Opinion
NO. 2017-CA-001655-MR
05-08-2020
FRANKLIN-SIMPSON COUNTY BOARD OF ZONING ADJUSTMENT, Appellant v. DRAKES CREEK HOLDING CO., LLC, Appellee
BRIEFS FOR APPELLANT: Aaron D. Smith, Bowling Green, Kentucky. BRIEF FOR APPELLEE: Elizabeth Teel, Russellville, Kentucky.
BRIEFS FOR APPELLANT: Aaron D. Smith, Bowling Green, Kentucky.
BRIEF FOR APPELLEE: Elizabeth Teel, Russellville, Kentucky.
BEFORE: ACREE, DIXON, AND MAZE, JUDGES.
OPINION
ACREE, JUDGE: The Franklin-Simpson County Board of Zoning Adjustment (the Board) appeals the Simpson Circuit Court's order denying summary judgment and denying a grant of governmental immunity in favor of Appellee, Drakes Creek Holding Co., LLC (Drakes Creek). We reverse and remand with instructions to dismiss Drakes Creek's claims against the Board.
FACTS AND PROCEDURE
This Court previously addressed this action in Drakes Creek Holding Co., LLC v. Franklin-Simpson County Board of Zoning Adjustment , 518 S.W.3d 174 (Ky. App. 2017) ( Drakes Creek I ). That opinion may be referenced for a more complete statement of the facts. For this appeal, the following is sufficient.
Local land use planning prohibited Drakes Creek from operating a quarry on its land, but not all of Drakes Creek's beneficial enjoyment of the property. However, Drakes Creek desired to make better use of the property. After being granted a conditional use permit (CUP) by the Board, Drakes Creek began operating a quarry.
Subsequent events led the Board to conclude Drakes Creek was not operating the quarry in compliance with the CUP and to revoke it because Drakes Creek was not using the road (Ditmore Ford Road) that was affiliated with the quarry as the permissible entrance and egress. In fact, the Board concluded that certain new local ordinances made compliance "impossible." These ordinances were "likely aimed at frustrating the very conditional use previously approved by the Board." Drakes Creek I , 518 S.W.3d at 181 (dicta).
Drakes Creek appealed the revocation, and that resulted in this Court's opinion in Drakes Creek I , wherein we held the Board's revocation was improper. Id. at 180. Specifically, this Court held "the Board erroneously concluded that the ordinances rendered compliance with the CUP ‘impossible’ ... [b]ecause uncertain commercial feasibility does not equal impossibility...." Id. at 181.
While this first administrative appeal was making its way through our courts, Drakes Creek arranged for alternative commercial access to the quarry. However, it claimed that between the time the CUP was revoked and the time the alternate route was attained, it suffered monetary damages; i.e. , Drakes Creek alleged that "[a]s a result of the Board's decision to wrongfully revoke the CUP, [it] was unable to operate the quarry or make any other meaningful use of the property...." (Appellee's brief, pp. 4-5.) Drakes Creek claimed the Board's actions supported three causes of action: (1) detrimental reliance; (2) tortious interference with contract; and (3) unconstitutional taking of property by inverse condemnation.
The Board filed a motion pursuant to CR 12.03 to dismiss Drakes Creek's claims against it on the pleadings asserting governmental immunity and that the inverse condemnation claim fails as a matter of law because, presuming the truth of all the allegations, the cause of action cannot be established. The circuit court treated portions of the motion as a motion for summary judgment and denied the motion. The Board brought this timely appeal.
Kentucky Rules of Civil Procedure.
STANDARD OF REVIEW
Kentucky's " Civil Rule 12.03 provides that any party to a lawsuit may move for a judgment on the pleadings." City of Pioneer Village v. Bullitt Cty. , 104 S.W.3d 757, 759 (Ky. 2003). A judgment on the pleadings "should be granted if it appears beyond doubt that the nonmoving party cannot prove any set of facts that would entitle him/her to relief." Id. (citation omitted). "[T]he circuit court is not required to make any factual determination; rather, the question is purely a matter of law." James v. Wilson , 95 S.W.3d 875, 884 (Ky. App. 2002). Consequently, appellate review of an order denying a judgment on the pleadings is de novo. Schultz v. Gen. Elec. Healthcare Fin. Servs., Inc. , 360 S.W.3d 171, 177 (Ky. 2012).
Further, a motion filed pursuant to CR 12.03 may be treated as a motion for summary judgment when the circuit court considers matters outside the pleadings. "The standard of review of a trial court's denial of summary judgment is de novo. See, Scifres v. Kraft , 916 S.W.2d 779, 781 (Ky. App. 1996)." Northern Kentucky Area Planning Comm'n v. Cloyd , 332 S.W.3d 91, 93 (Ky. App. 2010).
