Title: Housing Authority of the Birmingham District v. Logan Properties, Inc.

State: alabama

Issuer: Alabama Supreme Court

Document:

REL: 12/07/2012
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2012-2013
____________________
1111015
____________________
Housing Authority of the Birmingham District
v.
Logan Properties, Inc., and Alamerica Bank
Appeal from Jefferson Circuit Court
(CV-10-900216)
STUART, Justice.
The Housing Authority of the Birmingham District ("HABD")
appeals the judgment entered by the Jefferson Circuit Court
awarding Logan Properties, Inc., $350,000 on its inverse-
condemnation claim against HABD, as well as an additional
1111015
$100,000 
for 
litigation 
expenses, 
and 
awarding 
the 
intervening
plaintiff Alamerica Bank $10,000 for litigation expenses.  We
reverse and remand.
I.
Logan 
Properties 
is 
a 
real-estate 
and 
property-management
company that purchases, renovates, rents, and maintains
single-family and multi-family residences in the Birmingham
area.  In January 2002, Logan Properties purchased Patio
Court, a 30-unit apartment complex in the Ensley neighborhood
in Birmingham for approximately $101,000.  Logan Properties
began renovating the vacant units in the complex with the plan
of transferring current tenants into the newly 
renovated units
until the entire complex was eventually renovated and leased. 
Logan Properties financed the purchase and rehabilitation of
Patio Court by obtaining a construction loan from Alamerica
Bank.   In February 2003, Logan Properties obtained an
1
adjacent parcel of property including a triplex unit with the
same goal of renovating and leasing the units.
Sometime in 2004, Logan Properties learned that HABD had
obtained a federal grant to redevelop Tuxedo Court, a multi-
At the 2011 trial, the parties stipulated that at that
1
time at least $325,876 remained owing on that loan.
2
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block public-housing complex located across 22nd Street from
Patio Court.  That project, referred to by the parties as the
Hope VI project, entailed the demolition of the existing
Tuxedo Court housing complex and the construction of new
housing in its place.  At trial, Logan Properties' officers
testified that, after the plans for the Hope VI project were
made public, tenants started leaving Patio Court, telling
Logan Properties that HABD was going to condemn Patio Court as
part of the Hope VI project.  As residents in Tuxedo Court
left as well, the general area deteriorated, and the vacant
Patio Court apartments became the subject of theft and
vandalism. 
 
Although 
Logan 
Properties 
had 
completely 
renovated
18 of the units, it eventually stopped renovation work, and,
during the 2011 trial, it was conceded that the entire
property had become unlivable.2
In September 2005, the Boulevard Group, which was hired
by HABD to be the project manager for the Hope VI project,
offered to buy Patio Court, but not the triplex, from Logan
Properties for $200,000.  Logan Properties rejected the offer
It appears Patio Court still had some tenants as late as
2
2007.
3
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but, in November 2005, made a counteroffer to sell Patio Court
and the triplex for $415,000.  That offer was not accepted.  
It is not clear exactly what transpired over the next 18
months, but it appears that there were at least some ongoing
negotiations between Logan Properties and HABD while Patio
Court continued to deteriorate.  On May 15, 2007, Logan
Properties received an appraisal report it had commissioned,
placing the fair market value of Patio Court and the adjacent
triplex on September 1, 2005 –– "the date the owners state the
property was in livable condition" –– at $425,000.  On June
18, 2007, HABD sent Logan Properties a letter formally
offering to buy Patio Court and the triplex for $104,200, the
amount those properties had been appraised for in an
independent appraisal commissioned by HABD.  The letter also
advised Logan Properties that if it did not accept the offer,
"it will be necessary for HABD to file suit to acquire the
property by condemnation under its power of eminent domain." 
See § 24-1-28, Ala. Code 1975 (providing that a municipal
housing authority may "acquire by eminent domain 
any 
property,
real or personal, which it may deem necessary to carry out the
purposes of [the Housing Authorities Law, § 24-1-20 et seq.,
4
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Ala. Code 1975]").  Logan Properties did not accept the offer
and, in accordance with § 18-1A-270 et seq., Ala. Code 1975,
HABD 
subsequently 
initiated, 
on 
September 
26, 
2007,
condemnation proceedings in the Jefferson Probate Court.  As
required by § 18-1A-75(a), Ala. Code 1975, 
HABD simultaneously
filed a lis pendens notice on the properties.
