Florence Owner 1, LLC v. Duke Energy, Inc. ( 2022 )

RENDERED: DECEMBER 16, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1214-ME
FLORENCE OWNER 1, LLC;
FLORENCE OWNER 2, LLC;
FLORENCE OWNER 3, LLC;
FLORENCE OWNER 4, LLC;
FLORENCE OWNER 5, LLC;
FLORENCE OWNER 6, LLC;
FLORENCE OWNER 7, LLC; AND
M&T REALTY CAPITAL
CORPORATION APPELLANTS
APPEAL FROM BOONE CIRCUIT COURT
v. HONORABLE JAMES R. SCHRAND, JUDGE
ACTION NO. 21-CI-00119
DUKE ENERGY, INC. APPELLEE
AND
NO. 2021-CA-1291-MR
M&T REALTY CAPITAL
CORPORATION, A MARYLAND
CORPORATION, AS THE SUB-
SERVICER FOR WELLS FARGO
BANK, NATIONAL ASSOCIATION
AS MASTER SERVICER FOR US
BANK NATIONAL ASSOCIATION;
FLORENCE OWNER 1, LLC;
FLORENCE OWNER 2, LLC;
FLORENCE OWNER 3, LLC;
FLORENCE OWNER 4, LLC;
FLORENCE OWNER 5, LLC;
FLORENCE OWNER 6, LLC; AND
FLORENCE OWNER 7, LLC APPELLANTS
APPEAL FROM BOONE CIRCUIT COURT
v. HONORABLE JAMES R. SCHRAND, JUDGE
ACTION NO. 21-CI-00119
DUKE ENERGY KENTUCKY, INC. APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, CALDWELL, AND LAMBERT, JUDGES.
CALDWELL, JUDGE: This is an interlocutory appeal involving a condemnation
action by a private utility seeking an easement to erect towers and run electrical
transmission lines on the property of the Appellants, who either own or are the
mortgagor of the land and the apartment complex which sits upon it. The Boone
Circuit Court granted the condemnation petition, granting Duke Energy Kentucky
Inc. (hereinafter “Duke Energy”) an easement upon the land owned by the
Appellants (hereinafter “Florence Owners”) and granting the right to gain
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possession of the property described in the order upon payment to Florence
Owners the amount awarded by the appointed Commissioners. Having reviewed
the record below, the briefs of the parties, and the order of the trial court, we affirm
the order of the trial court.
FACTS
In February of 2020, Duke Energy had completed a site study and had
determined the best location for a new high-voltage transmission line in Boone
County. Because the area was growing so rapidly, it had been determined that a
new transmission line was necessary to support the increased retail, residential, and
industrial demands coming to the area.
Duke Energy, through a subcontractor, reached out to the owners of
an apartment complex owned by Florence Owners1 named “Grand of Florence” to
discuss acquiring an easement over the complex land to situate steel poles which
would carry the overhead high-voltage power lines. The site study had led to the
determination that the lines would be best situated at the entrance to the complex,
on Burlington Pike.
1
There were various enumerated LLCs formed to acquire the land, build, and own the apartment
complex. There is no delineation between the various “Florence Owners” entities in the order or
the briefs of the parties, so we will refer to them in this Opinion as Florence Owners. The
mortgagor of the project, M&T Realty Capital Corporation, as the sub-servicer for Wells Fargo
Bank, was also named in the condemnation petition and is a party-Appellant herein.
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The entities began negotiations, with the subcontractor on behalf of
Duke Energy first offering $50,997, then $57,732 for the easement in the summer
of 2020. Florence Owners at one time countered with $250,000 but withdrew that
offer upon realizing the scope of the project, which would involve high-voltage
transmission lines. Further, the signage for the apartment complex would need to
be removed, and the easement would allow Duke Energy to have access not just to
the easement property, but to the entirety of the apartment complex, should it be
necessary to service the easement. The final offer Duke Energy made through
their agent subcontractor was $75,000 in December of 2020.
