SIDING SALES, INC.; and LYNN OSBORNE; v. WARREN COUNTY WATER DISTRICT and CITY OF BOWLING GREEN, KENTUCKY
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RENDERED:
December 30, 1998; 10:00 a.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1997-CA-002084-MR
SIDING SALES, INC.; LYNN OSBORNE;
and, PAMELA K. OSBORNE
APPELLANTS
APPEAL FROM WARREN CIRCUIT COURT
HONORABLE JOHN MINTON, JR., JUDGE
ACTION NO. 94-CI-000744
v.
WARREN COUNTY WATER DISTRICT and
CITY OF BOWLING GREEN, KENTUCKY
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BUCKINGHAM, HUDDLESTON, AND KNOX, JUDGES.
KNOX, JUDGE: Appellants, Siding Sales, Inc., and its principal
owners, Lynn and Pamela Osborne, appeal from an order of the
Warren Circuit Court granting summary judgment in favor of
appellees.
We affirm.
Appellants, Lynn and Pamela Osborne (the Osbornes), own
commercial property located in the city of Bowling Green,
Kentucky (City).
The Osbornes’ property is leased to appellant,
Siding Sales, Inc. (Siding Sales), a supplier of vinyl siding and
other construction materials.
The road on which the property
fronts constitutes the city/county boundary line.
While the
Osbornes’ property is located within the city limits, the water
mains which service the property are located in the county.
Thus, appellee, Warren County Water District (Water District), is
responsible for providing water to the property.
On April 2, 1994, the building located on the property
owned by the Osbornes and leased to Siding Sales was totally and
completely destroyed by fire.
Deposition testimony from the
local arson investigator, Richard Story, indicates the fire was
started deliberately by persons unknown. Subsequently, the City
issued appellants a building permit for the purpose of
constructing a replacement building on the property, conditioned
upon provision by the Water District of a water supply sufficient
to protect appellants’ property.
Appellants completed the new
building and applied for an occupancy permit.
Meanwhile, the City asked the Water District to
increase the water supply available to the Osbornes’ property.
Ultimately, the City and the Water District split the cost of a
project which enlarged the water line servicing the property and
extended the Water District’s system to a new connection point
with its supplier, Bowling Green Municipal Utilities.
The water
line project took several months to complete, during which period
the City refused to issue an occupancy permit to the Osbornes.
Ultimately, the project was completed in October 1994, the permit
was issued, and Siding Sales resumed normal operation.
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Prior to completion of the project, however, in August
1994, appellants sued the City and the Water District,1 alleging
negligence on their part.
Specifically, they alleged the water
pressure (and, thus, the rate of flow in the water lines) was
insufficient to assist firefighters in their efforts to save
Siding Sales’ building, thereby causing its total destruction.
Additionally, appellants’ complaint set forth a “takings” claim,
alleging the City and the Water District caused an unnecessary
delay in Siding Sales’ ability to resume normal operation,
resulting in a taking of appellants’ private property without
just compensation, in violation of the United States and Kentucky
Constitutions.
Appellants demanded compensatory as well as
punitive damages on their negligence claims, and lost profits on
their takings claims.
The Warren Circuit Court granted summary judgment in
favor of appellees on all claims.
Specifically, as concerns
appellants’ claims of negligence, the trial court found the City
to be exempt from liability under the municipal immunity
provisions of KRS 65.2003.
It appears the court based its
summary judgment in favor of the Water District upon the same
premise, i.e. immunity.
Addressing appellants’ “takings” claims
against both appellees, the trial court found no taking to have
occurred, the acts of appellees having constituted “valid
exercises of the State’s police power.”
Further, the court found
that even if a taking of appellants’ property had occurred, the
1
Appellants also sued Bowling Green Municipal Utilities,
which was subsequently dismissed from the action and is not a
party to this appeal.
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lost profits claimed by appellants are not a proper measure of
damages in takings cases.
Thus, in any event, the court
determined, appellants cannot establish damages on that claim.
Appellants have appealed the issue of immunity as well as the
constitutional “takings” issue.