The probate court thereafter granted HABD's application
for 
condemnation 
and 
appointed 
three 
disinterested
commissioners to determine the compensation due Logan
Properties for the condemnation of its property.  On February
25, 2008, those commissioners filed a report with the probate
court setting the amount of compensation at $104,950. 
However, the probate court failed to enter an order adopting
the 
commissioners' 
report 
within 
the 
seven-day 
period 
required
by § 18-1A-282, Ala. Code 1975, and Logan Properties
thereafter moved for a dismissal of the condemnation action on
the basis of the probate court's failure to comply with § 18-
1A-282.  On July 2, 2008, the probate court granted that
motion and dismissed the action.
In May 2009, HABD renewed its effort to acquire the
property belonging to Logan Properties, ordering a new
5
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appraisal, which valued the property at $108,700.  On May 22,
2009, HABD made a formal offer to buy the property from Logan
Properties for that amount, again advising that it would
exercise its powers of eminent domain if the offer was not
accepted.  On November 20, 2009, HABD sent Logan Properties a
letter reiterating its offer and its intent to initiate
condemnation proceedings if Logan Properties did not agree to
sell the property.  
On January 21, 2010, Logan Properties initiated this
action in the Jefferson Circuit Court, asserting an inverse-
condemnation claim against HABD and arguing that HABD's
pursuit of its property over the previous several years
constituted a de facto taking of the property.  See, e.g.,
McClendon v. City of Boaz, 395 So. 2d 21, 24 (Ala. 1981)
("Inverse condemnation is the taking of private property for
public 
use 
without 
formal 
condemnation 
proceedings 
and 
without
just compensation being paid by a governmental agency or
entity which has the right or power of condemnation.").
Alamerica Bank thereafter moved to intervene pursuant to
Rule 24(a), Ala. R. Civ. P., to protect its interest as
mortgagee of the Patio Court property, and, on April 8, 2011,
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the trial court granted that motion.  A three-day jury trial
was held beginning October 4, 2011.  HABD moved for a judgment
as a matter of law at the close of the plaintiffs' case and
renewed that motion at the close of all evidence; the trial
court denied both motions.  Ultimately, the jury returned a
verdict in favor of Logan Properties and against HABD in the
amount of $350,000.  
Logan Properties and Alamerica Bank subsequently moved
the trial court to award them litigation expenses, including
attorney fees.  See § 18-1A-32(b), Ala. Code 1975 ("The
judgment and any settlement in an inverse condemnation action
awarding or allowing compensation to the plaintiff for the
taking or damaging of property by a condemnor shall include
the plaintiff's litigation expenses.").  Following a hearing,
the trial court granted their motions.  On December 16, 2011,
the trial court entered its final judgment, awarding Logan
Properties $350,000 on the jury verdict and an additional
$100,000 for litigation expenses and awarding Alamerica Bank
$10,000 
for 
litigation 
expenses. 
 
HABD's 
subsequent
postjudgment motion for a judgment as a matter of law or, in
the alternative, for a new trial was denied by the trial court
7
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on March 16, 2012, and, on April 20, 2012, HABD filed its
notice of appeal to this Court.
II.
In Alabama Department of Transportation v. Land Energy,
Ltd., 886 So. 2d 787 (Ala. 2004), this Court considered an
appellant's argument that the trial court had erred by failing
to grant the appellant's motion for a judgment as a matter of
law on the appellee's inverse-condemnation claim.  We
described the applicable standard of review as follows:
"'When reviewing a ruling on a motion for a
[judgment as a matter of law], this Court uses the
same standard the trial court used initially in
granting or denying the motion.  Palm Harbor Homes,
Inc. v. Crawford, 689 So. 2d 3 (Ala. 1997). 
Regarding questions of fact, the ultimate issue is
whether the nonmovant has presented sufficient
evidence to allow the case or issue to be submitted
to the jury for a factual resolution.  Carter v.
