K&R Partnership v. City of Whitefish

• Decision Date: 25 June 2008
• Docket Number: No. DA 06-0051.,DA 06-0051.
• Citation: 189 P.3d 593,2008 MT 228,344 Mont. 336
• Court: Montana Supreme Court
• Parties: K&R PARTNERSHIP, Plaintiff, Appellee and Cross-Appellant. v. CITY OF WHITEFISH, Defendant and Appellant.

189 P.3d 593

2008 MT 228

344 Mont. 336

K&R PARTNERSHIP, Plaintiff, Appellee and Cross-Appellant. v. CITY OF WHITEFISH, Defendant and Appellant.

No. DA 06-0051.

Supreme Court of Montana.

Submitted on Briefs August 22, 2007.

Decided June 25, 2008.

For Appellant: William P. Driscoll, Franz & Driscoll; Helena, Montana, James H. Goetz, Goetz, Gallik & Baldwin, P.C.; Bozeman, Montana.

For Appellee: Sean S. Frampton, Morrison & Frampton, P.L.L.P.; Whitefish, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Appellant City of Whitefish (Whitefish) appeals from the jury verdict and final order of the Eleventh Judicial District, Flathead County, awarding Appellee K&R Partnership (K & R) $161,000 for its inverse condemnation claim and $94,788.23 for litigation expenses. K&R cross appeals, challenging the District Court's decision to disallow "cost to cure" evidence and the court's partial denial of its claimed expenses. We reverse in part, affirm in part, and remand for further proceedings consistent with the opinion herein.

¶ 2 We consider the following issues on appeal, beginning with the issues raised by Whitefish:

¶ 3 1. Did the District Court err by misinterpreting the contract between Whitefish and K&R, thereby limiting the issues presented to the jury and precluding Whitefish from introducing evidence that its $130,000 payment and transfer of land to K & R constituted both the value of the condemned property and severance damages?

¶ 4 2. Did the District Court abuse its discretion by failing to impose reasonable constraints on the property owner's opinion testimony as to the value of his property?

¶ 5 3. Did the District Court err in granting litigation costs to K & R?

¶ 6 We then consider issues K&R raises on cross-appeal:

¶ 7 4. Did the District Court err by precluding K & R's evidence of "cost to cure"?

¶ 8 5. Did the District Court err by awarding interest to K & R from the date of the verdict instead of the date of possession?

¶ 9 6. Did the District Court err in not awarding K&R property taxes as a necessary litigation expense?

¶ 10 7. Did the District Court err in refusing to award K & R's expert fees incurred in preparation for the fees and expenses hearing?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 11 K & R, a partnership formed by four families, owns real property in the City of Whitefish. Located on the property is a 7,400 square foot commercial building that houses the "Dos Amigos Restaurant" and the "Best Bet Casino." The building is bordered by paved parking areas on all sides with the front of the building facing east. The property's east side is bordered by U.S. Highway 93, which runs north and south. K & R's property is bordered on the west by a vacant lot owned by Whitefish. The Whitefish property is bordered on the west by Baker Avenue, which parallels Highway 93.

¶ 12 In 1995, the State was widening Highway 93 to four lanes and Whitefish desired to run connector streets from Baker Avenue to Highway 93. In 1997, Whitefish sought to use West 13th Street as a connecter to Highway 93 by extending it from Baker Avenue east to the highway. However, West 13th Street, which was already connected to Baker Avenue, dead-ended into the K&R property. In order to connect West 13th Street to Highway 93, Whitefish sought to condemn 7,234 square feet of the K&R property and construct the extension of West 13th Street thereon. The construction would eliminate K & R's parking lot on the south side of its building but would provide K & R's business with direct access to West 13th Street and an alternate route to and from Highway 93. The condemnation would not permanently affect or alter K & R's pre-existing access to Highway 93. Whitefish entered into negotiations with K & R in order to acquire the 7,234 square feet of K & R's property (Condemned Property).

