City of Shreveport v. Chanse Gas Corp.

• Decision Date: 22 August 2001
• Docket Number: No. 958-CA, No. 34, No. 959-CA.
• Citation: 794 So.2d 962
• Parties: CITY OF SHREVEPORT, Plaintiff-Appellee, v. CHANSE GAS CORPORATION, et al., Defendant-Appellants.
• Court: Court of Appeal of Louisiana — District of US

794 So.2d 962

CITY OF SHREVEPORT, Plaintiff-Appellee, v. CHANSE GAS CORPORATION, et al., Defendant-Appellants.

Nos. 34,958-CA, 34,959-CA.

Court of Appeal of Louisiana, Second Circuit.

August 22, 2001.

Darrell Keith Cherry, New Orleans, Joseph Walter Greenwald, Baton Rouge, Billy Ray Pesnell, Shreveport, John Whitney Pesnell, New Orleans, Counsel for Appellants.

C. Gary Mitchell, Charles Gordon Tutt, Shreveport, Thomas Anthony Bordelon, Natchitoches, Jennifer Pool McKay, Counsel for Appellee.

Before NORRIS, CARAWAY and KOSTELKA, JJ.

NORRIS, Chief Judge.

The City of Shreveport filed these two suits to expropriate three tracts of land on the northwest corner of Caddo and Market Streets for the purpose of building a convention center complex. The property owners, Chanse Gas Corp. and Harold S. Hollenshead,¹ contested the City's action. After a five-day taking trial, the District Court approved the expropriation, finding a valid public purpose and legitimate public interest. The parties then proceeded to a compensation trial in which the jury unanimously fixed the market value of the property and awarded moving and other expenses to the defendants; judgments were rendered accordingly for a total of $1,055,635. Finally, the Court held a contradictory hearing, after which it awarded attorney fees of $200,000 and costs of $51,612.88, each only a portion of the amount claimed by the defendants.

The defendants appeal devolutively, contesting the finding of a public purpose and demanding that the property be restored; they also seek additional attorney fees and costs. The City answers the appeal, seeking to reverse or reduce the award of attorney fees and costs. For the reasons expressed, we affirm.

Factual and procedural background

Since at least 1998, government leaders of the City of Shreveport, as well as civic and business leaders, had advocated the need for a new, larger convention center. In January 1998 the City hired Ernst & Young, the large accounting and management firm, to conduct a convention center study. Ernst & Young's report, delivered to the City in July 1998, recommended building a new, state-of-the-art convention center and predicted its success as "the means to transition Shreveport's meetings industry from primarily local to the next level." This report also suggested that the City "foster the development" of a convention headquarters hotel. The report was made public and copies were distributed to the media.

The mayor at the time, "Bo" Williams, appointed a committee to study the report and consider how to implement its proposals. The committee strongly supported the plan, citing its benefits for economic development and improving the character of downtown. When the current mayor, Keith Hightower, assumed office in November 1998, he received the committee's report and named a new committee² to decide how the matter should be presented to the voting citizens of Shreveport. This committee recommended a bond issue be presented to voters on July 17, 1999, for authority to sell $85 million in bonds to build the convention center and parking garage. Bonds were to be repaid out of Harrah's Casino revenues. The committee vigorously promoted the bond issue. According to testimony, special emphasis was placed on the 1,300 permanent jobs with $25 million in wages, and $3.5 million in annual taxes that the convention center was predicted to generate. There was less emphasis on its projected $1 million annual deficit. The bond issue passed overwhelmingly, approving funds for the project.³ The City planned to induce a private developer to build the headquarters hotel, but despite its efforts none had expressed interest in doing so.

The City then contracted with Slack, Alost, Miremont & Associates, architects ("SAM"), which assembled a team of architects, real estate developers and hotel consultants to develop the convention center in accord with the bond issue.⁴ The team was to assess various requirements of the convention center, particularly a contiguous 300,000 sq. ft. location, with due regard to cost, environmental impact, long range planning and safety considerations. The team also assessed whether the convention hotel was economically feasible. It advised that without an adjacent headquarters hotel, the convention center would not appeal to large or regional groups, and would be no more than a civic center. It therefore advised that the hotel was essential to the success of the convention center.

Although the initial Ernst & Young report had suggested a location close to the riverfront, entertainment district and casinos, both mayors' committees approved slightly expanding the target area. After exhaustive consideration, SAM and the other consultants found the only practicable location was a three-block strip on the north side of Caddo Street, which the City began making efforts to purchase.

