City of Sioux Falls, a
Municipality Chartered Under the
Constitution of the State of South Dakota
Plaintiff and Appellant
 v.
Douglas L. Johnson and Sherry D. Johnson
Defendants and Appellees
 
[2001 SD 108]

South Dakota Supreme Court
Appeal from the Circuit Court of
The First Judicial Circuit
Lincoln County, South Dakota
Hon. Richard Bogue, Judge

R. Shawn Tornow
Sioux Falls City Attorney's Office
Sioux Falls, South Dakota
Attorneys for plaintiff and appellant

Mark V. Meierhenry of
Danforth, Meierhenry & Meierhenry
Sioux Falls, South Dakota
Attorneys for defendants and appellees

Considered on Briefs January 10, 2001
Opinion Filed 8/15/2001

#21548

Eckrich, Circuit Judge.

[¶1.] City of Sioux Falls (City) appealed an award of prejudgment interest, attorney's fees and expert witness fees.  We reverse and remand.

FACTS

[¶2.] This appeal arises from a protracted condemnation action.  On September 27, 1995, City initiated an action to condemn property owned by Doug and Sherry Johnson (Johnsons).  City needed Johnsons' land for a public right-of-way and a storm water drainage project.  The real property included a house, garage, barn, and 9.70 acres.[1]  

[¶3.] City, by resolution adopted August 7, 1995, decided to "expeditiously" proceed to acquire real estate by eminent domain proceedings.  City commenced its suit pursuant to SDCL ch 21-35.   City subsequently availed itself of the so-called "quick-take" procedures described in SDCL 31-19-23 et seq.  On October 25, 1995, City deposited $423,000 with the clerk of courts pursuant to SDCL §§ 31-19-26 and 31-19-28.  On November 3, 1995, Johnsons acquiesced to the quick-take proceeding by waiving a hearing to contest City's necessity to take their property.  See SDCL 31-19-10.1.  On November 7, 1995, Johnsons received the funds deposited by City pursuant to SDCL 31-19-29 and by order of the trial court.

[¶4.] Johnsons remained in possession of the property.  City obtained an order of possession on July 12, 1996 that gave it the right to exclusive possession on and after August 12, 1996.  City thereafter took exclusive possession of the property.

[¶5.] On September 20, 1996, City deposited an additional $124,955.98 with the clerk of courts to pay additional compensation due Johnsons, to be determined by jury verdict and judgment thereon or settlement of the matter.  This deposit, unlike the prior deposit, made no reference to any statute.  Johnsons received this deposit September 15, 1997 pursuant to SDCL 31-19-29.  On January 31, 1997, City amended its condemnation petition, in accord with the provisions of SDCL 21-35-28, to add other defendants as record holders of interest.

[¶6.] The first trial, held August 15, 1997, resulted in a jury award of $1.2 million.  This Court reversed and remanded for new trial, holding that the trial court abused its discretion in denying City's motion for a new trial.  Johnson I, 1999 SD 16 at ¶¶8-30, 588 NW2d at 908-11.  On January 26, 2000, following retrial, the jury returned a verdict of $1.1 million.  This sum was more than 20 percent above the City's offer, thus entitling the Johnsons to costs pursuant to SDCL 21-35-23.  A partial judgment for $552,044.52 was entered February 2, 2000. 

[¶7.] The trial court subsequently awarded:

a)         Prejudgment interest at 10% from November 3, 1995 to January 28, 2000, totaling $256,493.02.

b)         Expert witness fees of $4650.00 for appraiser Deane Davenport ($2,000.00 for trial; $2650.00 for initial report).[2] 

c)                  Attorney fees of $175,000.00 plus sales tax.

STANDARD OF REVIEW

[¶8.] The question regarding the proper rate of prejudgment interest involves reconciliation between statutes and as such, is reviewed under the de novo standard.  Welsh v. Centerville Twp., 1999 SD 73, ¶7, 595 NW2d 622, 624.  Awards of fees are reviewed under an abuse of discretion standard.   Eccleston v. State Farm Mutual Auto Ins. Co., 1998 SD 116, ¶20, 587 NW2d 580, 583; Boland v. City of Rapid City, 315 NW2d 496, 503 n4 (SD 1982).

DECISION

[¶9.] The Fifth Amendment to the Federal Constitution and articles VI, § 13 and XVII, § 18 of the South Dakota Constitution prohibit the taking of private property for public use without paying just compensation.[3]   The question as to what is just compensation for private property taken for public use is a judicial, and not a legislative, question.  Monongahela Navigation Co. v. United States, 148 US 312, 327, 13 SCt 622, 626, 37 LEd 463, 468 (1893).  Nevertheless, the legislature establishes the procedure to determine just compensation.

