Court Opinion

ID: 4184399
Source: CourtListenerOpinion
Date Created: 2017-07-07 15:05:51.926098+00
Date Added: 2024-06-11T07:46:59.792027
License: Public Domain

FILED
                                                                            Jul 07 2017, 5:51 am

                                                                                CLERK
                                                                            Indiana Supreme Court
                                                                               Court of Appeals
                                                                                 and Tax Court

      ATTORNEY FOR APPELLANT                                      ATTORNEYS FOR APPELLEE
      Philip D. Sever                                             Curtis T. Hill, Jr.
      Sever-Storey, L.L.P.                                        Attorney General of Indiana
      Carmel, Indiana                                             Andrea E. Rahman
                                                                  David L. Steiner
                                                                  Deputy Attorneys General
                                                                  Indianapolis, Indiana

                                                   IN THE
           COURT OF APPEALS OF INDIANA

      AAA Federal Credit Union,                                   July 7, 2017
      Appellant-Petitioner,                                       Court of Appeals Case No.
                                                                  71A03-1609-PL-2091
              v.                                                  Appeal from the St. Joseph
                                                                  Superior Court
      Indiana Department of                                       The Honorable Margot F. Reagan,
      Transportation,                                             Judge
      Appellee-Respondent.                                        Trial Court Cause No.
                                                                  71D04-1409-PL-270

      Mathias, Judge.

[1]   In this inverse condemnation case, we consider whether the trial court erred in

      concluding that the landowner did not have a property interest in the free flow

      of traffic from a particular road. Concluding that it did not err in reaching that

      conclusion, we affirm.

      Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017                       Page 1 of 14
                                   Facts and Procedural Posture
[2]   U.S. Highway 31 (“U.S. 31”) runs the length of Indiana, passing by or through

      the cities of Indianapolis in Marion County, Plymouth in Marshall County, and

      South Bend in St. Joseph County. As part of a larger effort to improve

      transportation between Marion County and St. Joseph County, in March 2002,

      the Federal Highway Administration (“FHWA”) and the Indiana Department

      of Transportation (“DOT”) began the process of public involvement in

      connection with a proposed improvement to U.S. 31 between Plymouth and

      South Bend (“the Project”).

[3]   On March 1, 2004, two years after DOT’s public involvement with the Project

      began, AAA Federal Credit Union (“AAA”), a small regional bank with

      branches in and around St. Joseph County, took title by deed to a three-quarter

      acre plot of land in a mixed residential and commercial area on the south side

      of South Bend (“the Property”).1 In early 2006, AAA finished construction of a

      branch building on the Property and has operated the branch on the Property

      since. The Project was completed sometime later.

[4]   Before the Project was completed, the Property lay at the northeast corner of

      the intersection of U.S. 31, running north-south, and Dice Street, running east-

      west. The Property had direct access by a western driveway to U.S. 31 and by a

      1
       On appeal, both AAA and DOT state that AAA purchased the Property in 2002. Appellant’s Br. at 5;
      Appellee’s Br. at 7. The trial court, however, found, “On March 1, 2004, [AAA] purchased [the Property].”
      Appellant’s App. p. 15. A copy of the deed is in the record before us, dated March 1, 2004. Appellee’s App.
      p. 11. Neither party alleges error in the trial court’s factual findings; we therefore accept them as given.

      Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017                          Page 2 of 14
      southern driveway to Dice Street. At that time, U.S. 31 was an undivided,

      open-access road on the same grade as the surrounding roads. However, one of

      the Project’s goals was to improve traffic flow on U.S. 31 by converting it to a

      divided, grade-separated, limited- or controlled-access road.

[5]   The Project moved U.S. 31 to the west by a few dozen feet. It is now a divided

      highway divided by a grass median, bounded by a wall to the east of the

      northbound lanes. Access to and from U.S. 31 is now possible only by grade-

      separated interchanges to the north and south of the Property. The Project left

      the Property entirely untouched. It continues to enjoy access to Dice Street by

      the southern driveway. However, the western driveway now accesses

      Hildebrand Street, a two-lane north-south frontage road running parallel to U.S.

      31, separated from it by the eastern wall. To access the Property from U.S. 31

      or vice versa now requires taking more or less circuitous routes to the north or

      south.

