Oklahoma Ex Rel. Department of Transportation v. United States , 613 F. App'x 724 ( 2015 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT June 1, 2015
Elisabeth A. Shumaker
Clerk of Court
STATE OF OKLAHOMA, ex rel.
DEPARTMENT OF
TRANSPORTATION,
Plaintiff - Appellee,
v. No. 14-5100
(D.C. No. 4:09-CV-00452-TCK-TLW)
UNITED STATES OF AMERICA, (N.D. Okla.)
SMALL BUSINESS
ADMINISTRATION,
Defendant - Appellee,
ARVEST BANK, a foreign corporation,
Defendant - Appellant,
and
CROW REAL ESTATE
INVESTMENTS, LLC, a terminated
Oklahoma limited liability company;
CROW ENTERPRISES, LLC, an
Oklahoma limited liability company,
d/b/a Turnpike Chrysler Jeep Dodge;
COUNTY TREASURER OF OTTAWA
COUNTY, OKLAHOMA; SECURITY
BANK,
Defendants.
ORDER AND JUDGMENT*
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
(continued)
Before BRISCOE, Chief Judge, LUCERO and MATHESON, Circuit Judges.
This appeal by Defendant-Appellant Arvest Bank (Arvest) involves a dispute
over the priority rights to funds deposited in the district court as just compensation
for a condemnation of real property by the Oklahoma Department of Transportation
(ODOT). Arvest appeals the district court’s ruling that it was not entitled to first
priority in the deposited funds because it had released its lien on the property during
the pendency of the condemnation proceedings. The district court had jurisdiction
under 28 U.S.C. § 2410(a)(4) because the Small Business Administration (the SBA)
held a mortgage on the condemned property. We have jurisdiction under 28 U.S.C.
§ 1291, and we affirm.
I. BACKGROUND
A. Original Petition
ODOT filed a petition in federal court to condemn 1.88 acres of a 5.16 acre
parcel of land owned by Crow Real Estate Investments, LLC and Crow Enterprises,
LLC (collectively, “Crow”) for highway expansion. ODOT named as defendants
Crow, which operated a car dealership on the property; Arvest, which then held a
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
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first-priority mortgage lien on the property for $468,040.27; the SBA, which held
second-priority lien on the property for $129,022.45; and the County Treasurer of
Ottawa County, Oklahoma. See Okla. ex rel. Dep’t of Transp. v. Lamar Adver. of
Okla., Inc., 335 P.3d 771, 775 (Okla. 2014) (“[P]roperty interests entitled to
[condemnation] compensation include every valuable interest that can be enjoyed and
recognized as property.”).
In Oklahoma, “[c]ondemnation proceedings are begun by one party filing a
petition in district court to appoint a commission made up of three disinterested
landowners to determine the amount of just compensation.” Indep. Sch. Dist. No. 5
v. Taylor, 324 P.3d 415, 420 (Okla. Civ. App. 2013) (internal quotation marks
omitted). After inspecting and assessing the property, the commission files a report
with the district court assessing the just compensation for the taking. Id. at 421;
Okla. Stat. tit. 69, § 1203(c). The interested property holders then have a right to
demand a jury trial on the issues of damages in a condemnation proceeding. Taylor,
324 P.3d at 421; Okla. Stat. tit. 69, § 1203(e). A jury verdict sets the final damage
award and supersedes the commissioners’ assessment of just compensation. City of
Okla. City v. Garnett, 296 P.2d 766, 767 (Okla. 1956); Okla. Stat. tit. 69, § 1203(e).
“[T]he ‘date of taking’ is established when the condemner pays the commissioners’
award into court.” Okla. ex rel. Dep’t of Transp. v. Post, 125 P.3d 1183, 1188
(Okla. 2005).
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B. Amended Complaint and Disbursement of Funds
The court referred ODOT’s condemnation proceeding to a magistrate judge,
who appointed three commissioners to estimate the just compensation for the taking.
Before the commissioners issued their report, ODOT amended its complaint to take
the full 5.16 acres, based on Crow’s representation that it would be physically and
functionally impossible for it to operate a car dealership on the remaining acreage if
ODOT only took 1.88 acres. The commissioners estimated the just compensation for
the full 5.16 acre parcel at $1,856,506.42. In early March 2010, ODOT deposited
that sum with the court. Crow, Arvest, the SBA, and ODOT each filed a timely
demand for a jury trial on the issue of damages.
