United States v. Eltzroth ( 1997 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
CLYDE A. ELTZROTH; RANDOLPH
MURDAUGH, JR.; NATIONSBANK OF
SOUTH CAROLINA, N.A., as Personal
Representative of the Estate of
Henry H. Edens, deceased,
Defendants-Appellants,
No. 97-1160
STATE OF GEORGIA,
Defendant-Appellee,
and
465 ACRES OF LAND, MORE OR LESS,
SITUATED IN JASPER COUNTY, STATE OF
SOUTH CAROLINA; TAX ASSESSOR OF
JASPER COUNTY; UNKNOWN OWNERS,
Defendants.
Appeal from the United States District Court
for the District of South Carolina, at Charleston.
David C. Norton, District Judge.
(CA-94-2335)
Argued: July 14, 1997
Decided: September 4, 1997
Before MURNAGHAN, Circuit Judge,
PHILLIPS, Senior Circuit Judge, and BRITT,
United States District Judge for the
Eastern District of North Carolina, sitting by designation.
_________________________________________________________________
Reversed and remanded by published opinion. Judge Murnaghan
wrote the opinion, in which Senior Judge Phillips and Judge Britt
joined.
_________________________________________________________________
COUNSEL
ARGUED: Thomas English McCutchen, Jr., MCCUTCHEN, BLAN-
TON, RHODES & JOHNSON, Columbia, South Carolina, for Appel-
lants. John Harris Douglas, Assistant United States Attorney,
Charleston, South Carolina; James S.S. Howell, Special Assistant
Attorney General, Atlanta, Georgia, for Appellees. ON BRIEF: Jeter
E. Rhodes, Jr., MCCUTCHEN, BLANTON, RHODES & JOHN-
SON, Columbia, South Carolina, for Appellants.
_________________________________________________________________
OPINION
MURNAGHAN, Circuit Judge:
Plaintiffs-Appellants Clyde Eltzroth, Randolph Murdaugh, Jr., and
NationsBank of South Carolina (collectively, the"Landowners") own
land on Barnwell Island (the "Island" or the"Property"), which sits
in the Savannah River. South Carolina deeded the Property to the
Landowners' predecessor in interest in 1942. In the 1950s, the United
States Army Corps of Engineers (the "Government") began dredging
the Savannah harbor, and it wanted to deposit the dredged material,
known as "spoil," on the Island. After the Government instituted con-
demnation proceedings to obtain a perpetual easement over the Prop-
erty, the United States Court of Appeals for the Fifth Circuit held that
the Island actually fell within the boundaries of Georgia, not in South
Carolina. The court subsequently determined that the Landowners did
not have valid title to the Property from South Carolina, and Georgia
granted a perpetual easement to the Government to deposit spoil on
the Island (the "Georgia Easement").
In 1990, in an unrelated case, the United States Supreme Court
held that the Island belongs to South Carolina, not Georgia. The
United States District Court for the District of South Carolina subse-
2
quently declared the Georgia Easement invalid. The Government then
filed the instant action to have the Property condemned. An issue
arose, however, regarding the date of the Government's "taking," and
thus the proper date for determining the market value of the Property.
The Government contends that the taking occurred on March 9, 1956
when it entered into physical possession of the Property pursuant to
the Georgia Easement, and it therefore argues that the Landowners
should receive compensation for the market value of the Property on
March 9, 1956. The Landowners, however, contend that the taking
did not occur until August 30, 1994 when the Government filed the
instant condemnation action and that they should receive compensa-
tion for the market value of the Property on that date. The district
court adopted the Government's position and held that the Govern-
ment took the Property in fee simple on March 9, 1956. For the rea-
sons stated below, we reverse and remand the district court's
judgment. Although the Government did take an easement in the
Property on March 9, 1956, we conclude that it did not take the
remaining interest in the Property, the fee simple subject to an ease-
ment, until August 30, 1994.
I.
In 1787, Georgia and South Carolina signed the Treaty of Beaufort
(the "Treaty"). The Treaty defined the boundary between the two
states, and it reserved all of the islands in the Savannah River to Geor-
gia. The legislatures of each state and the Continental Congress rati-
fied the Treaty in due course. See Georgia v. South Carolina, 497
U.S. 376, 380-81 (1990). Nonetheless, in 1940, the sheriff of Beaufort
County, South Carolina conveyed one such island, Barnwell Island,
to the Beaufort County Forfeited Land Commission (the "Commis-
sion") because the Barnwells failed to pay property taxes that Beau-
fort County had assessed. In 1942, South Carolina, through the
Commission, deeded Barnwell Island1 to Eustace Pinckney.
