United States v. 564 54 Acres of Land, More or Less Monroe and Pike Counties, Pennsylvania

• Decision Date: 14 May 1979
• Docket Number: No. 78-488,78-488
• Citation: 441 U.S. 506,99 S.Ct. 1854,60 L.Ed.2d 435
• Parties: UNITED STATES, Petitioner, v. 564.54 ACRES OF LAND, MORE OR LESS, situated in MONROE AND PIKE COUNTIES, PENNSYLVANIA, et al
• Court: U.S. Supreme Court

441 U.S. 506

99 S.Ct. 1854

60 L.Ed.2d 435

UNITED STATES, Petitioner,

v 564.54 ACRES OF LAND, MORE OR LESS, situated in MONROE AND PIKE COUNTIES, PENNSYLVANIA, et al.

No. 78-488.

Argued March 27, 1979.

Decided May 14, 1979.

Syllabus

The Government initiated condemnation proceedings to acquire land on which respondent, a private nonprofit organization, operated summer camps. Before trial, respondent rejected the Government's offer to pay the fair market value of the property, demanding instead the cost of developing functionally equivalent substitute facilities at a new site. The District Court held that the "substitute facilities" measure of compensation was available only to governmental condemnees, and that respondent therefore was entitled only to the fair market value of its property. On interlocutory appeal, the Court of Appeals reversed and remanded, holding that private nonprofit owners can obtain substitute-facilities compensation if there is no "ready market" for the condemned property and if the facilities are "reasonably necessary to public welfare." At trial, the jury found that respondent was not entitled to such compensation and awarded the fair market value of the property. The Court of Appeals again reversed, concluding that a new trial was required because of erroneous jury instructions on the "reasonable necessity" requirement.

Held : Allowing respondent the fair market value of its property, rather than the cost of substitute facilities, is consistent with the principles of fairness underlying the Just Compensation Clause of the Fifth Amendment. Pp. 510-517.

(a) In giving content to the just-compensation requirement of the Fifth Amendment, this Court has sought to put the owner of condemned property "in as good a position pecuniarily as if his property had not been taken," Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 708, 78 L.Ed. 1236. But this principle of indemnity has not been given its full and literal force. Because of serious practical difficulties in assessing the worth an individual places on particular property, the Court has resorted to the concept of fair market value—what a willing buyer would pay in cash to a willing seller at the time of the taking—even though this measure does not encompass all values an owner may derive from his property. However, when market value is too difficult to ascertain or when such an award would depart too far from the indemnity principle, other standards of compensation are appropriate. United States v. Commodities Trading Corp., 339 U.S. 121, 123, 70 S.Ct. 547, 549, 94 L.Ed. 707. Pp. 510-513.

(b) Here, there are no circumstances that require suspension of the normal rules for determining just compensation. Respondent's property had a readily discernible market value. And an award reflecting that figure would not be unjust simply because it might preclude continuation of respondent's use. This Court has previously held that nontransferable values arising from the owner's unique need for the property are not compensable. That respondent is a nonprofit organization does not require a different result. Nor is it relevant whether respondent's camps were reasonably necessary to the public welfare, since respondent is under no legal or factual obligation to replace the camps, regardless of their social worth. And that the camps may have benefited the community does not warrant compensating respondent differently from other private owners, for the principle of indemnity focuses exclusively on the owner's loss. To the extent that denial of an award for the use value of respondent's property departs from the indemnity principle, it is justified by the necessity for a workable measure of valuation. Pp. 513-517.

576 F.2d 983, reversed.

Stephen R. Barnett, Washington, D. C., for petitioner.

H. Ober Hess, Philadelphia, Pa., for respondents.

Mr. Justice MARSHALL delivered the opinion of the Court.

At issue in this case is the proper measure of compensation when the Government condemns property owned by a private nonprofit organization and operated for a public purpose. In particular, we must decide whether the Just Compensation Clause of the Fifth Amendment ¹ requires payment of replacement cost rather than fair market value of the property taken.

I

Respondent, the Southeastern Pennsylvania Synod of the Lutheran Church in America, operates three nonprofit, summer camps along the Delaware River. In June 1970, the United States initiated a condemnation proceeding to acquire respondent's land for a public recreational project. Before trial, the Government offered to pay respondent $485,400 as the fair market value of its property. Respondent rejected the offer and demanded approximately $5.8 million, the asserted cost of developing functionally equivalent substitute facilities at a new site. This substantial award was necessary, respondent contended, because the new facilities would be subject to financially burdensome regulations from which existing facilities were exempt under grandfather provisions.

