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Inverse Condemnation

This page briefly introduces the legal concept of inverse condemnation. This concept is primarily a creation of common law; that is, the courts through a series of legal decisions have defined the concept of inverse condemnation to remedy situations for which the legislative branch of government has not provided a statutory solution.

Inverse condemnation generally arises when government action arguably has taken private property; the government has not initiated an eminent domain proceeding nor compensated the impacted property owner; and the property owner is now commmencing a lawsuit against the government seeking compensation or an order requiring the government to discontinue its action.

Inverse condemnation arises when a public entity engages in an activity which amounts to a taking of private property without permission of owner or an effort to compensate the owner.

"The purpose of an inverse condemnation action is to allow a landowner whose private property has been taken for public use to secure the just compensation which he should have received in proceedings instituted by the public entity under [eminent domain], prior to the taking or damaging of the property." Arneson v. City of Fargo, 331 N.W.2d 30 (N.D. 1983).

Inverse condemnation does not arise only when an owner is deprived of all ownership rights. It can also arise from a regulation that takes some of the owner's rights, even though the owner retains ownership of the property. The challenge is distinguishing between a regulation that is "a proper exercise of police power" and a regulation that is "a taking of private property." See regulation as a taking.

The following excerpts are from Arneson v. City of Fargo, 331 N.W.2d 30 (N.D. 1983)

The Sheyenne River Diversion Project, completed in 1972, was constructed to allow the transfer of water from the Sheyenne River into the Red River to be utilized by the City of Fargo as an alternative water supply source. As part of this project, a dam was built approximately four miles south of West Fargo to impound a small quantity of water on the Sheyenne River. A pumping station was constructed to lift water from the impounded area into a diversion channel through which the water flows into Cass County Drain No. 27 (Drain 27) which is a partially manmade and partially natural drain. From Drain 27, the water flows into a natural drainage area known as Rose Coulee and from there into the Red River to the south of and upstream from the City of Fargo where the water ultimately flows downstream for use by the City of Fargo. At the point where water flowing in the diversion channel enters Drain 27, a small dam or weir was constructed to prevent the water from flowing south in Drain 27.

The Arnesons own land in Cass County … Their farmland is located within the assessment district of Drain 27. Since the completion of the Sheyenne River Diversion Project, the pumping station has been used to divert water from the Sheyenne River for use by the City of Fargo during one period from August 30, 1976, until June 20, 1977.  During the fall of 1976, water which was being diverted by the pumping station from the Sheyenne River rose to such a level in Drain 27 that it began to flow south over the top of the small dam located in the drain. Water in the drain south of the dam spilled over its banks and flooded the Arneson farmland. The flooding inhibited attempts by the Arnesons to till the ground and plant crops during the 1977 and 1978 crop years.

… [t]he Arnesons elected to proceed on a theory that the Defendants, through the construction and use of the Sheyenne River Diversion Project, caused a permanent taking of a flood easement upon the Arneson farmland entitling the Arnesons to compensation for the diminution in value of the farmland resulting from that taking. It was understood and agreed by all parties that the Arnesons would not seek compensation for nor introduce evidence of any temporary damage or loss of crops during 1977 and 1978 as a result of the flooding caused by use of the Sheyenne River Diversion Project during 1976 and 1977. The jury returned a verdict awarding the Arnesons compensation in the amount of $140,000.00 for diminution in the value of their farmland caused by the Defendants taking of a permanent flood easement upon the property. The Arnesons were awarded interest by the court at the rate of 6% per annum from the date of the taking in the amount of $46,200.00, and the court also awarded the Arnesons costs and disbursements of $1,768.80 and attorney's fees of $9,750.00 resulting in a total judgment of $197,718.80.

…

During the trial, the Arnesons introduced evidence in support of the following two grounds upon which they alleged that the Defendants acquired a permanent flood easement over their property resulting in a permanent diminution of value to their property: (1) future use of the diversion facility to divert water from the Sheyenne River could result in flooding of the Arneson property as occurred in 1976 and 1977; and (2) the dam located in Drain 27 as a part of the diversion facility restricts the flow of water in the drain reducing the ability of the Arneson farmland, which drains into Drain 27, to adequately dispose of excess surface water. The Defendants introduced evidence to show that the diversion facility may never again be used to provide an alternate source of water to the City of Fargo, and that, if used, improved methods would be utilized to eliminate the possibility of diverted waters flowing south in Drain 27 causing flooding of the Arneson farmland. The Defendants also introduced evidence to show that the presence of the dam in Drain 27 does not inhibit the flow of water in the drain and does not inhibit drainage of the Arneson farmland.

