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Creegan v. State

Supreme Court of Kansas

March 24, 2017

James M. Creegan, et al., Appellants,
v.
The State of Kansas, et al., Appellees.

         SYLLABUS

         1. A Fifth Amendment taking occurs when a party with the power of eminent domain deprives the owner of a property right. In order for the taking of an intangible property right to be compensable in Kansas, it is not necessary that the property be physically taken or for the property to be damaged within the meaning of K.S.A. 26-513(a).

         2. The violation of a restrictive covenant running with subdivision land by a party with the power of eminent domain is a compensable taking of a private property interest in real estate possessed by an owner of a dominant subdivision parcel, and that owner may sue in inverse condemnation.

         Review of the judgment of the Court of Appeals in an unpublished opinion filed January 23, 2015.

         Appeal from Johnson District Court; James F. Vano, judge. Judgment of the Court of Appeals reversing and remanding to the district court is affirmed. Judgment of the district court is reversed and remanded with directions.

          Douglas J. Patterson, of Property Law Firm, LLC, of Leawood, argued the cause, and Michelle W. Burns and Kellie K. Warren, of the same firm, were with him on the brief for appellants.

          Charles E. Millsap, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, argued the cause, and Lyndon W. Vix, of the same firm, and Timothy P. Orrick and Paul Schepers, of Orrick & Erskine, L.L.P., of Overland Park, and Barbara W. Rankin, chief counsel, of Kansas Department of Transportation, were with him on the briefs for appellees.

          Timothy P. Orrick, of Orrick & Erskine, L.L.P., of Overland Park, was on the brief for amici curiae League of Kansas Municipalities, City Attorneys Association of Kansas, Kansas Association of Counties, and Kansas Rural Water Association.

          Christopher F. Burger, of Stevens & Brand, L.L.P., of Lawrence, was on the brief for amicus curiae Westar Energy, Inc.,

          OPINION

          BEIER, J.

         This is an inverse condemnation action brought by property owners in the Grande Oaks subdivision in Overland Park to seek compensation from the State of Kansas and the Kansas Department of Transportation (collectively KDOT) for violation of restrictive covenants burdening subdivision property. KDOT obtained summary judgment in defendants' favor in the district court, but a panel of the Court of Appeals reversed. Creegan v. State, No. 111, 082, 2015 WL 423835 (Kan. App. 2015) (unpublished opinion).

         Today, on KDOT's petition for review, we depart from the rationale of the Court of Appeals but affirm its result. Violation of restrictive covenants can support the taking of a compensable real property interest in an inverse condemnation action. And this case must be remanded to district court to determine the amount, if any, of the just compensation due to the plaintiffs.

         Factual and Procedural Background

         The underlying facts of this case and its procedural history in the district court are not in dispute. As the Court of Appeals set out those facts and history:

"Grande Oaks is a subdivision in Johnson County, Kansas. The plots within Grande Oaks were made subject to a Declaration of Restrictions filed in the Register of Deeds Office of Johnson County, Kansas, on June 22, 1978. In relevant part, the Declaration of Restrictions stated that the property within Grande Oaks should be occupied and used for single-family residence purposes only.
"In 1999, KDOT purchased a sizeable section of real property from Christ Evangelical Lutheran Church of Lenexa, Kansas, Inc., which included land platted as lots 55 through 75 in Grande Oaks. In 2005, KDOT placed trailers on these lots and, in subsequent years, used the lots for various construction activities. Eventually, KDOT constructed permanent bridges and pavements on a number of the lots. The existing traffic pattern currently utilizes these newly constructed facilities.
"In March 2012, Plaintiffs, who all owned real property in Grande Oaks, initiated this lawsuit claiming inverse condemnation by Defendants. After some limited discovery, Defendants filed a motion for summary judgment[, ] arguing that violation of the restrictive covenant in this case was not a compensable taking under Kansas law." Creegan, 2015 WL 423835, at *1.

         As the Court of Appeals noted, no transcript of the district court hearing on summary judgment is included in the appellate record, but the record does contain a memorandum decision issued by the district judge. It reads in pertinent part:

"In this case, Plaintiffs do not allege an actual, physical taking. Instead, they allege that Defendant damaged their property by using its own property in violation of its deed restrictions. . . .
"The watershed issue in this case, the claim from which all of the Plaintiffs' theories of damages flow entirely[, ] is the State's violation of the restrictive covenants running with the land. Restrictive covenant compliance may be a contractual expectation, an intangible property right of the Plaintiffs and every other property owner in the subdivision. There is no dispute that the State has violated the restrictive covenants with respect to the lots it owns through purchase. However, violation of the restrictive covenants is not a physical taking. Some physical taking or substantial inevitable damage resulting in a taking must be alleged and produced in evidence to support a claim for inverse condemnation. The 'taking' alleged in this case is not a compensable taking at all. . . .
. . . .
". . . This trial court . . . will not create or expand the cause of action not otherwise recognized under Kansas law.
. . . .
". . . The Plaintiffs' case at bar pivots entirely upon the violation of restrictive covenants burdening property owned by the State. In Plaintiffs' theory, damages flow from the violation of the restrictive covenants. There is no evidence in this case of any actual physical taking of the real property, or substantial or sustained and inevitable physical damages to the real property amounting to a 'taking' of the real property owned by the Plaintiffs.
"Defendant argues that Plaintiffs' only claim of damages is the alleged diminution in the values of their respective properties, which are not compensable in an inverse condemnation case. On the other hand, Plaintiffs argue that they have alleged compensable damages. Plaintiffs alleged damages do not rise to the level of the taking required for inverse condemnation. They are incidental to the primary claim upon which the Plaintiffs rest, i.e., violation of the restrictive covenants. They are not compensable in inverse condemnation.
"In response to Defendant's Motion for Summary Judgment, Plaintiffs have only provided evidence of a diminution in value of their properties."

         At the close of this discussion, the district judge granted summary judgment to the defendants.

         On appeal, a majority of the Court of Appeals panel ruled that restrictive covenants are real property interests and that the damage done to those property interests by KDOT's violation of the covenants required just compensation. 2015 WL 423835, at *6. Judge G. Gordon Atcheson concurred in the majority's result, but he would have treated restrictive covenants as a hybrid of real property interests and contract interests Under his design, compensation would be due only for violation of restrictive covenants exhibiting the attributes of a real property interest 2015 WL 423835, at *6 (Atcheson, J., concurring). Whether these attributes exist would have to be determined on a case-by-case basis. According to Judge Atcheson, "[a] government entity takes the property interests embodied in a restrictive covenant to the extent ...


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