K. Petroleum, Inc. v. Property Tax Number Map Number 7 Parcel 12, Knox County, Kentucky et al

Filing 67

MEMORANDUM OPINION & ORDER re: 61 MOTION for Summary Judgment by K. Petroleum, Inc. filed by K. Petroleum, Inc. Plaintiff's motion for summary judgment [Record No. 61] is DENIED. Signed by Judge Danny C. Reeves on 9/22/2015. (MRS)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
(at London)
K. PETROLEUM, INC.,
Plaintiff,
V.
PROPERTY TAX MAP NUMBER 7
PARCEL 12, KNOX COUNTY,
KENTUCKY, et al.,
Defendants.

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Civil Action No. 6: 14-201-DCR

MEMORANDUM OPINION
AND ORDER

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This matter is pending for consideration of Plaintiff K. Petroleum, Inc.’s (“KPI”)
motion for summary judgment. [Record No. 61] The plaintiff has moved for judgment
granting it condemnation rights against the subject property and for an adjudication that the
amount of compensation owed to the defendants is $240.76. Specifically, K. Petroleum
argues that under K.R.S. § 416.660(1), just compensation for a temporary easement is the
fair rental value of the easement sought. In response, Defendants Jack Elliott Jr., Holly Jean
Elliott, and Marilyn Louise Elliott contend that K.R.S. § 416.560(4) is the appropriate
statutory reference for calculating compensation for a temporary easement. [Record No. 64]
They also argue that the rental value for a one-month easement is insufficient where the gas
line for which the easement is sought remains in place.
For the reasons outlined below, the plaintiff’s motion will be denied.

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I.
KPI is engaged in the construction, maintenance, and operation of gas pipelines.
[Record No. 29, ¶ 1] In September 2014, as the result of a bridge relocation project, KPI
began construction of the T-632 gas transmission pipeline over property owned by
Defendants Jack Elliott, Jr., Marilyn Louise Elliott, and Holly Jean Elliott, located in Knox
County, Kentucky. KPI hired Mountain Ridge, LLC, to place the pipeline. [Record No. 363, p. 4]

The plaintiff did not seek condemnation of the property prior to beginning

construction because “the pipeline was intended and believed to be constructed on property
adjacent” to the defendants’ property. [Record No. 29, ¶ 11] A KPI representative and a
state inspector on the project informed the employees of Mountain Ridge of where to place
the pipeline. [Record No. 36-3, p. 17]
On September 25, 2014, Jack Elliott, Jr. discovered that construction of the pipeline
had begun on the property. After he was told that a “house tap” would not be provided, he
demanded that Mountain Ridge’s employees leave the property and cease all construction.
[Id., pp. 17–18]

KPI attempted -- but was unable -- to reach an agreement with the

defendants to allow construction of the pipeline to continue. [Record No. 29, ¶ 15] This
delay caused the project to be put on hold for approximately three weeks and for the pipe
already placed on the defendants’ property to remain. [Record No. 36-3, p. 7]
On October 6, 2014, the plaintiff filed this condemnation action under Kentucky
Revised Statutes §§ 278.502 and 416.550 through 416.670, seeking the condemnation of
perpetual and temporary rights-of-way over the defendants’ property. [Record No. 1, ¶¶ 1,
15] Under Rule 71.1(c)(3) of the Federal Rules of Civil Procedure governing condemnation
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actions, the plaintiff named as defendants the individuals that were known to “have or claim
an interest in the property.” [Record No. 1, ¶¶ 1–2] Thereafter, KPI made arrangements to
construct the part of the T-632 pipeline at issue over another portion of land not owned by
the defendants. [Record Nos. 29, ¶ 11; 36-3, p. 7] The new pipeline was installed and
became operational on October 17, 2014. [Record No. 36-3, p. 9] The defendants filed their
Answer on November 4, 2014, which included a counterclaim for trespass and punitive
damages. [Record No. 10]
Subsequently, the defendants filed motions to dismiss asserting that the easement was
no longer necessary and that the amount-in-controversy was not sufficient to support federal
diversity jurisdiction. [Record Nos. 17, 19] On February 2, 2015, the Court denied both
motions. [Record No. 26] KPI subsequently filed an Amended Complaint setting forth
claims relevant to temporary rights-of-way over the property in question and removing the
claim for a permanent right-of-way. [Record No. 29] The defendants’ Answer, filed on
February 18, 2015, again included a counterclaim for trespass and punitive damages.
[Record No. 32]
The plaintiff responded by moving to dismiss the counterclaim, and the defendants
moved for partial summary judgment on their counterclaim and on the plaintiff’s claim for
condemnation of temporary rights-of-way. [Record Nos. 36, 46] The Court dismissed the
counterclaim for trespass and punitive damages and denied the defendants’ motion for
summary judgment regarding the temporary easement. [Record No. 54] The defendants
then moved for reconsideration [Record No. 58], which the Court denied. [Record No. 63]

