Opinion ID: 2214514
Heading Depth: 1
Heading Rank: 3

Heading: analysis

Text: ¶ 21 Article I, Section 13 of the Wisconsin Constitution provides: The property of no person shall be taken for public use without just compensation therefor. Likewise, the Takings Clause of the Fifth Amendment of the U.S. Constitution, made applicable to the States through the Fourteenth Amendment, provides that private property shall not be taken for public use, without just compensation. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005) (citing Chicago, Burlington & Quincy R. Co. v. City of Chicago, 166 U.S. 226, 17 S.Ct. 581, 41 L.Ed. 979 (1897)). In order to trigger the just compensation clause under either the Wisconsin Constitution or the U.S. Constitution, there must be a taking of private property for public use. Zinn v. State, 112 Wis.2d 417, 424, 334 N.W.2d 67 (1983); Howell Plaza II, 92 Wis.2d at 80, 284 N.W.2d 887. ¶ 22 Under the Wisconsin Constitution, two types of governmental conduct can constitute a taking: (1) an actual physical occupation of private property or (2) a restriction that deprives an owner of all, or substantially all, of the beneficial use of his property. Howell Plaza, Inc. v. State Highway Comm'n, 66 Wis.2d 720, 726, 226 N.W.2d 185 (1975) (hereinafter Howell Plaza I ). Similarly, under the U.S. Constitution, governmental conduct gives rise to a takings claim when there is either (1) direct government appropriation or physical invasion of private property or (2) government regulation of private property that is so onerous that its effect is tantamount to a direct appropriation. Lingle, 544 U.S. at 537, 125 S.Ct. 2074. The latter category, deemed a regulatory taking, is per se compensable under the Fifth Amendment if the regulation requires an owner to suffer a permanent physical invasion of her property or completely deprives an owner of ` all economically beneficial us[e]' of her property. Id. at 538, 125 S.Ct. 2074 (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992)). ¶ 23 In this case, E-L does not claim that the Sewerage District's conduct constituted a regulatory taking. Rather, E-L claims that the Sewerage District physically took E-L's property. [15] E-L's brief asserts that the Sewerage District physically took E-L's groundwater and deprived E-L of the use of that groundwater, resulting in the diminished value of E-L's property. E-L argues that by pumping groundwater from the trench, thereby extracting the groundwater from beneath E-L's adjacent building, the Sewerage District physically occupied or directly appropriated E-L's groundwater for the construction of the sewer. The removal of the groundwater damaged the building's wood piles, causing the building to settle and reducing the value of E-L's property. Because the groundwater was appropriated in connection with the installation of the sewer, which was created for the public's use and benefit, E-L claims that it is entitled to just compensation under both the Wisconsin Constitution and the U.S. Constitution. ¶ 24 E-L's takings claim must fail. E-L's claim morphed from a complaint that the Sewerage District physically took portions of the wood piles which rendered them unusable and damaged the E-L Building into a special verdict form that asked the jury to determine the sum of money that would justly compensate E-L for the taking of [the] groundwater. The groundwater was indeed that which was extracted by the Sewerage District, but E-L introduced no proof as to the value of the extracted groundwater. Therefore, whether E-L owns the extracted groundwater is inapposite in this case. [16] E-L instead seeks damages for the cost to repair its building and for the loss of use of its wood piles. However, the Sewerage District did not physically occupy the property for which E-L seeks compensation, and no government-imposed restriction deprived E-L of all, or substantially all, of the beneficial use of its property. What remains are mere consequential damages to property resulting from governmental action, which are not compensable under Article I, Section 13 of the Wisconsin Constitution or the Takings Clause of the Fifth Amendment.
