Taking of Property by Eminent Domain

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LAND USE

PLANNING AND

EMINENT DOMAIN

IN KENTUCKY

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Taking of Property by Eminent Domain

Bissell Roberts

BACKGROUND[1]

In Kentucky, the right of eminent domain is a constitutionally recognized right belonging to the state which is generally recognized as a superior to all other property rights in the Commonwealth. KRS 381.010 provides:

“The Commonwealth of Kentucky is deemed to have possessed the original, and has the ultimate property in and to all lands within her boundaries.”

In 1976 the Kentucky General Assembly enacted the “Eminent Domain Act of Kentucky”, KRS 416.540, et seq. (The “EDA”), which established mandatory procedures in Kentucky condemnation cases. (See, Appendix A) It is essential to understand the EDA’s procedures, since they provide the legal framework for all Kentucky condemnation cases.

A “Condemnor” is defined by the EDA to include the Commonwealth and, its agencies, as well as, a county, a municipality, a person, a corporation or other entity authorized by law to exercise the right of eminent domain, KRS 416.540(2).

KRS 416.540(1) defines “Condemn” as follows:

“. . . means to take private property for a public purpose under the right of eminent domain;”

The EDA broadly defines “Property” to include “real or personal property, or both, of any nature or kind that is subject to condemnation.” KRS 416.540 (5).

The underlying principle of eminent domain is the inherent power of the Commonwealth to acquire private property when needed by the public for a “public use”. Usually, condemnation cases are filed by the Commonwealth, a county or a municipality, however, the legislature has delegated Kentucky’s power of eminent domain to public utilities, quasi governmental agencies and private parties for various public purposes as set forth in the Kentucky Revised Statutes. Some of those uses include airports, bridges, cemeteries, colleges, drainage, electric power, garbage dumps, hospitals, housing projects, levies, mass transit, mine opening, parks, riverports, sanitation districts, scenic use, schools, sewers, slum clearance, telephones, turnpikes and water. Whether representing the Condemnor or the Condemnee it is always important to determine early on whether proper constitutional and statutory authority support the proposed “taking”.

Condemnation of property typically falls into one of more of the following categories –

A “total taking”, i.e., the taking of an entire piece of property;
A “partial taking”, i.e., the taking of portion of a piece of property;
Taking of another interest, e.g., condemnation of a lease;
A “temporary partial taking”, e.g., when property is temporarily needed for a public project and the condemnor is obligated to pay a rental fee; and
Condemnation for an “easement”.

SOURCE OF THE POWER

Neither the United States nor the Kentucky Constitutions explicitly create any right of condemnation. The Fifth Amendment of the U.S. Constitution provides “nor shall private property be taken for public use, without just compensation”. Although the framers of the U.S. Constitution recognized the government’s right to take, it was not until 1876 that the right was recognized by the United States Supreme Court in Kohl v. United States, 91 U.S. 367, 373 (1876). Prior to the Kohl decision, the federal government had generally pursued condemnation cases in state courts relying on state law. The “due process” clause of the Fourteenth Amendment of the U.S. Constitution eventually was construed by the United States Supreme Court to impose the Fifth Amendment’s obligation of “just compensation” for a taking to state court condemnation proceedings. Chicago B. & Q. R.Co. v. Chicago, 166 U.S. 226, 236 – 237 (1897).

In 1891 Kentucky adopted its current Constitution which in §13 and §242 provided that private property could not be taken for “public use” without “just compensation” to be paid “before such taking”. The Kentucky Constitution also specified that “just compensation” must be set by a jury and guaranteed property owners at least one appeal in any condemnation case.

THE “PUBLIC USE” ISSUE

Kentucky’s Constitution §13 requires that private property to be taken only for a “public use”. The EDA requires that private property to be taken in an eminent domain case only for a “public purpose”. KRS 416.540(6). See also, City of Bowling Green v. Cooksey, Ky., App., 858 S.W.2d 190 (1992). The determination of a “public purpose” is decided by the judiciary while the “necessity” for the exercise of the power of condemnation is generally decided by the legislative branch. Idol v. Knuckles, Ky., 383 S.W.2d 910 (1964). In every Kentucky case, the Condemnor must meet a two prong test of “necessity” and “public purpose”. Profitt v. Louisville & Jefferson County Metropolitan Sewer District, Ky., 850 S.W.2d 852 (1993).

