John E. Moriarity v. State of Indiana ( 2023 )

FILED
Nov 15 2023, 8:56 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Mark K. Leeman Theodore E. Rokita
Leeman Law Office Attorney General of Indiana
Logansport, Indiana Kyle Hunter
Deputy Attorney General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
John E. Moriarity, Mae E. November 15, 2023
Moriarity, and C-A-R-E Auto Court of Appeals Case No.
Auction, Inc., 22A-PL-2899
Appellants-Plaintiffs, Appeal from the Grant Circuit
Court
v. The Honorable Mark E. Spitzer,
Judge
State of Indiana, Indiana Natural Trial Court Cause No.
Resources Commission, and 27C01-1805-PL-17
Indiana Department of
Natural Resources,
Appellees-Defendants
Opinion by Judge Weissmann
Judges Riley and Bradford concur.
Court of Appeals of Indiana | Opinion 22A-PL-2899 | November 15, 2023 Page 1 of 7
Weissmann, Judge.
[1] Nearly 30 years ago, John and Mae Moriarity built on their property a dam big
enough to violate Indiana’s Dam Safety Act.1 After being ordered to either
modify the dam or remove it, the Moriaritys sought compensation from the
State for what they say will be attending damages—namely, a 30-to-40- acre
mud pit and thousands of dead fish. This claim ignores the simple fact that the
Moriaritys created the quagmire in which they find themselves and cannot now
rely on the State to bail them out. Therefore, we affirm the trial court’s
dismissal of the Moriaritys’ inverse condemnation action.
Facts
[2] In the late 1990s, the Moriaritys built a dam that rose more than 20 feet in
certain spots, creating a roughly 30-to-40-acre pond that contained over one
hundred acre-feet of water. After learning about the dam, the Indiana
Department of Natural Resources (DNR) ordered the Moriaritys to make
changes, fearing safety deficiencies could cause the structure to burst and
endanger nearby homeowners.
[3] The Moriaritys first litigated, and lost, a claim that their dam did not fall within
the DNR’s jurisdiction. Moriarity v. Ind. Dep’t of Nat. Res., 113 N.E.3d 614, 617-
1
Ind. Code § 14-27-7.5 et seq.
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18 (Ind. 2019). Our Supreme Court concluded that the Moriaritys must either
modify the illegal dam to comply with the Dam Safety Act or remove it. 2
[4] But while that case worked its way through the courts, the Moriaritys also
pursued an inverse condemnation action. They claimed the DNR’s action in
forcing them to modify or remove their illegal dam constituted a regulatory
taking that entitled them to just compensation. The trial court dismissed the
Moriaritys' inverse condemnation complaint, finding that the facts “[did] not
support a finding of a regulatory taking by the DNR.” App. Vol. III, p. 47.
Discussion and Decision
[5] On appeal, the Moriaritys claim they met the low bar necessary to survive
dismissal of their inverse condemnation claim. A motion to dismiss under
Indiana Trial Rule 12(B)(6) generally “tests the legal sufficiency of the plaintiff’s
claims, not the fact supporting it.” Bellwether Props., LLC v. Duke Energy Ind.,
Inc., 87 N.E.3d 462, 466 (Ind. 2017). A Trial Rule 12(B)(6) dismissal is
reviewed de novo. Crystal Valley Sales, Inc. v. Anderson, 22 N.E.3d 646, 652 (Ind.
Ct. App. 2014). Thus, the issue here is whether the Moriaritys’ complaint
alleged facts constituting a compensable regulatory taking. It did not.
2
The Indiana Supreme Court affirmed a trial court’s judgment, which itself affirmed the decision of the
Natural Resources Commission, that the Moriaritys’ dam violated the Indiana Dam Safety Act because it
was an impermissible “high-hazard structure.” Moriarity, 113 N.E.3d at 622-23 (citing Ind. Code § 14-27-7.5-
8(b)).
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Regulatory Taking
[6] Both Article 1, § 21 of the Indiana Constitution and the Fifth Amendment to
the United States Constitution prevent the taking of private property for public
use without “just compensation.” These provisions “are textually
indistinguishable and are to be analyzed identically.” State v. Kimco of Evansville,
Inc., 902 N.E.2d 206, 210 (Ind. 2009).
[7] Two types of regulatory action generally establish per se takings: (1) the
permanent physical invasion of property; or (2) the deprivation of all or
substantially all economic or productive use of an owner’s property. Lingle v.
