Part I

One of the most controversial and rapidly evolving fields of modern law, and particularly environmental law, is the interpretation of the Due Process Clause of the Fifth Amendment to the United States Constitution and its application to the process of land regulation and development in modern society.

This article will attempt to survey the history and current state of the law. The focus will be on limitations that are imposed on property owners, with particular attention to land use involving extraction and development that impinges on the natural environment.

Though recently headline news, the subject is not new, nor is it simple to explain. The over-riding principles were enunciated by the framers of the Constitution when the Bill of Rights was adopted in 1791. Space does not permit a tracing of the origins of the Fifth Amendment, except to say that the protection of property rights has had a long history in law. While the Fifth Amendment covers several subjects, its property clause states: "No person shall...be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation."

Despite the current controversy over interpretation of the "original intent" of the framers of the Constitution, it is clear that the words of the amendment have quite different meaning today than they did in the eighteenth century. What was simply assumed then is under microscopic analysis now.

For example, our society is split over when an embryo becomes a person. The concepts of liberty protected by the California civil rights laws would have been unthinkable to the framers. Most importantly, the definition of property has greatly expanded. In addition to the obvious outright ownership of land, we now have cooperatives, mobil homes, time shares, options to purchase, contingent employment benefits such as stock options, and so forth.

We have also honed the concept of "due process" to a fine point. That concept includes the requirement of "fundamental fairness." It appears that the framers originally thought of this requirement as procedural - notice, opportunity for a hearing, neutral decision-makers, and so on. Modern American law has expanded the concept to include substantive limitations on the ability of the government to adopt arbitrary and unreasonable legislation.

Further, we now have methods and principles for valuation and transfer of property that the framers could not have conceived. Consider, for example, only the use of derivative investments that are essentially valued based on taking the risk that something will decline in value. Finally, we have a complex society that necessitates governmental bureaucracies that are unique to modern life. As a result, the property rights and limitations of the Fifth Amendment have and must continue to be re-defined.

Most people associate the regulatory role of the government with the "New Deal" and the Roosevelt era. However, nuisance law (the right to seek damages and, more importantly, restraining orders against a property owner for improper land use) provided the earliest cases of intervention by government to limit property rights.

An early 16th century nuisance case was aimed at some city officials who allowed swine to run loose, distributing their dung in the alleys and lanes. The consequence was that the air was "so corrupted and infected" that a "dreadful terror" afflicted the populace. The court issued a writ ordering that the streets and lanes be cleansed and kept that way. The history of the Industrial Revolution, it is said, could be chronicled by the nuisance lawsuits filed to limit its excesses. But these were mostly private lawsuits. Indeed, the Sawyer decision, California's first environmental lawsuit, which resulted in an injunction limiting hydraulic mining in the Sierras, was between private parties - essentially a nuisance case.

It was clear from the time that the Constitution was drafted that the different states would approach similar land use problems in quite different ways. It was also clear that there were problems that crossed state borders. It was on this basis and in relation to the use and protection of water that federal regulation got its first impetus.

Federal government water regulation began with the Army Corps of Engineers which received its first mandate to regulate streams and rivers to protect interstate commerce in navigable waterways in 1899. But it wasn't until 1969 that the mandate was expanded to include what we now consider environmental review of impacts on fish and wildlife to protect a public interest. That same year Congress passed the environmental "Magna Carta" - the National Environmental Policy Act. Thus was born the "environmental impact statement," called the now-familiar "environmental impact report" or EIR under the California Environmental Quality Act, which was adopted in 1970.

Congress had passed the first Clean Air Act in 1955 which was substantially amended in 1967, 1970, 1977, and 1990. The Endangered Species Act was passed in 1973 and the Clean Water Act was passed in 1977. In fact, almost all environmental statutes, regulations and the court cases arising from them are a product of the past 25 years. In the history of law, this is a short time.

Land use law continues to change as society evolves. Those who study politics will note, however, that this area of law is a product of Republican as well as Democratic administrations, just as its philosophical principles are both liberal and conservative.

The land use principles set forth in the Fifth Amendment did not receive a lot of attention from the courts or in society for that matter until we had filled in our borders and the post-world war II population "boom" began to impinge on traditional extractive land uses, particularly in the west. The controversies that make headlines today still largely arise out of logging, mining and agriculture, together with a range of urban development projects, that are still decided primarily by city and county governments.

