Keeton v. State, Department of Transportation and Public Facilities

          Appeal from the Superior Court No. 3AN-14-06557 CI of the State of Alaska, Third Judicial District, Anchorage, Erin B. Marston, Judge.

          Jeffrey J. Jarvi, Anchorage, for Appellant. Dario Borghesan, Assistant Attorney General, Anchorage, and Jahna Lindemuth, Attorney General, Juneau, for Appellee State of Alaska, Department of Transportation and Public Facilities. Notices of nonparticipation filed by Thomas F. Klinkner, Birch Horton Bittner & Cherot, Anchorage, for Appellee City of Wasilla; David Pease, Matanuska Electric Association, Inc., Palmer, for Appellee

          Matanuska Electric Association, Inc.; Dana Lyn Dalrymple, Dalrymple Law, P.C., Palmer, for Appellee Mat-Su Title Insurance Agency, Inc.; and Jed L. Van Loan, Jed L. Van Loan, PC, Anchorage, for Appellee Matanuska Valley Federal Credit Union. No appearance by Appellee Matanuska-Susitna Borough.

          Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and Carney, Justices.

          OPINION

          MAASSEN, JUSTICE.

         I. INTRODUCTION

         The Department of Transportation and Public Facilities (DOT or the State) condemned a strip of property along the Parks Highway. DOT filed a declaration of taking, allowing it to take title immediately, and deposited approximately $15, 000 in court as estimated compensation for the taking. The landowner challenged DOT's estimate and was eventually awarded approximately $24, 000, as well as attorney's fees and costs. Pursuant to AS 09.55.440, the superior court awarded prejudgment interest to the landowner at the rate of 10.5% on the difference between the amount of DOT's initial deposit and the amount the property was ultimately determined to be worth.

         The landowner appeals, arguing that the prejudgment interest should have been calculated on the difference between the deposit and his entire judgment, including significant amounts for attorney's fees and appraisal costs. We conclude, however, that the landowner's argument is not supported by the statutory language, legislative history, or policy. We also reject the landowner's arguments that the superior court applied the wrong postjudgment interest rate and abused its discretion by denying discovery of the State's attorneys' billing records. Finally, we conclude that the superior court must state its reasons for excluding any attorney time from its attorney's fees award, and we therefore vacate the attorney's fees award and remand for reconsideration on this limited issue.

         II. FACTS AND PROCEEDINGS

         A. Facts

         The property at the center of this case is approximately 6.727 acres near Wasilla, owned by Robert Keeton III. Bounded by Jacobsen Lake on the south, the property rises to the Parks Highway to the north. The area nearest the lake is wetlands. Between the wetlands and the property's upland portion is an area filled with woodchips, where there used to be a mill. The property includes a cabin that has been turned into a duplex, an automobile repair shop, and a used car dealership operating out of a modular building.

         In 2014 DOT began a project to widen the Parks Highway from Mileposts 44.5 to 48.3. As part of the project it sought to condemn a portion of Keeton's property, referred to by DOT as "Parcel 77" and described as "a narrow strip along the current Parks Highway [], approximately 15 feet wide and 420 feet long, for a total of approximately 6, 301 square feet." According to DOT, Parcel 77 was "necessary for this project in order to relocate utilities and to accommodate right-of-way maintenance needs." The condemnation reduced Keeton's property from approximately 6.727 acres to 6.582 acres.

         To assist with its right-of-way acquisitions, DOT retained a consulting firm, which in turn subcontracted with an appraisal firm. The appraiser who did the work on Parcel 77 was Steve Carlson. Before starting the appraisal, Carlson estimated that the value of Parcel 77 would be less than $25, 000, and he thus prepared a waiver valuation, an "abbreviated form" of an appraisal. The waiver valuation valued Parcel 77 at $14, 800. Carlson also found that the condemnation caused no damage to the remaining property.

