Unified School Dist. 232 v. Cwd Investments

• Decision Date: 17 April 2009
• Docket Number: No. 97,581.,97,581.
• Citation: 205 P.3d 1245
• Parties: UNIFIED SCHOOL DISTRICT NO. 232, JOHNSON COUNTY, State of Kansas, Appellee, v. CWD INVESTMENTS, LLC., and Duggan Homes, Inc., Appellants.
• Court: Kansas Supreme Court

205 P.3d 1245

UNIFIED SCHOOL DISTRICT NO. 232, JOHNSON COUNTY, State of Kansas, Appellee, v. CWD INVESTMENTS, LLC., and Duggan Homes, Inc., Appellants.

No. 97,581.

Supreme Court of Kansas.

April 17, 2009.

Lynn Hursh, of Armstrong Teasdale, LLP, argued the cause, Daren K. Sharp, of the same firm, and Deron A. Anliker, of Duggan, Shadwick, Doerr & Kurlbaum, P.C., of Overland Park, were with him on the brief for appellants.

W. Joseph Hatley, of Spencer, Fane, Britt & Browne LLP, of Kansas City, Missouri, argued the cause, and Melissa Hoag Sherman, of Lathrop & Gage, L.C., of Overland Park, was with him on the brief for appellee.

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

In an eminent domain appeal to the district court, a residential subdivision developer and its affiliated homebuilder challenged the court-appointed appraisers' valuation of a part of their property condemned by a school district. Before their jury trial, the district court granted several school district motions excluding evidence of certain categories of damage claims. A jury later awarded damages of $718,100.

The developer, CWD Investments, LLC, and the homebuilder, Duggan Homes, Inc., appeal those damage-limiting court rulings and the jury's award. The school district cross-appeals. This court has jurisdiction pursuant to K.S.A. 26-504 and 60-2101(b).

The issues on appeal, and our accompanying holdings, are as follows:

1. Did the district court err in granting partial summary judgment to bar several of defendants' damage claims for their failure to come forward with evidence? No.

2. Did the district court abuse its discretion in granting a motion in limine to bar several of defendants' damage claims on the basis that they were not timely or adequately disclosed? No.

3. Did the district court err in refusing to instruct the jury that fair market value could not be determined by the summation of two different valuation approaches? No need to address.

Accordingly, the district court's rulings and the jury's verdict are affirmed.

FACTS

John Duggan is a developer, a homebuilder, and a lawyer. He is the President of Duggan Homes, Inc. (Duggan Homes), a homebuilding company, and a member of FH Investments, LLC, which is itself a member of CWD Investments, LLC (CWD). CWD was formed to develop a residential subdivision called Farmington Hills, located near 55th Street and Clare Road in Shawnee, Kansas.

Unified School District No. 232 (District) condemned 17.914 of Farmington Hills' 131.51 acres for use as an elementary school. At the time of the taking, the City of Shawnee had approved the plats, but no ground had been broken. It is undisputed that residential development is the highest and best use of the taken property. As a result of the partial taking, defendants redesigned the remainder of the subdivision.

Court-appointed appraisers valued the partial taking at $626,850. Defendants appealed the award to the district court pursuant to K.S.A. 26-508. The taking was finalized when the District paid the $626,850 into court.

Discovery

Pursuant to a third amended scheduling order, the district court directed that all discovery, except by agreement of counsel, close on December 20, 2004. On or about April 26, 2004, defendants disclosed their three experts, including Duggan, to the District's counsel. After an assertion that Duggan was not necessarily an expert to the extent requiring a disclosure pursuant to K.S.A. 60-226(b)(6)(B), the disclosure nevertheless provided that he might be offering expert opinions:

"Defendants anticipate that Mr. Duggan will provide testimony concerning, among other things, the best and most advantageous use of the property taken by plaintiff and damages to defendants as a result of the taking. Thus, although Defendants are not required to make this disclosure, Defendants are disclosing Mr. Duggan at this time to the extent Mr. Duggan may be asked to offer or does offer opinions regarding the aforementioned matters." (Emphasis added.)

On September 14, 2004, defendants responded to the District's first interrogatories. Interrogatory No. 3 asked them to "state the fair market value of the entire tract immediately before taking, the fair market value of the remainder after the taking, and the total compensation due as a result of the taking."