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1 The parties sometimes refer to the Property at issue as the "Barnwell
Islands." However, natural forces and the spoil deposits have converted
the separate islands into a continuous piece of land attached to the South
Carolina shore.
3
In 1952, the Government filed a condemnation action in the United
States District Court for the Southern District of Georgia to obtain a
perpetual easement over the Island to deposit spoil from the Savannah
harbor. The district court dismissed the action for lack of jurisdiction
because it found that the Island fell within South Carolina's bounda-
ries due to prescription and Georgia's acquiescence to South Caroli-
na's exercise of sovereignty over the Island. Georgia intervened and
claimed sovereignty to the Island based on the Treaty. The United
States Court of Appeals for the Fifth Circuit reversed. Relying on the
Treaty, the Fifth Circuit held that the Island fell within Georgia's bor-
der, and it remanded the case to the district court for further proceed-
ings. See United States v. 450 Acres of Land, 220 F.2d 353 (5th Cir.
1955).
During the interim, the Government entered into possession of an
easement on the Island pursuant to an April 3, 1953 district court
order that granted immediate possession to the Government under the
Rivers and Harbors Appropriation Act of 1918, 33 U.S.C.A. § 594(West 1986).2 On March 9, 1956, after the Fifth Circuit held that the
Island belonged to Georgia, Georgia deeded a perpetual easement
over the Island to the Government for spoil disposal. In 1957, on
remand from the Fifth Circuit, the district court dismissed Pinckney
as an improperly joined party on the ground that South Carolina did
not pass good title to him in 1942 since the Property actually fell
within Georgia's borders. The Government subsequently dismissed
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2 Section 594 provides in pertinent part:
Whenever the Secretary of the Army, in pursuance of author-
ity conferred on him by law, causes proceedings to be instituted
in the name of the United States for the acquirement by condem-
nation of any lands, easements, or rights of way needed for a
work of river and harbor improvements duly authorized by Con-
gress, the United States, upon the filing of the petition in any
such proceedings, shall have the right to take immediate posses-
sion of said lands, easements, or rights of way, to the extent of
the interest to be acquired, and proceed with such public works
thereon as have been authorized by Congress: Provided, That
certain and adequate provision shall have been made for the pay-
ment of just compensation to the party or parties entitled thereto.
33 U.S.C.A. § 594 (emphasis added).
4
the condemnation action because it had obtained the perpetual Geor-
gia Easement, the interest that it sought in the condemnation action,
and it began to deposit spoil on the Island. In 1960, Pinckney quit-
claimed whatever interest he held in the Property to the Landowners.
In an unrelated case, Georgia sued South Carolina in 1977 after a
long dispute between the two states over the exact location of their
boundary along the lower Savannah River. In 1990, the United States
Supreme Court determined the location of the boundary, and it held
that the Island belongs to South Carolina. The Court concluded that
South Carolina acquired sovereignty over the Island by prescription
and acquiescence, as evidenced by its taxation, policing, and patrol-
ling of the Island. See Georgia v. South Carolina, 497 U.S. 376, 388-
93 (1990).
In 1991, the Landowners filed a quiet-title action in the United
States District Court for the District of South Carolina to divest the
Government of the Georgia Easement. The district court concluded
that South Carolina exercised sovereignty over the Island on the date
of the Georgia Easement and that the Government therefore never
acquired a valid easement because Georgia did not have the right to
convey such an interest. Accordingly, the court invalidated the Geor-
gia Easement. See Eltzroth v. United States, C.A. No. 2:91-2139-18
(D.S.C. Feb. 25, 1994). The Government initially appealed the district
court's order to the Fourth Circuit, but it later dismissed the appeal.
On August 30, 1994, the Government filed the instant condemna-
tion action for the entire fee simple absolute in the United States Dis-
trict Court for the District of South Carolina. The Government named
the Landowners and Georgia as defendants. On September 11, 1995,
the district court dismissed Georgia as a party defendant because it
held that Georgia had no claim or interest in the Island due to its sov-
ereignty or to adverse possession. On October 23, 1995, the district
court granted the Government's motion to join Georgia as a party
plaintiff on the ground that Georgia will have to pay any compensa-
tion owed to the Landowners for the condemnation. 3
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3 Pursuant to the Rivers and Harbors Appropriation Act of 1917, 33
U.S.C.A. § 593 (West 1986), the Government may institute condemna-
tion proceedings to acquire land that a state needs in connection with a
river and harbor improvement authorized by Congress, but the state must
pay the expense of the proceedings and any award granted to the land-
owner.