The Fifth Amendment also applies to the state and local governments via the Fourteenth Amendment. Article I section 19 of the California Constitution contains a similar prohibition on taking without due process or just compensation. The process of the government taking land is a part of the eminent domain power known as condemnation.

Condemnation has theoretically required compensation, on the principle that the government should not force some people alone to bear public burdens which, in all fairness, should be borne by the public as a whole. "Inverse condemnation" is the term that has been applied to an incidental taking of property by means of governmental action for another purpose or even by inaction, such as by allowing a flood to destroy property.

Traditionally, the Fifth Amendment "takings clause," as it came to be known, was interpreted by the Supreme and lower courts to limit only actual, physical seizures of private property without payment. Physical takings are compensable no matter how minute the intrusion or important the public purpose. But when compensation is paid, physical takings are permitted.

Regulatory taking of property was first addressed by U.S. Supreme Court Justice Oliver Wendell Holmes in a famous 1922 decision called Pennsylvania Coal Co. v Mahon. His words became a legal maxim: "while property may be regulated to a certain extent, if regulation goes too far, it will be recognized as a taking" and, therefore, require compensation.

Figuring out which government regulations go "too far" has been a difficult task that has kept the courts busy for 72 years and continues to provoke litigation, as well as legislation, today.

The Supreme Court, in other cases, has established three factors it will look at to determine if a taking has occurred: 1) the type of governmental action being challenged, 2) the economic impact of the regulation on the property owner, 3) the extent to which the regulation has interfered with the investment expectations of the owner.

Further, the court has made it clear in a number of cases that, when federal, state or local government exercises its "police power" (which is "inherent" under the necessary and proper clause of Article I, section 8 of the U.S. Constitution and express in Article XI, section 7 of the California Constitution) to remedy health, safety and welfare concerns, the regulation will be approved regardless of the economic impact on the affected private property. The United States Supreme Court in 1926 decided the leading case, Euclid v. Ambler Realty, which established the right of local government to regulate land use under the police power.

The basis for the central concept that private rights of property must yield to the legitimate exercise of the police power was first stated in a 1887 Supreme Court case where the court ruled that "all property in this country is held under the impled obligation that the owner's use of it shall not be injurious to the community." That is, the ownership and use of property will always be evaluated in the context of community values such as survival, health and general welfare. Thus the idea gained acceptance that property rights are not absolute but subject to a balancing test when overriding community values are at stake.

Though `the devil has been in the details' of applying these principles, it is only recently that a nation-wide property rights movement has arisen to challenge the application of them.

At its core, the property rights coalition is most upset with land use laws, particularly those protecting wetlands and endangered species that it claims rob property owners of the unrestricted use and ultimate value of their land. It appears that the property rights groups are on a collision course with long-standing state and federal law on this point, since property rights, as we have seen, have never been considered absolute.

Even the most recent U.S. Supreme Court decisions still uphold the principles of land use regulation in general, as discussed above. However, there has been a shift in the perspective of the current Supreme Court. That shift has so far resulted in decisions which require closer examination of the purpose of the governmental regulation, require a clearer connection between the challenged regulation and a legitimate public purpose and presume that a taking has occurred when all economic value is taken from the landowner.

California courts generally continue the more traditional analysis which usually results in land use regulation being upheld in spite of some loss of value.

Part II

A recent Nevada County case will demonstrate how the expectations of land-owners are now being analyzed in the context of regulations that are claimed to be a "taking" of their property. The Court of Appeal issued its decision in Hansen Brothers Enterprises v. Board of Supervisors on November 15, 1994. That case, likely familiar to local residents, dealt with the alleged "vested mining use" of land along the Bear River bordering Nevada and Placer County.

After hearings on a reclamation plan, the Nevada County Planning Commission found that Hansen Brothers had lost its vested right to mine a hillside it had owned since 1954 along the river due to "discontinuance" of its operations for more than 180 days. The Commission also found that the hillside quarrying sought in the reclamation plan would be a prohibited "intensification" of the prior mining. A use permit was to be required before any of the proposed operations.

The Board of Supervisors upheld the Planning Commission in 1990 and Hansen Brothers sued. The Honorable visiting Judge Littrell upheld the Board and Hansen Brothers appealed.

