Session M: Litigation Issues and Case Law Update

Assistant General CounselKathleen M. Batha

Assistant Attorney GeneralSara K. Beachy

Wisconsin Dells, Chula Vista ResortMay 15, 2013

Part 1. Origins of the prohibition against use of the income approach in Wisconsin eminent domain law

Part 2. Recent Developments in Inverse Condemnation/Takings Law

Part 3. Recent Easement Decisions and Lessons

Overview

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Lambrecht v. State Highway Comm’n, 34 Wis.2d 218, 148 N.W.2d 732 (1967)

Mancheski v. State, 49 Wis.2d 46, 181 N.W.2d 420 (1970)

Leathem Smith Lodge, Inc. v. State, 94 Wis.2d 406, 288 N.W.2d 808 (1980)

Part 1. Prohibiting Use of Income Evidence to Establish FMV of Property

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“’Where property is so unique as to make unavailable any comparable sales data evidence of income has been accepted as a measure of value” (quoting Nichols, Eminent Domain).

Lambrecht v. State Highway Comm., 34 Wis. 2d 218, 226, 148 N.W.2d 732 (1967)

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"[T]he general rule sees the amount of profits from a business on the property as dependent upon too many contingencies to be accepted as evidence of fair market value of the property." Mancheski v. State, 49 Wis. 2d 46, 50, 181 N.W.2d 420 (1970).

Mancheski v. State, 49 Wis. 2d 46, 50, 181 N.W.2d 420 (1970).

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"As a starting point, it should be noted that Wisconsin law holds that income evidence is never admissible where there is evidence of comparable sales;” […] “exceptions to the general rule of the inadmissibility […] when (1) the character of the property is such that profits are produced without the labor and skill of the owner, (2) profits reflect the property's chief source of value, and (3) the property is so unique that comparable sales are unavailable. “

Leathem Smith Lodge, Inc. v. State, 94 Wis. 2d 406, 413, 288 N.W.2d 808 (1980)

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Rademann v. DOT, 252 Wis.2d 191, 642 N.W.2d 600, 2002 WI App 59

National Auto Truckstops, Inc. v. DOT, 263 Wis.2d 649, 665 N.W.2d 198, 2003 WI 95

Winterberry v. DOT, 338 Wis.2d 483, 808 N.W.2d 741, 2012 WI App 11

(Unpublished Disposition)

Subsequent affirmances of the inadmissibility of income evidence

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“[I]t is easy to see why a new and unique real estate development may depend heavily on the labor and skill of the developer. At a minimum, in any case, the circuit court could have reasonably concluded as much.”

“In short, it was reasonable to view the anticipated income stream as sufficiently speculative, at least at the time of the taking, such that income was not the property's chief source of value.”

Winterberry v. DOT, 338 Wis.2d 483, 2012 WI App 11, ¶ ¶ 26, 28 (Unpublished )

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Part 2. I’m changing stuff in your vicinity. Do I have to pay you?

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Thompson v. Town of Brooklyn, 2012 WI App 62, 341 Wis. 2d 489, 815 N.W.2d 406

Brenner v. New Richmond Reg'l Airport Comm'n, 2012 WI 98, 343 Wis. 2d 320, 816 N.W.2d 291

Part 2 – Developments in Inverse Condemnation/Takings Law

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Caution: Thompson is an “unpublished” opinion that cannot be cited to any court as binding precedent. However, it can be cited for persuasive value if a copy is provided to the court and other parties. See Wis. Stat. § 809.23.

Thompson v. Town of Brooklyn: Unpublished, but still persuasive

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“No touch no take” access restrictions Town improved a road abutting owner’s private

property in a manner that reduced (but did not eliminate) owner’s access to the road

Owner argued that the project deprived him of “reasonable access” to some parts of his property

Owner brought inverse condemnation/taking claim under Wis. Stat. § 32.10

Thompson: Background

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1. Did a “taking” occur that requires compensation?

2. What standard does the court apply to an access restriction to decide whether a taking occurred?

Thompson: Issues

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Wisconsin recognizes two types of takings:

1. actual, physical invasions or occupations; and

2. government action that deprives an owner of “all or substantially all” practical use and benefit of property (“regulatory taking”)

Thompson: Decision

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Court of appeals applied the “deprivation of all or substantially all benefit” standard from Sippel v. City of St. Francis, 164 Wis. 2d 527 (Ct. App. 1991).

