Kentucky Court Report - SCOKY & COAKY

"Unity rule" for valuation of multiple parcels not followed in Ky condemnation cases: BIANCHI V. CITY OF HARLAN (SC 5/22/2008)

BIANCHI V. CITY OF HARLAN
EMINENT DOMAIN:  "Unity rule" for valuation of multiple parcels not followed in Ky
2006-SC-000895-DG.pdf
PUBLISHED: AFFIRMING
OPINION BY:  ABRAMSON; SCOTT DISSENTING
DATE RENDERED: 5/22/2008

The City of Harlan (“Harlan”) filed petitions to condemn four parcels owned by the Bianchis. The condemned tracts were generally used for parking for its tenants in the neighboring properties. The Bianchis also owned several neighboring properties, most of which were used for retail stores.

The commissioners found a value for the four combined properties, to which both parties filed exceptions. The Bianchis also moved to file a counterclaim seeking compensation for the loss of value their other properties would sustain by the taking of the four properties. A jury awarded the Bianchis $120,000 for taking the four parcels and $43,640 for the lost value of their neighboring properties.

On appeal, the Court of Appeals affirmed the $120,000 award, but reversed the award for lost value because it did not believe the neighboring property could be deemed united for condemnation purposes. The Supreme Court accepted discretionary review.

The Bianchis argued that they were not compensated adequately for the four lots that were taken and that these properties should have been valued as a portion of the Bianchis’ entire holdings. The Court disagreed, stating that the measure of value when a portion of a tract is condemned is the market value of the entire tract immediately before condemnation less the market value of the remainder after condemnation. The Court also stated that the procedure used by the trial court – taking the value of the part taken and adding the value of the harm to the remainder – has been expressly rejected in Kentucky. Moreover, the Court found that the “unity rule,” which sometimes allows two or more parcels to be unified for valuation purposes if it can be shown that they are contiguous and are united in use and ownership, did not apply. The Bianchis had not alleged a necessary or permanent injury to their remaining property or a substantial interference with the continued use of it; injury to business or lost profits is not a proper element of compensation for condemnation. The Supreme Court affirmed the Court of Appeals’ reversal of the judgment on the Bianchis’ counterclaim.

Sam Hinkle

Conditional use permit (restaurant or tea room or catering service) and subsequent adoption of ordinance pending moratorium: THE GREATER HARRODSBURG/MERCER COUNTY PLANNING AND ZONING COMM. v. ROMERO (COA 3/28/2008)

THE GREATER HARRODSBURG/MERCER COUNTY PLANNING AND ZONING COMM. v. ROMERO
ZONING:  Conditional use permit (restaurant or tea room or catering service) and subsequent adoption of ordinance pending moratorium
2006-CA-002623
PUBLISHED: AFFIRMING
PANEL: THOMPSON PRESIDING; BUCKINGHAM, HENRY CONCUR
MERCER COUNTY
DATE RENDERED: 3/28/2008

The Romeros purchased property and prepared to open a bed and breakfast, tearoom and catering service. The property’s zoning permitted bed and breakfasts with a maximum of four rooms as an accessory use. After neighbors complained that the Romeros were operating a restaurant, the Greater Harrodsburg/Mercer County Planning & Zoning Commission (“Commission”) agreed to place a moratorium on tearoom conditional use permits until it adopted a definition for “tearoom.”

Ms. Romero went before the Commission and proposed that her tearoom be operated in two seatings, Monday through Saturday. The Commission then adopted a definition of “tearoom” as a facility open for no more than four hours per day with a capacity to serve a maximum of twenty people per seating. The Mercer County Fiscal Court enacted an ordinance requiring that the operator of a bed and breakfast planning to have a tearoom or cater special events apply to the Board of Adjustments (“Board”) for a conditional use permit.

The Romeros applied to the Board for a permit for additional uses of the property, including catering private parties, Sunday brunches, Sunday special events and a gift shop. The Board found that because the Romeros had engaged in prohibited uses after adoption of the ordinance, the entire operation of the property fell within the ambit of the ordinance. It then imposed several severe restrictions on the Romeros’ use of the property, including restrictions on parking, hours, days open, and number of special events. The Romeros filed a declaratory judgment action requesting a determination that the imposed restrictions on the tearoom and catering of special events were illegally imposed because those uses existed prior to the adoption of the ordinance. The circuit court granted summary judgment to the Romeros finding that their use of the property was a non-conforming use and the ordinance did not apply.