[6]   On September 17, 2014, AAA brought the instant action for inverse

      condemnation against DOT. After a two-day bench trial on May 24 and 25,

      2016, the trial court entered findings of fact, conclusions of law, and judgment

      for DOT. AAA now appeals, claiming the trial court erred in concluding that

      no compensable taking had occurred as a matter of law.

                                           Standard of Review
[7]   Where, as here, a trial court has entered findings and conclusions prior to

      judgment, we review the judgment in two steps. Canteen Serv. Co. of Indianapolis,

      Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017   Page 3 of 14
      Inc. v. Ind. Dep’t of Transp., 932 N.E.2d 749, 571 (Ind. Ct. App. 2010). We first

      determine whether the evidence supported the findings, then whether the

      findings supported the conclusions. Id. We will set aside the judgment only if

      clearly erroneous, leaving us with a firm conviction that a mistake has been

      made. Id. A judgment that applies the wrong legal standard to properly found

      facts is clearly erroneous. Id. Whether there has been a compensable taking is a

      question of law we review de novo. Biddle v. BAA Indianapolis, L.L.C., 860
N.E.2d 570, 575 (Ind. 2007).

                                      Discussion and Decision
[8]   By federal and state constitutional mandate, the state may not exercise its

      power of eminent domain to take private property for public use without paying

      just compensation. U.S. Const. amend. V, cl. 5; Ind. Const. art. I, § 21, cl. 2

      (“the takings clauses”); Chi., Burlington & Quincy R.R. Co. v. City of Chicago, 166
U.S. 226, 241 (1897) (incorporating federal takings clause against states); State v.

      Kimco of Evansville, Inc., 902 N.E.2d 206, 212 (Ind. 2009) (same analysis under

      federal and state takings clauses). The prospective exercise of the state’s

      eminent domain power is regulated by statute. Ind. Code art. 32-24.

[9]   However, “[a] person having an interest in property that has [already] been . . .

      acquired for public use without the procedures of this article or any prior law

      followed is entitled to . . . damages . . . .” Id. § 32-24-1-16. Damages actions

      under this section are called “inverse condemnation” actions. State v. Dunn, 888
N.E.2d 858, 861 (Ind. Ct. App. 2008), trans. denied. Proceedings on inverse

      Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017    Page 4 of 14
       condemnation actions are bifurcated into a summary phase and a damages

       phase. Id. The summary phase is litigated before the court, which must decide

       whether there has been a compensable taking as a matter of law. Id. If so, the

       damages phase is tried to the fact-finder, which determines how much

       compensation the landowner is owed by the condemnor. Id.

[10]   The United States Supreme Court has recognized two broad categories of

       takings: “The paradigmatic taking . . . is a direct government appropriation or

       physical invasion of private property” effecting “practical ouster . . . .” Lingle v.

       Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005) (citations and quotations omitted).

       However, the Court has also “recognized that government regulation of private

       property may, in some instances, be so onerous that its effect is tantamount to a

       direct appropriation or ouster . . . .” Id. In identifying such “regulatory takings,”

       id., the Court has urged “cognizan[ce] . . . that Government hardly could go on

       if to some extent values incident to property could not be diminished without

       paying for every . . . change in the general law[.]” Id. at 538 (citation and

       quotations omitted).

[11]   The Court has recognized three broad categories of regulatory takings.

       Requiring a landowner to suffer “permanent physical invasion of her property

       — however minor — ” is a per se regulatory taking. Id. (citing Loretto v.

       Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) (state law required

       landlords to permit cable companies to install cable facilities in apartment

       buildings)). So too is a regulation “that completely deprive[s] an owner of all

       economically beneficial use of her property.” Id. (original alteration, emphasis,

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017     Page 5 of 14
       citation, and quotations omitted). Outside these two per se categories,

       regulatory takings are tested by applying the factors set out in Penn Central

       Transportation Company v. City of New York, 438 U.S. 104 (1978). These include

       the economic impact of the regulation on the landowner, the extent to which

       the regulation interferes with reasonable investment-backed expectations, and

       the character of the state action. Biddle, 860 N.E.2d at 577-78 (citing Lingle, 544
U.S. at 538-39; Penn Cent., 438 U.S. at 124). The “common touchstone” of all

       three regulatory takings analyses is “to identify regulatory actions that are

       functionally equivalent to the classic taking in which government directly

       appropriates private property or ousts the owner from his domain.” Lingle, 544
U.S. at 539.