Unbeknownst to Florence Owners’ representatives at the time, a
condemnation suit was filed by Duke Energy on January 25, 2021. Continuing the
negotiations unaware of the filing of the condemnation action, Florence Owners
provided a counteroffer, based upon the actual pole locations, and staked area of
the easement, which were only provided by Appellee a month before. That
counteroffer was $5,650,000.2
The Boone Circuit Court held a hearing on the petition and
determined that Duke Energy had the statutory right to exercise the power of
2
This figure included compensation for the “perceived stigma” of high-voltage transmission
lines, which Florence Owners feared might impact the future rentability of the units. During the
public notice period, the perceived deleterious effects, whether real or imagined, of living close
to transmission lines were brought up by members of the public.
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eminent domain, that Duke had complied with the requirements of the Kentucky
Constitution, the Eminent Domain Act (KRS3 416.540-416.670), and common law
and had the right to condemn the easement. Florence Owners appeal that
determination and allege that Duke Energy did not have the right to take the
property and failed to negotiate in good faith.
STANDARD OF REVIEW
Because this matter was tried without a jury, we review the trial
court’s factual findings under a clearly erroneous standard and legal issues are
reviewed de novo. See God’s Center Foundation, Inc. v. Lexington Fayette Urban
Cnty. Government, 125 S.W.3d 295, 300 (Ky. App. 2002).
ANALYSIS
At the outset, we provide an overview of the Eminent Domain Act
and condemnation procedures outlined therein. In Allard v. Big Rivers Electric
Corporation, 602 S.W.3d 800 (Ky. App. 2020), this Court provided a history of the
Eminent Domain Act and a brief outline of the usual condemnation process
contained therein.
In 1976, the General Assembly enacted the
Eminent Domain Act of Kentucky, codified in KRS
416.540-416.680. “The purpose of the act was to set up a
new and uniform condemnation procedure.” Ratliff v.
Fiscal Court of Caldwell County, Kentucky, 617 S.W.2d
36, 38 (Ky. 1981). The term “[c]ondemn” is defined as
3
Kentucky Revised Statutes.
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“to take private property for a public use under the right
of eminent domain” and the term “[c]ondemnor” is
defined as “any person, corporation or entity, including
the Commonwealth of Kentucky, its agencies and
departments, county, municipality and taxing district
authorized and empowered by law to exercise the right of
eminent domain[.]” KRS 416.540(1) and (2).
...
KRS 416.570 provides that the condemnor must
file a verified petition setting forth the following
information:
Except as otherwise provided in KRS 416.560, a
condemnor seeking to condemn property or the use
and occupation thereof, shall file a verified petition
in the Circuit Court of the county in which all or
the greater portion of the property sought to be
condemned is located, which petition shall state
that it is filed under the provisions of KRS 416.550
to 416.670 and shall contain, in substance:
(1) Allegations sufficient to show that the
petitioner is entitled, under the provisions of
applicable law, to exercise the right of
eminent domain and to condemn the
property, or the use and occupation thereof,
sought to be taken in such proceedings;
(2) A particular description of the property
and the use and occupation thereof sought to
be condemned; and
(3) An application to the court to appoint
commissioners to award the amount of
compensation the owner of the property
sought to be condemned is entitled to
receive therefor.
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KRS 416.610, in turn, sets forth the proceedings in
eminent domain cases and provides for the entry of an
interlocutory judgment if certain findings are made:
(1) After the owner has been summoned twenty
(20) days, the court shall examine the report of the
commissioners to determine whether it conforms
to the provisions of KRS 416.580. If the report of
the commissioners is not in the proper form the
court shall require the commissioners to make such
corrections as are necessary.
(2) If no answer or other pleading is filed by the
owner or owners putting in issue the right of the
petitioner to condemn the property or the use and
occupation thereof sought to be condemned, the
court shall enter an interlocutory judgment which
shall contain, in substance:
(a) A finding that the petitioner has the right,
under the provisions of KRS 416.550 to
416.670 and other applicable law to
condemn the property or the use and
occupation thereof;
(b) A finding that the report of the
commissioners conforms to the provisions
of KRS 416.580;
(c) An authorization to take possession of
the property for the purposes and under the
conditions and limitations, if any, set forth
in the petition upon payment to the owner or
to the clerk of the court the amount of the
compensation awarded by the
commissioners;
(d) Proper provision for the conveyance of
the title to the land and material, to the
extent condemned, as adjudged therein in
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the event no exception is taken as provided
in KRS 416.620(1).