         B. Proceedings

         The parties were unable to agree on the amount of compensation due Keeton for the taking. On April 30, 2014, DOT filed a complaint for condemnation and a declaration of taking. DOT offered $14, 800 in just compensation and deposited $14, 905.98 with the superior court, including $105.98 as estimated pro-rated property taxes. In his answer Keeton disputed DOT's valuation, sought "[a]n award of just compensation for [DOT's] taking of and damage to his private property, including but not limited to, a fair valuation of and payment for the private property taken by [DOT]," and asked that he be awarded his costs and attorney's fees.

         The superior court appointed a master to hear the matter. In preparation for the hearing, Carlson did a full narrative appraisal of Keeton's property and determined that the value of Parcel 77 was $18, 300. In compliance with Carlson's revised estimation, DOT added an additional $3, 500 to the court deposit.

         Keeton also retained a commercial appraiser, Per Bjorn-Roli, to perform an appraisal on his behalf. Bjorn-Roli's estimates of value were significantly higher than those proposed by DOT: $35, 956 for the value of the property taken and $15, 580 for damage to the remainder of Keeton's property. Keeton also argued that the taking made it more costly for him to install a septic tank on his property, and he valued his total loss at $102, 456.

         The master's hearing was held in August and September 2016. The master found that the condemned property was worth $24, 740, and neither party appealed this determination. The amount exceeded DOT's initial deposit by approximately $10, 000 and its supplemented deposit, following Carlson's second appraisal, by $6, 440. Keeton moved for entry of final judgment and an award of attorney's fees and costs. In addition to the property's value he sought $44, 553.12 in attorney's fees, $30, 444 in appraiser fees, $1, 823.35 in other costs, and $25, 825.64 in prejudgment interest. A statute provides for prejudgment interest at the rate of 10.5% "on the amount finally awarded that exceeds the amount paid into court under the declaration of taking";^[1] Keeton argued that his fees and costs should be added to the property's ascertained value to determine "the amount finally awarded" for purposes of contrast with DOT's deposit.

         DOT partially opposed the request, asking to see Keeton's lawyer's billing records to determine their reasonableness and arguing that prejudgment interest could not be applied to an award of attorney's fees and costs. Keeton, in turn, sought the billing records of DOT's attorneys, but DOT successfully moved to quash the request. After inspecting Keeton's attorney's records, DOT decided not to obj ect to his attorney's fees and costs incurred through the May 2017 oral argument on the prejudgment interest issue.

         The superior court awarded a final judgment of just compensation for $24, 740 based on the master's recommendation and calculated prejudgment interest on the amount by which it exceeded DOT's deposits. The court also awarded Keeton $47, 453.12 in attorney's fees and $32, 276.50 in costs, with postjudgment interest at the rate of 4.25%.

         Keeton appeals from the superior court's refusal to include his attorney's fees and costs in "the amount finally awarded" for purposes of the award of prejudgment interest under AS 09.55.440(a). He also appeals the court's award of postjudgment interest at 4.25%; its decision to quash his subpoena for DOT's attorneys' billing records; and the court's decision to exclude certain activities from the attorney's fees award.

         III. STANDARD OF REVIEW

         Whether prejudgment interest as defined in AS 09.05.440(a) applies to an award of attorney's fees and costs in a condemnation action presents a legal question, which we review de novo.^[2] "We apply our independent judgment to questions of 'statutory interpretation requiring the application and analysis of various canons of statutory construction.' "^[3] We review for abuse of discretion a superior court's decisions to quash a subpoena^[4] and to deny certain requested attorney's fees and costs.^[5]

         IV. DISCUSSION

         A. The Superior Court Did Not Err By Denying Prejudgment Interest On Attorney's Fees And Costs Under AS 09.55.440.

         Alaska Statute 09.55.440(a) provides for prejudgment interest at 10.5% on only a portion of a condemnation award: the amount by which "the amount finally awarded . . . exceeds the amount paid into court under the declaration of taking." Keeton's primary argument on appeal is that "the amount finally awarded" should include his awards of attorney's fees and costs, not just the compensation reflecting the value of the condemned property; under this argument the gap between the amount deposited and the amount awarded is $61, 429.12^[6] rather than $6, 440. Keeton argues that his interpretation of the statute is plausible and that the statute must therefore be interpreted in his favor under the principle that "a grant of power of eminent domain is to be strictly construed against the condemning party and in favor of the property owner."^[7]

