Damages based on traffic flow were too high in I-69 takings case, COA rules

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The Indiana Supreme Court’s precedent holding that damages associated with traffic flow variations are not compensable is controlling in a case where the state seized a parcel of land in Johnson County for the I-69 project, the Court of Appeals of Indiana ruled in a reversal Tuesday.

To transform State Road 37 into part of the Interstate 69 corridor, the state needed to acquire a 0.632-acre commercial strip of land in Greenwood owned by Franciscan Alliance.

According to court records, the seizure consequently altered the traffic flow to Franciscan’s remaining land, which was undeveloped, and to an adjacent CVS pharmacy owned by SCP.

Originally, the property owners had direct access to State Road 37 via Fairview Road. But after the construction project, Fairview Road will be turned into a dead-end cul-de-sac. Consequently, northbound traffic needs to travel another mile to reach the owners’ properties, and southbound traffic just over three extra miles.

As part of the condemnation proceedings, multiple appraisers weighed in on what the state owed the owners for the seizure. The strip of land was valued at either $40,500 or $47,400, and according to the state’s appraiser, this taking was the only compensable damage.

But the owners’ appraisers found the inconvenient access changed the properties’ viable uses from commercial to residential — significantly reducing their values.

Franciscan’s appraiser calculated a $3 million loss. And SCP’s appraiser landed on a value of $4.4 million because the CVS’s income derives from “spontaneous buyers” who need the “quick, in and out” that access to a major roadway provides.

Franciscan and SCP convinced a jury that the state owed them compensation not just for the seized land, but also for the impact from the less convenient access.

A joint report from the appraisers calculated damages at about $1.9 million for both Franciscan and SCP. From those bases, the jury awarded compensation of $680,000 for Franciscan and $1.5 million for SCP.

The state appealed and asked if inconvenience associated with traffic flow, as opposed to ingress-egress loss of access, is a compensable injury.

It maintained it is not and asked the appellate court to reduce the damage award entered against it to $47,400.

The Court of Appeals reversed and remanded for a reduction in the damages award, with instructions that the Johnson Superior Court vacate the judgment in favor of SCP, enter judgment for Franciscan and recalculate the prejudgment interest.

Judge Leanna Weissmann wrote the opinion for the appellate court.

As an initial matter, the appellate court disagreed with the owners’ contention that the state waived any challenge to the jury award by failing to properly object to their valuation evidence.

Turning to the merits, Weissmann noted that the state’s argument relies on deep-rooted Indiana Supreme Court precedent holding that damages associated with traffic flow variations are not compensable. She pointed to State v. Ensley, 164 N.E.2d 342 (Ind. 1960).

Although the appellate court must follow the precedent from Ensley, Weissmann wrote, she acknowledged that society has shifted dramatically since the first applications of the rule.

“In 1960, customers had no choice but to drive the more circuitous traffic route to obtain necessary goods and services. Today customers can, and often do, avoid inconvenient trips by shopping online,” she wrote.

The COA also pointed to Green River Motel Mgmt. of Dale, LLC v. State, 957 N.E.2d 640 (Ind. Ct. App. 2011), and State v. The Mkt. Place at State Road 37, LLC, No. 22A-PL-2765, 211 N.E.3d 539, *3 (Ind. Ct. App. 2023) (mem.), trans. denied, to support the reversal.

“In summary, this case cleanly fits within the ambit of our existing caselaw on circuity of travel and traffic flow, and thus the $2.2 million judgment is erroneous,” Weissmann wrote.

As for attorney fees, the appellate court ruled that, as only the value of the strip of land is compensable, and the strip was solely owned by Franciscan, there are no longer any damages for SCP to recover and SCP may no longer recover attorney fees under Indiana Code § 32-24-1-14(b).

Finally, Weissmann addressed the state’s argument that the trial court applied the wrong statute in setting the amount of prejudgment interest.

The trial court applied 8% interest as allowed by Indiana’s eminent domain statute. But the state argued the court should have applied 6% interest as set forth in a more general statute governing government interest payments on final judgments.

The COA found the trial court did not err.

“But on remand, the amount of prejudgment interest owed will need to be recalculated due to the change in the underlying jury award,” Weissmann concluded.

Judge Patricia Riley and Senior Judge Margret Robb concurred.

The case is State of Indiana v. Franciscan Alliance, Inc. f/k/a Sisters of St. Francis Health Services, Inc.; The Market Place at State Road 37, LLC; Hook SupeRX, LLC; SCP 2010-C36-018 LLC; and Johnson County, Indiana, 22A-PL-2969.

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