Owner could not meet this standard Citing National Auto Truckstops v. State, 2003 WI 95,

263 Wis. 2d 649, owner argued that the test should be whether “reasonable access” remained to the property. Court of appeals rejected this argument in favor of the Sippel test.

Thompson: Decision (cont’d)

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Government can affect property values without paying compensation, so long as there is not a “taking”

Mere consequential damages are not a taking The “reasonable access” test in National Auto

Truckstops is not the right test in inverse condemnation cases

Thompson: Takeaways

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BUT: Be mindful of protecting access to all properties affected by a project. A total deprivation of access could be a taking because it would likely deprive the property of all or substantially all use and benefit.

Get an opinion from an access expert or engineer

Thompson: Takeaways (cont’d)

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Inverse condemnation case arising from invasion of airspace above private property by low-flying planes

Property owners claimed that overflights had adverse effects on their properties, including diminished use and enjoyment and decrease of value

Trial court applied the regulatory taking standard. Court of appeals applied the occupation standard.

Brenner v. New Richmond Reg'l Airport Comm‘n: Background

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Supreme Court applied occupation/invasion standard

The government cannot "take" private property from a person if the person does not have an interest in the property

Owners have “a three dimensional property interest in airspace” consisting of: property length x property width x government-defined minimum safe altitude of flight

Brenner: Decision

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Physical invasions of this “superadjacent” airspace may be a taking

BUT: “Generally speaking, actions that occur outside or above this block of air do not constitute a taking, even if the actions have adverse consequences to the person's property.”

Brenner: Decision (cont’d)

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If the overflights are low enough and frequent enough to have a direct and immediate effect on the use and enjoyment of the person's property, then a taking has occurred.

Brenner: Decision (cont’d)

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Government activities that are not “directly over a person’s property” cannot be an invasion/ occupation type of taking

Appraisers: If you are appraising property in an inverse condemnation case, be sure to clarify your appraisal assignment. Do you need a before and after? What is the “before” and “after” condition?

Brenner: Takeaways

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Wisconsin Power & Light v. Columbia County, 18 Wis.2d 39, 117 N.W.2d 597 (1962)

Howell Plaza v. State Highway Commission (“II”), 92 Wis.2d 74, 284 N.W.2d 887 (1979)

Zinn v. State, 112 Wis.2d 417, 334 N.W.2d 67 (1983)

E-L Enterprises, Inc. v. Milw. Metro Sewerage Distict, 326 Wis.2d 82, 785 N.W.2d 409, 2010 WI 58

Randall v. City of Milwaukee, 212 Wis. 347, 249 N.W. 73 (1933)

Other Important Takings Cases

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While “destruction of property or such damage as to render it worthless may be a taking of the property, depending on the circumstances, it is clear that not every such injury to or even destruction of property by a public agency is a taking within the meaning of the constitutional provision.”

Wisconsin Power & Light Co. v. Columbia County, 3 Wis. 2d 1, 4, 87 N.W.2d 279, 280 (1958)

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"'the fact that a property owner has suffered a loss as a result of the announcement and initial planning of a public improvement has not generally been held to constitute a taking of property.“ The "'mere plotting or planning in anticipation of a public improvement has not generally been held to constitute a taking or damaging of the property affected.'" Id

Howell Plaza, Inc. v. State Highway Comm., 92 Wis. 2d 74, 80, 284 N.W.2d 887 (1979) (“II”).

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“[T]he doctrine of sovereign immunity and the just compensation clause, must be read together. Under the just compensation clause a property owner has a constitutionally mandated right to be compensated for property taken by the state […]. [U]nder Art. IV, sec. 27, the legislature can provide specific procedures governing the recovery of such compensation as long as the procedure provides "just compensation." If such legislation is enacted, the property owner must follow those procedures in order to receive the compensation.

Zinn v. State, 112 Wis. 2d 417, 437-38, 334 N.W.2d 67 (1983)

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“[T]he 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.”

E-L Enterprises, Inc. v. MMSD,326 Wis.2d 82, ¶ 24 (2010)

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“Lands are set aside for public streets and highways, not for the present, with its necessities and modes of use, but for all time, with all the added demands that may be made upon the public ways within the scope of their original design, in the course of natural development that is constantly going on.”

