Creegan v. State

• Citation: 391 P.3d 36,305 Kan. 1156
• Decision Date: 24 March 2017
• Docket Number: No. 111,082,111,082
• Parties: James M. CREEGAN, et al., Appellants, v. The STATE of Kansas, et al., Appellees.
• Court: United States State Supreme Court of Kansas

305 Kan. 1156
391 P.3d 36

James M. CREEGAN, et al., Appellants,
v.
The STATE of Kansas, et al., Appellees.

No. 111,082

Supreme Court of Kansas.

Opinion filed March 24, 2017

Douglas J. Patterson, of Property Law Firm, LLC, of Leawood, argued the cause, and Michelle W. Burns and Kellie K. Warren, of the same firm, were with him on the brief for appellants.

Charles E. Millsap, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, argued the cause, and Lyndon W. Vix, of the same firm, and Timothy P. Orrick and Paul Schepers, of Orrick & Erskine, L.L.P., of Overland Park, and Barbara W. Rankin, chief counsel, of Kansas Department of Transportation, were with him on the briefs for appellees.

Timothy P. Orrick, of Orrick & Erskine, L.L.P., of Overland Park, was on the brief for amici curiae League of Kansas Municipalities, City Attorneys Association of Kansas, Kansas Association of Counties, and Kansas Rural Water Association.

Christopher F. Burger, of Stevens & Brand, L.L.P., of Lawrence, was on the brief for amicus curiae Westar Energy, Inc.,

The opinion of the court was delivered by Beier, J.:

This is an inverse condemnation action brought by property owners in the Grande Oaks subdivision in Overland Park to seek compensation from the State of Kansas and the Kansas Department of Transportation (collectively KDOT) for violation of restrictive covenants burdening subdivision property. KDOT obtained summary judgment in defendants' favor in the district court, but a panel of the Court of Appeals reversed. Creegan v. State , No. 111082, 2015 WL 423835 (Kan. App. 2015) (unpublished opinion).

Today, on KDOT's petition for review, we depart from the rationale of the Court of Appeals but affirm its result. Violation of restrictive covenants can support the taking of a compensable real property interest in an inverse condemnation action. And this case must be remanded to district court to determine the amount, if any, of the just compensation due to the plaintiffs.

FACTUAL AND PROCEDURAL BACKGROUND

The underlying facts of this case and its procedural history in the district court are not in dispute. As the Court of Appeals set out those facts and history:

"Grande Oaks is a subdivision in Johnson County, Kansas. The plots within Grande Oaks were made subject to a Declaration

391 P.3d 39

of Restrictions filed in the Register of Deeds Office of Johnson County, Kansas, on June 22, 1978. In relevant part, the Declaration of Restrictions stated that the property within Grande Oaks should be occupied and used for single-family residence purposes only.

"In 1999, KDOT purchased a sizeable section of real property from Christ Evangelical Lutheran Church of Lenexa, Kansas, Inc., which included land platted as lots 55 through 75 in Grande Oaks. In 2005, KDOT placed trailers on these lots and, in subsequent years, used the lots for various construction activities. Eventually, KDOT constructed permanent bridges and pavements on a number of the lots. The existing traffic pattern currently utilizes these newly constructed facilities.

"In March 2012, Plaintiffs, who all owned real property in Grande Oaks, initiated this lawsuit claiming inverse condemnation by Defendants. After some limited discovery, Defendants filed a motion for summary judgment[,] arguing that violation of the restrictive covenant in this case was not a compensable taking under Kansas law." Creegan , 2015 WL 423835, at *1.

As the Court of Appeals noted, no transcript of the district court hearing on summary judgment is included in the appellate record, but the record does contain a memorandum decision issued by the district judge. It reads in pertinent part:

"In this case, Plaintiffs do not allege an actual, physical taking. Instead, they allege that Defendant damaged their property by using its own property in violation of its deed restrictions....

