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This article originally appeared in the August 2017 edition of the Oregon Real Estate and Land Use Digest, Volume 39, No. 4, a publication of the Oregon State Bar Section on Real Estate and Land Use.
The Court of Appeals recently weighed in on the “ripeness” of claims for inverse condemnation and to interpret a judgment issued after a prior condemnation trial under the Uniform Declaratory Judgments Act. The case demonstrates the importance to both a condemner and property owner of clearly and unambiguously describing the scope of a taking in the conveying document – in this case a condemnation judgment.
Dayton v. Jordan, --- P3d --- (2016)
It is well established that a plat is generally sufficient to establish an express easement if it describes and depicts a roadway or trail sufficiently to reflect the intention to create an easement. Bloomfield v. Weakland, 224 Or App 433, 445-48 (2008), rev den, 346 Or 115 (2009). In cases where a plat is insufficient to establish the intent to create an express easement, an easement may nevertheless be implied. In the typical case, an implied easement is not reflected in a deed or plat. Rather, it arises as an inference of the intention of the parties based on the circumstances existing at the time the land was divided and conveyed. In those circumstances, the trial court applies the eight factor test established in Cheney v. Mueller, 259 Or 108, 118-19 (1971) to determine whether implied easement exists. In Dayton v. Jordan, the Court of Appeals addressed the question of whether the trial court may short cut the Cheney test by implying an easement based almost exclusively on the depiction of the purported easement on the plat. The Court of Appeals determined that the eight factor Cheney case must always be applied to establish an implied easement – even where the purported easement is depicted in a plat.
The Oregon Public Use of Lands Act, ORS 105.672 et seq., provides immunity from tort liability to private and public owners of land that is made available to the public for recreational purposes. The purpose of the Act is to encourage both private and public landowners to open their lands to the public. In Johnson v. Gibson, 358 Or 624 (2016), the Oregon Supreme Court answered the question posed to it by the Ninth Circuit Court of Appeals: Does the recreational immunity provided in the Public Use of Lands Act extend to employees of a landowner? The Oregon Supreme Court found that it did not.
The procedure for initiating and prosecuting a condemnation is set forth in Chapter 35 of the Oregon Revised Statutes. Once the condemnation lawsuit is filed, the Oregon Rules of Civil Procedure ("ORCP") typically control. However, there are potential traps lurking in the gray areas where the condemnation statute and the ORCPs converge. A condemning authority and property owner fell into such a trap in Washington County v. Querbach, 275 Or App 897 (2015).
State ex rel Dept. of Transp. v. Alderwoods (Oregon), Inc., 2015 WL 9589848, --- P.3d --- (2015)
The Oregon Supreme Court held that a government’s use of its police powers to eliminate or limit access to a property for public safety reasons is not compensable under Article I, Section 18 of the Oregon Constitution, so long as reasonable access to the abutting public right-of-way is maintained. The Court summarized its holding in the following proposition:
7455 Incorporated v. Tuala Northwest, LLC, 2015 WL 7009180 (Or. Ct. App. 2015)
On an issue of first impression in Oregon, the Court of Appeals recently decided that a tenant lacks standing to bring a lawsuit to establish a prescriptive easement. The tenant in this case operated a business under the name “Jiggles” in Tualatin. The neighboring property was a shopping center featuring a K-Mart store that was owned or managed by the defendants. The suit was brought after the defendants blocked access to plaintiff’s establishment from the neighboring shopping center by installing a fence and locked gate.
Litigation over easement rights is a common occurrence in Oregon. In their most typical form, these lawsuits are filed as declaratory judgment actions under Oregon’s Uniform Declaratory Judgment Act, ORS 28.010 et seq. As easement rights can span a number of properties and touch upon the property interests of many parties, the attorney filing the lawsuit is faced with the question of who must be named as defendants. The title holders to the affected properties are obviously necessary parties, but what about holders of lesser property rights, such as easements?
Improvement districts are authorized by statute to construct and operate permanent utilities for irrigation, drainage, diking, water improvement and water control throughout the State of Oregon. See Oregon Revised Statutes Chapters 545, 547, 551, 552 and 549. In some instances, the permanent utilities constructed and operated by these districts have been in existence for over 100 years. Often, these districts do not have title to the land on which the permanent utility is located nor do they hold recorded easements allowing access to maintain the infrastructure of the permanent utility. The lack of recorded property rights can lead to uncertainty as to what rights a district has to enter onto its members’ lands to operate, repair and improve the existing infrastructure of its permanent utility. Current landowners in a district may feel that their district does not have the right to enter onto their lands or that the district must obtain the right to enter their lands through voluntary acquisition or through condemnation. This creates a potential nightmare for an improvement district and its members when a landowner seeks to prevent a district from entering onto his or her land for the purpose of operating, repairing or improving the permanent utility. If this occurs, litigation may be the only option for the district or the landowner. This was the case in Davis v. Nye Ditch Users Improvement District, 247 Or App 266, 268 P3d 778 (2011).
