Farmers New World Life Ins. Co. v. Bountiful City

• Decision Date: 31 December 1990
• Docket Number: No. 890012,890012
• Citation: 803 P.2d 1241
• Parties: FARMERS NEW WORLD LIFE INSURANCE COMPANY, Plaintiff and Appellant, v. BOUNTIFUL CITY; McNeil Construction; Sharp, Sorensen and Associates; Interwest Construction; Fashion Village Shopping Center, a partnership; The Fashion Village Group; Merrill W. Beck; William Compton; and John Does 1 through 5, Defendants and Appellees.
• Court: Utah Supreme Court

Page 1241

803 P.2d 1241

FARMERS NEW WORLD LIFE INSURANCE COMPANY, Plaintiff and Appellant, v. BOUNTIFUL CITY; McNeil Construction; Sharp, Sorensen and Associates; Interwest Construction; Fashion Village

Shopping Center, a partnership; The Fashion Village Group;

Merrill W. Beck; William Compton; and John Does 1 through

5, Defendants and Appellees.

No. 890012.

Supreme Court of Utah.

Dec. 31, 1990.

James L. Christensen, Paul D. Newton, Mark J. Morrise, Salt Lake City, for Farmers New World Life Ins. Co.

Stanley J. Preston, Allen L. Larson, Robert C. Keller, Jody K. Burnett, Salt Lake City, for Bountiful City.

Gregory J. Sanders, J. Mark Whimpey, Salt Lake City, for McNeil Const.

Keith W. Meade, Salt Lake City, for Sharp, Sorensen & Associates.

Robert F. Babcock, Salt Lake City, for Interwest Const.

W. Durrell Nielsen, Salt Lake City, for Fashion Village Group.

Darwin C. Hansen, Salt Lake City, for Merrill W. Beck.

DURHAM, Justice:

Farmers New World Life Insurance Company (Farmers) brought this action against Bountiful City (the City) and a number of other defendants to recover damages to a commercial mall owned by Farmers. The original complaint included claims against the City for (1) breach of contract, and (2) inverse condemnation under article I, section 22 of the Utah Constitution. The City moved for summary judgment on all claims, and the trial court granted that motion (the first ruling). Farmers then amended its complaint, adding inverse condemnation claims against Bountiful under the fifth amendment of the United States Constitution. The City moved to dismiss the amended complaint, and the trial court again granted the motion (the second ruling), treating the motion to dismiss as a motion for summary judgment pursuant to rule 12(b) of the Utah Rules of Civil Procedure. Farmers appeals both the first and second rulings.

Farmers is the owner of a commercial mall located in Bountiful. Bordering the south wall of the mall is a natural waterway known as Mill Creek. In 1983, after a period of flooding, mall representatives requested that the City make improvements to the creek channel at the mall site in order to improve the flood capacity of the creek. In 1985, the City obtained from Farmers a deed granting an easement that allowed the City to construct and maintain a concrete culvert. The City contracted for the design, construction, and financing of the culvert and funded the project with county flood control funds as well as state disaster relief funds. Diversion of the creek during the construction of the culvert caused physical damage to the mall due to a loss of lateral support and water seepage.

In reviewing the trial court's rulings, we must review the facts and inferences in the light most favorable to Farmers. Because summary judgment is granted as a matter of law, we can reappraise the trial court's legal conclusions. Atlas Corp. v. Clovis Nat'l Bank, 737 P.2d 225, 229 (Utah 1987).

I. INVERSE CONDEMNATION CLAIM UNDER ARTICLE I, SECTION 22

Article I, section 22 of the Utah Constitution provides, "Private property shall not be taken or damaged for public use without just compensation." Prior to the construction of a public improvement, property can be taken and the owner compensated under the eminent domain power authorized by Utah Code Ann. §§ 78-34-1 to -20. In the event private property is taken or damaged for public use without a formal exercise of the eminent domain power, the property owner may bring an inverse condemnation action under article I, section 22 to recover the value of the property. ¹ For purposes of that constitutional provision, an inverse condemnation action requires (1) property, (2) a taking or damages, and (3) a public use.

A. Nature of Property

Farmers has alleged damage to a building which it owns. In Lund v. Salt Lake County, 58 Utah 546, 200 P. 510 (1921), considering an inverse condemnation claim for the contamination of a pond and the destruction of fish, this court stated, "The kinds of property subject to the [eminent domain] right ... is practically unlimited." Id., 200 P. at 512. Under general principles of eminent domain, "property" includes but is not limited to land and improvements subject to the substantive law of real property. 2 Nichols on Eminent Domain, § 5.45 (3d ed. 1990). Buildings attached to land are considered "property" for which the taking or damaging must be paid. Id. In O'Neill v. San Pedro, L.A. & S.L.R.R., 38 Utah 475, 114 P. 127 (1911), the court indicated that article I, section 22 damages property included injuries to a house caused by the vibrations, smoke, and cinders of a nearby railroad. Here, assuming that Farmers has a legal right in the building it says was damaged, Farmers has alleged a property interest protected by article I, section 22 of the Utah Constitution.

