AGCS MARINE INSURANCE COMPANY, A/K/A ALLIANZ GLOBAL CORPORATE & SPECIALTY, A/S/O HARRIS TEETER, ET AL.
THE CIRCUIT COURT OF ARLINGTON COUNTY Louise M. DiMatteo,
All the Justices
ARTHUR KELSEY JUSTICE .
insurers paid claims for property damage to a Harris Teeter
grocery store arising from the malfunctioning of a county
sewer line. Exercising their subrogation rights, the insurers
filed an inverse condemnation suit against Arlington County
on the theory that the sewer backup constituted a taking
and/or damaging of private property for a public use without
just compensation in violation of the Constitution of
Virginia. The circuit court dismissed the insurers'
complaint with prejudice and denied their motion for leave to
file an amended complaint.
agree with the circuit court that the original complaint
failed to state a claim for inverse condemnation. We
disagree, however, with the court's denial of the
insurers' motion for leave to amend their complaint. The
allegations in the proffered amended complaint, coupled with
the reasonable inferences arising from these allegations,
assert a legally viable claim for inverse condemnation. We
thus affirm in part, reverse in part, and remand for further
this appeal arises from the grant of a demurrer, we state the
factual allegations in the complaint in the light most
favorable to the insurers, giving them the benefit of all
reasonable inferences that arise from those allegations.
See Coutlakis v. CSX Transp., Inc., 293 Va. 212,
215, 796 S.E.2d 556, 558 (2017). However, we do not accept
the veracity of conclusions of law camouflaged as factual
allegations or inferences. See Arogas, Inc. v. Frederick
Cty. Bd. of Zoning Appeals, 280 Va. 221, 224, 698 S.E.2d
908, 910 (2010). Instead, we review all conclusions of law de
novo. See Evans v. Evans, 280 Va. 76, 81-82, 695
S.E.2d 173, 175-76 (2010).
case, the property insurers - AGCS Marine Insurance Company
and Indemnity Insurance Company of North America - issued
policies to Harris Teeter, the lessee of a building used for
its grocery store in Arlington County. The insurers together
paid approximately $1.8 million under their policies to
Harris Teeter for property damage resulting from the backup
of a county sewer line that caused raw sewage to flow into
the grocery store in May 2012. The subrogated insurers filed
suit against the County alleging only one count - an inverse
condemnation claim under Article I, Section 11 of the
Constitution of Virginia.
original complaint stated that the sewer line and the sewage
treatment plant for the sewer line "were maintained for
the public purpose of supplying Arlington County with water
and sewage disposal services." J.A. at 3. The sewage
backup, the complaint alleged, "was caused by the
failure of Arlington County to properly maintain and operate
the sewage treatment plant." Id. The complaint
provided several specific examples of this overall failure,
including that the County (1) failed to "properly
operate, inspect, maintain and test" the sewer system;
(2) failed to maintain and repair the pumps in the plant; (3)
failed to supervise its employees at the treatment plant; (4)
"ignored warnings from its employees" about the
equipment; (5) "bypassed safety features of the
equipment"; and (6) neglected necessary repairs.
in the complaint expressly or impliedly alleged that the
County purposefully caused the backflow of raw sewage into
the Harris Teeter grocery store. Nor did the complaint allege
that anyone working for the County either purposefully caused
the backflow or deliberately allowed it to happen in order to
keep the entire system operating for all other users of the
county sewer system.
County demurred on several grounds, the principal one being
that the allegations asserted, at best, a negligence claim
barred by sovereign immunity and not cognizable as a
constitutional violation. The County also argued that the
sewer backup did not itself constitute a public use of Harris
Teeter's property. The insurers disagreed and contended
that it did not matter that "the sewage
backup" itself did not constitute a public use
because the only question was "whether the sewage
treatment plant serves a public purpose, which it
obviously does." R. at 29 (emphases in original);
see also id. at 90 (same).
circuit court granted the County's demurrer and dismissed
the case with prejudice. The insurers moved to reconsider and
requested leave to file a proffered amended complaint that
amplified their claim. The court denied both motions and
entered final judgment.
appeal, the insurers argue that their original complaint
stated a viable claim for inverse condemnation and that, even
if it did not, the proffered amended complaint provides
whatever amplification of the claim may be necessary. Like
the circuit court, we conclude that the original complaint
sounded wholly in tort and did not state a prima facie cause
of action for inverse condemnation. We disagree, however,
with the circuit court's decision to deny the insurers
leave to amend their complaint. The amplified allegations in
the amended complaint, coupled with the reasonable inferences
that one could draw from them, state a viable claim for
For-Public-Use Requirement of Inverse Condemnation
The Constitution of Virginia states
[T]he General Assembly shall pass no law whereby private
property, the right to which is fundamental, shall be damaged
or taken except for public use. No private property shall be
damaged or taken for public use without just compensation to
the owner thereof. No more private property may be taken than
necessary to achieve the stated public use.
