SOUTHSIDE REAL ESTATE DEVELOPERS, INC. () VS. PIKE COUNTY FISCAL COURT
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RENDERED: SEPTEMBER 4, 2009; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-001534-MR
SOUTHSIDE REAL ESTATE
DEVELOPERS, INC.
v.
APPELLANT
APPEAL FROM PIKE CIRCUIT COURT
HONORABLE EDDY COLEMAN, JUDGE
ACTION NO. 05-CI-01146
PIKE COUNTY FISCAL COURT
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: LAMBERT, MOORE, AND VANMETER, JUDGES.
VANMETER, JUDGE: A county fiscal court’s authority to sell real property is
governed by KRS1 67.080 and 67.0802. The issue we address in this case is
whether the Pike Circuit Court erred in its determination that the Pike County
Fiscal Court’s failure to comply with the requirements of the latter statute prevents
1
Kentucky Revised Statutes.
Southside Real Estate Developers, Inc. from maintaining an action to compel a
conveyance from the Fiscal Court. Finding no error, we affirm.
I.
Factual Background.
The facts giving rise to this controversy are neither complicated nor
disputed. In the 1980s, the United States government undertook a Flood Control
Project2 in Pike County, which included the purchase of a number of small tracts of
property. 3 In an agreement dated August 1, 1983, the Fiscal Court agreed “not to
convey or otherwise dispose of any land ownership within the Project area without
written approval” of the United States. In 1998, after completion of the Project,
the United States conveyed to the Fiscal Court a number of small parcels,
including one designated as “Tract No. 1839,” a 0.37-acre piece of property
located adjacent to U.S. Route 119.
In 2002, Pike County magistrate Stirl E. Harris approached the federal
government about the possibility of one of his constituents obtaining Tract No.
1839 in exchange for another tract, which purportedly would be more suitable for
wildlife habitat mitigation than Tract No. 1839. Harris presented this matter to the
Fiscal Court at a meeting on December 16, 2002. Following a discussion, as
2
The Tug Fork Valley Flood Control Project was authorized by the Energy and Water
Development Appropriation Act, 1981, Pub. L. 96-367, Title II, § 202, 94 Stat. 1331.
3
The preamble of the deed by which the federal government conveyed the property to the Fiscal
Court recited the tracts necessity for the operation, management, and maintenance of the Project,
“including construction of mitigation features and areas to mitigate loss and damage to wildlife
habitat due to construction of the Project[]” and the Fiscal Court’s corresponding obligation “to
operate, manage and maintain [the] mitigation features and areas.”
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reflected in the Fiscal Court’s minutes, the following motion was made, seconded
and approved:
THE PIKE COUNTY FISCAL COURT HEREBY
AUTHORIZES an exchange of mitigation property to
replacement property owned by Denny Moore contingent
upon sign off of proper letter of approval by the United
States Corps of Engineers, a title search by Pike County
to be paid for by the replacement grantor who will
prepare the deed for this property and a quitclaim deed
for the mitigation property. (Ref. Court Ord. No. 12-1602.006)
After receiving input from several agencies, the federal government,
through the U. S. Army Corps of Engineers, approved the transfer by letter dated
December 31, 2002, recommending “that the [Fiscal Court] assure itself that the
replacement lands are unencumbered and that title to the replacement tract is
secured by the [Fiscal Court] prior to the conveyance of the current mitigation tract
(Tract No. 1839) to the acquiring party.”
For reasons unclear from the record, the contemplated transfer of
property did not occur, and the Fiscal Court took no further action concerning this
matter until March 1, 2004. On that date, the Fiscal Court discussed whether KRS
67.0802 had been properly followed. The Fiscal Court unanimously approved the
following:
THE PIKE COUNTY FISCAL COURT HEREBY
APPROVES rescinding Court Order No. 12-16-02.006
which concerns sale of mitigation property. The Court
did not properly follow the Kentucky statutory law for
such sale and that particular court order is improper.