Henderson, 598 So. 2d 1350 (Ala. 1992). ...  A
reviewing court must determine whether the party who
bears the burden of proof has produced substantial
evidence creating a factual dispute requiring
resolution by the jury.  Carter, 598 So. 2d at 1353. 
In reviewing a ruling on a motion for a [judgment as
a matter of law], this Court views the evidence in
the light most favorable to the nonmovant and
entertains such reasonable inferences as the jury
would have been free to draw.  Id.  If the question
is one of law, this Court indulges no presumption of
correctness as to the trial court's ruling.  Ricwil,
Inc. v. S.L. Pappas & Co., 599 So. 2d 1126 (Ala.
1992).'"
8
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886 So. 2d at 791-92 (quoting Ex parte Alfa Mut. Fire Ins.
Co., 742 So. 2d 1237, 1240 (Ala. 1999)).
III.
Section 235 of the of Alabama Constitution provides that 
entities invested with the privilege of taking property for
public use –– including municipal authorities such as HABD ––
"shall make just compensation ... for the property taken,
injured, or destroyed by the construction or enlargement of
its 
works, 
highways, 
or 
improvements, 
which 
compensation 
shall
be paid before such taking, injury, or destruction."  Ala.
Const. 1901, Art. XII, § 235.  Section 235 does not expressly
discuss inverse condemnation; however, statutes and this
Court's caselaw have long recognized that, if an entity
holding eminent-domain powers fails to make compensation
before taking, injuring, or destroying private property, the
aggrieved property owner is entitled to assert an inverse-
condemnation claim against that municipal corporation.  See
Jefferson Cnty. v. Southern Natural Gas Co., 621 So. 2d 1282,
1287 (Ala. 1993) ("Sonat") ("'Inverse condemnation' refers to
a legal action against a governmental authority to recover the
value of property that has been taken by that governmental
9
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authority without exercising its power of eminent domain –– it
is a shorthand description of the manner in which a landowner
recovers just compensation for a taking of his property when
the 
taking 
authority 
has 
not 
initiated 
condemnation
proceedings."), and § 18-1A-32, Ala. Code 1975 ("A condemnor
shall not intentionally make it necessary for an owner of
property to commence an action, including an action in inverse
condemnation, to prove the fact of the taking of his
property.").  Applying § 235, a plaintiff asserting an
inverse-condemnation 
claim 
is 
required 
to 
put 
forth
substantial evidence of the following elements: (1) that the
defendant is an entity "invested with the privilege of taking
property for public use"; (2) that the plaintiff's property
was "taken, injured, or destroyed"; and (3) that that taking,
injury, or destruction was caused "by the construction or
enlargement of 
[the 
defendant's] 
works, highways, 
or
improvements."  See, e.g., Mahan v. Holifield, 361 So. 2d
1076, 1079 (Ala. 1978) ("[Section 235] has been interpreted to
support a cause of action by a private landowner whose
property is taken or damaged by a municipality as a
consequence of its acts of construction or enlargement.").  In
10
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this case, there is no dispute that HABD holds eminent-domain
powers pursuant to § 24-1-28, Ala. Code 1975.  On appeal,
however, HABD argues that there was no taking, injury, or
destruction of Logan Properties' property and that, even if
the "injuries" alleged by Logan Properties were cognizable,
they were not caused by the construction or enlargement of
HABD's works or improvements.
It is undisputed in this case that HABD never seized,
occupied, or exercised control over the Patio Court property
or the adjacent triplex owned by Logan Properties.  It is
likewise undisputed that HABD never took any action that
physically injured or had any direct physical impact upon
those properties.  Finally, there is no allegation that HABD
ever impeded access to any property owned by Logan Properties. 
