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Lenertz v. City of Minot

Supreme Court of North Dakota

February 21, 2019

Allan Lenertz, Plaintiff and Appellant
v.
City of Minot N.D., Defendant and Appellee

          Appeal from the District Court of Ward County, North Central Judicial District, the Honorable Gary H. Lee, Judge.

          Robert S. Rau, Minot, ND, for plaintiff and appellant.

          Randall J. Bakke (argued) and Bradley N. Wiederholt (on brief), Bismarck, ND, for defendant and appellee.

          Crothers, Justice.

         [¶ 1] Allen Lenertz appeals from a judgment dismissing his claim for inverse condemnation against the City of Minot and awarding the City costs and disbursements. The district court did not err in ruling Lenertz established only a partial taking of his property, did not abuse its discretion in denying his proposed expert witness's testimony and did not err in granting the City judgment under N.D.R.Civ.P. 50. The court did abuse its discretion in awarding the City costs and disbursements. We affirm in part, and reverse in part.

         I

         [¶ 2] Between 2013 and 2014 the City installed a paved street and upgraded the storm water system adjacent to Lenertz's commercial property in southwest Minot. Lenertz's property subsequently suffered three flooding events. In 2016 Lenertz sued the City for inverse condemnation, alleging the City's actions in constructing the street and storm sewer system caused past and future flooding of his property and resulted in a total taking of his property. The City denied a taking occurred and raised affirmative defenses.

         [¶ 3] In March 2018, the district court held a trial, which included a jury solely to decide damages. Near the conclusion of Lenertz's case in chief, but before receiving testimony from appraiser Daniel Boris, his expert on damages, the court found the evidence established only a partial taking of Lenertz's property. Because Boris's proffered opinion was essentially that the commercial property's current market value constituted the full measure of damages to the property, rather than the property's diminution of value, the court allowed Lenertz to make an offer of proof on damages before deciding whether to dismiss under N.D.R.Civ.P. 50.

         [¶ 4] Without the jury present, the district court heard Boris testify for Lenertz's offer of proof. The court thereafter concluded Boris's valuation of the property was contrary to the law and would not assist the jury on damages. The court granted the City's motion for a judgment as a matter of law under N.D.R.Civ.P. 50, and explained:

"THE COURT: Right now, Mr. Bakke, I'm taking your comments and your request is basically a Rule 50 motion as for judgment -- a directed verdict; correct?
"MR. BAKKE: Correct, Your Honor.
"THE COURT: And Mr. Rau, I've heard from you. Mr. Boris was your last witness?
"MR. RAU: Yes, sir.
"THE COURT: The law in the State of North Dakota is, and I think it's the law in the entire nation that no property shall be taken or damaged for public use without just compensation. That's Article I, Section 16 of the North Dakota Constitution. An inverse condemnation occurs when a public project proximately causes a taking or a damaging to private property. I think that's pretty much black letter law. And at this stage, the Rule 50 stage, I think I mentioned this yesterday, on a prima facie basis I think Mr. Lenertz has established that an inverse condemnation may have occurred.

"Now that doesn't mean that I'm finding it's a final fact. I mean Mr. Bakke hasn't had a chance to put his defenses in yet. But just at this Rule 50 phase, I think Mr. Rau and Mr. Lenertz have established a prima facie case for a taking. There was no flooding before the project, now there is.

"It's going to rain again. We all know that. It will probably rain two inches again. I mean it's going to happen probably again, these torrential rains. I mean we have them once or twice a summer. May go two or three years without any, but then we may have a year where there's three or four. This happens. So I think without--you know, it's probably going to happen again. Whether that's inevitable or not, again, that would await further defense of defense. But for a prima facie case, I think you've established that yes it's going to rain again and it will probably rain this much.

"The design appears to have been defective. I think Mr.--from what I understand Mr. Hruby's testimony or AE2, or whatever it is, that a review of the design believed that the design had some flaws. Again, so on a prima facie case, that's more evidence of the taking--or the inverse condemnation.

"And lastly, the remedial efforts themselves, the fact that you had to take remedial efforts I think supports the fact that there was a design flaw, and the remedial efforts appear not to be working. So on a prima facie basis, again, I'm not saying this is an absolute because Mr. Bakke hasn't had a chance to put his defense in yet. But on a prima facie basis, I believe that Mr. Lenertz has established that an inverse condemnation may have occurred.

"An inverse condemnation may be a taking of the entirety, or it may be a partial taking. A taking of the entirety is in fact a taking of everything. There's nothing left. So for example, in the usual course if you have a road project and the road comes through and they take five acres, the five acres are completely gone and the damages are the total fair market value of those five acres. There's nothing left. It's taken from the owner forever, and the owner has no further interest in the property. That hasn't occurred here. This is not a total taking.