IMMUNITY
Appellants argue the City negligently: (1) failed to
enforce local fire protection standards during the process of
plat approval; (2) issued a building permit allowing construction
of the original building with knowledge the lot did not comply
with local fire protection safety standards; and, (3) denied
appellants an occupancy permit pending expansion of the water
mains servicing appellants’ property.
Appellants maintain the
City’s actions constituted its “ministerial” duties and that
under both statutory law and case law, the City is not exempt
from liability for negligence “arising out of acts or omissions
of its employees in carrying out their ministerial duties.”
KRS
65.2003(3)(e).
KRS 65.200-65.2006 constitutes the Claims Against Local
Governments Act.
Specifically, KRS 65.2003(3) exempts a “local
government” (i.e. a city) from liability for injuries or losses
resulting from:
Any claim arising from the exercise of
judicial, quasi-judicial, legislative or
quasi-legislative authority or others,
exercise of judgment or discretion vested in
the local government, which shall include by
example, but not be limited to:
(a) The adoption or failure to adopt any
ordinance, resolution, order, regulation, or
rule;
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(b) The failure to enforce any law;
(c) The issuance, denial, suspension,
revocation of, or failure or refusal to
issue, deny, suspend or revoke any permit,
license, certificate, approval, order or
similar authorization;
(d) The exercise of discretion when in
the face of competing demands, the local
government determines whether and how to
utilize or apply existing resources; or
(e) Failure to make an inspection.
Nothing contained in this subsection shall be
construed to exempt a local government from
liability for negligence arising out of acts
or omissions of its employees in carrying out
their ministerial duties.
Appellants maintain the rate of flow in their water
lines prior to the fire violated the City’s fire protection
safety standards.
It is not clear from the evidence in the
record whether the City’s ordinances even apply in this matter
since it is the county which is responsible for provision of
water to appellants’ property, nor is it clear that the rate of
flow in the water mains servicing appellants’ property was below
that which the City’s ordinances mandate.
Nonetheless,
appellants essentially allege the City failed to enforce local
regulatory law establishing fire safety standards and as such, we
believe the City is exempt from liability, under the authority of
KRS 65.2003(3)(b), “[t]he failure to enforce any law.”
Further, while appellants’ complaint charges the City
with having caused appellants’ injury, we believe appellants’
allegations are more properly interpreted to constitute charges
that the City failed to prevent their injury by providing
insufficient water to fight a fire set by an arsonist.
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Such a
distinction is significant in this case, and is similar to that
made in Gas Serv. Co. v. City of London, Ky., 687 S.W.2d 144
(1985), wherein it was alleged the city negligently installed the
local sewer system by placing it too close to existing gas lines,
and then failed to properly repair it, causing a natural gas
explosion which destroyed some buildings and damaged others.
The
Court distinguished the allegations before it, i.e. that
affirmative action taken by the city had actually caused
plaintiff’s damages, from those in Grogan v. Commonwealth, Ky.,
577 S.W.2d 4 (1979), in which the city was charged with negligent
failure to enforce local construction safety laws and
regulations, thus failing to prevent a tragic fire at the Beverly
Hills Supper Club in Southgate, Kentucky.
The city, in Grogan,
was found to be exempt from such liability:
As observed in Frankfort Variety, Inc. v.
City of Frankfort, Ky., 552 S.W.2d 653, 655
(1977), our most recent opinion on the
subject, “a city’s relationship to
individuals and to the public is not the same
as if the city itself were a private
individual or corporation, and its duties are
not the same. When it undertakes measures
for the protection of its citizens, it is not
to be held to the same standards of
performance that would be required of a
professional organization hired to do the
job. If it were, it very well might hesitate
to undertake them . . . . A city cannot be
held liable for its omission to do all the
things that could or should have been done in
an effort to protect life and property.”
Grogan, 577 S.W.2d at 5.
The Court in Gas Service Co. noted that under the facts
of Grogan, “the government was not charged with having caused the
injury, but only with having failed to prevent it by proper
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exercise of regulatory functions which have elements appearing
quasi-judicial and quasi-legislative in nature.”
687 S.W.2d at 149.
Gas Serv. Co.,
In a later case, our Supreme Court addressed
allegations that the city of Covington negligently failed to take
proper regulatory steps to shut down a building which violated
fire and safety codes.
