Tennessee Supreme Court Rules State Constitution Requires Government To Compensate Private Property Owners For Regulatory Takings of Property

August 18, 2014

The Tennessee Supreme Court has ruled that the State Constitution, like the United States Constitution, requires the government to compensate private property owners when governmental decisions, restrictions, or regulations take or interfere with private property interests.

The lawsuit was brought by Mack and Leann Phillips, who own more than 15 acres near Clarksville and who in 2010 sought permission to have the land subdivided. The Clarksville Montgomery Regional Planning Commission held a public hearing and then denied the request.

The property owners sought review of the Planning Commission’s decision from the Chancery Court but also filed suit in Circuit Court against Montgomery County, claiming that the denial of their request to subdivide the property amounted to a taking of their property for which Montgomery County owed them compensation. In legal terms, the property owners’ claim is known as a “regulatory taking” of property. The property owners asserted the denial of their request was based only upon the fact that their land lies in the path of a potential highway extension. The property owners based their claim on the Tennessee Constitution alone and did not rely upon the United States Constitution.

The property owners’ Chancery Court appeal from the Planning Commission’s decision remained unresolved, although such appeals should and normally do proceed quickly, but their state constitutional regulatory takings claim proceeded. The Circuit Court denied the County’s request to dismiss the lawsuit, but the County appealed. The Court of Appeals dismissed the regulatory takings claim, but the landowners then appealed to the Tennessee Supreme Court.

The Supreme Court reversed the dismissal. The Supreme Court explained that under the Fifth Amendment of the U.S. Constitution, property owners may seek compensation when government action results in a taking of property. Property may be taken, the Court explained, by an actual physical occupation or by government regulations or actions that interfere with a property owner’s use of the property. This latter type of taking is known in legal terms as a regulatory taking.

Until today, no prior Tennessee court had decided whether the State Constitution, like the U.S. Constitution, requires the government to compensate property owners for regulatory takings claims. Previously, Tennessee courts have addressed only physical occupation and nuisance-type takings claims. In its decision today, the Court discussed the similarities between article I, section 21 of the Tennessee Constitution and the Fifth Amendment of the U.S. Constitution and held that the State Constitution protects the right of Tennessee property owners to receive compensation for a regulatory taking of property to the same extent as the United States Constitution.

The Court remanded the claim before it to the trial court to determine whether, on the facts of this case, the Commission’s denial of the property owners’ request to subdivide their land actually amounted to a regulatory taking of property under the Tennessee Constitution for which compensation is due.

Read the Opinion in Mack Phillips et al. v. Montgomery County, authored by Justice Cornelia A. Clark.