The court of appeals affirmed, holding that the subsequent adoption of the ordinance did not apply to the Romeros’ property because there was no transformation of the inherent nature of the pre-existing primary use.

Digest by Sam Hinkle

Equitable estoppel did not apply in zoning case under facts and zoning action was arbitrary: Sebastian-Voor Properties, LLC, et al. v. Lexington-Fayette Urban County Government, et al. (SC 2/21/2008)

Sebastian-Voor Properties, LLC, et al. v. Lexington-Fayette Urban County Government, et al.
ZONING:  Land Use Planning
PUBLISHED: AFFIRMING
OPINION BY SCHRODER; NOBLE NOT SITTING; ABRAMSON CONCURRING IN RESULT ONLY
DATE RENDERED:  2/21/2008
2006-SC-000732-DG.pdf
NOT PUBLISHED: 930
DATE RENDERED: 2/21/2008

In 1963 the Lexington-Fayette County Planning Commission (“Commission”) approved a preliminary development plan for 122 one-acre lots in an agriculturally zoned area. Only 40 of the lots received final plat approval within the statutorily allowed time. Another 19 lots received approval in 1966 after the preliminary plan was re-approved. In 1967, the zoning regulations were changed to increase the minimum residential lot size from 1 acre to 10 acres. However, over the next 29 years, the Commission, contrary to existing regulations, approved final plats for 17 additional one-acre lots.

In 2002, the property owner applied for preliminary approval for one-acre lots on the remaining 59 acres. The Commission denied approval because the lots did not meet the minimum lot size and did not qualify for septic service. The owner appealed and moved for summary judgment on the grounds of equitable estoppel, arguing that prior approvals created vested property rights. The circuit court denied the motion. The owner again appealed. The court of appeals held that while equitable estoppel may be invoked against a governmental entity under exceptional circumstances, the facts of the case did not rise to that level. The Kentucky Supreme Court granted discretionary review.

The Supreme Court affirmed, stating that the proposed development did not comply with the current zoning regulations so that the Commission’s decision to deny the plan was not arbitrary. It stated that the owner, to develop as proposed, must seek a zone map amendment. The court also affirmed the decision that equitable estoppel did not apply because a public official’s previous erroneous interpretation of the law does not prevent a later proper interpretation.

Digest by Sam Hinkle

Annexation and restrictive covenants: JEWELL V. CITY OF BARDSTOWN, KY (COA 1/25/08)

JEWELL V. CITY OF BARDSTOWN, KY
ANNEXATION:  RESTRICTIVE COVENANT AND ESTOPPEL 
2007-CA-000422
PUBLISHED: AFFIRMING
PANEL:  LAMBERT PRESIDING; VANMETER, KNOPF CONCUR
COUNTY: NELSON
DATE RENDERED: 1/25/2008

The City of Bardstown (the “City”) began annexation proceedings on some unincorporated property. Many residents in the area of this property opposed annexation and filed a petition in opposition to annexation, requesting a public referendum. The Mayor of Bardstown disqualified those persons who signed the petition and whose property was subject to a Consent to Annexation Agreement. This agreement was entered into by the developers of the property in exchange for the City’s agreement to provide water and sewer services to the neighborhood, and ran with the land. Because of the disqualification, there were not enough signatories for a referendum. The annexation was completed. The residents filed suit challenging the mayor’s actions, but the circuit court affirmed the annexation.

On appeal, the court acknowledged that there are no Kentucky cases discussing whether a restrictive covenant consenting to annexation that runs with the land can estop land owners from signing a petition in opposition to annexation. However, the court looked at cases from other jurisdictions, all of which held that the landowners were estopped from revoking their consent to annexation by purchasing land subject to annexation-consent covenants, and believed that they were consistent with Kentucky’s annexation statutes. The court reasoned that the landowners gave consent to annexation in return for the valuable consideration from the City of the provision of city water and sewer services, and should be estopped from receiving the benefits of the bargain without the obligations. It therefore affirmed the circuit court’s ruling.