As a rule, a condemning authority may not take private property by condemnation and later transfer it to a private property owner for a use which the Condemnor thinks is a better or more beneficial use which remains essentially private. Owensboro v. McCormick, Ky., 581 S.W.2d 3, 7 (1979). A recent case in New Jersey involved a widow who had lived in her home on the Boardwalk in Atlantic City for thirty seven years. A New Jersey governmental agency was prompted by developer Donald Trump to condemn the widow’s home for needed limousine parking. On Appeal the widow raised constitutional defenses against taking of private property for another “private use” and the New Jersey Appellate court decided that any public benefit for the additional limousine parking was overwhelmed by the private interest of the widow’s continued ownership. TheAppeals Court reversed the condemnation in favor of Mr. Trump’s interest.

This approach should be contrasted with the Kentucky Supreme Court’s opinion in Dannheiser v. City of Henderson, Ky., 4 S.W.3d 542 (1999). The Kentucky Supreme Court in that case wrote that the General Assembly and courts had developed a “broad definition of activities that may qualify as a public purpose” and that Kentucky had long recognized “economic development” as a broad public purpose. Although Dannheiser was not a condemnation case, it involved the sale by a municipality of municipal property to private companies for less than market value and its discussion regarding the validity of industrial development as a “public purpose” may apply to eminent domain cases.

B. JUST COMPENSATION

“Is the Compensation ‘Just’ or is it ‘Just Compensation’?”

In most eminent domain cases no serious challenge is made by the property owner concerning the Condemnor’s “right to take” and the real battle centers on damages and the value of the property right taken. It is important from the prospective of the property owner and the property owner’s attorney to retain at an early stage well-qualified experts to determine the value of the property rights taken. Those experts could include appraisers, engineers, real estate brokers, and others.

A condition precedent to a lawsuit in most condemnation cases is an attempt by the Condemnor to acquire the owner’s interest in the property by agreement. KRS 416.550. The applicable condemnation statute and regulations should be reviewed in each case. Approximately seventy five percent (75%) of property owners accept settlement offers before suit is filed. After suit is filed approximately seventy-five (75%) of property owners settle before trial. Generally an expert opinion is necessary for the property owner to access the value of what is being condemned and to provide a sound and intelligent basis for settlement

Property owners in condemnation cases should realize early in the process they are generally at a disadvantage, because of the power and superior financial resources of the Condemnor. As a rule all of the Condemnor’s attorney’s fees (including those of private counsel) and experts fee are paid by the condemning authority, which has “deeper pockets” than the Condemnee. Although KRS 516.620(4) explicitly states that “all costs” in a Circuit Court action shall be adjudged against the Condemnor, as a general rule the Condemnee has no right to recover attorney’s fees or the costs of its expert witnesses. Commonwealth, Dept. of Highways v. Knieriem, Ky., 707 S.W.2d 340 (1986). This substantial tactical advantage of the Condemnor will be discussed in greater detail below.

Kentucky’s Constitution §242 requires that the owner shall be paid “just compensation” – “paid before such taking”. In condemnation cases, as contrasted with most civil cases, the jury’s verdict must be unanimous and needs be signed only by the foreman. Franklin County v. Bailey, 250 Ky. 528, 63 S.W.2d 622, 627 (1933). This poses a practical problem since it does not allow jurors, as in most civil cases, to decide damages based on agreement of 9 or more jurors. After a petition for condemnation is filed in the circuit court where the property is located an initial determination of just compensation is made by three court commissioners appointed by the court. The standard for valuation used by court commissioners set out in, KRS 416.580(1) and the standard a jury should follow, KRS 416.660(1), is essentially the same.

KRS 416.660(1) provides in part,

“. . .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 land 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.”

At the conclusion of the trial the circuit court jury should be instructed as to the definition of “fair market value”. Commonwealth, Dept. of Highways v. Herndon, Ky., 378 S.W.2d 620, 622 (1964). “Fair market value” is a value which would be reached between a willing seller who is not required to sell and a willing buyer who is not required to buy. Commonwealth, Dept. of Highways v. Darch, Ky., 374 S.W.2d 490, 491-492 (1964).

PROPERTY RIGHT TAKEN

It is important at an early date to determine exactly what property interest the Condemnor is seeking to acquire. This is crucial information in order to accurately evaluate the merits of any settlement offer, the sufficiency of the commissioners’ award, and exactly what the property owner’s experts need to appraise. The property interests that are subject to condemnation range from a fee simple title in an entire property, to a temporary easement over a small portion of a tract and everything in between.

