DEBILL ENTERPRISES, INC. VS. CITY OF PIKEVILLE, KENTUCKY
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RENDERED: OCTOBER 30, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-000184-ME
DEBILL ENTERPRISES, INC.
v.
APPELLANT
APPEAL FROM PIKE CIRCUIT COURT
HONORABLE EDDY COLEMAN, JUDGE
ACTION NO. 08-CI-01128
CITY OF PIKEVILLE, KENTUCKY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: KELLER, MOORE, AND TAYLOR, JUDGES.
KELLER, JUDGE: This appeal arises from the circuit court’s order authorizing
the City of Pikeville (Pikeville) to take possession through condemnation of real
property belonging to Debill Enterprises, Inc. (Debill). On appeal, Debill argues
that the report of the commissioners was inaccurate; that it was not paid just
compensation prior to condemnation; and that it did not receive due process. For
the reasons set forth below, we affirm.
FACTS
Debill owns a parcel of real property and a 27,000 square-foot
building in Pikeville located adjacent to Thompson Road. Debill leases space in
the building to two businesses and also operates a Mr. Gatti’s restaurant/game
room there. Adjacent to the building is a parking lot that, prior to condemnation,
contained 132 parking spaces.
The Pikeville City Commission began a project to widen Thompson
Road. In order to do so, Pikeville needed to acquire some property in fee simple
and permanent easements across other property adjacent to Thompson Road. In
August 2007, Pikeville offered Debill $103,300.00 for fee simple title to 0.129
acres and for a permanent easement across 0.166 acres. Debill did not respond to
Pikeville’s offer and, on August 11, 2008, Pikeville filed a petition seeking to take
the property through eminent domain. In its petition, Pikeville set out the legal
description of the property to be taken and the reason for the taking. Pikeville
asked the circuit court to appoint “three impartial housekeepers” to act as court
commissioners and for an order and judgment permitting Pikeville to condemn and
take possession of the property.
The court appointed Jimmy England (England), Dusty Layne (Layne),
and Judy Brooks (collectively referred to as the “Commissioners”), to serve as
court commissioners and asked them to review the Debill property in order to
determine its fair market value. The Commissioners, following their charge from
the court, prepared a report finding that the fair market value of the entire tract of
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land was $1,500,000.00, and the fair market value of the property to be taken was
$132,000.00.
Approximately six weeks after the Commissioners filed their report,
Debill filed a motion to dismiss the petition and an objection to Pikeville’s right to
condemn the property. In its petition, Debill complained that the property
description was not accurate; the Commissioners did not view the improvements
on the property, thus making their valuation inadequate; and the Commissioners
did not act in conformity with the law.
Pikeville filed a response arguing that the property description and
Commissioners’ report were accurate and adequate. Furthermore, Pikeville filed a
motion for interlocutory judgment, seeking permission to enter and possess the
property upon payment of the Commissioners’ award to either Debill or the Pike
County Clerk of Court.
The court scheduled and held an evidentiary hearing on the parties’
motions. At the hearing, England testified that he determined the value of the
entire tract by looking at recent sales of comparable real property. In making his
calculation, England did not go into the building or take any measurements of the
building; however, he testified that he had been in the building a number of times
and was familiar with it. Furthermore, although England did not have a map of the
entire parcel, he testified that the boundaries appeared to be fairly obvious.
Finally, England testified that he did not take into consideration how many parking
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spaces might be lost as a result of the taking or whether the taking would impede
access to the rear of the building.
Layne testified that he also used sales of comparable property in
determining the total value of the parcel. Like England, he did not have a map of
the entire parcel, but he was familiar with the apparent boundaries. Although
Layne did not calculate the number of parking spaces that might be lost or the
impact the taking would have on Debill’s business, he testified that he was
concerned that the easement would impede access to the rear of the building.
Debra Slone (Slone), testified that she is the President and majority
shareholder of Debill, which paid $1,600,000.00 for the property and building.
After purchasing the property, Debill made renovations to the building and
resurfaced the parking lot. Slone estimated that the taking would result in the loss
of twenty parking spaces and that Debill would have to move a sprinkler system
near the rear of the building in order to provide access for trucks and buses.
