Berger Family Real Estate, LLC v. City of Covington, 2013–CA–001482–MR

• Decision Date: 29 May 2015
• Docket Number: NO. 2013–CA–001482–MR,2013–CA–001482–MR
• Citation: 464 S.W.3d 160
• Parties: Berger Family Real Estate, LLC, Appellant v. City of Covington; Covington Business Council, Inc. ; and Urban Partnership of Covington, Appellees
• Court: Kentucky Court of Appeals

464 S.W.3d 160

Berger Family Real Estate, LLC, Appellant

v.City of Covington; Covington Business Council, Inc. ; and Urban Partnership of Covington, Appellees

NO. 2013–CA–001482–MR

Court of Appeals of Kentucky.

RENDERED: MAY 29, 2015; 10:00 A.M.

Brief for Appellant: Dana R. Howard, Lexington, Kentucky, Timothy J. Eifler, Louisville, Kentucky, Brandon N. Voelker, Cold Spring, Kentucky, Scott R. Thomas, Ft. Mitchell, Kentucky

Brief for Appellee City of Covington: Bryce C. Rhoades, Frank E. Warnock, Covington, Kentucky

Brief for Appellees Covington Business Council, Inc. and Urban Partnership of Covington: David V. KramerRyan M. McLane Crestview Hills, Kentucky

BEFORE: COMBS, STUMBO AND THOMPSON, JUDGES.

OPINION

THOMPSON, JUDGE:

Berger Family Real Estate, LLC (Berger) is a commercial property owner in a business district within the City of Covington. This action was filed after a petition was circulated to designate the area as a management district, also referred to as a business improvement district.

Berger appeals from an order of the Kenton Circuit Court dismissing its claims for declaratory and injunctive relief against the City of Covington, and two Kentucky non-profit corporations, Covington Business Council, Inc. and Urban Partnership of Covington (collectively the City). We agree with the Kenton Circuit Court that there is not a justiciable case or controversy and affirm.

The petition challenged was circulated pursuant to KRS 91A.555, which provides authority to a city such as Covington to establish a management district for the purpose of providing and financing economic improvements to benefit property within the proposed district. The procedure to initiate and establish the district is provided for in KRS 91A.560 :

(1) A city may initiate proceedings to establish a management district upon receipt by the mayor of a written petition requesting the formation of a management district. A petition requesting the formation of a management district shall contain:

(a) The signatures and addresses of a number of real property owners, who together are the owners of fifty-one percent (51%) or more of the properties within the proposed district and who are the owners of real property equal to at least fifty-one percent (51%) of the assessed value of property within the proposed management district;

(b) An accurate description of the boundaries of the proposed management district;

(c) An economic improvement plan that shall provide:

1. A description of the economic improvements to be provided within the district;

2. A preliminary estimate of the annual costs of the proposed economic improvements; and

3. The proposed method of assessing the costs of the economic improvements against the properties;

(d) The proposed makeup of the board of the management district, its powers and duties; and

(e) The number of years in which the assessments are proposed to be levied, not to exceed five (5) years.

(2) When a petition satisfying the requirements of subsection (1) of this section is received by the mayor, he shall forward it to the legislative body which may proceed to enact an ordinance establishing a management district as provided in KRS 91A.565.

KRS 91A.565(2) provides: “After the first reading of the ordinance to establish the management district, but prior to its second reading and passage, a public hearing on the question of the establishment of the management district shall be held by the legislative body.” KRS 91A.565(4) provides: “After the public hearing, the legislative body may give second reading to the ordinance that shall become effective if passed and approved pursuant to KRS 83A.060.”

The City of Covington is a second-class city that operates under a city manager form of government and governed by a board of commissioners consisting of the mayor and four commissioners. The Covington Business Improvement District Steering Committee consists of the City of Covington, the Covington Business Council, Inc. and the Urban Partnership of Covington.

After its formation, the Steering Committee circulated a petition addressed to property owners in the City of Covington's central business district to establish a management district to reverse the decline of the area. Prior to the petition being presented to the mayor for approval, this action was filed by Scott Street Land Company, LLLP,¹ pursuant to KRS 418.040 and KRS 418.045 seeking: (1) a declaration that the petition is statutorily invalid and that any ordinance emanating from that petition is likewise invalid; (2) an injunction preventing the City from expending public funds to circulate the petition and/or the City from considering the submission of the petition; and (3) a declaration that property owners have the right to sign, not sign and/or withdraw their names from the petition. Berger intervened seeking the same relief.

