Decision: U.S.D. 232 vs CWD Investments

Note: An earlier version of this article erroneously referred to the school district as “Shawnee Mission School District”. In fact USD 232 is the DeSoto school district, which also encompasses some of the outer parts of Shawnee and Lenexa. The article has been corrected.

April 17th. The Kansas Supreme Court has issued its opinion in Unified School District No. 232 vs. CWD Investments, an eminent domain valuation appeal. In a unanimous decision, written by Justice Nuss, the Court determined that the District Court had not abused its discretion in summarily ruling against some of a Johnson County property developer’s damage claims, and had not abused its discretion in barring the developer from raising some others at trial. The case arose over the condemnation of 17 acres of a subdivision in western Shawnee for the purpose of building an Elementary School. The property developer argued that this cost them around two million dollars in total losses compared to the Unified School District’s valuation of $700,000. A jury awarded the developer $8000 more than the school district appraisal.

CWD Investments and Duggan Homes planned to develop a residential subdivision near 55th Street and K-7. The property was intended to be developed into 307 lots. Prior to any ground being broken, the Unified School District condemned 17 acres to build a school. The developers say this led to the loss of 57 fewer units. The land was appraised, but the developers brought an appeal of the condemnation to the Johnson County District Court. During the discovery phase of the trial, John Duggan (President of Duggan Homes and one of the owners of CWD Investments) was deposed as an expert witness to testify about the claims he was making about the true losses his companies were experiencing as a result of the condemnation.

A key point of law regarding eminent domain in Kansas is that it is well established that future profits cannot be a factor in the damages awarded to those losing their property. The Kansas Supreme Court held this in the 1970s. The District Court did however make an evidentiary ruling that information about the way this aspect of the development might affect the fair market value of the land was admissible.

Duggan Homes (the builder for the project) and CWD Investments (the property developer) sought losses for a range of things over and above the appraiser’s value of the land. These included the cost of an extension to Clear Creek Parkway, the impact of having to spread development costs for the subdivision across fewer units on the competitiveness of the homes on the market, the costs of redesigning some of the subdivision, the impact on home values of the school and sewer costs. John Duggan described these and other damages in his deposition.

During the trial phase the District Court ruled that only the items discussed by Duggan in his deposition could be brought up. Yet, Duggan’s counsel took a broader view of that ruling and introduced evidence about items which Duggan had mentioned but not quantified. This ultimately resulted in a mistrial.

Prior to the next trial, the School District sought a summary judgment to rule against some of the developer’s claims since these constituted lost profits disguised as other items. The District Court granted the summary judgment, finding that the developer had failed to establish that it had any facts to support its argument that these costs did impact fair market value. The developer on appeal argued that the ruling was premature since the evidence it intended to present at trial would show the link. The Kansas Supreme Court rejected this argument, finding that the onus was on the developer to have shown this evidence during the summary judgment motion and that since it did not the District Court acted properly in granting summary judgment to the School District.

After this, but before the new trial, the developer altered their argument and included some costs which had not been detailed in the original depositions, such as the costs of the intersection of Clear Creek Parkway and K-7. This represented approximately 1.5 million dollars of additional damages. The School District sought to have evidence supporting this argument barred since it had not been included in the depositions and thus breached the District Court’s evidentiary ruling before the mistrial. The District Court agreed with the School District and barred evidence from being presented on these matters. The Kansas Supreme Court ruled that the District Court did not abuse its discretion in doing so, citing the latitude granted District Courts to determine admissibility of evidence and the fact that Duggan, who is also a lawyer, had signed a statement that his depositions were a complete account of the damages being sought. Just because the developer now had a new theory of its case did not entitle it to alter the evidence it was to present right before a trial.

As a result, the jury’s award of $718,100 damages was affirmed.

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One Response to “Decision: U.S.D. 232 vs CWD Investments”

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