State ex rel. Dep't of Transp. v. Trade Winds Motor Hotel E., Inc.

• Decision Date: 23 July 2020
• Docket Number: Case No. 117,756
• Citation: 484 P.3d 301
• Parties: The STATE of Oklahoma, EX REL. DEPARTMENT OF TRANSPORTATION, Plaintiff/Appellee, v. TRADE WINDS MOTOR HOTEL EAST, INC., Defendant/Appellant, and Polly Properties, LLC; Joe Mobley Investment Company ; Robert S. Mitchell, Deceased, and his successors; Iva L. Mitchell; Tulsa County Treasurer, Defendants, and United National Insurance Company; W.N. Couch, Inc., an Oklahoma corporation; W.N. Couch Contractors, a division of Sherwood Construction Co., Inc., a foreign corporation; and Sherwood Construction Co., Inc., a foreign corporation, Third-Party Defendants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

484 P.3d 301

The STATE of Oklahoma, EX REL. DEPARTMENT OF TRANSPORTATION, Plaintiff/Appellee,

v. TRADE WINDS MOTOR HOTEL EAST, INC., Defendant/Appellant,andPolly Properties, LLC; Joe Mobley Investment Company ; Robert S. Mitchell, Deceased, and his successors; Iva L. Mitchell; Tulsa County Treasurer, Defendants,andUnited National Insurance Company; W.N. Couch, Inc., an Oklahoma corporation; W.N. Couch Contractors, a division of Sherwood Construction Co., Inc., a foreign corporation; and Sherwood Construction Co., Inc., a foreign corporation, Third-Party Defendants.

Case No. 117,756

Court of Civil Appeals of Oklahoma, Division No. 4.

FILED JULY 23, 2020

Mandate Issued: March 17, 2021

Jot Hartley, Travis Hartley, THE HARTLEY LAW FIRM, PLLC, Vinita, Oklahoma, for Plaintiff/Appellee

K. Ellis Ritchie, Nicholas Atwood, RITCHIE, ROCK, MCBRIDE & ATWOOD, Pryor, Oklahoma, for Defendant/Appellant

Mark K. Blongewicz, Kelly C. Comarda, HALL, ESTILL, HARDWICK, GABLE, GOLDEN & NELSON, P.C., Tulsa, Oklahoma, for Third-Party Defendants W.N. Couch, Inc.; W.N. Couch Contractors; and Sherwood Construction Co.

OPINION BY P. THOMAS THORNBRUGH, PRESIDING JUDGE:

¶1 Appellant/Defendant, Trade Winds Motor Hotel East, Inc. (TWE), challenges the trial court's order entering judgment on a jury verdict that set an award for just compensation for property taken by Plaintiff, the Oklahoma Department of Transportation (ODOT), in a bifurcated condemnation case, including damages to TWE's remainder property. The order also reflects judgment in favor of ODOT on amounts of condemnation proceeds withdrawn by TWE and other Defendants in excess of the jury's verdict, and a finding pursuant to 12 O.S.2011 § 994 of no just reason for delay and directing the filing of final judgment. Based on our review of the record, the law, and the parties' briefs, we find the trial court committed reversible error in excluding certain relevant and material evidence from the jury's consideration. We vacate the judgment and remand for further proceedings.

BACKGROUND

¶2 This action concerns condemnation proceedings involving the now-defunct Tulsa Trade Winds Motor Hotel East (the Hotel)¹ and condemnation-related litigation that has spanned more than a decade. The essential, relevant facts gleaned from the trial court's journal entry and the parties' briefs appear largely undisputed.

¶3 In August 2008, ODOT filed proceedings to condemn approximately a quarter-acre of property adjacent to the Hotel for an access road, perpetual utility easement, and temporary construction easement in conjunction with ODOT's I-44 expansion between Yale and Harvard Avenues in Tulsa. The court-appointed Commissioners assessed compensation due for the property to be taken and damages to the remainder at $847,000. ODOT paid that amount into court.

¶4 Both ODOT and TWE filed exceptions. The court sustained the exceptions, set aside the award, and re-appointed Commissioners, who returned an "Alias Report" awarding $760,000. Each party demanded a jury trial, and ODOT did not withdraw its initial deposit of $847,000. ODOT's contractors—Third-party Defendants WNC, Inc. (formerly W.N. Couch, Inc.), W.N. Couch Contractors, a division of Sherwood Construction Co., Inc., and Sherwood Construction Co., Inc. (collectively, ODOT Contractors)—began work on the project, and ultimately completed it before the matter finally went to trial in February 2018. The litigation was prolonged by a series of physical calamities and legal conundrums that occurred in the interim.

¶5 In May 2010, while ODOT Contractors worked to relocate City of Tulsa water lines that were on the utility easement taken by ODOT, water leaks and flooding suddenly began to occur within, around, and under the Hotel, causing considerable damage. For reasons that remain disputed, TWE ended up closing the Hotel in August 2010.