¶ 25 To determine whether a taking occurred, E-L argues that the first question that must be addressed is whether property owners have a property right in groundwater. As E-L correctly points out, there can be no takings claim if that which the Sewerage District allegedly took is not E-L's property. However, E-L introduced no proof as to the value of the extracted groundwater. Instead, E-L seeks damages that flow from the allegation that when the Sewerage District pumped groundwater from the trench, the groundwater level beneath E-L's building was lowered, causing the wood piles to dry out and the building to settle. E-L's opening and closing arguments at trial make clear that instead of seeking damages for the value of the extracted groundwater, E-L seeks damages for the cost to repair the wood piles and E-L's building. ¶ 26 In its opening argument, E-L claimed that the Sewerage District took E-L's groundwater but consistently spoke of damage to E-L's wood piles and building: [The Sewerage District] knew that its partial taking of the property, taking of groundwater would result in a lower value of E-L's building. You take the groundwater, the piles rot, your building sinks, your building is not worth what it was. .... As a result of [the Sewerage District] taking groundwater, E-L's property lost value, the entire property. We believe the value of the building lost the value equal to the amount of the repairs that had to be done. If I'm going to sell a house and you think it's worth $400,000, and I know the roof needs to be repaired for $30,000, somebody buying that is going to say, no, it's not $400,000, it's worth 370. They're going to take out the value. And that's what E-L contends is the amount taken. The loss in the value of their property. And the amount that we're seeking on that is just the amount E-L paid out of pocket. .... Everything we show you at trial is for you to see why E-L should be compensated for the taking of the groundwater by [the Sewerage District]. And how much money will equal the value of the groundwater taken by [the Sewerage District] and the harm caused to E-L from the damage to its piles. ¶ 27 Similarly, in its closing argument, E-L reiterated to the jury that E-L was seeking damages for the cost to repair its building: The next question [on the special verdict form] asks what amount should E-L be paid for its just compensation. And here's where we're going on this. .... ... The reduction in the fair market value was what were the repairs that had to be done on this place. And the repairs that had to be done are summarized in Exhibit 51 [17] for you. There's multiple exhibits that have all the invoices, but if you look at Exhibit 51, you're going to find a summary. .... ... The number we're asking for when you add up all the number [sic] for the 2003 work, the 2004 work, and the attorney fees, we had to fight, you know, we had an easement that was a very standard easement. [18] We had an [sic] to get permission to go underneath and dig under that building.... .... So, ladies and gentlemen, when you add to the 2,300 from Dahlman, the 2003 expenses, the 2004, and legal fees, the number I come to is 309,388, and that's what I'm going to ask that you find as compensation for the amount of the taking. ¶ 28 It is clear from E-L's opening and closing arguments that instead of seeking damages for the value of the extracted groundwater, E-L seeks damages for the cost to repair the wood piles and E-L's building. ¶ 29 Because E-L introduced no proof as to the value of the extracted groundwater, the court of appeals' reliance on Dahlman is misplaced. [19] It is true, as noted by the court of appeals, E-L Enters., 316 Wis.2d 280, ¶ 9, 763 N.W.2d 231, that in Dahlman, this court held that the removal of a building's lateral support by street grading constituted a compensable taking. 131 Wis. at 436-40, 111 N.W. 675. There is a significant distinction, however, between Dahlman and this case. In Dahlman, we concluded that even though the subsidence of the soil caused no depreciation in the value of the property owners' premises, the property owners were still entitled to recover nominal damages for the value of the property taken for public use, which in that case, was soil. Id. In this case, E-L introduced no proof as to the value of the extracted groundwater. Instead, E-L seeks damages for the cost to repair its building and for the loss of use of the wood piles. Because E-L introduced no proof as to the value of the extracted groundwater, we need not decide today whether E-L owns the groundwater. Accordingly, the issue of whether a landowner owns the groundwater beneath his property is not before us today. [20]
¶ 30 Both the United States Supreme Court and this court have consistently recognized that government action outside the owner's property that causes consequential damages within does not constitute a taking. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 428, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982); see also Howell Plaza II, 92 Wis.2d at 80, 284 N.W.2d 887; Howell Plaza I, 66 Wis.2d at 725, 226 N.W.2d 185; Wis. Power & Light, 3 Wis.2d at 6, 87 N.W.2d 279. Sec. 13, art. I, like its equivalent in the federal constitution, `does not undertake, ... to socialize all losses, but only those which result from a taking of property.' Id. (quoting United States v. Willow River Power Co., 324 U.S. 499, 502, 65 S.Ct. 761, 89 L.Ed. 1101 (1945)). As we pointed out previously, the U.S. Constitution and the Wisconsin Constitution, unlike the constitutions of other states, [21] provide only that the property of no person shall be taken for public use without just compensation; there is no mention of just compensation for property that is merely damaged for public use. Howell Plaza II, 92 Wis.2d at 81, 284 N.W.2d 887; Howell Plaza I, 66 Wis.2d at 726, 226 N.W.2d 185; Wis. Power & Light, 3 Wis.2d at 6, 87 N.W.2d 279. Therefore, in the absence of a physical invasion which ousts the owner from full or partial possession or a total deprivation of beneficial use, mere damage to property (or property value) does not constitute a taking. 