(Ref. Court Ord. No. 03-01-01.009)
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In August 2005, Southside, a corporation of which Moore is
apparently the president, filed this action against the Fiscal Court seeking
enforcement of the transaction which the Fiscal Court contemplated and approved
in December 2002. Following a bench trial, the trial court issued Findings of Fact,
Conclusions of Law and Judgment in favor of the Fiscal Court. Essentially, the
trial court concluded that the Fiscal Court’s December 2002 order did not
sufficiently comply with KRS 67.0802. Southside appeals.
II.
Standard of Review.
Our standard of review in this matter is two-fold. First, the trial
court's “[f]indings of fact shall not be set aside unless clearly erroneous, and due
regard shall be given to the opportunity of the trial court to judge the credibility of
the witnesses.” CR4 52.01. Second, any “interpretation of a statute is a matter of
law.” Commonwealth v. Gaitherwright, 70 S.W.3d 411, 413 (Ky. 2002). Thus,
the construction and application of statutes are interpreted “de novo without
deference to the interpretations adopted by lower courts.” Wheeler & Clevenger
Oil Co. v. Washburn, 127 S.W.3d 609, 612 (Ky. 2004). As noted, the facts in this
matter are not disputed. Thus, our determination is largely a matter of construing
KRS 67.0802.
III.
Issues on Appeal.
Southside makes two arguments on appeal. First, Southside asserts
that the December 2002 order complied with KRS 67.0802. Second, it contends
4
Kentucky Rules of Civil Procedure.
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that whether the December 2002 order complied with the state statute is irrelevant,
since the transfer of property is subject only to regulations or requirements
imposed by the federal government.
A.
Compliance with KRS 67.0802.
With respect to Southside’s first argument, that the Fiscal Court
complied with KRS 67.0802 and therefore was obligated to complete the
contemplated exchange of property, the starting point must be a fiscal court’s
ability to sell real estate. The law is clear that a fiscal court has only those powers
authorized by the legislature. Bates v. Greenup County, 282 Ky. 268, 271, 138
S.W.2d 463, 465 (1940). Furthermore, any person dealing with a fiscal court is
assumed to know the law, as well as any limitations on the fiscal court’s powers
and authority. See Boyd Fiscal Court v. Ashland Pub. Library Bd. of Trs., 634
S.W.2d 417, 418 (Ky. 1982) (stating party had “ample notice of the fiscal court's
limited capacity to contract”). Although KRS 67.080(1)(b) provides general
authority for a fiscal court to “[s]ell and convey any real estate . . . belonging to the
county,” a conveyance or sale of real estate must also be made “in accordance with
KRS 67.0802[.]” KRS 67.080(1)(b) 2.
KRS 67.0802 in turn sets out two major requirements for the sale of
property:
(2) Before selling or otherwise disposing of any real or
personal property, the county shall make a written
determination setting forth and fully describing:
(a)
The real or personal property;
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(b)
Its intended use at the time of acquisition;
(c) The reasons why it is in the public interest to
dispose of it; and
(d)
(3)
The method of disposition to be used.
Real or personal property may be:
(a) Transferred, with or without compensation,
to another governmental agency;
(b) Sold at public auction following publication
of the auction in accordance with KRS
424.130(1)(b);
(c) Sold by electronic auction following
publication of the auction, including the uniform
resource link (URL) for the site of the electronic
auction, in accordance with KRS 424.130(1)(b); or
(d) Sold by sealed bids in accordance with the
procedure for sealed bids under KRS 45A.365(3)
and (4).
In this case, many of the trial court proceedings appear to have
focused on whether the Fiscal Court’s December 16, 2002, minutes sufficiently
complied with KRS 67.0802(2). However, as argued by the Fiscal Court, the
proposed transaction in no way made any pretense of satisfying the provisions of
KRS 67.0802(3), which obviously require either a transfer to another governmental
agency, or a public sale by auction or sealed bid. We recognize that the trial court
decided this case under subsection (2), “an appellate court may affirm the decision
of a trial court for any reason sustainable under the record.” Lynn v.
Commonwealth, 257 S.W.3d 596, 599 (Ky.App. 2008) (citing Brewick v. Brewick,
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121 S.W.3d 524, 527 (Ky.App. 2003)). As the proposed transaction clearly did not
comply with KRS 67.0802, the trial court did not err in so holding.
