Download CLE materials - University of Kansas School of Law

Construction and
Eminent Domain
Law Update
Chris Burger
May 18-19, 2017
University of Kansas School of Law
Recent Developments in Construction Law
Christopher F. Burger*
Lindsey Masonry Co. v. Murray & Sons Constr. Co., 390 P.3d 56 (Kan. Ct. App. 2017). An
opinion written by Judge Hill arising from a general contractor and its subcontractor exchanging
various drafts of form agreements on multiple projects, and the award of interest, costs, and
attorney fees under the Kansas Fairness in Public Construction Contracts Act.
Syllabus
1. To form a binding contract, there must be a meeting of the minds on all essential
elements. Contract formation requires an unconditional and positive acceptance. A
conditional acceptance is really a counteroffer and no contract is formed.
2. An acceptance of a contract must mirror the terms of the offer. A conditional
acceptance is a counteroffer that rejects the original offer.
3. When one party has knowledge of a term required by another party and continues to do
business with that party without objection, the facts may establish that the party impliedly
agreed to the term.
4. Under the Kansas Fairness in Public Construction Contract Act, found at K.S.A. 161901 et seq., the term "contract" means a contract or agreement concerning construction
made and entered into by and between an owner and a contractor, a contractor and a
subcontractor, or a subcontractor and another subcontractor.
5. An implied-in-fact contract has the same legal effect as an express contract. Parties
may be bound as firmly by implied contracts as by those expressed in words, oral or
written. The law implies, from circumstances and the silent language [**2] of the parties'
conduct and actions, contracts and promises as forcible and binding as those made by
express words or through the medium of written memorials.
*
Adjunct Professor of Law at University of Kansas School of Law and partner with Stevens & Brand LLP in
Lawrence Kansas. This does not create an attorney-client relationship and no legal advice is being given. Any
opinions are mine alone.
1
6. Prejudgment interest can be awarded to both express and implied contracts.
7. The Kansas Fairness in Public Construction Contract Act requires a contractor pay its
subcontractors on any properly completed and undisputed request for payment within 7
business days of receipt of payment by the owner. K.S.A. 16-1903(f). If the contractor
fails to pay its subcontractors within such timeframe, the contractor shall pay 18 percent
interest on the undisputed amount. K.S.A. 16-1903(g).
8. When a court resolves a case based on quantum meruit, it finds that no contract
existed. In such a case, the law creates a contract to prevent unjust enrichment. In
contrast, an implied-in-fact contract has the same legal effect as an express contract.
9. It is fundamental that equitable remedies are generally not available if there is an
adequate remedy at law.
Quotes of Interest
“Though there were setoffs claimed, the underlying money that Lindsey was owed for doing the
work described in his payment applications was not disputed. … Under the Act, "'undisputed
payment' means payments which all parties to the contract agree are owed to the contractor."
K.S.A. 16-1902(i). A panel of this court has held that for a payment to be disputed, there must be
some matter that can be disputed in good faith because Kansas contracts contain an implied
covenant of good faith and fair dealing.” Lindsey Masonry at 68.
“Raising counterclaims does not erase the fact that Lindsey did the work and was entitled to
payment.” Lindsey Masonry at 68.
“We acknowledge that parties may be bound by the terms of a contract, "even though they do not
sign it, where their assent is otherwise indicated, such as by accepting and acting upon the
contract, or by ratifying the contract, [**12] or by the acceptance by one of the performance by
the other." 17A Am. Jur. 2d, Contracts § 172, p. 184. … We note that the Restatement also
provides: "An offer can be accepted by the rendering of a performance only if the offer invites
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such an acceptance." Restatement (Second) of Contracts § 53 (1981; online 2016).” Lindsey
Masonry at 61.
“In our view, the district court's ruling is consistent with the general rule that an acceptance of a
contract must mirror the terms of the offer. 17A Am. Jur. 2d, Contracts § 80. A conditional
acceptance is a counteroffer that rejects the original offer. Sandoval, 295 Kan. at 282. Lindsey
and Murray did not have an agreement by virtue of Murray sending Lindsey a modified AIA
contract. Instead it was another offer. [**22] Thus, there was no contract unless Lindsey
accepted Murray's offer (the modified version of the AIA) in its entirety. And, when the district
court ruled, there was no [*65] evidence that Lindsey expressed acceptance to the modified
AIA contract document. … But that does not necessarily resolve the issue of whether certain
provisions in the contract documents exchanged by the parties were relevant to establishing the
parties' course of conduct for an implied-in-fact contract. Implied-in-fact contracts arise in
Kansas most frequently in the employment context.” Lindsey Masonry at 64-65.
“The real problem here lies in the idea that the doctrine of implied-in-fact contracts ought to be
deployed when the parties actually have engaged in the readily identifiable steps necessary to
form a traditional contract or when the parties are presumptively sophisticated [**48] business
entities undertaking a multifaceted commercial deal. Courts may find implied-in-fact contracts
when the overall circumstances indicate the parties intended to be bound to certain mutual
obligations but have not formally exchanged discrete offers or acceptances. The terms of their
contractual relationship must be discerned from their general communications and the pattern of
their interactions.” Lindsey Masonry at 73 (concurrence).