Samuel Hinkle

Condemnation and substituted parties: HUNSAKER V. COM. (SC 11/21/2007)

HUNSAKER V. COM.
CONDEMNATION:  REPAYMENT AND SUBSTITUTE PARTIES' OBLIGATION
2005-SC-000974-DG.pdf
PUBLISHED: AFFIRMING
OPINION BY SCHRODER; SCOTT DISSENTS BY SEP. OP.
DATE RENDERED: 11/21/2007

A condemnation action was brought against Mildred Hunsaker. The trial court entered an interlocutory order granting possession to the Commonwealth and setting the property value at $657,782.50. Due to the court order, Ms. Hunsaker was able to withdraw this amount paid to the court, which she did. The Commonwealth filed exceptions to the Commissioner’s report, claiming the evaluation was excessive.

Five to six years later, after Ms. Hunsaker had conveyed her interest in the property to her daughters and had died, the daughters were substituted for Ms. Hunsaker in the action by agreed order. At trial, the jury set the value of the property at $300,000. The court’s judgment required the daughters to pay the Commonwealth the excess that Ms. Hunsaker had received, plus interest. On appeal, the daughters argued that they should not be required to pay because they had not received any of the money Ms. Hunsaker had gotten. The court of appeals held that the daughters were liable for the money because, as a general rule “when a party is substituted for another party, he takes up the litigation with all of its benefits and with all of its burdens just where the predecessor dropped it.”

The Supreme Court agreed and affirmed, holding that the daughters chose to intervene, were the real parties in interest, and must be subject to the burdens as well as the benefits of that status.

In a strong dissent, Justice Scott argued that under the condemnation statutes, compensation can only be paid to the person who owned the property at the time of the taking. Thus, he argued, it was only Ms. Hunsaker who was entitled to the money and was obligated to pay back the excess she had received. Justice Scott stated that while it is true that the substituted party must stand in the shoes of the party for whom he substituted, “he is not, however, obligated for the debts and liabilities of his parties’ predecessor, except as otherwise provided by law.” Justice Scott would have reversed and sent the case back to the circuit court to determine the extent to which the judgment exceeded the value of the property the daughters received, because the value of what they received is the only amount for which the daughters should be liable.

By Sam Hinkle

Attorney fees in condemnation cases: GOLDEN FOODS, INC. V. THE LOUISVILLE & JEFFERSON COUNTY METRO SEWER DISTRICT (COA 11/21/2007)

GOLDEN FOODS, INC. V. THE LOUISVILLE & JEFFERSON COUNTY METRO SEWER DISTRICT
ATTORNEYS FEES: CONDEMNATION ACTION
2006-CA-001645
PUBLISHED: AFFIRMING
PANEL: THOMPSON, PRESIDING; NICKELL, STUMBO CONCUR
COUNTY: JEFFERSON
DATE RENDERED: 11/21/2007

Golden Foods, Inc. (GFI) appeals TC's Order denying its motion for attorney fees in condemnation action instituted by MSD to acquire GFI's property in order to implement a sewer improvement project in an unincorporated part of Jefferson County. MSD had previously filed a condemnation action that was dismissed by the TC due to MSD's conduct not meeting the good faith standard required of condemnors. MSD appealed that dismissal, and began a second round of negotiations with GFI for purchase of the property, which was unsuccessful. MSD then filed a second condemnation action. After conducting a right-to-take hearing, the TC this time granted MSD's petition after finding that MSD had acted in good faith in attempting to acquire the property. GFI appealed, but the COA affirmed the TC's grant of the petition (2004-CA-000688-MR unpublished). Back at the TC for further proceedings, GFI filed a motion for attorney fees relating to its successful defense of MSD's first condemnation petition. The TC denied the motion and ruled that while MSD's initial negotiations efforts were not sufficient to meet good faith standards to permit the taking, they were not so egregious as to justify the extraordinary award of attorney fees. GFI appealed.