While the pre-trial proceedings were pending, Crow asked the court to
disburse the funds on deposit. As no party objected, on March 29, 2010, the court
ordered the deposited funds to be disbursed as follows: $1,259,443.70 to Crow,
$468,040.27 to Arvest, and $129,022.45 to the SBA. The court’s order made
explicit, however, that “[n]either the deposit previously made, nor the disbursement
ordered herein, shall constitute a waiver of any parties’ right to demand a jury trial or
right to contest the amount of just compensation for the subject property.” Aplt.
App. at 102.
In April 2010, Arvest released its mortgage lien on the Crow property in
response to a letter from Crow’s attorneys demanding it do so. SBA did not release
its mortgage lien.
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C. Second Amended Complaint and Return of Disbursed Funds
In December 2010, ODOT filed a second amended complaint, reducing the
amount of land being taken to the original 1.88 acres, having determined Crow could
operate its dealership if ODOT acquired only 1.88 acres. The parties consented to
the filing, and pursuant to court order the commissioners issued a second report
valuing the 1.88 acre parcel at $592,766.00.
ODOT then moved for return of the excess disbursed funds, namely, the
$1,263,740 difference between the commissioners’ valuation of the 5.16 acre parcel
and the 1.88 acre parcel. Crow, Arvest, and the SBA objected, arguing in part that
any return was premature in light of the pending jury trial, which would make the
final damage award. Arvest and the SBA also argued they should not be required to
return the excess funds because their liens would not be fully satisfied by the
$592,766.00 valuation. Arvest did not inform the court it had released its lien.
Following a hearing, the magistrate judge granted ODOT’s motion in April
2012. He ruled there had been two distinct takings under Oklahoma law during the
condemnation proceeding: (1) the taking of the 5.16 acre parcel, effective when the
funds were deposited with the court, but which terminated when the parties consented
to ODOT’s second amended complaint, and (2) the taking of the 1.88 acre parcel,
which was effective when the commissioners filed the second valuation report
because ODOT had already paid the just compensation monies into the court.
Because the parties had consented to ODOT reducing its condemnation to 1.88 acres,
the magistrate judge concluded it would violate Oklahoma’s constitution and
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condemnation laws to allow Crow, Arvest and the SBA to retain use of the funds
disbursed based on a condemnation of 5.16 acres.
On April 26, 2012, the magistrate judge ordered Crow, Arvest, and the SBA to
return all of the disbursed funds so as to (1) repay directly to ODOT each parties’
proportionate share of the $1,263,740 excess funds and (2) to re-deposit with the
court all of the remaining $592,766 pending trial.1 Stating, as it turns out incorrectly
regarding Arvest, that neither Arvest or the SBA had released its lien, the magistrate
judge required the remaining funds be re-deposited for later determination of the
parties’ relative priorities because the $592,766 valuation was likely to be
insufficient to fully satisfy both liens. Aplt. App. at 282. Arvest appealed the
magistrate judge’s order to the district court, but still did not disclose it had released
its lien. The district court affirmed the order. Arvest and the SBA returned their
excess funds to ODOT and re-deposited the remaining funds with the court. Crow,
however, never returned or re-deposited any of the funds it had received.
D. Final Compensation Award and Disbursement of Funds
In September 2012, ODOT informed the court a title search revealed Arvest
had released its lien in April 2010, and Crow had encumbered the property to
Security Bank. Thereafter, based on the parties’ stipulation, the district court entered
1
Thus, Crow was ordered to repay ODOT $857,314.52 and deposit
$402,129.18 with the district court; Arvest was ordered to repay ODOT $318,599.17
and deposit $149,441.10 with the court; and the SBA was ordered to repay ODOT
$87,826.73 and deposit $41,195.72 with the court.
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an Agreed Partial Journal Entry of Judgment in December 2012, establishing a final
just compensation award of $559,443.70 for the 1.88 acre parcel, granting ODOT a
mortgage on Crow’s entire property, and ruling disbursement of the funds on deposit
would be determined by subsequent court order.
Arvest, ODOT, and the SBA each sought the full amount of the $190,636.81
on deposit with the court. ODOT argued it should receive all the money because
Crow’s failure to return the disbursed funds meant it had paid more than the just
compensation for the 1.88 acres. The SBA asserted it had first priority on the funds
because Arvest had released its lien. Arvest countered that it should be recognized as
the equitable holder of a first priority lien, arguing it had been obligated by
Okla. Stat. tit. 46, § 15(A) to release its lien when the money was disbursed, and
would not have released its lien had it known ODOT would later amend its
complaint.
The magistrate judge issued a report and recommendation (R&R) rejecting
ODOT’s argument, concluding ODOT’s proper remedy was to maintain a suit against
Crow to recover the excess monies. The magistrate judge concluded that Arvest’s
release of its mortgage lien eliminated its first priority status, and that the SBA was
entitled to all the funds on deposit as the first priority lien holder. The district court
adopted the R&R on July 28, 2014, and ordered all of the funds be paid to the SBA.