The selected area included Chanse and Hollenshead's warehouse and parking lot and Chanse's office building. They had bought these properties in early 1997 for a total of $246,000. In August 1999, they listed them for sale for a total of $750,000. Days later, Hollenshead read in The Times that the City was considering that location; he raised the asking price to $900,000. On August 25, the City offered the defendants a total of $512,000 for the three tracts, in accord with its appraisals; they refused. The City gradually increased its bids, offering $750,000 on January 5, 2000.⁵ This offer was also refused. In the meantime, the City Council authorized an expropriation action; the City filed the instant suits on January 11, 2000. The defendants vigorously denied the City's right to expropriate, but alternatively demanded over $3.25 million in compensation. The cases were consolidated for trial.

The taking trial was held May 24-31, 2000. Pursuant to La. R.S. 19:105, this was a bench trial. The court received extensive testimony and documentary evidence regarding the convention center and hotel, notably the City's claim that the project promoted economic development for the City and its residents, and thus served public purposes and the public interest. La. Const. Art. 1, § 4; R.S. 19:102. The defendants contended that economic development is not a public purpose; their witnesses testified that the project would actually be a financial drain on the City, that it would interfere with other ongoing City projects, that the headquarters hotel would compete with existing hotels, and that the City would ultimately have to donate property to a hotel developer in order to induce the construction of the hotel.

By written reasons for judgment, the District Court listed both sides' contentions and analyzed them. Citing Town of Vidalia v. Unopened Succession of Ruffin, 95-580 (La.App. 3 Cir. 10/4/95), 663 So.2d 315, and Board of Com'rs v. Missouri Pacific R. Co., 625 So.2d 1070 (La.App. 4 Cir.1993), writs denied 93-3100, 93-3088 (La.1/28/94), 630 So.2d 802, cert. denied 512 U.S. 1220, 114 S.Ct. 2707, 129 L.Ed.2d 835 (1994), the court held that economic development in the form of a convention center with a supporting hotel is indeed a public purpose and in the public interest. Weighing all the evidence, the court concluded that while the project "is not without some potential risk, the City has demonstrated reasonable, prudent and sound discretion as well as good faith." The court therefore adjudicated that the properties be expropriated and ordered a jury trial on compensation.

The compensation trial took place August 21-25, 2000.⁶ The City's experts appraised the tracts at approximately $600,000. Hollenshead admitted that he and Chanse's president, Mr. Kai S. Chang, had paid $63,000 for the warehouse in 1997, but he estimated he had spent $200,000 improving the structure and remodeling it into a luxury apartment, private office and showroom for his antique cars and other collectibles; most of these improvements were undertaken after the City expressed an interest in buying the property. Other defense witnesses estimated the properties' fair market value at $2.4 million,⁷ and replacement cost at about $1.9 million. A final defense witness, an expert appraiser and real estate market analyst from Connecticut, Dr. W.M. Kinnard, did not appraise the property but attended the entire trial and offered an oral critique of the five appraisals introduced into evidence. He felt that the appraisal with the best methodology was the one fixing the fair market value at $2.4 million.

The jury rendered a unanimous verdict fixing the total fair market value at $688,000,⁸ and declining to award replacement costs. It also awarded moving expenses of $192,635 and other expenses of $175,000, for a total verdict of $1,055,635. The quantum has not been appealed.

Finally, in September 2000 the court held a hearing on the defendants' motion to complete compensation with respect to attorney fees and costs. For the taking and compensation trials, the defendants requested attorney fees of $344,048.95 and costs of $150,310.77.⁹ The City countered that because the jury awarded a fair market value less than the City's final offer for the property, the defendants were not entitled to attorney fees for the taking trial, citing R.S. 19:201 and Illinois Central R. Co. v. 16.032 Acres of Land in Jefferson Parish, 2000 WL 278096 (E.D.La.3/14/00). The court rejected this argument, finding it would penalize a property owner for exercising (albeit unsuccessfully) his right to contest expropriation. The court ruled the defendants were entitled to attorney fees for the entire proceedings, but found that these must be reasonable. After discussing the claims and finding many of them to be excessive or unnecessary, the court awarded attorney fees of $200,000 and costs of $51,612.88. Judgments were rendered accordingly, detailing every allowed amount.

Discussion: Power of expropriation

By their first assignment of error the defendants urge that the...