“This judicial opinion has SHOCK revelation about the law in the State of Kansas”
a. Contract formation discussion for the situation when bidders reference form
documents as part of their bids, but the parties then exchange a series of
competing drafts under separate platforms, AIA and ConsensusDocs, on multiple
serial and simultaneous projects.
b. The court would not use overlapping terms to form a patch-work agreement.
i. “In our view, the district court's ruling is consistent with the general rule
that an acceptance of a contract must mirror the terms of the offer. 17A
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Am. Jur. 2d, Contracts § 80. A conditional acceptance is a counteroffer
that rejects the original offer. Sandoval, 295 Kan. at 282. Lindsey and
Murray did not have an agreement by virtue of Murray sending Lindsey a
modified AIA contract. Instead it was another offer. [*22] Thus, there
was no contract unless Lindsey accepted Murray's offer (the modified
version of the AIA) in its entirety.” Id. at 56.
c. But, the court may have left open using an alleged course of conduct between the
parties as a tool to form an implied-in-fact contract through the exchanged
provisions between the form documents. The court seems to have left open the
plausibility of the argument, but factually rejected it since there was no expression
either side intended to be governed by the terms of either contract.
d. Implied-in-fact contracts held to have the same legal effect as an express contract
under the Fairness Acts.
i. “When a court resolves a case based on quantum meruit, it finds that no
contract existed. In such a case, the law creates a contract to prevent unjust
enrichment. In contrast, an implied-in-fact contract has the same legal
effect as an express contract.”
e. Discussion of “undisputed” under the Act(s).
i. “The district court found the entire net judgment "undisputed." At a later
hearing, the court explained that there was never a dispute that the work
described in the schedule of values was done. Though there were setoffs
claimed, the underlying money that Lindsey was owed for doing the work
described in his payment applications was not disputed.”
ii. “for a payment to be disputed, there must be some matter that can be
disputed in good faith because Kansas contracts contain an implied
covenant of [*32] good faith and fair dealing.”
iii. “This boils down to whether Murray's counterclaims make Lindsey's claim
for money owed under the contract "disputed" under the Act. Reasoning
by analogy, we think not.”
iv. Undisputed because liquidated?? “Kansas law generally provides that
prejudgment interest is allowable on liquidated claims. A claim is
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liquidated when both the amount due and the date due are fixed and
certain or ascertainable by mathematical computation.”
v. Undisputed because funds had been received from the owner?? Hence
liquidated.
vi. “A question about the amount of a setoff or counterclaim does not change
the liquidated nature of the damages for breach of contract.” And “Raising
counterclaims does not erase the fact that Lindsey did the work and was
entitled to payment.”
vii. Possible exception possible for construction defect counterclaim, but not
delay damages or claims for incomplete work completion costs.
f. Highlights from Judge Atcheson concurrence.
i. Warns: “The real problem here lies in the idea that the doctrine of impliedin-fact contracts ought to be deployed when the parties actually have
engaged in the readily identifiable steps necessary to form a traditional
contract or when the parties are presumptively
sophisticated [*48] business entities undertaking a multifaceted
commercial deal. Courts may find implied-in-fact contracts when the
overall circumstances indicate the parties intended to be bound to certain
mutual obligations but have not formally exchanged discrete offers or
acceptances. The terms of their contractual relationship must be discerned
from their general communications and the pattern of their interactions. …
Judicial recognition of implied-in-fact contracts necessarily entails an
amorphous exercise requiring interpretation of parties' inexact signals to
arrive at sufficiently definite rights and duties to [*49] bind those parties
to a legally enforceable agreement.”
ii. “To be sure, implied contracts serve an entirely beneficial purpose in
sorting out legal relationships between parties taking a casual or
unsophisticated approach to their mutual transactions and in resolving
their disputes about rights and duties arising from comparatively simple
transactions. But the convention ought to be cautiously invoked to find
enforceable agreements governing complex transactions when the parties
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have engaged in recognizable steps toward making a formal contract. If
those steps have not yielded an identifiable contract, then the parties likely
have not entered into [*50] an enforceable agreement.”
iii. “With intricate commercial transactions, a court attempting to imply in
fact a contract from the parties' conduct will, more likely than not, wind up
either creating at least some material terms that the parties never mutually
accepted or omitting entirely what reasonably would be considered
essential terms for a formal contract. Either way, the court would flout
accepted legal principles in the guise of "implying" a contract.”
2. Hilton Plaster Co. v. Knoblauch, unpublished, 380 P.3d 720 (Kan. Ct. App. 2016). A per
curium opinion deferring to the factual findings of trial court concerning issues of:
a. Creation of a subcontractor relationship as opposed to separate contracts in a
multi-‘prime’ project.
b. Deference to the factual findings of the trial court.
3. Midwest Crane & Rigging, LLC v. Kan. Corp. Comm'n, 2016 Kan. App. Unpub. LEXIS
649, at *1 (Kan. Ct. App. Aug. 5, 2016). “Under provisions of the Unified Carrier
Registration Act (UCR) and agreement, 49 U.S.C. § 14504a (2012), motor carriers, motor
private carriers, and freight forwarders operating in interstate or international commerce
must pay an annual registration fee (UCR fee) to their "'base-State'" in an amount
calculated on the size of their "'commercial motor vehicle'" fleet. 49 U.S.C. §
14504a(a)(1), (2), (f) (2012). The UCR was implemented by an interstate agreement
under which individual states have the option of participating in the collection and
sharing of UCR fee revenues. 49 U.S.C. § 14504a(e), (g), (h). Kansas is among the states
that have elected to participate in the UCR. See K.S.A. 2015 Supp. 66-1,115; K.S.A.
2015 Supp. 66-1,139a; K.A.R. 82-4-30a(c) (2015 Supp.) ("An interstate regulated motor
carrier shall not operate in interstate commerce over the highways of this state unless the
carrier is registered in the carrier's base state pursuant to 49 U.S.C. 14504a(a)(2) [of the
UCR].").”
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4. Midwest Crane & Rigging, LLC v. Schneider, 2016 Kan. App. Unpub., 369 P.3d 340
(Kan. Ct. App. 2016). A per curium opinion arising from trial court’s grant of motion to
dismiss for res judicata. “After suing Emcon, Inc. (Emcon), for breach of contract and
only recovering under the theory of unjust enrichment, Midwest Crane and Rigging, LLC
(Midwest), filed this suit seeking to recover from Carlos Gallegos and Frank Schneider
(Defendants), the two field employees who signed the contested equipment rental
agreements on behalf of Emcon. Midwest's petition alleged that Defendants committed
negligent and intentional misrepresentation resulting in damage to Midwest. In response
to the petition, Defendants filed a motion to dismiss arguing that the doctrine of res
judicata prohibited Midwest from relitigating claims that had already been decided. The
district court granted Defendants' motion to dismiss. Midwest appeals. Finding that the
doctrine of res judicata bars Midwest's claims and finding that the doctrine of judicial
estoppel is inapplicable because Defendants claims were not inconsistent with Emcon's
claims, we [*2] affirm. In addition, we deny Defendants request for appellate attorney
fees and costs.”
