State Ex Rel. Department of Transportation v. Miller, 2016 S.D. 88

Background

The State reconstructed the I-90/Cliff Avenue interchange in Sioux Falls and instituted a quick-take condemnation of portions of Lots 6, 7, and 8 owned by Miller and Walsh, depositing statutory funds and seeking immediate possession. Miller and Walsh requested a jury to determine compensation.
The State physically took a triangular portion and acquired temporary and permanent easements over Lots 6–8; it also extended 63rd Street and closed the intersection at Cliff Avenue and 63rd Street, altering access routes to the property.
Miller and Walsh own Lots 5–8 (contiguous) and Lot 15 (across 63rd Street). They claimed Lot 15 is part of a larger commercial assemblage and that the State’s project (including intersection closure) destroyed the property’s highest and best use, reducing value.
Pretrial, the court excluded claims expressly based on the intersection closure but allowed evidence of depreciation from traffic diversion as bearing on market value and permitted Miller and Walsh to treat Lot 15 as part of the “larger parcel.”
At trial each side presented valuation experts; the jury awarded $551,125. The State appealed, raising four issues: inclusion of Lot 15 in the larger parcel, exclusion of the State expert’s testimony on Lot 15, the court’s jury instruction using “project” (not “taking”), and admission of testimony about traffic diversion diminishing value.

Issues

Issue	Plaintiff's Argument (Miller & Walsh)	Defendant's Argument (State)	Held
1. Whether Lot 15 must be treated as part of the larger parcel for valuation	Lot 15 is owned by them, intended for unified commercial development (assemblage); unity of ownership, use, and contiguity exist	Lot 15 is detached across 63rd St., not presently integrated or necessary to use of Lots 5–8; unity not proven	Reversed: trial court erred as a matter of law in ruling Lot 15 part of parcel; issue for jury/new trial
2. Whether the court abused discretion by precluding State expert from testifying Lot 15 was not part of the larger parcel	Expert testimony should be excluded because legal elements of larger-parcel were already decided	State argued its expert must be allowed to rebut unity-of-use/contiguity evidence	Reversed: court abused discretion by preventing State from presenting rebuttal; new trial required
3. Whether the court erred by instructing jury to value property "before and after the project" instead of "before and after the taking"	Using "project" was factually necessary to allow jury to consider consequential damages from the overall project	"Project" is broader than compensable "taking" and could mislead jury to award noncompensable harms	Reversed: instruction abused discretion; court must use "taking" on remand
4. Whether evidence of diminished value from diversion/circuity (closure of intersection) was admissible	Evidence of traffic diversion and changed access bears on after-taking market value and highest-and-best-use	Diversion/circuity are generally noncompensable; only substantial impairment of access is a compensable property interest	Remanded: court must first determine as a matter of law whether the State substantially impaired access (and, if not caused by the taking, whether the injury is peculiar to owners). If not, such evidence is inadmissible

Key Cases Cited

Schuler v. Board of Supervisors of Lincoln Township, 12 S.D. 460, 81 N.W. 890 (1900) (early South Dakota decision permitting jury to consider diversion-of-travel evidence under a now-repealed statute)
State Highway Commission v. Fortune, 77 S.D. 302, 91 N.W.2d 675 (1958) (articulates larger-parcel factors: unity of title, contiguity, unity of use)
State Highway Comm’n v. Hayes Estate, 82 S.D. 27, 140 N.W.2d 680 (1966) (measure of severance damages: before-and-after fair market value of the unit)
State ex rel. Dep’t of Transp. v. Henrikson, 1996 S.D. 62, 548 N.W.2d 806 (1996) (discusses loss-of-access claims and limits on recovery for median/diversion damages)