S. Fred HALL; and Viewcrest Investments, LLC, an Oregon limited liability company, Petitioners on Review,
STATE OF OREGON, by and through the Oregon Department of Transportation, Respondent on Review, and Westek Properties, LLC, Intervenor
Argued and Submitted November 8, 2013.
CC 081164; CA A146386. On review from the Court of Appeals.[*]
W. Michael Gillette, Schwabe, Williamson & Wyatt, P.C., Portland, argued the cause for petitioners on review. With him on the briefs was David Anderson.
Stephanie L. Striffler, Assistant Attorney General, Salem, argued the cause for respondent on review. With her on the brief were Mary H. Williams, Deputy Attorney General, Anna M. Joyce, Solicitor General, and Patrick M. Ebbett, Assistant Attorney General.
Denis M. Vannier, Deputy City Attorney, Portland Office of City Attorney, Portland, filed a brief on behalf of amicus curiae League of Oregon Cities.
[355 Or. 505] BREWER, J.
Plaintiffs, the owners of real property in Linn County, brought an inverse condemnation
action against the Oregon Department of Transportation (ODOT). Plaintiffs alleged in their complaint and undertook to prove at trial that ODOT, by repeatedly making representations to others about its intention to landlock their property and initiate a condemnation action, created a nuisance that " blighted" plaintiffs' property, resulting in a compensable taking of the property under Article I, section 18, of the Oregon Constitution. A jury agreed and awarded plaintiffs more than $3,000,000 in damages. ODOT appealed the ensuing judgment, and the Court of Appeals reversed, holding that no taking had occurred. Hall v. ODOT, 252 Or.App. 649, 288 P.3d 574 (2012). We allowed plaintiffs' petition for review, and, for the reasons set out below, we affirm the decision of the Court of Appeals, reverse the judgment of the trial court, and remand the case to that court for further proceedings.
FACTS AND PROCEDURAL BACKGROUND
Because plaintiffs prevailed before the jury in the trial court, we view the facts in the light most favorable to them. See Stuart v. Pittman, 350 Or. 410, 414, 255 P.3d 482 (2011) (stating principle). Plaintiffs own a 25-acre parcel of land adjacent to Interstate 5 in Linn County. Included within that parcel are three small areas where plaintiffs have sold " sign easements" that allow for placement of, and access to, billboards. In addition, plaintiffs have an easement for access to an overpass that crosses Interstate 5, known as the " Viewcrest interchange." The company that manages the billboards uses the easement for access to the billboards. Without that easement, plaintiffs' parcel would be landlocked.
In 2001, ODOT started a public planning process to address certain safety concerns pertaining to the Viewcrest interchange. Among other ways to deal with those concerns, ODOT explored the possibility of closing the interchange. For various reasons, ODOT determined that closing the interchange was the best option available, even though it would leave plaintiffs' property landlocked and would require the [355 Or. 506] state to acquire that property by eminent domain. ODOT discussed its plans with plaintiffs and it made public statements about removing the Viewcrest interchange and condemning plaintiffs' property in public meetings, by telephone to interested parties who contacted ODOT to determine the status of the access, in the newspapers, and on the Internet.
ODOT encountered opposition to the removal of the Viewcrest interchange. At public meetings that ODOT held, it became clear that members of the public opposed removing the Viewcrest interchange before a replacement interchange could be built. In May 2002, ODOT announced that the proposed plan would be revised to delay removal of the Viewcrest interchange for three years. Around that time, ODOT learned that plaintiffs were trying to develop their property. An ODOT official sent an internal email to another ODOT official stating that, because it would have a negative impact on freeway safety, ODOT had taken steps to stop any future development of plaintiffs' property.
Between 2005 and 2007, plaintiffs attempted to sell their property or reach agreements to develop it; those efforts were unsuccessful. A real estate broker working with plaintiffs on a possible land exchange transaction testified that he was unable to consummate an agreement because of the uncertainty surrounding the potential closure of the Viewcrest interchange. During that period, ODOT continued to publicly discuss removing the interchange as one option among others for addressing traffic safety concerns in the area.
In 2008, plaintiffs commenced this action for inverse condemnation against ODOT in Linn County Circuit Court. As pertinent here, plaintiffs alleged in their complaint: (1) ODOT had disseminated information to the public that plaintiffs' access to the state highway system would be eliminated and that ODOT planned to acquire plaintiffs' property
through eminent domain proceedings; (2) ODOT had [355 Or. 507] conducted public hearings informing the public, orally and in writing, that the Viewcrest interchange would be eliminated and plaintiffs' property condemned, and that plaintiffs' access to the interchange was dangerous and should be eliminated for public safety reasons; (3) ODOT had publicly discussed a document prepared by its agent, CH2MHill, concluding that the Viewcrest interchange was unsafe and recommending its closure and the commencement of eminent domain proceeding to acquire plaintiffs' property; (4) ODOT had informed officials of the City of Millersburg and the public that it intended to remove plaintiffs' access and landlock, then condemn, their property; and (5) when prospective investors, lessees, purchasers, and developers called ODOT to inquire about access to the highway, ODOT had informed them that it intended to close the Viewcrest interchange and initiate condemnation proceedings. Plaintiffs alleged that those representations " have had the effect of blighting plaintiffs' land" and that ODOT's " repetitive, intrusive conduct constitutes a nuisance" that denied them the substantial use, benefit, and profits of their property, and as such, constituted a taking for public purposes without the payment of just compensation. Plaintiffs further alleged that they suffered economic damages as a result of ODOT's conduct in the form of a reduction in the value of their property.