B. Existence of Taking or Damage

In the usual eminent domain setting, property is completely taken or destroyed for a public use, rendering it valueless to the owner. In addition, however, "severance damages" may be recoverable where property not actually taken is damaged by the construction or use of the improvement. See Utah Code Ann. § 78-34-10(3). Generally, all unavoidable injuries arising out of the proper construction of a public use which directly affect the market value of the abutting property may be considered in calculating damages. See Morris v. Oregon Short Line R.R., 36 Utah 14, 102 P. 629, 631 (1909).

Farmers alleges damages which include (1) loss of income, (2) diminution in value of the mall, and (3) cost of repair to the mall's roof, floors, walls, plumbing, sewer, and fill. These damages were allegedly caused by a loss of lateral support and the seepage of water through spaces in the wall panels.

In Board of Education v. Croft, 13 Utah 2d 310, 373 P.2d 697 (1962), this court struck down a property owner's damage award, holding that an owner is entitled to compensation only for injuries that "would be actionable at common law" or for injuries where there is "a definite physical injury cognizable to the senses with a perceptible effect on the present market value." Id. at 699. The court went on to state that the requisite physical injury may include "destroying lateral supports" and "running surface waters onto adjacent lands." Id.

Recently, in Rocky Mountain Thrift Stores, Inc. v. Salt Lake City Corp., 784 P.2d 459 (Utah 1989), this court denied a business owner's inverse condemnation action against a city for injuries resulting from the city's interference with access to the owner's store. The damages occurred as a result of the operation and maintenance of a drainage system during and after a flood. This court held that article I, section 22 did not apply because the damages resulted from a "temporary, one-time occurrence" rather than a "permanent, continuous, or inevitably recurring interference with property rights." Id. at 465.

Under the foregoing definitions, damages protectible under article I, section 22 must be physical and permanent, continuous, or recurring. The diminution of value and cost of repairs to the mall which Farmers has alleged constitute damages within the guarantee of article I, section 22.

C. Presence of a "Public Use"

The Utah legislature has authorized the state land board to construct any projects it considers necessary for the control or prevention of floods, granting that agency eminent domain power to acquire lands necessary for that purpose. Utah Code Ann. § 65-1-75. This authorization is based on the concept that a taking of private property in support of a flood control program is for a public use. 2A Nichols on Eminent Domain, § 7.41 (3d ed. 1990). It is universally conceded that the government has the power to take private property in the interest of the public health and safety, id. at § 7.36, and flood control falls within this governmental purpose. This court has impliedly recognized flood control as a public use for purposes of article I, section 22. See Colman v. Utah State Land Bd., 795 P.2d 622 (Utah 1990); Rocky Mountain Thrift Stores, Inc. v. Salt Lake City Corp., 784 P.2d 459 (Utah 1989).

In the instant case, the City's construction of the culvert was in support of a flood control program and therefore was a public use within the meaning of article I, section 22. All damages necessarily resulting from the construction of that improvement and not otherwise paid for would be recoverable in an inverse condemnation action as damages incurred for a public use under the terms of the constitutional provision. In Utah, however, under the statutes and case law, damages which are not a direct and necessary consequence of the construction or operation of a public use are not recoverable in an inverse condemnation action.

In 1987, after this cause of action arose, the legislature enacted Utah Code Ann. § 63-30-10.5, authorizing inverse condemnation actions against the government. That statute waives governmental immunity for the taking or damaging of private property without just compensation and provides for the assessment of compensation and damages under title 78, chapter 34 (enacted prior to this action). See Utah Code Ann. § 63-30-10.5. Title 78 provides that property taken must be "necessary" to a use authorized by law. Id. at § 78-34-4. That title further provides that severance damages are to be assessed in situations where property not actually taken "will be damaged by the construction of the proposed improvement." Id. at § 78-34-10(3) (emphasis added). The use of the words "necessary" and "will" in the statute limits its applicability to those damages which are anticipated prior to the condemnation and are an unavoidable consequence of the construction of the improvement. Avoidable injuries not directly resulting from the construction or operation of a public improvement are not within the statute's protection. See Thomas E. Jeremy Estate v. Salt Lake City, 87 Utah 370, 49 P.2d...