2A Julius L. Sackman, Nichols on Eminent Domain § 6.01[11], at 6-19 (3d ed. 2009). ¶ 31 In Wisconsin Power & Light, this court recognized that under the Wisconsin Constitution and the U.S. Constitution, mere consequential damage to property resulting from government action is not a taking thereof. 3 Wis.2d at 6, 87 N.W.2d 279. In that case, a utility company alleged a takings claim against Columbia County. Id. at 4, 87 N.W.2d 279. In the process of building a road, the county deposited sand and gravel in a swamp adjacent to the utility company's electrical power line and close to one of its towers. Id. at 3, 87 N.W.2d 279. The sand and gravel extended under the surface of the swamp, displacing the muck and peat so as to create mounds of earth eight to 10 feet high above the surface of the swamp under the power line and to move [the utility company's] tower horizontally and tilt it. Id. As a result, the tower was twisted and bent and had to be replaced. Id. ¶ 32 Like E-L's damaged building and wood piles in this case, the damaged tower was not taken for public use in the usual sense of those words. Id. at 4, 87 N.W.2d 279. Just as E-L's building and wood piles were not used in connection with the sewer installation, the tower in Wisconsin Power & Light was not used in connection with the county's highway project. Id. Rather, the tower was merely damaged by accident as a result of the highway project. Id. Because the issue was one of only damage, without appropriation to the public purpose, id. at 6, 87 N.W.2d 279, this court concluded that the utility company was unable to recover its damages on the theory of a constitutional taking for public use, id. at 7, 87 N.W.2d 279. [22] ¶ 33 Similarly, in this case, we conclude that the damages E-L suffered are mere consequential damages to property resulting from governmental action, which are not compensable under Article I, Section 13 of the Wisconsin Constitution or the Takings Clause of the Fifth Amendment. E-L seeks damages for the cost to repair its building and the loss of use of the wood piles. However, the Sewerage District did not physically occupy E-L's building or wood piles. The Sewerage District did not use the building or wood piles in connection with the sewer installation, and the public obtained no benefit from the damaged building or wood piles. Rather, the wood piles were damaged as a result of the Sewerage District's alleged negligent construction of the sewer. Accordingly, we have in this case only damage, without appropriation to the public purpose. Id. at 6, 87 N.W.2d 279. Such damage is not recoverable in a takings claim but instead sounds in tort. The circuit court already dismissed E-L's tort claims against the Sewerage District on the grounds of governmental immunity under Wis. Stat. § 893.80(4). [23] ¶ 34 The court of appeals relied upon our decision in Damkoehler for authority that the Sewerage District's diversion of groundwater that supported the structural integrity of E-L's building constituted a compensable taking, as opposed to mere consequential damage to property for which there is no remedy. See E-L Enters., 316 Wis.2d 280, ¶¶ 9, 11, 763 N.W.2d 231. In Damkoehler, this court recognized that a landowner has the right to have her property protected against an excavation that causes her property to subside. 124 Wis. at 151, 101 N.W. 706. In that case, for purposes of improving the highway, the city of Milwaukee excavated a street adjacent to the plaintiff's property and caused a considerable part of her land to subside and fall into the street. Id. at 150, 101 N.W. 706. We held that the city's actions, in removing the lateral support of the soil of the plaintiff's property, amounted to a compensable taking. Id. at 150-51, 101 N.W. 706. In so holding, we distinguished the underlying case from our holding in Alexander v. City of Milwaukee, 16 Wis. 247 (1862), in which we concluded that the damages to the plaintiff's property caused by the city's harbor improvements were consequential to the public improvement and were not recoverable from the city. Damkoehler, 124 Wis. at 150, 101 N.W. 706. We concluded that the Damkoehler facts fell within an exception to the general rule that consequential damage to property resulting from governmental action is not a taking thereof: [T]he court [in Alexander ] expressly declare[d] that it [did] not wish `to be understood as asserting the doctrine that there must be an actual taking or appropriation of the property itself in order to entitle the owner to compensation for damages done him. The city might so build a bridge, or open a street, or excavate a canal along or upon a lot, only appropriating a small amount of it, or perhaps none of the land itself, and yet entirely destroy the value of the property for all purposes.' The instant case, in its facts, comes within the exception so distinguished by the court, and cannot be held to be ruled by the decision of that case. Id. (quoting Alexander, 16 Wis. at 253) (emphasis added). Accordingly, in Damkoehler, the city's actions amounted to a compensable taking because the city, by removing the lateral support of the soil of the plaintiff's property, caused a substantial part of the plaintiff's land to subside and fall and `entirely destroy[ed] the value of the property for all purposes.' Id. at 150, 101 N.W. 706 (quoting Alexander, 16 Wis. at 253). ¶ 35 The distinction between Damkoehler and this case is significant. In this case, E-L does not claim that by diverting the groundwater beneath E-L's building and thereby reducing the building's structural integrity, the Sewerage District deprived E-L of all, or substantially all, of the beneficial use of its building. Nor can E-L so claim. The fact that E-L continued to lease the building throughout this entire period is alone sufficient to show that the value of E-L's building was not destroyed for all purposes. Therefore, this case does not fall under the Damkoehler exception to the well-recognized rule that mere consequential damage to property resulting from governmental action is not a taking thereof.
