City of Kokomo, Indiana v. Estate of Audra R. Newton ( 2019 )

FILED
Dec 18 2019, 8:44 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Steven C. Shockley Rebecca R. Vent
Blake J. Burgan Katherine J. Noel
Chou-il Lee Noel Law
Taft Stettinius & Hollister LLP Kokomo, Indiana
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
City of Kokomo, Indiana, December 18, 2019
Appellant-Plaintiff, Court of Appeals Case No.
19A-PL-1321
v. Appeal from the Howard Superior
Court
Estate of Audra R. Newton, The Honorable Brant J. Parry,
Appellee-Defendant. Judge
Trial Court Cause No.
34D02-1612-PL-937
Najam, Judge.
Statement of the Case
[1] The City of Kokomo (“the City”) appeals from the trial court’s judgment in
favor of the Estate of Audra R. Newton (“the Estate”) following a jury trial on
the issue of damages in this condemnation proceeding. The City raises a single
dispositive issue for our review, namely, whether the trial court erred when it
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denied the City’s motion for a directed verdict at the close of the evidence at
trial. We reverse and remand with instructions.
Facts and Procedural History
[2] At the time of her death in December 2015, Audra Newton (“Audra”) owned
two contiguous parcels of real property in Kokomo, one at 226 South Union
Street (“Union Street parcel”) and the other at 226 North Main Street (“Main
Street parcel”). For many years, both parcels were used by The Kokomo Glass
Shop, Inc. (“Kokomo Glass”), a company owned by Audra. In her will, Audra
devised both parcels to her son, Bradley Newton (“Bradley”).
[3] On December 12, 2016, the City filed a complaint against the Estate to
condemn the Main Street parcel. On that date, the Estate was the owner of
record. The Estate did not object to the taking, and the trial court appointed
three appraisers to assess the Estate’s damages from the taking as provided
under Indiana Code Section 32-24-1-9 (2019). On July 27, 2017, the appraisers
filed a report finding that the fair market value of the Main Street parcel was
$100,000. The appraisers also found that the taking of the Main Street parcel
would cause an additional $43,000 in damages to the residue, 1 the Union Street
1
Indiana Code Section 32-24-1-9(c) provides in relevant part that an appraiser shall determine the “damages,
if any, to the residue of the property of the owner or owners caused by taking out the part sought to be
acquired.” The “residue” in a condemnation proceeding is the real property that remains in the owner’s
possession after a partial taking. See Unger v. Ind. & Mich. Elec. Co., 420 N.E.2d 1250, 1259 (Ind. Ct. App.
1981). Here, because the two parcels shared unity of title, unity of use, and contiguity, the parties agreed to
treat the Union Street parcel as residue of the taking of the Main Street parcel. See State v. Church of Nazarene
of Logansport, 268 Ind. 523, 377 N.E.2d 607, 609 (1978).
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parcel, for a total of $143,000 in damages. Accordingly, pursuant to Indiana
Code Section 32-24-1-10, the City deposited that amount with the trial court
clerk and moved the court to grant the City possession of the Main Street
parcel. The trial court granted the motion and continued the cause of action for
the purpose of resolving the dispute between the City and the Estate as to the
amount of damages.
[4] When the City took title to the Main Street parcel, Kokomo Glass, which had
operated its business from both parcels, was unable to continue operations.
Accordingly, Kokomo Glass moved its business, and the Estate offered the
Union Street parcel for sale. At that time, Bradley’s son Wesley Newton
(“Wesley”), was responsible for the day-to-day operations of Kokomo Glass.
[5] On September 7, the Estate timely filed exceptions 2 to the appraisers’
assessment of damages and moved the trial court for a jury trial on damages.
The court granted that motion and set the matter of damages for a jury trial.
Prior to trial, the City offered to settle with the Estate for $160,000. The Estate
rejected that offer. Also prior to trial, the City filed a motion in limine to
exclude from trial evidence of Kokomo Glass’ relocation expenses and lost
2
“Any party to [a condemnation] action . . . aggrieved by the assessment of benefits or damages in a report
of the appraisers may file written exceptions to the assessment in the office of the circuit court clerk.” Ind.