5. United States ex rel. W. Bldg. Grp. v. Travelers Cas. & Sur. Co. of Am., No. 16-1407JTM, 2017 U.S. Dist. LEXIS 7069, at *4-6 (D. Kan. Jan. 18, 2017). In the process of
compelling arbitration and staying the trial court proceedings, “Plaintiff asks the court to
place restrictions on the arbitration.”
a. “Plaintiff expresses concern that "Defendants intend . . . to stay the arbitration
proceeding until [AWAP] can litigate its pass-through claims against the Corps of
Engineers." According to plaintiff, such an arbitration stay would delay resolution
of plaintiff's Miller Act claims in violation of the Tenth Circuit's opinion in
Fanderlik-Locke Co. v. United States, 285 F.2d 939, 942 (10th Cir. 1960).
Plaintiff asserts the court must "give effect" to the parties' subcontract agreement
that "the arbitrator would be limited to applying the law of the state of Kansas and
decisions [*5] of the District of Kansas and the Tenth Circuit construing the
Miller Act." Specifically, plaintiff asks the court to "prohibit the arbitrator from
issuing a stay of the arbitration proceedings contrary to the established law of this
jurisdiction" and to prohibit defendants from asking the arbitrator to stay
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plaintiff's Miller Act claims. … The court respectfully declines plaintiff's request.
First, plaintiff has cited no case, and the court knows of none, in which a court has
compelled arbitration and placed restrictions of this type on the arbitration
proceeding. Binding precedent suggests that the court has no such authority. The
Supreme Court has directed that "'procedural questions which grow out of the
dispute and bear on its final disposition' are presumptively not for the judge, but
for an arbitrator, to decide." And the Tenth Circuit has directed that "'arbitration is
a matter of contract' in which courts have a limited role. In that limited role,
courts do not have authority to decide questions explicitly addressed by the
arbitration agreement." "In this circuit, the arbitration panel is entitled to extreme
deference in setting the bounds of its authority [*6] to decide an issue submitted
to arbitration." Thus, although plaintiff may well be correct that under FanderlikLocke the arbitration of plaintiff's Miller Act claim cannot be stayed pending a
resolution of AWAP's pass-through claims against the COE, the question is for
the arbitrator to decide, not for this court to dictate. … Second, plaintiff's request
presupposes a potential future development—i.e., that defendants will move the
arbitrator to stay the arbitration—which may or may not come to fruition. The
court may not issue advisory opinions about speculative future events. If and
when defendants make such a motion, plaintiff may assert their substantive
arguments that Fanderlik-Locke prohibits such a stay, and the arbitrator will rule
under the applicable law. Plaintiff has not cited a case suggesting that the court
may anticipate and decide an issue which only hypothetically may arise during
arbitration.”
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Recent Developments in Eminent Domain Law
Christopher F. Burger*
Creegan v. State, 2017 Kan. LEXIS 115, at *1 (Mar. 24, 2017). A unanimous decision written
by Justice Beier (Biles, J., not participating, Michael J. Malone, Senior Judge assigned) arising
from KDOT’s voluntary acquisition of tracts within a subdivision that were ultimately used for
non-residential purposes in violation of the community’s restrictive covenants. Some of the nonacquired lot owners brought a lawsuit asserting inverse condemnation.
Syllabus:
1. The violation of a restrictive covenant running with subdivision land by a party with the
power of eminent domain is a compensable taking of a private property interest in real
estate possessed by an owner of a dominant subdivision parcel, and that owner may sue
in inverse condemnation.
2. A Fifth Amendment taking occurs when a party with the power of eminent domain
deprives the owner of a property right. In order for the taking of an intangible property
right to be compensable in Kansas, it is not necessary that the property be physically
taken or for the property to be damaged within the meaning of K.S.A. 26-513(a).
Quotes of interest:
“We see these arguments as logically flawed and overstated. For example, the existence of
private property interests do not prevent the exercise of eminent domain; they merely require the
payment of just compensation when the private property interests are extinguished for public use.
But we need not further address these policy arguments today. It is sufficient to say that the
ultimate arbiters of public policy wisdom are the citizens whose Fifth Amendment rights are
vindicated by our ruling. If those arbiters decide to change the public policy animating the
amendment, they are free to do so.” Id. at 34.
*
Adjunct Professor of Law at University of Kansas School of Law and partner with Stevens & Brand LLP in
Lawrence Kansas. This does not create an attorney-client relationship and no legal advice is being given. Any
opinions are mine alone.
9
“But we are not limited to the "damage" language of EDPA or Kirkpatrick's interpretive
gloss on it. Rather, we must examine the character of restrictive covenants in Kansas and the
rights they produce and protect for owners of the land with which they run. We also are not
concerned with whether KDOT's actions constitute a permissible taking under EDPA. The
question is whether there has been a taking requiring just compensation under the federal
Constitution. Regardless of what types [*19] of takings the legislature has authorized under
EDPA, we are concerned with whether the plaintiffs' Fifth Amendment right to just
compensation is being infringed.” Slip op at 18-19.
“And a hasty review of our opinion in Kirkpatrick might lead to a conclusion that eminent
domain applies only to real property interests….” Slip op at 19.
“EDPA, no matter its virtues, cannot be the be-all and end-all on the substance of eminent
domain and inverse condemnation law in Kansas. It may expand upon but cannot constrict
any rights Kansans are guaranteed by the Fifth Amendment. No matter how this court may
interpret or construe the statutory language, the constitutional provision trumps.” Slip op at
18.