DATE OF TAKING

For “just compensation” and valuation purposes it is also crucial to determine the legal “date of taking” and to develop an appropriate settlement and/or litigation strategy based on the “date of taking”. The EDA provides that the taking date shall be (1) either the date the Condemnor takes possession of the property or (2) the date of the trial on the issue of just compensation, whichever occurs first. KRS 416.660(2). It is also important for the property owner to consider prevailing market conditions. For example, in a real estate market where prices are accelerating quickly, it may be in the property owner’s best interest to delay resolution of the condemnation case, if the “date of taking” is the date of trial. On the other hand, if property values are generally declining, it may be in the property owner’s interest to resolve the case sooner rather than later, if the “taking date” is the date of trial.

By statute, changes in the condemned property’s value either up or down, which are “substantially due” to public knowledge about the condemnation project should be disregarded in determining fair market value. KRS 416.660(2). Juries should be instructed to disregard any increase or decrease in value attributable to the condemnation project. Commonwealth, Dept. of Highways v. Parker, Ky., 388 S.W.2d 366 (1965). If prior to entry of an interlocutory judgment the property is damaged or decreases in value the property owner continues to bear the risk of loss. In Ford v. City of Bowling Green, Ky., 780 S.W.2d 613 (1989), a building on the property being condemned was heavily damaged by vandals before an interlocutory judgment was entered authorizing the city to take possession of the property. KRS 416.660(2). Needless to say, the vandalism reduced the fair market value of the entire property because the valuation date was the date the Condemnor took possession of the property. The Ford case illustrates the importance to the property owner of maintaining adequate insurance for all structures on the property involved in a condemnation case until the Condemnor’s take possession of the property pursuant to court order or the date of trial, whichever occurs sooner.

FACTORS WHICH AFFECT THE FAIR MARKET VALUE

In general, Kentucky courts recognize that property owners are entitled to compensation based on the highest and best use of the property. Commonwealth, Dept. of Highways v. Ramsey, Ky., 388 S.W.2d 610 (1965). Usually, the actual use made of the property should be used by experts in their valuations, unless there is a probability of a higher use in the future. Sloan v. Commonwealth, Dept. of Highways, Ky., 405 S.W.2d 294, 296 (1966).

Evidence that may be introduced to assist the jury it in determining fair market value of the condemned property include:

¨ Comparable sales – Stewart v. Commonwealth, Dept. of Highways, Ky., 337 S.W.2d 880 (1960);

¨ Possibility of zoning change – Commonwealth, Dept. of Highways v. Bradley, Ky., 483 S.W.2d 150 (1972);

¨ Eminent change in market potential – Commonwealth, Dept. of Highways v. Wyatt, Ky., 434 S.W.2d 807 (1968);

¨ Tax assessment – Commonwealth, Dept. of Highways v. Stallings, Ky., 465 S.W.2d 723 (1971);

¨ Enhancement of remaining property as a result of taking – Commonwealth, Dept. of Highways v. Eberenez, Ky., 435 S.W.2d 753 (1968);

¨ Although not applicable to every condemnation case, the jury may award damages for special losses if applicable including the following types of losses.

¨ Complete loss of access for ingress and egress to and from the property. Commonwealth, Dept. of Highways v. Jent, Ky., 525 S.W.2d 121 (1975);

¨ Necessary fencing costs – Commonwealth, Dept. of Highways v. Watson, Ky., 446 S.W.2d 294 (1969);

¨ Damage to personal property which is destroyed or reduced in value – Superior Coal & Builders’ Supply Co. v. Board of Education, 260 Ky. 84, 83 S.W.2d 875 (1935);

¨ A partial taking case with damage resulting from an unreasonable change in the path of a stream – City of Danville v. Smallwood, Ky., 347 S.W.2d 516 (1961).

As a rule jurors are not entitled to consider evidence and property owners are not entitled to recover damages in a condemnation case as a result of the following changes caused by the condemnation:

¨ Jury instructions do not limit compensation to the highest figure supported by evidence and instructions should not set a “high”/”low” range for a verdict. Commonwealth, Dept. of Highways v. C.S. Brent Seed Co., Ky., 376 S.W.2d 310, 311 (1964);

¨ Impaired access to the remaining property even if access is much more difficult – Commonwealth, Dept. of Highways v. Comer, Ky., App., 824 S.W.2d 881 (1991), cert. den. 505 U.S. 1222 (1992);

¨ Loss of business – Monticello Co., Inc. v. Commonwealth, Natural Resources & Environmental Protection Cabinet, Ky., App., 864 S.W.2d 921, 924 (1993).