B.
Federal Law Preemption.
Southside’s second argument is, essentially, that any requirements
imposed by KRS 67.0802 are preempted by federal law. Southside does not
provide in its brief “a statement with reference to the record showing whether the
issue was properly preserved for review and, if so, in what manner.” CR
76.12(4)(c)(v). The importance of this rule is to ensure that “the trial court should
first be given the opportunity to rule on questions before they are available for
appellate review.” Elwell v. Stone, 799 S.W.2d 46, 48 (Ky.App. 1990). An
exception to this rule exists “to avert a manifest injustice.” Id. Another occurs
when the record sufficiently demonstrates that the issue presented in the appellate
court was contested before the trial court, Baker v. Campbell County Bd. of Educ.,
180 S.W.3d 479, 481-82 (Ky.App. 2005). Here, the trial court record is neither
lengthy nor ponderous, and we note that Southside made a passing reference to this
issue in its opening statement at the bench trial before the court. Thus, we will
address it briefly.
In Gustafson v. City of Lake Angelus, 76 F.3d 778, 782-83 (6th Cir.
1996), the Sixth Circuit Court of Appeals provided a concise discussion of the
parameters of preemption:
The doctrine of preemption springs from the
Supremacy Clause of the Constitution: “[t]he
Constitution and the Laws of the United States which
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shall be made in Pursuance thereof . . . shall be the
supreme Law of the Land.” U.S. Const., art. VI, cl. 2;
Fidelity Federal Savings & Loan Ass'n v. de la Cuesta,
458 U.S. 141, 152, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664
(1982). As interpreted by Chief Justice Marshall, “in
every case, the act of Congress, or the treaty, is supreme;
and the law of the state, though enacted in the exercise of
powers not controverted, must yield to it.” Gibbons v.
Ogden, 22 U.S. (9 Wheat.) 1, 6 L.Ed. 23 (1824).
Preemption is predicated on congressional intent. The
will of Congress to monopolize an area of legislation
may be expressed in the authorizing statute and in the
regulations enacted pursuant to that statute.
Hillsborough County, Florida v. Automated Medical
Labs., Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 2375, 85
L.Ed.2d 714 (1985).
A statute may be construed as preemptive under
three circumstances. Id. First, Congress, in enacting a
federal statute, may express a clear intent to preempt
state law. Pacific Gas & Electric Co. v. State Energy
Resources Conservation & Development Comm'n, 461
U.S. 190, 203, 103 S.Ct. 1713, 1721-22, 75 L.Ed.2d 752
(1983). Second, absent express preemption, federal law
may have an implied preemptive effect if Congress
revealed this intent by “occupying the field” of
regulation. Silkwood v. Kerr-McGee Corp., 464 U.S.
238, 248, 104 S.Ct. 615, 621, 78 L.Ed.2d 443 (1984).
There is implied preemption when there is a “scheme of
federal regulation . . . so pervasive as to make reasonable
the inference that Congress left no room for the States to
supplement it” or “because the Act of Congress may
touch a field in which the federal interest is so dominant
that the federal system will be assumed to preclude
enforcement of state laws on the same subject.” Fidelity
Federal Savings & Loan Ass'n, 458 U.S. at 153, 102
S.Ct. at 3022. There is a third type of preemption when
state law actually conflicts with federal law. Such
conflict occurs where “compliance with both federal and
state regulations is a physical impossibility,” Florida
Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132,
142-43, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963), or
where state law “stands as an obstacle to the
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accomplishment and execution of the full purposes and
objectives of Congress.” Hines v. Davidowitz, 312 U.S.
52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941).
The focus of a preemption inquiry is on
congressional intent.
We also note that “[p]re-emption of state law by federal statute or
regulation is not favored ‘in the absence of persuasive reasons—either that the
nature of the regulated subject matter permits no other conclusion, or that the
Congress has unmistakably so ordained.’” Chicago & N. W. Transp. Co. v. Kalo
Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258 (1981)
(quoting Florida Lime & Avocado Growers, 373 U.S. at 142, 83 S.Ct. at 1217).