Arvest appeals.
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II. DISCUSSION
A. Jurisdiction
ODOT argues we lack jurisdiction over this appeal because the district court’s
July 28 order was not a final appealable order under § 1291. ODOT contends it is
still entitled to an order from the district court granting it an additional money
judgment against Crow for the unreturned disbursement. We disagree.
The December 2012 Agreed Partial Journal Entry of Judgment determined the
amount of just compensation for ODOT’s condemnation. The July 28, 2014 order
determined the parties’ priority rights to the funds on deposit and ordered those funds
disbursed. As part of that determination, the July 28 order resolved ODOT’s
argument that it was entitled to the funds as reimbursement from Crow: it ruled that
ODOT’s only remedy to recover the excess funds from Crow was to maintain a
separate action against Crow, citing United States v. Featherston, 325 F.2d 539, 541
(10th Cir. 1963) (holding that “[i]f the ultimate recovery is less than the amount
deposited, the government can get the excess back from the clerk [of court] or, if it
has been paid to the landowner, maintain a suit to recover it from him.”). Because
the July 28 order disposed of all of the claims and ended the condemnation
proceedings, it was a final, appealable order. See Riley v. Kennedy, 553 U.S. 406,
419 (2008) (holding a final decision “ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment.”) (internal quotation marks
omitted).
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B. ODOT’s Arguments Waived
ODOT’s arguments that it was entitled to the $190,636.81 or an order from the
district court directing that Crow make payment to ODOT are not properly before
this court. ODOT did not file a cross-appeal from the district court’s decision and,
thus, waived any challenge to the district court’s order of disbursement. See Trigalet
v. Young, 54 F.3d 645, 647 n.3 (10th Cir. 1995) (holding that court lacked
jurisdiction to consider issue when party did not file a cross-appeal); see also Mass.
Mut. Life Ins. Co. v. Ludwig, 426 U.S. 479, 480-81 (1976) (per curiam) (holding a
party may not seek to enlarge its own rights or lessen the rights of its adversary
absent a cross-appeal).
C. Arvest’s Arguments Regarding Distribution of Remaining Funds
Arvest argues (1) it was entitled to the entire $190,636.81 because it was the
first priority lienholder as of the date of the taking—when ODOT deposited funds
into the court in March 2010 based on the first commissioners’ award; (2) Oklahoma
condemnation law does not provide for two commissioners’ awards; and (3) the April
26, 2012 order requiring the parties to repay and re-deposit the funds disbursed in
March 2010 should be reversed to avoid unjust enrichment to the SBA and ODOT.
“[W]e review the district court’s interpretation and determination of state law
de novo.” Berry & Murphy, P.C. v. Carolina Cas. Ins. Co., 586 F.3d 803, 808
(10th Cir. 2009).
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1. First Lienholder Argument
First, Arvest argues it was the first lienholder on the effective date of the
taking—in March 2010—when ODOT paid into the court the amount of just
compensation set by the first commissioners’ report. It contends the later repayment
of the disbursement monies cannot operate to change its priority rights as of the date
of the taking. Arvest further asserts it was statutorily obligated to release the lien
after the March 2010 disbursement under Okla. Stat. tit. 46, § 15(A), which states:
“[a]ny mortgage on real estate shall be released by the holder of any such mortgage
within fifty (50) days of the payment of the debt secured by the mortgage,” subject to
a penalty of up to $100 per day for failure to release the mortgage. Id. It argues the
SBA should not be allowed to take priority over Arvest’s lien by virtue of ignoring
its own obligation under § 15(A) to release its lien.
Arvest’s argument ignores relevant Oklahoma law. The commissioners’
assessment of just compensation is just that – an assessment; it is superseded by any
subsequent jury verdict, which sets the final damage award. Garnett, 296 P.2d
at 767; Indep. Sch. Dist. No. 5, 324 P.3d at 422; Okla. Stat. tit. 69, § 1203(e)(1)
(“[E]ither party may within sixty (60) days after the filing of [the commissioners’]
report file with the clerk a written demand for a trial by jury, in which case the
amount of damages shall be assessed by a jury.”). Indeed, “where a demand is made
for a jury trial in a condemnation proceeding, the award made by the commissioners
is not competent evidence to go before the jury,” Taylor, 324 P.3d at 422, and
“[t]he Commissioners’ award will no longer be relevant when superseded by the
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jury’s verdict,” Okla. ex rel. Dep’t of Transp. v. Mehta, 180 P.3d 1214, 1220
(Okla. Civ. App. 2008).