PARTIAL TAKING

If only a portion of the property is taken, the condemnation verdict in general represents the difference in the fair market value of the owner’s property immediately before the taking and the fair market value of the owner’s property remaining immediately after the taking. Commonwealth, Dept. of Highways v. Tackett, Ky., 498 S.W. 630, 632 (1973). In a partial taking case, the jury may in addition to the “taking damages” consider “resulting damages” which are those damages associated with the effect the taking has on the future marketability of the remainder of the Condemnee’s property. Commonwealth, Dept. of Highways v. Elizabethtown Amusements, Inc., Ky., 367 S.W.2d 449, 452 (1963).

CONDEMNATION OF LEASES

It is not unusual for a condemning authority to condemn property that is subject to a lease. Where there are such conflicting claimants to the condemnation award, each party shall be deemed an “owner”. The condemnation proceeding cannot be delayed because of any conflicts between the competing owners, e.g., the landlord and the tenant. KRS 416.640.

In spite of these conflicting and competing claims for just compensation, the property must be valued as the fair market value of the unit as a whole. The award is then allocated to the conflicting claimants. Commonwealth, Dept. of Highways v. Sherrod, Ky., 367 S.W.2d 844, 850 (1963). In the many instances, a written lease will control the rights of the landlord and tenant with respect to any sharing or division of a condemnation award. For example, the lease may specifically provide that the tenant has no interest in any condemnation award. However, if the tenant is entitled to share the award, then the formula for allocating the award set out in Sherrod will apply. If the lease does not provide for a legal allocation of any condemnation award or settlement, this issue must be decided by agreement of the landlord and tenant or by the jury’s verdict. One way of analyzing the potential value of a tenant’s legal interest in the award is to consider whether the tenant has a “bargain lease” at below market rates. If the tenant’s lease is at a below market rate, the tenant should share in the condemnation award in the absence of a conflicting lease provision. If, however, the tenant’s lease is at an above market rental rate, the tenant’s lease should add value to the landlord’s property and the tenant would not share in the condemnation award in the absence of a favorable lease provision. See, Kentucky Instructions to Juries, Palmore, § 14.3 (see, Appendix B), which provides a sample instruction as suggested by the Sherrod case, supra.

C. ATTACKING THE RIGHT TO TAKE

Within 20 days of service of a summons, the property owner shall file its Answer to the Petition. KRS 416.600 provides the Answer “shall be confined solely to the question of the right of the petitioner to condemn the property sought to be condemned, but without prejudice to the owner’s right to except from the amount of compensation awarded…”. If the owner’s Answer places in issue the Condemnor’s right to condemn the property, “the court shall, without intervention of jury, proceed forthwith to hear and determine whether or not the petitioner has such right.” KRS 416.610(4). If the court determines that the Condemnor/Petitioner does not have the right to condemn the property, it must dismiss the Petition and direct the Condemnor to pay all costs. If the court finds that the Condemnor does have the right to condemn the property, it shall enter an interlocutory judgment and find the Petitioner does have such right. KRS 416.610(4). Ratliff v. Fiscal Court of Caldwell County, Ky., 617 S.W.2d 36 (1981) held that if an Answer placed into issue the Condemnor’s right to condemn the property that “the trial court must immediately determine this matter” following a hearing. The failure of a party to file an Answer is a waiver of the property owner’s right to contest the right to take issue. Commonwealth v. Wireman, Ky., 714 S.W.2d 159 (1986).

Frequently, property owners have no valid basis to challenge the Condemnor’s right to take. However, legitimate taking challenges may be available and should be considered in appropriate cases. Some of those legitimate challenges to the “right to take” will be discussed below. One example involves the required statutory authority for the Condemnor to condemn property. In Bernard v. Russell County Air Board, Ky., 718 S.W.2d 123 (1986), the Kentucky Supreme Court held that a County Air Board on its own initiative could not lawfully condemn private property without prior authorization from the county government.

Kentucky statutes may in specific situations require the condemning authority to act by resolution or ordinance to condemn properties. Resolutions and ordinances may require recitation of the fact that the Condemnor could not acquire the property by agreement. For example, KRS 65.533(5) pertaining to a Riverport Authority’s procedure to condemn and KRS 97.540 relating to a required resolution for a third or fourth class city to condemn property for a cemetery or park.

In Eaton Asphalt Paving Co. v. CSX Transp., Inc., Ky. App., 8 S.W.3d 878 (1999), the Kentucky Court of Appeals held that a domestic railroad corporation which was merged to form a foreign corporation did not retain its power of eminent domain in Kentucky and thus affirmed the property owner’s challenge a right to take by the foreign corporation.

