JACK CUSTER AND SANDRA MILLER CUSTER v. LOUISVILLE JEFFERSON COUNTY METRO GOVERNMENT DIVISION OF PUBLIC WORKS AND ASSETS APPELLEES AND NO 2010 CA 001259 MR

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Court of Appeals of Kentucky.

JACK E. CUSTER AND SANDRA MILLER CUSTER S v. LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, DIVISION OF PUBLIC WORKS AND ASSETS APPELLEES AND NO.2010–CA–001259–MR

LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT;  AND LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, DIVISION OF PUBLIC WORKS AND ASSETS CROSS- APPELLANTS v.

NO. 2010–CA–001223–MR

Decided: January 13, 2012

BEFORE:  CLAYTON, DIXON AND LAMBERT, JUDGES. BRIEFS FOR APPELLANT:  Kyle T. Hubbard Louisville, Kentucky BRIEF FOR APPELLEE:  Michael J. O'Connell Jefferson County Attorney William T. Warner David A. Sexton Assistant Jefferson County Attorney Louisville, Kentucky

OPINION

REVERSING AND REMANDING

Appellants/Cross–Appellees, Jack and Sandra Custer, appeal from an order of the Jefferson Circuit Court denying their claim for damages due to Appellee/Cross–Appellant's, Louisville/Jefferson County Metro Government, Division of Public Works and Assets (Louisville Metro), bad faith negotiations in this reverse condemnation case.   Louisville Metro has filed a cross-appeal, arguing that it was entitled to judgment as a matter of law in the proceedings below.   For the reasons set forth herein, we reverse the lower court and remand this matter for the entry of an order of dismissal.

In 1996, Louisville Metro constructed a permanent, paved walkway that traversed the outer edge of property located at 2910 Northwestern Parkway in Louisville.   The walkway, officially referred to as the “River Walk,” is close to the Ohio River and is used by pedestrians, bicycles, motorcycles and even some vehicles.   The Custers purchased the Northwestern Parkway property on December 2, 2003, by a Commissioner's Deed at a foreclosure proceeding.

In 2007, the Custers noticed that a catch basin on the section of the River Walk located on their property was not draining properly.   In the process of determining who was responsible for maintaining the catch basin, Louisville Metro apparently became aware that it did not own that parcel of property containing the River Walk. In January 2008, Louisville Metro official Judy Hettich contacted the Custers to arrange a meeting to discuss the situation.   The Custers admit that they did not attend the meeting.

After becoming disgruntled with some of the public activities that were occurring on the River Walk, the Custers met with their Louisville Metro Councilwoman and an Assistant Jefferson County Attorney in August 2008, to discuss the use of their property by Louisville Metro.   Subsequently, on November 20, 2008, the Custers received a letter that provided, in pertinent part:

Metro Government will agree to purchase the property at issue in fee Double provided that Mr. and Mrs. Custer donate the property to Metro Government.   In return, Metro Government will agree to provide Mr. and Mrs. Custer a recordable plat of the property, at Metro's cost which is estimated at $2,200․

After rejecting the above-offer, the Custers received a second letter on December 9, 2008, stating as follows:

Metro's position has been, and still is, that Metro will either pay the Custers the appraised value Metro has obtained, $1,900, or Metro will agree to pay the cost of a formal survey and plat estimated to be $2,200, but not both.

The Custers again refused Louisville Metro's offer.   After further negotiations failed, the Custers filed a reverse condemnation suit in the Jefferson Circuit Court on February 9, 2009, seeking damages for a temporary and permanent taking as well as damages for Louisville Metro's alleged bad faith negotiations.

Following a trial in February 2010, a jury awarded the Custers $5,500 for the “reasonable fair market rental value for the temporary encroachment and use of [their] property for five years,” and $2,500 as “compensation for the permanent taking of [their] property.”   In a subsequent hearing, the trial court ruled that the Custers failed to prove that Louisville Metro acted in bad faith during negotiations and, as such, they were not entitled to sanctions and attorneys' fees.