[12]   Irrespective of the species of taking alleged, “[t]he threshold question in

       determining whether a taking has occurred is whether the . . . landowner has a

       property interest in the property that has been acquired by the State.” Dunn, 888
N.E.2d at 862. In the specific context of landowners abutting reconfigured

       highways, two complementary rules are thoroughly well-settled. First, the right

       of an abutting landowner to ingress and egress over the public roads is a

       cognizable property right, and substantial or material interference with this right

       by the state is a compensable taking (“the ingress-egress rule”). Kimco, 902
N.E.2d at 214; State v. Ensley, 240 Ind. 472, 164 N.E.2d 342, 349 (1960); Green

       River Motel Mgmt. of Dale, L.L.C. v. State, 957 N.E.2d 640, 644 (Ind. Ct. App.

       2011), trans. denied; Canteen Serv. Co., 932 N.E.2d at 753; Dunn, 888 N.E.2d at

       862. Second, by contrast, an abutting landowner has no cognizable property

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017   Page 6 of 14
       right in the free flow of traffic past his property (“the traffic-flow rule”). Kimco,
902 N.E.2d at 214; Ensley, 164 N.E.2d at 350; Green River, 957 N.E.2d at 644;

       Canteen Serv., 932 N.E.2d at 753; Dunn, 888 N.E.2d at 862.

[13]   The traffic-flow rule denies recovery to landowners who complain that, as a

       result of highway improvement or reconfiguration, the landowner’s invitees

       must take a more circuitous or inconvenient route to the land, while the points

       of ingress and egress over the land remain unaffected. Ensley denied recovery to

       a recreational center whose property value was reduced when the state divided

       the north-south road abutting the center to the east by installing a raised

       median, blocking northbound traffic from turning left directly into the center

       and forcing it to take a more circuitous route to a different entrance. 164 N.E.2d

       at 350. Kimco “reaffirm[ed] Ensley,” 902 N.E.2d at 208, and denied recovery to

       a shopping complex whose property value was reduced by forty percent when

       the state widened an abutting road and installed a median. Id. at 209, 215. This

       court has followed our supreme court’s long-standing approach. Green River,
957 N.E.2d at 642, 645 (no recovery where U.S. highway moved quarter-mile

       to west; access to property from new U.S. highway and interstate required 1.6-

       to 4.6-mile detour); Canteen Serv., 932 N.E.2d at 750–51, 755 (no recovery

       where previously abutting street moved 210 feet south and reconfigured access

       to property required travel on frontage road); Dunn 888 N.E.2d at 859, 867 (no

       recovery where installation of median redirected traffic).

[14]   This case is controlled by the traffic-flow rule. AAA complains that customers

       driving on U.S. 31 now must take a more circuitous and inconvenient route to

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017      Page 7 of 14
       reach the Property, while their western and southern driveways — along with

       the rest of the Property — have remained completely untouched. Indeed, this

       case is even farther from a compensable taking than is the ordinary traffic-flow

       case. Here, AAA does not complain of impairment to the free flow of traffic

       past its property in general. There was no showing, and AAA does not argue,

       that access from Hildebrand Street, the new frontage road, is any more difficult

       than was access from U.S. 31 before the Project was completed, and Dice Street

       remained unaffected by the Project. Rather, AAA argues that the flow of traffic

       from U.S. 31 has been impaired by the Project. See Appellant’s Br. at 23

       (“[D]irect access to U.S. 31 is a property right.”). If AAA has no cognizable

       property interest in the free flow of traffic past its property, still less does it have

       such a right in the free flow of traffic from a particular road. Put differently,

       AAA is claiming a property interest in continuing to abut a particular type of

       road: “[A]n actively used U.S. highway must continue to remain an actively

       used U.S. highway, and any change in the nature of the roadway [abutting a

       property] . . . results in a taking.” Appellee’s Br. at 23. As DOT correctly

       observes, this is not and cannot be the rule.

