The Law

Disappearing Intersection
by Michael Blahy

Operating a retail business at an intersection with a state highway brings traffic to your store. What compensation is deserved when the intersection disappears?

Raj Bhandari operated a Gas Station at the level intersection of Northstar Road and Highway 51 in Lincoln County Wisconsin. It was a convenient location, with a driveway on Northstar Road and great visibility to vehicles travelling on Highway 51. Direct access to Highway 51 was sold to the Wisconsin Department of Transportation (DOT) by a previous owner.

Bhandari’s company, United America entered into an agreement to purchase the property in 2004 and prior to completing the purchase, in 2006, approached the DOT on “whether it had any plans to change the intersection”. He was assured that a change would not happen in their lifetimes.

Seven years later, in 2013 the DOT took on a highway improvement project to create an overpass at the intersection without entrance and exit ramps. Users of Highway 51 were now required to “take a circuitous route and drive miles out of the way to reach United America's property”. As a result, United America’s revenues dropped substantially along with the property value.

Relying on Wisconsin Statute, Section 32.18, United America made a claim to the DOT to recoup the difference in property value. DOT refused, and the action was started in the circuit court.

Wisconsin Statute, Section 32.18 reads:

Where a street or highway improvement project undertaken by the department of transportation . . . causes a change of the grade of [a] street or highway in cases where such grade was not previously fixed by city, village or town ordinance, but does not require a taking of any abutting lands, the owner of such lands at the date of such change of grade may file with the department of transportation . . . a claim for any damages to said lands occasioned by such change of grade.  . . . [Upon denial of that claim,] such owner may . . . commence an action against the department of transportation . . . to recover any damages to the lands shown to have resulted from such change of grade.

DOT and United America agreed that the conditions specified in the statute exist in this case. What is in question is whether “a diminution in value [is] a cognizable injury within the class of ‘damages to the lands’? ”. The circuit court thought so, and finding United America’s appraiser “most credible”, with a “before‑value” of $600,000 and an “after‑value” of $71,500, awarded United America damages of $528,500.

DOT appealed the ruling and the court of appeals reversed the lower court saying “considering the context and this court's precedent  . . . the phrase ‘to said lands’ plainly limits the scope of ‘any damages’ to ‘structural or physical’ injuries to the land itself. ” United America appealed to the Wisconsin Supreme Court.

In a six to one ruling after analysis of the words and phrases “any”, “personal property”, “property”, “lands” , “occasioned”, “damages”, “damage to property”, “damage to lands”, and the use of these words in similar legislation and precedent judgements, concluded:

“that a property's diminution in value falls outside the scope of ‘damages to lands’ suffices to resolve this case.”

From the dissenting opinion:

“According to the majority, if the Department of Transportation (DOT) causes a change of grade on the state's highways, abutting landowners are left without any recourse or compensation when DOT's actions eviscerate the value of their property.”

“Contrary to the majority's holding, Section 32.18 allows landowners to recover ‘any damages to the lands’ resulting from a DOT change-of-grade project, and nothing in the statutory text restricts a landowner's recovery to ‘structural’ or ‘physical’ losses as the court of appeals concluded, nor does the text foreclose the recovery of damages for diminution in property value. Accordingly, the circuit court properly awarded damages to United America for DOT's change of grade at the Highway 51/Northstar Road intersection. ”

And she closed with a quote:

"Property rights are necessary to preserve freedom, for property ownership empowers persons to shape and to plan their own destiny in a world where governments are always eager to do so for them."

(United America, LLC v. Wisconsin Department of Transportation (SUPREME COURT OF WISCONSIN, Docket No. 2018AP2383))

Decision: May 2021
Published: May 2021

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