Code § 32-24-1-11.
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profits caused by the condemnation of the Main Street parcel as irrelevant to
the taking. The trial court denied that motion.
[6] At the close of the evidence at trial in March 2019, the City moved for a
directed verdict alleging that, while the Estate had presented evidence of
damages to the Union Street property sustained by Kokomo Glass, it had not
presented evidence that the Estate had sustained any such damages. The trial
court denied that motion. At the conclusion of trial, the jury awarded the
Estate $305,600 in damages, including the $100,000 for the taking of the Main
Street parcel and $205,600 for damages to the Union Street parcel. The trial
court entered judgment against the City for $305,600 plus 8% interest per
annum from the date of the taking, and the court awarded the Estate litigation
expenses in the amount of $25,000. 3 Both parties filed motions to correct error,
which the trial court denied. This appeal ensued.
3
Indiana Code Section 32-24-1-14 provides in relevant part that, in a condemnation proceeding,
if there is a trial and the amount of damages awarded to the defendant by the judgment . . .
is greater than the amount specified in the last offer of settlement made by the plaintiff . . . ,
the court shall allow the defendant the defendant’s litigation expenses, including reasonable
attorney’s fees, in an amount not to exceed the lesser of:
(1) twenty-five thousand dollars ($25,000); or
(2) the fair market value of the defendant’s property or easement as determined under this
chapter.
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Discussion and Decision
[7] The City contends that the trial court erred when it denied its motion for a
directed verdict at the close of the evidence at trial. Indiana Trial Rule 50(A)
provides in part:
Where all or some of the issues in a case tried before a jury or an
advisory jury are not supported by sufficient evidence or a verdict
thereon is clearly erroneous as contrary to the evidence because
the evidence is insufficient to support it, the court shall withdraw
such issues from the jury and enter judgment thereon or shall
enter judgment thereon notwithstanding a verdict.
A directed verdict is proper only if all or some of the issues are not supported by
sufficient evidence. Perez v. Hu, 87 N.E.3d 1130, 1134 (Ind. Ct. App. 2017).
“‘We will examine only the evidence and the reasonable inferences that may be
drawn therefrom that are most favorable to the nonmovant, and the motion
should be granted only where there is no substantial evidence supporting an
essential issue in the case.’” Id. (quoting Think Tank Software Dev. Corp. v.
Chester, Inc., 30 N.E.3d 738, 744 (Ind. Ct. App. 2015), trans. denied). A directed
verdict or judgment on the evidence is improper if there is evidence that would
allow reasonable people to differ as to the result. Id.
[8] As this Court has observed, “the fundamental purpose of our statutory eminent
domain scheme is to ensure landowners are given just compensation when their
property is taken.” Southern Ind. Gas and Elec. Co. v. Russell, 451 N.E.2d 673,
675 (Ind. Ct. App. 1983) (emphasis added). As a general rule, in determining
the appropriate amount of damages in an eminent domain action, all of the
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landowner’s interest is compensable, including the rights of ingress, egress, and
air space. Id. “When land is appropriated under the power of eminent domain,
just compensation has been held to be the fair market value of the acquired
property at the time of the taking.” Id. at 675-76.
[9] The City contends that the Estate presented no evidence at trial that it had
sustained any damages in excess of the $100,000 in damages for the taking of
the Main Street parcel. The City points out that each element of additional
damages alleged at trial were damages to Kokomo Glass, which is not only a
separate entity from the Estate but is not an owner of either parcel. The City
maintains that the only damages it owes to the Estate is $100,000, which is the
fair market value of the Main Street parcel. We must agree.