The City moved to dismiss the complaint arguing numerous grounds, including the lack of a justiciable case or controversy. The circuit court agreed with the City that there was no current controversy subject to judicial review and dismissed the complaint. This appeal followed.

We first address an appellate procedural issue presented by the City. It maintains this Court is precluded from reviewing the circuit court's ruling that there was no current controversy subject to judicial review because it was not specified as an issue presented on appeal in Berger's prehearing statement. It points out this Court previously denied Berger's motion to amend its prehearing statement.

Kentucky Rule of Civil Procedure (CR) 76.03(8) provides: “A party shall be limited on appeal to issues in the prehearing statement except that when good cause is shown the appellate court may permit additional issues to be submitted upon timely motion.” Despite the use of “shall,” in Capital Holding Corp. v. Bailey, 873 S.W.2d 187, 197 (Ky.1994), the Court stressed “failure to observe strict compliance with CR 76.03 is not jurisdictional.” It emphasized that the purpose of the rule is not to preserve issues for review on the merits but is “part of the prehearing conference rule (CR 76.03 ), which is an informal procedure added to the appellate process in an effort to settle cases, or otherwise dispose of them, without the need of a full-blown appeal.” Id. at 196–97. Therefore, “the question is one of substantial compliance with appropriate sanctions primarily dependent upon whether and what prejudice resulted to the opposing party[.]”Id. at 197. In the spirit of substantial compliance, our Supreme Court cautioned against “a hypertechnical reading of the statement of issues requirement[.]” Id.

The basis for the circuit court's dismissal of Berger's action was that there was not a justiciable case or controversy but, unexplainably, Berger's prehearing statement does not specifically set forth this threshold issue. Nevertheless, we cannot reconcile the purpose of the rule with penalizing Berger for its omission. The issue in this case is straightforward and “the parties are and have been well aware of” the primary issue presented on appeal. Jones v. Dougherty, 412 S.W.3d 188, 192 (Ky.App.2012). We conclude there can be no prejudice to the City from our review of the threshold issue presented and, therefore, proceed to address whether the circuit court properly dismissed Berger's action.

The Declaratory Judgment Act, KRS 418.040, provides:

In any action in a court of record of this Commonwealth having general jurisdiction wherein it is made to appear that an actual controversy exists, the plaintiff may ask for a declaration of rights, either alone or with other relief; and the court may make a binding declaration of rights, whether or not consequential relief is or could be asked.

KRS 418.045 permits a person “whose rights are affected by statute, municipal ordinance, or other government regulation ... provided always that an actual controversy exists” to petition for a declaration of rights.

The actual controversy requirement is constitutional in origin. Section 112(5) of the Kentucky Constitution grants the circuit court jurisdiction over only “justiciable causes.” Although evading precise definition, the question of justiciability focuses on “whether there is a live controversy for the court to decide.” Interactive Gaming Council v. Commonwealth ex rel. Brown, 425 S.W.3d 107, 112 (Ky.App.2014).

An essential element of any justiciable claim is ripeness. Doe v. Golden & Walters, PLLC, 173 S.W.3d 260, 270 (Ky.App.2005). Ripeness is a threshold issue: “Because an unripe claim is not justiciable, the circuit court has no subject matter jurisdiction over it.” Id. (citations omitted).

“The basic rationale of the ripeness requirement is ‘to prevent the courts, through the avoidance of premature adjudication, from entangling themselves in abstract disagreements[.]’ ” W.B. v. Commonwealth, Cabinet for Health and Family Services, 388 S.W.3d 108, 114 (Ky.2012) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967) ). A court is precluded from deciding “[q]uestions which may never arise or which are merely advisory, academic, hypothetical, incidental or remote, or which will not be decisive of a present controversy[.]” Interactive Gaming Council, 425 S.W.3d at 112 (quoting Hughes v. Welch, 664 S.W.2d 205, 208 (Ky.App.1984) ).

Additionally, KRS 418.065 of the Declaratory Judgment Act “anticipates that there will be occasions when it will not be best to address the controversy at the time of the petition, and so authorizes the courts to defer consideration until the circumstances are more favorable for a resolution of the issue presented[.]” W.B., 388 S.W.3d at 112. The statute states: “The Court may refuse to exercise the power to declare rights, duties or other legal relations in any case where a decision under it would not terminate the uncertainty or controversy which gave rise to the action, or in any case where the declaration or construction is not necessary or proper...