5th Circuit Rules Assessments Not Recoverable in Eminent Domain Case

United States v. Land No. 11-31167

http://www.ca5.uscourts.gov/opinions/pub/11/11-31167-CV0.wpd.pdf

In this eminent domain case, the Court rules that an association’s right to collect assessments is “property,” but concludes that its diminution is not a compensable interest under the Takings Clause.  While this is a condemnation claim triggered by the federal government’s eminent domain power and the definition of “property” exclusively under Louisiana law, the ruling could be used for local government eminent domain claims here in Texas.

Mariner’s Cove Development (“Mariner’s Cove”) is a residential community consisting of fifty-eight town homes.  The home owners association controls the covenants which provide that each owner of a lot in Mariner’s Cove pays a proportionate 1/58 share of the expense of maintenance, repair, replacement, administration, and operation of the community properties.

Mariner’s Cove suffered substantial damage from Hurricane Katrina. After Katrina, the United States Army Corps of Engineers (“Corps”) began to repair and rehabilitate the levee adjacent to Mariner’s Cove, and began to construct an improved pumping station at the 17th Street Canal. The Corps later determined that it needed to acquire fourteen of the fifty-eight units in Mariner’s Cove to facilitate its access to the pumping station.  The association brought suit for the loss of assessments it would have obtained from the properties.

The Court reasoned that under Louisiana law, the right to collect such assessment was a “property” right.  However recognizing such a right as compensable under the Takings Clause would allow parties to recover from the Government for condemnations that eliminate interests that do not stem from the physical substance of the land, and that would unjustifiably burden the Government’s eminent domain power.  Here, the Court affirms the District Court’s judgment that the diminution to the assessment base was incidental to the condemnation, and thus barred by the “consequential loss rule.”   In other words, the  government wins.