"A partial taking is a short-term, or temporary interference with the landowners use and enjoyment of the property. That's what I was able to discern from my research in that. That a partial taking is a short-term, temporary interference with the landowners use and enjoyment of a property. And this sort of intermittent flooding I think would satisfy that definition. In this case, I would find as a matter of law that there was a partial taking only. And I'd let it go to the jury on a question of a partial taking.

"And it is a partial taking, because Mr. Lenertz still has the property. He still has it's use, he still is conducting business there just as before. He still is generating income. The flooding is temporary, short-term events. So this is at most, a partial taking.

"Now having made that as a determination, Mr. Lenertz would be entitled to what's called just compensation for that partial taking. Just compensation for the taking of the entirety is the fair market value of everything that is taken. It's gone. That's what just compensation for a total taking is. For a partial taking, just compensation is damages. And the just compensation for a partial taking is the difference between the fair market value of the property before the partial taking and the fair market value of the property after the taking. It's the diminution in value, which even Mr. Boris agrees is the proper measure, the diminution in value.

"To support that finding of diminution in value, Mr. Lenertz has offered Mr. Boris as an expert on the issue of damages. Now I understand that North Dakota is not a [ Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 590 (1993)] state. We're not a [ Daubert ] state. Our rules of evidence allow for a broad use of expert testimony. And an expert must have--but there's two steps to this broad use of the expert testimony.

"Step number one: the expert must have specialized knowledge or skill in a specific area. I think Mr. Boris certainly has the requisite credentials. But the second step of the use of expert testimony in North Dakota, the second step is: whether the testimony will assist the trier of fact. And in this case, I don't believe Mr. Boris' testimony is of any assistance to the trier of fact. Mr. Boris states that the property--a property that suffers only intermittent, temporary flooding, which has not [a]ffected it's use, it's not [a]ffected its occupancy, it's not [a]ffected the income, that that property has no value. Hence, his diminution in value, he states the property is worthless. This is not of any assistance to the trier of fact.

"And following in on some of Mr. Bakke's comments on this, he states his diminution in value is derived by the fact that it would be the difference between the price of the property and the cost of the cure. I don't think that's the proper way to determine diminution in value. The diminution in value is the fair market value before the property and the fair market value after the property. It's not what would it cost to repair it and if the repairs cost more, th[e]n it's worth nothing. That's not diminution in value.

"That's number one. Number two, by his own admission he says[, ']I am not an engineer, I am only guessing that it would cost this much to repair the property.['] He has no basis for the opinion that the cost of repair would be more than the value of the property. So not only is he using an improper measure of damages, he has no basis for his statements because he doesn't know. He fully admits.

"I actually wrote this down. His comments were 'what little I know about this', then he says 'my guess you be' [sic]. That was in direct testimony. That's not a basis for an expert opinion. An expert has to have some basis of knowledge. So to say that the cost of repairs would be more than a million dollars, he has no basis for that. So even in his own opinion he doesn't have any basis to support that opinion that the cost--even if you took the idea that the diminution in value is what the cost of repairs would be, he has no basis for making that as an estimate.

"But I don't believe that that's even a fair way to do it. As he said further, he said, and again, following on Mr. Bakke's comments, I wrote them down. He said what would have to happen in a sale situation?, you'd have to disclose the flooding. What happens then? The buyer walks away, or you have to discount the value in order to effectuate the sale. That discount in value is the diminution in value in my mind.

"What is that, is it a percentage? Is it a dollar amount? What is it. We have nothing. Mr. Boris offers nothing to give us what that discount would be. That discount is the diminution in value. Mr. Boris didn't do this. So his testimony is not useful to the jury. It does not help the jury come to a determination of just compensation.

"It is Mr. Lenertz's burden of proof to show what the diminution of value would be, and he has offered nothing. The failure of proof on the diminution in value requires the Court to dismiss and to grant judgment in favor of the City.

"Mr. Bakke, you'll prepare the appropriate order and order for judgment?
"MR. BAKKE: Yes, Your Honor.
"MR. RAU: Will the Court be writing a written opinion on that?
"THE COURT: No, my opinion is as I stated here in Court. I think my comments are sufficiently detailed that my reasoning is readily available."

         [¶ 5] On April 3, 2018, the district court entered its order for judgment. An amended judgment was entered on May 23, 2018, dismissing Lenertz's inverse condemnation action with prejudice and awarding the City costs and disbursements of $3, 070.

         II

         [¶ 6] Rule 50(a), N.D.R.Civ.P., governs the district court's decision whether to grant a motion for judgment as a matter of law and provides:

"(1) In General. If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for ...

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