A condemnation petition may be challenged on the basis that the Condemnor did not attempt to reach agreement with the property owner to acquire its property interest before filing a lawsuit, as required by KRS 416.550. There is no requirement, however, that the Condemnor seek to obtain agreements to buy the targeted property if the identity of the property owner is unknown or if there are multiple owners of various interests in a single parcel. Commonwealth, Dept. of Highways v. Cardinal Hill Nursery, Inc., Ky., 343 S.W.2d 842 (1961).

KRS 416.560 requires any department, instrumentality or agency of the Commonwealth having a right of condemnation, other than the Department of Transportation and local boards of education, to exercise such right by requesting the Kentucky Department of Finance to institute the condemnation action on its behalf. KRS 416.560(3). Similarly, departments and agencies of a city, county or urban-county government (other than the Louisville Water Company), must request the governing body of the city, county or urban county to institute condemnation proceedings on its behalf. KRS 416.560(1). A failure to follow the required statutory procedures should serve as grounds to challenge the right to take.

Perhaps the most common reason to challenge the right to take is a challenge as to the “public use” or “public purpose” of the condemnation. This concept was discussed above. Property may not be condemned from one private entity for use of another private entity because the second use is deemed a better use by the Condemnor. Craddock v. University of Louisville, Ky., 303 S.W.2d 548 (1957); Sturgill v. Commonwealth, Dept. of Highways, Ky., 384 S.W.2d 89 (1964). The use of private funds to aid the government in restoring and maintaining a condemned property did not affect the Commonwealth’s right to condemn the property, in the case involving the state’s condemnation of the Mary Todd Lincoln Home in Lexington. Coke v. Commonwealth, Dept. of Finance, Ky., 502 S.W.2d 57 (1973).

Decker v. City of Somerset, Ky. App., 838 S.W.2d 417 (1992), held that positive income production was not necessary for a project to serve a “public purpose” in a project involving condemnation of private property for construction of a conference center, auditorium, theatre, economic development office. The Decker opinion also held that the burden of proof was on the parties objecting to the condemnation to show a lack of “necessity”.

In Commonwealth, Dept. of Highways v. Taub, Ky., 766 S.W.2d 49 (1988), the court held that upon a determination by a circuit court of a “necessity” for the taking, the burden of proof was on the party challenging the taking to defeat the “right to take”, which as a rule that could be defeated only by a showing of fraud, bad faith or abuse of discretion.

Although not directly related to a challenge to the right to take, there is authority in Kentucky for property owners to reacquire an interest in previously condemned property which is not used for a public purpose or is abandoned by the condemning authority. If a condemning authority ceases to use property for any public purpose, the Kentucky Supreme Court in City of Louisville v. Louisville Scrap Material Co., Inc., Ky., 932 S.W.2d 352 (1996), held that title to property would revert in fee simple to the property owner’ successor in interest.

There have been interesting cases concerned with the right of a property owner to reacquire property from a Condemnor. If the condemning authority acquires property and does not commence development of the property within eight years from the date of condemnation “the current landowner” may repurchase the property at the price the Condemnor paid. KRS 416.670(1). In Miles v. Dawson, Ky., 830 S.W.2d 368 (1991), the court held that the property owner had the right to repurchase that portion of its property which was not used by the condemning authority for a “public purpose” and that the fact that the Condemnor wanted to trade the unused portion of the condemned property for the public project in exchange for other property to be condemned would not defeat the original owner’s right to repurchase.

Similarly, in City of Covington v. Hardebeck, Ky. App., 883 S.W.2d 499 (1994), the property owners were entitled to repurchase for a pro-rata portion of the original purchase price that portion of the property sold to the city for a park which was unused by the city even though the size of the unused tract was miniscule.

D. CIVIL PROCEDURE RELATING TO EMINENT DOMAIN

The EDA sets a required statutory procedure which applies to all condemnation actions in Kentucky. Condemnation cases are also governed by the Kentucky Rules of Civil Procedure, except as otherwise provided for by the EDA. KRS 416.650. Some of the relevant Rules of Civil Procedure and Kentucky Rules of Evidence which apply in condemnation cases will be discussed below.

The twelve steps in a typical condemnation case under the EDA are:

Step 1: Condemnor seeks to acquire property by negotiation. KRS 416.550

Step 2: Governing body by resolution/ordinance takes action to approve a lawsuit. KRS

416.560.