5
Before the Government obtained the Georgia Easement in 1956, it
consisted mainly of marshlands. However, the spoil that the Govern-
ment deposited created dry land on the Island, and the Island's market
value has greatly increased since 1956. The district court therefore
asked the parties to brief the valuation issue. The Government and
Georgia contended that the taking of the entire fee simple occurred on
March 9, 1956 when the Government entered into physical possession
of the Property pursuant to the Georgia Easement, and they therefore
argued that the court should value the Property as of that date. The
Landowners argued that the taking of the fee simple occurred on
August 30, 1994 when the Government filed the instant condemnation
action and that the court should value the Property as of that date. On
August 27, 1996, the district court held that the taking of the fee sim-
ple absolute occurred on March 9, 1956.
On October 18, 1996, the district court denied the Landowners'
motion for reconsideration. On December 9, 1996, the district court
amended its orders and certified the issue to the Fourth Circuit pursu-
ant to 28 U.S.C.A. § 1292(b) (West 1993). 4 On February 5, 1997, we
granted the Landowners' petition for permission to appeal the district
court's interlocutory order.
II.
The Fifth Amendment of the United States Constitution provides:
"nor shall private property be taken for public use, without just com-
pensation." U.S. Const. amend. V. The Landowners in the instant case
contend that the district court erred in holding that the Government
"took" a fee simple absolute in the Property on March 9, 1956. In our
view, the appeal involves two separate questions: 1) whether a taking
occurred on March 9, 1956; and 2) if so, what interest the Govern-
ment took in the Property on that date. We review such questions of
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4 Section 1292(b) gives the courts of appeals discretion to permit inter-
locutory appeals from district court orders when the district judge is "of
the opinion that such order involves a controlling question of law as to
which there is substantial ground for difference of opinion and that an
immediate appeal from the order may materially advance the ultimate
termination of the litigation." 28 U.S.C.A. § 1292(b).
6
law de novo. See Watson v. Lowcountry Red Cross, 974 F.2d 482, 485
(4th Cir. 1992). We address each question in turn below.
A.
We first must determine whether a taking occurred on March 9,
1956 when the Government first possessed the Property pursuant to
the Georgia Easement. Based on the Supreme Court's holding in
United States v. Dow, 357 U.S. 17 (1958), we conclude that a taking
of at least some interest in the Property did occur on March 9, 1956.
In Dow, the Supreme Court discussed the proper method for deter-
mining the date of a taking. In that case, the Government had seized
a pipeline easement over private property in 1943 pursuant to a court
order for immediate possession of the easement under the Second
War Powers Act of March 27, 1942, 56 Stat. 176, 177. See Dow, 357
U.S. at 18-19. The Government filed a declaration of taking in 1946
for the easement pursuant to the Declaration of Taking Act (the "Tak-
ing Act"), 40 U.S.C.A. § 258a-258e (West 1986 & Supp. 1997), and
it deposited the estimated just compensation with the court at that
time. Id. at 19.
The Dow Court held that the Government can take property pursu-
ant to its eminent domain power in either of two ways: 1) by physi-
cally entering and appropriating the property for public use without
a court order; or 2) by instituting condemnation proceedings under
various federal statutes that authorize such takings. See Dow, 357
U.S. at 21. The Court stated:
Although in both classes of "taking" cases-- condemna-
tion and physical seizure -- title to the property passes to
the Government only when the owner receives compensa-
tion, or when the compensation is deposited into court pur-
suant to the Taking Act, the passage of title does not
necessarily determine the date of "taking." The usual rule is
that if the United States has entered into possession of the
property prior to the acquisition of title, it is the former
event which constitutes the act of taking. It is that event
which gives rise to the claim for compensation and fixes the
7
date as of which the land is to be valued and the Govern-
ment's obligation to pay interest accrues.
Id. at 21-22 (citations omitted). The Court therefore held that when
the Government files a declaration of taking after it has entered into
possession of private property, "the date of``taking' is the date on
which the Government entered and appropriated the property to pub-
lic use." Id. at 23. The Court explained:
[I]n cases where there has been an entry into possession
before the filing of a declaration of taking, such entry has
been considered the time of "taking" for purposes of valuing
the property and fixing the date on which the Government's
obligation to pay interest begins to run. To rule that the date
of "taking" is the time of filing would confront us with a
Hobson's choice. On the one hand, it would certainly be
bizarre to hold that there were two different "takings" of the
same property, with some incidents of the taking determined
as of one date and some as of the other. On the other hand,
to rule that for all purposes the time of taking is the time of
filing would open the door to anomalous results. For exam-
ple, if the value of the property changed between the time
the Government took possession and the time of filing, pay-
ment as of the latter date would not be an accurate reflec-
tion of the value of what the property owner gave up and the
Government acquired.