Upon review, the COA began by noting that attorney fees are not recoverable without a specific contractual provision or fee-shifting statute supporting same. However, attorney fees can be awarded in condemnation proceedings under certain circumstances if the TC determines that the condemnor acted in bad faith or caused unreasonable delay. The COA notes that a finding of bad faith does not automatically require a TC to award attorney fees as a matter of law. The decision is within the sound discretion of the TC, and will not be disturbed absent a finding of abuse of discretion. The TC felt that MSD's improper conduct of suddenly reducing its offer from $60,000 to $4,000 without explanation before the first condemnation action did not rise to the level of the extremely deliberate bad faith acts at issue in two comparison cases (Northern Ky. Port Authority v. Cornett and Bernard v. Russell County Air Board) in which attorney fees were awarded. Because the TC's ruling was based on proper application of the law and within its broad discretion, the COA affirmed the TC's decision.

By Chad Kessinger
Schiller, Osbourn, Barnes & Maloney

Zoning: BOARD OF COMMISSIONS OF CITY OF DANVILLE V. DAVIS (COA 10/12/2007)

BOARD OF COMMISSIONS OF CITY OF DANVILLE V. DAVIS
ZONING AND CONDEMNATION: ZONING CHANGE WITH CONDITIONS
2006-CA-001924
PUBLISHED: AFFIRMING
PANEL: GUIDUGLI PRESIDING; HOWARD, VANMETER CONCUR
COUNTY: BOYLE
DATE RENDERED: 10/12/2007

The Davises sought a zoning change. The Planning and Zoning Commission (“Commission”), after a public hearing, recommended the zone change with four conditions attached. The Board of Commissioners (“Board”) approved the zone change with the conditions.

The Davises appealed, arguing that the conditions were impermissible conditions subsequent that were in excess of the Board’s authority and that a severance clause in the zone change allowed it to stand without the conditions. The circuit court agreed. The Board appealed.

On appeal, the Board argued that because the Commission had been dismissed from the circuit court action, the court lacked authority to address the authority or actions of the Commission. The court disagreed, stating that the party that had final approval over enactment of the zone change, the Board, was a party, and that the Commission, whose recommendations were being reviewed, had not been a necessary party.

The Board also argued that the statute requiring a development plan gives it all-inclusive power to impose the plan and to place additional conditions upon a zone change. The court disagreed, holding that the only condition permitted by the statute is the submission of the development plan. It rejected the argument that the Board had the authority to impose additional conditions, a power that is granted only to urban county governments. The court stated that if the Commission found any part of the Davises’ development plan to be unsatisfactory, it should have delayed approval of the zone changes, rather than approving with conditions.

The court also rejected the Board’s argument that the severability clause in the zone change should be rejected, holding that the ordinance would have been enacted without the conditions attached.

Digested by Sam Hinkle

Zoning: KEOUGH V. WOODFORD COUNTY BOARD OF ADJUSTMENTS (COA 10/5/2007)

KEOUGH V. WOODFORD COUNTY BOARD OF ADJUSTMENTS
ZONING:
2006-CA-001745
PUBLISHED: REVERSING AND REMANDING
PANEL: WINE PRESIDING; THOMPSON, HENRY CONCUR
COUNTY: WOODFORD
DATE RENDERED: 10/05/2007

Post applied for a conditional use permit to operate a “tourist home” on his property. Post had filed an earlier such application in which the Planning Director supplied a definition for “tourist home” from a development definition book, because it was not defined in the Woodford County zoning ordinances. The Board of Adjustments (“Board”) conducted a hearing on the new application in which the Planning Director recommended the same “tourist home” definition. The Board voted unanimously to grant the conditional use permit.

Two neighboring property owners appealed (the “Neighbors”). The circuit court affirmed. On appeal, the Neighbors argued that the Planning Director exceeded her authority by providing a definition for “tourist home” and that the Board exceeded its authority in accepting the definition. The court disagreed, stating that the zoning ordinance’s scheme for granting conditional use permits provides a sufficient framework for the Planning Director to interpret the ordinance to clarify the intent of the fiscal court. The court also stated that because the Planning Director recommended a definition synonymous with “bed and breakfast,” the court concluded that the decision was not clearly erroneous.

The Neighbors also argued that the Board’s decision was arbitrary because Post’s proposed use of his property did not fit the definition of “tourist home.” The court agreed, stating that since “tourist home” was to be synonymous with “bed and breakfast,” and Post’s proposed use was for 12 bedrooms with the owner not living on the property, the proposed use did not meet the bed and breakfast definition of less than 9 bedrooms with the owner residing on the property. The court reversed and ordered that the conditional use permit be set aside.