Finally, Slone testified that, if she lost parking spaces, Debill’s franchise with Mr.
Gatti’s might be in jeopardy.
We note that neither England nor Layne could state with precision
how they arrived at the value they assigned to the property to be taken. However,
it appears that value was based on a per-acre value of $450,000.00. Furthermore,
although neither could state at the hearing the acreage of the entire tract, both
indicated that, at the time they made their valuation, they knew the total acreage.
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Following the hearing, the court entered a judgment in favor of
Pikeville. In its judgment, the court first found that Pikeville was authorized to
take the property and that the taking was for a public purpose. The court then
found that Pikeville acted in good faith in negotiating with Debill regarding
purchase of the property. Despite Debill’s protestations to the contrary, the court
found that the Commissioners’ report conformed to the requirements of Kentucky
Revised Statutes (KRS) 416.580(1). In doing so, the court noted that the statute
does not require the Commissioners to use any particular method in valuing
property but that the Commissioners “did more than required by the statute.”
Finally, the court granted Pikeville’s request for an interlocutory judgment and
authorized Pikeville to:
take possession of the property for the purpose of
designing and constructing a roadway with associated
easements as requested in the Petition upon payment to
either the owners of the property or to the Pike Circuit
Court the amount of compensation awarded by the
Commissioners in their report filed therein on September
4, 2008.
Both parties filed exceptions to the Commissioners’ report. Debill
continued its arguments regarding the deficiency of the process and the inadequacy
of the Commissioners’ valuation, and Pikeville argued that the Commissioners’
valuation was inflated. This appeal followed.
STANDARD OF REVIEW
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The facts are not in dispute. Debill raises only issues of law on
appeal, therefore, our review is de novo. Western Kentucky Coca-Cola Bottling
Co., Inc. v. Revenue Cabinet, 80 S.W.3d 787, 790 (Ky. App. 2001).
ANALYSIS
We begin by noting that Debill does not contest Pikeville’s right to
exercise eminent domain over and condemn the property or that the property is
designated for a public use. Debill does, however, contest the validity of the
condemnation procedure generally and as applied in this case. Therefore, we will
limit our analysis to Debill’s complaints about that procedure.
1. Accuracy of Commissioners’ Report
We first address Debill’s argument that the Commissioners’ report
and valuation were inaccurate. KRS 416.550 provides that, if a “condemnor
cannot, by agreement with the owner thereof, acquire the property” needed, the
condemnor may condemn the property pursuant to KRS 416.550 through 416.670.
In order to do so, the condemnor must file a petition pursuant to KRS 416.570,
setting out “[a] particular description of the property and the use and occupation
thereof sought to be condemned; and . . . [a]n application to the court to appoint
commissioners to award the amount of compensation the owner of the property
sought to be condemned is entitled to receive. . . .” The court then must appoint
three commissioners who
shall view the land or material sought to be condemned
and award to the owner or owners such a sum as will
fairly represent the reduction in the market value of the
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entire property, all of or a portion of which is sought to
be condemned, said sum being the difference between the
market value of the entire property immediately before
the taking and the market value of the remainder of the
property immediately after the taking thereof, together
with the fair rental value of any temporary easements
sought to be condemned.
KRS 416.580(1).
Debill argues that the Commissioners’ report and valuation are flawed
because the Commissioners did not take into consideration the improvements to
the property when they did their valuation. Having reviewed the record, we do not
believe that the evidence completely supports Debill’s argument, because both
Layne and England testified that they had been in the building a number of times.
However, assuming the Commissioners completely ignored the improvements,
they were not required by the statute to do otherwise. “Statutory authority rests
solely with the court-appointed commissioners to award just compensation to the
owners of land being condemned.” Corns v. Transp. Cabinet, 814 S.W.2d 574,
578 (Ky. 1991). As noted by Pikeville and the circuit court, the statute does not set
forth any criteria for the Commissioners to follow in valuing the property, simply
stating that the Commissioners “shall view the land or material sought to be
condemned.” KRS 416.580(1). As the Court noted in Corns, if a condemnee is
dissatisfied with the valuation, he may “take exception to the amount of the
commissioners’ award and . . . have that issue determined by a jury.” Corns at
577.
