BERNICE SHIPP V. THOMAS LOGSDON; and SHERRY LOGSDON
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RENDERED:
OCTOBER 25, 2002; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-001163-MR
BERNICE SHIPP
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE JUDITH E. McDONALD-BURKMAN, JUDGE
ACTION NO. 99-CI-006783
V.
THOMAS LOGSDON; and
SHERRY LOGSDON
APPELLEES
OPINION
AFFIRMING IN PART, AND VACATING AND REMANDING IN PART
* * * * * * * *
BEFORE:
EMBERTON, Chief Judge; BUCKINGHAM and GUDGEL, Judges.
GUDGEL, JUDGE:
This is an appeal from a judgment entered by the
Jefferson Circuit Court in a case involving real estate and
eminent domain issues.
For the reasons stated hereafter we
affirm in part, and vacate and remand in part.
Appellant Bernice Shipp was the owner of certain
property, including a small retail building and a parking area,
bordered by Shelbyville Road in Jefferson County.
The property,
hereinafter referred to as the original tract, was leased to a
dry cleaning business until early 1997.
Throughout the lease
period Shipp and the lessee believed that Shipp's tract included
an adjacent paved area, hereinafter referred to as the adjacent
tract, which was used for parking and for the placement of a sign
identifying the business.
However, it was later determined that
the adjacent tract was owned by the state.
On July 28, 1997, Shipp and appellees Thomas and Sherry
Logsdon executed a lease which included an option to purchase the
original tract.
The lease/option provided that "[i]f buyers
exercise option to purchase said property - any money from state
will be applied to purchase price of land at west end of building
and seller will be out no expense."
The lease period commenced
on August 1, 1997, and the Logsdons utilized the adjacent tract
for parking although all parties knew that the tract belonged to
the state.
Meanwhile, plans were made for a major road renovation
project affecting the portion of Shelbyville Road adjacent to
Shipp's property.
On September 12, 1997, the state offered Shipp
$65,900 for certain interests in the original tract, including
$2,900 for a temporary construction easement and $63,000 for the
parking area.
Although the amount of compensation remained open
for negotiation, on September 17 Shipp and the state executed a
right of entry agreement whereby the state acquired possession of
the original tract's parking area plus a temporary construction
easement.
It is undisputed that because the right of entry
agreement eliminated most parking spaces located on the original
tract, that tract was rendered worthless for retail use unless
the adjacent tract could continue to be used for parking.
The
parties had anticipated that Shipp would purchase the adjacent
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tract, but the state's proposed purchase price of $54,000
apparently far exceeded Shipp’s expectation as to cost and no
purchase was made.
Moreover, although the Logsdons exercised
their option to purchase the original tract in July 1999, Shipp
refused to purchase the adjacent tract with the money which the
state was to pay for the right of entry and easement.
Because of
the controversy over entitlement to that money, the state
retained those funds.
Eventually, the trial court concluded that
the Logsdons were entitled to the benefit of the entire $65,900
payable by the state.
This appeal followed.
First, Shipp contends that the trial court erred by
failing to fix a date of taking of the original tract which would
establish the parties' respective rights to compensation.
We
disagree.
The record shows that the parties executed the
lease/option agreement on July 28, 1997, which was some eight
weeks before Shipp and the state executed the right of entry
agreement.
Although the lease/option document may have been
inartfully worded by stating that "[i]f buyers exercise option to
purchase said property - any money from state will be applied to
purchase price of land at west end of building and seller will be
out no expense," that specific wording nevertheless clearly takes
precedence over general legal principles regarding the relative
interests of buyers and sellers in eminent domain situations.
Given the fact that the lease/option specifically mandated that
any money paid by the state would be applied toward the adjacent
tract's purchase if the Logsdons purchased the original tract, it
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follows that the court was not required to determine the date
when the original tract was taken by the Logsdons.
Hence, the
court did not err by failing to do so.
Next, Shipp contends that the Logsdons, as holders of
"an unexercised option to purchase real estate on the date of
taking by eminent domain," lacked "a compensable interest in the
property."
However, there is no merit to this contention since
it is clear that the parties specifically provided by contract,
in the clause quoted in the preceding paragraph, that the
Logsdons would have a compensable interest in proceeds paid by
the state for the original tract if they decided, at any time
during the lease period, to exercise their option to purchase
that tract.
Next, Shipp contends that the trial court erred by
enforcing the agreed restriction on her right to receive the
compensation to be paid by the state.
We disagree.
As noted above, the parties specifically provided in
the lease/option agreement that "[i]f buyers exercise option to
purchase said property - any money from state will be applied to
purchase price of land at west end of building and seller will be
out no expense."
Contrary to Shipp's contention, it is not fatal
to the Logsdons’ position that the state was not named as a party
since the parties’ dispute centers not on whether the state would
pay compensation, but instead on the disposition of those funds
and any property purchased with the funds.
Moreover, we are not persuaded by Shipp's assertion
that the parties made a mutual mistake in the lease/option
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agreement by failing to address the issue of whether Shipp was
obligated to purchase and convey the adjacent tract to the
Logsdons if they purchased the original tract.
It was admitted
that the original tract has little retail value unless the
adjacent tract is available for parking, and that the adjacent
tract has little value except for use in connection with the
original tract.
