Pener v. King

• Decision Date: 24 March 2017
• Docket Number: No. 114,850,114,850
• Citation: 305 Kan. 1199,391 P.3d 27
• Parties: Adam PENER, as Personal Representative of the Estate of Alexander Gold, and as Trustee of the Alexander Gold Revocable Trust Dated 01/26/1994, Appellants, v. Michael S. KING, Secretary of Transportation for the State of Kansas, Appellee.
• Court: Kansas Supreme Court

305 Kan. 1199

391 P.3d 27

Adam PENER, as Personal Representative of the Estate of Alexander Gold, and as Trustee of the Alexander Gold Revocable Trust Dated 01/26/1994, Appellants,

v.Michael S. KING, Secretary of Transportation for the State of Kansas, Appellee.

No. 114,850

Supreme Court of Kansas.

Opinion filed March 24, 2017

Todd H. Bartels, of Polsinelli PC, of Kansas City, Missouri, argued the cause, and Amy E. Morgan, of the same firm, was with him on the briefs for appellants.

Timothy P. Orrick, of Orrick & Erskine, L.L.P., of Overland Park, argued the cause, and Paul G. Schepers, of the same firm, was with him on the brief for appellee.

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

This is an eminent domain proceeding initiated by the Kansas Department of Transportation for a highway improvement project. Adam Pener was the trustee and personal representative of the trust and estate that owned the condemned property at the time of the taking. He challenges the damages award entered by the district court after a bench trial, claiming the court gave insufficient weight to the replacement value for a fence and to a comparable sale when it calculated the property's value. Pener also argues the district court should have awarded him attorney fees and expenses. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The taking involved three tracts located in Wyandotte County that were owned by two entities for which Pener is the fiduciary—the Alexander Gold Revocable Trust dated 01/26/1994, and the estate of the late Alexander Gold. KDOT condemned permanent highway right of way easements covering 142,858 of these tracts' approximately 338,000 total square feet.

Before KDOT commenced the condemnation, it offered to buy the right of way for $104,930, but an agreement could not be reached. KDOT filed its petition under the Eminent Domain Procedure Act, K.S.A. 26–501 et seq . The district court appointed an appraisers' panel pursuant to the act, and the panel determined damages totaling $195,500. Unsatisfied, Pener invoked the landowners' statutory rights to trial in the district court. See K.S.A. 2016 Supp. 26–508(a). The parties tried the case to the court, rather than a jury.

Three witnesses testified about the property's value before and after the taking. The district court found the damages from the taking were $295,702. The court also denied Pener's claim for attorney fees and expenses.

Pener timely appealed. Jurisdiction is proper. K.S.A. 2016 Supp. 26–504 ("Appeals to the supreme court may be taken from any final order under the provisions of [the Eminent Domain Procedure Act].").

THE DISTRICT COURT'S DAMAGES AWARD

Pener argues the district court erred in calculating the damages award because it failed to include the replacement cost for a security fence that was part of the taking and because it gave insufficient consideration to a comparable sale. We reject both claims.

The district court properly considered the cost to replace fencing.

Some additional facts put this question into better perspective. During the negotiations leading up to the filing of the eminent domain action, KDOT represented that a separate offer of "[c]ompensation to cure any damages caused by the project, including fencing replacement" had been made to Shostak Iron and Metal Co., Inc., which was leasing the tracts. After the appraisers' panel entered its award, Shostak asked for apportionment. The district court ultimately dismissed Shostak's claims based on lease language in which it agreed not to share in any condemnation award.

At the bench trial, Pener testified new fencing was required on the tracts' new, post-taking property line. Based on an exhibit KDOT prepared for the appraisers' panel, in which KDOT represented its damage estimate included $65,720 to replace fencing, Pener believed the district court's damage award should include that additional amount. He claimed KDOT "stipulat[ed] to" this figure. Pener also said he believed the Shostak lease would require the existing fence to be replaced and that security was important to the property's use before its eventual redevelopment. Pener's expert witness testified he valued the property after the taking by reducing his appraisal an additional $70,000 to replace the fence, which he considered necessary.