Va. Const. art. I, § 11. The power of eminent domain is
thus limited. Private property cannot be "damaged or
taken except for public use, " and, even then, the power
can be exercised only to the extent "necessary to
achieve the stated public use." Id. When a
lawful taking or damaging of property is justified by a
public use, it must be remedied by payment of "just
compensation to the owner." Id.
literally, the operative clause of Article I, Section 11 of
the Constitution of Virginia states only that the General
Assembly "shall pass no law" that takes or damages
private property except for public use, id., thus
implying that the constitutional prohibition acts solely as a
limitation upon the legislature. For good reason, we have
never accepted such a hyper-literal reading of this
provision. From ancient times, ad hoc seizures of property
without direct legislative approval were understood to
violate the requirement of just compensation no less than
outright legislative confiscations. See Magna Carta,
ch. 28 (prohibiting the King's officers from taking
"the corn or other goods of any one without instantly
paying money for them, unless he can obtain respite from the
free-will of the seller"), reprinted in Boyd C.
Barrington, The Magna Carta and Other Great Charters of
England 228, 237 (1899). That ancient maxim found its voice
in the Takings Clause of the Fifth Amendment to the United
States Constitution, a provision that St. George Tucker
believed was meant "to restrain the arbitrary &
oppressive measure of obtaining supplies by impress[ment] as
was practiced during the last war, not infrequently without
any Compensation whatsoever." 4 St. George Tucker, Ten
Notebooks of Law Lectures 147 (in the Tucker-Coleman Papers
on file with the Earl Gregg Swem Library, College of William
and Mary); see also 1 St. George Tucker,
Blackstone's Commentaries, Editor's App. Note D, at
in this tradition, the Constitution of Virginia declares the
right to private property to be "fundamental." Va.
Const. art. I, § 11; see also Code §
1-219.1(A). This view presupposes that an essential
"interdependence exists between the personal right to
liberty and the personal right in property. Neither could
have meaning without the other." Lynch v. Household
Fin. Corp., 405 U.S. 538, 552 (1972). "In a word,
" James Madison said, "as a man is said to have a
right to his property, he may be equally said to have a
property in his rights." James Madison, Property (Mar.
29, 1792), reprinted in 1 The Founders'
Constitution 598, 598 (Philip B. Kurland & Ralph Lerner
eds., 1987). Madison continued, "If the United States
mean to obtain or deserve the full praise due to wise and
just governments, they will equally respect the rights of
property, and the property in rights." Id. at
599. It "has long been recognized, " therefore,
that property rights are "basic civil rights, "
Lynch, 405 U.S. at 552, and that a government's
failure to protect private property rights puts every other
civil right in doubt.
by these background principles, Virginia law recognizes
inverse condemnation as a viable theory of recovery for de
facto violations of Article I, Section 11 of the Constitution
of Virginia. See generally Kent Sinclair, Sinclair
on Virginia Remedies § 64-1, at 64-1 to -5 (5th ed.
2016). Inverse condemnation arises out of the self-executing
nature of Article I, Section 11 and thus must be
distinguished from common-law tort claims. See Burns v.
Bd. of Supervisors, 218 Va. 625, 627, 238 S.E.2d 823,
condemnation permits recovery only when "property is
taken or damaged for public use" - thereby
bestowing on the owner a right to "sue upon an
implied contract that he will be paid therefor such
amount as would have been awarded if the property
had been condemned under the eminent domain statute."
Id. (emphases added). This implied-contract characterization
captures well the idea that just-compensation provisions
represent a "historical compact" between citizens
and their government that "has become part of our
constitutional culture." Lucas v. South Carolina
Coastal Council, 505 U.S. 1003, 1028 (1992).
implied-contract explanation also reinforces the first
premise of inverse condemnation law, which recognizes a
remedy for a de facto taking or damaging of private property
in the same way that eminent domain proceedings provide a
remedy for a de jure taking or damaging. In inverse
condemnation cases, the law implies the constitutional duty
of compensation in circumstances where the taking or damaging
of private property would be compensable under traditional
eminent domain principles. For this reason, we say that an
inverse condemnation claim "is not a tort action, but a
contract action" based upon an implied constitutional
promise of compensation. Jenkins v. County of
Shenandoah, 246 Va. 467, 470, 436 S.E.2d 607, 609
limits of this implied constitutional promise are found in
the express language of Article I, Section 11 of the
Constitution of Virginia, from which an inverse condemnation
claim arises. See Burns, 218 Va. at 627, 238 S.E.2d
at 825 (noting that an inverse condemnation claim is "a
contract action under Article I, Section 11 of the
Constitution of Virginia" (emphasis added)). Article I,
Section 11 prohibits the taking or damaging of private
property "for public use without just
compensation." Va. Const. art. I, § 11. The power
of eminent domain can never be exercised "except for
public use, " and, even then, that power can only be
exercised to the extent "necessary to achieve the stated
public use." Id. The constitutional duty of
just compensation thus presupposes that the taking or
damaging of private property was "for public use"
and done only to the extent "necessary to achieve the
stated public use." Id.
level, it is quite easy to apply this for-public-use limiting
principle. Because the power of eminent domain extends only
to "lawful acts" by government officials, it does
not include "negligent" or other
"wrongful" acts committed outside of or in
violation of their delegated authority. Eriksen v.
