City of Missoula v. Mountain Water Co.

• Decision Date: 08 May 2018
• Docket Number: DA 17-0674
• Citation: 391 Mont. 288,417 P.3d 321,2018 MT 114
• Parties: CITY OF MISSOULA, Plaintiff and Appellee, v. MOUNTAIN WATER COMPANY, et al., Defendants and Appellants, and Employees of Mountain Water Company, Intervenors.
• Court: Montana Supreme Court

391 Mont. 288

417 P.3d 321

2018 MT 114

CITY OF MISSOULA, Plaintiff and Appellee,

v. MOUNTAIN WATER COMPANY, et al., Defendants and Appellants,andEmployees of Mountain Water Company, Intervenors.

DA 17-0674

Supreme Court of Montana.

Submitted on Briefs: April 4, 2018

Decided: May 8, 2018

For Appellant Mountain Water Company: William T. Wagner, Stephen R. Brown, Kathleen L. DeSoto, Garlington, Lohn & Robinson, PLLP, Missoula, Montana, Joe Conner, Adam Sanders, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Chattanooga, Tennessee

William W. Mercer, Kyle Anne Gray, Brian M. Murphy, Billings, Montana (for Carlyle Infrastructure Partners, LP)

For Appellants: Michael W. Green ; D. Wiley Barker, Crowley Fleck PLLP, Helena, Montana

For Appellee: Scott M. Stearns, Natasha Prinzing Jones, Zachary Aaron Franz, Randy J. Tanner, Boone Karlberg P.C., Missoula, Montana, William K. VanCanagan, Datsopoulos, MacDonald & Lind, P.C., Missoula, Montana, Harry H. Schneider, Jr., Perkins Coie LLP, Seattle, Washington

Justice Ingrid Gustafson delivered the Opinion of the Court.

¶ 1 Appellant Mountain Water Company (Mountain Water) appeals from the November 9, 2017 order of the Fourth Judicial District Court, Missoula County, denying Mountain Water’s motion for post-summons interest.

¶ 2 We restate the issue on appeal as follows:

Whether the District Court erred when it determined Mountain Water was not entitled to interest pursuant to § 70-30-302(2), MCA.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 Mountain Water operated a water delivery system located in and around Missoula, Montana. On May 5, 2014, the City of Missoula (the City) filed an amended complaint seeking condemnation of the water system. The Fourth Judicial District Court issued a Preliminary Order of Condemnation under § 70-30-206, MCA, on June 15, 2015. This Court affirmed the Preliminary Order of Condemnation in City of Missoula v. Mt. Water Co. , 2016 MT 183, 384 Mont. 193, 378 P.3d 1113.

¶ 4 On October 26, 2015, the District Court concluded that § 70-30-302(5), MCA, which provides that an award of compensation does not include improvements made to condemned property, was unconstitutional as applied to Mountain Water. Therefore, Mountain Water sought compensation for improvements made to the condemned property after May 5, 2014. A Condemnation Commissioner hearing was held in November 2015 to determine the amount of just compensation. The Commissioners determined that the fair market value of the water system, including all improvements, was $88.6 million.

¶ 5 Following the Commissioners’ valuation, Mountain Water sought interest for the time period prior to the City taking possession based on the Commissioners’ $88.6 million valuation. On April 6, 2016, the District Court denied an award of interest concluding the plain language of § 70-30-302(2), MCA, in conjunction with § 70-30-311, MCA, did not entitle Mountain Water to post-summons interest because the City never took interlocutory possession of the condemned property.

¶ 6 On May 3, 2016, the District Court determined Mountain Water and Carlyle were prevailing parties entitled to recover necessary expenses pursuant to § 70-30-305(2), MCA. After an evidentiary hearing, the District Court awarded Carlyle $1,111,659.94 and Mountain Water $2,800,745.57 for litigation expenses. However, Carlyle’s litigation expenses remain in escrow pending the outcome of the appeal to the Montana Supreme Court.¹

¶ 7 The City then moved for the Court to "oversee and supervise the transition of ownership and possession." The City specifically sought access to data such as customer and human resource information prior to taking possession. On January 4, 2017, the District Court granted the City limited access to Mountain Water’s data to ensure a smooth transition of the public utility. However, the District Court repeatedly stated giving limited access to the City did not grant the City a possessory right in the water system. Consequently, the District Court rejected Mountain Water’s argument that allowing the City access to limited data qualified as a transfer of possession pursuant to § 70-30-311, MCA.

¶ 8 On June 5, 2017, Mountain Water and the City entered into a Settlement Agreement. The Settlement Agreement provided the City would take possession of Mountain Water’s condemned property simultaneously upon the City paying Mountain Water for all assets and claims² asserted in the condemnation action, the FBO refunds and the Carlyle Litigation Expenses. The Settlement Agreement provided the City would pay approximately $84 million, which included payment for improvements made during the pendency of the condemnation and for attorney fees and costs.

