ANDREW MORSE and JOHN and EMILY CLARKE, for themselves and on behalf of all similarly situated individuals, Plaintiffs and Appellants, v. STATE OF SOUTH DAKOTA, and/or THE SOUTH DAKOTA COMMISSION OF SCHOOL AND PUBLIC LANDS, as successors of the SOUTH DAKOTA CEMENT PLANT COMMISSION, and the SOUTH DAKOTA CEMENT PLANT TRUST, Defendants and Appellees.
#30899-a-JMK
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
OPINION FILED 07/09/26
2026 S.D. 45
THE HONORABLE ERIC J. STRAWN, Judge
APPEAL FROM THE CIRCUIT COURT OF THE FOURTH JUDICIAL CIRCUIT, MEADE COUNTY, SOUTH DAKOTA. ARGUED OCTOBER 8, 2025.
MATTHEW NIS LEERBERG
KATHLEEN R. BARROW
DAVID G. CROOKS of
Fox Rothschild, LLP
Dallas, Texas
ANTHONY VITULLO
Dallas, Texas
MICHAEL S. BEARDSLEY
MATTHEW J. MCINTOSH of
Beardsley, Jensen & Lee
Rapid City, South Dakota Attorneys for plaintiffs and appellants
ROBERT B. ANDERSON
JUSTIN L. BELL of
May, Adam, Gerdes & Thompson LLP
Pierre, South Dakota
ROBERT L. MORRIS
Belle Fourche, South Dakota Attorneys for defendants and appellees.
[¶1.] Hideaway Hills, a residential subdivision in Black Hawk, South Dakota, is sinking. Built atop an old, underground mine and previously reclaimed land, the subdivision is home to over 150 homeowners. Residents first noticed foundational issues including cracking and settling in the walls and basements of their homes in 2008. The neighborhood‘s streets also showed significant stress, and several small sinkholes opened later that year. Stability issues throughout the entire neighborhood becamе unmistakable in April 2020 when a large sinkhole opened on East Daisy Drive.
[¶2.] The mining history of the land underneath Hideaway Hills is at the center of Plaintiffs’ claims. In the 1900s, several companies mined the land for gypsum by means of an underground mine. The South Dakota Cement Plant Commission (Cement Plant), a subdivision of the state, purchased the property thereafter for fair market value and surface mined the property for gypsum for several years. When it completed its mining operation, the State reclaimed the land to pastureland and sold it via public sale to Raymond Fuss and his son, Larry Fuss. Aware of the presence of previous underground and surface mines, Larry and a local developer, Byron Keith Kuchenbecker, then devеloped the land into a residential subdivision now known as Hideaway Hills.
[¶3.] When the largest sinkhole, and the catalyst of this litigation, opened in late April 2020, Andrew Morse, the class representative for the Plaintiffs, sued the State on behalf of many of the homeowners in Hideaway Hills for damages related
Factual and Procedural History
[¶4.] A nearly 30-foot-deep sinkhole opened in the Hideaway Hills residential community located in Black Hawk, South Dakota, on April 27, 2020,
[¶5.] A brief history of the ownership and mining activity on the land at issue is necessary to provide context for Plaintiffs’ claims. Dakota Plaster conducted the first recorded mining activity on the land in the early 1900s, which included both surface and underground mining. The dates of Dakota Plaster‘s underground mining activities are not fully documented, but it appears they mined the site for almost 30 years. Dakota Plaster used the “room and pillar” method, which resulted in a substantial network of undergrоund tunnels and large, cavernous rooms. Existing documents revealed that Dakota Plaster supplied the Cement Plant with gypsum beginning in 1924, but it is suspected that the underground mine was inactive by 1927. US Gypsum acquired the mine from Dakota Plaster in 1930. However, because South Dakota lacked a state mine inspector from 1926 to 1936, there are no records regarding US Gypsum‘s mining activities during these years.
[¶7.] The next recorded mining activity occurred when the Cement Plant, a subdivision of the State, purchased the property in 1985 from Stensaas by contract for deed for $140,000. Stensaas preserved a life estate in the property so that he could continue to reside in his home and on nearby land.