In light of these undisputed facts, HABD argues that it was
entitled to a judgment as a matter of law because, it says,
there was no evidence of any taking of or injury to property
owned by Logan Properties.  See, e.g., Sonat, 621 So. 2d at
1286-87 
("Section 
235 
specifically 
requires 
municipalities 
and
other corporations 'invested with the privilege of taking
property for public use' to make 'just compensation' for
11
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'property taken, injured, or destroyed by the construction or
enlargement of its works, highways, or improvements,' where
there is evidence of some direct physical injury to the
property."  (emphasis added)); Reid v. Jefferson Cnty., 672
So. 2d 1285 (Ala. 1995) (affirming a summary judgment entered
in 
favor 
of 
municipalities 
on 
plaintiff's 
inverse-condemnation
claim alleging that he suffered an injury when a pedestrian
bridge was constructed adjacent to his business, where
evidence indicated that no work was performed on plaintiff's
property, that the surface of plaintiff's property was not
disturbed, and that the plaintiff's property was 
not 
subjected
to any direct or indirect physical disturbance); and Alabama
Power Co. v. City of Guntersville, 235 Ala. 136, 145, 177 So.
332, 340 (1937) ("The embarking upon a competitive business
with 
appellant, 
without 
any 
physical 
disturbance 
of
appellant's property, or any interference with the right the
appellant has to the legal and proper use of the same, is not
such an injury to, or destruction of, property as falls within
the protection of section 235 of the Constitution."  (emphasis
added)).
12
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Logan Properties does not dispute that there was no
trespass onto its property.  Rather, it argues that HABD
engaged in a series of actions that resulted in the
devaluation of its property.  In its complaint, it articulated
the alleged taking as follows: "The fact that the HABD has
indicated, attempted and continues to pursue the condemnation
of [Patio Court and the adjacent triplex] from Logan
Properties constitutes a taking."  Essentially, Logan
Properties argues that the possibility of condemnation became
public in 2004, resulting in a steady exodus of tenants.  As
tenants left, income was reduced, making it harder to finance
the ongoing renovations of Patio Court and the triplex. 
Eventually, Alamerica Bank stopped loaning Logan Properties
money for the renovations because of the possibility of
condemnation, and the lis pendens notice placed on the
property in September 2007, Logan Properties argues, not only
made it impossible to borrow money to maintain or to renovate
the property but also rendered the property unmarketable. 
Finally, Logan Properties argues, even after the first
condemnation action was dismissed in July 2008, HABD did not
remove the lis pendens notice or file a new condemnation
13
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action, and Logan Properties was finally forced to initiate
this action in January 2010 in order to get the property out
of the limbo it had been in for approximately six years.  In
sum, Logan Properties argues, HABD's actions over this lengthy
period cannot be considered simply part of the normal
condemnation process and any number of those actions have
injured Logan Properties sufficiently to constitute an injury
or taking that is compensable pursuant to § 235.
Logan Properties has put forth substantial evidence
indicating that the Hope VI project as a whole and HABD's
efforts to acquire Patio Court and the adjacent triplex had a
negative effect, either direct or indirect, upon Patio Court
and the adjacent triplex.  However, we cannot agree that any
decrease in value of those properties related to the Hope VI
project constituted a taking or an injury that is compensable
pursuant to § 235.  As is evident from our caselaw, § 235 is
most generally implicated either when property is physically
taken by an authorized entity, see, e.g., Florence v.
Williams, 439 So. 2d 83, 88 (Ala. 1983) (in which a
municipality condemned private property for the construction
of an off-street parking facility), or when property is
14
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physically injured, disturbed, or damaged in association with
a public-works project, see, e.g., Warwick v. Mobile Cnty., 17
Ala. App. 206, 206, 84 So. 396 (1919) (holding county liable
where its employees entered onto plaintiff's property to
remove soil for use in repair of adjacent roadway). 
Additionally, we have noted that § 235 is applicable in cases
where an authorized entity engaged in "the construction or
enlargement of 
its 
works, 
highways, 
or 
improvements"
interferes with a nearby property owner's right of access to
his or her property.  See Davis v. State, 346 So. 2d 936, 939
(Ala. 1977) ("'"The overwhelming weight of authority is that
the owner of land abutting on a street or highway has a
private right in such street or highway, distinct from that of
the public, which cannot be taken or materially interfered
with without just compensation.  Access to the highway is one
of these private rights and is a property right, and the
interference with the right of access of an abutting owner is
an element of damage."'" (quoting St. Clair Cnty. v. Bukacek,
272 Ala. 323, 328, 131 So. 2d 683, 687 (1961), quoting in turn
Blount Cnty. v. McPherson, 268 Ala. 133, 135, 105 So. 2d 117,
119 (1958))).
