invalid reading of our Constitution. Because that decision was in error and effectively rendered nugatory the constitutional public use requirement, it must be overruled.
It is true, of course, that this Court must not "lightly overrule precedent." But because Poletown itself was such a radical departure from fundamental constitutional principles and over a century of this Court’s eminent domain jurisprudence leading up to the 1963 Constitution, we must overrule Poletown in order to vindicate our Constitution, protect the people’s property rights, and preserve the legitimacy of the judicial branch as the expositor — not creator — of fundamental law.
In the twenty-three years since our decision in Poletown, it is a certainty that state and local government actors have acted in reliance on its broad, but erroneous, interpretation of art 10, § 2. Indeed, Wayne County’s course of conduct in the present case was no doubt shaped by Poletown’s disregard for constitutional limits on the exercise of the power of eminent domain and the license that opinion appeared to grant to state and local authorities.
Nevertheless, there is no reason to depart from the usual practice of applying our conclusions of law to the case at hand. Our decision today does not announce a new rule of law, but rather returns our law to that which existed before Poletown and which has been mandated by our Constitution since it took effect in 1963. Our decision simply applies fundamental constitutional principles and enforces the "public use" requirement as that phrase was used at the time our 1963 Constitution was ratified.
Therefore, our decision to overrule Poletown should have retroactive effect, applying to all pending cases in which a challenge to Poletown has been raised and preserved.
Hathcock, 471 Mich at 483-84 (footnotes omitted).
Like Poletown, K & K Const, Inc fundamentally altered the common understanding of art 10, § 2. According to Justice Cooley and pre-1963 case law, diminution-of-value claims were proper under Michigan law. This prevented the government from shifting the high costs of laws and regulations to a select few individuals, which is in line with the Lockean view of property rights. It may (or may not) have come to pass that an exception for zoning regulation became part of the common understanding. But that does not mean that any regulation that diminishes the value of a property is now noncompensable. In 1963, there was no such thing as a sand dune protection regulation or a wetlands protection regulation in Michigan law, while in contrast, there clearly was a common understanding that compensation was required for nonzoning diminutions of property value. If this Court is to honor "fundamental constitutional principles and over a century of this Court’s eminent domain jurisprudence leading up to the 1963 Constitution," it should analyze whether K & K Const, Inc properly reflects the common understanding of art 10, § 2.
In K & K Const, Inc, just as in Poletown, this Court accepted a flawed federal model that diminishes the rights of Michigan property owners. In Hathcock, this Court corrected its 23-year error. K & K Const, Inc was nine years ago; Michigan property owners should not have to wait another 14 years for K & K Const, Inc to be corrected.