In this instance, Southside appears to argue that, because the Fiscal
Court accepted conveyance of the property under the 1983 Agreement (which
prohibited any conveyance without the approval of the federal government), the
only requirement for transfer of the property was approval of the federal
government. Thus, any state laws which impose additional requirements on a
transfer are preempted. However, in support of its argument, Southside points only
to (1) the Energy and Water Development Appropriation Act, 1981, which was the
original appropriation for the Project, (2) the Energy and Water Development
Appropriation Act, 1992,5 which provided the supplemental appropriation to finish
the Project, 33 C.F.R. § 208.10 governing local flood protection works, and (3) the
1983 Agreement. In no way, shape or form do any of these items manifest
5
Energy and Water Development Appropriations Act, 1992, Pub. L. 102-104, Title I, 105 Stat.
510.
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Congressional intent to preempt state requirements on the transfer of real estate
owned by counties. No express preemption exists, such as was evident in Kinley
Corp. v. Iowa Utils. Bd., Utils. Div., Dep’t of Commerce, 999 F.2d 354, 358 (8th
Cir. 1993) (holding that the statutory language of the Hazardous Liquid Pipeline
Safety Act of 1979, 49 U.S.C. §2002(d), that “‘[n]o State agency may adopt or
continue in force any safety standards applicable to interstate pipeline facilities or
the transportation of hazardous liquids associated with such facilities[,]’”
constituted Congress’ express “intent to preempt the states from regulating in the
area of safety in connection with interstate hazardous liquid pipelines”). Further,
no “‘scheme of federal regulation [exists which is] . . . so pervasive as to make
reasonable the inference that Congress left no room for the States to supplement
it[.]’” Fidelity Federal Sav. & Loan Ass'n, 458 U.S. at 153, 102 S.Ct. at 3022
(quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152,
91 L.Ed. 1447 (1947)). See, e.g., R. J. Corman R. R. Co./Memphis Line v.
Palmore, 999 F.2d 149, 152-53 (6th Cir. 1993) (holding that more than a century
of comprehensive federal regulation of railroads, including “rates, safety, labor
relations and worker conditions[,] . . . indicates Congress’s general intent that
railroads should be regulated primarily on a national level through an integrated
network of federal law[,]” and that the federal act which established a uniform
workday for railroad employees, but left the amount of pay to labor agreements,
preempted Kentucky legislation which established overtime pay rate for
employees, to the extent the state sought to apply that legislation to railroad
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employees). Finally, compliance with both federal and state requirements,
concerning the transfer of real property subject to the 1983 Agreement, is not
physically impossible. KRS 67.0802 does not conflict with the federal requirement
of prior consent; rather it supplements that requirement.
Our reading of the 1983 Agreement and KRS 67.0802 indicates that
each addresses a different governmental concern. The federal requirement seeks to
ensure that the objectives of the Flood Control Project, i.e., primarily to mitigate
property damage in areas subject to flooding, and secondarily to preserve wildlife
habitat, are not frustrated over time by state or local issues. The state statute, by
contrast, is not directed toward objectives relating to flood control or wildlife
habitat. Instead, its purpose is to ensure that local governments and their taxpayers
receive adequate compensation when local governments decide to sell real
property. As noted by the Supreme Court, the preemption “doctrine does not and
could not in our federal system withdraw from the States . . . the ‘power to regulate
where the activity regulated [is] a merely peripheral concern’ [of] a federal law.”
Chicago & N. W. Transp., 450 U.S. at 317, 101 S.Ct. at 1130 (quoting San Diego
Bldg. Trades Council v. Garmon, 359 U.S. 236, 243, 79 S.Ct. 773, 778, 3 L.Ed.2d
775 (1959)).
IV.
Conclusion.
While federal government consent must first be obtained prior to the
Fiscal Court’s conveyance of any parcel held under the August 1983 agreement,
the other customary requirements for a valid transfer of real property must also be
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met. These requirements included compliance with KRS 67.0802. The trial court
did not err in so holding.
The Pike Circuit Court’s judgment is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Lawrence R. Webster
Pikeville, Kentucky
R. Roland Case
Pikeville, Kentucky
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