State v. Franciscan All.
| Docket Number | 22A-PL-2969 |
| Decision Date | 28 November 2023 |
| Parties | State of Indiana, Appellant-Plaintiff, v. Franciscan Alliance, Inc. f/k/a Sisters of St. Francis Health Services, Inc.; The Market Place at State Road 37, LLC; Hook SupeRX, LLC; SCP 2010-C36- 018 LLC; and Johnson County, Indiana, Appellee-Defendants |
| Court | Indiana Appellate Court |
Appeal from the Johnson Superior Court Trial Court Cause No 41D04-1911-PL-181 The Honorable Marla K. Clark, Judge
ATTORNEYS FOR APPELLANT Theodore E. Rokita Attorney General of Indiana Frances Barrow Deputy Attorney General Indianapolis, Indiana
ATTORNEYS FOR APPELLEE FRANCISCAN ALLIANCE, INC. Paul D. Vink Seema R. Shah Bose McKinney & Evans LLP Indianapolis Indiana
ATTORNEYS FOR APPELLEE SCP 2010-C36-018 Nadine E. McSpadden Andrielle M. Metzel Taft Stettinius & Hollister, LLP Indianapolis, Indiana Ryan Simatic Biersdorf & Associates, PA Minneapolis, Minnesota
[¶1] As part of the Interstate 69 construction project, the State seized 0.632 acres of land owned by Franciscan Alliance in Greenwood, Indiana. The seizure consequently altered the traffic flow to Franciscan's remaining land, which was undeveloped, and to an adjacent CVS pharmacy owned by SCP. Franciscan and SCP (collectively "Owners") convinced a jury that the State owed them compensation not just for the seized land but also for the impact from the less convenient access. The jury awarded $680,000 to Franciscan and $1.5 million to SCP.
[¶2] The State appeals asking if inconvenience associated with traffic flow, as opposed to ingress-egress loss of access, is a compensable injury. The State maintains it is not, and accordingly asks this court to reduce the damage award entered against it to $47,400. The State's argument relies on deep rooted Indiana Supreme Court precedent holding that damages associated with traffic flow variations are not compensable. Finding this precedent controlling, we reverse and remand for a reduction in the damages award.
[¶3] To transform State Road 37 into part of the I-69 corridor, the State needed to acquire a 0.632-acre commercial strip of land owned by Franciscan (the Strip). The Strip appears in red below. SCP's CVS is located within the bottom-left block labeled "Marketplace":
(Image Omitted)
[¶4] Originally, Owners had direct access to State Road 37 via Fairview Road. But after the construction project, Fairview Road will not connect to the new I-69 and will instead be turned into a dead-end cul-de-sac. Consequently, northbound traffic needs to travel another mile to reach Owners' properties, and southbound traffic just over three extra miles.
[¶5] As part of the condemnation proceedings, multiple appraisers weighed in on what the State owed the owners for the seizure. The Strip was valued at either $40,500 or $47,400, and according to the State's appraiser, this taking was the only compensable damage. But Owners' appraisers found the inconvenient access changed the properties' viable uses from commercial to residential- significantly reducing their values. Franciscan's appraiser calculated a $3 million loss. And SCP's appraiser landed on a value of $4.4 million because the CVS's income derives from "spontaneous buyers" who need the "quick, in and out" that access to a major roadway provides. Tr. Vol. III, p. 95. The appraiser testified that the loss of easy access would doom the store: "if you don't have access . . . you really don't survive." Id. Additionally, a joint report from the appraisers calculated damages at about $1.9 million for both Franciscan and SCP. From these bases, the jury ultimately landed on compensation of $680,000 for Franciscan and $1.5 million for SCP.
[¶6] Both Article 1, § 21 of the Indiana Constitution and the Fifth Amendment to the United States Constitution prevent the taking of private property for public use without "just compensation." These provisions "are textually indistinguishable and are to be analyzed identically." State v. Kimco of Evansville, Inc., 902 N.E.2d 206, 210 (Ind. 2009).
[¶7] At the heart of this dispute is whether Owners are entitled to compensation related to changes in their properties' access. The resolution rests on whether this is merely a change in traffic flow or circuity of travel case, as in State v. Ensley, 164 N.E.2d 342 (Ind. 1960) and Kimco, 902 N.E.2d 206 (Ind. 2009), or an ingress-egress, loss-of-access case where the property's highest and best use has changed, as in City of Hammond v. Marina Entertainment Complex, Inc., 733 N.E.2d 958 (Ind.Ct.App. 2000).