[¶8.] The Cement Plant applied for and received authority to mine the property in 1985 under Permit 424. The application for the permit was publicly filed with the Meade County Register of Deeds on June 25, 1985, and mining began in April 1986. The Cement Plant strip mined the property throughout the 1980s and into the 1990s. But, unlike Dakota Plaster, the State contends that it did not perform underground mining, instead relying on surface mining to extract gypsum.
[¶9.] By 1987, the State had mined and reclaimed2 a five-acre portion of the land in the northeastern area, which involved grading and contouring the land. Lyle Dennis, the blasting supervisor on the project, testified that part of this reclamation process involved blasting to close an underground mine entrance. Prior to closing the entrance, the State drilled six test holes in the area to determine if there was sufficient gypsum to mine. Dennis further testified that he confirmed there was insufficient gypsum to mine in that area, and that the blasted area was then graded and contoured. Morse, however, maintains that the State conducted blasting in the underground tunnels previously mined by Dakota Plaster, searching for additional deposits of gypsum.
[¶10.] Three years into the surface mining operation, on October 6, 1989, the Department of Water and Natural Resources approved an amendment to the Cement Plant‘s mining permit to include a small area of land immediately south of
[¶11.] The Cement Plant converted their mining permit—Permit 424—to a mining license—License 89-383—in 1991 after a statutory change to
[¶12.] As required by statute, the State reclaimed the land it mined, ultimately reclaiming around 16 acres by the end of its operations. This process involved filling the previously mined locations with backfill it had preserved from prior mining activities, ensuring that the backfill was sloped according to natural grade, and then reseeding the reclaimed area with vegetation native to the area along with watering the vegetation. Prior to the State‘s mining activities, the area was used for pastureland, and it was reclaimed to return to “pasture condition” under the approved permit.3 The State, when reclaiming the surface mines, used
[¶13.] After the property was reclaimed, the State prepared it for sale. On March 2, 1993, the State, as required by statute, had the land appraised for its “highest and best use,” which the appraiser determined was for a “[r]esidential ranchette.” The land area assessed in the appraisal included both the permit area and the land that was excluded from the permit area as a result of Stensaas‘s life estate. The appraisal for “residential ranchette” was a nod to the old Stensaas ranch house and outbuildings on the northwest corner of the property, which the appraiser described as in “fair condition.” The appraiser noted that the lack of utilities foreclosed the possibility of other types of developments, and that the location of a “sewer lagoon” on the southern border of the property was “considered adverse for any development on the subject in the immediate proximity of the lagoon.”
(. . . continued)
[¶15.] Larry moved into Stensaas‘s house on the northwest corner in 1998. He cut hay on the land and leased it to pasture horses until approximately 2000. After the current lawsuit was filed, the parties engaged in discovery, which revealed that Larry knew the Cement Plant had previously engaged in surface mining on the property, and that he had knowledge of an existing underground mine. Larry testified by deposition that he was aware that children used to play in the underground mine, and that the Stensaases had previously used the mine as a dump for large items of trash, including old cars.
[¶16.] Larry was approached in 2000 by Byron Keith Kuchenbecker, a local developer, regarding a proposal to develop the pastureland into a residential community. Larry suggested that Kuchenbecker develop a manufactured home park rather than a residential, stick-built development because he was concerned about the presence of an underground mine on the property. Larry testified by
[¶17.] Kuchenbecker proposed his plan for a “Manufactured Housing Community” to the Meade County Planning Commission in July 2000. In his application, Kuchenbecker acknowledged:
In the 1980‘s[,] the South Dakota Cement Plant mined the gypsum rock from the site. One can still identify spoil pile areas by abnormal terrain and exposed gypsum fragments. In the early 1900‘s[,] an underground gyp[sum] mining operation took place on the NE corner of the property. Field boring operation may be required to identify any cavities that may be a safety hazard.
[¶18.] At some point after the submission of his application, Kuchenbecker decided to develop a residential, stick-built community rather than one comprised of manufactured homes. This was allegedly because a member of the Planning Commission who lived nearby was more amenable to a traditional development than a manufactured housing community. Larry testified that he did not approve of the idea, and that he “still didn‘t recommend it for development.” Larry removed himself from Kuchenbecker‘s development plans a short time later, selling the property to Kuchenbecker for $250,000.
