Blanchard v. City of Springdale

          APPEAL FROM THE BENTON COUNTY CIRCUIT COURT [NO. 04CV-16-1060] HONORABLE XOLLIE DUNCAN, JUDGE

          Kelley Law Firm, PLLC, by: Glenn E. Kelley and Caroline W. Kelley, for appellant.

          Crouch, Harwell, Fryar & Ferner, PLLC, by: Charles L. Harwell and Matthew L. Fryar, for appellee.

          KENNETH S. HIXSON, JUDGE

         This is an appeal from an eminent-domain proceeding, and the issues on appeal involve only costs and attorney's fees. The litigation was initiated when appellee Springdale Water and Sewage Commission (SWSC)^[1] filed an eminent-domain complaint against appellant, Rick A. Blanchard, as Trustee of the Rick A. Blanchard Living Trust Agreement dated August 18, 1989 (the Trust). SWSC's complaint sought two utility easements over property owned by the Trust and prayed that just compensation be awarded. After a jury trial, the jury returned a verdict of $104, 846.12 to the Trust as just compensation for the easements, and a judgment was entered in this amount. The Trust subsequently filed a motion for attorney's fees and costs, and the trial court entered an order denying the Trust's motion. The Trust now appeals, contending the trial court erred in denying the motion for attorney's fees and costs. We affirm the trial court's denial of attorney's fees, and we affirm in part and reverse in part the denial of costs.

         I. The Award of Just Compensation for the Taking

         The Trust owns 54.93 acres of property in Benton County (the Trust property). In 2016, SWSC sought a 65-foot-wide utility easement across the middle of the Trust property and a 35-foot easement along the edge of the Trust property next to a state highway. These proposed easements formed an L-shape and consisted of 2.61 acres. Although SWSC was seeking two easements, for ease of discussion we will hereafter refer to them collectively as "the easement." In prelitigation negotiations, SWSC and the Trust were unable to reach an agreement regarding the appropriate just compensation for the easement.

         On July 27, 2016, SWSC filed a complaint against the Trust. In its complaint, SWSC asserted that it was authorized to acquire easements by eminent domain pursuant to Ark. Code Ann. §§ 18-15-301 et seq., §§ 18-15-401 et seq., and § 14-235-210. SWSC attached to its complaint a copy of the easement. SWSC's complaint stated that the easement was "needed for the construction and maintenance of improvements to and for the location of sewer lines." (Emphasis added.) The easement, which was attached to the complaint, contained a property description of the entirety of the Trust property, as well as a description of the portions of the Trust property to be encumbered by the easement. The easement provided for the right of ingress and egress "for the purpose of laying, repairing, inspecting, maintaining, removing, or replacing, said water transmission line(s), and/or sewer collection or force main line(s), and the right of exercising all other rights necessary to carry out the purposes for which this easement is created." (Emphasis added.) The easement further provided that the grantee "shall have and is hereby granted the right of constructing, reconstructing, locating, relocating, inspecting, patrolling, [and] expanding existing facilities or such additional facilities, and appurtenances as may be required in the future."

         Also on July 27, 2016, SWSC filed a motion for order of possession. In this motion, SWSC represented that "the rights of way condemned by plaintiff in this action are for the construction of improvements to and for the installation of sewer lines." (Emphasis added.) Attached to the motion was an appraisal report prepared by Shannon Mueller. The appraisal report states that the easement "is intended to be 'for a water transmission line(s), and/or sewer collection or force main line(s).'" (Emphasis added.) The SWSC's appraisal report also states that "[t]he intended use of this report is to assist the client [SWSC] with an acquisition (permanent easement) decision in connection with the Spring Creek Sanitary Sewer Project." (Emphasis added.) SWSC's appraisal estimated that the damage to the value of the Trust property resulting from the easement was $33, 900. Relying on this estimate of just compensation, SWSC deposited $33, 900 with the clerk of the court.

         On July 29, 2016, the trial court entered an order of possession granting SWSC the right of possession of the property described in the easement attached to SWSC's complaint. The order of possession states that SWSC's easement is "needed by the plaintiff for the construction and maintenance of improvements to and for the installation of sewer lines." (Emphasis added.)

         On August 17, 2016, the Trust answered SWSC's complaint. In its answer, the Trust asserted that the estimated compensation of $33, 900 deposited by SWSC was insufficient to compensate the Trust for the condemnation of the subject property. The Trust asked that the trial court empanel a jury to ascertain the amount of just compensation due to the Trust.

         A two-day jury trial was held on August 21 and 22, 2018. At trial, the Trust presented the testimony of its own appraiser, Glen Carlson. Carlson prepared an appraisal report wherein he estimated the damages caused by the "utility easement" to be $121, 000.

         Rick Pulvirenti, a civil engineer employed by SWSC, testified about the easement crossing the Trust property. Pulvirenti indicated that the easement is part of the Spring Creek Sewer Project. This project extends the boundaries of SWSC's sewage service and requires the installation of sewer lines for the transmission of sewage from a lift station to SWSC's wastewater-treatment facility. These sewer lines cross the Trust property, creating the necessity for the easement. Pulvirenti stated that "[t]his project is only the transmission of sewage between the lift station and some other point." Pulvirenti indicated that at some future time, SWSC could install additional sewer lines over the easement that would result in no additional compensation to the Trust. Pulvirenti testified that SWSC also has water lines running through other portions of the Trust property, but that compensation for those lines was negotiated years ago when the water lines were installed. He stated that the water lines are not part of this project.