[¶8] As a preliminary matter, Owners contend the State waived any challenge to the jury award by failing to properly object to their valuation evidence.[1] We disagree.
[¶9] At the outset of the jury trial, the State objected to a jury instruction that it argued improperly implied that increased travel times were compensable damages. Tr. Vol. II, pp. 10-12. The State even obtained the trial court's permission, with no complaint from Owners, to view its objection as continuing throughout the trial. Id. at 13-14. Thus, the State properly objected.
[¶10] Owners also complain that the State should have filed a motion to dismiss the case before the jury trial began, noting there was little point in holding a trial if the vast majority of damages turned out to be non-compensable. But Owners identify no requirement for the State to have done so to preserve its valuation argument. We also note that, prior to the trial, the State filed a motion in limine to prevent owners from presenting their valuation evidence relating to the loss of access. Appellant's App. Vol. II, p. 18.
[¶11] Accordingly, we find no waiver of the State's argument.
[¶12] A party may not obtain damages in an eminent domain action resulting from a claim that "traffic is diverted from [the] premises or made to travel a more circuitous route." State v. Ensley, 164 N.E.2d 342, 350 (Ind. 1960). This general rule has been reaffirmed many times. See, e.g., State v. Kimco of Evansville, 902 N.E.2d 206, 212-16 (Ind. 2009) (reaffirming Ensley in the context of a shopping mall whose traffic flow was negatively affected by street construction); AAA Fed. Credit Union v. Ind. Dep't of Transp., 79 N.E.3d 401, 405 (Ind.Ct.App. 2017) ( "an abutting landowner has no cognizable property right in the free flow of traffic past his property ('the traffic-flow rule')"); State v. Dunn, 888 N.E.2d 858, 864-66 (Ind.Ct.App. 2008) ().
[¶13] The Indiana Supreme Court established the traffic flow rule in 1960 under similar facts as presented here. State v. Ensley, 164 N.E.2d 342 (Ind. 1960). Though we must follow the precedent from Ensley, society has shifted dramatically since the first applications of the rule. In 1960, customers had no choice but to drive the more circuitous traffic route to obtain necessary goods and services. Today customers can, and often do, avoid inconvenient trips by shopping online. For instance, in State v. Kimco of Evansville, the shopping mall'S loss of easy access to its premises led to a 40% drop in tenants. 902 N.E.2d at 209. Because of changing societal habits, the factual distinction between the legal concepts of a change in traffic flow versus ingress and egress has become a difficult basis on which to base a resolution. But the reevaluation of this decades-old rule is a role left for our Supreme Court. The policy justifications for this rule have long been recognized:
The propriety of such an allowance in any case where only an indirect access is cut off, the landowner being left with other, although more circuitous, indirect ways of approaching the highway, seems doubtful, since obviously if the principle were extended to its logical limits almost every member of the public could claim compensation on the theory that the convenience of the highway was reduced by closing any means of access.
State v. Tolliver, 205 N.E.2d 672, 676 (Ind. 1965) (emphasis in original) (internal quotation omitted).
[¶14] This case is a textbook illustration of the traffic flow rule. First and foremost, Owners still have access to the new I-69. AAA Fed. Credit Union, 79 N.E.3d at 405-06 (collecting cases which denied compensation where "the points of ingress and egress over the land remain unaffected"). Granted, the construction project will add approximately 1 to 3 miles of travel distance to reach their property. But this Court has already held that the increase of 4 miles in travel distance is not severe enough to be considered an effective elimination of ingress and egress rights. Green River Motel Mgmt. of Dale, LLC v. State, 957 N.E.2d 640, 645 (Ind.Ct.App. 2011) ().
[¶15] More recently, in a related case concerning the Market Place property on which the CVS sits, a panel of this Court found that essentially the same factual scenario "falls squarely within the traffic-flow-rule cases." State v. The Mkt. Place at State Road 37 LLC, No. 22A-PL-2765 211 N.E.3d 539, *3 (Ind.Ct.App. 2023) (mem.), trans. denied. The State argued that the owner of the Market Place property could not introduce evidence of any damages from the closure of Fairview Road because "the closure of the intersection is not a 'taking' for which Market Place is entitled to compensation." Id. at *1. This Court agreed that business would suffer from the I-69...
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