Mont.-Dakota Utilities Co. v. Parkshill Farms, LLC

Decision Date13 December 2017
Docket Number28174
Citation905 N.W.2d 334
Parties MONTANA-DAKOTA UTILITIES CO. and Otter Tail Power Company, Plaintiffs and Appellees, v. PARKSHILL FARMS, LLC, Reuben Parks, Vera Parks, and Ordean Parks, Defendants and Appellants, and Web Water Development Association, Inc., Kermit Parks, and Estate of Orion E. Parks, Defendants.
CourtSouth Dakota Supreme Court

JASON R. SUTTON, THOMAS J. WELK of Boyce Law Firm, Sioux Falls, South Dakota, Attorneys for plaintiffs and appellees.

N. BOB PESALL, Flandreau, South Dakota, Attorney for defendants and appellants.

GILBERTSON, Chief Justice

Through formal condemnation proceedings, Montana-Dakota Utilities Co. and Otter Tail Power Co. (collectively, "Utilities") obtained easements to construct a powerline across four parcels belonging to Parkshill Farms LLC and Reuben, Vera, and Ordean Parks.1 The Parkses appeal, arguing that the easements were not taken for a public use and that they are unnecessary. The Parkses also argue the circuit court abused its discretion when it rejected a jury instruction requested by the Parkses. We affirm in part, reverse in part, and remand.

Facts and Procedural History

[¶2.] Montana-Dakota Utilities Co. is a public utility that provides electricity to about 135,000 customers in South Dakota, Montana, North Dakota, and Wyoming. Otter Tail Power Co. is a public utility that provides electricity to over 130,000 customers in South Dakota, Minnesota, and North Dakota. These utility companies are members of the Midwest Independent Service Operator ("MISO"), which is a nonprofit organization created to regulate the planning, construction, and management of electricity transmission in the upper Midwest, including South Dakota. MISO, in turn, is subject to regulation and control by the Federal Energy Regulatory Commission ("FERC"). Under FERC guidelines, public utilities that participate in the interstate electricity market must provide open access to their transmission lines under nondiscriminatory rates and conditions to anyone participating in the market.

[¶3.] In order to facilitate electricity generation and to promote reliable service in its geographic area, MISO continually evaluates the needs of its transmission system and considers projects to improve that system. At issue in this case, MISO determined a high-voltage (345 kilovolt) transmission line should be constructed between a substation located south of Big Stone City, South Dakota, and another substation located near Ellendale, North Dakota. The line is 163 miles long, with 10 miles of line located in North Dakota and the rest in South Dakota. This transmission line is commonly referred to as the "Big Stone South to Ellendale" project—or "BSSE."2 After MISO's board of directors approved the project, the Utilities were required to construct the transmission line. After months of consideration,3 the Utilities picked a route and began negotiating with the affected property owners. The Utilities successfully negotiated voluntary easements over 91% of the parcels along the BSSE's proposed route. The Parkses were among a few who refused settlement.

[¶4.] Unable to secure voluntary easements from the Parkses, the Utilities filed a condemnation petition on October 28, 2015. In the petition, the Utilities sought permanent, 150-foot-wide easements "for the purpose of constructing, operating, [and] maintaining an overhead electric transmission line up to but not exceeding 345kV over, under and across" the Parkses' properties. The proposed easements included the right to

construct, operate, maintain, use, upgrade, build, rebuild, relocate, or remove an electric line facility with one or more circuits, with all towers, structures, poles, foundations, crossarms, cables, wires, anchors, guys, supports, counterpoises, fixtures and equipment related to said electric line facility, together with communication equipment relating to the operation of such electric line facility ... through, over, under and across [the Parkses' property.]

The circuit court held a hearing on April 5, 2016, to determine the Utilities' right to take the easements. The Parkses challenged both the scope and the duration of the proposed easements. The court approved the petition, and on January 25 and 26, 2017, the case proceeded to a jury trial to determine the amount of compensation due for the easements.

[¶5.] At trial, the Parkses' real-estate appraiser testified the market value of their properties would diminish by $840,000 as a result of the proposed easements. The Utilities' real-estate appraiser valued the easements at only $73,097. Although the easements included the right to construct a number of supporting structures and features, see supra ¶ 4, the Utilities' witnesses testified that it was extremely unlikely the Utilities would exercise these additional rights. In response, the Parkses requested a jury instruction that would have required the jury to "consider all damages, present and prospective, that will accrue reasonably from the taking of the easement, and in so doing must consider the most injurious use of the property reasonably possible under the easement." The court rejected the requested instruction. The jury ultimately awarded $95,046 to the Parkses and the other landowners.