[10] The undisputed evidence shows that Kokomo Glass is an S corporation with
Bradley as its sole shareholder. 4 Bradley is also the personal representative of
the Estate, and, following Audra’s death, he inherited the fee simple title to
both parcels. Bradley testified that Kokomo Glass paid rent for its use of the
parcels to Audra, then to the Estate, and then to him. The Estate is the only
named defendant in this action, as the Estate was the owner of record when the
City filed its complaint. By the time of the jury trial on damages, neither
Bradley nor Kokomo Glass had been joined as a party to this action.
4
For income tax purposes, an S corporation owned by a single shareholder is a disregarded entity.
However, for all other purposes, an S corporation is a legal entity separate from its shareholder(s).
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[11] In its brief, the Estate avers that “the Newtons” introduced at trial “ample
evidence . . . that they suffered residual damages ranging from the cost of
appraisals, reconstruction of glass shelving, moving of signage, increased
advertising, a new website, new business cards, invoices and office supplies,
along with labor costs to move the contents of Union Street.” Appellee’s Br. at
8-9 (emphases added). But the Estate does not direct us to any evidence that the
Estate had sustained such damages. Rather, Bradley and Wesley both testified
that Kokomo Glass had sustained damages as a result of the taking of the Main
Street parcel in excess of $80,000. Wesley testified first, and during his
testimony, the City objected to his description of Kokomo Glass’ damages. The
City asserted that the Estate, not Kokomo Glass, owned the parcels and
Kokomo Glass could not, therefore, “make damage claims for the taking of the
property [it] did not own.” Tr. Vol. 2 at 202. Counsel for the Estate responded,
“but the owner of the glass company owns the property. I mean, it’s all
intertwined.” Id. at 203. The City countered that the Estate and Kokomo
Glass “are separate entities.” Id. at 207. The trial court overruled the City’s
objection.
[12] Then, at the close of the evidence, the City moved for a directed verdict stating
in relevant part:
We are asking that the Court find that a verdict should be
directed, that damages to a third party, Kokomo Glass, not be
allowed, and that we are here only for the damages to the . . .
Main Street property. Any damages that have been alleged,
attempted to prove, have been by the tenant who has no
standing.
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Tr. Vol. 3 at 8. The Estate responded as follows:
If this was a concern for the City, they certainly should have
brought it up long, long ago because if, they’ve known about this
scenario and we’ve litigated it this way from day one. Not once
did the City ever address this as an issue. Brad is one [and] the
same. He is personal representative of the Estate and Kokomo
Glass. Therefore, he is the party. He is the party and the
damages are both to the Estate and to Kokomo Glass.
Id. at 11-12. 5 The trial court denied the motion.
[13] As our Supreme Court has explained,
[a] real party in interest . . . is the person who is the true owner of
the right sought to be enforced. Bowen v. Metro Bd. of Zoning
Appeals (1974), Ind. App., 317 N.E.2d 193. He or she is the
person who is entitled to the fruits of the action. Cook v. City of
Evansville (1978), Ind. App., 381 N.E.2d 493.
Indiana Trial Rule 17(A) states that “[e]very action shall be
prosecuted in the name of the real party in interest.” As
evidenced by the clear language in Trial Rule 17, it encourages
allowing the real party in interest to be joined or substituted in
the action:
5
On appeal, the Estate contends that, “[f]rom the inception of the eminent domain case,” the City has
consistently treated the Estate, Bradley, and Kokomo Glass as “one entity” and that “justice dictates that the
City should not be able to prevail on appeal by claiming form over substance and procedural complexity over
facts.” Appellee’s Br. at 14. In support of that contention, the Estate cites to this Court’s opinion in General
Finance Corp. v. Skinner, 426 N.E.2d 77 (Ind. Ct. App. 1981). We find General Finance inapposite. And the
Estate’s contention is not supported by the record. The City consistently objected to the admission of
evidence of damages attributable to Kokomo Glass rather than the Estate. Before trial, the City filed a
motion in limine to exclude such evidence as irrelevant. During trial, the City objected to the admission of
such evidence. And at the close of the evidence, the City moved for a directed verdict based on the total lack
of evidence of damages to the residue incurred by the Estate.