Step 3: Ten days prior to condemnation petition, Condemnor acquires a right of entry onto owner’s property to conduct surveys, studies, etc. KRS 416.560(4).

Step 4: Verified petition filed in Circuit Court. KRS 416.570.

Step 5: Court appoints commissioners to value property to be condemned. KRS

416.580.

Step 6: The majority of commissioners file written report with Circuit Court and request

their fees to be taxed as costs. KRS 416.580(2).

Step 7: Condemnor requests issuance of summons. KRS 416.590.

Step 8: Owner may file Answer to challenge right to condemn. KRS 416.600.

Step 9: The court examines commissioners’ report and if no Answer or pleading

which challenges right to take, the court enters interlocutory judgment of

condemnation. KRS 416.610

Step 10: If Answer challenges right to take, court conducts hearing to determine the right

to take and enters an appropriate judgment. KRS 416.610(4)

Step 11: Within 30 days of entry of interlocutory judgment, either party may file

exceptions.

Step 12: Trial by jury on valuation issues.

After entry of a final judgment by the Circuit Court, all parties have a right of one appeal to the Kentucky Court of Appeals. KRS 416.650.

The condemning authority in Kentucky condemnation cases has a built-in financial advantage because its attorneys and experts (whether private or public employees) are paid by an agency of the government. KRS 416.620(4) provides “all costs in the circuit court shall be adjudged against the condemnor.” The Kentucky Court of Appeals in Transportation Cabinet, Dept. of Highways v. Wireman, Ky. App., 714 S.W.2d 159 (1986) held that “costs” did not include appraiser’s fees paid by the property owner. Similarly, the owner’s attorney’s fees are not recoverable. Commonwealth, Dept. of Transportation v. Knieriem, Ky., 707 S.W.2d 340, 341 (1986).

In Northern Ky. Port Authority Inc. v. Cornett, Ky., 700 S.W.2d 392, 393-94 (1985), the Kentucky Supreme Court held that costs and attorneys’ fees could be recovered by a property owner after a voluntary dismissal of an attempted condemnation case only upon the finding of “bad faith or unreasonable delay” by the Condemnor. That opinion noted that the award of attorneys’ fees might be considered part of costs as a part of equitable terms and conditions in granting a voluntary dismissal. The case was remanded to the trial court for further consideration of this issue.

In Bernard v. Russell Co. Airport, Ky. App., 747 S.W.2d 610 (1987), the Kentucky Court of Appeals remanded the case to the Circuit Court and ordered the Circuit court to award attorneys’ fees to the property owners after their successful defense against a condemnation case filed by an air board, which did not legally exist and which had no legal right to condemn property. The opinion at p. 612 held,

“…Condemnation proceedings that are blatantly illegitimate, and when instigated raised the specter of undue harassment and expense for a private citizen, inherently create a presumption of bad faith. It is conceivable that this presumption of bad faith could be rebutted in a case of milder circumstances; but it cannot in one whose facts are so harsh as these.”

UNTESTED STRATEGIES

The remaining portion of this section is a discussion of untested litigation strategies and uncharted territory. The ideas expressed are those of the author, are untested , and for the most part are not based on any controlling legal precedent.

The world economy, prevailing interest rates, market trends and the current market conditions for local real estate are factors that inevitably play a part in every condemnation case. If the Condemnor takes possession of the property, the Condemnor must pay the owner 6% interest per annum on the amount the jury verdict exceeds the Commissioners’ award. If the jury verdict is less than the Commissioners’ award, the property owner must pay the Condemnor 6% interest per annum from the date the property owner accepted the Commissioners’ award, if the jury verdict is less than the Commissioners’ award. Thus, the Condemnor’s taking possession of the property, prevailing interest rates, the marketplace and other factors play a role in each party’s strategy.

THE PROPERTY OWNER’S STRATEGY

If the Commissioners’ award exceeds the market value of the property and the Condemnor takes possession, in most circumstances the property owner will want to withdraw the award from the court and not press for a speedy trial unless and until existing and projected interest rates are less than six % per annum.

Conversely, if the Commissioners’ award is substantially below the value of the property being condemned and the Condemnor takes possession, the property owner may want to withdraw the award and press for an early trial date. As part of its tactics, the property owner should consider making an “offer of judgment” pursuant to CR 68. The “offer of judgment” may set the legal stage for the property owner to argue that it is entitled to recover as part of its “costs” pursuant to CR 68(3), all expert witness fees and all attorneys’ fees incurred after the offer of judgment. (See, Appendix C) HOW IS THIS POSSIBLE, YOU ARE WONDERING!

