In Hunter Landing, LLC v. City of Council Bluffs, No. 16-2138 (May 16, 2018), the Iowa Court of Appeals held that the jury was entitled to be instructed about all takings theories, and not just limited to a Lucas and physical invasion instruction.
After several of Hunter’s nonconforming buildings were damaged in a flood and the City concluded all but one of them were more than 50% damaged, the City demolished them. Hunter sued, asserting the City “inversely condemned its property by limiting the right of direct access to the property, restricting the highest and best use of the property, removing buildings, removing electrical power to operate a water well system, removing drainage tubes, and removing septic systems.”
The court gave the jury this instruction:
Land-use regulation does not constitute inverse condemnation requiring compensation if it substantially advances a legitimate state interest. There are two exceptions. When the regulation (1) involves a permanent physical invasion of the property or (2) denies the owner all economically beneficial or productive use of the land, the State must pay just compensation.
When the regulation denies the owner all economically beneficial or productive use of the land, the City—under limited circumstances—may resist payment of compensation. The limited circumstances include those instances where it can be shown that the property owner’s property rights never included the right to use the land in the way the regulation forbids. Whether or not the property owner’s property rights included the right to use the land in the way the regulation forbids is to be determined under state nuisance and property law.
Slip op. at 3. The jury returned a no-liability verdict.
Hunter’s appeal argued that the above instruction wasn’t good enough, and didn’t thoroughly describe the takings law applicable to the facts. Yes, Hunter did seek compensation for physical takings and use wipeouts, but it also alleged a regulatory restriction on the property’s highest and best use. Items (1) and (2) in the instruction accurately detailed the per se tests (physical invasion and Lucas wipeouts), but what about the three-factor Penn Central test for regulatory takings? Even if the jury didn’t find a physical invasion or wipeout, couldn’t it still determine that, on balance, the City had taken Hunter’s property even though it did not invade the land, and the land still had some economic use left?
The Court of Appeals said yes:
At trial, the district court instructed the jury only as to the per se takings noted in Brakke. The jury was not instructed on the third type of regulatory taking involving the Penn Central factors. The court erred in so instructing the jury.
…
Without instruction on the third type of regulatory taking, the court denied Hunter Landing of having the jury consider its theory of recovery. Moreover, the court erred in conflating “the kinds of damages that [Hunter Landing] is seeking” with its legal theory. Contrary to the district court’s belief that the jury could discern the damages sought by Hunter Landing, the jury could not reach the issue of damages without first determining that Hunter proved inverse condemnation. Under the instruction given, the jury could not find any City action short of “a permanent physical invasion” or a denial of “all economically beneficial ownership” constituted a taking.
Slip op. at 7-8.
One judge dissented, concluding that Hunter didn’t ask for the omitted Penn Central instruction, and had not objected at trial and thus failed to preserve the error when counsel told the judge: “My only issue with the instruction, Your Honor, is that there is Iowa case law that indicates that even no matter of minor the invasion, a minor invasion by the government on a private property owner’s land is still actionable and compensatory…” Slip op. at 10. In other words, the only objection made (according to the dissenting judge) was on the adequacy of the court’s physical invasion instruction, which did not preserve error on Penn Central issues.
Hunter Landing, LLC v. City of Council Bluffs, No. 16-2138 (Iowa App. May 16, 2018)