City of Cold Spring v. Campbell County Board of Education

RENDERED: DECEMBER 16, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1470-MR
CITY OF COLD SPRING APPELLANT
APPEAL FROM CAMPBELL CIRCUIT COURT
v. HONORABLE JULIE REINHARDT WARD, JUDGE
ACTION NO. 20-CI-00926
CAMPBELL COUNTY BOARD OF
EDUCATION APPELLEE
OPINION
REVERSING
AND REMANDING
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BEFORE: COMBS, LAMBERT, AND TAYLOR, JUDGES.
COMBS, JUDGE: This case involves the proper exercise of the power of eminent
domain. At issue is whether a school board possesses the right to invoke that
power in order to acquire real property owned by a city.
The Appellant, the City of Cold Spring (the City), appeals the
interlocutory order of the Campbell Circuit Court that concluded that the Campbell
County Board of Education (the Board of Education or the Board) was entitled to
exercise the power of eminent domain to acquire real property located at U.S. 27
North and Industrial Road in Cold Spring, Kentucky. Because there is no express
-- or necessarily implied -- statutory authority permitting a Board of Education to
condemn property owned by the City, we are compelled to reverse.
The Board of Education sought to acquire property for the purpose of
developing a new public middle school to serve students in the northern half of the
Campbell County school district. A new school was expected to alleviate the
substantial enrollment strain on the existing middle school.
The Board located suitable property and communicated with its
owner, Disabled American Veterans, Inc. (DAV), throughout 2020. While it had
owned the property since the 1960’s, DAV representatives indicated that it
intended to relocate its national headquarters to a new facility in Erlanger. On
September 16, 2020, a special meeting of the Board of Education was conducted to
allow members to tour the property. Its interest in acquiring the property was
made public.
On October 2, 2020, the Board of Education made an offer to
purchase the property within the range of estimated value communicated to it by
DAV’s real estate agent. After receipt of the offer, DAV’s agent advised that
multiple parties were interested in purchasing the property and encouraged the
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Board to submit its best offer. On October 30, 2020, the Board of Education
submitted a second and higher offer, explaining that it would prefer to obtain the
property through negotiated purchase rather than through eminent domain
proceedings.
On November 30, 2020, DAV informed the Board of Education that it
would not sell the property to the Board. The Board of Education believed that
DAV preferred to sell the property to a private developer, A1. Neyer, LLC
(Neyer), instead. The Board was convinced that the City intended to buy the
disputed property in order to thwart its condemnation of the property and that the
City would then transfer it to Neyer for private development. However, without
the knowledge of the Board, DAV and Neyer had already executed a purchase
agreement with respect to the disputed property a couple of weeks before on
November 13, 2020.
On December 10, 2020, the Board of Education posted the agenda for
its regularly scheduled December 14, 2020, meeting. The agenda indicated a need
for executive session to discuss exercising its power of eminent domain to acquire
the DAV property. At this meeting, the Board of Education approved acquisition
of the disputed property through condemnation proceedings.
On December 17, 2020, the City conducted a special meeting and
authorized its mayor and city attorney to negotiate the purchase of the DAV
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property. Within a matter of days, the City Council approved the plan in executive
session.
On December 20, 2020, Neyer assigned its purchase agreement with
DAV to the City. In exchange, the City agreed to grant to Neyer the exclusive
right to develop the disputed property and to own the private investment made to
that end. The City agreed to collaborate with Neyer to secure government
financing of the development and to cooperate with Neyer in any zoning and
permitting matters that might arise. The City agreed that “the future uses of the
Property, along with all development plans, designs, budgets, schedules and other
requirements of such development shall be determined by [Neyer], in [Neyer’s]
sole and absolute discretion.” Finally, the City agreed to assign back to Neyer its
rights under the purchase agreement if it decided not to purchase the property or if
it defaulted on the terms of the underlying purchase agreement.
On this same date, December 20, 2020, the Board of Education filed
its petition for condemnation pursuant to the provisions of KRS1 162.030. The
Board of Education alleged that despite its good faith efforts to purchase the
property through negotiation, it had been unable to secure a satisfactory contract to
acquire the real property from DAV. It sought an order: (1) concluding that it had
a right to condemn the subject property and (2) appointing commissioners to
1
Kentucky Revised Statutes.
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determine the value of the property and to award an amount of compensation
required for the taking. It recorded a notice of lis pendens the following day.