[¶10.] "Takings" cases are not exclusively condemnation cases.  One should recognize that the term "condemnation" generically describes a variety of procedures by which a sovereign exercises its power of eminent domain or takes private property.[4]   Two such procedures established by the legislature are:  1) a municipality's power to take by non-quick-take eminent domain proceedings in which the necessity to take and the value of the property taken are determined, SDCL ch 21-35; and 2) quick-take proceeding as applicable to municipalities described both in SDCL 21-35-9 and SDCL 31-19-23 et seq.  These quick-take proceedings are not mutually exclusive.  SDCL 31-19-40. 

[¶11.] In non-quick-take condemnation cases, the municipality files a petition pursuant to the provisions of SDCL 21-35-2.  No right to possession of the property is obtained by the condemning authority until it pays the full amount of condemnation judgment and costs.  A City may dismiss the action after a just compensation verdict but before judgment is entered.  City of Aberdeen v. Lutgen, 273 NW2d 183, 185 (SD 1979).

[¶12.] "In quick-take cases, the condemning authority takes possession of the property prior to trial upon payment into court of its estimate of the value of the property taken.  The condemnee may immediately withdraw the amount of the quick-take deposit and may also recover the amount of any deficiency where the value of the property is later determined at trial to be greater than the amount initially deposited by the condemnor."  King v. State Roads Comm’n of State Highway Admin., 467 A2d 1032, 1035 (MdCtApp 1983).  A municipality may utilize the quick-take provisions of SDCL 31-19-23 "any time before final judicial determination of the rights of the parties" even if the case is initially commenced as a non-quick-take action.  This is in fact what City did and Johnsons agreed to.[5] 

[¶13.] Both parties acquiesced to a quick-take proceeding pursuant to SDCL 31-19-23.  The question now becomes whether § SDCL 31-19-33 applies to the case.  SDCL 31-19-33 requires a condemnor to pay "interest at the Category A rate of interest as established in § 54-3-16 on the amount finally awarded as the value of the property as of the date of the court deposit."  Pursuant to this statute, interest accumulates from that date to the date of payment, but interest is not allowed on money deposited into the court.  However appellees concede in their brief that the date of the taking was November 3, 1995.

[¶14.] SDCL 31-19-33 clearly applies to municipalities utilizing the quick-take procedure.  SDCL 31-19-40 provides:  "Nothing in 31-19-23 to 31-19-39, inclusive, may be construed as to impair any provisions of chapter 21-35 or §§ 31-19-1 to 31-19-22, inclusive, or §§ 9-12-1 and 9-27-1, but the proceedings herein provided for are additional and cumulative thereto."  Furthermore, SDCL 31-19-33 provides in pertinent part, "[a]fter the right to compensation has vested pursuant to 31-19-24, the condemnation action . . . shall go to trial, and just compensation shall be ascertained . . . and established by judgment.  The judgment shall include interest. . . ."  (emphasis added).

[¶15.] City and Johnsons implicitly agreed to the application of SDCL 31-19-24.[6]   If SDCL 31-19-24 applies, then SDCL 31-19-33 applies as well.  Interest should therefore be calculated at the 4.5 percent rate as set forth in SDCL 31-19-33, and 31-19-24.7   We reverse the award of prejudgment interest and remand to the trial court to calculate interest at the rate of 4.5 percent from November 3, 1995.

[¶16.] This decision does not overrule settled condemnation law in South Dakota regarding the award of prejudgment interest.8   As noted above, the legislature has prescribed various taking procedures.  The quick-take procedure utilized herein is fundamentally different than a non-quick-take condemnation.

[¶17.] In City of Aberdeen, supra, City dismissed its suit after the verdict but before a judgment entered.  The crucial fact was that City abandoned its action before any taking occurred, thus no just compensation or damages were due.  In that instance it was obvious no pre-judgment interest can or should be awarded.

[¶18.] SDCL 21-35-22 contemplates the possibility that certain condemnation cases may be abandoned before judgment.  Denial of prejudgment interest in such cases is not only fair, it makes sense.  Technical title, especially when the proceeding may be dismissed, is not the functional equivalent of interference with use or possession.  South Dakota has previously held in accord with this view.  See Hurley, 134 NW2d 782 (inverse condemnation action brought by original proceeding to this Court under the provisions of what is now SDCL ch 21-32).