15
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Indeed, with the exception of McEachin v. City of
Tuscaloosa, 164 Ala. 263, 51 So. 153 (1909), the cases Logan
Properties cites in support of the trial court's judgment
uniformly fall within one of these two categories.  Yet it is
undisputed in this case that there has been no physical
disturbance to or intrusion upon Logan Properties' property
and no interference with its access to the property.  Logan
Properties accordingly emphasizes this Court's holding in
McEachin and argues that it controls, while HABD argues that
McEachin was wrongly decided and that this Court has since
retreated from its holding.  A review of that case is
accordingly appropriate.
In McEachin, a property owner sued a municipality after
it had cut down shade trees located in the public right-of-way
in front of her house, arguing that her house was made less
comfortable and valuable as a result and that she was
accordingly entitled to compensation under § 235.  The trial
court held that she had no claim; however, this Court reversed
that judgment, holding that "if her property was injured by
the destruction of the trees, by the defendant, in and about
the enlargement or improvement of the street, she is entitled
16
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to just compensation, under the very letter of the
Constitution."  164 Ala. at 265, 51 So. at 153.  Thus, the
McEachin Court placed no import on the fact that there was no
physical invasion or damage to the plaintiff's property or
impairment to access, instead effectively holding that the
plaintiff was entitled to compensation merely because her
property suffered a loss in value in association with
improvements made by a municipality to adjacent property. 
Logan Properties argues that the circumstances in this case
are analogous and that it is entitled to compensation for the
same reasons.
HABD, however, argues that McEachin is an outlier from
which this Court has retreated, as evidenced by cases like
City of Guntersville, in which we indicated that in order to
recover for a taking pursuant to § 235 there must be either
some physical disturbance to property or interference with a
property owner's right to use that property.  235 Ala. at 145,
177 So. at 340 ("The embarking upon a competitive business
with 
appellant, 
without 
any 
physical 
disturbance 
of
appellant's property, or any interference with the right the
appellant has to the legal and proper use of the same, is not
17
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such an injury to, or destruction of, property as falls within
the protection of section 235 of the Constitution."). 
Moreover, HABD argues that this Court, in Alabama Power Co. v.
Christian, 216 Ala. 160, 162, 112 So. 763, 764 (1927),
suggested that it was willing to revisit the holding of
McEachin, but ultimately declined to do so because the
appellant had not made that specific argument.  
("[A]ppellant,
as we understand the argument, has not seen fit, on this
appeal, to draw into question the authority of the prevailing
opinion[] in McEachin ....").
The ongoing validity of McEachin has, however, been
called into question in this case, and we agree with HABD
that, to the extent McEachin holds that a compensable injury
or taking can occur in the absence of any physical intrusion,
injury, or destruction, including an injury to access, it was
wrongly decided.  Section 235 provides that an entity
authorized to exercise the power of eminent domain "shall make
just compensation ... for the property taken, injured, or
destroyed by the construction or enlargement of [that
entity's] works, highways, or improvements ...."  The
requirement that the taking or injury result from the
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"construction or enlargement of ... works, highways, or
improvements" –– projects that themselves have a tangible
physical effect on property ––  suggests that any injury or
taking must also be of a physical nature.  Logan Properties'
assertion that it has suffered a taking or injury merely
because its property was identified for acquisition and/or
condemnation by HABD and because that fact made it more
difficult to renovate, lease, or otherwise use the property,
thus decreasing its market value, therefore fails in the
absence of any evidence of a physical injury to that
property.   
3
This holding 
is 
consistent 
with the 
United 
States 
Supreme
3
Court's rulings in cases involving claims alleging that the
threat of condemnation and/or precondemnation procedures
constitute a taking.   See, e.g. Agins v. City of Tiburon, 447
U.S. 255, 263 n. 9 (1980) (overruled on other grounds by
Lingle v. Chevron, 544 U.S. 528 (2005)) ("Appellants also
claim that the city's precondemnation activities constitute a
taking. ...  