Chevron U.S.A., Inc., 544 U.S. 528, 538 (2005). Outside of these “two relatively
narrow categories,” courts turn to the well-worn Penn Central factors. Id. (citing
Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978)). These
factors require consideration of (1) the economic impact of the regulation, (2)
the extent the regulation interfered with distinct investment-backed
expectations, and (3) the character of the government action. Id. at 538-39.
[8] Here, given that no physical invasion occurred, the Moriaritys largely allege the
second category of a per se taking: the loss of all economic or productive use of
their property. But even if such a loss occurred, the Moriaritys’ claim fails
because the government may affect a total regulatory taking without
compensation where “‘background principles of nuisance and property law’
independently restrict the owner’s intended use of the property.” Lingle, 544
U.S. at 538 (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1026-32
(1992)).
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[9] The Moriaritys never possessed a right to build an illegal dam. Therefore, they
are not entitled to compensation because the State forced them to remove or
modify it. This situation falls neatly within a category of regulatory cases
identified by the United States Supreme Court as not deserving of just
compensation. In Lucas, the petitioner purchased two beachfront lots that he
intended for future residential use. 505 U.S. at 1007. But within a few years, the
state of South Carolina enacted a law that effectively banned “any permanent
habitable structures” from being built on his lots, which were within a beach
erosion zone. Id. Under these circumstances, the Supreme Court found no
compensable taking because “background principles” in the “law of property
and nuisance” supported the state’s right to place such restrictions upon land
ownership. Id. at 1029.
[10] As an illustrative example, Justice Scalia pointed out that “the owner of a lake-
bed . . . would not be entitled to compensation when he is denied the requisite
permit to engage in a landfilling operation that would have the effect of
flooding others’ land.” Id. This is true even where the “regulatory action may
well have the effect of eliminating the land’s only economically productive use”
because the government action “does not proscribe a productive use that was
previously permissible under relevant property and nuisance principles.” Id.
(emphasis added).
[11] The Moriaritys’ situation mirrors Justice Scalia’s example. The DNR is
requiring the Moriaritys to fix or remove the dam because of the hazard it poses
to them and their neighbors. To find for the Moriaritys here would be like
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endorsing the lake-bed owner’s unpermitted landfilling operation and then—
once the threat of flooding arises—forcing the State to pay the owner to undo
his own actions that created the danger in the first place. Such a result is absurd.
Indeed, the “recognition that the Takings Clause does not require compensation
when an owner is barred from putting land to a use that is proscribed by those
‘existing rules or understandings’ is surely unexceptional.” Id. Thus, the
Moriaritys’ complaint did not plead a per se regulatory taking.
[12] For similar reasons, the Moriaritys also failed to plead a regulatory taking under
the Penn Central factors. First, under our standard of review, we assume as true
the Moriaritys’ claim that the dam’s removal will cause them significant
economic damages. Yet this injury is counterbalanced by the corresponding
lack of any investment-backed expectations the Moriaritys should have had.
Although the Moriaritys alleged their expectation that the dam would create a
“thriving ecosystem” of fish and wildlife, Appellant’s Br., p. 26 (citing App.
Vol. II, p. 88), left entirely unmentioned is any reasonable expectation that they
possessed the right to build a dam that violated Indiana’s Dam Safety Act. And
the Moriaritys would have been entirely wrong to simply assume their dam’s
legality. As the Supreme Court remarked in Lucas, a “property owner necessarily
expects the uses of his property to be restricted, from time to time, by various
measures newly enacted by the State in legitimate exercise of its police powers.”
505 U.S. at 1027 (emphasis added).
[13] Lastly, the character of the government action here supports finding no
regulatory taking occurred. In regulating the Moriaritys’ dam, the DNR is
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acting to promote the common good and ensure public safety from the risk that
a potentially deficient dam will fail and flood nearby landowners. These facts
are the hallmark of a permissible government action. See Duke Energy Ind., LLC
v. Bellwether Props., LLC, 192 N.E.3d 1003, 1009 (Ind. Ct. App. 2022) (finding
no regulatory taking where government action “is intended to protect life and
property”).
[14] Because the Moriaritys’ complaint did not successfully plead a regulatory
taking, we affirm its dismissal.
Riley, J., and Bradford, J., concur.
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