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Sara Beachy

Sara Beachy
sbeachy@axley.com
608.283.6763

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Wisconsin Supreme Court Holds Loss in Value is Not Compensable Under Wis. Stat. § 32.18

January 4, 2022

Co-author: James B. Aird

We’re circling back today to a May 2021 decision by the Wisconsin Supreme Court, United America, LLC v. Wisconsin Dep’t of Transportation, 2021 WI 44, 397 Wis. 2d 42, 959 N.W.2d 317. In that case, the court concluded that Wis. Stat. § 32.18 only requires compensation when a change in a road grade causes structural or physical damage to land. Mere loss in value is not compensable.

United America operated a gas station on North Star Drive in Merrill, Wisconsin, near the intersection with Highway 51. Convenient access to the highway disappeared when the Wisconsin Department of Transportation (DOT) converted North Star Drive into a bridge over the highway and denied United America’s request for on/off ramps.  As a result of the new overpass, Highway 51 traffic stopped patronizing the United America station, the station’s revenue disappeared, and its property value plummeted.  United America was left with little recourse because none of its land was actually taken by the DOT. The only possible remedy was a claim under Wis. Stat. § 32.18.

Wis. Stat. § 32.18 provides a remedy for those who have not suffered a taking but nonetheless experience damage to their land from a change-of-grade road project.  Section 32.18 provides that where a street or highway improvement project causes a change of the grade, but does not require a taking of any abutting lands, the owners of such lands may file a claim for “damages to said lands” with the DOT.  If the DOT denies or ignores the claim, the owner may commence an action to recover in court.

In some respects United America’s case seemed to fall within the statute.  United America suffered no taking, its land abuts the road that was changed, and United America suffered a major loss in business and property value because the DOT raised the road and built a bridge with no on/off ramps from the highway.  On the other hand, United America suffered no direct physical damage to its land, but rather just lost the ease at which the Highway 51 travelers accessed the gas station.

A nearly unanimous Wisconsin Supreme Court treated this case as one of simple statutory interpretation.  The Supreme Court agreed with the Court of Appeals that the phrase “to said lands” limits the scope of damages to “structural or physical injuries.”  This interpretation was compelling for the majority because the legislature uses the word “property” elsewhere in Chapter 32, such as when describing how to calculate just compensation under § 32.09(6)(f), but it chose the limiting phrase “to said lands” in § 32.18.  “’Lands’ constitutes something narrower than ‘property,’ as the former does not cover the intangible estates in those lands or personal property.” United America, 2021 WI 44 at ¶13.

Legislative history confirms this interpretation, the court reasoned, because the legislature specifically considered and rejected more expansive language. The “legislature knows how to use clear, unambiguous, and peremptory language to change the common law rule regarding a diminution in value.” Id. at ¶16.  Further, under the common law, an owner cannot recover for consequential injuries resulting from the exercise of state police power in a taking.  For the majority, Wis. Stat. § 32.18 thus represents an exception to the general rule which must be construed narrowly.

Justice Rebecca Grassl Bradley dissented, arguing for the sanctity of property rights.  Justice Bradley highlights that the statute says “any damage” and that “damages” refers to “compensation for loss or injury” and “loss” is commonly understood to include diminution in value.  Further, Wis. Stat. § 990.01(18) defines “land” to include “interests therein,” including diminution.  Reliance on other provisions of Wis. Stat. Ch. 32 is misplaced, according to the dissent, because those statutes apply to eminent domain proceedings, whereas § 32.18 is designed as a catch-all to cover damages which specifically do not include an actual taking. Justice Bradley emphasized that the Supreme Court had identified § 32.18 as the proper statute for these kind of claims before in Jantz v. State Dept. of Transp., Division of Highways, 63 Wis. 2d 404, 217 N.W.2d 266 (1974), when an owner tried to recover for a similar situation under § 32.09.  As Bradley wrote, “to the detriment of property owners, the majority adopts a complicated and roundabout analysis that suffocates the ordinary meaning of the statutory words.” Id. at ¶40.

Despite Justice Bradley’s objections, the Court found that United America was out of luck in getting compensation.  Wisconsin business owners who rely on the patronage of highway travelers should be aware that the DOT may not be responsible for loss of business, even when the DOT cuts off access to customers.

DOT

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