On December 23, 2020, pursuant to the provisions of KRS 416.580,
the Campbell Circuit Court appointed three commissioners to report on the amount
of compensation to be awarded for the taking of the disputed property. Also on
this date of December 23, 2020, the City filed an “ex parte motion to intervene.” It
asserted a legal interest in the property as reflected in the assignment of the
purchase agreement between DAV and Neyer. The Board of Education challenged
the City’s authority to intervene in the condemnation proceeding, arguing that it
was a summary, expedited proceeding that did not envision intervention by other
parties.
The City nevertheless tendered an intervening complaint on January
15, 2021. The court took the matter under submission. On January 21, 2021, the
commissioners submitted their report and award.
By order entered on February 10, 2021, the Campbell Circuit Court
granted the City’s motion to intervene in the eminent domain proceeding. The
tendered complaint was ordered filed. In its complaint, the City acknowledged that
DAV remained the record owner of the disputed property but described its (the
City’s) equitable interest in it.
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While there is no indication that a motion to dismiss is permitted in
condemnation proceedings, DAV nonetheless filed just such a motion in lieu of an
answer on February 15, 2021. It argued that the Board of Education could not
exercise the right of eminent domain because it had failed to secure final site
approval from the Kentucky Department of Education. The Board challenged
DAV’s motion to dismiss. In addition, the Board filed a motion for a more definite
statement with respect to the City’s intervening complaint.
Thereafter, the City filed an amended intervening complaint and a
motion for declaration of rights. It asked the court to authorize its purchase of the
disputed property and to order the Board to remove the lis pendens. It contended
that the condemnation action violated its rights.
On April 8, 2021, DAV deeded the disputed property to the City by
special warranty deed. Excepted from the usual covenants and warranties was any
claim related to the pending condemnation proceedings. The City immediately
filed a motion to dismiss, arguing that the Board of Education could not condemn
public property. The Board of Education responded and disputed the underlying
premise of the motion.
On June 24, 2021, this case was transferred to a different division of
the Campbell Circuit Court. The court set the matter for oral argument to hear the
parties’ positions on the outstanding motions to dismiss.
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In an order entered on September 10, 2021, the circuit court denied
the motions of both the DAV and the City to dismiss the eminent domain
proceedings. The matter was finally set for the hearing required by the provisions
of KRS 416.610 to determine the right of the Board of Education to take the
disputed property. The hearing was scheduled to be conducted on October 6,
2021.
Meanwhile, the City filed its answer to the Board of Education’s
petition. Once again, the City argued that the disputed property could not be the
subject of eminent domain proceedings because it was public property.
Upon oral motion of the Board of Education, DAV was dismissed
from the action before the court’s proceedings began on October 6, 2021. The City
stipulated that it had sought to purchase the disputed property in order to prevent
the Board from exercising its power of eminent domain to acquire it and that as
record owner of the property, the City’s rights would be adjudicated by the
eminent domain proceedings.
Following the evidentiary hearing, the Campbell Circuit Court found
that the disputed property:
is the most promising because of its location, topography,
condition, and multiple access points. The location
would allow students that are currently transported from
the North end of the County to have a shorter bus ride.
Buses and parents could enter and exit in a different
location from each other. Buses could potentially be
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stored on site, saving additional travel time. In addition,
based on . . . calculation prepared following the tour,
renovating the Property versus building a new school
would save the Board approximately 7 million dollars.
* * * *
The City purchased the Property in an effort to
circumvent the Board from acquiring the Property by
eminent domain. The Property was purchased for
economic development, but the City intends to sell the
Property to Neyer or another private developer. There is
no evidence that the City intends to use industrial
revenue bond or other government funding to finance the
Property.
After the filing of the condemnation action, the Board
began the process of complying with the KDE [Kentucky
Department of Education] requirements, set forth under
702 KAR[2] 4:050, to acquire the Property. KDE is the
state regulatory agency for all public K-12 schools in
Kentucky. To acquire property for a school, a school
board must get approval from KDE. The Board does not
need permission from KDE to file an eminent domain
action. The Board has funds to purchase the Property
without borrowing money.
* * * *
The Board worked with KDE to acquire the Property.
One requirement was a title search, which a 60-year title
search was conducted and was satisfactory to KDE. . . .
On October 5, 2021, the Kentucky Board of Education
. . . gave the Board approval to acquire the Property.