“As discussed below in more detail, both parties and the members of the Court of Appeals
panel have mistakenly concentrated on the potential applicability of EDPA's language about
damage to plaintiffs' subdivision parcels to the unfortunate exclusion of a more traditional
"taking" analysis. This approach has led to confusion on the question actually before us. In
fact, we are far less concerned with whether there was physical damage to the parcels owned
by plaintiffs than with whether their right to a certain amount of legal control over use of the
parcels owned by KDOT was vaporized. This right, possessed by plaintiffs as a function of
the restrictive covenant [*18] governing all subdivision parcels, was one of the "sticks" in the
valuable "bundles of sticks" they paid for when they acquired their land.” Slip op at 17-18.
10
“The bottom line is that it matters not whether the right held by plaintiffs under the restrictive
covenant in this case is further identified as a real property interest or a contract right. For
purposes of eminent domain—and, by extension, inverse condemnation—each is "property"
requiring just compensation under the Fifth Amendment if taken by the State.” Slip op at 20.
“The first component is intended to compensate plaintiffs for any qualifying damage caused
to their parcels by the nonconforming use. In order to recover, plaintiffs' proof will have to
meet the requirements of EDPA, as interpreted in Kirkpatrick. See K.S.A. 26-513(a);
Kirkpatrick, 289 Kan. at 569 ("damage must be substantial and must be the planned or
inevitable result of government action undertaken for public benefit"). The parties have
disagreed during this appeal on whether plaintiffs can muster such proof or have already
failed when called upon to come forward with it. The record does not definitively settle this
question for us, and we [*32] leave it to our able district court colleague to sort out this
disagreement on remand.
The second component should compensate plaintiffs for the taking of their rights to control
the use of KDOT's parcels under the restrictive covenant. KDOT admits those rights were
effectively extinguished by its nonconforming use, which, we have established, was a taking
of one "stick" in each plaintiff's "bundle of sticks." The value of each plaintiff's right of
control under the covenant has nothing to do with the desirability or lack of desirability of the
particular public use; it is the value of the right of legal control involuntarily forfeited. It is
equal to the difference between the fair market value of the dominant estate with the
restrictive covenant intact and the fair market value of the dominant estate with the restrictive
covenant taken. See K.S.A. 26-513(c).
"If only a part of a tract of land or interest is taken, the compensation and measure of
damages is the difference between the fair market value of the entire property or
interest immediately before the taking, and the value of that portion of the tract or
interest remaining immediately after the taking." K.S.A. 26-513(c).
11
This will account for removal of the [*33] restrictive covenant "stick" from each plaintiff's
"bundle of sticks." See Annot. Eminent Domain, 4 A.L.R.3d 1137 ("Once the theoretical
right to compensation for the loss of a negative easement is recognized, the problems of the
action are substantially the same as in any other eminent domain proceeding. Practically, the
property owner must establish the value of the right taken, at the time of the taking, by
competent lay or expert testimony. . . . [C]ounsel for the condemning authority may have
some hope of escaping substantial liability by attacking the proposed proof of value and
urging that at most nominal damages should be allowed.").”
Slip op at 31-33.
“The Kansas Supreme Court defends the Bill of Rights, then the unthinkable happens…”
A. The Court contended that “Both the Court of Appeals majority and Judge Atcheson
were led astray by the plaintiffs' and other jurisdictions' misdirected focus on whether
a restrictive covenant gives rise to a real property interest or merely a contract right,”
slip op at 19, in part due to “hasty review of our opinion in Kirkpatrick.” Id.at 26.
But that was irrelevant since the Court had noted in a stand-alone paragraph that
“Each side is minimally helpful.” Id. at 17.
B. Sufficiency of the Eminent Domain Procedure Act??
a. The Eminent Domain Procedure Act is focused “on only real property and
interests tied to real property” and hence narrower than the Fifth Amendment.
Slip op at 7. But is also broader in that it makes compensable “damage to real
estate or an interest in it.” Id. Its language is NOT the Court’s primary
analytical focus because the Court addressed “more traditional ‘taking’
analysis.” Id. At 12-13
b. “But we are not limited to the "damage" language of EDPA or Kirkpatrick's
interpretive gloss on it. Rather, we must examine the character of restrictive
covenants in Kansas and the rights they produce and protect for owners of the
land with which they run. We also are not concerned with whether KDOT's
actions constitute a permissible taking under EDPA. The question is whether
there has been a taking requiring just compensation under the federal
Constitution. Regardless of what types [*19] of takings the legislature has
12
authorized under EDPA, we are concerned with whether the plaintiffs' Fifth
Amendment right to just compensation is being infringed.” Creegan v. State,
2017 Kan. LEXIS 115, at *18-19 (Mar. 24, 2017)
c. “EDPA, no matter its virtues, cannot be the be-all and end-all on the substance
of eminent domain and inverse condemnation law in Kansas. It may expand
upon but cannot constrict any rights Kansans are guaranteed by the Fifth
Amendment. No matter how this court may interpret or construe the statutory
language, the constitutional provision trumps.” Slip op at 18. Is this another
way of saying that the Act that gives rise to the authorized procedure to
enforce eminent domain rights is unconstitutional to the extent it prohibits the
taking of rights under a restrictive covenant?
C. Breadth of “property.” Vaporized “…their right to a certain amount of legal control
over use of the parcels.” Slip op at 12. “As discussed below in more detail, both
parties and the members of the Court of Appeals panel have mistakenly concentrated
on the potential applicability of EDPA's language about damage to plaintiffs'
subdivision parcels to the unfortunate exclusion of a more traditional "taking"
analysis. This approach has led to confusion on the question actually before us. In
fact, we are far less concerned with whether there was physical damage to the parcels
owned by plaintiffs than with whether their right to a certain amount of legal control
over use of the parcels owned by KDOT was vaporized. This right, possessed by
plaintiffs as a function of the restrictive covenant [*18] governing all subdivision
parcels, was one of the "sticks" in the valuable "bundles of sticks" they paid for when
they acquired their land.” Creegan v. State, 2017 Kan. LEXIS 115, at *17-18 (Mar.
24, 2017).
D. Restrictive Covenants enforceability by injunction? The opinion recognizes the
enforceability of restrictive covenants by injunction, slip op at 14-15, and discusses
that “Although Kansas does not have a case directly on point, the general rule is that a
party also can recover monetary damages for breach of a restrictive covenant.” Id.