[¶19.] The purchase agreement offered by Larry to Kuchenbecker contained the following disclaimer:
12. CONDITION OF PROPERTY. KUCHENBECKER [has] thoroughly researched, examined and tested the property to [his] own satisfaction and know[s] that there may be excessive rock, underground cavities, foundations, and junk underground. KUCHENBECKER accept[s] the property in an “as is” condition with no guaranty by FUSS that the property is suitable for any development contemplated by KUCHENBECKER.
[¶21.] The first incident occurred around April 2004, when Kuchenbecker was driving a scraper over the northeast portion of the land which would later become East Daisy Drive. The wheel on the scraper fell into a hole that he described as around two to three feet wide. The hole revealed a “cavern” below that Kuchenbecker described as 40 to 50 feet deep. Kuchenbecker repelled through the hole and down into the cavern to investigate, stating the conditions were “wet and damp” and tall enough “that you could stand up in.” He could not recall the length of the cavern. Kuchenbecker testified that he notified his realtor, Ron Sjodin, John Ogden, Bob Powles—a member of the Meade County Planning Board—and Doug Sperlich, his engineer, about the void. However, both Sperlich and Powles testified by deposition that they were not notified about the hole or cavern. Kuchenbecker‘s solution was to fill the hole back in and compact the ground. After discovering the cavern, Kuchenbecker employed American Engineering Testing (AET) to drill bore holes where he intended to build the houses on East Daisy Drive. AET drilled 25-
[¶22.] Shortly after the first incident, Brandon Powles, who was digging sewer line trenches for the development, encountered another small void. He estimated that this void was six feet deep. Kuchenbecker decided to fill the hole and encase the utility pipe in steel casing. Sperlich testified by deposition that Kuchеnbecker did not contact him about this second void, and that he “wouldn‘t want any part” of developing on land over an underground mine or gypsum deposits. Additionally, Sperlich testified that he was not aware of any compaction testing done at any point during development.
[¶23.] Once development concluded in 2005, Kuchenbecker contracted with realtor Ron Sjodin on an exclusive listing basis to sell the lots in Hideaway Hills to individual homebuilders. The purchase agreement from Kuchenbecker to each homebuilder contained the following disclaimer:
The BUYERS acknowledge that they have been made aware that the property being purchased hereunder, along with the adjoining property, was once mined on the surface and underground for gypsum. The SELLER is unaware as to the exact date that the underground mining ceased but believes it was sometime in the 1950‘s. The surface of the property was reclaimed to meet the requirements of the State of South Dakota after the surface mining operation was completed. The SELLER is not making any warranty, express or implied, concerning any sub-surface conditions that may exist on the property being purchased by the BUYER herein. It will be the BUYER‘S responsibility to remediate any subsurface conditions that exist on the property including, but not limited to, fissures or cavities that may be as a result of these mining operations. The BUYER has accepted the subsurface of the property in an “as is” condition, without any warranty by the SELLER.
[¶25.] The Hideaway Hills Subdivision was completed around 2005, and residents began moving in shortly thereafter. Homeowners began reporting signs of settlement and cracking within their houses in 2008. The first recorded sinkhole opened on East Daisy Drive in 2008 at a home owned by Thomas and Susanne Kelly. Shortly thereafter, another sinkhole developed in their backyard, exposing the bumper of a car in the hole below. The sinkhole that triggered the present cause of action formed on April 27, 2020. The nearly 30-foot-deep sinkhole opened mere feet from the edge of a resident‘s home, exposing pipes and underground lines
[¶26.] An attorney for the Plaintiffs brought multiple lawsuits in both state and federal court against various entities including Meade County, Kuchenbecker, Sjodin, and other developers. All of these lawsuits were dismissed. Resident Andrew Morse, in November 2020, brought the present class action lawsuit against the State on behalf of the Hideaway Hills residents affected by the unstable subsurface conditions. The complaint alleged inverse condemnation, breach of duty of subsurface/subjacent support, breach of exрress covenant, and unjust enrichment. Morse later dismissed all claims except for the inverse condemnation claim, arguing the State “took or damaged his property for public use without just compensation,” not as an exercise of a valid police power, and in violation of [¶27.] The parties filed cross-motions for summary judgment. The circuit court granted summary judgment to the State and dismissed the matter with prejudice. The court reasoned that Morse‘s claims sounded in tort, in that the case was primarily a tort action for withdrawal of subjacent support rather than a claim for inverse condemnation. As such, the court determined that Morse was precluded from pursuing a tort claim against the State because the State, as a sovereign entity, is immune from suit unless authorized by statute. [¶29.] “This Court reviews a grant of summary judgment ‘to determine whether the moving party has demonstrated the absence of any genuine issue of material fact and entitlement to judgment on the merits as a matter of law.