Digest by Samuel Hinkle

ZONING: BAESSLER V. LEXINGTON-FAYETTE URBAN COUNTY GOVERNMENT (COA 9/28/2007)

BAESSLER V. LEXINGTON-FAYETTE URBAN COUNTY GOVERNMENT
ZONING: CHANGE TO COMPREHENSIVE PLAN
2006-CA-001352
PUBLISHED: AFFIRMING
PANEL: DIXON PRISIDING; GRAVES CONCURS; TAYLOR CONCURS IN RESULT ONLY
COUNTY: FAYETTE
DATE RENDERED: 09/28/2007

Baesler applied to amend the Fayette County comprehensive plan to change to light industrial use the portion of his property that bordered the Blue Sky Rural Activity Center (“Blue Sky”), which is an industrial area containing manufacturing and other industrial facilities. Baesler’s property was considered a buffer under the comprehensive plan, separating Blue Sky from agricultural land.

After a public hearing, the Lexington-Fayette Urban County Planning Commission (“Commission”) denied the application. On remand by a circuit court reversal because of due process violations, the Commission again denied the application. Baesler appealed to the circuit court, which affirmed.

On appeal, Baesler argued that the Commission’s finding of fact that the Blue Sky Wastewater Treatment Facility was inadequate was not supported by substantial evidence. The court disagreed, holding that although there was conflicting evidence, there was substantial evidence to support the Commission’s decision.

Baesler also claimed that the Commission’s finding that expanding Blue Sky to include Baesler’s property would negatively impact agricultural property lacked substantial evidence, a claim rejected by the court because substantial testimony and evidence supported the finding.

Finally, Baesler argued that his procedural due process rights were violated because a Councilwoman from Lexington testified at the hearing stating that her district opposed expanding Blue Sky. Baesler claimed that the testimony was improper and unduly influenced the Commission’s decision. The court disagreed, stating that there was no evidence of impropriety, and therefore Baesler’s due process rights were not infringed.

Digested by Sam Hinkle

Zoning Due Process: GODMAN V. CITY OF FORT WRIGHT (COA 8/31/2007)

GODMAN V. CITY OF FORT WRIGHT
ZONING:  Due Process and revoking temporary permit
2006-CA-000696
PUBLISHED: AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
PANEL: WINE PRESIDING; COMBS, NICKELL CONCUR
PANEL: KENTON
COUNTY: J
DATE RENDERED: 8/31/2007

In 1984, the owner of a half-acre tract in Fort Wright, Kentucky (“City”) asked to rezone the property to commercial and permit a temporary access. The request was approved, subject to future revocation based upon certain criteria. Thereafter, the property was transferred to an entity that constructed and operated a car wash, using the temporary access. The Godmans acquired title to the property in 1999. Shortly thereafter, the City notified the Godmans that it intended to revoke the temporary access. In 2002, the Zoning Administrator for the City sent a letter by certified mail to the Godmans informing them that he was revoking the temporary access. The letter was returned unclaimed. One month later, the Zoning Administrator sent an identical letter by regular mail. Counsel for the Godmans acknowledged receipt of the second letter and asked, in writing, for clarification. The City did not respond.

One year and six days later, the City brought a civil action against the Godmans seeking to close the access. The Circuit Court granted summary judgment to the City, finding that the Godmans did not file a timely appeal from the City’s final decision revoking the access point. Both a local ordinance and KRS 100.261 require a party to appeal to the Board of Adjustment within thirty days after receiving notice of a final decision of the Zoning Administrator.

On appeal, the court held that the letter sent to the Godmans failed to comply with minimum requirements of due process, because: (1) the letter did not provide any reasoning for the decision, thereby preventing any meaningful review and (2) the letter failed to inform the Godmans of their obligation to file a timely appeal. The court also noted that the City failed to respond to the Godmans’ written request for clarification. The court concluded that the City had failed to show a final and appealable decision by the Zoning Administrator and reversed and remanded the matter to the circuit court with instructions to dismiss the City’s action.

By Samuel Hinkle