Id. at 24 (emphasis added). See also Best v. Humboldt Placer Mining
Co., 371 U.S. 334, 340 (1963) (holding that while "[t]itle to the prop-
erty passes later, . . . the entry into possession marks the taking, gives
rise to the claim for compensation, and fixes the date as of which the
property is to be valued").
In the instant case, the district court granted the Government imme-
diate possession of an easement over the Property in 1954 pursuant
to the Rivers and Harbors Appropriation Act. The parties have stipu-
lated that the Government actually entered into possession of an ease-
ment on the Property on March 9, 1956 under the invalid Georgia
Easement. On August 30, 1994, the Government filed a complaint of
condemnation for the fee simple absolute, filed a declaration of taking
8
pursuant to the Taking Act, and deposited the estimated amount of
just compensation with the court. Thus, since the Government filed
the declaration of taking after it entered into possession of an ease-
ment on the Property, "the date of ``taking' is the date on which the
Government entered and appropriated the property to public use."
Dow, 357 U.S. at 23. The district court therefore correctly concluded
that a taking of at least part of the Property occurred on March 9,
1956.
The Landowners' arguments to the contrary lack merit. They argue
that no taking occurred until 1994 because, unlike in Dow, the Gov-
ernment in the instant case did not enter into possession of the Prop-
erty by "seizing" it. Since the Government possessed the Property
pursuant to the Georgia Easement, and since Georgia voluntarily
agreed to the Easement, they argue that the Government's entry and
possession in 1956 did not amount to a taking. They cite several cases
in support of their view that the Government's possession of private
property pursuant to a voluntary contract right does not constitute a
taking.
For example, in United States v. Bedford Assocs. , 657 F.2d 1300(2d Cir. 1981), the Government occupied space in a private office
building pursuant to a lease that the Second Circuit later declared was
unenforceable. In anticipation of a condemnation action by the Gov-
ernment, the court stated:
In the event that the government elects to condemn an
interest in the premises, we think it plain that just compensa-
tion for the taking so accomplished must be determined as
of the date of the government's statutory election. Through-
out the proceedings in this case, the government has dis-
claimed any exercise of its power of eminent domain, and
has vigorously contended that it occupies [the property] by
contractual right. Because the government's occupancy has
been merely the assertion of a contract right, it was not a
seizure of the premises within the contemplation of cases
such as United States v. Dow, 357 U.S. 17 (1958). This is
true even though, as we have held above, the government's
lease was not specifically enforceable. The government can-
not be said to have taken property merely because its good
9
faith estimate of the enforceability of its contractual rights
later proves mistaken. Accordingly, any taking of an interest
in [the property] can occur only after the government has
abandoned its insistence upon its contractual right to occupy
the building, as it must after our rejection of its claim for
specific performance, and asserts a right to occupancy based
upon its prerogatives as sovereign.
Id. at 1318 (citations omitted). The Landowners argue that cases such
as Bedford Assocs. stand for the proposition that occupancy under a
contract right, even if unenforceable, is not the type of "taking" that
Dow contemplated. They therefore argue that the Government's pos-
session and occupancy of the Property under the Georgia Easement
is not a taking even though the district court later declared the Ease-
ment invalid.
Although the Landowners' argument is appealing at first blush, it
ultimately lacks merit because of the unique facts of the instant case.
In Bedford Assocs. and the other cases that the Landowners cite, the
landowner at issue entered into a voluntary contract with the Govern-
ment, and the Government had no intent at the time of the contract
to condemn or appropriate the property. In the instant case, however,
the Government entered into the easement with Georgia, not with the
Landowners. Moreover, the Georgia Easement was not exactly volun-
tary. The Government had already filed a condemnation action to
obtain a perpetual easement over the Property, and the district court
had already granted the Government immediate possession of the
Property pursuant to the Rivers and Harbors Appropriation Act. The
Landowners stress that the Government subsequently dismissed the
1952 condemnation action. However, the Government only dismissed
the action after Georgia "voluntarily" agreed to give the Government
what it sought in the condemnation action, presumably in order to
save litigation costs. Unlike the cases that the Landowners cite, the
Government in the instant case clearly intended to appropriate an
interest in the Property at the time it entered into possession of the
Property in 1956.