Following the denial of their motion to alter, amend or vacate the trial court's ruling with respect to the bad faith claim, the Custers appealed to this Court.   Louisville Metro has filed a cross-appeal claiming that it was entitled to judgment as a matter of law because at the time the Custers purchased their property, the River Walk was a dedicated public easement and further that the Custer's reverse condemnation action was barred by the five-year statute of limitations set forth in KRS 413.120(1).   Because we agree with Louisville Metro, we necessarily do not reach the bad faith issue.

KRS 82.400(3) provides, in pertinent part:

(3) When any property has been opened to the unrestricted use of the general public for five (5) consecutive years, it shall be conclusively presumed to have been dedicated to the city or consolidated local government as a public way or easement, subject to acceptance by the city or consolidated local government.   The city or consolidated local government may, at any time after the expiration of five (5) years from the time the property is opened to the public, pass an ordinance declaring it so dedicated, and accepting the dedication, whereupon it shall be a public way or easement of the city or consolidated local government for all purposes․

It is undisputed that the River Walk was completed and opened to the public in 1996.   The Custers did not purchase their property until 2003.   By operation of law, the River Walk was a dedicated public way or easement by the time title passed to the Custers.

We find no merit in the Custer's argument that the dedication was invalid because Louisville did not enact a formal ordinance accepting the property.   In fact, in construing the above statute, our Supreme Court has unequivocally stated that there is no requirement of a formal ordinance dedicating or accepting the property.  Louisville v. Louisville Scrap Metal Co., 932 S.W.2d 352 (Ky.1996).  “[T]he intention of the owner to dedicate and the acceptance by the public may be inferred from the use of the public for a substantial number of years and there is no requirement for a formal ordinance dedicating or accepting the property in question.”  Id. at 356.  (Citing Pulaski County v. City of Somerset, 364 S.W.2d 334 (Ky.1963) and Commonwealth, Dept. of Highways v. Wynn, 396 S.W.2d 798 (Ky.1965)).   As such, Louisville Metro was entitled to judgment as a matter of law.

We likewise agree with Louisville Metro that the Custer's reverse condemnation action was barred by the statute of limitations.   At the outset, we would note that the Custers contend that because Louisville Metro did not assert a statute of limitations in its answer, it has waived the affirmative defense.   However, prior to trial, Louisville Metro tendered an amended answer in which the five year limitations period was included.   Following a bench discussion, the trial court accepted the amended answer.   Significantly, although the Custer's counsel argued that the statute of limitations was not applicable to the facts herein due to the nature of the taking, no objection was made as to the timeliness of the amended answer or to the affirmative defense.   Accordingly, we cannot agree that such was waived.

Sections 13 and 242 of the Kentucky Constitution require just compensation when private property is taken for public use.   Ordinarily, the law of eminent domain requires that prior to such a “taking,” the land must be properly condemned.  Jones v. Com., Trans.   Cabinet, Dept. of Highways, 875 S.W.2d 892, 893 (Ky.App.1993).   The Custers, however, brought this action as a “reverse condemnation” action.   Reverse or inverse condemnation is “the term applied to a suit against a government to recover the fair market value of property which has in effect been taken and appropriated by the activities of the government when no eminent domain proceedings are used.”  Commonwealth, Natural Resources & Environmental Protection Cabinet v. Stearns Coal and Lumber Co., 678 S.W.2d 378, 381 (Ky.1984).   See also Com., Dept. of Highways v. Gilles, 516 S.W.2d 338, 339 (Ky.1974).   As our highest Court explained in Witbeck v. Big Rivers Rural Electric Cooperative Corp., 412 S.W.2d 265 (Ky.1967) (overruled on other grounds in Commonwealth, Dept. of Highways v. Stephens Estate, 502 S.W.2d 71, 73 (Ky.1973)):

[W]here an entity possessing the power of eminent domain prematurely enters upon the premises of the condemnee, the exclusive remedy of the landowners is based on Kentucky Constitution, Section 242, which provides that “just compensation for property taken” shall be made.   This remedy is frequently referred to as “reverse condemnation.”   The measure of damages is the same as in condemnation cases.