In a pretrial ruling, the District Court held that the "substitute facilities," or replacement cost, measure of compensation was available only to governmental condemnees, and that respondent therefore was entitled only to the fair market value of its property. App. 38-48. On interlocutory appeal, the Court of Appeals for the Third Circuit reversed. 506 F.2d 796 (1974). Relying on other appellate decisions,² the Court of Appeals determined that in condemnations of property belonging to States or their subdivisions, the Fifth Amendment requires an award of replacement cost "so that the functions carried out by or on behalf of members of the community may be continued." Id., at 799-800.³ Since the Fifth Amendment refers expressly to private but not to public property, the court reasoned that the Framers could not have "intended to impose a greater obligation of indemnification" toward public entities then toward private owners. Id., at 801. Accordingly, the Court of Appeals applied standards governing condemnations of publicly owned property, and held that substitute-facilities compensation was available to private nonprofit owners if there was no "ready market" for the condemned property and if the facilities were "reasonably necessary to public welfare." Id., at 800. The case was remanded to the District Court for consideration of whether respondent's property met this test.

After a 10-day trial, the District Court instructed the jury regarding the prerequisites of a substitute-facilities award. Specifically, the court charged that there was no "ready market" for respondent's facilities if "the fair market value of the condemned property [was] substantially less than the cost of constructing functionally equivalent substitute facilities." See 576 F.2d 983, 992 n.9 (1978). The District Court further instructed that the property was "reasonably necessary to public welfare" if it "fulfill[ed] a community need or purpose." See id., at 995 n.16. The jury found that respondent was not entitled to substitute-facilities compensation, and after considering additional evidence, awarded $740,000 as the fair market value of the property.

A different panel of the Court of Appeals reversed. Id., at 996. Although the court found that the jury instructions on the ready-market issue were not fundamentally in error,⁴ it disagreed with the District Court's interpretation of the reasonable-necessity requirement. Under the Court of Appeals' theory, this test was met if the facility "provide[d] a benefit to the community that [would] not be as fully provided after the facility [was] taken." Id., at 995. Because the jury instruction had been framed in terms of necessity rather than community benefit, the court concluded that a new trial was required. One judge, concurring, agreed that the trial court's charge had not been consistent with the Court of Appeals' interlocutory decision, but argued that the prior opinion, although controlling, was incorrect. Id., at 996-1000. The third member of the panel dissented on the ground that the District Court had adhered to the principles previously enunciated in the interlocutory opinion. Id., at 1001-1010.

We granted certiorari, 439 U.S. 978, 99 S.Ct. 562, 58 L.Ed.2d 649 (1978), and now reverse.

II

A.

In giving content to the just compensation requirement of the Fifth Amendment, this Court has sought to put the owner of condemned property "in as good a position pecuniarily as if his property had not been taken." Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 708 (1934).⁵ However, this principle of in- demnity has not been given its full and literal force. Because of serious practical difficulties in assessing the worth an individual places on particular property at a given time, we have recognized the need for a relatively objective working rule. See United States v. Miller, 317 U.S. 369, 374, 63 S.Ct. 276, 280, 87 L.Ed. 336 (1943); United States v. Cors, 337 U.S. 325, 332, 69 S.Ct. 1086, 1090, 93 L.Ed. 1392 (1949). The Court therefore has employed the concept of fair market value to determine the condemnee's loss. Under this standard, the owner is entitled to receive "what a willing buyer would pay in cash to a willing seller" at the time of the taking. United States v. Miller, supra, 317 U.S. at 374, 63 S.Ct., at 280; accord, City of New York v. Sage, 239 U.S. 57, 61, 36 S.Ct. 25, 26, 60 L.Ed. 143 (1915); United States v. Virginia Electric & Power Co., 365 U.S. 624, 633, 81 S.Ct. 784, 790, 5 L.Ed.2d 838 (1961); Almota Farmers & Elevator and Warehouse Co. v. United States, 409 U.S. 470, 474, 93 S.Ct. 791, 794, 35 L.Ed.2d 1 (1973).

Although the market-value standard is a useful and generally sufficient tool for ascertaining the compensation required to make the owner whole,⁶ the Court has acknowledged that such an award does not necessarily compensate for all values an owner may derive from his property....