By Joseph E. Tierney, IV
For those who own property abutting a highway or are thinking of developing in such a zone, a recent Supreme Court decision may impact your right to compensation should the Wisconsin Department of Transportation (“DOT”) ever need direct access to a portion of your property. The ability to demonstrate a notable deprivation of the beneficial use of the property will be critical.
In an opinion decided on February 4, 2016, the Supreme Court of Wisconsin affirmed an unpublished Court of Appeals case which stood for the proposition that the DOT does not have to compensate an owner of property when the DOT takes direct access to a state highway as part of its police power in accordance with Wis. Stat. § 32.09 so long as alternate access is provided that does not deprive the abutting owner of all or substantially all beneficial use of its property. In Hoffer Properties, LLC v. State of Wisconsin Department of Transportation, Case No. 2012AP2520, the DOT eliminated the access of Hoffer Properties, LLC (“Hoffer”) by designating State Highway 19 as a controlled access highway. Hoffer was compensated for the taking, but argued that the award was not enough because it did not properly compensate Hoffer for the reduction in the value of the remaining parcel. The Court disagreed and held that “as long as alternate access is given that does not deprive the abutting owner of all or substantially all beneficial use of the property,” then the abutting property owner is precluded from compensation as a matter of law. Further, the Court expressly rejected a “reasonableness” standard for evaluating the loss of value. The Court did, however, indicate that the inquiry in these situations should turn on the facts related to whether the alternate access deprives the owner of “all or substantially all beneficial use.” This is an extremely favorable standard for the State. Property owners will have to affirmatively show that they have been deprived of the use of their property.
Our experience with other areas of the law such as zoning and eminent domain indicate that this will be an uphill battle. Hope is not completely lost, however. The Court acknowledged in Hoffer the possibility of an inverse condemnation claim: “If the replacement access is so circuitous as to amount to a regulatory taking of the property, then compensation is due and the abutting property owner may bring an inverse condemnation claim pursuant to Wis. Stat. § 32.10.” However, inverse condemnation is of itself a difficult remedy as Justice Prosser points out in his dissent.
In his dissent, Justice Prosser contends the majority was creating new law contrary to the practice and spirit of prior case law. Although he felt the result in the case was probably appropriate, he argues that “reasonableness” was indeed the standard that should be applied. Further, he argues that the traditional distinction between police power (e.g. where takings are generally not compensable) and eminent domain (e.g. where compensation is generally due) should be minimized in this circumstance. He further notes that inverse condemnation is an inadequate remedy due to level of proof required.
Overall, Hoffer represents another case in favor of the State’s relatively easy exercise of police power and owners of property abutting a highway should take notice.
If you have any questions regarding this article, please contact your Davis & Kuelthau attorney, or the author, Joseph E. Tierney at 414.225.1471 / jtierney@dkattorneys.com.