Witbeck, 412 S.W.2d at 269 (citations omitted).

Thus, in a reverse condemnation suit, the landowner brings the action seeking compensation for the property the governmental agency has taken.   The obligation to pay is viewed by the courts as an implied promise by the government to pay.  Jones, 875 S.W.2d at 892.  “Recovery [is] permitted ․ on the theory that when the acts of the state constitute[ ] a taking of property, the law [implies] an agreement to pay for it.”  Curlin v. Ashby, 264 S.W.2d 671, 672 (Ky.1954).   Accordingly, since the obligation is viewed as an implied promise, an action based on a promise to pay must be brought within five years from the date of the accrual of the action pursuant to KRS 413.120(1).   Ky. L. of Damages § 17:19 (2011);  Jones, 875 S.W.2d at 893.

However, from the very nature of a “reverse condemnation” action there can be no breach of the implied promise to pay until first there has been a compensable “taking,” and the complaining party has suffered an injury Here, the taking occurred in 1996 when Louisville Metro constructed and opened the River Walk to the public.   Essentially, the injured party was the landowner at that time.   There is no evidence that the prior landowner proceeded with any legal action, lending credence to the argument that the subject property was publically dedicated.   As the Custers did not even purchase the property until 2003, any right to bring a reverse condemnation action against Louisville Metro had already expired.

Even if we were to hold that the statute of limitations did not begin to run until the Custers purchased the property and became aware the River Walk encroached on their land, the action would still be barred as the Complaint was not filed until 2009.   There has never been any claim that the portion of the River Walk that traverses the Custer's property was somehow hidden or not readily visible.   We find it significant that the commissioner's deed by which the Custers obtained the property clearly provided that such was sold subject to any easements and right of ways.   Further, the Custers readily admitted at trial that they were aware the River Walk had been constructed in 1996 and even used such before purchasing the property in question.

Nevertheless, in rejecting Louisville Metro's statute of limitations defense, the trial court agreed with the Custers that no limitations period applied because the taking of the property was “reoccurring” and “continuous.”   Indeed, as they did in the trial court, the Custers again rely upon the holding in Lynn Mining Co. v. Kelly, 394 S.W.2d 755, 757 (Ky.1965), wherein the Court stated:

If the facts establish a temporary nuisance, this was a continuing trespass for which damages could be recovered for each recurring injury (subject to the limitation that damages could not be recovered for so much of the injury as occurred more than five years before the commencement of this action.)

See also Ferguson v. Utilities Elkhorn Coal Co., 313 S.W.2d 395, 399 (Ky.1958);  West Kentucky Coal Co. v. Rudd, 328 S.W.2d 156, 160 (Ky.1959).

The flaw, however, in both the trial court's and the Custer's reasoning is that this matter is not a nuisance or trespass action, but rather a reverse condemnation action.   In fact, all parties agree that sovereign immunity bars a trespass or nuisance claim against Louisville Metro under the facts herein.   See KRS 67C.101(2)(e).   Yet, the trial court intermixed nuisance theories not only with regard to the statute of limitations, but also the subsequent instructions.

As Louisville Metro argued below, the construction and dedication of the River Walk in 1996 constituted a permanent and unequivocal taking of the property at issue.   Certainly, the Custer's predecessor in interest had the right to seek just compensation for said taking.   However, KRS 413.120(1) clearly requires such action to be commenced within five years.   Because seven years elapsed before the Custers purchased the property and thirteen years elapsed before an action was filed, the Custer's claims must be deemed barred and the trial court should have dismissed the action as a matter of law.

For the foregoing reasons, the judgment of the Jefferson Circuit Court is reversed and this matter is remanded for entry of an order dismissing the Custer's claims against Louisville Metro.

ALL CONCUR.