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No action shall be dismissed on the ground that it is
not prosecuted in the name of the real party in
interest until a reasonable time after objection has
been allowed for the real party in interest to ratify the
action, or to be joined or substituted in the action.
T.R. 17(A)(2). Trial Rule 17 also clearly states that the
substitution of a real party in interest relates back to the date the
initial complaint was filed. “Such ratification, joinder, or
substitution shall have the same effect as if the action had been
commenced initially in the name of the real party in interest.” Id.
Hammes v. Brumley, 659 N.E.2d 1021, 1030 (Ind. 1995). Further, as this Court
has explained, “[i]t is well-settled that a ‘corporation is a legal entity separate
and distinct from its stockholders, individually or collectively considered.’ The
stockholders or directors of a corporation cannot recover upon causes of action
belonging to the corporation.” Smith v. Kinney, 167 Ind. App. 202, 338 N.E.2d
507, 509 (1975) (quoting Benner-Coryell Lumber Co. v. Ind. Unemployment Comp.
Bd., 218 Ind. 20, 29 N.E.2d 776, 778 (1940)).
[14] Here, when the parties were discussing final jury instructions with the trial
court, the Estate moved to “amend the pleadings to add Kokomo Glass Shop to
the caption of this action.” Tr. Vol. 3 at 47. In particular, the Estate told the
trial court:
As stated yesterday, we have pursued this case from day one with
the expressed and implied consent of the City that we are
including Kokomo Glass Shop. We tried this entire case on damages
of Kokomo Glass Shop. Therefore, it would be appropriate at this
point in time to amend the caption and add Kokomo Glass Shop
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to comply with the evidence that was presented to the jury,
Judge.
Id. (emphasis added). After some discussion, however, and without
explanation, the Estate withdrew its motion.
[15] We hold that the trial court erred when it denied the City’s motion for a
directed verdict. The record is clear that the only evidence of damages
presented at trial, other than the agreed-upon $100,000 for the Main Street
parcel, were damages allegedly incurred by Kokomo Glass. The Estate’s
attempt to conflate Kokomo Glass with the Estate or with Bradley is not well
taken. They are not “one and the same” as the Estate argued at trial. While
Bradley is both the sole shareholder of Kokomo Glass and the personal
representative of the Estate, only the Estate is a party to this matter, and it is a
separate entity from Kokomo Glass. The Estate did not present any evidence
that it had incurred damages related to the Union Street parcel, which was the
sole issue before the jury. The City was entitled to a directed verdict awarding
damages to the Estate of $100,000 for the condemnation of the Main Street
parcel, which damages the City conceded. 6 See, e.g., Smith, 338 N.E.2d at 509
6
Because we reverse on this ground, we need not decide what damages, if any, Kokomo Glass, a tenant,
would have been entitled to recover had it been added as a party to this matter. “The holder of an unexpired
leasehold interest in land is entitled to just compensation under the Fifth Amendment, for the value of that
interest when the land is taken by eminent domain.” Ind. Grocery Co. v. Crosby Props. Co., 578 N.E.2d 780, 782
(Ind. Ct. App. 1991), trans. denied. “Tenants are thus entitled to compensation for an unexpired term of a
lease terminated by condemnation.” Id.
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(affirming directed verdict for defendant where plaintiff alleging damages was
not real party in interest).
[16] We reverse and remand to the trial court with instructions to enter judgment in
favor of the Estate in the amount of $100,000 plus prejudgment interest of 8%
per annum since August 8, 2017, the date of the taking. In addition, because
the damages award is less than the amount the City had offered to settle this
matter one year prior to trial, the Estate is not entitled to litigation expenses.
See I.C. § 32-24-1-14; City of Mishawaka ex rel. Dep’t of Redev. v. Fred W. Bubb
Funeral Chapel, Inc., 469 N.E.2d 757, 761 (Ind. Ct. App. 1984), trans. denied.
[17] Reversed and remanded with instructions.
Vaidik, C.J., and Tavitas, J., concur.
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