¶ 13 K & R and Whitefish were unable to reach an agreement on the value of the property and instead, on October 6, 1998, entered into an "Agreement and Grant of Possession" (Agreement). The Agreement provided that K & R would grant Whitefish possession of the Condemned Property and Whitefish would pay K & R the sum of $130,000 as well as convey to K & R 10,175 square feet of its vacant lot bordering the west side of the K & R property (Conveyed Property). Whitefish also agreed to pave the Conveyed Property so that K&R could use it for parking purposes. The Agreement memorialized these provisions and also stated that the parties were unable to agree on (1) the value of the Condemned Property; (2) the severance damages to the remaining K&R property; and (3) the value of the Conveyed Property. Pertinent to this appeal, the Agreement provided:

WHEREAS, the parties hereto are, in good faith, unable to agree on the valuation of the Condemned Property, the severance damages to the remainder of Landowner's property, and the value of the property the City is agreeing to convey to the Landowner in partial consideration of the City's taking of Landowner's property for public use, and

WHEREAS, it appears that it may be necessary to resort to litigation to determine such valuations ... the parties hereto agree as follows:

. . . .

2. .... The parties agree that the City Property conveyed to the Landowner is in the nature of severance damages and is similar in use to that of the Condemned Property, although the parties retain the right to negotiate and litigate the relative values of the City Property and the Condemned Property;

. . . .

13. That except as to items 2, 8, 9 above, and 18 below, the City agrees not to seek compensation, credit or setoff against the compensation which may be due the Landowner for the Condemned Property; and

14. That the parties shall have sixty (60) days from the date of execution of this Agreement to negotiate the value of the compensation for the taking of the properties described herein and all impacts of the construction of the 13th Street Extension upon the remaining property of the Landowner and the Landowner's businesses. All compensation paid or payable to the Landowner other than that specifically allocated in the final compensation agreement or judgment as compensation for the Condemned Property shall be deemed severance damages, compensating Landowner for the decrease in the value of the property it retains that results from construction of the 13th Street connector and the corresponding taking of the Condemned Property.

. . . .

18. That within ten (10) business days of the date of this Agreement, the City shall pay to Landowner the sum of One Hundred Thirty Thousand and No/100 Dollars ($130,000.00) cash. The City asserts this, when combined with other consideration passing, to be the full value of both the Condemned Property and all severance damages. Any additional compensation either negotiated or ordered paid to the Landowner by the City shall bear interest at the rate of Ten Percent (10%) per annum.

However, still unable to agree on the valuation of the properties exchanged and severance damages, on May 18, 1999, K&R filed a complaint for inverse condemnation and breach of the Agreement.

¶ 14 Prior to the jury trial, held July 25-27, 2005, the District Court made several pivotal rulings on motions in limine. First, the District Court decided that the only issue for the jury to determine was the "amount to which K&R [was] entitled as compensation for the land taken." The court reasoned from Item 14 of the Agreement that "[i]t appears from [the] Agreement that [K & R's] severance damages have already been addressed, and it has accepted as payment the $130,000.00, and non-monetary benefits." Accordingly, the jury was not asked to determine the amount of severance damages owed to K & R.

¶ 15 Second, based on this interpretation of the Agreement, the court granted K & R's motion to preclude Whitefish from admitting "any evidence of the amount of money paid by the City of Whitefish to K & R Partnership for compensation." The District Court again reasoned that Item 14 of the Agreement designated the $130,000 as severance damages only, and therefore could not be considered by the jury in determining K & R's entitlement to compensation for the Condemned Property. As a result, the court ordered Item 18 of the Agreement, referencing Whitefish's payment of $130,000, redacted. The court also disallowed any testimony or other evidence of the $130,000 payment.

¶ 16 Third, the court disallowed Whitefish from presenting any evidence regarding the Conveyed Property. The court reasoned that because Whitefish had not yet deeded the land to K & R there was no "unity of ownership" between the Conveyed Property and the remaining K & R property. Consequently, the court determined that the Conveyed Property could not be considered when determining the fair market value of K & R's remaining property after the condemnation. Moreover, the District Court stated that even if there was unity of ownership, evidence of the Conveyed Property would be inadmissible because, under the Agreement, it was likewise payment for K & R's "severance damages," which the court had determined was not an issue at trial. Consistent therewith, the District Court disallowed Whitefish's expert appraiser, Steven Hall (Hall), from discussing the "after" value of K & R's remaining property following Whitefish's transfer of the adjoining Conveyed Property. Accordingly, no testimony whatsoever was allowed at trial regarding the Conveyed Property.

¶ 17 Fourth, the court determined that the "cost to cure damages" sought by K & R were non-compensable because K & R's access to Highway 93 remained unchanged after the condemnation. The court reasoned that because the condemnation resulted in a "reconfiguration" of K & R's parking lot as opposed to a complete loss of access to the highway, K & R's request that the public pay to "reconstruct its building to improve its foot traffic access and to present a more attractive first appearance" was "[c]...