Background
Hideaway Hills is a residential subdivision in Black Hawk, South Dakota, built atop land with a long history of underground and surface gypsum mining. Beginning in the early 1900s, multiple private companies mined the area using the “room and pillar” method, leaving a substantial network of underground tunnels and caverns. In 1985, the South Dakota Cement Plant Commission — a state subdivision — purchased the property for $140,000 and spent the following decade conducting surface mining operations. When the State completed its mining, it reclaimed the land to pasture condition using backfill that included pulverized gypsum and sold the property via public sale in 1994 to Raymond Fuss, reserving subsurface mineral rights as required by the South Dakota Constitution.
Larry Fuss, Raymond’s son, later sold the land to developer Byron Keith Kuchenbecker for $250,000 on an “as is” basis, explicitly disclosing that underground cavities might exist. Kuchenbecker proceeded to develop a stick-built residential community despite personally encountering significant underground voids during construction — including a 40-to-50-foot-deep cavern discovered when a piece of equipment broke through the surface on what would become East Daisy Drive. He filled the holes and continued development without adequate geotechnical investigation. The purchase agreements between Kuchenbecker and homebuilders warned of prior mining, but the homebuilders’ realtor omitted any such disclosure when selling individual homes to the ultimate buyers. Nearly all homebuyers moved in unaware of the subsurface conditions.
Residents began noticing cracking and settling as early as 2008. The litigation catalyst came on April 27, 2020, when a nearly 30-foot-deep sinkhole opened in a front yard on East Daisy Drive, exposing underground utility lines and a large underground void. Thirteen homes were evacuated and remain vacant. Class representative Andrew Morse filed suit against the State asserting inverse condemnation under Article VI, § 13 of the South Dakota Constitution, arguing that the State’s improper surface-mine reclamation and failure to provide adequate subsurface support amounted to a compensable taking or damaging of private property for public use. All other claims were voluntarily dismissed. The circuit court granted summary judgment to the State on sovereign immunity grounds, reasoning the claim sounded in tort. Plaintiffs appealed.
The Court’s Holding
The South Dakota Supreme Court affirmed summary judgment for the State, though on different grounds than the circuit court. The court agreed that sovereign immunity does not bar inverse condemnation claims — Article VI, § 13 of the South Dakota Constitution “essentially abrogates sovereign immunity” with respect to takings and damage claims. The circuit court’s sovereign immunity rationale was therefore incorrect. Nevertheless, the court affirmed because Plaintiffs failed to establish a viable inverse condemnation claim on its merits.
The dispositive deficiency was the “private property” element. Article VI, § 13 protects private property from being “taken for public use, or damaged, without just compensation.” The court held that this protection is not triggered when the governmental entity’s damaging activities occur on land the government itself owns. Here, the Cement Plant’s mining and reclamation operations took place entirely while the State held title to the property, having purchased it from Stensaas for fair market value. The State was therefore acting within the full scope of its ownership rights — it was entitled to commercially exploit land it owned. The court distinguished its prior decisions in Rupert v. City of Rapid City and Long v. State, where the governmental activities causing damage in each case were directed at, or spilled over onto, land that was already privately owned at the time of the harmful act. No such intrusion onto private property occurred here.
The court rejected Plaintiffs’ theory that the State’s retention of subsurface mineral rights after the sale created ongoing strict liability for surface damage. Plaintiffs argued that a subsurface mineral-rights owner must leave sufficient support for the surface, making the State strictly liable to current homeowners. The court found this argument insufficient to overcome the threshold failure: the property was not “private property” at the time the State took the actions alleged to have caused the harm. Because Plaintiffs could not satisfy the private property element of their inverse condemnation claim, summary judgment for the State was proper.
Key Takeaways
- Sovereign immunity does not shield the State from inverse condemnation claims under Article VI, § 13 of the South Dakota Constitution — but a plaintiff must still prove all elements of the constitutional claim, including that the damaged property was private property at the time of the governmental act.
- An inverse condemnation claim under South Dakota law cannot be grounded solely in governmental activities that occurred while the government owned the property; a compensable taking or damaging requires that the harm be inflicted on private property, not on the State’s own land.
- The State’s statutory retention of subsurface mineral rights after selling the surface estate does not, standing alone, create strict inverse condemnation liability for pre-existing damage caused during the period of state ownership.
- Developers who build on land with known underground voids — and realtors who fail to pass along material mining disclosures to ultimate homebuyers — face serious exposure, as illustrated by the parallel litigation history against Kuchenbecker, Sjodin, and others (all ultimately unsuccessful on other grounds in prior proceedings).
Why It Matters
The decision draws a sharp line between two types of government-caused harm: damage inflicted by the government on private land (which can support an inverse condemnation claim under South Dakota’s broad “taken or damaged” clause) and damage resulting from activities the government conducted on its own land before selling it (which cannot). For property owners, this distinction can be outcome-determinative regardless of how severe the harm is. The 150-plus Hideaway Hills homeowners — many of whom purchased their homes without any knowledge of the subsurface mining history — are left without a constitutional remedy against the State, even though the State’s reclamation choices appear to be a contributing cause of the ongoing ground instability.
The ruling also underscores the practical limits of South Dakota’s constitutionally expanded inverse condemnation clause. Although the “or damaged” language gives state property owners broader protections than the federal Takings Clause, those protections are bounded by the requirement that the harmed property be privately owned at the moment the government acts. Attorneys advising property owners near former government-owned mining, resource extraction, or reclamation sites should assess carefully whether relevant governmental activities predated private ownership — and should explore whether tort, nuisance, or statutory reclamation-law theories, rather than inverse condemnation, better fit the facts.