A party having an interest in the condemned property can immediately receive
the preliminary award based on the commissioners’ assessment, but it does so
“subject to the right of either party to prosecute further proceedings concerning the
sufficiency or insufficiency of the award.” Okla. ex rel. Dep’t of Transp. v.
Pendergraft, 919 P.2d 451, 453 (Okla. 1996) (internal quotation marks omitted). The
March 2010 order disbursing the funds stated the disbursement was not the final
determination of just compensation and did not act as waiver of the parties’ right to
contest the amount of just compensation or to request a jury trial. Aplt. App. at 102.
Arvest cites no Oklahoma law stating it cannot lose its lien position even if it
releases its lien before the final damage award. Oklahoma law suggests otherwise.
The Oklahoma Supreme Court has ruled that “if a mortgagee opts to have the
commissioners’ preliminary award paid directly to him – rather than simply having
his mortgage declared a lien on an award – then the mortgagee remains subject to . . .
the right of the condemning authority to seek a judicial determination of the
sufficiency or insufficiency of the award.” Pendergraft, 919 P.2d at 453.
Further, as the district court ruled, a mortgagee can refuse to release a lien
without penalty under § 15(A) when it has a good-faith belief there are substantial
grounds for contesting that repayment has been made. See Grissom v. Dye, 269 P.2d
367, 370-71 (Okla. 1953) (holding there must be a clear showing of bad faith to seek
a penalty under § 15(A)). Based on Oklahoma’s statutory condemnation statutes and
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case law holding that distribution of a preliminary award is not the final damage
award and that a mortgage holder might be required to return any excess funds,
Arvest had a good faith legal justification to assert it had no assurance it had received
payment in full from Crow when it received the March 2010 distribution.
2. Two Commissioners’ Awards
Arvest argues the district court erred in ordering the parties to repay and
redeposit the monies disbursed in March 2010 because Oklahoma condemnation
statutes only contemplate one commission’s award. Arvest states that Oklahoma
courts strictly adhere to the statutory condemnation proceedings and argues if
Oklahoma’s legislature had intended to allow for multiple commission awards, it
would have said so.
Contrary to Arvest’s assertion, Oklahoma’s condemnation law does allow for
the possibility of a court ordering a new or supplemental commissioners’ report. See
Okla. Stat. tit. 69, § 1203(e)(1) (A new appraisal should be ordered “as right and
justice may require . . . on good cause shown.”); Garnett, 296 P.2d at 767 (holding it
was not error for the court to order a supplemental commissioners’ report). Here,
based on the original petition, the court initially asked the commissioners to value a
taking of 1.88 acres; then, after the amended complaint was filed, to value a 5.16 acre
taking; and then, after the second amended complaint was filed, without objection by
any party, and while a jury trial was pending, to value the original 1.88 acre taking.
Cf. Garnett, 296 P.2d at 767 (“The original report and the supplemental report made
one complete report covering the property they were directed to value in the first
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instance.”). We find no support for Arvest’s assertion this was contrary to Oklahoma
condemnation law.
3. The April 26, 2012 order and unjust enrichment
Finally, Arvest argues the order mandating repayment of the first award should
be reversed to prevent unjust enrichment in favor of SBA and ODOT. It asserts that
ODOT made a business decision to condemn the whole 5.16 acre parcel, voluntarily
deposited the amount of the estimated damage award based on the first
commissioners’ report, and should not be allowed to gain title to the property at a
loss to Arvest.
We find no basis for equitable relief. ODOT acted in accordance with
Oklahoma’s policy to compensate property owners as soon as possible for a taking by
depositing funds in court based on the first commissioners’ report. Arvest chose to
take an immediate distribution and chose to release its lien when it was clear the
distribution was subject to challenge and revision. Arvest consented when ODOT
filed its second amended complaint, and it did not disclose to the court it had released
its lien. Arvest lost its first priority position through its own actions. “[E]quity may
not be invoked when its aid becomes necessary through a party’s own fault, and its
effect is to allow plaintiffs to escape from circumstances created by their own acts.”
Credithrift of Am., Inc. v. Amsbaugh, 773 P.2d 1287, 1289 (Okla. 1988).
* * * *
In sum, it was clear when Arvest released its lien that the commissioners’
award was preliminary, that a jury trial on the actual amount of just compensation
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was pending, and that Arvest could be required to return any excess over the amount
of the ultimate just compensation award. In short, Arvest released its lien before just
compensation was determined.
III. CONCLUSION
The judgment of the district court is affirmed.
ENTERED FOR THE COURT
Scott M. Matheson, Jr.
Circuit Judge
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