In Nye Ditch, the predecessors-in-interest to the plaintiffs joined with neighboring landowners in the 1920s to dig the Nye Ditch to irrigate their lands for agriculture. Id. at 268. The plaintiffs Davis and Ritters each purchased property in the district in 2003 and 2006, respectively. Id. The plaintiffs’ properties benefitted from the Nye Ditch and it was visible from their land. Id. The Nye Ditch Users Improvement District was formed under Chapter 554 in 2006 and the plaintiffs’ lands were within the district. Id. at 268–69. The plaintiffs used the Nye Ditch and paid assessments to the district. Id. at 269. The district contracted with an excavation contractor to make improvements to the Nye Ditch on the Ritters’ property. The Ritters barred the excavation crew from entering their property and filed a lawsuit challenging the district’s authority to enter onto their lands. Id. The trial court granted summary judgment to the district finding that the district had the right to enter the land based on “(1) the easements belonging to landowners who draw water from the ditch, (2) ORS Chapter 554, and (3) defendant’s articles of incorporation.” Id. at 270. The plaintiffs appealed.
The Court of Appeals began its analysis by noting that the landowners drawing water from Nye Ditch, as neighbors who receive a “mutual benefit” through a “common enterprise,” hold easements to cross their neighbors’ property to access the Nye Ditch. Id. at 270–71 (citing Foster v. Foster, 107 Or 355, 368, 213 P 895 (1923); Luckey v. Deatsman, 217 Or 628, 634, 343 P2d 723 (1959)). The easements are appurtenant to and run with the land. Nye Ditch, 247 Or App at 271; Luckey, 217 Or at 636–37. The Court of Appeals further held that landowners’ easement rights included the right to access their neighbors’ property for repairs. Id. at 271 (citing Baumbach v. Poole, 266 Or 154, 157–58 n.1, 511 P2d 1219 (1973)). “The general rule, that a party who has a right of enjoyment, has also a right to enter and make necessary repairs, is essential to the enjoyment of the thing granted.” Id. at 271–72 (quoting Thompson v. Uglow, 4 Or 369, 372 (1873)).
The Court of Appeals went on to explain that the Nye Ditch Users Improvement District was entitled to exercise its members’ easement rights to enter onto its members’ lands to improve or repair the Nye Ditch. Id. at 275. The holding was based on the statute authorizing the formation of the district, ORS Chapter 554. In particular, the Court noted that ORS 554.110 gave the district’s board “full authority and power to . . . (1) Build, construct and complete any works and improvements . . . (3) Operate and maintain such works as are necessary, convenient and beneficial for said purposes . . . .” Id. at 274. The Court of Appeals found that the statute granted the district the right to enter the land of its members to improve or repair irrigation ditches by implication.
[W]here a power is conferred by an act, everything necessary to carry out that power and make it effectual and complete will be implied. Further that which is implied in a law is as much a part of it as that which is expressed. These long-established principles of statutory construction are universally recognized [.]
Id. at 275 (quoting Pioneer Real Estate Co. v. City of Portland, 119 Or 1, 10, 247 P2d 319 (1926)). “The legislature granted improvement districts the authority to act on behalf of individual landowners and to exercise, on their behalf, their common-law rights of improvement and repair and access necessary for that purpose.” Id. at 275.
The decision in Nye Ditch has a number of interesting aspects. First, it acknowledges that the landowners who band together to build a permanent utility have property rights in each other’s lands. Second, it takes that concept a step further to allow statutorily created and governed improvement districts to exercise its members’ property rights to operate, maintain and improve its existing infrastructure. Third, by allowing the districts to exercise its members’ property rights, the Court of Appeals appears to have bypassed the question of whether the District’s operation, maintenance and improvement of a permanent utility on the lands of its members constitutes a constitutional taking. By doing so, it removes the possibility that the members of the district may have to pay for the permanent utility twice – once when it was built and a second time to gain access to it. Thus, the Court of Appeals created an elegant solution to what is otherwise an intractable problem for improvement districts around the Oregon.
In a condemnation when only a portion of the property is taken, the property owner is entitled to just compensation based on the value of the property taken plus damages to the remaining property, if any. However, if the damage to the remaining property can be cured, the property owner is only entitled to the lesser of the damage to the remaining property or the cost to cure.