In the appeal, Hansen Brothers argued that it had a vested property right not just to extract from the river bed but to quarry the hillside and that its presence by storage of materials on the site constituted a continued mining operation.

Nevada County contended that the hillside operation was different from the river bed operation, that all operations had ceased for the required period thus extinguishing the vested right and finally that the proposed operations were an expansion of operations prohibited without a permit under the Nevada County Development Code and the State Surface Mining and Reclamation Act (SMARA).

The Court of Appeal split 2-1 with Justice Blease writing for the majority to uphold the county ordinance at issue and the application of the state and local regulations of the land use. The court stated, "Simply put, due process requires the government to allow the company to continue in its prior beneficial use of the land, no more. The zoning ordinance, an exercise of the police power, effectively freezes the right to use the land in the non-conforming way at its present level and then progressively prohibits uses that are abandoned."

The court concluded, "The ordinance in question here only regulates the use of land beyond the use to which the land was put before enactment of the ordinance. Thus, it does not interfere with vested property rights and does not constitute a taking for which the government must provide compensation."

As is often the case in appellate decisions, the dissent provided the most striking analysis of the case. Justice Puglia launched his opinion with a ringing defense of property rights as "natural" rights.

He wrote, citing no legal authority for his statement, that "the just compensation clause is bound up with the concept of `natural rights' including liberty and property, which exist independent of government." He argued that "the protection of property interests mandated by the just compensation clause began to erode before the ink on the Bill of Rights had dried." He claimed that there was a "dual standard...relegating property rights to the legal dust bin." He quoted James Madison to the effect that "Government is instituted no less for protection of the property, than of the person, of individuals."

Justice Puglia, if he could, would hold that "due process requires compensation for any public restriction on any lawful uses of private property, both current and prospective." He would have allowed Hansen Brothers what the other justices called a "200 fold increase in extraction, excavating the entire Nevada County area [of land owned by Hansen Brothers], which was previously barely touched, to a depth of 350 feet." The only limit Justice Puglia would have imposed would be the law of nuisance, thereby shifting the burden of litigation from the County to the adjacent property owners.

Hansen Brothers requested a re-hearing of the decision. It was denied on December 12. Hal DeGraw, when he argued the case for Nevada County, stated that testimony showed the operations covered in the Reclamation Plan were a very substantial change and expansion far beyond the vested rights that Hansen Brothers had. Hansen Brothers' Sacramento attorney argued that the entire operation could not be broken up into separate river bed and hillside excavations. The Appellate Court disagreed with Hansen Brothers' view of their vested rights.

Hansen Brothers has filed notice of appeal to the California Supreme Court. The matter is pending.

In the meantime, there will surely be new bills introduced in Congress as well as the California legislature to specify the degree of taking and the circumstances that will require compensation. Whether the due process clause can be reduced to a mathematical formula based on the property owner's expectations of profit or value, and how to decide when those expectations are reasonable, is the future challenge for the legal system.

Postscript

On January 8, 1996 a divided California Supreme Court ruled that the Hansen Brothers' Bear River operation must be considered as a whole -- mining from the river bed, quarrying from the hillside, crushing to create aggregate, storing and selling aggregate were "integral parts of the business" in 1954.

Though the Supreme Court reversed the lower court rulings and sent the case back for further hearings in Nevada County, it did not overturn established land use law regarding vested rights. The court affirmed the right of local government to adopt zoning laws that restrict use of property and diminish the value of property without compensation "unless all beneficial use of the property is denied." (emphasis added)

Finally, the court expressly adopted the "diminishing asset" doctrine for excavating businesses. The doctrine is an exception to the general rule that non-conforming uses of land that exist on the date a restrictive zoning law is adopted may not be expanded thereafter. Where an excavator has an "objectively manifested" intent to excavate an entire property prior to a restrictive zoning ordinance being adopted, the excavation into new areas of the same property is not an illegal "expansion."

Several justices dissented, arguing that substantial evidence supported the Planning Commission, Board of Supervisors, Superior Court and Court of Appeal findings of Hansen Brothers' proposed use being more "intense".

The matter now will return to local government for Hansen Brothers to show that the geographical area it desires to excavate was clearly and objectively intended to be excavated at the time SMARA was adopted in 1975.