Posted on: July 23rd, 2018

Plaintiff, Hunter Landing, LLC, appealed from a district court decision denying its motion for a new trial, contending the jury instruction on inverse condemnation was a misstatement of law. When a governmental entity takes all or part of a landowner owner’s private property without a formal condemnation proceeding, the property owner can bring an action for inverse condemnation against that entity.

Hunter Landing, LLC (Hunter Landing) owned property near the City of Council Bluffs (City). The property was subject to four 100-year leases. Severe flooding of the area in May 2011, affected several residential structures owned by Hunter Landing. In wake of the flood’s damage, the Governor issued a disaster proclamation and the City proposed purchasing and destroying the flooded properties. The City inspected the property and buildings owned by Hunter Landing to assess the extent of damage caused by the flood. Following the City’s inspection, five or six residential structures owned by Hunter Landing were declared “unsafe and unfit for human occupancy” and made subject to demolition. The City demolished the condemned buildings and during the demolition process, subsurface equipment and structures were damaged or destroyed and the power company removed its electrical lines. In anticipation of the City’s buyout, the Hunter Landing property was appraised and found to have an average, pre-flood market value of $485,000. However, the City did not purchase the property because all of the lessees would not terminate their leases. Following the May 2011 flood, the City amended its floodway ordinance to provide as follows:

If any nonconforming use or structure is destroyed by any means, including flood, it shall not be reconstructed if the cost is more than fifty (50) percent of the market value of the structure before the damage occurred, unless it is reconstructed in conformity with the provisions of the Municipal floodway ordinance.

As a result of the amendment, Hunter Landing filed suit against the City for inverse condemnation. At trial, the district court proposed a jury instruction on inverse condemnation that stated the government was required to compensate a landowner only when its regulation “(1) involves a permanent physical invasion of the property or (2) denies the owner all economically beneficial or productive use of the land, . . .” Hunter Landing objected to the instruction, specifically the language on permanent physical invasion, arguing Iowa law allows a cause of action for even a minor invasion by the government on a landowner’s private property. The district court overruled the objection and the jury returned a verdict for the City, finding no inverse condemnation occurred. Hunter Landing moved for a new trial but the district court denied its motion.

In reversing the district court’s decision, the court of appeals held the instruction given to the jury was an incorrect statement of the law. The court of appeals found the district court’s instruction to the jury was deficient because it failed to inform the jury that Hunter Landing could have a claim against the City based on (1) the economic impact of its regulation on Hunter Landing, (2) the extent to which its regulation interfered with Hunter Landing’s investment expectations, and (3) the character of the City’s action. Because the jury could not find in favor of Hunter Landing under the instruction given without first finding a permanent physical invasion or a denial of all economically beneficial ownership, the court of appeals concluded the district court’s instruction was faulty. The case was reversed and remanded for a new trial.

Hunter Landing, LLC v. Council Bluffs, No. 16-2138 (Iowa Ct. App. May 16, 2018).

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