¶6 In May 2012, TWE filed a district court action against ODOT Contractors (without naming ODOT as a defendant), seeking damages for trespass and negligence in the Contractors' performance of the water line work.² In mid-2013, TWE substituted its property insurer, United National Insurance Company (UNIC), as plaintiff and real party in interest in the tort case based on UNIC's status as TWE's alleged subrogee entitled to recoup its payments for insured losses³ resulting from the ODOT Contractors' alleged negligence. TWE withdrew from the tort case, and in early 2013 UNIC removed the case to federal district court.

¶7 In November 2013, however, ODOT and TWE moved to add ODOT Contractors and UNIC as necessary parties to the condemnation proceeding. They requested that (1) UNIC be required to assert any claims it might have, as TWE's subrogee, against ODOT and/or the Contractors, and (2) the ODOT Contractors be required to "appear and defend against claims ... for tortious or negligent injury to the real property which is the subject matter of this action occurring during construction of [ODOT's] highway improvements ...." ODOT also requested the court to re-appoint the Commissioners to again appraise the amount and extent of damages inflicted to the property due to the construction operations, and to return a supplemental report "awarding and apportioning the amount of such damages, if any, separate and apart from the damages awarded for the original taking." In December 2013, the court granted the joinder motion.

¶8 UNIC thereafter obtained a voluntary dismissal of the federal court action, and both UNIC and ODOT Contractors were joined as Defendants/Third-Party Defendants in the condemnation case. In September 2014, the following actions occurred:

(1) ODOT filed a claim against ODOT Contractors for indemnity, reimbursement, and contribution for amounts ODOT was required to pay as "consequential damages" to TWE's remainder property (whether paid to TWE or UNIC) as a result of ODOT Contractors' "construction operations."

(2) UNIC filed a claim against the ODOT Contractors for negligence, and also sued TWE for a declaratory judgment that UNIC had a valid subrogation interest in any funds recovered by TWE due to loss resulting from ODOT Contractors' negligence.

(3) TWE filed a claim against UNIC for breach of contract and breach of the duty of good faith and fair dealing in UNIC's handling of TWE's claim under its insurance policy, claiming TWE had sustained losses covered by insurance of more than $2,663,159, of which UNIC had paid only $396,093.

(4) Although not until April 2017, with the court's permission TWE asserted counterclaims against ODOT alleging alternative theories of recovery sounding in breach of a general duty of care to TWE, breach of contract (TWE as a third-party beneficiary), inverse condemnation, negligence, trespass, and nuisance. TWE sought judgment against ODOT for "just compensation and/or damages" in excess of $75,000. ODOT did not file a response to the counterclaims until July 2018, after trial in the condemnation case had concluded.

¶9 In July 2015, after being re-appointed pursuant to the court's December 2013 order, the Commissioners filed a "Supplement to Alias Report" assessing damages "separate and apart from the damages awarded" in their prior Alias Report at $3,890,000.⁴ ODOT did not pay this amount into court, but filed its "exceptions," as did the ODOT Contractors.⁵ The trial court ultimately sustained the exceptions and set aside the Supplement to Alias Report.⁶

¶10 Meanwhile, in August 2015, over TWE's objection, the court granted a motion by ODOT Contractors to "separate or bifurcate [ODOT's] condemnation case against [TWE] for purposes of pretrial motion practice and trial from the negligence, contribution, indemnification, declaratory judgment, breach of contract, and bad faith claims" among the parties. TWE's objection primarily was on grounds that separating the cases was premature. It also argued, however, that it was not required to establish the ODOT Contractors' negligence in order to recover just compensation for damage caused by their work, so there was no need for a separate "negligence" trial in order for a jury to make a damage assessment. TWE further argued that ODOT's claims for indemnity/contribution and the like against the ODOT Contractors could be decided by the same jury, as those jurors would have heard all the evidence and be familiar with the project.

¶11 In July 2016,⁷ after again re-appointing Commissioners (in March 2016) and accepting proposed "Instructions to Commissioners" from ODOT, TWE and the ODOT Contractors, the court entered its "Second Alias Instruction[s] to the Commissioners." Those instructions—which are identical to instructions proposed by ODOT and substantially similar to those submitted by the ODOT Contractors—told the Commissioners to re-inspect and determine the value of the damage to TWE's "remaining property" that was "incident to the taking" by ODOT as of 2008, and not as the property "is currently situated." The instructions stated that damage was " ‘incident to the taking’ when it is not the result of negligence, but rather may be the natural and ordinary, but unforeseen, result of the project which gave rise to the taking in the first place." Specifically, the instructions informed the Commissioners that the "claimed water damage" to the remainder property "is not ‘incident to the taking’ because the damage resulted from the alleged negligence of third parties and not from something inherent in the project." (Emphasis in original).

¶12 In November 2016, the Commissioners returned their "Second Alias Report" assessing compensation due to TWE, exclusive of damages due to the claimed negligence of third parties, to again be $3,890,000. ODOT again filed exceptions and demanded a jury trial.

¶13 In May 2017, however, ODOT Contractor Sherwood moved for summary judgment against UNIC on the negligence claim asserted as TWE's purported subrogee. TWE objected to the motion and filed a lengthy brief,⁸ but UNIC did not respond. Rather, in June 2017, UNIC filed a...