The opinion does not address how a lack of a legal remedy is a requirement before an
injunction can be granted.
E. A contract is property, but is every contract compensable? See slip op at 17.
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“It has long been the rule in this state that the profits from a business conducted
on a particular piece of property are not compensable losses in a condemnation
action. This is based on the recognition that
"'[i]f the owner of property uses it himself for commercial purposes, the amount
of his profits from the business conducted upon the property depends so much
upon the capital [***36] employed and the fortune, skill and good management
with which the business is conducted, that it furnishes no test of the value of the
property. It is, accordingly, [**220] well settled that evidence of the profits of a
business conducted upon land taken for the public use is not admissible in
proceedings for the determination of the compensation which the owner of the
land shall receive.'" City of Bonner Springs v. Coleman, 206 Kan. 689, 694, 481
P.2d 950 (1971) (quoting 5 Nichols on Eminent Domain, § 19.3(1), p. 19-48).”
City of Wichita v. Denton, 296 Kan. 244, 262, 294 P.3d 207, 219-20 (2013)
F. Do restrictive covenants now constitute “an interest born of real property
ownership”? Id. at 19. An interest in controlling the use of parcels? “Plaintiffs' have
been deprived of all economic value of their right of control under the covenant; their
property interests, in this case, real property interests, have been taken.” Id. at 30.
G. Conflict between Creegan v. State, 2017 Kan. LEXIS 115, at *31-33 (Mar. 24, 2017),
and Kan. City Power & Light Co. v. Strong, 302 Kan. 712, 725-26, 356 P.3d 1064,
1073-74 (2015)??
K.S.A. 26-513(c), applicable to partial takings such as occur with utility
easements, plainly creates a simple compensation formula with two variables: (1)
the fair market value of the property pre-taking, less; (2) the value of the
remainder. The statute then defines [*726] and describes the legally necessary
evidence to prove up each variable. The first variable—the [***27] pre-taking
"fair market value"—must be proved "by use of the comparable sales, cost or
capitalization of income appraisal methods or any combination of such methods."
K.S.A. 26-513(e).
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[**1074] It is significant that the second variable in subsection (c) does not use
the term "fair market value" but rather speaks simply of the value of the
remainder. We will not presume that this word choice was accidental. In fact,
HN6
we presume the legislature deliberately chose the words used and intended
those choices to convey a real meaning. See Hays v. Ruther, 298 Kan. 402, 406,
313 P.3d 782 (2013). Here, HN7
the words chosen by the legislature subject the
first variable to K.S.A. 26-513(e) while leaving the second variable subject to
adjustments pursuant to K.S.A. 26-513(d). There, the legislature defines and
describes a nonexclusive list of factors which, if shown, can prove the reduced
value of the post-taking remainder. The listed factors include the remaining
appearance, productivity, convenience, use, view, and cohesion (i.e., whether the
remainder has been severed). An additional recognized factor—though not
included in the legislature's nonexclusive list—is any evidence tending to show
what a hypothetical buyer would consider in determining a purchase price for the
property. See City of Mission Hills v. Sexton, 284 Kan. 414, 423, 160 P.3d 812
(2007) (quoting City of Wichita v. Eisenring, 269 Kan. 767, 773, 7 P.3d 1248
[2000]) ("'[A]ny competent evidence bearing [***28] upon market value
generally is admissible including those factors that a hypothetical buyer and seller
would consider in setting a purchase price for the property.'").
Water Dist. No. 1 v. Prairie Ctr. Dev., L.L.C., 304 Kan. 603, 604, 375 P.3d 304, 307 (2016). A
majority decision written by Justice Luckert, with a concurrence from Justice Stegall, blessing a
condemning authority’s use of careful language in its petition to preclude an impact on an
otherwise interested party and thus exclude them from the proceedings.
Syllabus
1. In Kansas, the Eminent Domain Procedure Act provides the only avenue through
which the government can exercise its eminent domain power. A statute conferring the
15
right to exercise the power of eminent domain is to be strictly construed in light of the
objectives and the purposes sought to be attained by its enactment.
2. Provisions of the Eminent Domain Procedure Act control an eminent domain
proceeding to the extent the provisions address an issue. In an appeal from an eminent
domain award, the code of civil procedure applies.
3. A government entity filing a petition under the Eminent Domain Procedure Act must
name and provide notice to all owners of an interest in land the entity seeks to take,
including lienholders and anyone in possession of the property.
4. Eminent domain proceedings, which are intended to be quickly resolved, only concern
(1) the authority to take and (2) just compensation for the taking. Litigation of collateral
issues is relegated to other civil actions.
5. There is no provision in the Eminent Domain Procedure Act precluding a landowner
from raising statutory defect arguments [***2] in the condemnation proceeding.
6. The language in an eminent domain petition and the corresponding appraiser's report
determines the extent of the property rights taken. Generally, no more property of a
private individual, and no greater interest therein, can be condemned and set apart for
public use than is absolutely necessary. A condemning body has no authority to
appropriate private property for only a contemplated or speculative use in the future.
7. When interpreting a written document, the intent of the parties controls and is best
evinced by the document's unambiguous language. A document's meaning should be
gleaned from the document as a whole rather than through the analysis of a single or
isolated provision.
8. Inverse condemnation is an action initiated by the landowner and is available when
private property has been taken for public use without formal condemnation proceedings
and where it appears there is no intention or willingness of the taker to bring the action.
16
9. The owner of an easement is entitled to compensation when the easement is taken in
eminent domain.
10. In an eminent domain proceeding, parol evidence is not admissible to limit the extent
of a taking.
Quotes of Interest
“In Kansas, the EDPA provides the only avenue through which the government can exercise its
eminent domain power. … Importantly, "'[a] statute which confers the right to exercise the
power of eminent domain is to be strictly construed in light of the objectives and the purposes
sought to be attained by its enactment.'” Id. at 605, 308.
“4.1. An entity must comply with the EDPA when taking an easement.” Id. at 616, 304.