S.W.2d 577 (1991).
Bolden v. City of Covington, Ky., 803
The plaintiffs charged the city’s failure to
enforce its safety regulations ultimately caused a fire in that
building, set by an arsonist, to spread next door to the
plaintiff’s building.
The Court found the city to be exempt from
liability under the circumstances:
Tort liability does not extend to “cases
where the ‘government takes upon itself a
regulatory function,’ Brown, supra at 498,
which is different from any performed by
private persons or in private industry, and
where, if it were held liable for failing to
perform that function, it would be a new kind
of tort liability.” Gas Service, supra, 687
S.W.2d at 149.
Id. at 581.
In the present case, we believe the City’s role was
regulatory in nature, as was the case in Bolden.
As such, we
agree with the trial court that the City is exempt from liability
under these circumstances.
The City’s refusal to issue an occupancy permit for
appellants’ new building, pending expansion of the water lines
serving appellants’ property, constituted not only regulatory
action on the City’s part, but also discretionary action, given
its imposition of conditional occupancy dependent upon a
sufficient water supply.
We believe these circumstances fall
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under KRS 65.2003(3)(c) and, as such, the City is exempt from
liability for negligence in this case.
Appellants allege the Water District negligently: (1)
placed its stamp on the subdivision plat creating appellants’
lot; (2) failed to provide sufficient water to assist
firefighters; and, (3) failed to make capital improvements to its
system in a timely manner, delaying Siding Sales’ ability to
resume normal operation.
The Water District maintains it is
exempt from liability for these alleged acts of negligence under
the theories of both sovereign immunity and statutory immunity.
We find it to be exempt under statutory authority.
The Water District is a special district created by the
Warren County Fiscal Court pursuant to KRS Chapter 74 (Water
Districts), in accordance with the procedures set forth in KRS
65.805-65.830 (creation of a nontaxing special district).
As
such, it is a “local government” under the Claims Against Local
Governments Act, KRS 65.200-65.2006, defined as “any city
incorporated under the law of this Commonwealth, the offices and
agencies thereof, any county government or fiscal court, any
special district . . . created or controlled by a local
government.”
KRS 65.200(3).
(Emphasis added).
For the same
reasoning we have set forth above supporting the City’s exemption
from liability for alleged acts of negligence, we find the Water
District to be exempt from such liability.
Further, as concerns the water line expansion project,
undertaken after destruction of appellants’ original building,
appellants do not allege negligence in the actual construction of
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the project, nor do they allege the project failed to increase
the water supply to an adequate level.
Essentially, they
challenge the Water District’s exercise of discretion in
determining how to best use its limited resources to upgrade the
water supply.
However, under KRS 65.2003(3)(d), we believe the
Water District is exempt from liability in the face of such
allegations.
The purpose of summary judgment is “to expedite the
disposition of cases and avoid unnecessary trials when no genuine
issues of material fact are raised . . . .”
Steelvest, Inc., v.
Scansteel Serv. Ctr., Ky., 807 S.W.2d 476, 480 (1991).
It should
be used only when, as a matter of law, “it appears that it would
be impossible for the respondent to produce evidence at the trial
warranting a judgment in his favor.”
Id.
Given the status of
both the City and the Water District as “local governments” under
the Claims Against Local Governments Act, and given the
provisions of KRS 65.2003 as well as case law addressing the
question, we believe the trial court correctly determined
appellees to be exempt from liability for negligence under the
circumstances, and correctly granted summary judgment in favor of
appellees.
TAKINGS CLAIM
Appellants allege the City’s refusal to issue an
occupancy permit for the replacement building constructed on the
property following the fire, and the Water District’s completion
of the water line construction project in an untimely manner,
delayed Siding Sales’ ability to resume normal operation for a
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period of several months.
This delay, they claim, resulted in a
taking of their property without just compensation.
Appellants’
property was destroyed by fire on April 2, 1994, and they
completed construction of their replacement building in July
1994.
Although they began using that portion of the building
comprising their office space immediately thereafter, apparently,
they were unable to utilize their warehouse until October or
November.
They claim lost profits as their damages, i.e. costs
incurred in using temporary facilities and in advertising their
temporary location.