(3) Any exception from such interlocutory
judgment by either party or both parties shall be
confined solely to exceptions to the amount of
compensation awarded by the commissioners.
(4) If the owner has filed answer or pleading
putting in issue the right of the petitioner to
condemn the property or use and occupation
thereof sought to be condemned, the court shall,
without intervention of jury, proceed forthwith to
hear and determine whether or not the petitioner
has such right. If the court determines that
petitioner has such rights, an interlocutory
judgment, as provided for in subsection (2) of this
section, shall be entered. If the court determines
that petitioner does not have such right, it shall
enter a final judgment which shall contain, in
substance:
(a) A finding that the report of the
commissioners conforms to the provisions
of KRS 416.580;
(b) A finding that the petitioner is not
authorized to condemn the property or the
use and occupation thereof for the purposes
and under the conditions and limitations set
forth in the petition, stating the particular
ground or grounds on which the petitioner is
not so authorized;
(c) An order dismissing the petition and
directing the petitioner to pay all costs.
“[T]he judgment referred to in KRS 416.610 as an
‘interlocutory judgment,’ was final and appealable as to
the issue of the right to condemn and the right to
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immediate entry.” Hagg v. Kentucky Utilities Co., 660
S.W.2d 680, 681 (Ky. App. 1983).
Id. at 805-07.
1. Burden of Proof
Initially, the parties contest which of them had the burden of proof at
the trial court level. Florence Owners insist that the condemnee only has the
burden of proof when contesting the public nature of the project. Duke Energy
insists that the party opposing the condemnation has the burden to prove lack of
good faith, lack of necessity, or unauthorized exercise of the power of eminent
domain.
As the public nature of the project was not challenged by Florence
Owners, the burden of proving fraud, bad faith or abuse of discretion was properly
theirs. “The respondents, as the parties challenging the condemnation, bear the
burden of establishing the lack of public necessity of public use and any abuse of
discretion . . . .” Milam v. Viking Energy Holdings, LLC, 370 S.W.3d 530, 533
(Ky. App. 2012). See also Commonwealth Dep’t of Highways v. Vandertoll, 388
S.W.2d 358, 359 (Ky. 1964) (“[W]hen the department of highways by official
order determines that an acquisition is necessary a condemnee, in order to defeat
such an acquisition, has the burden of proving fraud, bad faith, or abuse of
discretion.”).
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2. Easement is not Overbroad
Florence Owners insists that Duke Energy is taking more of its
property than necessary for the expressed purpose. However, Florence Owners is
conflating the size of an easement with the form of estate taken. “It reasonably
follows that an estate greater than what is ‘needed’ to achieve the legal purpose
cannot be taken.” Lexington-Fayette Urban Cnty. Government v. Moore, 559
S.W.3d 374, 381 (Ky. 2018) (emphasis added). In other words, when an easement
will serve the public purpose stated as making the taking necessary, it is not proper
for the condemnor to take an estate in fee simple. Further, the amount of land
necessary to support the public purpose of the taking is generally left to the
condemnor’s discretion.4 In the present case, Duke Energy sought an easement of
.209 acres of Florence Owners’ property of over twenty-seven acres. The trial
court found this easement to be consistent with the requirements of the stated
project and we find no fault with that determination.
Next, Florence Owners argues that the easement was overbroad and
allowed Duke Energy to have “access rights to all adjoining land,” not part of the
easement owned by Florence Owners. However, as Duke Energy points out, it is
4
See God’s Center Foundation, Inc., 125 S.W.3d at 299 (“Generally, the condemning body has
broad discretion in exercising its eminent domain authority including the amount of land to be
taken.”).
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consistent with Kentucky law to allow reasonable ingress and egress through land
not subject to the easement to access the easement proper.