Randall v. City of Milwaukee, 212 Wis. 374, 378, 249 N.W. 73 (1933)

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Part 3. Easement Issues

Savage v. American Transmission Co., 2013 WI App 20, 346 Wis. 2d 130, -- N.W.2d --- (Jan. 16, 2013)

Enbridge Energy v. Engelking, Appeal No. 12-AP-1188 (Mar. 12, 2013) (per curiam)

Recent Easement Cases:

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Just compensation appeal following acquisition of “supplemental aerial easement” for new HVTL

ATC already owned 19-foot wide HVTL easement

In 2007, ATC determined it needed a supplemental easement to secure aerial rights to add additional conductors (wires) and various other rights

Negotiation failed, and ATC exercised its eminent domain authority under Wis. Stat. § 32.06

Savage: Background

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1. What rights did ATC actually acquire in the easement?

2. Did owner’s appraiser err by appraising the whole property, rather than the value of the rights acquired?

Savage: Issues

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Compensation is based on the difference between the fair market value of the whole property before and after the taking

Appraiser must analyze the impact on the whole property, not the value of individual parts (“unit rule”)

Savage: Decision

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Appraiser must look at what easement says, not on what condemnor says it will do within the easement area

“Compensation for the taking of an easement is based on an assumption that the condemnor…will exercise all of the rights that it has taken”

Savage: Decision (cont’d)

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BUT: If the easement itself is silent or ambiguous, then appraiser can consider future/planned use. Future uses must be “reasonably probable,” not speculative or remote.

See Clarmar Realty Co. v. Redevelopment Auth. of Milwaukee, 129 Wis. 2d 81 (1986); Bembinster v. State, 57 Wis. 2d 277 (1973).

Savage: Decision (cont’d)

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Court applied Alt “expert privilege” to acquisition appraisers. See Burnett v. Alt, 224 Wis. 2d 72 (1999).

Under Alt, an appraiser or other expert cannot be compelled to give expert opinion testimony at deposition or trial against his/her will (except in rare circumstances).

Expert can still be compelled to give factual testimony.

Savage: Alt Expert Privilege

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Draft easements carefully – acquire only the rights you need unless you want to pay for rights you don’t really need

Acquisition appraisers and other experts can’t be subpoenaed to testify against their will

Savage: Takeaways

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Easement contract dispute between owner and Enbridge Energy, owner of gas pipeline

Not an eminent domain action. Why not? Caution: Enbridge is an unpublished per curiam

decision, which cannot be cited even for persuasive value

Enbridge Energy v. Engelking

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Owner owns 20-acre parcel subject to an existing 1949 pipeline easement

A second, third, and fourth pipeline were constructed in 1956, 1966, and 2002 – no condemnation, no new easement acquired, and no new compensation paid

In 2009, Enbridge attempted to negotiate with Engelkings, but negotiations failed

Enbridge went ahead and constructed a fifth and sixth pipeline

Enbridge: Background

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Finally, Engelkings file something accusing Enbridge of trespass and requesting an injunction to keep Enbridge off their land. Enbridge counterclaims.

Enbridge still doesn’t commence condemnation proceedings, and Engelkings don’t file an inverse condemnation action

Comes to court as a contract/easement dispute

Enbridge: Background (cont’d)

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1. When an easement is not particularly defined as to location, does the easement encumber the whole property?

2. If payment is required for additional lines under the easement, at what point in time is payment due?

Enbridge: Issues

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When an easement is not defined as to location, “a reasonably convenient and suitable way is presumed to be intended, and the right cannot be exercised over the whole of the land.”

If the parties cannot agree on a location, the court will set one. Court “cannot act arbitrarily and must proceed with due regard for the rights of the parties.” Remanded to circuit court to set the location.

Enbridge: Decision

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It would be unreasonable to interpret the easement “such that the Engelkings could significantly delay an entire large-scale construction project” by a dispute over compensation.

Also: Engelkings’ counsel fined $225 for three citations to unpublished opinions.

Enbridge: Decision (cont’d)

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Construct within existing easement area at your peril If an easement is ambiguous or silent about a key

provision, ask for a legal opinion Lawyers: Know the rules about citing unpublished

opinions, including Enbridge v. Engelking! Caution: Public highways and easements are treated

differently than private roads and private easements by a variety of laws

Enbridge: Takeaways

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