The 
[California] Supreme Court correctly rejected
the contention that the municipality's good-faith planning
activities, which did not result in successful prosecution of
an eminent domain claim, so burdened the 
appellants' 
enjoyment
of their property as to constitute a taking. ...  Even if the
appellants' ability to sell their property was limited during
the pendency of the condemnation proceeding, the appellants
were free to sell or develop their property when the
proceedings ended.  Mere fluctuations in value during the
process of governmental decisionmaking, absent extraordinary
delay, are 'incidents of ownership.  They cannot be considered
as a "taking" in the constitutional sense.'  Danforth v.
United States, 308 
U.S. 271, 285 (1939)."); Tahoe-Sierra Pres.
19
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In sum, we reiterate the following articulation of the
rule made by this Court in City of Guntersville:
"We think the proper rule, deducible from the
foregoing authorities, is, that just compensation
must be made by municipal corporations and other
corporations and individuals invested with the
privilege of taking property for public use, when,
by the construction or enlargement of 'its' works,
highways, or improvement, there will be occasioned
some direct physical disturbance of a right, either
public or private, which the owner enjoys in
connection with his property, and which gives it an
additional value, and that by reason of such
disturbance he has sustained some special damage
with respect to his property in excess of that
sustained by the general public."
235 Ala. at 143-44, 177 So. at 339 (emphasis added).   It is
4
undisputed that HABD caused no "direct physical disturbance"
to property owned by Logan Properties; accordingly, the trial
Council, Inc. v. Tahoe Reg'l Planning Agency, 535 U.S. 302,
336 (2002) ("A rule that required compensation for every delay
in the use of property would render routine government
processes 
prohibitively 
expensive 
or 
encourage 
hasty
decisionmaking."); and First English Evangelical Lutheran
Church of Glendale v. Los Angeles Cnty., 482 U.S. 304, 320
(1987) ("[D]epreciation in value of the property by reason of
preliminary activity is not chargeable to the government.").
We disagree, however, with the conclusion of the City of
4
Guntersville Court that the removal of trees in McEachin
constituted "a direct physical injury" to the plaintiff's
property.  235 Ala. at 141, 177 So. at 336-37.
20
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court erred by failing to grant HABD's motions for a judgment
as a matter of law.5
IV.
Logan 
Properties 
initiated 
an 
inverse-condemnation 
action
against HABD, alleging that HABD had taken or injured property
owned by Logan Properties.  Following a trial, a jury returned
a verdict in favor of Logan Properties, and the trial court
entered a judgment on that verdict, awarding Logan Properties
$350,000 in damages and $100,000 for litigation expenses. 
Alamerica Bank, which had intervened to protect its interest
as the mortgagee of the property, was also awarded $10,000 for
litigation expenses.  However, because no evidence was
Logan Properties also argues to this Court that HABD's
5
motions for a judgment as a matter of law should not have been
granted because it is always for the jury to decide whether
there has been an injury or taking for purposes of § 235.  See
Sonat, 621 So. 2d at 1287 ("This case involves inverse
condemnation; therefore, the trial court did not err in
allowing the jury to determine whether there had been a § 235
'taking' or 'injury.'").  However, a jury issue arises only
when a genuine issue of material fact has been raised.  See
also Reid, 672 So. 2d at 1290, and Avery v. Marengo Cnty.
Comm'n, 646 So. 2d 1347, 1351 (Ala. 1994) (affirming summary
judgments entered by the trial court in favor of defendant
government entities on plaintiffs' inverse-condemnation
claims).  In this case, the facts are undisputed –– there has
been no physical injury and there is accordingly no issue
regarding what caused that injury.  Thus, a judgment as a
matter of law is appropriate. 
21
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presented at trial indicating that HABD was responsible for a
direct physical injury upon Logan Properties' property, that
judgment is now reversed and the cause remanded for the trial
court to enter a judgment as a matter of law in favor of HABD.
REVERSED AND REMANDED.
Malone, C.J., and Parker, Shaw, and Wise, JJ., concur.
22