An easement confers a right upon the dominant tenement
to enjoy a right to enter the servient tenement. See Scott
v. Long Valley Farm Kentucky, Inc., 804 S.W.2d 15, 16
(Ky. App. 1991). While an easement holder may not
expand the use of the easement, it is equally true that the
easement grantor may not interfere with the easement
holder’s use of the easement. Commonwealth, Dept. of
Fish and Wildlife Res. v. Garner, 896 S.W.2d 10, 13-14
(Ky. 1995).
Sawyers v. Beller, 384 S.W.3d 107, 111 (Ky. 2012).
Florence Owners also complain that the easement allows Duke
Energy to enter upon the adjoining land to clear vegetation which is adjacent to the
easement. Again, such allowance is consistent with Kentucky law, contrary to
Florence Owners’ allegations.
Insofar as the use of the secondary easement is
concerned, this court is of the opinion that the owner of
an easement acquired by personal negotiations, by
eminent domain, by prescription, or otherwise, for the
erection of electric wires may enter upon the premises
over which the wires are constructed for the purpose of
removing vegetation, or other growth or substance, that
interferes with the natural and reasonable use of the
easement for the purpose to which the land
accommodated by the easement may be naturally and
reasonably devoted.
Farmer v. Kentucky Utilities Co., 642 S.W.2d 579, 581 (Ky. 1982).
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Next, Florence Owners complain that the easement prevents them
from placing any obstructions which might interfere with Duke Energy’s use of the
easement. Again, such language is entirely consistent with Kentucky law. “The
owners of the easement and the servient estate have correlative rights and duties
which neither may unreasonably exercise to the injury of the other.”
Commonwealth, Dep’t of Fish & Wildlife Resources v. Garner, 896 S.W.2d 10, 13
(Ky. 1995).
The easement also allows Duke Energy to use the adjoining land
while constructing, maintaining, and repairing the transmission lines. Again, such
is consistent with Kentucky law.
We affirm so much of the decision of the Court of
Appeals as holds that the Kentucky Utilities Company,
by reason of its primary easement, has a right to enter
upon the servient property beneath the lines and in the
immediate vicinity thereof for the purpose of repairs and
maintenance.
Farmer, 642 S.W.2d at 581.
Lastly, Florence Owners complain that the easement infringes on their
rights to sue should Duke Energy cause any damage or otherwise tortiously
interfere with their property rights by attempting to limit the statute of limitations
to ninety (90) days. Whether that section of the easement is effective and
enforceable is a question which will be ripe for determination should the
eventuality occur.
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Ripeness under federal law is a jurisdictional requirement
under Article III of the United States Constitution. Nat’l
Park Hosp. Ass’n v. Dep’t of Interior, 538 U.S. 803, 807-
08, 123 S. Ct. 2026, 2030, 155 L. Ed. 2d 1017 (2003).
This requirement similarly appears under the Kentucky
Constitution in that circuit courts have “original
jurisdiction of all justiciable causes not vested in some
other court.” Ky. Const. § 112(5) (emphasis added).
For a claim to be justiciable, it must be ripe. Nordike v.
Nordike, 231 S.W.3d 733, 739 (Ky. 2007). As this Court
has recognized, “[t]he basic rationale of the ripeness
requirement is ‘to prevent the courts, through the
avoidance of premature adjudication, from entangling
themselves in abstract disagreements[.]’” Barber v.
Bradley, 505 S.W.3d 749, 760 n.5 (Ky. 2016) (quoting
W.B. v. Cab. for Health & Family Servs., 388 S.W.3d
108, 114 (Ky. 2012)). “[A] fundamental tenet of
Kentucky jurisprudence [is] that courts cannot decide
matters that have not yet ripened into concrete disputes.
Courts are not permitted to render advisory opinions.”
Nordike, 231 S.W.3d at 739 (citations omitted).
Bingham Greenebaum Doll, LLP v. Lawrence, 567 S.W.3d 127, 129-30 (Ky. 2018)
(emphasis in original).