At trial, plaintiffs adduced evidence in support of the allegations in their complaint, including evidence of ODOT's repeated representations, both to the public and in internal communications, about closing the Viewcrest interchange, and they asserted that that evidence showed that ODOT's conduct was motivated by ill will toward them on the part of ODOT officials that was aimed at preventing any development of the property. Plaintiffs also presented evidence that, in fact, they had been unable to develop or sell the property because of the possibility of a future condemnation action. In addition, both sides presented evidence to establish the value of the property.
[355 Or. 508] Throughout the litigation, ODOT took the position that planning for public use of a parcel of private property does not amount to a compensable taking under Article I, section 18, unless it deprives the owner of all economically viable use of the property. Plaintiffs responded that they had never argued that ODOT took the property merely by planning for its public use; rather, plaintiffs asserted that they had couched their takings claim on the premise that ODOT's conduct, motivated by a desire to stop development at the site, amounted to a nuisance that " blighted" their property. Furthermore, plaintiffs argued that the standard for which ODOT had advocated in this case--that a taking occurs only when government conduct deprives a property owner of all economically viable use--applies only in cases in which the owner has alleged a " regulatory" taking. Plaintiffs insisted that they had never asserted that ODOT had engaged in rulemaking or any other legislative or quasilegislative act that had reduced the property's value. Instead, plaintiffs maintained, they could establish a taking by showing that ODOT had substantially interfered with the use and enjoyment of their land in a way that reduced its value.
At the close of evidence at trial, ODOT moved for a directed verdict on the ground that there was no evidence that its conduct had amounted to a nuisance but, rather, the evidence showed that it had engaged in planning for a public use, and the proper standard of harm was whether ODOT's conduct had deprived plaintiffs of all economically viable use of their property. The trial court agreed with plaintiffs' legal arguments, denied ODOT's motion for a directed verdict, and rejected ODOT's proposed jury instructions and a related challenge to the jury verdict forms. Instead, consistently with plaintiffs' theory of the case, the trial court instructed the jury as follows:
" Plaintiffs allege that the Oregon Department of Transportation took their property in violation of the Oregon Constitution and in violation of the Constitution of the United States. In order to prevail on this claim, Plaintiffs must prove each of the following elements: Number one, that the property allegedly taken has a legal right to vehicle access to the west end of the Viewcrest interchange; [355 Or. 509] number two, that the Department of Transportation's actions have substantially and unreasonably interfered with Plaintiffs' use and enjoyment of their land and that Defendant's activities were sufficiently direct, particular, and of a magnitude to support a conclusion that the interference has reduced the fair market value of Plaintiffs' [land]."
In response to questions posed in the verdict form, the jury found that ODOT's actions had substantially and unreasonably interfered with plaintiffs' use and enjoyment of their land, and that those actions were sufficiently direct, particular, and of a magnitude to support a conclusion that that interference had reduced the fair market value of the property. The jury also found that the value of the property without the interference was $4,000,000 and that ODOT's interference had reduced that value by $3,378,750. After receiving the jury's verdict, the trial court denied ODOT's motion for judgment notwithstanding the verdict and entered judgment for plaintiffs.
On appeal, ODOT raised numerous assignments of error, most of which centered on its contention that plaintiffs could not prevail on their inverse condemnation claim without proving that ODOT had deprived them of all economically viable use of their property. The Court of Appeals ultimately concluded that evidence that ODOT's actions lowered the value of plaintiffs' property was insufficient to establish a compensable taking. Hall, 252 Or.App. at 656. As a second ground for its decision, the Court of Appeals held that the trial court had erred if it denied ODOT's motion for a directed verdict because plaintiffs had proved that ODOT was not exercising its police power but instead was pursuing a vendetta against them. Id. at 655-56. The court concluded that plaintiffs' assertion that ODOT's malicious intention to prevent development of plaintiffs' property was self-defeating: " If * * * the intent behind ODOT's actions was not to take plaintiffs' property for public use, then those actions could not amount to a taking." Id. at 655 (emphasis in original). The court reversed and remanded the case to the trial court.
On review, plaintiffs challenge both grounds underlying the Court of Appeals' decision. Because it resolves the [355 Or. 510] matter entirely, we confine our analysis to plaintiffs' assertion that the trial court properly based its dispositive rulings, jury instructions, and verdict form on its conclusion that the substantial-interference-with-use-and-enjoyment standard--not the more stringent deprivation-of-all-economically-viable-use standard--applied to plaintiffs' inverse condemnation claim. As we will explain, because the actions that plaintiffs challenge involved planning related to the designation of plaintiffs' property for eventual public use, and plaintiffs did not allege that those actions deprived them of all economically viable use of their property or prove that ODOT physically ...