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On July 30, 2015, KPI moved for summary judgment, seeking condemnation rights
and an adjudication that the compensation owed to the defendants is $240.76. [Record No.
61] The defendants filed their objections to the motion on August 20, 2015, and KPI replied
on August 24, 2015. [Record Nos. 64, 65]
II.
KPI moves for summary judgment granting it a temporary easement for the onemonth period during which it was constructing the T-632 pipeline on the defendants’
property. [Record No. 61-1, p. 2] It asserts that the proper calculation of damages is the fair
rental value of the easement from September 1, 2014, to September 25, 2014, when the
defendants ordered KPI to cease construction and leave the property. [Id.] In response, the
Elliotts argue that Kentucky law requires KPI to compensate them for the diminution in
market value caused by the placement of the pipeline on their land. [Record No. 64-1, p. 3]
They further contend that damages for a one-month easement are inappropriate because the
pipeline remains in place. [Id.] In its reply, KPI claims that it is not responsible for the
pipeline remaining on the land, as the defendants forced KPI to cease construction and vacate
the premises on September 25, 2014. [Record No. 65, pp. 12]
Summary judgment is appropriate when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
FED. R. CIV. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Chao v.
Hall Holding Co., 285 F.3d 415, 424 (6th Cir. 2002). A dispute over a material fact is not
“genuine” unless a reasonable jury could return a verdict for the nonmoving party. That is,
the determination must be “whether the evidence presents a sufficient disagreement to
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require submission to a jury or whether it is so one-sided that one party must prevail as a
matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986).
The party moving for summary judgment bears the burden of showing conclusively
that no genuine issue of material fact exists. CenTra, Inc. v. Estrin, 538 F.3d 402, 412 (6th
Cir. 2008). Once the moving party has met its burden of production, the party opposing
summary judgment must “‘do more than simply show that there is some metaphysical doubt
as to the material facts.’” Sigler v. Am. Honda Motor Co., 532 F.3d 469, 483 (6th Cir. 2008)
(quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).
Instead, the nonmoving party must present “significant probative evidence” of a genuine
dispute in order to defeat the motion for summary judgment. Chao v. Hall Holding Co., 285
F.3d 415, 424 (6th Cir. 2002). In deciding whether to grant summary judgment, the Court
views all the facts and inferences drawn from the evidence in the light most favorable to the
nonmoving party. Matsushita, 475 U.S. at 587.
Under K.R.S. § 278.502, a corporation engaged in constructing, maintaining, or
operating gas pipelines in public service may condemn lands necessary for such construction,
maintenance, or operation. “[W]here an entity possessing the power of eminent domain
prematurely enters upon the premises of the condemnee,” the measure of damages is the
same as in condemnation cases. Witbeck v. Big Rivers Rural Elec. Coop. Corp., 412 S.W.2d
265, 269 (Ky. Ct. App. 1965) (overruled on other grounds).
In condemnation cases involving a permanent easement, the measure of damages is
the diminution in market value of the land from the time of the taking. K.R.S. § 416.660(1).
Conversely, with a temporary easement, the proper measure of damages is the rental value of
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the land. Id.; Com., Dep’t of Highways v. Taylor Cnty. Bank, 394 S.W.2d 581, 582 (Ky. Ct.
App. 1965); Com., Dep’t of Highways v. Fister, 373 S.W.2s 720, 723 (Ky. Ct. App. 1963).
However, when the physical object for which the temporary easement is sought remains on
the land, the cost of removal may be the appropriate condemnation award. See Clemmer v.
Rowan Water, Inc., No. 0:04CV165HRW, 2006 WL 449266, at *5 (E.D. Ky. Feb 23, 2006).
In the present action, KPI claims that the defendants are only entitled to the fair rental
value of their land from September 1 through September 25, 2014, the period during which
KPI was originally constructing the T-632 pipeline on their land. [Record No. 61-1, p. 2] It
further argues that, because the defendants have failed to identify any evidence of the rental
value, the Court should look to KPI’s real estate appraiser’s estimate, which is $240.76. [Id.]
In contrast, the Elliotts assert that K.R.S. § 416.560(4) sets out the manner for calculating
their damages, and that compensation for a one-month taking is legally insufficient where the
pipeline remains on their land. [Record No. 64-1, p. 3] In response, KPI characterizes the
latter request as a request for a permanent easement. [Record No. 65, p. 1] Additionally,
KPI argues that it cannot be held responsible for its failure to retrieve the pipeline when the
defendants ousted KPI from the property. [Id., p. 3]
KPI is correct in asserting that K.R.S. § 416.660(1) is the appropriate provision for
calculating damages, not K.R.S. § 416.560(4). While the defendants properly point out that
the first phrase of K.R.S. § 416.660(1) refers to permanent, rather than temporary, easements,
the final phrase of that provision states that landowners receive the “fair rental value of any
temporary easements sought to be condemned.” See, e.g., Com., Dep’t of Highways v.
Taylor Cnty. Bank, 394 S.W.2d 581, 582 (Ky. Ct. App. 1965). Further, K.R.S. § 416.560(4)
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is inapplicable, as that provision’s purpose is to award damages to landowners harmed by the
condemnor’s entry onto their land for conducting “studies, surveys, tests, sounding, and
appraisals.”