3. Good Faith Negotiations
Finally, Florence Owners allege that Duke Energy did not negotiate in
good faith before filing the condemnation action. “The constitution, statutes and
case law of Kentucky necessarily imply the exercise of good faith . . . in using its
power to condemn and/or take private property from its citizens.” City of Bowling
Green v. Cooksey, 858 S.W.2d 190, 192 (Ky. App. 1992). Florence Owners
complain that Duke Energy took months to provide it with information related to
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the placement of the easement and the types of power lines it intended to install.
The trial court found as follows:
In this matter, Duke attempted to ensure the public
was aware of the Project. They considered one hundred
and seventy-four routes which are contained in a Line
Route Evaluation Report before on [sic] deciding on the
current route. They sent a letter to effected [sic] property
owners advising them of an open house to discuss the
project and hear concerns with it. Additionally, Duke
made three offers to Florence between June, 2020 and
January, 2021 when they filed the instant action. This
Court cannot find that Duke acted in bad faith when
negotiating the acquisition of the property, and, therefore
the Court finds Duke complied with the provisions found
in KRS 416.550.
We cannot say that the trial court’s findings here are clearly erroneous
and we agree with the trial court’s legal conclusion. Remembering that the amount
Duke Energy must compensate Florence Owners for the easement was determined
by appointed Commissioners,5 we cannot say that the offers made by Duke Energy
5
KRS 416.580(1)(a). From the Interlocutory Order:
The Commissioners filed their Report on March 11, 2021, valuing Florence’s
property as (sic) at $150,000 before the taking and $130,000 after the taking
determining the value of the taking to be $20,000. Florence owns an additional
contiguous parcel in the area and the parties agree the before and after values
were based on the PVA value of the second parcel which is not subject to the
Easement. The Court ordered the Commissioners to perform a second valuation.
They have done so valuing the property at $40,000,000 before the taking and
$39,895,000 after the taking for a valuation of the taking at $105,000. The Court
finds the Commissioners’ Award after the second evaluation complies with the
statutory requirements.
See KRS 416.660(1):
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during negotiations were conclusive of bad faith or that Florence Owners’
counteroffer was reasonable.
Rather, we agree with the trial court that Duke Energy attempted, in
good faith, to negotiate with Florence Owners prior to filing the condemnation
action, and continued to negotiate even after so filing, indicating that Duke Energy
was still open to settling the matter without judicial intervention. “The judge
found that there was an offer which the landowners rejected. The evidence showed
that efforts to buy the property were made over a substantial period of time, that
the state made a legitimate offer, and the landowners flatly rejected it.” See Coke
v. Commonwealth Dep’t of Finance, 502 S.W.2d 57, 59 (Ky. 1973). Evidence of
the parties’ being unable to come to an agreement does not mean the trial court’s
finding of good faith was clearly erroneous or that such is proof of lack of good
faith on the part of Duke Energy; the statutory scheme exists because it is quite
often not possible for the parties to come to an agreement. Lastly, the
Commissioners arrived at a valuation of $105,000, which is closer to the highest
In all actions for the condemnation of lands under the provisions of KRS 416.550
to 416.670, except temporary easements, there shall be awarded to the landowners
as compensation such a sum as will fairly represent the difference between the
fair market value of the entire tract, all or a portion of which is sought to be
condemned, immediately before the taking and the fair market value of the
remainder thereof immediately after the taking, including in the remainder all
rights which the landowner may retain in the lands sought to be condemned where
less than the fee simple interest therein is taken, together with the fair rental value
of any temporary easements sought to be condemned.
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amount offered by Duke Energy ($75,000) than it is to the amount of Florence
Owners’ final counteroffer ($5,650,000), supporting the finding that Duke Energy
acted in good faith during the negotiations.
CONCLUSION
The trial court’s findings of fact were not clearly erroneous, and its
legal conclusions were consistent with controlling law. The trial court properly
granted the interlocutory judgment to condemn the property; thus, we affirm.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE:
Daniel A. Hunt Nicholas J. Pieczonka
Matthew Fellerhoff Alex E. Wallin
Covington, Kentucky Cincinnati, Ohio
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