“The core of the Bonhams' appeal is their claim that WaterOne cannot realistically hope to
construct a water line without interfering with Stonecrest Road. That contention might have
seemed like a fair possibility when the district court considered the parties' arguments; it might
even prove (or by the time it reached this court have proven) true. If so, WaterOne will have
exceeded its legal authority; because of such possibilities, we urge condemning authorities to be
scrupulously fair in the exercise of eminent [*614] domain, always cognizant of
the [***19] responsibility that comes with a power so great. … Nevertheless, we are constrained
in an eminent domain proceeding by the language the condemning authority uses, its
condemnation plans, and the limits of the EDPA. "'A condemnation proceeding instituted under
K.S.A. 26-501 et seq., . . . does not provide a forum for litigation over the right to exercise
eminent domain or to determine the extent of said right. . . . The right . . . to determine other
issues such as the necessity and extent of the taking can only be litigated in an individual civil
action.'" (Emphasis added.) Miller, 283 Kan. at 114. We reiterate, the express language in
WaterOne's petition—which controls in the very narrow proceedings at issue here—did not
condemn the Bonhams' easement.” Id. at 613-14, 312.
“Notwithstanding WaterOne's intentions, the Bonhams are not, as we have alluded, left without a
remedy just because their claims were improper in this case: Should WaterOne interfere with the
17
Bonhams' easement (or if it has done so), the Bonhams could file a separate action for inverse
condemnation. 6 Nichols on Eminent Domain § 26A.03[1]. Indeed, "[i]nverse condemnation is
an action initiated by the landowner and is available when private property has been taken for
public use without formal condemnation proceedings and where it appears there is no intention
or willingness of the taker to bring the action." City of Wichita v. Meyer, 262 Kan. 534, 548, 939
P.2d 926 (1997). It seems WaterOne has no intention to file a formal condemnation proceeding
as to the Bonhams' easement. So if WaterOne does take or damage the easement, the Bonhams
have viable legal options, which they recognized in the hearing before the district court.” Id. at
615, 313.
“From the record here, it does not appear that Prairie Center Development or WaterOne filed an
appeal under K.S.A. 2015 Supp. 26-508 to challenge the amount of compensation awarded. …
What makes this case unique is that the Bonhams—who were never parties to WaterOne's
action—filed an appeal.” Id. at 608,309.
“Thus, under City of Wichita, the district court in this case had jurisdiction over the proceedings
to narrowly consider the merit of the Bonhams' statutory-defect argument. See also Dotson v.
State Highway Commission, 198 Kan. 671, 675-76, 426 P.2d 138 (1967) (permitting unnamed
owner to join in appeal: "[A]ny appeal by a landowner, lienholder or interested party brings to
the district court for determination in a single action the sufficiency of the award for all interests
in the tract or parcel of land under condemnation."). Id. at 610,310.
“Without question, notice is a fundamental component and policy objective of the Kansas
Eminent Domain Procedure Act (EDPA). See K.S.A. 2015 Supp. 26-503. However, the reality
our decision today manifests without articulating—a state of affairs deserving explicit
acknowledgment—is that the EDPA grants condemning authorities carte blanche to consciously
limit the scope of the required notice through [***29] drafting gamesmanship. If complete and
widespread notice is indeed a fundamental policy objective of the legislature, as it appears to be,
this case simply illustrates that the statutory language chosen by the legislature fails to
implement that policy in an airtight manner.” Water Dist. No. 1 v. Prairie Ctr. Dev., L.L.C., 304
Kan. 603, 619, 375 P.3d 304, 315 (2016) (Stegall concurring)
18
“What the court plans to do now will make you FURIOUS”
A. Which code applies to a Chapter 26 proceeding? “Alternatively, the code of civil
procedure gives the district court discretion to permit intervention if the Bonhams
presented "a claim . . . that share[d] with the main action a common question of law
or fact." K.S.A. 2015 Supp. 60-224(b)(1)(B). WaterOne notes that the Bonhams
characterized their motion specifically as a motion to void under City of Wichita
rather than a motion to intervene. But implicit in the motion to void was
an [**311] intervention question—whether the Bonhams had an ownership interest
sufficient to give them a place in this action. And typically intervention is subject
to [*611] liberal construction in favor of intervention. Smith v. Russell, 274 Kan.
1076, 1083, 58 P.3d 698 (2002). In this procedurally unique case, we do not find that
the district court [***14] wholly lacked jurisdiction to narrowly consider the
Bonhams' claims.” Water Dist. No. 1 v. Prairie Ctr. Dev., L.L.C., 304 Kan. 603, 61011, 375 P.3d 304, 310-11 (2016). “In Kansas, provisions of the EDPA control the
proceedings to the extent the provisions address an issue. In an appeal from an
eminent domain award, the code of civil procedure applies.” Water Dist. No. 1 v.
Prairie Ctr. Dev., L.L.C., 304 Kan. 603, 606, 375 P.3d 304, 308 (2016)
B. Resort to separate lawsuit, or not? Compare inverse condemnation remedy with,
“This court in City of Wichita reasoned that even though REM was not initially a
party to the proceedings, as a landowner with rights at stake, it should not have to risk
foregoing an appeal of an award by filing a separate action to challenge the validity of
the petition. 262 Kan. at 542; 6 Nichols on Eminent Domain § 26A.03[3] (3d ed.
2008) ("[A] description of property to be taken that does not meet the strict pleading
requirements [***13] of this allegation will render the entire condemnation
proceeding void.").” Water Dist. No. 1 v. Prairie Ctr. Dev., L.L.C., 304 Kan. 603,
610, 375 P.3d 304, 310 (2016).
19
Pener v. King, 2017 Kan. LEXIS 117, at *1-2 (Mar. 24, 2017). Unanimous opinion written by
Justice Biles (Rosen, J, not participating, Michael J. Malone, Senior Judge, assigned),affirming
the refusal to include the replacement cost for destroyed fencing in the amount of the award.
Syllabus
1. Under the Eminent Domain Procedure Act, K.S.A. 26-501 et seq., in a partial taking
case there are only two issues: (a) the value of the entire property or interest immediately
before the taking; and (b) the value of that portion of the land or interest remaining
immediately after the taking.
