Strange Bedfellows

By DAVID MOON, Moon Capital Management
August 22, 2004

With little fanfare for national publicity, the Supreme Court in the state of Michigan recently made a powerful statement about the protections associated with the ownership of assets. The court took the only position that was morally defensible, and in so doing created a unique alliance among two groups that are often at odds with one another: real estate developers and historic preservationists.

Wayne County, Michigan was trying to acquire 1,300 acres to build a new industrial park, the centerpiece of which would be a new General Motors plant. Most of the property owners agreed to sell. But a few ornery owners refused to part with their property ' and these parcels were crucial to the proposed project. The county government attempted to use its eminent domain powers to acquire the remaining two percent of the land, citing the huge public benefit of the new plant. The landowners sued.

In a unanimous decision, the court overturned a lower court finding and ruled against Wayne County.

A primary proper function of government is to safeguard the rights of minorities. The most important minority in a society is a minority of one; a society that does not protect the rights of any individual places at risk the rights of every individual.

Developers and other business types often espouse the economic community benefit associated with retail, commercial or residential development ' even if it requires the condemnation of someone's real estate. A developer may want to use someone else's property in a way that is contrary to the current owner's intended use. That a developer's planned use might economically, aesthetically or culturally benefit the entire community is really immaterial ' at least according to the Michigan court. If a developer can't acquire ownership of land in a private transaction, he ought not to be able to decide how it's used ' even with the help of a willing governmental accomplice.

Historic preservationists and developers occasionally (frequently?) find themselves quarreling over property uses. But they often share an ironic goal: they want the benefit or use of someone else's asset. (Developers almost always pay for these assets, however, even if it requires' the 'help' of government.) Preservation activists often seek to restrict the use of an individual's property because of some perceived public benefit that might be gained through that restriction. (In this sense, an industrial park and an old building are similar.) But there is a difference between public benefit (like an architecturally unique private residence) and public use (like a road.)

When pressure or legal maneuvering prevents a landowner from deciding what to do ' or not do ' with his property, it amounts to social larceny. This is no different than if someone's property was taken in order to build a gas station. (Preservationist will adamantly disagree with that analogy, pointing out that historically significant architecture and a crass commercial venture are not comparable. But beauty is in the eye of the beholder.)

Michigan is a surprising bastion of conservative judicial interpretists, not activists. I hope the trend spreads.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

Add me to your commentary distribution list.

MCM website