Impact on remaining property and the ability to “cure” damage is probably the most subjective area in any condemnation appraisal. The ODOT ROW Manual instructs the appraiser to first determine if the remaining property is damaged and to quantify that damage. Only after the appraiser has determined there has been damage and the extent or amount of the damage is the appraiser to consider if the damage can be “cured” and, if so, the “cost of the cure.” Often, however, an appraiser will go directly to the cure and its costs, bypassing any quantification of the amount of the damages. The “cure” and “cost of cure” are often the significant issue in partial takings with the condemner and owner positions challenging each other as to what would constitute a cure and its costs.
In two recent condemnation trials, the State of Oregon has sought to exclude evidence and testimony about potential “cures” considered by the property owner’s appraiser in concluding the just compensation for a partial taking. In both cases, the State’s appraiser presented evidence that the damage to the property owner’s remaining property could be cured, and measured the damages to the remaining property using the “cost-to-cure” valuation methodology. In each case, the property owner’s appraiser considered and rejected potential cures as not resulting in a cure or the cost was more than the damage. The owner’s appraiser determined the damage to the remainder, i.e., its diminution in the value, based on a change in the highest and best use of the property, as the appropriate measurement of just compensation.
The owner did seek to present testimony and evidence as to potential cures and then costs. The State argued to exclude this evidence based on the Oregon Evidence Code Rule 403 and the Oregon Supreme Court’s holding in Tunison v. Multnomah County, 251 Or 602 (1968). The State argued that evidence of the potential cures rejected by the property owner’s appraiser would mislead and confuse the jury, resulting in substantial prejudice to the State that would outweigh the probative value of the evidence. The specific language in Tunison relied on by the State reads:
"[The property owner argues] that since, under the circumstances . . . restoration costs may be used as a measure of damages, it is necessary for the appraiser to make an initial estimate of such costs in order to determine whether they were less than the depreciation in the market value of the property not taken and thus binding upon the owner. We reject this argument. The appraiser may find it advisable to make such a calculation but if the owner seeks to recover the depreciation in the market value of the property remaining, he cannot testify as to restoration costs. To permit him to do so would be to inject into the case evidence which the jury is likely to improperly consider in estimating the owner’s loss. (emphasis added.)"
Id. at 604-05
In response, the property owners made three arguments: (1) that the property owner was entitled to put on evidence of potential cures considered and rejected by the appraiser to rebut the State’s evidence that the damage to the remainder should be measured by the State’s proposed “cost-to-cure”; (2) that USPAP requires an appraiser to consider “cost-to-cure” in determining just compensation in a partial taking; and (3) that later Court of Appeals opinions favor allowing the jury to consider evidence of competing valuation methodologies in determining just compensation. The trial court denied the motion to exclude in each case finding that the property owner was entitled to present the rejected “cures” as rebuttal evidence. The trial courts appeared to reject (or at least did not reach a decision on) the property owners’ other two arguments.
The Tunison case is most often cited in support of using a “cost-to-cure” methodology in valuing damages to the remainder in condemnation cases. As a result, the State’s use of this case in an attempt to exclude competing “cost-to-cure” evidence is clever, but also disconcerting. First, USPAP (and the ODOT Right of Way Manual) requires an appraiser to consider potential cures in determining damages to the remainder in a partial taking case. To exclude evidence of rejected potential cures would prevent an appraiser from testifying to a key underpinning of his or her opinion on value. Second, the argument runs counter to Oregon Court of Appeals cases issued after Tunison that set a liberal standard for presenting expert testimony on valuation methodology to juries. See Tri-Met v. Posh Ventures, LLC, 24- Or App 425, at 437-438 (2011) (finding that jury is entitled to “hear expert testimony regarding the appropriateness of a particular valuation methodology”) and City of Bend v. Juniper Utility Co. 242 Or App 9, 20 (2011) (it is left to the trier of fact to assess the evidence, including expert testimony regarding the appropriateness of a particular valuation methodology, and to then make a factual call as to the fair market value of the property in question). Third, any danger that a jury will be misled or confused by evidence of rejected “cures” is mitigated by the uniform jury instructions used in most condemnation cases. For these reasons, it is the authors’ opinion that a property owner should be entitled to present evidence of competing potential cures in it case in chief, and not just as rebuttal evidence.