We are all familiar with the general rule cited in the Bernard v. Russell Co. Airport at p. 611, that “in absence of a statute or a contract expressly providing for attorney’s fees, they are not allowed.” I recommend to you for consideration two obscure , but important Kentucky cases regarding the recovery of attorney’s fees. They are Kentucky State Bank v. AG Services, Inc., Ky., 663 S.W.2d 754, 755 (1984) and Batson v. Clark, Ky. App., 980 S.W.2d 566, 577 (1998). In Kentucky State Bank, the Court of Appeals recognized the general rule in Kentucky that the recovery of attorneys’ fees is not possible in the absence of a contractual or statutory provision. The opinion at p. 755 went on to state:

“However, this rule does not, we believe, abolish the equitable rule that an award of counsel fees is within the discretion of the court depending on the circumstances of each particular case.”

Although the court found that the equities did not justify the award of attorneys’ fees, the Kentucky State Bank opinion was cited fourteen years later in Batson v. Clark, which affirmed a trial court’s award of attorneys’ fees in the complete absence of a statute or contractual provision therefore. The Batson opinion at p. 577 cited language of the Kentucky State Bank case, and upheld the trial court’s award of attorneys’ fees (albeit very modest attorneys’ fees) awarded in the discretion of court using its inherent equitable powers.

In the proper case where the property owner has strong expert evidence that the value of the property being condemned is significantly in excess of the Condemnor’s lowball offer, you may want to consider an “offer of judgment” and educate the court that an award to the owner of its expert witness fees and attorneys’ fees may properly be based on the court’s inherent equitable powers. This is a tool which may also be useful in achieving an appropriate settlement or following the trial, a recovery of attorneys’ fees and expert witness fees for your client based on the trial court’s exercise of discretion. In the process you may want to emphasize that this is a way in which the trial court can “level the playing field” for property owners in condemnation cases. Because an allowance of fees is a matter of discretion for the court and the award would be made only if “equitable.”

E. EXPERT WITNESSES

Usually condemnation trials involve a classic “battle of experts”. Certainly trial counsel should not overlook the importance of lay testimony to help establish a factual foundation for testifying experts opinions. Ordinarily, the property owner may not be qualified to express an expert opinion, however, if the court determines the property owner possesses the necessary qualifications he or she may testify as an expert citing comparable sales. Bennett v. Commonwealth, Dept. of Highways, Ky., 417 S.W.2d 143 (1967). In most cases each party will introduce at least one expert to express an opinion on the value of the property taken. Kentucky does follow a somewhat relaxed standard in qualifying a witness to testify as to the value of the property being condemned which requires the witness to understand the standard of the value and be able to make reasonable inferences from those values. Commonwealth, Dept. of Highways, v. Finley, Ky., 371 S.W.2d 854, 856 (1963).

Because a Kentucky condemnation case is tried in the county where the property is located, the reputations and credibility of an expert witness may be crucial to the jury verdict. It is essential that any local expert is well-regarded in the community, has practical qualifications, is very familiar with local property values, understands what property right is being taken, knows how to properly calculate the damages and is willing to update his or her opinion as of the “date of taking”.

The expert must use the proper date of taking. If the date of taking is the date of trial, the expert will need to update any preliminary valuation and make clear through the discovery process that an update will be required. Unless unusual circumstances exist, counsel may be well advised to stipulate with court approval an “agreed valuation date” which is in advance of the date of trial. This will allow discovery depositions with valuations which are not subject to change. Depending on the valuation date which applies, counsel should be particularly conscious of their obligation under CR 26(e) to update their expert’s opinion in advance of trial, if required by local rules, a pre-trial order or CR 26(e).

Pursuant to KRE 702, the trial court will approve the introduction of testimony by a qualified expert which will assist the jury in assessing the damages. The courts in Kentucky have for the most part adopted the key federal court standards for expert testimony. Mitchell v. Commonwealth, Ky., 908 S.W.2d 100 (1995) adopted the standard for review of expert testimony established in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Goodyear Tire & Rubber Co. v. Thompson, Ky., 11 S.W.3d 575 (2000), adopted the rationale of Kumho Tire Co. Ltd. v. Carmichael, 526 U.S.137 (1999), that a trial judge on a case by case should as necessary screen and approve of the qualifications of testifying experts as a judicial gatekeeper. You should consider the use of pretrial conferences, procedures and stipulations to establish the right of expert witnesses to testify.