[15]   AAA makes three arguments in favor of its position. First, AAA argues that the

       Project deprived the Property of its highest and best use as a site for a bank

       branch. However, this argument conflates the measure of damages for a

       compensable taking with the inquiry into whether such a taking happened at

       all:

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017       Page 8 of 14
               “[I]f the highest and best use before the taking is for one purpose,
               and because of the access available after the taking, the property
               was no longer suitable for that use, but was still suitable for a less
               valuable use, the owner would be entitled to the damages
               reflecting the diminished value.” . . . This language addressed
               damages from a taking . . . Elimination of all access to [the new
               U.S. highway] may have met the test. But [the landowner] did
               not suffer a compensable taking of access in the first instance.

       Kimco, 902 N.E.2d at 215 (internal citation omitted) (quoting State v. Peterson,

       269 Ind. 340, 381 N.E.2d 83, 85 (1978)).

[16]   Second, AAA points us to three cases readily distinguishable from that at bar,

       and repeatedly so distinguished in the case law. In State v. Geiger & Peters, Inc.,

       245 Ind. 143, 196 N.E.2d 740 (1964), our supreme court found a compensable

       taking by a substantial or material interference with the landowner’s right of

       ingress and egress. 196 N.E.2d at 743. There, construction of an expressway

       destroyed one of the landowner’s two points of access to the property. Id. at

       741. The second access-point was rendered unusable by the installation of a

       narrow service road which was incapable of bearing the ninety-foot steel trusses

       manufactured on the property. Id. at 742. Here, by contrast, both access-points

       were completely untouched by the state. See Kimco, 902 N.E.2d at 213 n.8

       (distinguishing Geiger & Peters as ingress-egress case from traffic-flow cases);

       Dunn, 888 N.E.2d at 864 (same).

[17]   State v. Tolliver, 246 Ind. 319, 205 N.E.2d 672 (1965), was factually analogous to

       Geiger & Peters, and our supreme court again found the case to be controlled by

       the ingress-egress rule. 205 N.E.2d at 677-78. There, one of the landowner’s

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017      Page 9 of 14
       two access-points was destroyed by the construction of an interstate. Id. at 673.

       Though the second access-point was left untouched, it was reachable only after

       crossing a bridge that was incapable of bearing the fifty-ton loads regularly

       transported from the landowner’s steel-fabrication plant. Id. Thus, the

       landowner had no “reasonable outlet or access left . . . [,]” id. at 678, in effect,

       no access at all. The facts here are distinguishable on the same basis as they

       were from Geiger & Peters: neither access-point has been made actually or

       constructively unusable; the only difference in their use is some additional

       inconvenience to drivers on U.S. 31. See Kimco, 902 N.E.2d at 213 n.8

       (distinguishing Tolliver as ingress-egress case from traffic-flow cases); Dunn, 888
N.E.2d at 864–65 (same).

[18]   In State v. Diamond Lanes, 251 Ind. 520, 242 N.E.2d 632 (1968),

               a landowner operated a bowling alley on a piece of property
               accessible by four access points and by traffic traveling in either
               direction on two roads. . . . [T]he State constructed [a new
               highway] that cut of access with certain directions of traffic to the
               business property . . . . At first blush, Diamond Lanes appears to
               be a traffic flow case. However, [our supreme court] explained
               that the primary access point was “completely eliminated” and the
               access to another road “was taken and in its place there was
               substituted access onto a frontage road” . . . .

       Dunn, 888 N.E.2d 865–66 (emphasis added). Unlike Geiger & Peters and Tolliver,

       therefore, Diamond Lanes only involved destruction of one access-point, plus

       complications and ensnarlments for traffic at other access-points. Diamond Lanes

       is still distinguishable from this case on the grounds that, here, no access-point

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017    Page 10 of 14
       was completely or partially eliminated, or even altered. See Kimco, 902 N.E.2d

       at 213 n.8 (Diamond Lanes as ingress-egress case because “at least one access

       point ‘completely eliminated,’ and the substituted access could ‘in no way be

       equated with the former access’”); Canteen Serv., 932 N.E.2d at 754 (“Diamond

       Lanes does not stand for a bright-line rule that the creation of a frontage road is

       necessarily a taking. . . . To the contrary, . . . Diamond Lanes [is about] a change

       in the means of access to an owner’s property . . . .”).

[19]   Finally, AAA argues it is entitled to free-floating consideration of its allegedly

       reduced property value2 under Biddle, Lingle, and Penn Central. However, it is

       not, for three reasons. First, the Lingle framework applies to regulatory takings,

       cases where “government regulation of private property [is] so onerous that its

       effect is tantamount to a direct appropriation or ouster[.]” Lingle, 544 U.S. at

       537. Here, and in the other traffic-flow cases discussed here, there was no

       regulation of private property. The state reconfigured public property; it did not

       regulate private property.

