Euclid v. Ambler Realty Co.

Euclid, Ohio lies a few miles inland from the shore of Lake Erie, northeast of the city of Cleveland. In 1926, the village of Euclid won a case in the U.S. Supreme Court which affirmed the right of local governments to control the use of land through zoning.

To avoid being engulfed by the approaching growth of the nearby city, on 13 November 1922 Euclid's Village Council passed zoning ordinances governing the use of local land. Six distinct zones were created within Euclid's boundaries, each with its own rules stipulating what the town considered to be acceptable types of development. The first zone, for example, was to be reserved for single family dwellings, with industry completely prohibited. At the other end of the scale, the sixth zone allowed usage for manufacturing, fuel storage, penal institutions, or whatever else land owners might desire to build. Four intermediate district classifications set rules over what balance of business and residential development would be allowed in each.

The Ambler Realty Company had bought 68 acres of vacant land in Euclid prior to the village council's action. Most of the realty company's holdings lay within the U-6 or "industrial" zone defined by the town. Some of the land, however, lay within the more restrictive zones, disallowing Ambler's plans to sell the real estate for industrial development. Ambler Realty took the village to federal court over the new local law, claiming that zoning rules diminished the value of their investment property to only a quarter of what the land was worth as industrial real estate.

Because courts generally deferred to the constitutional rights of private property owners, Ambler Realty had good reason to hope that their suit would succeed. Instead of attacking the specifics of Euclid's regulations, however, the suit assaulted the concept of zoning itself, attempting to push such regulation out of the way. As land owners, Ambler Realty claimed that the village council's rule-making infringed upon the company's rights to due process and equal protection under the law, as guaranteed by the Fourteenth Amendment. From a legal standpoint, this strategy was a fatal mistake.

Ambler Realty was initially successful. The Federal Court for the Northern District of Ohio granted the company an injunction in January of 1924, enjoining Euclid's building inspector from enforcing the zoning laws. The decision found that preventing the realtors from reselling their property for its maximum potential value amounted to depriving the company of "property" (i.e. resale profit) without due compensation. Euclid's law was declared unconstitutional.