Whether an entity is entitled to governmental immunity is a question of law; therefore, our review is de novo. Louisville Arena Authority, Inc. v. RAM Engineering & Const., Inc. , 415 S.W.3d 671, 677 (Ky. App. 2013).
In summary, this Court will review the entirety of this appeal de novo.
ANALYSIS
We first conclude that the Board is entitled to governmental immunity regarding the detrimental reliance and tortious interference claims.
"Whether an entity is a government agent is a threshold consideration in governmental immunity analysis." Bryant v. Louisville Metro Housing Authority , 568 S.W.3d 839, 846 (Ky. 2019) (quoting Jacobi v. Holbert , 553 S.W.3d 246, 252 (Ky. 2018) (citation omitted)). As said in Comair, Inc. v. Lexington-Fayette Urban County Airport Corporation , "This inquiry can be as simple as looking at the ‘parent’ of the entity in question, i.e., was it created by the state or a county, or a city?" 295 S.W.3d 91, 99 (Ky. 2009).
We conclude the Board was created pursuant to state enabling legislation by Simpson County, making the Board an agent of the county, a government entitled to immunity. Bryant , 568 S.W.3d at 846 (citation omitted) ("A county ‘is a political subdivision of the Commonwealth ... and as such is an arm of the state government [and i]t, too, is clothed with the same sovereign immunity’ ...."). We reach this conclusion regarding the Board's agency based on the following analysis, beginning with the statutes that enabled Simpson County to create the Board.
The legislature intended every acre in the Commonwealth to be "within the jurisdiction of some board of adjustment...." KRS 100.217(1)(a). Boards of adjustment are agencies of "planning units" which "may consist of a city or county, acting independently in accordance with KRS 100.117 ; cities and their county, jointly, in accordance with KRS 100.121 ; or groups of counties and their cities, regionally, in accordance with KRS 100.123." KRS 100.113. By all appearances, the Board in this case was either created by Simpson County pursuant to KRS 100.117, or by Simpson County and the City of Franklin, Kentucky, jointly, pursuant to KRS 100.121.
Clearly the Franklin-Simpson County Board of Zoning Adjustment exists by virtue of some act of the Simpson County Fiscal Court or the City of Franklin, or through their joint effort. However, this Court has not been directed to any initiating legislation of either governing body. Franklin-Simpson County Zoning Regulations (F-SCZR) § 1.1.1 says, "These Zoning Regulations are adopted pursuant to the authority granted by KRS chapter 100.210, which permits cities and counties to adopt land use regulations." However, KRS 100.210 was repealed decades ago. The same county regulations give some indication that the Board was created by county action only. For example, "Board of Adjustment" is defined as "the board of zoning adjustment of Simpson County" with no reference to the City of Franklin. F-SCZR § 2.3.15. Additionally, F-SCZR § 1.6.1 says the purpose of "these regulations ... [is to i]mplement the planning policies adopted in the Simpson County Comprehensive Plan[,]" again, with no mention of the City of Franklin.
City of Franklin regulations do not read as though they stand independently of the county's regulations regarding zoning and related land use. The section on zoning simply incorporates by reference nine ordinances passed by the city between 1983 and 2018. See Code of Ordinances of the City of Franklin (COCF) § 158.01 (Ready access to these ordinances, as by use of the internet, is not available.). However, elsewhere in the regulations under the general heading "Land Use" there are indications of a joint enterprise for land use planning. For example, COCF § 156.02(A) says, "These regulations [specifying the subdivision regulations section] shall be known and cited as the ‘Subdivision Regulations for the City of Franklin and Simpson County, Kentucky.’ " Other regulations place emphasis on the role of the county. See SRCFSC § 156.03 (emphasis added) ("These regulations were prepared and adopted by the Joint City-County Planning Commission of the county , under authority granted by the KRS Chapter 100."); SRCFSC § 156.05(B) (emphasis added) ("These regulations shall be administered by the Joint City-County Planning Commission of the county. "). Another regulation acknowledges a subsumption of the county's jurisdiction. SRCFSC § 156.04 ("The provisions of these regulations shall apply to all lands within the county, including the incorporated area of the city.").
Both as a matter of law and fact in this case, the Simpson County Judge/Executive is the appointing authority for members of the Board, subject to the approval of the Simpson County Fiscal Court. KRS 100.217(3) ; Drakes Creek I , 518 S.W.3d at 179, 182 ("member recently appointed by [County Judge/Executive] Jim Henderson"; "the respective legislative body, in this case the Simpson County Fiscal Court, has the power to approve the appointee"). Also, any member of the Board can be removed by the same appointing authority. KRS 100.217(8).
