Executive Summary

The United States Supreme Court’s controversial 5-4 decision in Kelo v New London, a 2005 physical takings case where in the Supreme Court allowed the taking of homes so that they could be given to a private developer, has led to a judicial re-examination of property rights. Some courts have rediscovered John Locke and the prominent place of his ideas in our Founding Fathers’ minds. Under Lockean theory, according to the U.S. Supreme Court, "[T]he purpose of the Takings Clause . . . is to prevent the government from ‘forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’" One contemporary scholar, Richard Epstein, in his 1985 seminal work "Takings: Private Property and the Power of Eminent Domain," used Lockean theory to criticize the holdings in many federal takings cases. In contrast to federal takings law, Michigan’s traditional approach of compensating owners for diminution in value due to regulation is true to Locke.

In interpreting constitutional provisions, the Michigan courts look to the voters’ common understanding at the time voters approved that particular provision; at issue in this case was art. 10, § 2 as it existed from 1963 to 2006.[†] In 1998, the Michigan Supreme Court issued the K & K Const, Inc decision, which adopted the federal regulatory takings model that often leaves property owners without compensation when regulations significantly diminish the value of their property. But the Michigan Supreme Court did not address the common-understanding doctrine. In two later takings cases, 2004’s Wayne County v Hathcock, which addressed when a physical taking was for a public use, and 2003’s Silver Creek Drain Dist v Extrusions Div, Inc, which addressed how to compute what constitutes just compensation, the Michigan Supreme Court applied the common-understanding doctrine. Proper application of the common-understanding doctrine indicates that K & K Const, Inc was improperly decided and should be overruled.

Hathcock is particularly instructive for understanding why K & K Const, Inc was improperly decided. In Hathcock, the Michigan Supreme Court was deciding whether to overrule its 1981 Poletown Neighborhood Council v Detroit decision, wherein the court had upheld the condemnation of an entire neighborhood so that an automobile plant could be constructed. The Hathcock court indicated that the Poletown court improperly relied on federal takings law to determine that such economic development takings were proper; instead, the proper focus should have been on Michigan history and Michigan case law, both of which showed a strong tradition of narrowly defining "public use" so as to protect property owners from physical takings abuse.

A similar history exists in regard to regulatory takings. Michigan has a long tradition, dating back to Justice Thomas Cooley, whom the Michigan Supreme Court has called the "patron saint of constitutional interpretation," of compensating for diminution in value that occurs when a property owner suffers a loss due to a regulation: As the law has developed since Cooley’s time, the only type of regulations that might be exempted from this rule concern zoning. Justice Cooley stated:

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.

Thus, K & K Const, Inc was improperly decided and should be overruled, so that Michigan can return to the Lockean tradition of providing compensation to owners when society devalues the owner’s property for society’s benefit. Lockean theory requires that the cost of the regulation be spread through society, not borne just by the property owner.

[†] In the 2006 general election, the voters amended art. 10 § 2 to prevent physical takings abuse.