Given the absence of any real controversy
concerning the relationship between the two tracts, the trial
court did not abuse its discretion by resolving any ambiguity in
the language of the lease/option agreement by finding that the
parties agreed the adjacent tract would be purchased and conveyed
to the Logsdons in the event they exercised their option to
purchase the original tract.
Indeed, this is the only
construction of the agreement which makes sense, since the
language of the disputed clause would be extraneous and
unnecessary if the parties intended that Shipp would acquire and
retain the adjacent tract for her own benefit regardless of
whether the Logsdons exercised their option to purchase the
original tract.
It necessarily follows, therefore, that the only
logical conclusion is that when the lease/option agreement was
executed, the parties intended that the Logsdons, by the exercise
of their option to purchase, would be entitled to acquire both
the original and the adjacent tracts.
Finally, we are not
persuaded by Shipp's assertion that the lease/option agreement
should be set aside because the purchase price of the adjacent
tract greatly exceeded the anticipated purchase price.
Indeed,
it is clear that a mistake regarding a future event, such as the
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proposed purchase here, does not constitute a material mistake
which permits a contract to be set aside.
See Restatement
(Second) of Contracts §151 cmt. a (1981).
Next, Shipp asserts that even if the Logsdons are
entitled to the adjacent tract, she is entitled to retain any
amount by which the compensation payable by the state for the
original tract exceeds the purchase price payable to the state
for the adjacent tract.
For the reasons stated hereafter, we
vacate the court’s judgment as to this issue and remand the
matter for further proceedings.
KRS 416.660 provides:
(1) In all actions for the
condemnation of lands under the
provisions of KRS 416.550 to 416.670,
except temporary easements, there shall
be awarded to the landowners as
compensation such a sum as will fairly
represent the difference between the
fair market value of the entire tract,
all or a portion of which is sought to
be condemned, immediately before the
taking and the fair market value of the
remainder thereof immediately after the
taking, including in the remainder all
rights which the landowner may retain in
the lands sought to be condemned where
less than the fee simple interest
therein is taken, together with the fair
rental value of any temporary easements
sought to be condemned.
(2) Any change in the fair market
value prior to the date of condemnation
which the condemnor or condemnee
establishes was substantially due to the
general knowledge of the imminence of
condemnation or the construction of the
project shall be disregarded in
determining fair market value. The
taking date for valuation purposes shall
be either the date the condemnor takes
the land, or the date of the trial of
the issue of just compensation,
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whichever occurs first.
added.)
(Emphasis
Here, the right of entry agreement clearly provided
that although the amount of compensation to be paid was still
undecided when the agreement was executed, the state was
immediately entitled to enter and possess the portion of the
original tract which was described in the agreement.
Thus,
regardless of when the state may have physically entered the
property, the taking of the property occurred and Shipp lost all
right to use and possess that property on the date the agreement
was executed.
Moreover, although the Logsdons acquired a lease/option
on the property before the right of entry agreement was executed
in September 1997, they were merely holders of an option to
purchase which was not exercised until nearly two years later.
As a result, they are not entitled to damages stemming from the
taking except to the extent that their outstanding leasehold
interest may have diminished the market value of the original
tract prior to the execution of the right of entry agreement.
See Gulf Interstate Gas Co. v. Garvin, Ky., 368 S.W.2d 309, 313
(1963); Commonwealth, Department of Highways v. Sherrod, Ky., 367
S.W.2d 844 (1963).
Thus, the trial court erred by determining
that the Logsdons are entitled to receive the difference between
the amount paid by the state for the original tract and the
purchase price of the adjacent tract, and that finding must be
set aside.
On remand, the court should determine the amount by
which the compensation paid for the original tract exceeds the
amount used to purchase the adjacent tract, and then value the
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parties' respective interests in the original tract at the time
the right of entry agreement was executed.
The court should then
divide the excess compensation in proportion to those respective
interests.
See Gulf Interstate, 368 S.W.2d at 313; Sherrod, 367
S.W.2d 844.
Finally, Shipp contends that the trial court erred by
failing to award to her, rather than to the Logsdons, the amount
paid by the state for the temporary easement.
Again, we vacate
the court’s judgment as to this issue and remand the matter for
further proceedings.
As stated above, KRS 416.660(1) provides that
"landowners" shall be compensated for land permanently taken,
"together with the fair rental value of any temporary easements
sought to be condemned."
Moreover, "the taking date for
valuation purposes shall be either the date the condemnor takes
the land, or the date of the trial of the issue of just
compensation, whichever occurs first."
KRS 416.660(2).
Here, the temporary easement was taken and the state
acquired the right to enter the property when the right of entry
agreement was executed in September 1997.
This is true
regardless of when the state physically entered the property.
the Logsdons clearly were lessees rather than "landowners" in
As
September 1997, the trial court erred by determining that they
were entitled to the entire amount awarded as compensation for
the temporary easement.
Instead, as noted above, on remand the
court should value the Logsdons' interests in the compensation
paid for the temporary easement by fixing the value of the
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parties' respective interests in the original tract as of the
date on which the agreement was executed, and it should then
divide that compensation in proportion to those interests.
See
Gulf Interstate, 368 S.W.2d 309; Sherrod, 367 S.W.2d 844.
The court's judgment is affirmed in part, and vacated
and remanded in part for further proceedings consistent with the
views expressed in this opinion.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEES:
Henry K. Jarrett, III
Louisville, KY
Lester I. Adams, Jr.
Louisville, KY
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