God's Center v. Lexington Fayette Urban

• Decision Date: 08 November 2002
• Docket Number: No. 2001-CA-000982-MR.,2001-CA-000982-MR.
• Citation: 125 S.W.3d 295
• Parties: GOD'S CENTER FOUNDATION, INC., Appellant, v. LEXINGTON FAYETTE URBAN COUNTY GOVERNMENT, Appellee.
• Court: Kentucky Court of Appeals

125 S.W.3d 295

GOD'S CENTER FOUNDATION, INC., Appellant, v. LEXINGTON FAYETTE URBAN COUNTY GOVERNMENT, Appellee.

No. 2001-CA-000982-MR.

Court of Appeals of Kentucky.

November 8, 2002.

Rehearing Denied January 16, 2003.

Discretionary Review Denied by Supreme Court February 11, 2004.

Gayle E. Slaughter, Lexington, KY, for appellant.

Theresa L. Holmes, Rochelle E. Boland, Lexington, KY, for appellee.

Before DYCHE, HUDDLESTON and JOHNSON, Judges.

OPINION

JOHNSON, Judge.

God's Center Foundation, Inc., has appealed from the findings of fact, conclusions of law, and order entered by the Fayette Circuit Court on April 13, 2001, which held that the Lexington-Fayette Urban County Government (LFUCG) properly exercised its power of eminent domain in seeking condemnation of the Lyric Theatre property for a valid public purpose. Having concluded that the factual findings made by the circuit court in support of its rulings were supported by substantial evidence and that the circuit court did not err in its legal conclusions that the LFUCG did not act arbitrarily or in excess of its authority in seeking condemnation of the Lyric Theatre, we affirm.

This case has a long, combative history centering on the preservation and operation of the Lyric Theatre located on East Third Street in Lexington, Kentucky. The Lyric Theatre opened in 1948 and served as the primary entertainment venue for African-Americans in the city with performances by major black artists and movies at a time of segregation in other theaters. As a result, the Lyric Theatre developed significant cultural importance and became a symbol of pride to the African-American community in the city. As its business declined, the Lyric Theatre closed in 1963 and fell into serious disrepair until it was acquired in 1984 by Larry Huffman. Huffman serves as the Chairman of the Board of God's Center, and he deeded the property to God's Center. God's Center is a non-profit, religious-based organization, which is self-described as an "educational foundation dedicated to restoring ethical values and moral education among the populace." God's Center made some repairs to the building, and it hoped to conduct educational and cultural instruction, but it has not reopened the facility to the public.

Due to the historic importance of the Lyric Theatre, in the mid to late 1990's, the LFUCG developed a plan to preserve the building and to restore it for use as an African-American cultural center in conjunction with an overall redevelopment plan for the downtown area. In January 1997 the LFUCG entered into a Memorandum of Understanding (MOU) with the Commonwealth of Kentucky to settle a lawsuit in which the LFUCG agreed to invest approximately $930,000.00 in an African-American cultural project centered on the Lyric Theatre including any necessary renovation of the building.¹ The MOU obligated the LFUCG to "use its best efforts to obtain all necessary titles or rights of entry for the construction of this project including taking any necessary eminent domain actions, within a reasonable time from the execution of the Memorandum of Understanding."

Shortly thereafter, the LFUCG entered into negotiations with God's Center for purchase of the Lyric Theatre. The LFUCG offered to purchase the property for $59,000.00 based on the higher of two appraisal reports it had obtained.² God's Center proposed a cooperative arrangement whereby it would retain ownership and primary control and operation of the building with the LFUCG providing input on possible events and some resources for renovation. LFUCG would receive an easement in the building.

Unable to reach an agreement with God's Center and following a vote by the LFUCG Council authorizing legal action, the LFUCG filed a petition on April 30, 1997, pursuant to the Eminent Domain Act³ and KRS Chapter 67A, to condemn the Lyric Theatre and surrounding property located on East Third Street in Lexington. The petition alleged that the property was "necessary for an African-American cultural project as agreed in a Memorandum of Understanding between the Commonwealth of Kentucky and the Lexington-Fayette Urban County Government . . . ." On May 1, 1997, an order was entered appointing three commissioners, who assessed the property with a fair market value of $113,400.00. In opposing the condemnation, God's Center alleged that the LFUCG had acted in bad faith during negotiations; the LFUCG had instituted the proceedings to fraudulently and illegally deprive God's Center of its private property rights and to assist political allies; and the LFUCG had acted arbitrarily and in excess of its lawful authority. God's Center asserted that a taking by eminent domain was neither necessary nor for a public need.