[¶19.] In Hurley, we held the date of taking or damaging, was the date of substantial interference with the easement right.9   In the present case, City clearly took exclusive possession, well beyond any technical vesting of title, prior to judgment.  They commenced surveying and grading, destroying the home and

outbuildings.  City had no ability to abandon the proceeding as its actions were irrevocable and irretrievable.  The statutory scheme requires interest at 4.5 percent.  Interest should therefore be awarded from November 3, 1995 and calculated pursuant to SDCL 31-19-33.

ATTORNEY FEES

[¶20.] The Johnson I jury awarded $1.2 million.  There, the trial court made a finding that the issues involved were not difficult or complex and awarded $130,000 in attorney fees.  The Johnson II jury awarded $1.1 million.  The trial court made a finding that the issues involved were not routine and took greater skill and expertise and awarded $175,000 of the $222,600 requested by Johnsons.  There is no logical explanation; the issues and parties remain the same.  Discovery was largely completed prior to Johnson I.  Our opinion reversing that case provided parameters for all to follow.

[¶21.] In this case, Johnsons base their attorney's fee claim upon a contingent fee.  "’[W]hile such contingent fee arrangements may be perfectly valid and proper as between an attorney and his client, it does not necessarily follow that such fee is a reasonable fee to be taxed against the party taking private property for a public use, as permitted under [SDCL 21-35-23].’"  City of Sioux Falls v. Kelley, 513 NW2d 97, 111 (SD 1994) (quoting City of Bismarck v. Thom, 261 NW2d 640, 643 (ND 1977)).

[¶22.] The standards to decide reasonable attorney fees are well settled.  The interplay between contingent fee agreement and the other applicable standards is set forth in Kelley, supra.  After reviewing the record, we find ourselves unable to conduct a meaningful appellate review.  The case is therefore remanded to the trial court to determine reasonable attorney fees.

EXPERT FEES

[¶23.] Appraiser Davenport testified at the first trial but did not do so at the second trial.  Johnsons' affidavit supporting Davenport's fees for Johnson II lists $2000 of his $4650 fee as attributable to "Trial."  The request in Johnson II is identical to the request made in Johnson I.  It is difficult to justify the $2000 as attributable to "Trial" in Johnson II when Davenport did not testify.  The attorney's affidavit in support of the expert fees is sketchy and conclusory.  Nevertheless, the trial court had an opportunity to hear first-hand Mr. Davenport's qualifications and assess his work product.  We cannot say, therefore, the $2650 awarded for Mr. Davenport's initial report was an abuse of discretion.

[¶24.] Johnsons are entitled to expert fees.  That Davenport did not testify for Johnsons is not dispositive.  "It is settled law in this state that in condemnation actions an appraiser for the other party may be called upon to testify."  Rapid City v. Baron, 88 SD 693, 227 NW2d 617, 619 (1975).  SDCL 21-35-23 does not require an expert witness to testify.

[¶25.] Davenport's work product was utilized at both trials.  Whether his services, attributed to "Trial," were necessarily incurred for bringing this matter to the second trial has not been adequately considered.  On its face, $2000 of Davenport's fees are attributable to "Trial."  If those fees were incurred during the first trial, then they are not reasonable fees to be paid as a result of Johnson II unless they should be awarded in the interest of justice.  SDCL 15-17-56.  The issue is remanded to the trial court to determine whether the $2000 assigned to "Trial" was necessarily incurred in the second Johnson trial or should be awarded in the interest of justice.

[¶26.]              Johnsons raise an issue for the first time on appeal regarding an alternate method for calculating prejudgment interest.  They failed to file a notice of review and such failure waives our consideration of these issues.  Zoss v. United Building Centers, Inc., 1997 SD 93, ¶20, 566 NW2d 840, 846.

APPELLATE ATTORNEY FEES

[¶27.] Johnsons filed a separate motion for $28,656 plus tax for appellate attorney fees.  Appellate attorney fees may be granted "in actions where such fees may be allowable[.]"  SDCL 15-26A-87.3.  Johnson claims appellate attorney fees are allowable pursuant to SDCL 21-35-23.  This statute clearly contemplates that attorney fees are awarded at the trial level for trial.  The motion for appellate attorney fees is denied.

[¶28.] MILLER, Chief Justice, and AMUNDSON, KONENKAMP and GILBERTSON, Justices, concur.

[¶29.] ECKRICH, Circuit Judge, for SABERS, Justice, disqualified.