Anderson, 195 Va. 655, 660-61, 79 S.E.2d 597, 600
(1954). "If they exceed their
authority, or violate their duty, they act at their own risk,
and the State is not responsible or liable therefor."
Id. (citation omitted). What is true for eminent
domain is likewise true for inverse condemnation claims.
Tortious or wrongful conduct by a government official, acting
outside his or her lawful authority, can never be a
sufficient ground, in itself, for an inverse condemnation
nearly all other levels, however, the for-public-use limiting
principle can be quite difficult to apply. No "magic
formula" addresses the multitude of fact patterns that
can arise, and, truth be told, there are "few invariable
rules in this area." Arkansas Game & Fish
Comm'n v. United States, 568 U.S. 23, ___, 133 S.Ct.
511, 518 (2012). Several of our cases nonetheless provide a
useful framework for understanding the factual scenarios that
satisfy this limitation on inverse condemnation claims.
Jenkins, we considered a county water-drainage
easement that crossed two lots in a residential subdivision.
On the easement, the lot owners alleged, the county had dug
an improperly designed drainage ditch and failed to maintain
it. On a regular basis, the ditch flooded the lots because it
was "incapable of conveying concentrated storm
water." Jenkins, 246 Va. at 469, 436 S.E.2d at
609. We addressed the only for-public-use question before us:
whether there was "evidence" that the drainage
ditch (situated on an easement dedicated to the county by a
subdivision developer) "was part of a water discharge
system which served to divert water" from developed land
onto the plaintiffs' property. Id. at 470, 436
S.E.2d at 609. We held that there was such evidence. See
not hold that the flooding damage triggered inverse
condemnation liability simply because the ditch was a
component of the county's water-discharge system.
Instead, we pointed out that the alleged purpose and function
of the ditch - which was located on the plaintiffs'
property - was "to divert water from approximately 36
acres of developed land onto their property, " and it
was flooding from that very diversion that damaged the
plaintiffs' lots. Id. It did not matter that the
original design of the ditch or its later disrepair was
negligent under traditional tort principles. See id.
An inverse condemnation action, we reaffirmed, "is not a
tort action, but a contract action" under Article I,
Section 11 of the Constitution of Virginia. Id.
considered a similar scenario in Hampton Roads Sanitation
District v. McDonnell, 234 Va. 235, 360 S.E.2d 841
(1987). There, a pump station operated by a sanitation
district handled overload conditions by opening a
"bypass valve" that "divert[ed] the overflow
from the pump station and discharge[ed] the wastewater upon
[the plaintiff's] property." McDonnell, 234
Va. at 237, 360 S.E.2d at 842. "The undisputed evidence,
" we observed, proved that the sanitation district
"intentionally discharged sewage" onto the
plaintiff's property by designing the bypass valve to
"permit such discharge when the flow became
excessive." Id. at 238-39, 360 S.E.2d at 843.
These facts established that the pump station damaged private
property "for public uses" under Article I, Section
11 of the Constitution of Virginia. Id.
more recent case, Kitchen v. City of Newport News,
we held that an inverse condemnation claim could proceed to
trial based on allegations that a municipality had caused
residential subdivisions to serve as "contingent
retention or detention pond areas" for water overflowing
a nearby creek and pond. 275 Va. 378, 387-89, 657 S.E.2d 132,
137-38 (2008). These factual allegations supported the
landowner's claim that the municipality flooded his
property "for public use" because, whether
expressly or implicitly, the municipality chose to use the
subdivisions as contingent overflow areas for the municipal
water-discharge system. Id.
most recent case addressing the for-public-use requirement is
Livingston v. Virginia Department of Transportation,
284 Va. 140, 726 S.E.2d 264 (2012). Like Jenkins and
Kitchen, Livingston involved flooding.
Various homeowners claimed that the Virginia Department of
Transportation (VDOT) redesigned an existing water-discharge
system serving an area in Fairfax County. The redesign
included relocating a tributary of the Potomac River,
narrowing the natural width of the tributary by 62%, filling
in portions of watershed marshes to construct a highway, and
building the highway "in such a way, " allegedly,
"as to serve as a concrete wall blocking any northern
flow of water from the channel." Livingston,
284 Va. at 146, 726 S.E.2d at 268. Subsequent failure to