¶ 36 Wisconsin Stat. § 32.10 is based on Article I, Section 13 of the Wisconsin Constitution and is the legislative direction as to how the mandate of the just compensation clause is to be fulfilled. Zinn, 112 Wis.2d at 433, 334 N.W.2d 67. [A] landowner, who believes that his or her property has been taken by the government without instituting formal condemnation proceedings, may bring an inverse condemnation claim under § 32.10 to recover just compensation for the taking. Id. at 432-33, 334 N.W.2d 67 (recognizing that Wis. Stat. ch. 32 sets out the procedure the government must follow in acquiring private property for public use, and § 32.10 provides a remedy for when the government takes property without first condemning it and paying just compensation under ch. 32). Wisconsin Stat. § 32.10 provides in relevant part: If any property has been occupied by a person possessing the power of condemnation and if the person has not exercised the power, the owner, to institute condemnation proceedings, shall present a verified petition to the circuit judge of the county wherein the land is situated asking that such proceedings be commenced.... The court shall make a finding of whether the defendant is occupying property of the plaintiff without having the right to do so. If the court determines that the defendant is occupying such property of the plaintiff without having the right to do so, it shall treat the matter in accordance with the provisions of this subchapter ... assuming the plaintiff is not questioning the right of the defendant to condemn the property so occupied. (Emphasis added.) By its terms, § 32.10 is designed solely to deal with the traditional exercise of eminent domain by the government: the government has occupied private property, plans to continue such occupation and the landowner is merely requesting just payment for this land. Zinn, 112 Wis.2d at 433, 334 N.W.2d 67. ¶ 37 To state a cause of action under Wis. Stat. § 32.10 in the absence of actual possession or occupation, this court concluded in Howell Plaza I that the facts alleged must show that the property owner has been deprived of all, or practically all, of the beneficial use of his property or of any part thereof. 66 Wis.2d at 730, 226 N.W.2d 185. We later clarified that holding in Howell Plaza II, concluding that short of actual occupation, there must be a legal restraint by the condemning authority that deprives the owner of all, or substantially all, of the beneficial use of his property. 92 Wis.2d at 81-82, 87-89, 284 N.W.2d 887 (affirming circuit court's judgment in favor of the State Highway Commission in the property owner's inverse condemnation action under Wis. Stat. § 32.10 because if the property owner was in fact unable to develop its property, it was not due to any restriction imposed upon it by the commission). Therefore, under this court's jurisprudence, in order to state a claim of inverse condemnation under § 32.10, the facts alleged must show either that there was an actual physical occupation by the condemning authority or that a government-imposed restriction deprived the owner of all, or substantially all, of the beneficial use of his property. ¶ 38 Still, when a property owner alleges a constitutional taking, the remedy provided by Wis. Stat. § 32.10 is not necessary to enforce the right to just compensation. Zinn, 112 Wis.2d at 438, 334 N.W.2d 67. The property owner has stated a claim based directly on Article I, Section 13 of the Wisconsin Constitution. Id. ¶ 39 In this case, E-L has failed to establish an inverse condemnation claim under Wis. Stat. § 32.10. It is undisputed that the Sewerage District did not physically occupy the property for which E-L seeks compensation, its building or the wood piles, and no government-imposed restriction deprived E-L of all, or substantially all, of the beneficial use of its property. [24] Therefore, the remedy provided in § 32.10 is simply inapplicable. ¶ 40 Because E-L has failed to establish an inverse condemnation claim under Wis. Stat. § 32.10, E-L is not entitled to its attorney fees and costs under Wis. Stat. § 32.28(3).