In disposing of appellants’ takings claim,
the trial court stated in its order:
A “taking” has been defined as “the
entering upon private property and devoting
it to public use so as to deprive the owner
of all beneficial enjoyment.” Commonwealth
Natural Resources and Environmental
Protection Cabinet v. Stearns Coal & Lumber
Co., Ky., 678 S.W.2d 378, 381 (1984).
Whenever a “taking” occurrs [sic], the
property owner is entitled to be justly
compensated. Commonwealth Dept. Of Highways
v. Gisborne, Ky. App., 391 S.W.2d 714 (1965).
Given these definitions, the Court has been
hard pressed to find any case law supporting
the plaintiffs’ claim that the defendants’
actions herein constitute a taking. In fact,
the holdings in City of Louisville v.
Thompson, Ky., 339 S.W.2d 869 (1960) and
V.T.C. Lines, Inc. v. City of Harlan, Ky.,
313 S.W.2d 573 (1957), summarily refute the
plaintiffs’ taking claim. In those cases,
the courts determined that actions similar to
the defendants[’] were valid exercises of the
State’s police power.
In addressing this issue it must be noted
that the plaintiffs’ claim is based solely on
lost profits. However, even if the
plaintiffs’ allegations were true and the
Water District’s and City’s action did
constitute a taking, lost profits are not a
proper measure of damages in a “takings”
case. In Commonwealth Dept. of Highways v.
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Siler, Ky., 487 S.W.2d 926 (1972), the
Kentucky Supreme Court made that rule very
clear when it stated as follows: “If there is
one thing about which there seems to be
unanimity of opinion on this subject, it is
that the injury to business or lost profits
is not a proper element of compensation for
land taking in condemnation proceedings.”
We agree with the trial court’s assessment of the case,
and find that the regulation of the use of appellants’ property
under the circumstances constituted a valid exercise of police
power and, therefore, did not constitute a taking of appellants’
property.
“The right to conduct a business is subordinate to the
police power of the state reasonably exercised in the public
interest.”
Jasper v. Commonwealth, Ky., 375 S.W.2d 709, 711
(1964) (citations omitted).
The real question, according to the
Jasper court, is whether appellees’ acts constituted “a
reasonable regulation of appellants’ business in the furtherance
of a substantial public purpose.”
Id.
We believe they did.
Certainly, upgrading the provision of fire protection and water
services already afforded citizens promotes their well-being and
furthers the policy promulgated by the local government of
ensuring those services are adequate.
Denying a property owner
occupancy of his building pending completion of upgraded services
is a legitimate way in which to further the policy.
Although appellants would have us believe they have
been unfairly singled out for such treatment, we do not believe
that is the case.
The United States Supreme Court has
consistently distinguished between situations
in which a government physically and
permanently occupies or takes title to
property, or in effect destroys the
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claimant’s rights in property, and those in
which the government merely regulates the use
of the property. Certainly, governments are
entitled to regulate landowners’ use of
property, and compensation generally is
required as a result of regulations
only if considerations such as the
purpose of the regulation or the extent
to which it deprives the owner of the
economic use of the property suggest that
the regulation has unfairly singled out
the property owner to bear a burden that
should be borne by the public as a whole.
Natural Resources and Envtl. Protection Cabinet v. Kentucky
Harlan Coal Co., Ky. App., 870 S.W.2d 421, 425 (1993) (citations
omitted).
Appellees neither physically nor permanently occupied
appellants’ property, nor did appellees strip appellants of any
rights in their property.
Appellants were able to use their
building, albeit on a limited basis, immediately following
completion of their replacement building.
Appellees merely
regulated appellants’ use of their property pending the provision
of upgraded water lines, and we do not find that in so doing,
appellants were unfairly singled out.
We believe the trial court
properly granted summary judgment in favor of appellees.
For the foregoing reasons, we affirm the order of the
Warren Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANTS:
BRIEF FOR WARREN COUNTY WATER
DISTRICT:
Stephen B. Catron
Bowling Green, Kentucky
Dennis Gaines Penn
Bowling Green, Kentucky
BRIEF FOR CITY OF BOWLING
GREEN, KENTUCKY:
Patrick J. Murphy
Lexington, Kentucky
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