AAA Fed. Credit Union v. Ind. Dep't of Transp.

• Decision Date: 07 July 2017
• Docket Number: Court of Appeals Case No. 71A03-1609-PL-2091
• Parties: AAA FEDERAL CREDIT UNION, Appellant-Petitioner, v. INDIANA DEPARTMENT OF TRANSPORTATION, Appellee-Respondent.
• Court: Indiana Appellate Court

79 N.E.3d 401

AAA FEDERAL CREDIT UNION, Appellant-Petitioner,

v.INDIANA DEPARTMENT OF TRANSPORTATION, Appellee-Respondent.

Court of Appeals Case No. 71A03-1609-PL-2091

Court of Appeals of Indiana.

July 7, 2017

Attorney for Appellant: Philip D. Sever, Sever-Storey, L.L.P., Carmel, Indiana

Attorneys for Appellee: Curtis T. Hill, Jr., Attorney General of Indiana, Andrea E. Rahman, David L. Steiner, Deputy Attorneys General, Indianapolis, Indiana

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.

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 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, Inc. v. Ind. Dep't of Transp. , 932 N.E.2d 749, 751 (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, 17 S.Ct. 581, 41 L.Ed. 979 (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 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, 125 S.Ct. 2074, 161 L.Ed.2d 876 (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, 125 S.Ct. 2074 (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, 102 S.Ct. 3164, 73 L.Ed.2d 868 (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, 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, 98 S.Ct. 2646, 57 L.Ed.2d 631 (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, 125 S.Ct. 2074 ; Penn Cent. , 438 U.S. at 124, 98 S.Ct. 2646 ). 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, 125 S.Ct. 2074.

[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 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...