Additionally, as in Bryant , supra , in which a housing authority was analyzed for governmental immunity, "[t]he legislature prescribed the manner through which a [board of adjustment] can contract for certain services." Bryant , 568 S.W.3d at 847 ; KRS 100.223. The analogy with the housing authority is practically complete. See Bryant , 568 S.W.3d at 846-47. Consequently, we reach a similar conclusion. "The statutes portray sufficient control for this prong of the Comair test [of whether the entity is an agency of a government] to be met." Id. at 846.
"The more important question" is whether the Board "is performing an integral state function." Id. at 847. That question is answered in two parts – "whether the entity's function is ‘governmental’ as opposed to proprietary, and whether it is a matter of ‘statewide’ concern." Coppage Construction Company, Inc. v. Sanitation District No. 1 , 459 S.W.3d 855, 862 (Ky. 2015).
The Board's function is governmental and not proprietary. "A proprietary function is of the type normally engaged in by businesses or corporations and will likely include an element of conducting an activity for profit." Jacobi , 553 S.W.3d at 255 (citation omitted). "A government agency's immunity is limited to governmental tasks rather than allowing it an unfair advantage when partaking in profit-seeking ventures." Id. In some cases, this question was a closer call.
For example, in Jacobi , one of the questions was whether the revenue-generating aspect of practicing law made the work of the Department of Public Advocacy proprietary. Bryant , 568 S.W.3d at 847 (citing Jacobi , 553 S.W.3d at 256 ). Similarly, the Court had to consider whether the revenue received by an airport board made its function proprietary. Id. at 847-48 (citing Comair , 295 S.W.3d at 102 ). In Bryant , the housing authority collected rents. Id. In each of these cases, the Court found, on balance, that the entity's function was governmental.
The Board has no proprietary characteristic to consider. The only "revenue" generated is from filing fees of little relative consequence. Northern Kentucky Area Planning Commission v. Cloyd , supra , is more analogous than the cases just cited. In Cloyd , as here, we did not need to consider whether the entity's function places it in competition with the private sector. There is no equivalent in the private sector; the Board's function is entirely governmental and regulatory.
As we did in Cloyd , we move in the instant case directly to the second part of the question – is the Board's function a matter of statewide concern? We conclude it is.
In Cloyd , this Court considered the governmental immunity of a planning commission and found a planning commission "tends to do the work of a state, but on a local scale" and that commissions "protect certain interests of the state...." 332 S.W.3d at 96. Examining the enabling statutes, we said, "[I]t is difficult to discern why the General Assembly would have gone to the trouble of granting to commissions certain statutory authority, identified the limits on that authority, and imposed specific responsibilities of planning commissions if a significant state interest was not involved." Id. The very same can be said of boards of adjustment. "Despite the hybrid nature of these entities, analysis of their parent entities and the functions they perform reveals they are entitled to governmental immunity." Id. The Board performs a governmental function of statewide interest.
Because the Board is cloaked with governmental immunity, the circuit court should have granted summary judgment as to Drakes Creek's detrimental reliance and tortious interference claims.
However, governmental immunity is no bar to Drakes Creek's claim of inverse or reverse condemnation. Commonwealth, Natural Resources & Environmental Protection Cabinet v. Stearns Coal and Lumber Co. , 678 S.W.2d 378, 381 (Ky. 1984). "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." Id. However, for the claim to proceed after a challenge pursuant to CR 12.03, Drakes Creek was required to demonstrate how it could establish all elements of the cause of action. That includes demonstrating how it could establish a "taking." That is not possible on this record.
"The question of a legal taking is crucial. A taking is generally defined as the entering upon private property and devoting it to public use so as to deprive the owner of all beneficial enjoyment." Id. (emphasis added). Land use regulations that predated the Board's grant of the CUP may have restricted Drakes Creek's complete beneficial enjoyment of the subject property, but certainly they did not extinguish beneficial enjoyment completely. Whatever beneficial enjoyment the property allowed Drakes Creek (or its predecessor-in-interest) prior to the Board's grant of the CUP, the same beneficial enjoyment existed, in the same measure, after the CUP was revoked. It is impossible to find that revoking the CUP deprived Drakes Creek of all beneficial enjoyment of the property.
Drakes Creek cannot establish a taking, a crucial element of the cause of action for inverse condemnation, thereby making it impossible to prove an inverse condemnation claim. For that reason, denial of the Board's motion pursuant to CR 12.03 was erroneous as a matter of law.
CONCLUSION
For the foregoing reasons, we reverse the Simpson Circuit Court's denial of the Board's motion to dismiss and remand with instructions to dismiss Drakes Creek's claims against the Board.
ALL CONCUR.