Dugan v. Town of Paradise Valley

• Decision Date: 19 April 2011
• Docket Number: 1 CA-CV 10-0133
• Parties: MARTIN J. DUGAN, JR., and TIFFANY L. McCREARY, husband and wife, Plaintiffs/Appellants, v. TOWN OF PARADISE VALLEY, a municipal corporation, Defendants/Appellees.
• Court: Arizona Court of Appeals

MARTIN J. DUGAN, JR., and TIFFANY L. McCREARY, husband and wife, Plaintiffs/Appellants, v. TOWN OF PARADISE VALLEY, a municipal corporation, Defendants/Appellees.

1 CA-CV 10-0133

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT E

Filed: April 19, 2011

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz.R.Sup.Ct. 111(c); ARCAP 28(c); Ariz.R.Crim.P. 31.24

MEMORANDUM DECISION

(Not for Publication-Rule 28, Arizona Rules of Civil Appellate Procedure)

Appeal from the Superior Court in Maricopa County

Cause No. CV2007-051027

The Honorable Eddward P. Ballinger, Jr., Judge

AFFIRMED

Jennings, Strouss & Salmon, P.L.C. Phoenix

by Douglas G. Zimmerman

Valerie J. Walker

Attorneys for Plaintiffs/Appellants

Jennings, Haug & Cunningham, LLP Phoenix

by Larry J. Crown

Hillary P. Gagnon

Attorneys for Defendants/Appellees

IRVINE, Judge

¶ Martin J. Dugan, Jr. and wife Tiffany L. McCreary ("Dugans") timely appeal from judgment in favor of the Town ofParadise Valley ("Town") on their claim for inverse condemnation. For the reasons that follow, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶ In August 2000, the Dugans purchased a residential property ("Dugan lot") in Paradise Valley. The Dugan lot lies on Doubletree Ranch Road, which runs from west to east, in the low area of a federal flood zone. One block north of the Dugan lot is Berneil Drive, which also runs from west to east. Three historic washes (Washes 1, 2 and 3) carry floodwater from north to south across Berneil Drive and Doubletree Ranch Road. Wash 1 flows between the Dugan lot and the lot immediately to the east ("Cabrera lot"). Washes 2 and 3 flow further to the west. Although the Cabrera lot has a ditch to pass water from Wash 1, the Dugan lot does not. The Dugan lot is also surrounded by a wall on the southern side and on the East, along the border with the Cabrera lot.

¶ In August 2005, the Dugan lot flooded after heavy rains. The water created a pond in their backyard over one-foot deep in some areas, but did not enter the house. The Dugans released the water by punching holes in the southern wall of the lot.

¶ In August 2006, the Dugan lot flooded again in substantially the same manner. The Dugans punched additional holes in the southern wall to release the water. They discoveredthat the neighbor on the other side of the southern wall had built, after the previous flood, a berm that prevented water from draining onto her property. The Town prevailed upon the neighbor to tear down a significant portion of the berm and re-grade her lot along the wall. The Town also secured a watershed easement from the neighbor and permitted the Dugans to use it in their drainage solution. The Dugans hired an engineer, who concluded that the floods were caused by a significant increased flow into Wash 1 from development northwest of the Dugan lot. According to the report, water that historically flowed south along Washes 2 and 3 were being redirected into Wash 1 by Berneil Drive, berms and walls near the curbs, and residential developments along that street.

¶ The Dugans sued the Town for inverse condemnation and tortious diversion of water. The Town denied it caused the flooding, arguing the Dugan lot did not have proper drainage. The Town filed a motion for summary judgment, raising inter alia qualified immunity under Arizona Revised Statutes ("A.R.S.") section 12-820.02 (2003). Because the Dugans argued they would not seek liability based on a theory of negligent code enforcement, the trial court denied the motion for summary judgment, ruling that qualified immunity did not bar the inverse condemnation claim. The parties stipulated that the Town had qualified immunity pursuant to A.R.S. § 12-820.02, and that the Dugans would not seek damages based on any theory of liability for the town's regulatory function "absent any intent to injure or gross negligence."

¶ On the last day of trial, the Dugans presented testimony from their contractor, Glen Shaw, regarding damages. Because Shaw gave questionable testimony about his license at a deposition, the trial court permitted the Town to present an untimely disclosed witness from the Registrar of Contractors, Paul Terek, to testify that Shaw was not licensed and could not legally submit a bid. At the close of evidence, the trial court granted directed verdict on the tortious diversion of water claim.