Moreover, if we concluded that no taking occurred until August 30,
1994 and valued the fee simple absolute as of that date, the Landown-
ers would receive a substantial windfall due to the Government's
10
efforts over the past forty years. The Government's spoil deposits
have turned the previously marshy, separate islands into dry land con-
nected to the South Carolina shore. If we picked the 1994 market
value of the fee simple absolute, the Landowners would receive com-
pensation far in excess of the Property's value on the date that the
Government actually appropriated and began using the Property for
public use. As the Dow Court held, "payment as of the latter date
would not be an accurate reflection of the value of what the property
owner gave up and the Government acquired." Dow, 357 U.S. at 24.
Thus, the district court correctly held that the Government took at
least some interest in the Property on March 9, 1956.
B.
We conclude, however, that the district court erred in holding that
the Government took the entire fee simple absolute on March 9, 1956.
The evidence clearly demonstrates that the Government only took an
easement in the Property on that date. The Government's original
condemnation action in 1952 only sought an easement over the Prop-
erty, and Georgia only granted an easement in 1956. Moreover, the
Landowners asserted in many affidavits that they have used the Prop-
erty for recreational and hunting purposes for the past forty years.
Landowner Murdaugh asserted that the Georgia Department of Trans-
portation (the "GDOT") gave him a key to the gate surrounding the
Island in the early 1970s, and Landowner Eltzroth asserted that the
GDOT gave him a key in 1985. The Government has not contested
the truth of the Landowners' affidavits. Furthermore, the GDOT letter
that accompanied Eltzroth's key stated in part:
I understand that [a GDOT employee] discussed our current
diking problem with you and explained our interest in hav-
ing your property available for dredge storage. Flexibility to
place dredge material, we believe, is the key to long term
land storage. Your property enhances that flexibility and in
the long term such material placement could raise the value
of the property. I believe mutual[ly] beneficial arrangements
can be made.
(emphasis added). The affidavits clearly reveal that the Government
and Georgia never believed that they had "taken" a fee simple abso-
11
lute in 1956. The Landowners continued to use the Property, and the
Government thus never exclusively possessed the fee simple. The
original condemnation action and the GDOT letter reveal that the
Government only intended to take, and only believed that it had
taken, an easement, and it still acted as if the Landowners owned the
fee.5 We therefore conclude that the Government only entered into
possession of an easement on March 9, 1956.
The parties have not cited, and we have been unable to find, any
case where the Government entered into possession and "took" a lim-
ited interest in private property and then subsequently filed a declara-
tion of taking for a greater interest in the property. However, since the
Government entered into possession of an easement on March 9,
1956, before it filed any declaration of taking, we conclude that the
taking of the easement occurred on March 9, 1956. See Dow, 357
U.S. at 22 (holding that when the "United States has entered into pos-
session of the property prior to the acquisition of title, it is the former
event which constitutes the act of taking"). But the Government never
entered into possession of the remaining interest in the Property, the
fee simple absolute subject to the easement. Therefore, the taking of
the remaining interest in the Property did not occur until August 30,
1994 when the Government filed the declaration of taking and stated
that it intended to take the entire fee. Id. at 23 (holding that "when the
Government files a declaration before it has entered into possession
of the property the filing constitutes the ``taking'").
III.
The date of taking "fixes the date as of which the land is to be val-
ued and the Government's obligation to pay interest accrues." Dow,
357 U.S. at 22. Accordingly, Georgia must pay the Landowners the
_________________________________________________________________
5 We must note that we do not understand why the GDOT referred to
the Property in the 1985 letter as the Landowners' Property. At that
point, the Supreme Court had not yet reversed the Fifth Circuit's 1955
opinion which held that the Island belonged to Georgia. Thus, if any-
thing, the Government should have thought that Georgia owned the fee
simple, not the Landowners. Nonetheless, the Government's and Geor-
gia's actions clearly reveal that they assumed that the Landowners
retained the fee simple.
12
market value of the easement on March 9, 1956, plus interest from
that date until it fully pays the award. In addition, Georgia must pay
the Landowners the market value of the remaining interest in the
Property, the encumbered fee simple absolute subject to the easement,
on August 30, 1994, plus interest until payment. We reverse the dis-
trict court's judgment and remand for further proceedings.
REVERSED AND REMANDED
13