2. In ascertaining the amount of compensation and damage in an eminent domain or
condemnation proceeding, the cost of new fences or loss of fences and the cost of
replacing them with fences of like quality are not to be considered as separate items of
damages but are to be considered only as they affect the total compensation and damage.
3. In a condemnation proceeding, the award will not be disturbed on appeal from the
district court as long as it is supported by substantial evidence.
4. The verdict in a condemnation proceeding must be within the range of the opinion
testimony admitted at trial.
5. In a condemnation proceeding, the landowner's attorney fees are statutorily provided
for in two instances. One occurs when the condemning authority abandons the
proceedings after a court-appointed appraiser award. The other occurs when
the [*2] condemning authority appeals a court-appointed appraiser award to the district
court and the jury renders a verdict for the landowner that is greater than the appraiser
award.
Quotes of Interest
“Pener presented evidence of the fence's replacement value, including what he characterized as
KDOT's admission as to that amount. KDOT's appraiser testified the loss of the fence diminished
the parcel's post-taking value by only $11,000. When the district court adopted KDOT's view, it
20
acted consistent with K.S.A. 26-513(d)'s admonition that replacement cost be considered to the
extent it affected value rather than as a separate item of damages.” Pener v. King, 391 P.3d 27
(Kan. 2017).
“In condemnation proceedings, the landowner's attorney fees are statutorily provided for in only
two instances. One occurs when the condemning authority abandons the proceedings after a
court-appointed appraiser award. See K.S.A. 2016 Supp. 26-507(b). The other occurs when the
condemning authority appeals a court-appointed appraiser award to the district court and the jury
renders a verdict for the landowner that is greater than the appraiser award. See K.S.A. 26-509
("Whenever the plaintiff condemner shall appeal the award of court appointed appraisers, and the
jury renders a verdict for the landowners in an amount greater than said appraisers' award, the
court may allow as court costs an amount to be paid to the landowner's attorney as attorney
fees.").”
Doug Garber Constr., Inc. v. King, 388 P.3d 78, 80 (Kan. 2017). A unanimous opinion written
by Justice Stegall (Biles, J., not participating. David Ricke, District Judge, assigned), affirming
the trial court’s exclusion of certain valuation evidence due to the project being viewed as one.
Syllabus
1. A district court has broad discretion to admit or reject evidence in an eminent domain
proceeding, including evidence of fair market value.
2. The enhancement or depression of real property value due to the project for which
condemnation is sought is excluded in determining fair market value.
3. In an eminent domain action, a property owner may testify about the fair market value
of the property based on his or her familiarity with the property, but the opinion will be
excluded if based on legally improper considerations.
21
Quotes of Interest
“A district court has broad discretion [**9] to admit or reject evidence—including evidence of
fair market value—in an eminent domain proceeding. See Preisser, 295 Kan. at 363; City of
Wichita v. Eisenring, 269 Kan. 767, 773, 7 P.3d 1248 (2000). Evidence in an eminent domain
proceeding consists mostly of witness opinions because "the valuation of real estate is largely a
subjective matter and cannot be definitely determined by the application of any exact principle of
science." Eisenring, 269 Kan. at 774. A district court is responsible for defining the extent of
compensable rights, "and if it is established that value testimony was based on noncompensable
items or the credibility of the testimony is otherwise destroyed the testimony should be stricken
in response to a proper motion." Morgan v. City of Overland Park, 207 Kan. 188, 190, 483 P.2d
1079 (1971)” Id. at 82.
“The Project Influence Rule excludes certain factors from the fair market value calculation in an
eminent domain proceeding. Generally stated, the "enhancement or depressing of value due to
anticipated improvements by the project for which condemnation is sought is excluded in
determining fair market value." Hudson, 246 Kan. at 406. The rule can fairly be understood as an
interpretation of the plain meaning of—and legislative intent inherent in—K.S.A. 26-513(b), that
the fair market value of the property must be measured "at the time of the taking." See Kansas
City Power & Light Co. v. Strong, 302 Kan. 712, 725, 356 P.3d 1064 (2015) ("Where [statutory]
language is plain and unambiguous, it is determinative of legislative intent."). In other words, the
statute dictates that fair market value must be calculated before the project improvements for
which condemnation is sought are made.” Id. at 82.
“Second, Garber argues the district court erred in excluding Ms. Garber's testimony. HN10
In
an eminent domain action, a property owner who does not qualify as an expert may testify about
the fair market value of the property based on familiarity with his or her property and values in
the neighborhood. In re Eminent Domain, 299 Kan. at 50. But, a property owner's opinion about
fair market value will be excluded if based on legally improper considerations, such as an
unrecognized appraisal method. 299 Kan. at 47-48.” Id. at 84.
“Sneaky owners are doing this to save money. Number 4 will amaze you!”
22
A. Just because I want to write “Garber Golden Gateway.” “Moreover, Ms. Garber
estimated the "Garber Golden Gateway" would generate over $22 million in business
income in one year by charging a $2 gate fee to 31,100 cars passing through per day.
Subtracting operating expenses and applying an 8% capitalization rate, Ms. Garber
concluded the Property was worth a total of $347 million in future profits.”
Nauheim v. City of Topeka, 52 Kan. App. 2d 969, 970, 381 P.3d 508, 509 (2016). Opinion by
Jeffrey E. Goering.
Syllabus
1. Where reasonable minds could differ as to the conclusions drawn from the evidence,
summary judgment is inappropriate.
2. When a statute is plain and unambiguous, the court must give effect to its express
language rather than determine what the law should or should not be.
3. A "displaced person" as that term is used in K.S.A. 2015 Supp. 26-518(a) is any person
who moves from real property as a direct result of the acquisition of such property by any
condemning authority.
4. When the condemning authority conditions the acquisition of real property on the
property being vacant at the time of closing, the forced relocation of tenants is a direct
result of the acquisition of the property by the condemning authority.