2
Kentucky Administrative Regulations.
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The circuit court rejected the City’s contention that the disputed
property was being used or held for public purposes and that it could not, therefore,
be taken through the exercise of the Board of Education’s power of eminent
domain. The court concluded that the Board had demonstrated a need for a new
middle school and the need to condemn the disputed property specifically; that it
had negotiated for the purchase of the property in good faith; that there was
reasonable assurance that the school project would be completed; and,
parenthetically, that use of the property would promote economic development for
the City. It concluded that the Board of Education was entitled to condemn the
property pursuant to the provisions of KRS 416.540-416.670 and authorized the
Board to take possession of the property upon payment into court the amount of
compensation awarded by the commissioners. Its order was entered on November
23, 2021.
On November 29, 2021, the Board of Education paid the award into
court and demanded possession of the property. On December 2, 2021, the court
entered its interlocutory order and judgment (including the legal description of the
property taken).
On December 10, 2021, the City filed its notice of appeal. On
December 17, 2021, the funds paid into court by the Board were released to the
City.
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On appeal, the City argues that the circuit court erred by concluding
that the Board could take its property through eminent domain proceedings
because the General Assembly authorized the Board to take only private property.
It contends that its public property is not subject to the Board’s power to take
through condemnation. We are compelled to agree.
We begin by noting that the Eminent Domain Act of Kentucky, KRS
416.540-416.670, does not expressly provide for an appeal of a trial court’s
interlocutory order concerning a condemnor’s right to take. However, in Ratliff v.
Fiscal Court of Caldwell County, Kentucky, 617 S.W.2d 36 (Ky. 1981), the
Supreme Court of Kentucky held that constitutional considerations require that an
immediate appeal be afforded to a condemnee.
The right of eminent domain is necessarily inherent in a sovereign
authority, which may choose to delegate the power of condemnation. “It is within
the authority of the General Assembly to define the limits of the right of eminent
domain and to establish the specific terms under which the condemning authority
may exercise such power.” Kelly v. Thompson, 983 S.W.2d 457, 458 (Ky. 1998).
“[T]he general rule is that a condemnor to whom the power of eminent domain has
been delegated may not condemn public property unless authority is expressly or
impliedly granted by statute.” Kentucky Heritage Land Conservation Fund Board
v. Louisville Gas and Electric Co., 648 S.W.3d 76, 88 (Ky. App. 2022) (citing 29A
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C.J.S. Eminent Domain § 61 (2022)). Statutes delegating the authority to exercise
the right of eminent domain are to be strictly construed. Bell’s Committee v. Board
of Education of Harrodsburg, 192 Ky. 700, 234 S.W. 311 (1921). Because the
scope of the Board’s condemnation authority is a matter of statutory interpretation,
we review the trial court’s conclusion of law de novo.
The authority of the Board of Education to exercise the power of
eminent domain is expressly set out in provisions of KRS 162.030. The statute
provides, in relevant part, as follows:
Each board of education may, when unable to make a
contract satisfactory to the board with the owner for the
purchase of real estate to be used for school purposes,
initiate condemnation proceedings pursuant to the
Eminent Domain Act of Kentucky (KRS 416.540 to
416.670) . . . .
KRS 162.030. The title to all property acquired by a school district is vested in the
Commonwealth for the benefit of the district board of education. KRS 162.010.
In considering this statutory delegation of the right to eminent
domain, we note the reasoning of a relevant case. In Jefferson County By and
Through Hollenbach v. South Central Bell Telephone Company, 555 S.W.2d 629(Ky. App. 1977), this Court considered the provisions of KRS 76.110(1) conferring
the power of eminent domain upon sewer districts. The statute provides that a
sewer district may utilize the power of eminent domain in order to acquire real or
personal property necessary for its purposes “whether or not the same are owned or
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held for public use by corporations, associations, or other persons having the
power of eminent domain, or otherwise held or used for public purposes.” KRS
76.110(1). We observed that this language expressly provides that the sewer
district’s power of eminent domain extends to public property. Separately, the
statute provides that the “method of condemnation of such property shall be
pursuant to the Eminent Domain Act of Kentucky.” KRS 76.110(2) (emphasis
added).
As noted above, KRS 162.030 provides the statutory basis for the
power of eminent domain exercised by the Board of Education. The provision
empowers the Board to initiate condemnation proceedings where it is unable to
make a satisfactory contract for the purchase of real property “with the owner.”
