City of Sioux Falls v. Johnson

• Decision Date: 15 August 2001
• Docket Number: No. 21548.,21548.
• Citation: 2001 SD 108,632 N.W.2d 849
• Parties: CITY OF SIOUX FALLS, a municipality chartered under the Constitution of the State of South Dakota, Plaintiff and Appellant, v. Douglas L. JOHNSON and Sherry D. Johnson, Defendants and Appellees.
• Court: South Dakota Supreme Court

632 N.W.2d 849

2001 SD 108

CITY OF SIOUX FALLS, a municipality chartered under the Constitution of the State of South Dakota, Plaintiff and Appellant, v. Douglas L. JOHNSON and Sherry D. Johnson, Defendants and Appellees.

No. 21548.

Supreme Court of South Dakota.

Considered on Briefs January 10, 2001.

Decided August 15, 2001.

R. Shawn Tornow, Sioux Falls City Attorney's Office, Sioux Falls, SD, Attorneys for plaintiff and appellant.

Mark V. Meierhenry of Danforth, Meierhenry & Meierhenry, Sioux Falls, SD, Attorneys for defendants and appellees.

ECKRICH, Circuit Judge.

[¶ 1.] City of Sioux Falls (City) appealed an award of prejudgment interest, attorney's fees and expert witness fees. We reverse and remand.

FACTS

[¶ 2.] This appeal arises from a protracted condemnation action. On September 27, 1995, City initiated an action to condemn property owned by Doug and Sherry Johnson (Johnsons). City needed Johnsons' land for a public right-of-way and a storm water drainage project. The real property included a house, garage, barn, and 9.70 acres.¹

[¶ 3.] City, by resolution adopted August 7, 1995, decided to "expeditiously" proceed to acquire real estate by eminent domain proceedings. City commenced its suit pursuant to SDCL ch 21-35. City subsequently availed itself of the so-called "quick-take" procedures described in SDCL 31-19-23 et seq. On October 25, 1995, City deposited $423,000 with the clerk of courts pursuant to SDCL §§ 31-19-26 and 31-19-28. On November 3, 1995, Johnsons acquiesced to the quick-take proceeding by waiving a hearing to contest City's necessity to take their property. See SDCL 31-19-10.1. On November 7, 1995, Johnsons received the funds deposited by City pursuant to SDCL 31-19-29 and by order of the trial court.

[¶ 4.] Johnsons remained in possession of the property. City obtained an order of possession on July 12, 1996 that gave it the right to exclusive possession on and after August 12, 1996. City thereafter took exclusive possession of the property.

[¶ 5.] On September 20, 1996, City deposited an additional $124,955.98 with the clerk of courts to pay additional compensation due Johnsons, to be determined by jury verdict and judgment thereon or settlement of the matter. This deposit, unlike the prior deposit, made no reference to any statute. Johnsons received this deposit September 15, 1997 pursuant to SDCL 31-19-29. On January 31, 1997, City amended its condemnation petition, in accord with the provisions of SDCL 21-35-28, to add other defendants as record holders of interest.

[¶ 6.] The first trial, held August 15, 1997, resulted in a jury award of $1.2 million. This Court reversed and remanded for new trial, holding that the trial court abused its discretion in denying City's motion for a new trial. Johnson I, 1999 SD 16 at ¶¶ 8-30, 588 N.W.2d at 908-11. On January 26, 2000, following retrial, the jury returned a verdict of $1.1 million. This sum was more than 20 percent above the City's offer, thus entitling the Johnsons to costs pursuant to SDCL 21-35-23. A partial judgment for $552,044.52 was entered February 2, 2000.

[¶ 7.] The trial court subsequently awarded:

a) Prejudgment interest at 10% from November 3, 1995 to January 28, 2000, totaling $256,493.02.

b) Expert witness fees of $4650.00 for appraiser Deane Davenport ($2,000.00 for trial; $2650.00 for initial report).²

c) Attorney fees of $175,000.00 plus sales tax.

STANDARD OF REVIEW

[¶ 8.] The question regarding the proper rate of prejudgment interest involves reconciliation between statutes and as such, is reviewed under the de novo standard. Welsh v. Centerville Twp., 1999 SD 73, ¶ 7, 595 N.W.2d 622, 624. Awards of fees are reviewed under an abuse of discretion standard. Eccleston v. State Farm Mutual Auto. Ins. Co., 1998 SD 116, ¶ 20, 587 N.W.2d 580, 583; Boland v. City of Rapid City, 315 N.W.2d 496, 503 n. 4 (S.D. 1982).

DECISION

[¶ 9.] The Fifth Amendment to the Federal Constitution and articles VI, § 13 and XVII, § 18 of the South Dakota Constitution prohibit the taking of private property for public use without paying just compensation.³ The question as to what is just compensation for private property taken for public use is a judicial, and not a legislative, question. Monongahela Navigation Co. v. United States, 148 U.S. 312, 327, 13 S.Ct. 622, 626, 37 L.Ed. 463, 468 (1893). Nevertheless, the legislature establishes the procedure to determine just compensation.