         We have strictly construed against the State its power to condemn, ^[8] which is not at issue in this case. In any event, the plain language of AS 09.55.440(a) is not ambiguous, and therefore strict construction of it would not help Keeton's position. "We construe statutes according to reason, practicality, and common sense, considering the meaning of the statute's language, its legislative history, and its purpose."^[9] Applying these usual rules of statutory construction, we conclude that the superior court did not err by excluding attorney's fees and costs from its award of prejudgment interest under AS 09.55.440(a).

         1. The plain language of the eminent domain statutes does not contemplate that "compensation" as used in those statutes includes attorney's fees and costs.

         When the State seeks to exercise its power of eminent domain over private property, "it may file a declaration of taking with the complaint or at any time after the filing of the complaint, but before judgment."^[10] The declaration of taking must state the authority under which the power is being exercised, the public use intended for the property, a description of the property and the interests in it, a statement of necessity, and - as most relevant here - "a statement of the amount of money estimated by the plaintiff to be just compensation for the property or the interest in it."^[11] Title to the property vests in the State once it has filed "the declaration of taking and the deposit with the court of the amount of the estimated compensation stated in the declaration ... ."^[12]The deposit tolls the running of interest on the sum deposited; by use of this procedural device, the State may "minimize the risk of an interest assessment (and avoid the expenses of litigation) by making a reasonable offer which the property owner is likely to accept prior to the institution of legal proceedings."^[13]

         When the State files the declaration of taking and the deposit, "the right to just compensation for [the property] vests in the persons entitled to it, "^[14] and the court may thereafter order that the deposit be distributed "at any time."^[15] Assuming the landowner does not accept the amount deposited as just compensation, "[t]he compensation shall be ascertained and awarded in the proceeding and established by judgment."^[16] The next sentence of AS 09.55.440(a) is at the heart of this appeal: "The judgment must include interest at the rate of 10.5 percent a year on the amount finally awarded that exceeds the amount paid into court under the declaration of taking. The interest runs from the date title vests to the date of payment of the judgment."^[17] Because prejudgment interest applies only to the excess of "the amount finally awarded" over "the amount paid into court under the declaration of taking," including attorney's fees and costs in "the amount finally awarded" may-as in this case - significantly increase the possible excess to which prejudgment interest will apply.

         We conclude, however, that the plain language of the statute, read in context, does not support this interpretation. "When a statute ... is part of a larger framework or regulatory scheme, even a seemingly unambiguous statute must be interpreted in light of the other portions of the regulatory whole."^[18] Alaska Statute 09.55.440(a) begins by reference to "the filing of the declaration of taking and the deposit with the court of the amount of the estimated compensation stated in the declaration"; the next sentence of subsection (a) refers again to "the compensation," which "shall be ascertained and awarded in the proceeding and established by judgment"; and the third sentence of the subsection picks up the term "award" and contrasts it with the "estimated compensation" referred to in the first sentence: interest shall be included "on the amount finally awarded that exceeds the amount paid into court under the declaration of taking." (Emphasis added.) In this procedural sequence, "the estimated compensation," through ascertainment and award, becomes "the compensation," which is "established by judgment" and contrasted with the State's initial estimate of what it was likely to be.

         "Compensation" is explained in other statutes in the same chapter. Alaska Statute 09.55.310, addressing the hearing process, provides that "[t]he jury or master" shall "ascertain and assess .. .the value of the property sought to be condemned, and all improvements on it pertaining to the realty, and of each separate estate or interest in it" (emphasis added), as well as any collateral damage or benefit to portions of the landowners' property that have not been condemned. Alaska Statute 09.55.330, entitled "Compensation and damages," reads in pertinent part:

For the purpose of assessing compensation and damages, the right to them accrues at the date of issuance of the summons, and its actual value at that date is the measure of compensation of the property to be actually taken, and the basis of damages to property not actually taken but injuriously affected in the cases where the damages are allowed. . . . Improvements put upon the property after the ...