Facts
- Husband-and-wife ranchers owned 1,280 acres in fee in western Arizona and operated an integrated ranch that also used 12,027 acres leased from Arizona and 31,461 acres of federal land.
- Access to the federal land depended on Taylor Grazing Act permits, which were revocable by the United States and, by statute, created no “right, title, interest, or estate” in federal lands.
- The United States condemned 920 acres of the ranchers’ fee land for a federal project.
- At the just-compensation trial, the ranchers conceded the federal permit lands themselves could not be valued as property, but argued the condemned fee land had higher market value because it could be used together with the federal permit lands.
- The district court allowed valuation evidence and a jury determination that included the fee land’s increment in market value attributable to its combined use with the permit lands.
- The Ninth Circuit affirmed, permitting compensation based on the enhanced open-market value of the fee land as part of an integrated ranch unit.
- The Supreme Court granted review.
Issues
- Whether the Fifth Amendment requires compensation for the portion of a condemned fee parcel’s market value attributable to its combined use with adjacent federal grazing lands held only under revocable Taylor Grazing Act permits.
- Whether “fair market value” in condemnation must include value derived from a government-conferred privilege that the government may terminate without compensation.
Decision
- The Supreme Court reversed and remanded.
- The Court held that just compensation does not include any value added to the fee land by Taylor Grazing Act permits.
- Because the permits are revocable and expressly create no property interest in federal land, the increment in value attributable to their use is not compensable “private property” under the Fifth Amendment.
- The case was remanded for a new compensation determination excluding the permit-based enhancement.
Legal Principles
- Just compensation is generally measured by fair market value, but market value is a working measure and need not include elements the Constitution does not require the public to pay.
- The government need not compensate for value that derives from a revocable government permit or license, where the government could eliminate that value by terminating the permission without paying compensation.
- The “unit” or “assemblage” approach to valuation does not apply to include increments in value attributable solely to government-controlled privileges that create no compensable property rights.
Conclusion
When the government condemns privately owned land, the Fifth Amendment does not require payment for any portion of the land’s market value that is attributable to revocable Taylor Grazing Act grazing permits, because those permits confer no compensable property interest and may be withdrawn by the government without compensation.