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In this case, Pikeville did not seek to condemn the building; therefore,
under the statute, the Commissioners were not required to view the building. They
were only required to view that which was being condemned, the land. This they
did. Thus, we discern no error in the circuit court’s finding that the
Commissioners’ report met the statutory criteria. Whether the Commissioners’
award is adequate is a matter that Debill can address, if it chooses to do so, in a
trial of its exceptions to the interlocutory judgment under KRS 416.620.
2. Due Process
Debill argues that it was denied due process because: (1) the statute
does not provide for an appeal of an interlocutory order giving the condemnor
immediate possession; (2) it will not have available to it “just compensation”; and
(3) it will be denied the ability to bifurcate its counterclaim alleging bad faith. We
will address each of these sub-issues in the order presented.
KRS 416.620(1) provides that a party displeased with the
interlocutory judgment may file exceptions to that judgment and receive a jury trial
on the issues raised. However, a party may not raise as an issue the right of the
condemnor to condemn the property. Debill argues that this prohibition forecloses
it from challenging on appeal Pikeville’s right to condemn Debill’s property. This
argument fails for two reasons.
First, Debill raised a number of issues before the trial court, all of
which related to the manner in which the condemnation proceeded and the method
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and valuation of the property. Debill did not challenge Pikeville’s right to
condemn the property or that the property was being taken for a public purpose.
Because Debill did not raise those issues before the circuit court, whether the
statute provides a right of appeal on those issues is irrelevant.
Second, although the statute does not provide Debill with a right to
appeal the interlocutory order, the Supreme Court of Kentucky declared that such a
right exists. See Ratliff v. Fiscal Court of Caldwell County, Kentucky, 617 S.W.2d
36, 39 (Ky. 1981). Therefore, Debill’s argument that it does not have a right to
appeal the interlocutory order is without merit.
Debill next argues that it will not have available to it “just
compensation,” alleging that Pikeville did not act in good faith when negotiating
for the purchase of the property. In Commonwealth v. Cooksey, 948 S.W.2d 122
(Ky. App. 1997), this Court held that a condemnor has the obligation to act in good
faith. However, this Court went on to state that a court may “deny the right to take
only where there has been ‘[a] gross abuse or manifest fraud.’” Id. at 123 (internal
citation omitted).
As noted above, Pikeville offered to purchase the property from
Debill for an amount equal to 78 percent of the amount awarded by the
Commissioners. Pikeville then waited a year for a response before filing its
petition to take the property through eminent domain. Nothing in this fact scenario
indicates an absence of good faith on the part of Pikeville in negotiating with
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Debill or in filing its petition. Thus we discern no error in the trial court’s finding
that Pikeville did not act in bad faith.
Finally, Debill argues that it is foreclosed from bifurcating its bad
faith claim from its claim for damages. This argument also fails for two reasons.
First, as noted above, Debill has not put forth any evidence of bad faith. Second,
in Cooksey, this Court stated that the time to bring a bad faith claim is prior to the
trial court’s issuance of an interlocutory order, not afterward. Id. at 123. Debill
did not present any substantive evidence of bad faith prior to the court’s entry of its
interlocutory judgment; therefore, it is precluded from doing so now.
3. Failure to Pay Just Compensation
Debill argues that its property was taken prior to payment of just
compensation. While Debill may dispute whether the compensation was just, the
court’s order required Pikeville to pay the amount awarded by the Commissioners
either to Debill or to the Pike Circuit Court. This is all that is required.
Finally, we note that, although Debill couches its arguments
otherwise, it appears that its real issue is with the amount of compensation awarded
by the Commissioners. As previously noted, Debill is free to pursue that issue
before a jury in a trial based on its exceptions.
CONCLUSION
For the foregoing reasons, we affirm the Pike Circuit Court.
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ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Donald H. Combs
Pikeville, Kentucky
Russell H. Davis, Jr.
Pikeville, Kentucky
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