Effectively, the State asserted that only it could present evidence and testimony of a potential cure and its costs, but the owner, if relying on just compensation using diminution in value to the remainder, could not present testimony or evidence as to a cure or its costs, i.e., what is good for the goose is only for the goose. Fortunately, in both cases, the court allowed the owner to put in evidence and testimony regarding potential cure and their costs as rebuttal to the State’s assertion of a specific cure and its costs. Overall, a practitioner should carefully consider this aspect of the Tunison case in preparing for any trial that involves a partial taking in which either party intends to present “cost-to-cure” evidence.
State v. Alderwoods (Oregon), Inc., 2014 WL 4823607 (Or. App. Sept. 17, 2014)
The issue of whether a property owner is entitled to compensation for the taking of abutter’s rights of access to a public highway was again taken up by the Court of Appeals in State v. Alderwoods (Oregon), Inc. The case involved an eminent domain action relating to the recent improvements to Highway 99W near its intersection with Highway 217. The State filed an eminent domain action seeking to take a temporary construction easement in order to improve the sidewalk and to remove the curb cuts and driveways that allowed access to the Alderwoods (Oregon), Inc.’s property from Highway 99W. The property retained indirect access to Highway 99W from Warner Road. In its Complaint, the State alleged that, in addition to the temporary construction easement, it was seeking to acquire “[a]ll abutter’s rights of access, if any” to Highway 99W. After the Complaint was filed but before trial, ODOT exercised its regulatory authority to remove the property’s access to Highway 99W through a separate administrative action. Prior to trial, the trial court granted the State’s motion in limine to exclude all evidence of diminution in the value of Alderwoods’s land resulting from the loss of direct access to Highway 99W. The parties stipulated to a general judgment awarding just compensation for the temporary construction easement and Alderwoods appealed the trial court’s ruling on the motion in limine.
The Court of Appeals heard the appeal en banc and an equally divided Court issued a per curiam decision affirming the trial court’s ruling. Judge Armstrong wrote the concurring opinion in favor of affirming the trial court’s decision. Judge Sercombe wrote a separate concurring opinion. Judge Wollheim wrote the dissent. All three opinions agree that, generally, “there is no right to compensation for a loss or restriction of access to an abutting street if access to the property is not completely eliminated by the project for which the other property is being condemned.” Id. at *8. Although a property owner has a common law right of access to an abutting public right of way, that access right is subservient to the public’s right of free use of the streets. The state may protect that right through the exercise of its police powers. Thus, if the state exercises its police power to eliminate or restrict property’s access to an abutting public right of way (so long as all access is not eliminated), the property owner is not entitled to compensation regardless of the diminution of value caused by the loss or restriction of access.
The three opinions differ on whether the State is required to pay just compensation where it seeks to take or restrict a property owner’s right of access through an eminent domain action as opposed to an administrative action exercising its police powers. Judge Armstrong in his concurring opinion reasoned that Alderwoods had a common law right of access to Highway 99W. However, because that right of access was lost by administrative action “the property has no lawful access to Highway 99W irrespective of the condemnation of the access to the highway.” Id. at *7 (emphasis in original). Therefore, Judge Armstrong concluded that the evidence of diminution of value was irrelevant and properly excluded by the trial court.
Judge Sercombe in his separate concurring opinion finds that an abutter’s common law right of access is general and unfixed. Judge Sercombe reasons that compensation is only required if the state takes both the direct and indirect access to the public right of way. Id. at *9. Judge Sercombe concludes that Alderwoods was not entitled to compensation for the loss of direct access to Highway 99W in the eminent domain action because the State did not also seek to take Alderwoods’s indirect access. The fact that the State also took Alderwoods’s right of access through an administrative action did not factor into Judge Sercombe’s opinion.
Judge Wollheim’s dissent concludes that Alderwoods should have been allowed to present evidence of damages resulting from the State’s taking of its abutter’s right of access to Highway 99W in the eminent domain proceeding. Judge Wollheim does not dispute that the State has the right to take or restrict access through its regulatory authority without compensation (so long as all access is not eliminated). However, because the State chose to take the access through its eminent domain under the authority granted by ORS 374.035, the State was statutorily required to pay just compensation in the eminent domain proceeding. Judge Wollheim did not consider the administrative action eliminating access, in part, because the State did not argue that the regulatory action eliminated Alderwoods’s right to compensation.
It is anticipated that Alderwoods will file a petition of review with the Oregon Supreme Court. Until the Supreme Court weighs in on the issue, the primary take away from the Court of Appeals per curiam decision is that the condemner should exercise its regulatory authority to eliminate or restrict a property’s abutter’s rights of access before it files an eminent domain action. It is clear under all three opinions that a property owner is not entitled to just compensation for a restriction or elimination of abutter’s right of access through the state’s regulatory authority (so long as all access is not eliminated).
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