E-L Enterprises, Inc. v. Milwaukee Metro. Sewerage Dist.

326 Wis.2d 82

785 N.W.2d 409

72 ERC 1088

2010 WI 58

E-L ENTERPRISES, INC., Plaintiff-Respondent,

v.MILWAUKEE METROPOLITAN SEWERAGE DISTRICT, Defendant-Appellant-Petitioner.

No. 2008AP921.

Supreme Court of Wisconsin.

Argued Oct. 21, 2009.

Decided July 2, 2010.

For the defendant-appellant-petitioner there were briefs by G. Michael Halfenger, William J. Katt, Jr., and Foley & Lardner LLP, Milwaukee, and Michael J. McCabe, James H. Petersen, Lauri Ann Rollings, and the Milwaukee Metropolitan Sewerage District, Milwaukee, and oral argument by G. Michael Halfenger.

For the plaintiff-respondent there were briefs by Jerome R. Kerkman, Susan A. Cerbins, Joseph R. Cincotta, and Kerkman & Dunn, Milwaukee, and oral argument by Jerome R. Kerkman.

An amicus curiae brief was filed by Daniel M. Olson and the League of Wisconsin Municipalities, Madison, on behalf of the League of Wisconsin Municipalities.

¶ 1

ANNETTE KINGSLAND ZIEGLER, J.

This is a review of a published decision of the court of appeals, ¹ which affirmed the judgment entered on a jury verdict by Milwaukee County Circuit Court, Richard J. Sankovitz, Judge. The jury found that when constructing a sewer, the Milwaukee Metropolitan Sewerage District (the Sewerage District) unreasonably removed groundwater from the property of E-L Enterprises, Inc. (E-L), which caused E-L's building to settle and amounted to a taking of E-L's property without just compensation. The jury awarded E-L damages in the amount of $309,388.

¶ 2 The Sewerage District filed a motion for judgment notwithstanding the verdict on the grounds that the damages E-L suffered to its property were consequential damages resulting from governmental action and therefore were not compensable under the takings clause of the Wisconsin Constitution. Alternatively, the Sewerage District moved for a new trial based on insufficient evidence to support the verdict. The circuit court denied the Sewerage District's motions and awarded E-L its attorney fees and costs. The circuit court then entered judgment in the amount of $624,375.48 on behalf of E-L and against the Sewerage District.

¶ 3 The Sewerage District appealed, and the court of appeals affirmed. The Sewerage District petitioned this court for review, and we accepted. We now reverse the decision of the court of appeals.

¶ 4 This case presents the following issues: (1) whether the Sewerage District's conduct constituted a taking of E-L's property without just compensation in violation ofArticle I, Section 13 of the Wisconsin Constitution and the Fifth Amendment of the United States Constitution; ²and (2) whether E-L has established an inverse condemnation claim under Wis. Stat. § 32.10 (2007-08),³ entitling E-L to attorney fees and costs.⁴

¶ 5 As a preliminary matter, we need not decide today the panoply of issues that relate to an allegedtaking of groundwater. In this case, E-L introduced no proof as to the value of the extracted groundwater.⁵ Instead, E-L seeks damages for the cost to repair its building and for the loss of use of its wood piles. 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. Accordingly, what remains are mere consequential damages to property resulting from governmental action, which are not compensable under constitutional takings law.⁶ The damage to E-L's building was caused by the alleged negligent construction of the sewer; hence, E-L's claim sounds in tort and seeks damages for which the Sewerage District is not liable under the doctrine of governmental immunity. For the same reasons, we further conclude that E-L has failed to establish an inverse condemnation claim under Wis. Stat. § 32.10. E-L is therefore not entitled to attorney fees and costs under Wis. Stat. ch. 32. Accordingly, this court reverses the decision of the court of appeals.

[785 N.W.2d 413, 326 Wis.2d 89]

I. FACTUAL BACKGROUND AND PROCEDURAL POSTURE

¶ 6 In the 1980s, the Sewerage District constructed the Deep Tunnel System, a 19 mile long system of sewers across Milwaukee County "that help[s] reduce water pollution by storing excess wastewater 140 to 330 feet underground" until the wastewater can be treated at reclamation facilities. ⁷ The Deep Tunnel included the 1987-88 construction of the Crosstown 7 sewer (the sewer), a "near-surface collector sewer" that collects sewage overflow and diverts it away from the Menominee River and into storage in the Deep Tunnel. The sewer was constructed for the Sewerage District by Bowles Contracting Inc./Tomasini Construction Inc. Joint Venture (BCI/TCI). Pursuant to the Sewerage District's contract with BCI/TCI, the means and methods of the construction were left to BCI/TCI's discretion. The contract required BCI/TCI to avoid damage to neighboring buildings and to repair any damage caused by the removal of water from the construction site. Under the contract, BCI/TCI was responsible for any resulting damage to surrounding properties.