Thus, the fair rental value of the subject property is the appropriate

compensation for KPI’s temporary easement.
However, KPI has failed to carry its burden with respect to the time period for which
the defendants should receive compensation. The cases it cites involve temporary easements
with a definite termination point. [See Record No. 45, pp. 12.] In fact, KPI fails to refer to
any case where a court has awarded only the rental value of the land when the physical
object for which the temporary easement was sought remains on the land.1 In Com., Dep’t of
Highways v. Nantz, the court stated, “[t]he amount awarded for temporary use requires more
detailed analysis of the evidence. The complaint sought the temporary use of the ten-foot
strip for a period of two years. From the evidence, it appears well over one year was
consumed in the improvements taken.” 421 S.W.2d 579, 580 (Ky. Ct. App. 1967). From
this, KPI might argue that the Elliotts are only entitled to compensation for the period when
KPI actually “consumed” the property by engaging in construction activities. However, the
Court does not find this distinction persuasive.

Because the pipeline may impact the

1
Com., Dep’t of Highways v. Ray, 392 S.W.2d 665, 666, 668 (Ky. Ct. App. 1965) (awarding
damages for both: (i) the nine-month temporary easement used for reconstruction of the permanent
easement and for (ii) the permanent easement, a highway); Com., Dep’t of Highways v. Taylor Cnty.
Bank, 394 S.W.2d 581, 58182 (Ky. Ct. App. 1965) (awarding damages for both: (i) the land taken and
for (ii) the temporary construction easement fifteen feet in depth, lasting six to seven months); City of
Richmond v. Gentry, 136 Ky. 319, 33839 (1910) (holding that sewer constituted permanent easement,
thus, compensation was the diminution in value of the land). [See Record No. 45, pp. 12.] See also,
Nantz, 421 S.W.2d at 580 (temporary easement used for reconstruction of highway on land taken in fee);
Com., Dep’t of Highways v. Fister, 373 S.W.2d 720, 721 (Ky. Ct. App. 1963) (awarding damages for land
taken and for temporary easement used for construction on that land).