"The watershed issue in this case, the claim from which all of the Plaintiffs' theories of damages flow entirely[,] is the State's violation of the restrictive covenants running with the land. Restrictive covenant compliance may be a contractual expectation, an intangible property right of the Plaintiffs and every other property owner in the subdivision. There is no dispute that the State has violated the restrictive covenants with respect to the lots it owns through purchase. However, violation of the restrictive covenants is not a physical taking. Some physical taking or substantial inevitable damage resulting in a taking must be alleged and produced in evidence to support a claim for inverse condemnation. The ‘taking’ alleged in this case is not a compensable taking at all....

....

"... This trial court ... will not create or expand the cause of action not otherwise recognized under Kansas law.

....

"... The Plaintiffs' case at bar pivots entirely upon the violation of restrictive covenants burdening property owned by the State. In Plaintiffs' theory, damages flow from the violation of the restrictive covenants. There is no evidence in this case of any actual physical taking of the real property, or substantial or sustained and inevitable physical damages to the real property amounting to a ‘taking’ of the real property owned by the Plaintiffs.

"Defendant argues that Plaintiffs' only claim of damages is the alleged diminution in the values of their respective properties, which are not compensable in an inverse condemnation case. On the other hand, Plaintiffs argue that they have alleged compensable damages. Plaintiffs alleged damages do not rise to the level of the taking required for inverse condemnation. They are incidental to the primary claim upon which the Plaintiffs rest, i.e. , violation of the restrictive covenants. They are not compensable in inverse condemnation.

"In response to Defendant's Motion for Summary Judgment, Plaintiffs have only provided evidence of a diminution in value of their properties."

At the close of this discussion, the district judge granted summary judgment to the defendants.

On appeal, a majority of the Court of Appeals panel ruled that restrictive covenants are real property interests and that the damage done to those property interests by KDOT's violation of the covenants required just compensation. 2015 WL 423835, at *6. Judge G. Gordon Atcheson concurred in the majority's result, but he would have treated restrictive covenants as a hybrid of real

391 P.3d 40

property interests and contract interests. Under his design, compensation would be due only for violation of restrictive covenants exhibiting the attributes of a real property interest. 2015 WL 423835, at *6 (Atcheson, J., concurring). Whether these attributes exist would have to be determined on a case-by-case basis. According to Judge Atcheson, "[a] government entity takes the property interests embodied in a restrictive covenant to the extent the nonconforming use to which it puts restricted land creates or causes conditions that intrude upon privately owned land subject to that same restriction." 2015 WL 423835, at *17 (Atcheson, J., concurring).

DISCUSSION

Because the district judge granted summary judgment to the defendants, we apply the following standard of review:

" ‘Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. [Citations omitted.]’ Shamberg, Johnson & Bergman, Chtd. v. Oliver , 289 Kan. 891, 900, 220 P.3d 333 (2009)." Fawcett v. Oil Producers, Inc. of Kansas , 302 Kan. 350, 358–59, 352 P.3d 1032 (2015).

The issue of law at the heart of this case is whether there has been a compensable taking of a private interest in real property. See Estate of Kirkpatrick v. City of Olathe , 289 Kan. 554, 559, 215 P.3d 561 (2009) (citing Korytkowski v. City of Ottawa , 283 Kan. 122, 128, 152 P.3d 53 [2007] ). An issue of law is reviewable de novo on appeal. See Platt v. Kansas State University , 305 Kan. 122, 126, 379 P.3d 362 (2016).

"This court has long recognized that ‘the right to take private property for a public use is inherent in the state.’ " 289 Kan. at 558, 215 P.3d 561 (quoting State, ex rel. v. Urban Renewal Agency of Kansas City , 179 Kan. 435, 438, 296 P.2d 656 [1956] ). But that power is limited by both federal and state law.

Both the federal and state Constitutions address takings for public use. The Fifth Amendment to the United States Constitution provides that "private property [shall not] be taken for public use, without just compensation." Article 12, Section 4 of the Kansas Constitution provides that "[n]o right of way shall be appropriated to the use of any corporation, until...