806 N.W.2d 217 (S.D. 2011), 25769, Hall v. State ex rel. South Dakota Dept. of Transp.

Docket Nº:25769.
Citation:806 N.W.2d 217, 2011 SD 70
Opinion Judge:ZINTER, Justice.
Party Name:Patrick R. HALL, Marlyn G. Erickson and Fuel Food Mart, Inc., a South Dakota Corporation, Plaintiffs and Appellants, v. STATE of South Dakota, by and through the SOUTH DAKOTA DEPARTMENT OF TRANSPORTATION and the South Dakota Department of Transportation Commission, Defendants and Appellees.
Attorney:Brian W. Blaesser of Robinson & Cole, LLP, Boston, Massachusetts and Jeffrey G. Hurd of Bangs, McCullen, Butler, Foye & Simmons, LLP, Rapid City, South Dakota, Attorneys for plaintiffs and appellants. Karla L. Engle of South Dakota Department of Transportation, Pierre, South Dakota, Attorney for ...
Judge Panel:GILBERTSON, Chief Justice, and KONENKAMP, and SEVERSON, Justices, and MEIERHENRY, Retired Justice, concur. WILBUR, Justice, not having been a member of the Court at the time this action was submitted to the Court, did not participate.
Case Date:October 26, 2011
Court:Supreme Court of South Dakota
 
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Page 217

806 N.W.2d 217 (S.D. 2011)

2011 SD 70

Patrick R. HALL, Marlyn G. Erickson and Fuel Food Mart, Inc., a South Dakota Corporation, Plaintiffs and Appellants,

v.

STATE of South Dakota, by and through the SOUTH DAKOTA DEPARTMENT OF TRANSPORTATION and the South Dakota Department of Transportation Commission, Defendants and Appellees.

No. 25769.

Supreme Court of South Dakota.

October 26, 2011

Argued May 24, 2011.

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[Copyrighted Material Omitted]

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Brian W. Blaesser of Robinson & Cole, LLP, Boston, Massachusetts and Jeffrey G. Hurd of Bangs, McCullen, Butler, Foye & Simmons, LLP, Rapid City, South Dakota, Attorneys for plaintiffs and appellants.

Karla L. Engle of South Dakota Department of Transportation, Pierre, South Dakota, Attorney for defendants and appellees.

ZINTER, Justice.

[¶ 1.] Patrick Hall, Marlyn Erickson, and Fuel Food Mart, Inc. (" Landowners" ) own property abutting former Exit 66 on Interstate 90 (I-90), a controlled-access highway that passes by Ellsworth Air Force Base. A part of Landowners' property was taken by condemnation in 1961 for the construction of I-90 and Exit 66. In that condemnation proceeding, the State mitigated the severance damages for the property not taken because of the " special benefit" the remaining property would receive from access that was designated to be provided at Exit 66. However, in 2003, the State removed the Exit 66 interchange to enhance the viability of the Air Force Base. Landowners subsequently filed this suit for inverse condemnation based on the closure of Exit 66. The circuit court granted summary judgment for the State, concluding that Landowners never possessed any property right that

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could have been taken. We reverse and remand for a trial on damages.

Facts and Procedural History

[¶ 2.] Landowners own two parcels of land (the " Property" ) that abut North Ellsworth Road (a north-south conventional highway), I-90 (an east-west controlled-access highway), and the former location of Exit 66 (the former interchange on I-90 for North Ellsworth Road). From 1962 until October 1, 2003, the Property enjoyed indirect access to and from I-90 via Exit 66.

[¶ 3.] Landowners operated a Flying J Truck Stop on the Property. The truck stop business was uniquely dependent upon the access provided at Exit 66. The sale of gasoline, diesel fuel, and convenience store items specifically catered to travelers on I-90. On October 1, 2003, the State closed Exit 66 and removed all access to I-90 at that location. As a result of the State's removal of Exit 66, the Flying J suffered an immediate loss of business and was forced to cease operations on October 23, 2003.

[¶ 4.] In 1961, the State obtained the right-of-way for I-90 and the northeast and northwest quadrants of the Exit 66 interchange by condemnation. At that time, there was no east-west highway where I-90 was to be constructed. The South Dakota Department of Transportation's I-90 construction plans were referenced in the option agreement by which the State obtained its right-of-way in the condemnation proceedings. The plans indicated that the Property would have indirect access to I-90 through the interchange that became Exit 66. Therefore, in calculating the just compensation due for acquisition of its easement on the Property, the State's appraisal noted that " the presence of the interchange" would be a " significant" and " special benefit" to the Property. The appraisal concluded that " the increase in [the remaining Property's] land values next to the interchange would more than offset the severance damages on the [Property not taken]." Consequently, the State offset severance damages for the Property remaining after the condemnation. Of the forty properties taken in this five-mile section of the interstate project, Landowners' Property was the only property that the State determined to be specially benefitted.