¶ The inverse condemnation claim was submitted to the jury with a qualified immunity instruction. The Dugans moved for a mistrial based on the Town's late disclosure of Terek as a witness, but the motion was denied. The jury returned a unanimous verdict in favor of the Town on the inverse condemnation claim. The Dugans timely appeal.

DISCUSSION

1. Qualified Immunity Instruction

a. Constitutionality

¶ The Dugans argue that the jury should not have been instructed on qualified immunity. Because inverse condemnation arises under Article 2, Section 17 of the Arizona Constitution, they contend that statutory immunity did not apply once the tort claim was dismissed. On this record, we disagree.

¶ We review a trial court's jury instructions for an abuse of discretion, but review de novo whether the instructions accurately state the law. A Tumbling-T Ranches v. Flood Control Dist. of Maricopa County, 222 Ariz. 515, 533, 1 50, 217 P.3d 1220, 1238 (App. 2009). "In deciding this question, we review jury instructions in their totality. A party is entitled to an instruction on any theory of the case if reasonably supported by the evidence." Id. (internal citation omitted).

¶ In Arizona, the flooding of land is compensable under eminent domain provisions. State v. Leeson, 84 Ariz. 44, 50, 323 P.2d 692, 696 (1958). Where, as here, the government did not condemn private property, a plaintiff may seek damages for inverse condemnation. A Tumbling-T, 222 Ariz. at 525, 1 18, 217 P.3d at 1230. To prevail under a claim for inverse condemnation, a plaintiff must prove that "a governmental entity constructed or developed a public improvement that substantially interfered with [their] property right." Id.

¶ The Dugans do not dispute the accuracy of the inverse condemnation instruction, which reads:

Plaintiffs claim that the Defendant substantially and illegally interfered with their physical use, possession and enjoyment of their property so as to constitute a taking of this realty. Defendant denie[s]any of its actions constituted a taking of Plaintiffs' property.

A taking occurs when government action directly and substantially interferes with or directly and substantially disturbs a private property owner's physical use, possession or enjoyment of the property and decreases the value of the property.

To prove a taking by Defendant, Plaintiffs must prove that Defendant substantially, interfered (in terms of the magnitude and probability), with their property by constructing or developing a public improvement, so as to lessen the value of the property.

(Emphasis added.) Accordingly, they claimed that the Town "directly and substantially" flooded their lot by "constructing or developing" Berneil Drive with the purpose and effect of diverting flood water in accordance with its general duty to manage such waters. In establishing that claim, the Dugans agreed before trial that they would not allege any theory of liability based on the following regulatory conduct:

The parties agree that the Town has qualified immunity pursuant to A.R.S. § 12820.02 for the issuance of or failure to revoke or suspend any permit, license, certificate, approval, order or similar authorization.... Therefore, Plaintiffs agree that they do not assert any theory of liability against the Town for which this statute may apply. Specifically, the Plaintiffs agree that they do not seek any liability against the Town and will not submit evidence or testimony criticizing the Town for an alleged failure to revoke or suspend any permit granted to private homeowners, for permitting and approvingsubdivisions, for approving and issuing permits to homeowners to construct walls, berms or other structures which blocked the natural wash, for action taken or not taken by the Town against the Plaintiffs' neighbor to the south... for allegedly constructing a berm within a dedicated drainage easement, absent any intent to injure or gross negligence.

(Emphasis added.)

¶ Despite this stipulation, the Dugans now argue that the qualified immunity instruction impermissibly prevented the jury from considering the following conduct:

(1) accepting, by act or omission, walls or berms within [the] public right of way that blocked the path of storm water from flowing in historic channels or as sheet flows south of Berneil Drive, and (2) allowing subdivisions which diverted storm water onto Berneil Drive, and (3) allowing a subdivision without any southward drainage facilities which were recommended by the engineer.

Such conduct, however, is precisely the regulatory function for which the Dugans agreed not to seek liability.

¶ In their reply brief, however, the Dugans contend that the stipulation applied only to the dismissed tort claim. The record contradicts this assertion. At the summary judgment hearing, the Dugans' counsel stated:

I want to make it absolutely clear that we have not alleged the basis of the Town's liability is its regulatory action.

I knew that going in. We have made that absolutely clear. This is an inverse condemnation [claim] under Article 2, Section 17, involving a physical invasion of the plaintiffs' land. It involves the deliberate, intentional diversion of water.

Let me show you what this means.... [W]e have, specifically, alleged factually [and the reports state] that the Town of Paradise Valley by its regulatory inaction has, in fact, prevented water coming down to [Washes 2 and 3]. We do not, and cannot, assert subject to the immunity statutes that their approval of permits to build in the wash, block the wash, do all of

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