If there is a large disparity between the appraisal by the condemning authority’s expert and the property owner’s expert, consideration should be given to requesting a court-appointed expert. KRE 706(a) establishes the procedure for appointment of a court-appointed expert and KRE 706(b) provides for that expert’s compensation. In considering whether to make a motion for the trial court to appoint an expert witness, you should evaluate carefully whether you expect the court appointed expert’s opinion to be in line with your expert’s opinion. Under KRE 706(a) the trial court may require parties to submit “nominations” for appointment of an expert or may appoint an expert agreed upon by the parties. If the court appoints an expert and that expert opinion aligns closely with the expert opinion of one of the parties, that will probably facilitate resolution of the case at an early date. If a case is not settled a court-appointed expert’s opinion may be given considerable weight by a jury.

Pursuant to KRE 614 the court on its own motion or at the suggestion of a party may call a witness and interrogate a witness whether called by the court or by a party. Although KRE 614 allows a party to cross-examination a witness called by a judge, nevertheless, that witness, particularly a court-appointed expert, may have a powerful impact on a jury verdict.

If the court appoints an expert witness, that witness is entitled to “reasonable compensation” as the court shall determine and “the compensation” to be paid from funds available for “just compensation” under the “Fifth Amendment”. Is this another way for the property owner to “level the condemnation playing field?”

F. INVERSE VS. DIRECT CONDEMNATION

Occasionally, the Commonwealth, an agency of the Commonwealth or an agency of some other branch of government takes possession of a property interest of a property owner without previously acquiring that property interest by agreement or by eminent domain. The sole remedy available to the property owner is to file a suit for either injunctive relief or damages. Both remedies are not available. Keck v. Hafley, Ky., 237 S.W.2d 527 (1951). Since most Kentucky cases concerning a property owner’s claim for “just compensation” under § 13 and § 242 of the Kentucky Constitution and not injunctive relief, the balance of this outline will focus on suits for damages.

Where an agency of the government acquires possession of land without filing an eminent domain case, the property owner has the right to file a “reverse condemnation” or a “inverse condemnation” suit. Jones v. Commonwealth, Dept. of Highways, Ky. App., 875 S.W.2d 892 (1993). A lawsuit for damages also known as “condemnation in reverse” should be filed in the circuit court where the property is located. Commonwealth, Dept. of Highways v. Gisborne, Ky., 391 S.W.2d 714 (1965). A property owner’s claim against the government will not be considered by a federal court if the property owner had not first attempted a inverse condemnation pursuit in state court. Heaton v. City of Princeton, 47 F. Supp. 2d 841 (W.D. Ky. 1997), aff’d 178 F.3d 1294 (6th Cir. 1998).

The EDA does not apply in an inverse condemnation case. For example, there is no appraisal by a court-appointed commissioners and no payment of money into court by the Condemnor. Nevertheless, the general principles of eminent domain law apply. An inverse condemnation case is filed by the property owner. The property owner must prove that the “taking” has already occurred. Jones v. Commonwealth, Dept. of Highways, supra, at p. 893. In addition to the taking of the property there must be, destruction or injury to property rights. Holloway Const. Co. v. Smith, Ky., 683 S.W.2d 248 (1984).

The right of “just compensation” is guaranteed by Kentucky’s Constitution subsequent to the taking and applies on the same basis as if an eminent domain proceeding had been filed prior to the taking. Bader v. Jefferson Co., 274 Ky. 486, 119 S.W.2d 870 (1938). The application of Kentucky’s constitutional principles are “self-executing” even though there is no specific statutory authority for the property owner to recover damages from the government in a “reverse condemnation” case.. D.T.C. Lives, Inc. v. City of Harlan, Ky., 313 S.W.2d 573 (1958). Because the courts view the right to recovery as an implied promise to pay by the governmental authority, the contract statute of limitations applies. Jones v. Commonwealth, Dept. of Highways at 893.

The same formula of damages in a reverse condemnation case should be used as in an eminent domain case, and punitive damages are not recoverable. Witbeck v. Big Rivers Rural Elec. Coop Corp., Ky., 412 S.W.2d 265, 269 (1967). Similarly, a requirement that the jury verdict must be unanimous applies in a reverse condemnation case. Commonwealth, Dept. of Highways v. Gilles, Ky., 516 S.W.2d 338, 339 (1974).

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[1] These materials concern the state law of eminent domain in Kentucky and do not address in any detail, eminent domain proceedings under Federal law or the law of other states.