[¶ 5.] There is no dispute that the State's 2003 closure of Exit 66 was unrelated to road design, traffic safety, or interstate travel. The Exit was closed to eliminate land uses at Exit 66 that were deemed " incompatible" with the continued viability of Ellsworth Air Force Base.1 To remove the threat that incompatible uses posed to the continued operation of Ellsworth, the State closed Exit 66 and replaced it with a new exit approximately one mile to the east.2

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[¶ 6.] On August 1, 2001, prior to the closure of Exit 66, Landowners filed a complaint seeking monetary damages and a declaratory judgment. Landowners contended that the closure would constitute an inverse condemnation of the Property. The circuit court granted summary judgment for the State. We reversed and remanded to consider whether compensable damages were incurred in light of the purpose of the closure, the extent of access denied, and the reasonableness of the closure. Hall v. State ex rel. S.D. Dep't of Transp. (Hall I), 2006 S.D. 24, 712 N.W.2d 22. At the time we decided Hall I, discovery had not disclosed that the State had offset severance damages in the 1961 condemnation because of the special benefit the Property would receive from the State's designated access to I-90 at Exit 66. On remand, Landowners raised a new takings argument based on the special benefit and offset of severance damages disclosed in discovery.

[¶ 7.] The circuit court granted summary judgment in favor of the State without addressing the new argument. The circuit court concluded that Landowners suffered no loss of right of access to or from I-90 because, in the court's view, a controlled-access highway statute prevented abutting property owners from ever obtaining any right of egress and ingress to a controlled-access highway. The court relied on Darnall v. State, 79 S.D. 59, 67, 108 N.W.2d 201, 205 (1961) (concluding that no just compensation was due for a loss of access to a highway because there was no " unrestricted right of direct access to [a landowner's] business establishment" from a newly created controlled-access highway). The court distinguished Hurley v. State, 82 S.D. 156, 143 N.W.2d 722 (1966) (allowing just compensation when a controlled-access highway is created from a conventional highway to which the landowners enjoyed access predating the change). The court concluded that there was no deprivation of a right of access, and therefore no compensable taking or damage could follow.

[¶ 8.] Landowners raise several issues on appeal. We conclude that the dispositive question is whether Landowners' Property was subject to a second taking or damage as a result of the State's 2003 change in access that had been designated in the 1961 condemnation and used to reduce severance damages to the Property.

Decision

[¶ 9.] This Court reviews a grant of summary judgment " to determine whether the moving party has demonstrated the absence of any genuine issue of material fact and entitlement to judgment on the merits as a matter of law." DRD Enterprises, LLC v. Flickema, 2010 S.D. 88, ¶ 10, 791 N.W.2d 180, 183-84. There are no genuine issues of material fact on the issue we address. 3 The " circuit court's

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conclusions of law are reviewed de novo." Id.

[¶ 10.] Article VI, § 13 of the South Dakota Constitution provides: " Private property shall not be taken for public use, or damaged, without just compensation[.]" This provision requires the State to compensate a property owner not only when private property is taken, but also when it has been damaged, an additional protection not contained in the U.S. Constitution. Krier v. Dell Rapids Twp., 2006 S.D. 10, ¶ 21, 709 N.W.2d 841, 846. Damage to property is compensable if the injury is peculiar to the land:

[I]t is a basic rule of this jurisdiction governing compensation for consequential damages that where no part of an owner's land is taken[,] but because of the taking and use of other property so located as to cause damage to an owner's land, such damage is compensable if the consequential injury is peculiar to the owner's land and not of a kind suffered by the public as a whole.

Id. ¶ 23. Thus the question is whether the closure of Exit 66 caused compensable damages that were peculiar to the Property and not of a kind suffered by the public as a whole. The compensable damage element of this question requires us to first determine whether Landowners were deprived of any property right.

[¶ 11.] Generally, a property owner has no right of access to a newly-constructed controlled-access highway where there was no pre-existing highway. 8A Nichols on Eminent Domain § G16.03[a][iii] at G16-26 (3d ed. 2007) (" It has been held that where there was no pre-existing road, the owner had no access to begin with, and was therefore not deprived of any rights." ) 4 We have followed this rule, concluding that a landowner abutting one conventional highway does not have a right to compensation for not being given initial access to a new controlled-access highway where the new controlled-access highway did not interfere with the landowners' access to the abutting conventional highway. See Darnall, 79 S.D. at 70, 108 N.W.2d at 207. On the other hand, we have recognized a right to compensation for damages occasioned by the loss of access to a conventional highway that was converted to a controlled-access highway, a ruling consistent with most states. See Hurley, 82 S.D. at 163-64, 143 N.W.2d at 726.

[¶ 12.] Today's case is different than both Darnall 5 and Hurley. 6 We have not

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had occasion to consider Landowners' new argument that an abutting property owner is entitled to compensation for damages when the initial compensation for a physical taking is offset because of the special benefit of access the State indicates the remaining...

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