[¶ 10.] "Takings" cases are not exclusively condemnation cases. One should recognize that the term "condemnation" generically describes a variety of procedures by which a sovereign exercises its power of eminent domain or takes private property.⁴ Two such procedures established by the legislature are: 1) a municipality's power to take by non-quick-take eminent domain proceedings in which the necessity to take and the value of the property taken are determined, SDCL ch 21-35; and 2) quick-take proceeding as applicable to municipalities described both in SDCL 21-35-9 and SDCL 31-19-23 et seq. These quick-take proceedings are not mutually exclusive. SDCL 31-19-40.

[¶ 11.] In non-quick-take condemnation cases, the municipality files a petition pursuant to the provisions of SDCL 21-35-2. No right to possession of the property is obtained by the condemning authority until it pays the full amount of condemnation judgment and costs. A City may dismiss the action after a just compensation verdict but before judgment is entered. City of Aberdeen v. Lutgen, 273 N.W.2d 183, 185 (S.D.1979).

[¶ 12.] "In quick-take cases, the condemning authority takes possession of the property prior to trial upon payment into court of its estimate of the value of the property taken. The condemnee may immediately withdraw the amount of the quick-take deposit and may also recover the amount of any deficiency where the value of the property is later determined at trial to be greater than the amount initially deposited by the condemnor." King v. State Roads Comm'n of State Highway Admin., 298 Md. 80, 467 A.2d 1032, 1035 (1983). A municipality may utilize the quick-take provisions of SDCL 31-19-23 "any time before final judicial determination of the rights of the parties" even if the case is initially commenced as a non-quick-take action. This is in fact what City did and Johnsons agreed to.⁵

[¶ 13.] Both parties acquiesced to a quick-take proceeding pursuant to SDCL 31-19-23. The question now becomes whether § SDCL 31-19-33 applies to the case. SDCL 31-19-33 requires a condemnor to pay "interest at the Category A rate of interest as established in § 54-3-16 on the amount finally awarded as the value of the property as of the date of the court deposit." Pursuant to this statute, interest accumulates from that date to the date of payment, but interest is not allowed on money deposited into the court. However appellees concede in their brief that the date of the taking was November 3, 1995.

[¶ 14.] SDCL 31-19-33 clearly applies to municipalities utilizing the quick-take procedure. SDCL 31-19-40 provides: "Nothing in 31-19-23 to 31-19-39, inclusive, may be construed as to impair any provisions of chapter 21-35 or §§ 31-19-1 to 31-19-22, inclusive, or §§ 9-12-1 and 9-27-1, but the proceedings herein provided for are additional and cumulative thereto." Furthermore, SDCL 31-19-33 provides in pertinent part, "[a]fter the right to compensation has vested pursuant to 31-19-24, the condemnation action ... shall go to trial, and just compensation shall be ascertained... and established by judgment. The judgment shall include interest ...." (emphasis added).

[¶ 15.] City and Johnsons implicitly agreed to the application of SDCL 31-19-24.⁶ If SDCL 31-19-24 applies, then SDCL 31-19-33 applies as well. Interest should therefore be calculated at the 4.5 percent rate as set forth in SDCL 31-19-33, and 31-19-24.⁷ We reverse the award of prejudgment interest and remand to the trial court to calculate interest at the rate of 4.5 percent from November 3, 1995.

[¶ 16.] This decision does not overrule settled condemnation law in South Dakota regarding the award of prejudgment interest.⁸ As noted above, the legislature has prescribed various taking procedures. The quick-take procedure utilized herein is fundamentally different than a non-quick-take condemnation.

[¶ 17.] In City of Aberdeen, supra, City dismissed its suit after the verdict but before a judgment entered. The crucial fact was that City abandoned its action before any taking occurred, thus no just compensation or damages were due. In that instance it was obvious no pre-judgment interest can or should be awarded.

[¶ 18.] SDCL 21-35-22 contemplates the possibility that certain condemnation cases may be abandoned before judgment. Denial of prejudgment interest in such cases is not only fair, it makes sense. Technical title, especially when the proceeding may be dismissed, is not the functional equivalent of interference with use or possession. South Dakota has previously held in accord with this view. See Hurley, 81 S.D. 318, 134 N.W.2d 782 (inverse condemnation action brought by original proceeding to this Court under the provisions of what is now SDCL ch 21-32).

[¶ 19.] In Hurley, we held the date of taking or damaging, was the date of substantial interference with the easement right.⁹ In the present case, City clearly took exclusive possession, well beyond any technical vesting of title, prior to judgment. They commenced surveying and grading, destroying the home and outbuildings. City had no ability to abandon the proceeding as its actions were irrevocable and irretrievable. The statutory scheme requires interest at 4.5 percent. Interest should therefore be awarded from November 3, 1995 and calculated pursuant to SDCL 31-19-33.

ATTORNEY FEES

[¶ 20.] The Johnson I jury awarded $1.2 million. There, the trial court made a finding that the issues involved were not difficult or complex and awarded $130,000 in attorney fees....