¶ 7 To construct the sewer, BCI/TCI dug a trench, installed sewer pipes, and restored the surface. A portion of the sewer was constructed in the Sewerage District's easement under a private alley adjacent to the subject building owned by E-L on North 12th Street in Milwaukee.⁸ E-L's building was built in 1928 on "wood piles,"long wooden poles that are capped with concrete and driven into the ground to provide support for the building's foundation. To prevent the wood piles from rotting and weakening, they must be sufficiently saturated with water.

¶ 8 However, in order for BCI/TCI to properly lay the sewer pipe and pour concrete, the trench had to be dry. Accordingly, BCI/TCI pumped groundwater from the trench for 17 days. When the sewer was completed in 1988, groundwater measurements showed that the level of groundwater near E-L's building had been significantly reduced. It took two years for the groundwater level to recover.

¶ 9 In 1998, about ten years after the sewer project was completed, E-L's owner, Joseph Loftus, noticed that cracks in the foundation of his building appeared to be worsening, so he started to monitor the building's settlement rate. In 2001, an engineer examined the building's wood piles and determined that the caps of 14 wood piles had rotted and were no longer able to support the building. Those particular wood piles were under the south wall of E-L's building, nearest to the 1987-88 sewer construction site. In September 2003, E-L notified the Sewerage District of the building damage, and in October, E-L repaired the building. To repair the building, the damaged portions of the wood piles were sawed off and replaced with concrete. The repairs cost a total of $309,388, which includes E-L's attorney fees incurred in litigation with a neighbor who owned the adjacent alley and refused E-L access to make the building repairs. It is undisputed that E-L continued to lease the building throughout this entire period.

¶ 10 On June 23, 2004, E-L filed suit against the Sewerage District and CNAInsurance Companies (CNA), the insurer for the now defunct BCI/TCI. E-Lalleged causes of action against the Sewerage District for negligence, continuing nuisance, and inverse condemnation and alleged causes of action against CNA for negligence and continuing nuisance.⁹ The circuit court dismissed E-L's negligence and nuisance claims against the Sewerage District on the basis of governmental immunity under Wis. Stat. § 893.80(4).¹⁰ Accordingly, only E-L's inverse condemnation claim remained.¹¹

¶ 11 As to the inverse condemnation claim, E-L's complaint alleged that the Sewerage District's operation and maintenance of the Deep Tunnel System and the pipes constructed as a part of the sewer "physically took portions of the wood piles which rendered them unusable and damaged the E-L Building." E-L alleged that the Sewerage District's acts constituted a taking:

[The Sewerage District's] conduct constitutes a taking of E-L Enterprises' property for public use.

Specifically, [the Sewerage District's] conduct constitutes a physical invasion that deprived and continues to deprive E-L Enterprises of all beneficial use of the wood piles in violation [of] the Fifth Amendment of the United States Constitution and Article I, Section 13 of the Wisconsin Constitution.

....

[The Sewerage District] took E-L Enterprises' property without paying E-L Enterprises its just compensation.

In addition to damages, E-L's complaint demanded attorney fees and costs relating to E-L's claim for inverse condemnation.¹²

¶ 12 E-L's takings claim under Article I, Section 13 of the Wisconsin Constitution proceeded to a jury trial. The special verdict form asked the jury whether the Sewerage District's removal of groundwater from E-L's property was a taking. To assist the jury in answering that question, the circuit court instructed the jury that the law bars the government from taking property for public use without compensating the owner and that "[g]roundwater is considered property of the person who owns the land under which it flows." ¹³ Ifthe jury found that the Sewerage District's removal of groundwater from E-L's property was ataking, the jury was required to answer whether the removal of groundwater from E-L's property caused E-L's building to settle. If the jury answered that question in the affirmative, the jury had to determine the sum of money that would "justly compensate E-L for the taking of the groundwater beneath the south end of [E-L's] building."

¶ 13 The jury found that the Sewerage District's removal of groundwater from E-L's property was unreasonable, constituted a taking, and caused E-L's building to settle. The jury awarded E-L $309,388 "for the taking of groundwater" beneath its building-an amount equal to the cost to repair E-L's building and the attorney fees E-L incurred litigating with the neighbor who owned the adjacent alley and refused E-L access...