‘” Rupert v. City of Rapid City, 2013 S.D. 13, ¶ 8, 827 N.W.2d 55, 60 (quoting Hall v. S.D. Dep‘t of Transp., 2011 S.D. 70, ¶ 9, 806 N.W.2d 217, 221). A trial court‘s grant of summary judgment will be affirmed “if there is any legal basis to support its ruling.” Krier v. Dell Rapids Twp., 2006 S.D. 10, ¶ 12, 709 N.W.2d 841, 845 (citing Schulte v. Progressive N. Ins. Co., 2005 S.D. 75, ¶ 5, 699 N.W.2d 437, 438). “[I]n any takings case, the determination whether a property interest was taken or damaged for public use is a question of law for the cоurt.” Krsnak v. Brant Lake Sanitary Dist., 2018 S.D. 85, ¶ 15, 921 N.W.2d 698, 702 (alteration in original) (quoting Dep‘tof Transp. v. Miller, 2016 S.D. 88, ¶ 43, 889 N.W.2d 141, 154). “On appeal, an alleged violation of constitutional rights—such as whether a sufficient inverse condemnation claim exists—‘is an issue of law to be reviewed under the de novo standard.‘” Id. (citation omitted). [¶30.] The issues of sovereign immunity and inverse condemnation are intertwined, and we address them together. The [¶31.] “Sovereign immunity is the right of public entities to be free from liability for tort claims unless waived by legislative enactment.” Truman v. Griese, 2009 S.D. 8, ¶ 9, 762 N.W.2d 75, 78 (quoting Pub. Entity Pool for Liab. v. Score, 2003 S.D. 17, ¶ 7 n.3, 658 N.W.2d 64, 67 n.3). The defense of sovereign immunity does not apply to inverse condemnation claims because [¶32.] As noted above, the South Dakota Constitution is unique and differs in important respects from the United States Constitution. With the addition of the phrase “or damaged” in [¶33.] The starting place for an inverse condemnation claim is to determine whether the alleged governmental invasion resulted from its exercise of the power of eminent domain under [T]he initial question is whether the governmental entity‘s actions constituted the taking or damaging of property for public use. That is, it must first be determined whether the taking or damaging was occasioned by the governmental entity‘s exercise of its power of eminent domain. Only after it has been established that a compensable taking or damage has occurred should consideration be given to what damages were proximately caused by the taking or damaging for public use. 827 N.W.2d 486, 489 (Neb. 2013). Therefore, we initially consider whether the State‘s actions or inaction in this case amounted to a compensable taking or damaging of Plaintiffs’ private property for public use. [¶34.] Plaintiffs allege that the State damaged property for public use through its mining and reclamation activities on the property. The Plaintiffs claim that the Cement Plant‘s prior mining activities on the property created surface instability and that the State‘s reclamation activities were inadequate to restore the property and provide adequate surface stability for future landowners. The Plaintiffs also allege that the State failed to adequately disclose the risks to future рroperty owners at the time they sold the property. [¶35.] Plaintiffs rely heavily on our decision in Rupert v. City of Rapid City, where we upheld the property owner‘s claim for inverse condemnation when the city‘s use of deicer on the city streets ran onto their property, killing the owners’ trees. 2013 S.D. 13, ¶ 1, 827 N.W.2d at 58. Plaintiffs also cite Long v. State, where [¶36.] Here, the State claims it did not damage private property because, in 1985, the Cement Plant acquired the right to mine and reclaim the property when the State purchased full property rights to the land. This included ownership of both the surface estate and the mineral estate. It is undisputed that all of the Cement Plant‘s mining and reclamation activities occurred while the land was publicly owned. [¶37.] In contrast, in Rupert, “the undisputed evidence established that the City‘s use of the deicer killed 42 mature pine trees on [private property].” 2013 S.D. 13, ¶ 16, 827 N.W.2d at 63. Similarly, in Long, the State‘s action in building a highway in 1949 and then failing to modify the drainage during a 2009 resurfacing project, and the resultant damage from flood waters, all occurred while the damaged properties were owned privately. 