5. Not every acquisition made by a condemning authority is covered by K.S.A. 2015
Supp. 26-518. In order to recover relocation benefits under K.S.A. 2015 Supp. 26-518(a),
a displaced person must prove that the condemning authority either threatened or took
affirmative action towards condemnation prior to the acquisition.
6. Under the facts of this case, when a condemning authority mentions the option of
condemnation during negotiations for the acquisition [***2] of real property, whether
23
the condemning authority threatened condemnation action is a question of material fact
which precludes the entry of summary judgment.
Quotes of Interest
“The uncontroverted facts in this case establish that the City's acquisition of the subject property
was contingent upon the property being vacant at the time of closing. This condition precedent
for the acquisition of the property was established by the City, not the [*974] landlord. Stated
another way, the City was [**512] only a willing purchaser of the subject property if the
property was vacant. There was no other reason for the landlord to force the tenants to relocate
from the property other than the fact that it was a necessary prerequisite for the sale of the
property to the City. To suggest that the tenants' relocation from the subject property under such
circumstances was an indirect result of the City's acquisition of the property is to ignore entirely
the reason why the landlord forced the tenants to relocate. In this myopic view, the landlord's
decision to force the tenants to relocate was independent of, or at best
tangentially [***10] related to, the City's acquisition of the property, which is contrary to the
summary judgment record. There is no evidence in the summary judgment record to suggest that
the landlord's forced relocation of the tenants was for reasons independent of the City's
acquisition of the subject property.” Id. at 973-74, 511-12.
“The statutory language defining a "displaced person" is straightforward and unambiguous. HN5
A "displaced person" is any person who moves from real property as a direct result of the
acquisition of such property by the City. See 42 U.S.C. § 4601(6)(A)(i)(I) (2012). Here, the City
conditioned the acquisition [**513] [***13] of the subject property on the property being
vacant at the time of closing. The landlord forced the tenants to vacate the subject property in
order to meet this condition. The property, having been vacated by the tenants, was then acquired
by the City. As such, the landlord's decision to force the tenants to vacate the property was an
event that was inseparably linked to the sale of the property to the City. The uncontroverted facts
in this case establish that the tenants' forced [*976] relocation from the subject property was the
direct result of the City's acquisition of that property—there was no other reason that the tenants
were forced to relocate. The district court's holding to the contrary was in error. The tenants are
24
"displaced persons" as that term is defined in Uniform Relocation Assistance and Real Property
Acquisition Policies Act and are therefore "displaced persons" as that term is used in K.S.A.
2015 Supp. 26-518(a).” Id. at 975-76, 512-13.
“Although the tenants are "displaced persons," they are not entitled to relocation benefits
pursuant to K.S.A. 2015 Supp. 26-518 unless the subject property was acquired by the City
"through negotiation in advance of a condemnation [***14] action."” Id. at 976, 513.
“In order for the tenants to establish that they are entitled to relocation benefits pursuant to
K.S.A. 2015 Supp. 26-518, the tenants must prove that the City either threatened or took
affirmative action towards condemnation.” Id. at 977, 514.
Twin Valley Tel., Inc. v. State Corp. Comm'n of Kan., 376 P.3d 95 (Kan. Ct. App. 2016).
Unpublished. “Per Curiam: Twin Valley Telephone, Inc., has appealed a ruling of the Kansas
Corporation Commission rejecting the company's request for a significantly enhanced
government subsidy to offset the cost of providing landline services to about 5,000 customers in
the north central part of the state. Twin Valley has presented no legally persuasive argument the
KCC erred. The KCC's order conforms to a legislative directive in K.S.A. 2015 Supp. 662008(e)(2) that state subsidies not be used to replace reductions in federal subsidies, and the
decision does not constitutionally take Twin Valley's property without just compensation. We,
therefore, affirm the agency action denying the requested subsidy.”
“WHOA: look what we discovered about the law in this case”
A. Loss of value enough? “Twin Valley has simply argued that anything less than the
determined "reasonable rate" amounts to a constitutional taking demanding just
compensation. But the law is otherwise. The Takings Clause does not require an exact
match but a rate of return within a range of reasonableness. A rate of return must be
so low—outside that reasonable range—as to be confiscatory to trigger constitutional
relief. Twin Valley has not shown that a 4.64% rate of return for the relevant time
25
period to be unreasonable or confiscatory given the circumstances of this [*17] case
and the administrative record.”
Jenkins v. Chi. Pac. Corp., 366 P.3d 664 (Kan. Ct. App. 2016). Unpublished. “Kansas courts
have "uniformly held that railroads do not own fee titles to narrow strips taken as right-of-way,
regardless of whether they are taken by condemnation or right-of-way deed." Harvest Queen
Mill & Elevator Co. v. Sanders, 189 Kan. 536, 542, 370 P.2d 419 (1962). However, "[w]here a
railroad owns the land under its tracks in fee simple, the abandonment of its rail service does not
affect its property right at all." 65 Am. Jur. 2d, Railroads § 54.”
Bridgestone Retail Operations, LLC v. GFTLenexa, LLC, 366 P.3d 667 (Kan. Ct. App. 2016).
Unpublished. “Per Curiam: This declaratory judgment action involves the interpretation of a
contract. After the parties filed cross-motions for summary judgment, the district court granted
GFTLenexa's motion and denied Bridgestone Retail Operations, LLC's motion. Bridgestone
timely appeals, arguing that the district court misinterpreted the controlling provision of the
contract. We agree and therefore reverse.”
Stalnaker v. Cowley Cnty. Cmty. Coll., 369 P.3d 340 (Kan. Ct. App. 2016). Unpublished.
“BUSER, J.: Larry L. Stalnaker filed this lawsuit for relocation payments after Cowley County
Community College (College) took his farm shed through eminent domain. The trial court
refused most of his requested relief because Stalnaker did not produce records of actual
relocation expenses. Upon our interpretation of Kansas law and the relevant federal regulations,
we conclude that because Stalnaker did produce estimates for relocation expenses from three
commercial movers, he should obtain relief. Accordingly, we reverse and remand with
directions.”
26