[¶6.] The Parkses appeal, raising the following issues:

1. Whether the easements were taken for a public use.
2. Whether the easements were necessary.
3. Whether the circuit court abused its discretion by refusing the Parkses' requested jury instruction.
Analysis and Decision

[¶7.] The power to take privately owned property and put it to public use is "an inherent right vested in a sovereign state as a necessary attribute thereof." Darnall v. State , 79 S.D. 59, 63, 108 N.W.2d 201, 203 (1961). In South Dakota, the Legislature has delegated this power of eminent domain to "[a]ny corporation organized under [SDCL] chapter 49-33 [,]" SDCL 49-34-4, which includes electric utilities. When such a public utility seeks to invoke its delegated power, it must show:

(1) [t]hat [it] is within the class to whom the power has been delegated [,] (2) [t]hat all conditions precedent have been complied with[,] (3) [t]hat the purpose for which the property is to be taken is one of the purposes enumerated in the statute[,] (4) [t]hat the property is to be taken for a public use[, and] (5) [t]hat the particular property sought to be taken is necessary to the accomplishment of the public purpose intended.

Ill. Cent. R.R. Co. v. E. Sioux Falls Quarry Co. , 33 S.D. 63, 71, 144 N.W. 724, 726 (1913) (emphasis omitted). The Parkses do not dispute the Utilities have met their burden in regard to the first three elements. Instead, this case involves the public-use and necessity requirements.

[¶8.] 1. Whether the easements were taken for a public use.

[¶9.] As an initial matter, the parties disagree on the applicable standard of review. The Parkses request de novo review, contending this issue involves constitutional and statutory interpretation. The Utilities respond that the dispute in this issue is largely a factual matter that should be reviewed under the clearly erroneous standard. Both parties are correct to some extent. Determining whether the nature of a proposed use is public or private "is ultimately a judicial question." Id. at 77, 144 N.W. at 728 (quoting Hairston v. Danville & W. Ry. Co. , 208 U.S. 598, 606, 28 S.Ct. 331, 334, 52 L.Ed. 637 (1908) ). Thus, the ultimate issue in this case is a question of law. Locklin v. City of Lafayette , 7 Cal.4th 327, 27 Cal.Rptr.2d 613, 867 P.2d 724, 751 (1994) (en banc). Questions of law are reviewed de novo. Coffey v. Coffey , 2016 S.D. 96, ¶ 7, 888 N.W.2d 805, 808. However, the factual findings on which those conclusions are premised are reviewed under the clearly erroneous standard. Id.

[¶10.] The Parkses argue their property was not taken for a public use. Our cases have long subscribed to the view that the term public use , as used in Article VI, simply means "use by the public[.]" Ill. Cent. R.R. , 33 S.D. at 78, 144 N.W. at 728. "[T]he matter that is controlling ... is not the necessity of the use, not even the fact of use, but the right to use." Id. at 78, 144 N.W. at 729. The Parkses contend "[t]he public does not have the right to use the easements, or the transmission line, on the same terms as the Utilities who would establish it." According to the Parkses, the Utilities "would take the easements in fee simple" and could "close it up and prohibit all or any part of the public from its use" or "sell the easements to third parties who could do the same." In essence, the Parkses argue that in order to satisfy the public-use clause, the general public must be entitled to use the condemned property in the same manner as the condemning authority .

[¶11.] The Parkses' view of the public-use requirement is untenable. The rights acquired by a condemning authority are often by necessity broader than the right of use acquired by the general public. For example, when the State or a railroad condemns a right-of-way across privately owned land for the purpose of constructing and operating a highway or track, the condemning authority acquires the rights to construct and operate the highway or track (as well as necessary incidental powers), whereas the general public acquires only the right to use the highway or track so constructed. It would be physically impossible to ensure that every member of the public had the right to use the condemned right-of-way "on the same terms" as the condemning authority—i.e., to construct and operate his or her own highway or track. Under the Parkses' reading of the public-use clause, then, it would essentially be impossible for the State or a railroad to condemn a right-of-way to construct and operate a highway or track "for public use."

[¶12.] In contrast to the Parkses' argument, determining whether the nature of a proposed use is public requires a comparison of the rights...

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