Tag Archives: property rights

Eminent Domain and Trump’s Wall

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photo by Sandeesledmere

Sucamore Gap on Hadrian’s Wall

Mashable quoted me in Sorry, Cards Against Humanity Can’t Stop Trump’s Wall. It opens,

As much as we may want to believe it, a card game company probably can’t save our country.

This week, owners of the irreverent (and kind of obnoxious, imo) Cards Against Humanity game unveiled their annual PR stunt and it has higher aspirations than last year’s pointless hole.

As part of the Cards Against Humanity Saves America campaign, it announced the purchase of “acres of land” on the U.S.-Mexico border and promised not to build a wall on it.

Going further, the company said that it had retained the services of legal representation specializing in property rights, “to make it as time-consuming and expensive as possible for the wall to get built.”

Sounds good, right? Guess there won’t be a wall!

Not so fast, patriots.

The government has a big ace up its sleeve when it comes to taking land from property owners. It’s called “eminent domain” and it’s right there in the constitution’s Fifth Amendment, below the part that people always talk about on lawyer shows. The Fifth Amendment states the government can’t take “private property be taken for public use, without just compensation.”

But it can still take land for public use, and it almost always does.

Government is mightier than the card game

The several law professors we talked to all came to the same forgone conclusion: the government will ultimately take that land from Cards Against Humanity.

“The power of eminent domain is considered to be a fundamental power of any government to use,” Professor of Law David Reiss at Brooklyn Law school said. And in this case, given the limited facts that were available to him, “ultimately the government would succeed.”

Over the past several decades, the judicial definition of eminent domain has expanded broadly. Historically, governmental use of eminent domain would fall under the umbrella of public use by using the acquired land to build a road or build a hospital. That’s changed in recent years, as the blanket phrase of “public use” has been used in eminent domain cases to include razing blighted urban areas or if the land could be seen as encouraging economic development.

Richard Epstein, Professor of Law at NYU, emphatically agreed that Cards Against Humanity would not stand much of a chance. Legally speaking, he saw, “the wall [will be seen] as a public good. There’s nothing you could do to resist them taking the land.”

Lynn E. Blais, Real Property Law Professor at the University of Texas at Austin, also thought that the government would easily win, but acknowledged how Cards Against Humanity could make an impact.

“They can’t stop the border wall for sure,” Blais said. Legally speaking, “it’s clearly for public use [but] they can challenge the process at every step if they want. That could take a long long time.”

And just as the company mentions in its announcement, it hopes to get in the way and meddle up Trump’s plans to build a wall, at least in that one plot of land it purchased. That delay tactic might prove exceptionally effective.

“They may not be looking to stop it, but merely to delay it. Delay can be very powerful. Sometimes delay can be as effective as winning the case,” Reiss said. “With enough money, it can be delayed for years.”

Did CAH fall down at the starting line? 

A few of the legal experts we talked to were adamant that Cards Against Humanity, in openly alluding to the fact that they hoped to make the wall construction “as time-consuming and expensive as possible,” invariably hurt their chances to gain favor with a judge. Basically, in flipping Trump off through a land buy, they exposed their bias and they might not receive a full case because of it.

“I wonder if they shot themselves in the foot if they admitted this was a delay tactic. Some judges might few that negatively,” Reiss said. “Judges wouldn’t look kindly on admitting delay.”

Epstein was very certain that the company’s promotion would hurt their chances of winning any case the federal government might bring against it.

“They are tacitly admitting that the goal is to block the president,” he said. “It’s one one of the dumber ideas I’ve heard of.”

He was certain that it would only invalidate any defense Cards Against Humanity tried to bring up, seeing as how the company already showed its actual intent. Still, he thought of it as a sign of the times, saying, “One of the consequences from the president acting like a crackpot means you get crackpot solutions.”

Blaise, however, believed the opposite side of this argument, and thought that land owners can do whatever they damn well please.

I don’t think it matters why you don’t want the government to take your land. As a property owner, you get to be as irrational as you want,” she said.

So you’re saying there’s a public use chance…

Even though a prospective case doesn’t look too promising for Cards Against Humanity, it still has avenues it can take to launch a defense of their new land. According to the legal experts we talked to, the most promising defense would be on whether the wall is really for public use. This is given that “public use” in the Fifth Amendment is not terribly defined and that arguments could readily be made that a border wall with Mexico might be more harmful than good.

“Public use is now often an incredibly broad term,” Reiss said. And, should the case go to federal court, the government’s potential case would invoke border security or immigration policy, which Reiss thought a judge would probably find compelling evidence.

Wednesday’s Academic Roundup

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Reiss on Fair Housing Falsehood

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The Providence (R.I.) Journal quoted me in its Truth-O-Meter column:  Mike Stenhouse: According to HUD, It’s Unfair, Unjust for Wealthy to Live in Exclusive Neighborhoods. The column reads, in part,

For more than three years, the Rhode Island Division of Planning has been working on RhodeMap RI, a long-term economic development plan meant to help guide efforts to improve the state’s economy.

The process, partly financed by a $1.9-million grant from the U.S. Department of Housing and Urban Development (HUD),  didn’t get much notice until a nearly 200-page draft of the plan was released in mid-September, igniting a firestorm of controversy.