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utilization of the defendants’ land for residential development, the fact that it remains on the
land cannot be overlooked. And even if the pipeline had no effect on the land, under
Clemmer v. Rowan Water, Inc., the defendants would still be entitled to the fair rental value
for the period of occupancy. No. 0:04CV165HRW, 2006 WL 449266, at *5 (E.D. Ky. Feb.
23, 2006) (concluding that condemnees should receive three-years’ worth of rent for the time
during which the 6-inch water line remained on their land). Therefore, the defendants are
potentially entitled to the fair rental value of their property up to this date.
In its reply to the defendants’ objections, the plaintiff argues that it cannot be held
liable for the fact that the pipeline remains on the defendants’ land, as the defendants
demanded that KPI cease construction and leave the premises on September 25, 2014.
[Record No. 65, p. 1] This argument fails for two reasons. First, KPI has failed to show that
there is no genuine dispute over the circumstances that caused KPI to leave, meaning it is
unclear whether KPI has made any attempt to remove the unused pipeline. At one point,
KPI alleges that it was “clean[ing] up the temporary use,” which the defendants described as
a re-entry to “conceal an illegal trespass.” [Record No. 45, p. 2, referring to Record No. 32,
p. 3] With this statement, KPI seems to suggest that it was attempting to remove the pipeline
when Defendant Jack Elliot, Jr. forced KPI to leave. However, in its Amended Complaint,
KPI claimed that before it completed construction of the original pipeline, the defendants
“stopped progress of the work,” which suggests that KPI was still actively in the process of
constructing, rather than removing, the pipeline. [Record No. 29, ¶ 10] Further, KPI did not
make arrangements to construct the pipeline on other property until after the defendants
refused access to their land. [Record Nos. 29, ¶ 12; 36-3, p. 7] It seems unlikely that KPI
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would have attempted to remove the pipeline before making new arrangements, especially
when it was still in the process of requesting a permanent easement on the defendants’
property for continued construction. Because the Court views the evidence in the light most
favorable to the nonmoving party, it concludes that KPI has failed to demonstrate that there
is no genuine dispute regarding the reasons the pipeline remains on the defendants’ land.2
FED. R. CIV. P. 56(a).
Next, even if the Elliotts prevented KPI from removing the pipeline, at least one case
suggests that the appropriate remedy would be the cost of removal, rather than the rental
value for the period during which KPI’s activities took place on the property. Clemmer v.
Rowan Water, Inc., involved three water lines. No. 0:04CV165HRW, 2006 WL 449266
(E.D. Ky. Feb 23, 2006). While the court in Clemmer ultimately dismissed the case because
the recovery did not satisfy diversity jurisdiction, it came to two important conclusions in
calculating the potential recovery. It reasoned that for the 8-inch water line, the plaintiffs
were entitled to the fair rental value of their property for the three years that the line occupied
their land ($3,000). Id. at 5. But for the 6-inch water line, which remained on the land, the
court reasoned that the plaintiffs were entitled to the cost of its removal ($10,000). Id.
Therefore, even if KPI is not at fault for failing to remove the pipeline, the Elliotts are not
necessarily precluded from any relief other than the fair rental value of their property from

2
If the plaintiff could demonstrate that no genuine dispute existed regarding whether it attempted
to remove the pipeline, the Court would be more apt to entertain the argument that the defendants should
not receive any relief other than the rental value of the easement, as they may have waived any argument
for an injunction to have the pipeline removed or for damages for the cost of removal.

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September 1 to September 25, 2014. The Court cannot say that KPI is entitled to judgment
as a matter of law. FED. R. CIV. P. 56(a).
III.
While the rental value of the land at issue generally constitutes just compensation for
a temporary easement, KPI has failed to demonstrate that there is no genuine issue regarding
the time period the Court should use for this calculation, as the pipeline KPI constructed
remains on the defendants’ land. Even if KPI is not to blame for its failure to remove the
pipeline, the defendants may be entitled to the cost of its removal, rather than the rental value
of the land.

Therefore, the Court will deny KPI’s motion for summary judgment.

Accordingly, it is hereby
ORDERED that the plaintiff’s motion for summary judgment [Record No. 61] is
DENIED.
This 22nd day of September, 2015.

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