The Supreme Court’s decision in Murr v. Wisconsin, issued earlier late last month, was a severe disappointment to fans of limited government and property rights. On a 5-3 ruling, with Justice Neil Gorsuch not participating, the court upheld a Wisconsin law that undermined the property value of a family-owned investment.
The Murr family owned two adjacent lots in St. Croix County, in northwestern Wisconsin, along the St. Croix River. In 1960, the family had purchased one lot, and built on it a cabin that became their home. In 1963, they purchased the adjacent lot as a long-term investment. In 2004, the family finally decided to cash in on their investment, selling the vacant lot to finance the flood-proofing of their cabin.
Even though the Murrs had long paid property taxes on the assessed value of two separate lots, the County now told them the two lots were two small to be divided, and were now deemed to be a single, combined indivisible lot. This wiped out the value of the family’s investment.
The vacant lot they had wanted to sell had previously been assessed at $400,000. Unable now to be to be detached from its adjacent lot, the value of the land reduced by nine- tenths. What had been bought and held and taxed as a separate lot was now treated differently because the owners happened to own the adjacent parcel of land.
A prime case of ‘regulatory takings’ doctrine
This seemed an obvious violation of the “regulatory takings” doctrine. The Fifth Amendment prohibits a taking, also known as eminent domain in the case of land, without just compensation. However, governments can do much to “take” property value without actually “taking” it.
Thus the court had historically crafted the regulatory takings doctrine. This doctrine kicks in when a government regulation effectively deprives a property owner of effectively all of the economically reasonable use and value of their property. In such a case, the government has effectively taken it, and must pay compensation to the owner.
The Murrs had maintained, and the state had recognized for decades, that the land in question was treated as two separate lots with two separate property tax payments. If treated as suh, the regulatory taking was undeniable as it effectively wiped out the value of the second property.
If, on the other hand, the land was treated as a single combined lot, as the county insisted in prohibiting the sale, the government would be able to argue that substantial value remained with the combined property, which still included salable land with a cabin on it. Hence they argued no “taking” had taken place.
Count on Justice Kennedy to screw things up
In the Court’s majority opinion Justice Anthony Kennedy, joined by the four liberal Justices, sided with Wisconsin and against the Murrs. The majority opinion did not quite grant the state’s position, which was that combining adjacent lots was purely a question of state law. Rather, the court articulated a new federal constitutional standard to be applied based on a vague multi-point balancing test. That was little consolation to the Murrs, however, since the court’s “balancing” held that Wisconsin’s involuntary combination of the lots met this standard.
The unfairness to the Murr family was obvious. It has provoked widespread backlash. Several Western states, wary of the ramifications, took the unusual step of filing amicus briefs against Wisconsin. In the Wisconsin state legislature, there is already talk of changing the law that was upheld by the high court.
Like the Supreme Court’s notorious eminent domain ruling in Kelo v. New London more than a decade ago, there is again a possible silver lining here. Many states may reform their property and real estate laws in response to public backlash, in order to prevent or limit involuntary combination of adjacent lots held by the same owner. In this case, by providing a stark and high-profile example of government abuse of private property, the Supreme Court may once again be a useful foil. Now it will be up to the political process to respond to the call, and strengthen their respective state’s protection of property rights.
(Photo of the home of Susette Kelo, condemmed by the state of Connecticut, lies near foundations from recently destroyed homes in the Fort Trumbull area of New London, Connecticut. The U.S. Supreme Court ruled June 23, 2005, the stimulation of economic development is a suitable use of the government’s power of eminent domain to create a new conference hotel and “riverwalk.” Photo by Spencer Platt/Getty Images)