[20]   More fundamentally, Biddle, Lingle, and Penn Central never purported to

       dispense with the antecedent inquiry of whether a cognizable private property

       interest has been burdened, encumbered, or interfered with in the first place. See

       Penn Cent., 438 U.S. at 125 (citing cases where government action “did not

       interfere with interests that were sufficiently bound up with the reasonable

       2
        AAA’s expert reported that the value of the Property was reduced from $800,000 before the Project to
       $100,000 after the Project. Appellant’s App. p 23.

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017                       Page 11 of 14
       expectations of the claimant to constitute ‘property’”); Bettendorf v. St. Croix

       County, 631 F.3d 421, 424 (7th Cir. 2011) (“The Takings Clause presupposes

       government interference with one’s property rights . . . .” (emphasis added)),

       425 n.2 (“[P]roperty interests are created and defined by an independent source,

       such as . . . state law.”). Identifying cognizable property interests is precisely the

       function of the post-Ensley distinction between traffic-flow cases and ingress-

       egress cases. “Although not phrased in the Lingle language, the substance of

       [Ensley’s] view anticipated a similar standard: any impaired value derived from

       some action that does not ‘encroach upon the property’ is not compensable.”

       Kimco, 902 N.E.2d at 212-13 (quoting Ensley, 164 N.E.2d at 346). However, the

       state action in this case is to be characterized, it did not “encroach upon the

       property” of AAA. Id.

[21]   Second, the specific controls over the general. In Biddle itself, while our

       supreme court set out the Lingle framework in dicta, it actually applied a

       different, pre-Lingle, pre-Penn Central analysis specific to the problem then before

       it: When do airplane fly-overs constitute a compensable taking of residential

       property? Biddle, 860 N.E.2d at 579 (“Aaron [v. United States, 311 F.2d 798 (Ct.

       Cl. 1968)] is specially tailored to the task of identifying government takings

       based on aircraft noise.”). Similarly, in Kimco, our supreme court acknowledged

       Biddle and the Lingle framework, but decided the case before it by applying the

       principles of Ensley and its progeny, which we apply here.

[22]   Third, even applying the Lingle framework and the Penn Central factors would

       not permit us to find a taking based on AAA’s reduced property value because
       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017    Page 12 of 14
       AAA did not have a reasonable expectation that the configuration of U.S. 31

       would remain unaltered. AAA bought the Property on March 1, 2004, two

       years after FHWA and DOT began involving the public in planning the Project.

       On March 26, 2002, FHWA published a Notice of Intent to Prepare an

       Environmental Impact Statement (“EIS”) for the Project in the Federal Register.

       Public meetings of various kinds were held through 2002 and 2003, and news

       releases were distributed. A draft EIS detailing proposed routes for the

       improved U.S. 31 was made available for public review on February 27, 2004,

       and was open for public comment from March 5, 2004, to April 26, 2004.

       Though the draft EIS included, among other proposed alternatives, the present

       configuration of U.S. 31, DOT had no record of AAA participating in public

       comment. Ex. Vol., Resp’t’s Ex. O. On September 23, 2004, DOT publicly

       announced that the present configuration was the “preferred alternative” for the

       Project and would be advanced for consideration in a final EIS. Id. This was

       “well before” AAA obtained a building permit for the branch in September

       2005. Id. To find a compensable taking on these facts would turn the state and

       taxpayers of Indiana into underwriters of the known risks of AAA’s real estate

       investment.

                                                   Conclusion
[23]   The trial court ruled, “The cases are rather clear. There has been no taking

       under Indiana and federal law. It is understandable that the property owner [is

       upset because it] has lost the very easy direct access from the very busy old US

       31, but under Indiana eminent domain law, this situation does not involve a

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017    Page 13 of 14
       legal ‘taking.’” Appellant’s App. p. 17. We agree. The judgment of the trial

       court is therefore affirmed.

[24]   Affirmed.

       Kirsch, J., and Altice, J., concur.

       Court of Appeals of Indiana | Opinion 71A03-1609-PL-2091 | July 7, 2017   Page 14 of 14