The Board isolates the phrase “with the owner” and construes it broadly to
encompass the owner of public as well as private property. However, the statute
further directs that “the proceedings,” and not merely the method by which the
condemnation is effected, are to be undertaken “pursuant to the Eminent Domain
Act of Kentucky. . . .” Id. Proceedings undertaken pursuant to the provisions of
the Eminent Domain Act are limited to takings of private property. KRS
416.540(1) expressly provides that to “[c]ondemn means to take private property
for a public use under the right of eminent domain. . . .” (Emphasis added.)
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In Kentucky Heritage Land Conservation Fund Board, we considered
the nature of the power of Louisville Gas and Electric Company to exercise its
right of eminent domain. 648 S.W.3d 76. We analyzed the provisions of KRS
278.502 granting to utility companies providing gas in public service the authority
to condemn needed property where “it is unable to contract or agree with the
owner” and directing that the “proceedings for condemnation shall be as provided
in the Eminent Domain Act of Kentucky.” (Emphasis added.) Reading the
limitations imposed by the provisions of the Eminent Domain Act along with the
provisions of KRS 278.502, we acknowledged, without deciding, that the gas
company’s “power of eminent domain may ordinarily be limited to private
property[.]” Kentucky Heritage Land Conservation Fund Board, 648 S.W.3d at
88.
The provisions of KRS 162.030 do not expressly, or by necessary
implication, expand the boundaries of the power of eminent domain delegated to
the Board of Education to encompass the taking of public property. Instead, the
statutory authority confines the terms under which proceedings may be initiated by
reference to those contained in the Eminent Domain Act limited to the taking of
private property. Consequently, we are persuaded that the Board’s right to
exercise the power of eminent domain does not extend to the taking of public
property.
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The Board of Education characterizes the City’s purchase of the
disputed property as a ruse and challenges the nature of the City’s intended use of
it. However, we are restricted by law to addressing only relevant matters -- not
peripheral or speculative issues. The uncontradicted evidence shows that the City
had an interest in the disputed property on the date that the condemnation action
was filed; i.e., it had been assigned the purchase agreement between Neyer and
DAV. The holder of an equitable interest in land clearly has an interest that is
compensable in a condemnation proceeding. It was the record owner of the
property prior to the court’s hearing conducted expressly to determine the Board’s
right to exercise its power of eminent domain. Public property is not converted to
private property -- even where the municipality owns it in a proprietary capacity.
The nature of the ownership of the disputed property -- not its use -- controls in
this case.
Nevertheless, it is worth noting that the disputed property was
conveyed to DAV by the Campbell County Business Development Corporation
(CCBDC) subject to deed restrictions aimed at promoting economic growth at the
site. These restrictions were implemented as a result of a 1963 agreement between
CCBDC and the City. In the agreement, the City agreed to a zone change sought
by CCBDC in exchange for the City’s continued interest in regulating development
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of the property. The City maintains that its purchase of the disputed property helps
it to maintain the agreement’s provisions and aims for the public benefit.
The Board argues that the City’s contemplated use of the property
does not constitute a “public use” as that phrase is commonly used in
condemnation jurisprudence. However, the analysis suggested by the Board is not
necessary where the City is not seeking to take property through eminent domain.
It already owns the property. We have concluded that the Board of Education has
not been delegated the power to condemn public property. And the City is not
required to prove that the disputed property will be devoted to public use. The
City’s property is subject to its control, and it may authorize its use as it sees fit.
The Board of Education also argues that its right of condemnation
must necessarily extend to the taking of public property; otherwise, its ability to
provide for an efficient system of public education is compromised. It is true that
the General Assembly is charged by Section 183 of our State Constitution with
providing for public education. However, in delegating the right of eminent
domain to the Board of Education, the legislature did not expand that power to
condemn public property -- even for the laudable purpose and mandatory duty of
providing for public education. Consequently, this argument is best directed to our
General Assembly as it is beyond our purview.
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We reverse the order of the Campbell Circuit Court and remand this
case for entry of an appropriate order.
LAMBERT, JUDGE, CONCURS.
TAYLOR, JUDGE, DISSENTS AND DOES NOT FILE SEPARATE
OPINION.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Brandon N. Voelker Jason V. Reed
Covington, Kentucky Debra S. Pleatman
Covington, Kentucky
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