The part of the interrogatory response regarding defendant developer CWD basically concerned its lost profits on the sale of the 57 unimproved lots which were taken:

"Defendants state that the fair market value of the entire tract immediately before the taking as it relates to CWD Investments damages for the taking ranges from $11,394,250.00 to $12,581,100.00 based on the value of the property and the profits from the sale of 364 lots and the fair market value of the remainder after the taking as it relates to CWD Investments' damages ranges from $9,912,260.00 to $10,973,712.00 based on the value of the property and the profits from the sale of 307 lots."

The next part of the interrogatory response referred to defendant homebuilder Duggan Homes. It basically concerned damages for lost sales of homes to be built on the 57 lots:

"The fair market value of the entire tract immediately before the taking as it relates to Duggan Homes' damages ranges from $17,472,000.00 to $21,840,000.00 based on the sale of homes on 364 lots, and the fair market value of the remainder after the taking as it relates to Duggan Homes' damages ranges from $14,746,000.00 to $18,420,000.00 based on the sale of homes on 307 lots."

The final part of the response to Interrogatory No. 3 referred to both defendants and set forth the amounts of damages claimed by each:

"The total compensation due Duggan Homes, Inc., ranges between $2,600,000.00 to $3,500,00.00. The total compensation due CWD Investments, LLC ranges between $1,400,000 to $1,700,00 based on the value of the property, the inability of CWD Investments to distribute development costs across the entire 364 lot subdivision as platted and approved by the City of Shawnee, and the inability of CWD Investments to develop and sell 57 lots in Farmington Hills." (Emphasis added.)

Interrogatory No. 7 asked defendants to detail the facts relied upon to justify or support their damage claims. Their response concerning CWD again mentioned loss of 57 lots and loss of their ability to spread the entire subdivision's "development" costs over those lots:

"The property was purchased for development as a residential subdivision, and Plaintiff knew of Defendants' plans to develop the entire tract as a residential subdivision. The entire tract was platted as a residential subdivision, Farmington Hills, as of the taking by Plaintiff. The taking of the property in the Farmington Hills subdivision will preclude CWD Investments from developing and selling 57 lots thereby preventing CWD Investments from utilizing the property for its best and most advantageous use. The taking will also preclude CWD Investments from distributing development costs, across the entire Farmington Hills subdivision, which originally comprised 364 lots prior to the taking. These costs include to date engineering costs for redesign work, walking trails and an amenity package, the pool tract and cabana, offsite sewer costs, deceleration lanes for Claire [sic] Road, and costs for construction of extension of Clear Creek Parkway and an at-grade intersection at Clear Creek Parkway and K-7 required by the State of Kansas."

Defendants' response to Interrogatory No. 7 regarding factual support for Duggan Homes' damages again simply concerned its loss of ability to build homes on the taken lots:

"The taking will also preclude Duggan Homes from building and selling homes on the 57 lots thereby preventing Duggan Homes from utilizing the property for its best and most advantageous use."

Defendants expressly reserved the right to supplement their responses to Interrogatory Nos. 3 and 7.

All of defendants' interrogatory responses were signed by Duggan. In the verification, he swore that he had read them, had the authority to make them on behalf of the defendants, and that such answers were true and correct to the best of his knowledge and belief.

Several weeks after the District's receipt of these responses, on October 1, and then on November 2, 2004, Duggan was deposed as an authorized representative of both defendants, apparently pursuant to K.S.A. 60-230(b)(5). Consistent with the defendants' earlier designation of Duggan as an expert, he testified he anticipated offering expert witness testimony in the case, e.g., "to render opinions based upon the development in question and how we were going to proceed forward and make a profit on that." On the defendants' behalf, he now identified four specific categories of claimed damages.

First, Duggan identified lost profits on the 57 taken lots totaling approximately $1,054,500. He calculated each lot would have earned a profit of between $12,000 and $20,000, depending on its location. He calculated the figures by multiplying his estimate of the selling price for the fully developed lots (an average of $65,000-$75,000) by the historical profit margin he had obtained in his other developments: 25%-37.5%.

Second, Duggan testified that after reconfiguring the subdivision due to the taking, 10 of the remaining lots would "back up" to the new school. Because he opined that these were therefore less desirable, he devalued them at approximately $35,000 apiece for a loss of $350,000.

Third, Duggan testified that the inability to spread the original 364-lot subdivision's $900,000 "amenity costs" over the 57 taken lots would result in damages because "the profitability of the remaining lots goes down."

"And so we still have the expenses of building the amenities; but now we don't have an extra 57 lots over which to share that expense; and so the profitability of the remaining lots goes down by that number, and we think that number is...