¶ 9 On June 15, 2017, the District Court entered its Final Judgment in Condemnation. The Judgment included the agreed payment method and transfer of possession between the City and Mountain Water as set forth in the Settlement Agreement. On June 22, 2017, the District Court signed the Final Order of Condemnation in open court and the City tendered its check to Mountain Water pursuant to the Settlement Agreement. The Final Order stated the City would take title and possession of all condemned assets upon the filing of the Order with the County Clerk. The Order was subsequently filed and recorded by the County Clerk.

¶ 10 On July 18, 2017, Mountain Water again sought post-summons interest and requested an evidentiary hearing. Subsequently, on November 9, 2017, the District Court denied Mountain Water’s motion for statutory interest pursuant to § 70-30-302(2), MCA, for the same reasons set forth in its April 6, 2016 order. The District Court further refused to grant Mountain Water discretionary interest based on our decision in City of Billings v. Hunt , 257 Mont. 99, 847 P.2d 715 (1993). Mountain Water timely appeals.

STANDARD OF REVIEW

¶ 11 This Court reviews a district court’s conclusions of law de novo to determine if they are correct. Mixed questions of law and fact, "including the district court’s application of controlling legal principles to its factual findings," are reviewed de novo. Mountain Water , ¶ 20.

DISCUSSION

¶ 12 Whether the District Court erred when it determined Mountain Water was not entitled to interest pursuant to § 70-30-302(2), MCA.

¶ 13 Mountain Water argues the District Court erred because § 70-30-302(2), MCA, mandates an award of interest. Mountain Water maintains the City took possession pursuant to § 70-30-311, MCA. Mountain Water also argues the District Court improperly relied on federal law to determine Montana’s statutory scheme regarding condemnation.³ Alternatively, Mountain Water argues it is entitled to discretionary interest.

¶ 14 The City asserts the District Court correctly concluded Mountain Water was not entitled to interest pursuant to § 70-30-302(2), MCA. The City argues § 70-30-311, MCA, does not apply because the City did not make payment into court and the City did not take interlocutory possession. The City further maintains Mountain Water is not entitled to discretionary interest.

¶ 15 The Fifth Amendment to the United States Constitution prohibits governmental entities from taking private property for public use under the power of eminent domain without paying "just compensation." Similarly, the Montana Constitution prohibits the taking or damaging of private property for public use "without just compensation to the full extent of the loss having been first made to or paid into court for the owner." Mont. Const. art. II, § 29. "A taking does not occur until: (1) legal title vests in the condemnor, (2) the condemnor enters into actual possession, or (3) the condemnor takes constructive possession either by causing damage to property or by depriving the owner of full beneficial use of his land." Mt. Water Co. v. Dep’t of Revenue , 2017 MT 117, ¶ 15, 387 Mont. 394, 394 P.3d 922 (citing City of Billings , 257 Mont. at 103, 847 P.2d at 717-18 ).

¶ 16 For the purposes of assessing compensation, the right to compensation is considered to have accrued at the date of the service of the summons, and the property’s fair market value as of that date is the measure of compensation for all property to be actually taken or injuriously affected. Section 70-30-302(1), MCA. Additionally, § 70-30-302(2), MCA, allows interest from the date of the service of the summons if certain conditions are met. Section 70-30-302(2), MCA, in relevant part, provides:

If an order is made allowing the condemnor to take possession, as provided in ... 70-30-311, the full amount finally awarded must draw interest at the rate of 10% a year from the date of the service of the summons.

¶ 17 Section 70-30-302(2), MCA, assesses interest when the process described in § 70-30-311, MCA, puts a condemning plaintiff into possession of the condemned property. K&R P’ship v. City of Whitefish , 2008 MT 228, ¶ 64, 344 Mont. 336, 189 P.3d 593.

¶ 18 Section 70-30-311(1), MCA, provides:

At any time after the filing of the preliminary condemnation order pursuant to 70-30-206 ... and while it retains jurisdiction, the court upon application of the condemnor may make an order that:

(a) upon payment into court of the amount of compensation claimed by the condemnee in the condemnee’s statement of claim of just compensation under 70-30-207 or the amount assessed either by the commissioners or by the jury, the condemnor is authorized:

(i) if already in possession of the property of the condemnee that is sought to be taken, to continue in possession; or

(ii) if not in possession, to take possession of the property and use and possess the property during the pendency and until the final conclusion of the proceedings and litigation.

¶ 19 Section 70-30-311, MCA, is an exception requiring the condemnor to make payment prior to a final judgment payment. This exception is when the condemnor seeks an interlocutory order putting the condemnor in possession of the condemned property. Bozeman Parking Comm’n v. First Trust Co ., 190 Mont. 107,...