The Defendants assert that one occurrence of flooding caused by governmental action cannot support a claim for compensation for a permanent taking unless there is proof of future inevitable frequent reoccurrences of the flooding. We agree that a landowner cannot receive compensation for a permanent taking or permanent damaging of his property due to governmentally caused flooding of the property unless it is proven that there will be frequent inevitable reoccurrences of the flooding … With regard to this issue the United States Court of Claims, in Accardi, supra, states:

"Where a claim of taking of private property for a public use is founded upon interference with land due to flooding, the burden of proving the claim consists of more than a mere showing that governmental action 'has interfered with property rights.' … In general terms, where no permanent flooding of the land is involved, proof of frequent and inevitably recurring inundation due to governmental action is required…

The Defendants concede in this case that the diversion of water from the Sheyenne River during 1976 and 1977 caused flooding of the Arneson property which would have supported a claim for a temporary taking or damaging of the property. However, the Arnesons elected to proceed on a theory of a permanent taking which, we agree with the Defendants, requires proof that there will be frequent inevitable reoccurrences of flooding caused by the diverting of water from the Sheyenne River by the Defendants. Having reviewed the entire record in this case, we conclude that there is not substantial evidence to prove that there will be frequent inevitable reoccurrences of flooding caused by an overflow of diverted water from the Sheyenne River which would support, on that ground, the Arnesons' claim for damages for a permanent taking of their property.

However, the second ground upon which the Arnesons claim the Defendants have caused a permanent taking of their property does not require proof that in the future diverted water from the Sheyenne River will flood the property. This alternative ground on which the Arnesons seek permanent damages is that the presence of the dam in Drain 27 inhibits the flow of water through the drain resulting in a diminished capability of the Arneson property to rid itself of excess surface water. Unlike the flooding caused by an overflow of diverted Sheyenne River water which occurred on a one-time basis and for which their is no proof of inevitable reoccurrence, the existence of the dam in Drain 27 presents a continuous obstacle to waterflow which, Melvin Arneson testified, inhibits drainage of the Arneson farmland almost every year:

…

Melvin testified that the diversion project has reduced the value of 600 acres of Arneson farmland from $800.00 an acre to $550.00 per acre for a total diminution in value of $150,000.00.

…

We conclude that there is substantial evidence upon which the jury could have found that the dam located in Drain 27, as part of the diversion facility, restricts drainage of the Arneson farmland, thereby resulting in a permanent diminution in the value of the Arneson property of $140,000.00. The ever-present obstacle to surface water drainage caused by the dam's existence constitutes a permanent taking of a "flood" easement on the Arneson property just as surely as would frequent inevitable reoccurrences of diverted water being flooded onto the property. Although there was evidence upon which the jury could have reached a contrary conclusion, it did not do so; and we will not substitute our judgment for the jury's where, as in this case, there is conflicting evidence from which reasonable men might draw different conclusions.

…

The right of eminent domain is to be exercised in the manner provided under Chapter 32-15, N.D.C.C. In United Power Association v. Moxness, 267 N.W.2d 814 (N.D. 1978), we stated that Section 32-15-32 N.D.C.C, has no application "to proceedings provided for outside of Chapter 32-15." However, an inverse condemnation action constitutes, in effect, a proceeding provided for under Chapter 32-15, N.D.C.C., which, under Section 32-15-01, N.D.C.C., provides in relevant part, "private property shall not be taken or damaged for public use without just compensation first having been made to or paid into court for the owner." The purpose of an inverse condemnation action is to allow a landowner whose private property has been taken for public use to secure the just compensation which he should have received in proceedings instituted by the public entity under Chapter 32-15, N.D.C.C., prior to the taking or damaging of the property. Accordingly, we conclude that when a landowner brings an action in inverse condemnation through which he receives a compensation for the taking or damaging of his property for public use it is proper for the trial court to award, in its discretion, reasonable costs and attorney's fees under Section 32-15-32, N.D.C.C.

See KAFKA v. MT DEPT. OF FISH, WILDLIFE & PARKS for a December 2008 Montana Supreme Court decision declaring a change in state law (adopted by the voters as an initiated measure) was not be a taking. The court determined that

• "... the Licenses [to operate a game farm] were not compensable property interests" (¶54),
• "takings claims for goodwill and going-concern value have never been recognized in the regulatory taking context" (¶63),
• "[the game farm operators] have not shown that [the initiated measure] had any economic impact on their lands" (¶83), and
• "[the game farm operators] could not maintain a reasonable investment-backed expectation that they would be permanently insulated against the possibility that the Game Farm industry would be either regulated so as to eliminate its profitability, or completely abolished" (¶93).

Several justices provide an extensive dissent.

Last updated January 2, 2009

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