2017 S.D. 79, ¶¶ 2–7, 904 N.W.2d at 505–06. More importantly, the Court in Long specifically noted the state did not claim that the flood damage to the landowners’ properties was “within the scope of the right previously acquired by the State to construct the highway.” Id. ¶ 19, 904 N.W.2d at 510. When the State surface mined and reclaimed the land in this case, the State was acting within the scope of its right to mine and damage the land, [¶38.] The Cement Plant‘s mining and reclamation efforts, as well as its actions in selling the property, occurred while it owned the property at issue in this litigation. As such, the State‘s activities do not constitute a taking of “private property” because the State was entitled to commercially utilize the property it had purchased. The Plaintiffs’ claims are inconsistent with the language of [¶39.] Nonetheless, Plaintiffs maintain that selling the surface property to private owners while retaining the mineral rights to the property to the present date renders the State strictly liable for any damage to their private property that has ocсurred or will occur in the future as a result of the prior mining activities on the property. Because the State reserved the mineral rights, as is required by law, Plaintiffs argue that “the subsurface owner must leave sufficient support for the surface to remain in its natural condition.”7 Plaintiffs argue that the State‘s [¶40.] Even if we were to classify the State‘s retention of the subsurface rights, after completing its mining and rеclamation activities on the property, an activity causing damage to private property, the Plaintiffs have failed to establish that the State‘s retention of the mining rights to the property is a “public use” under the damaging clause of the South Dakota Constitution. We defined “public use” long ago in Illinois Central Railroad Co. v. East Sioux Falls Quarry Co., 33 S.D. 63, 144 N.W. 724, 728 (1913), and again addressed the definition in Benson v. State, 2006 S.D. 8, ¶¶ 42, 88, 710 N.W.2d 131, 146, 163. We adopted the “use by the public test,” which “requires that there be a ‘use or right of use on the part of the public or some limited portion of it[.]‘” Benson, 2006 S.D. 8, ¶ 42, 710 N.W.2d at 146 (alteration in original) (citing Ill. Cent. R.R. Co., 144 N.W. at 728). [¶41.] More recently, we have clarified that “the term public use, as used in (. . . continued) [¶42.] Additionally, the Plaintiffs’ claims for inverse condemnation based upon an alleged ongoing duty on the part of the State, as the subsurface owner, to permanently provide subsurface support to private property owners lacks any discernable public use. Plaintiffs seеmingly acknowledge that mining gypsum is not currently economically feasible, and they have not identified any other public use of the State‘s ownership of the mining rights to the property. “The underlying intent of the [damaging] clause is to ensure that individuals are not unfairly burdened by disproportionately bearing the cost of projects intended to benefit the public generally.” Rupert, 2013 S.D. 13, ¶ 9, 827 N.W.2d at 61 (citation omitted). Plaintiffs have failed to show any general public benefit from the State‘s ownership of the mining rights to the property within the meaning of [¶43.] Applying the use by the public test, the Cement Plant‘s prior surface mining operations and resulting minerals were for proprietary and commercial use, not for “public use.” Under these facts, Plaintiffs cannot satisfy the “public use” element оf an inverse condemnation claim. Because we may “affirm the circuit court on summary judgment if it is correct for any reason,” we conclude the circuit court did not err in granting summary judgment to the State. A-G-E Corp. v. State, 2006 S.D. 66, ¶ 13, 719 N.W.2d 780, 785 (citation omitted). [¶44.] Based upon our conclusion that the State‘s activities in this case relating to the mining and ownership of the subject property did not constitute a taking or damaging of private property for a public use, Plaintiffs have not established a claim for inverse condemnation. We need not address Plaintiffs’ claims of strict liability, nor the State‘s claims that the action should also be dismissed on the basis of causation, standing, or that the action is untimely under [¶46.] We affirm the circuit court‘s grant of summary judgment because Plaintiffs have failed to prove that a genuine issue of material fact exists regarding whether the Cement Plant‘s activities constitute a taking or damaging of private property for public use. [¶47.] JENSEN, Chief Justice, and SALTER, DEVANEY, and MYREN, Justices, concur. [¶48.] GUSINSKY, Justice, not having been a member of the Court at the time this action was considered by the Court, did not participate.Standard of Review
Analysis
1. Whether the circuit court properly granted summary judgment to the State.
Conclusion