On October 22, 1997, the LFUCG filed a motion for an interlocutory summary judgment pursuant to KRS 416.610(4). On November 6, 1997, God's Center filed a response in which it alleged that the condemnation was not necessary and in bad faith because it was part of a self-enrichment scheme to legitimize payment of monies to political allies of the LFUCG. God's Center stated that the LFUCG had discriminated against it; and the LFUCG did not need a fee title interest in the property for the public purpose that the LFUCG had asserted as justification for the condemnation. God's Center claimed that there were numerous disputed genuine issues as to material facts which precluded summary judgment. On December 6, 1997, the circuit court entered an order and opinion granting the LFUCG's motion for summary judgment. Subsequently, on February 26, 1998, the circuit court entered an interlocutory order and judgment of condemnation pursuant to KRS 416.610(4), which was appealed by God's Center.

On July 23, 1999, this Court rendered an Opinion reversing the trial court's interlocutory judgment and remanding the case for a trial on the issue of the LFUCG's right to condemn the disputed property.⁴ After reviewing the law governing eminent domain and summary judgment, this Court held that God's Center was entitled to an evidentiary hearing on its factual allegations challenging the legality of the LFUCG's actions. Following this Court's Opinion, the parties conducted further discovery and God's Center filed a motion for leave to file a counterclaim and a third-party complaint based on the federal Racketeer Influenced and Corrupt Organizations Act (RICO).⁵ The LFUCG opposed the motion by arguing that it was untimely and that it alleged no new facts. The circuit court denied the motion in part because it would have introduced additional defendants not otherwise involved in the eminent domain action which was the primary focus of the litigation.⁶

The circuit court conducted a bench trial on March 5, 6, and 7, 2001, with 14 witnesses testifying for God's Center and six witnesses for the LFUCG. When God's Center attempted to introduce several letters discussing settlement of the lawsuit, the trial court granted the LFUCG's motion to exclude evidence of negotiations between the parties that occurred after the condemnation action was filed. Following the trial, the circuit court on April 13, 2001, entered its findings of fact, conclusions of law, and order granting the LFUCG's petition to acquire the Lyric Theatre property through eminent domain. The trial court ruled that the LFUCG did not act arbitrarily or abuse its discretion in seeking a fee simple title through condemnation of the property. The judgment reserved the issue of the appropriate fair market value to be paid God's Center for title to the property, but it was made final for the purpose of appeal.⁷ This appeal followed.

It is undisputed that the LFUCG has the authority to condemn property through the sovereign power of eminent domain of the Commonwealth⁸ subject to the constitutional restriction that the taking be for "public use" and the condemnee receive "just compensation."⁹ The taking of private property for a non-public use may also offend due process and the prohibition on the arbitrary exercise of power in Section 2 of the Kentucky Constitution.¹⁰ Generally, the condemning body has broad discretion in exercising its eminent domain authority including the amount of land to be taken.¹¹ A determination by the condemnor that the taking is a necessity is ordinarily conclusive,¹² but the courts will review the condemning body's exercise of discretion for arbitrariness or action in excess of its authority.¹³ The condemnor's decision on the amount of land to be condemned will be disturbed only if it is unreasonable in relation to the public interest or welfare involved and the condemnor may consider the future, as well as the present, needs for the taking.¹⁴ Kentucky courts have also imposed a duty on the condemnor to negotiate in good faith the acquisition of the property prior to seeking condemnation.¹⁵ In City of Bowling Green v. Cooksey,¹⁶ the Court stated: "Under KRS 416.550, the condemnor cannot acquire the property in fee simple if it can obtain access or use of the property through other privileges or easements."¹⁷ The party challenging the condemnation, however, bears the burden of establishing the lack of necessity or public use and abuse of discretion.¹⁸

Since this case was tried before the circuit court without a jury, we review the trial court's factual findings under a clearly erroneous standard and the legal issues de novo.¹⁹ Factual findings are not clearly erroneous if they are supported by substantial evidence.²⁰ "Substantial evidence has been conclusively defined by Kentucky courts as that which, when taken alone or in light of all the evidence, has sufficient probative value to induce conviction in the mind of a reasonable person."²¹ It is within the province of the trial court as the fact-finder to determine the credibility of the witnesses and the weight given to the evidence.²² Although the factors of necessity and public use associated with condemnation are ultimately legal...