KDOT's expert testified the fence taking resulted in only an $11,000 diminution in the value after the taking. Therefore, he believed it would be inappropriate to spend $70,000 to replace the fence because that sum exceeded the contributory value of the fence section to the property as a whole, i.e. , $11,000. A KDOT staff attorney testified KDOT negotiated the "compensation for [the] cost to cure" with Shostak and had agreed to present the settled-upon $65,720 amount to the court-appointed appraisers. He did not believe he discussed the issue with Pener at the time. He acknowledged KDOT agreed at the administrative hearing to pay the $65,720 cost of replacing the fence by including the amount as an item in its appraisal.

After hearing this testimony, the district court found the "fence [was] not going to add $70,000 worth of value." Accordingly, it used KDOT's expert's approach and found the fence's taking resulted in an $11,000 diminution in the property's value.

On appeal, Pener argues the trial court should have included the entire $65,720 amount from KDOT's appraiser-panel exhibit in its damages award. This argument turns on Pener's reading of K.S.A. 26–513(d), the interpretation of which presents a question of law subject to de novo review. See Hoesli v. Triplett, Inc. , 303 Kan. 358, 362, 361 P.3d 504 (2015).

Under K.S.A. 26–513(b), "If the entire tract of land or interest in such land is taken, the measure of compensation is the fair market value of the property or interest at the time of the taking." But "[i]f only a part of a tract of land or interest is taken, the compensation and measure of damages is the difference between the fair market value of the entire property or interest immediately before the taking, and the value of that portion of the tract or interest remaining immediately after the taking." K.S.A. 26–513(c).

" 'Fair market value' means the amount in terms of money that a well informed buyer is justified in paying and a well informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion. The fair market value shall be determined by use of the comparable sales, cost or capitalization of income appraisal methods or any combination of such methods." K.S.A. 26–513(e).

The statute further provides:

"In ascertaining the amount of compensation and damages, the following nonexclusive list of factors shall be considered if such factors are shown to exist. Such factors are not to be considered as separate items of damages, but are to be considered only as they affect the total compensation and damage under the provisions of subsections (b) and (c) of this section . Such factors are:

....

"(8) Cost of new fences or loss of fences and the cost of replacing them with fences of like quality, to the extent that such loss affects the value of the property remaining."

(Emphasis added.) K.S.A. 26–513(d)(8).

Relying on the italicized language, Pener argues the trial court erred by not including the entire $65,720 in its judgment, claiming "[a]warding [l]andowners a cost to cure for fence replacement was essential, given that [KDOT's] removal of this fixture ... 'affect[ed] the value of the property remaining.' " But this argument misconstrues K.S.A. 26–513(d) and is contrary to our caselaw.

In Rostine v. City of Hutchinson , 219 Kan. 320, 323–24, 548 P.2d 756 (1976), this court held the italicized portion of the statute

"is a codification of the rule of law of this state which prohibits the use of the 'summation method' of valuation.

"The 'summation method' denotes a process of appraisal whereby each of several items that contribute to the value of real estate are valued separately and the total represents the market value thereof. Use of this method of appraisal has generally been rejected since it fails to relate the separate value of the improvements to the total market value of the property.... In contrast, the 'unit rule,' which is the generally accepted method of valuation, denotes a process of appraisal whereby the total value of real estate is first determined without placing a value on each of the separate contributing items. Consideration of the value of buildings and improvements is limited to the extent they enhance the value of the land taken. The same rule applies to machinery or other articles of personal property which have become affixed to the real estate.... In Hoy v. Kansas Turnpike Authority , 184 Kan. 70, 334 P.2d 315 [ (1959) ], we emphasized the requirement in this state that improvements be considered only to the extent they enhance the value of the whole property and not as separate items:

" 'Improvements, such as here involved, located upon land which is condemned, are not to be valued separately but are part of the real estate and must be considered in determining the value of the land taken....' [Citations omitted.]"

See also Kansas City Mall Assocs. v. Unified Gov't of Wyandotte County/KCK , 294 Kan. 1, 12, 272 P.3d 600 (2012) (noting unit rule requires total value be determined and limits consideration of the value of buildings and improvements to the extent they enhance the value of the land taken) (citing Creason v. Unified Gov't of Wyandotte County , 272 Kan. 482, 485–86, 33 P.3d 850 [2001] ).

Pener presented evidence of the fence's replacement value, including what he characterized as KDOT's admission as to that amount. KDOT's appraiser testified the loss of the fence diminished the parcel's post-taking value by only $11,000. When the district court adopted KDOT's view, it acted consistent with K.S.A. 26–513(d)'s admonition that replacement cost be considered to the extent...