If you can figure out the syntax of this post’s headline, you’ve just figured out the rationale of the Wisconsin Supreme Court in E-L Enterprises, Inc v. Milwaukee Metropolitan Sewerage District, No. 2008AP921 (July 2, 2010). In that case, the court held that the removal of groundwater was not a compensable taking because the property owner did not seek compensation for the taken water, but for damage to its building which relied in part on the groundwater for support.
Many years ago, in the course of constructing a new pipeline, the local sewer company removed groundwater under a neighboring building. Removal of the water resulted in the wooden supports under the building rotting, which caused the building to settle. The cost to replace the wooden supports with concrete supports was approximately $300,000.
The property owner brought claims for negligence, nuisance and inverse condemnation because the sewer company “physically took portions of the wood piles which rendered them unusable and damaged the E-L Building.” The trial court dismissed the negligence and nuisance claim because the sewerage district was immune, but the jury allowed the building owner to recover its damages “for the taking of groundwater,” in an amount equal to its cost of repair plus attorney’s fees. The court of appeals affirmed.
The Wisconsin Supreme Court reversed, holding that damage to the building are “mere consequential damages to property resulting from governmental action, which are not compensable under constitutional takings law.” Slip op. at 33. The building owner alleged a physical taking of its groundwater, but the jury compensated it for damage to the building:
E-L’s takings claim must fail. E-L’s claim morphed from a complaint that the Sewerage District “physically took portions of the wood piles which rendered them unusable and damaged the E-L Building” into a special verdict form that asked the jury to determine the sum of money that would “justly compensate E-L for the taking of [the] groundwater.” The groundwater was indeed that which was extracted by the Sewerage District, but E-L introduced no proof as to the value of the extracted groundwater. Therefore, whether E-L owns the extracted groundwater is inapposite in this case. E-L instead seeks damages for the cost to repair its building and for the loss of use of its wood piles. However, the Sewerage District did not physically occupy the property for which E-L seeks compensation, and no government-imposed restriction deprived E-L of all, or substantially all, of the beneficial use of its property. What remains are mere consequential damages to property resulting from governmental action, which are not compensable under Article I, Section 13 of the Wisconsin
Constitution or the Takings Clause of the Fifth Amendment.
Slip op. at 17 (footnote omitted). Because “E-L introduced no proof as to the value of the extracted groundwater,” slip op. at 18, and it only sought to recover “damages for the cost to repair the wood piles and E-L’s building,” id., the court held it was not a taking of the groundwater.
The court concluded that the resulting damage to the building caused by the taking of the groundwater was not compensable because neither the U.S. Constitution nor the Wisconsin Constitution contain a “damage” clause (unlike the constitutions of many states which require compensation when property is “taken or damaged” for public use). Slip op. at 23-24. Damages are reserved for tort claims:
E-L seeks damages for the cost to repair its building and the loss of use of the wood piles. However, the Sewerage District did not physically occupy E-L’s building or wood piles. The Sewerage District did not use the building or wood piles in connection with the sewer installation, and the public obtained no benefit from the damaged building or wood piles. Rather, the wood piles were damaged as a result of the Sewerage District’s alleged negligent construction of the sewer. Accordingly, we have in this case “only damage, without appropriation to the public purpose.” Such damage is not recoverable in a takings claim but instead sounds in tort. The circuit court already dismissed E-L’s tort claims against the Sewerage District on the grounds of governmental immunity under Wis. Stat. § 893.80(4).
Slip op. at 27 (citation and footnote omitted). Justice Bradley filed a concurring opinion emphasizing that the taking claim was an “attempt to dress up its tort claim in takings clothes to circumvent the District’s immunity.” Concurring opinion at 3.
Justice Prosser dissented because denying the building owner redress for the undisputed damage to its building “interprets the scope of damages under takings law too narrowly.” Dissenting opinion at 5. He argued that the damage to the building was the reduction in its fair market value:
This point is further emphasized by E-L’s initial claim that the “taking” was the taking of “portions of the wood piles” supporting the building. Whether MMSD “took” the wood piles or “took” the groundwater, the result was the same: MMSD took a portion of E-L’s property, causing a reduction in fair market value to the remainder of that property.
Id. at 7.