Critics of the plan denounced it as a thinly disguised blueprint for social engineering. If it is implemented, they say, local communities will be forced to cede authority to the federal government on issues such as affordable housing and land use, and individual property rights will be under threat.

Supporters, including Governor Chafee and the planners and community leaders who drafted the plan, say it’s a well crafted, comprehensive guide that will help move the state’s economy forward over the decades ahead. They say there’s nothing in the plan that would infringe on individual property rights or local home rule.

The debate grew so heated at one meeting a shouting match broke out, with charges of racism and bigotry hurled. And last week, at a meeting of the Statewide Planning Council, opponents called it unconstitutional, socialist and even treasonous. Nonetheless, the council voted unanimously to adopt it.

Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity, a conservative research group, has led the opposition. A few weeks ago, he talked about the plan on WPRO-AM’s “The Dan Yorke Show.”

Yorke asked Stenhouse to cite a component of the plan “that highlights what you think is problematic.”

“I’m going to give you my interpretation,” Stenhouse responded. “I don’t have their plan in front of me. What we believe, for instance, take Poppasquash Point in Bristol. According to HUD, it is patently unfair and socially unjust that wealthy people can live in an exclusive neighborhood.”

We wondered whether Stenhouse was right about HUD’s view of wealthy neighborhoods such as Poppasquash Point, one of the state’s priciest enclaves.

When we asked Stenhouse about his statement, he told us he was not directly quoting HUD, but said that his statement was “an accurate interpretation of HUD’s openly stated intent.” He provided links to multiple documents to support his position.

While we don’t view Stenhouse’s statement as a direct quote of HUD policy, we do  believe that listeners who heard Stenhouse’s preface — “according to HUD” — would assume he was summarizing HUD’s policy.

Stenhouse’s backup is comprised primarily of links to a news story and an editorial in Investor’s Business Daily and links to various legal  documents and HUD regulations.

*    *    *

According to David Reiss, a professor of real estate and housing policy at Brooklyn Law School, “HUD does not interpret the FHA [Fair Housing Act] to mean that `wealthy people’ can’t `live in an exclusive neighborhood.’”

“An exclusive neighborhood is an expensive one – the FHA does not ban expensive neighborhoods.” Reiss continued in an email statement. “What it does do is ban exclusionary practices.  Exclusionary practices are those that exclude people based on certain of their characteristics such as their race, sex or religion.  To my knowledge, HUD has never taken the position that merely living in an exclusive – that is, expensive — neighborhood violates the FHA.”

We also asked HUD whether Stenhouse had accurately characterized its rules.

“There are simply no policies, practices, regulations or anything that can validate such hyper hyperbole,” Brian Sullivan, a public affairs officer with HUD, said in an email statement.

Our ruling

Mike Stenhouse said “According to HUD, it is patently unfair and socially unjust that wealthy people can live in an exclusive neighborhood.”

There’s no doubt that HUD has challenged what it considers to be discriminatory practices at the community level, including exclusionary zoning ordinances.

But that’s not nearly the same as objecting to the right of wealthy people to live in expensive neighborhoods.

We rule Stenhouse’s claim False.

Levitin on the Uncertainty of Mortgage Title

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Adam Levitin has posted The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title to SSRN.  This paper adds to a small (here and here, for instance), but important body of literature that seeks to harmonize the application of foreclosure laws with the Uniform Commercial Code. Levitin’s abstract reads

The mortgage foreclosure crisis raises legal questions as important as its economic impact. Questions that were straightforward and uncontroversial a generation ago today threaten the stability of a $13 trillion mortgage market: Who has standing to foreclose? If a foreclosure was done improperly, what is the effect? And what is the proper legal method for transferring mortgages? These questions implicate the clarity of title for property nationwide and pose a too- big-to-fail problem for the courts.

The legal confusion stems from the existence of competing systems for establishing title to mortgages and transferring those rights. Historically, mortgage title was established and transferred through the “public demonstration” regimes of UCC Article 3 and land recordation systems. This arrangement worked satisfactorily when mortgages were rarely transferred. Mortgage finance, however, shifted to securitization, which involves repeated bulk transfers of mortgages.

To facilitate securitization, deal architects developed alternative “contracting” regimes for mortgage title: UCC Article 9 and MERS, a private mortgage registry. These new regimes reduced the cost of securitization by dispensing with demonstrative formalities, but at the expense of reduced clarity of title, which raised the costs of mortgage enforcement. This trade-off benefitted the securitization industry at the expense of securitization investors because it became apparent only subsequently with the rise in mortgage foreclosures. The harm, however, has not been limited to securitization investors. Clouded mortgage title has significant negative externalities on the economy as a whole.

This Article proposes reconciling the competing title systems through an integrated system of note registration and mortgage recordation, with compliance as a prerequisite to foreclosure. Such a system would resolve questions about standing, remove the potential cloud to real-estate title, and facilitate mortgage financing by clarifying property rights.

I had to agree with one of his conclusions:  “Reduction of transaction costs is ultimately a second-order move for commercial law. The first-order move, so elemental it is easy to forget, is clarification of the property being transferred.” (723-24) The others are pretty compelling too.