Carter v Nugent Sand Co, No 49S00-0812-CV-00649, 2010 WL 1486909 (Ind April 14, 2010)

Issue: When is construction done for public use?

The Indiana Supreme Court avoided a constitutional question related to a takings claim and instead dismissed the action for failure to exhaust administrative remedies. The case pertained to the effect of language in permit approvals for the digging of a channel from the Ohio River to a nearby lake so that the lake could be used for a sand and gravel operation. The Department of Natural Resources (the “DNR”) had imposed a permit condition dedicating waters to public use. Specifically, Nugent Sand was required to dedicate the pre-existing lake to general public use. The Indiana Supreme Court denied efforts to seek judicial relief from conditions imposed within the permit approvals.

In 1999, Nugent Sand leased 156.2 acres for use in its commercial barge operations. “The acreage contained a 50-acre man-made body of water, standing about 200 feet inland from the Ohio River.” Id. at *1. Nugent Sand sought and acquired a permit from the Department of the Army, Corps of Engineers. Additionally, Nugent Sand obtained certificates of regulatory approval from the DNR “because the construction would take place in a floodway and involved construction of an access channel.” Id. at *1. “Among the conditions contained in [the] DNR’s granted certificates were provisions mandated by a section of the Indiana Code.” Id. at *1. The code provision required any water created to be for “general public use.” Id. at *1.

Following the approvals, Nugent Sand excavated a channel through the Ohio River’s bank to the man-made lake to accommodate a commercial barge operation. It also built a dock in the lake for unloading barges.

Around 2005, boaters began using the lake, after entering through the excavated channel. Nugent Sand attempted to enforce “No Trespassing” warnings. When Nugent Sand complained about boaters interfering with its business operations, the DNR stated that the waters were public and provided similar statements to citizens who called to inquire about the status of the lake. Nugent Sand complained that the DNR’s diffusion of its position led to more boaters.

Nugent Sand and the landowners (from whom Nugent Sand leased the land) filed a complaint against DNR for declaratory and injunctive relief. Nugent Sand moved for summary judgment, effectively arguing that the lake and the channel were private property from which they could exclude the public and that any attempt to force them to dedicate the property for public use without compensation would be an unconstitutional taking. The DNR responded that Nugent Sand “exchanged providing public access to the lake and channel as a condition for digging the channel, and the public gained access to the property by virtue of Indiana statute as well as various common law principals.” Id. at 2. The trial court entered a permanent injunction in Nugent Sand’s favor. Because the trial court held unconstitutional one of the statutes under which the DNR had acted during the permitting process, the DNR was then allowed to appeal directly to the Indiana Supreme Court.

Before the Indiana Supreme Court, the DNR maintained that Nugent Sand should have undertaken its administrative remedies instead of filing the present action. Nugent Sand maintained that it had no notice that it might need to invoke administrative procedures, since the terms imposed by the DNR were not set forth in the approvals. Nugent Sand also emphasized that it only became clear after the appeal period expired that the DNR was going to declare all additional waters created by the project to be for public use.

The Court concluded that Nugent Sand had an administrative remedy. In fact, each permit contained information regarding how to appeal. “DNR gave plain notice.” Id. at *4. “[T]he available process was ignored a decade ago.” Id. at 4.

The case is significant because it shows the dangers of failing to appreciate the details of the construction approval process. Here, a sand and gravel company wasted much time and money to unknowingly benefit the public. By failing to grasp the implications of the approval documents, the sand and gravel company wrecked its would-be operation and harmed the landowners from whom it leased the land.