         After the trial, the jury returned a verdict of $104, 846.12 in favor of the Trust as just compensation for the taking. The verdict was entered of record on August 23, 2018.

         II. The Motion for Attorney's Fees and Costs

         The Trust filed a motion for attorney's fees and costs, and this motion set off a flurry of motions and countermotions by each party. Each motion and countermotion advanced specific interpretations and constructions of the aforementioned statutes, which ultimately resulted in the trial court denying appellant's motion for attorney's fees and costs.

         On August 24, 2018, the Trust filed its initial motion for attorney's fees and costs. The Trust's motion was made pursuant to Ark. Code Ann. § 18-15-605(b) (Repl. 2015), which provides:

In the case of application for orders of immediate possession by the corporation or water association, if the amount awarded by the jury exceeds the amount deposited by the corporation or water association in an amount which is more than twenty percent (20%) of the sum deposited, the landowner shall be entitled to recover the reasonable attorney's fees and costs.

         (Emphasis added.) The Trust asserted that this statute provides for attorney's fees and costs in condemnation proceedings involving municipalities where the jury awards damages of more than 20 percent than the sum deposited. Noting that the jury's verdict exceeded the amount deposited by SWSC by more than 20 percent, the Trust requested attorney's fees of $49, 832.50 and costs of $9237.00.

          On August 29, 2018, SWSC filed a response to the Trust's motion for attorney's fees and costs. In its response, SWSC contended that the Trust was not entitled to attorney's fees or costs because Ark. Code Ann. § 18-15-605(b) does not apply to a taking for a sewer line. In its accompanying brief, SWSC asserted that Ark. Code Ann. § 18-15-301(a) provides the general authority of a municipal corporation to condemn private property for construction or other lawful purposes; that Ark. Code Ann. § 18-15-401 describes a municipality's authority to exercise that broad condemnation power for water systems; and that Ark. Code Ann. § 14-235-210 (Repl. 1998) extends municipal authority to condemnations for purposes of expanding sewer systems. SWSC asserted that Ark. Code Ann. §§ 18-15-601 et seq., which SWSC did not rely on in these proceedings, provides a means by which a municipality can condemn land for purposes of expanding a water system or water-generated electric system. SWSC contended that Ark. Code Ann. § 18-15-605(b), upon which the Trust relied in its application for attorney's fees and costs, has no application to this case because its application is limited to a condemnation for purposes of expanding a city's municipal water system. SWSC argued that because it acted only to expand its sewer system, it was not responsible for the Trust's attorney's fees or costs. SWSC noted that its complaint, its motion for order of possession, and the trial court's order of possession all reference an easement for the installation and maintenance of sewer lines. SWSC asserted that it had clearly requested that its easement be limited to sewer lines, and that sewer lines were the only lines SWSC had run within the easement.

          Before an underlying judgment was entered and while the Trust's motion for attorney's fees and costs remained pending, the Trust filed a motion regarding the form of the judgment, and SWSC filed a response. In the Trust's motion filed on September 5, 2018, and SWSC's response filed on September 10, 2018, the parties disagreed as to the nature of the easement that had been granted to SWSC and prepared different precedents for consideration by the trial court.

         In the Trust's motion, it contended that SWSC's easement was not limited to sewer lines but that it also included water-transmission lines (which would then permit the Trust to recover statutory attorney's fees). In support of its claim, the Trust noted that the stated purpose of the easement that SWSC attached to its complaint was for "water transmission line(s), and/or sewage collection or force main line(s)." (Emphasis added.) The Trust alleged that SWSC's postverdict characterization of the easement as only a sewage easement was a thinly veiled effort to avoid an assessment of attorney's fees and costs as contemplated under the statute that authorizes attorney's fees and costs for the taking of waterworks easements. The Trust submitted a proposed judgment wherein the Trust would be compensated for the taking of a permanent utility easement.

         SWSC responded that, notwithstanding the generic reference to transmission lines and/or sewer-collection lines in the easement attached to its complaint, its application for an easement was at all times limited to sewage-transmission lines as evidenced by the language in the complaint itself. SWSC stated that the testimony at trial confirmed that sewage-transmission lines were currently in the easement and that other sewage- transmission lines would likely be added in the future. SWSC submitted a proposed judgment wherein the Trust would be compensated for the taking of a permanent utility easement for sewer lines.

         The trial court accepted the precedent submitted by SWSC. On September 19, 2018, the trial court entered a judgment awarding the Trust $104, 846.12 as just compensation for "the taking of a permanent utility easement for sewer lines." (Emphasis added.)

         On September 25, 2018, the Trust filed an amended motion for attorney's fees and costs. In its amended motion, the Trust realleged its claim for attorney's fees of $49, 832.50 and costs of $9327.00 under Ark. Code Ann. § 18-15-605(b). In addition, the Trust requested the above attorney's fees and costs under a common-law theory that SWSC had failed to act in good faith by instituting, and later abandoning, condemnation proceedings (i.e., SWSC's posttrial request to limit the easement to a sewer easement in an effort to avoid liability for attorney's fees ...