Date: 12-23-2011

Case Style: Debra L. Miller v. Glacier Development Company, L.L.C.

Case Number: 101,097

Judge: Johnson

Court: Supreme Court of Kansas on appeal from the District Court, Wyandotte County

Plaintiff's Attorney: James D. Oliver, of Foulston Siefkin, LLP, of Overland Park, argued the cause, and Reid F. Holbrook and Judd L. Herbster, of Holbrook & Osborn P.A., of Overland Park, were with him on the briefs for appellant Dean.

Defendant's Attorney: Paul G. Schepers, of Orrick & Associates, L.L.P., of Overland Park, argued the cause, and Timothy P. Orrick, Renee M. Gurney, and Jason B. Prier, of the same firm, were on the brief for appellee.

Description: Lester M. Dean, Jr. challenges the entry of a personal judgment against him for an excess condemnation award which had been paid to Glacier Development Co., L.L.C. (Glacier), a limited liability company (LLC) of which Dean was the sole and managing member. Finding that the district court did not have jurisdiction to make the findings necessary to hold Dean personally liable for an LLC debt, we reverse.

FACTUAL AND PROCEDURAL OVERVIEW

Glacier owned certain property in Kansas City, Kansas, which the Kansas Department of Transportation (KDOT) took for highway purposes on August 13, 2003. KDOT's eminent domain petition did not individually name Dean as a defendant or allege that he personally owned any of the property. The court-appointed appraisers awarded Glacier $2.19 million as the fair market value of the property. Glacier applied to withdraw the appraisers' award, subject to the payment of certain liens and other fees. The court subsequently granted the application, and the court clerk distributed the landowner's share of the award to Glacier.

On August 29, 2003, KDOT appealed the appraisers' award. Its notice of appeal to the district court listed a number of defendants, including Glacier, but it did not identify Dean, individually, as a landowner. However, certain attorneys filed an entry of appearance which declared that they were appearing "on behalf of Defendants, Glacier Development Company, L.L.C. and Lester M. Dean, Jr." Thereafter, both parties and the district court included Dean in the case caption and referred to him as one of the landowners.

In June 2005, a jury trial was conducted, resulting in a verdict that the subject property's value was $800,000. The district court accepted the jury's valuation and opined that "[a]s a result of the verdict, [KDOT] is entitled to judgment against the Defendants in the amount of $1,390,000, the difference between the amount previously paid by Condemnor and the jury's verdict of just compensation, plus interest at the statutory rate from the date of taking until satisfied." The court's journal entry of judgment, file-stamped July 15, 2005, ordered that a judgment was awarded in favor of plaintiff KDOT "against the Defendants," without specifically stating whether Dean, as an individual, was to be jointly and severally liable with the LLC for the excess distribution of the appraisers' award.

The landowner appealed the jury verdict, continuing to utilize the modified caption that named Dean as a defendant and continuing to refer to Dean as an owner of the condemned property. However, while the appeal was pending, Glacier and Dean filed a motion in the district court, seeking either a nunc pro tunc order or relief from the district court judgment. Specifically, the motion requested that Dean's name be removed from the judgment because he did not own the subject property in his personal capacity; he was not personally named as a defendant in KDOT's petition; and he was not served with process in his personal capacity. On December 5, 2005, the district court denied the motion, finding that it could not characterize the naming of Dean as a defendant to be a clerical error or simple oversight that would be amenable to a nunc pro tunc order. Further, the district court opined that it did not have jurisdiction to address the substantive claim because the appeal had been docketed with the Clerk of the Appellate Courts, i.e., the assumption of jurisdiction by the appellate courts had terminated the district court's jurisdiction over substantive questions.

Thereafter, Dean sought to set aside or stay the enforcement of the judgment in the State of Missouri based upon the fact that he was not a party to the Kansas eminent domain proceeding. That avenue of challenge was ultimately unsuccessful. See Miller v. Dean, 289 S.W.3d 620 (Mo. App. 2009).

Back in Kansas, a divided Supreme Court affirmed the jury's valuation verdict in a plurality opinion filed July 13, 2007. Miller v. Glacier Development Co., 284 Kan. 476, 161 P.3d 730 (2007). Thereafter, Dean filed a motion for relief from judgment in the district court, asserting that he was not properly a party defendant in the eminent domain appeal. The district court denied the motion, finding that its prior order in December 2005 was res judicata on the issue. Dean's appeal of that ruling is now before us.

This opinion began its journey with then-Chief Justice Robert Davis participating in the decision and voting to affirm the imposition of personal liability upon Dean. The former Chief Justice did not have an opportunity to consider the current versions of the majority and dissenting opinions. Nevertheless, given that a majority of the court agrees with the current result, we deem it unnecessary to rehear the case with a substitute jurist. We will simply reflect that Chief Justice Davis dissents.

RES JUDICATA

The district court's denial of Dean's current challenge to its jurisdiction was based upon the doctrine of res judicata. From the beginning, all members of this court have been unanimous in finding that the district court's reliance on res judicata was erroneous.

Standard of Review

Whether the doctrine of res judicata applies in a certain situation is an issue of law over which appellate courts exercise de novo review. Rhoten v. Dickson, 290 Kan. 92, 106, 223 P.3d 786 (2010).

Analysis

"Res judicata requires a prior final judgment on the merits." State v. Flores, 283 Kan. 380, 384, 153 P.3d 506 (2007). In 2005, the district court correctly opined that it did not have jurisdiction to decide the substantive issue presented because a district court loses jurisdiction over a case when an appeal is docketed. See State v. McDaniel, 255 Kan. 756, 761, 877 P.2d 961 (1994). Obviously, if the district court was jurisdictionally precluded from ruling on the merits of an issue, it could not have entered the prior final judgment on the merits that is a prerequisite to invoking the doctrine of res judicata. Accordingly, the district court erred in finding that the doctrine of res judicata governed.

JURISDICTION

The dispositive question in this matter is whether the district court had the authority to adjudge Dean personally liable to KDOT for the amount of the appraisers' award paid out to Glacier that exceeded the compensation finally awarded on appeal. We find that it did not.

Standard of Review

Whether a judgment is void for lack of jurisdiction is a question of law over which an appellate court's review is unlimited. Harsch v. Miller, 288 Kan. 280, 286, 200 P.3d 467 (2009).

Analysis

The parties devote considerable effort arguing over whether Dean submitted to the personal jurisdiction of the district court after KDOT failed to personally name Dean as a defendant landowner in its appeal petition or to serve process on Dean in his personal capacity. However, we need not consider that debate because the absence of subject matter jurisdiction to adjudge Dean personally liable resolves this dispute.

Subject matter jurisdiction refers to the power of a court to hear and decide a particular type of action. Wichita Eagle & Beacon Publishing Co. v. Simmons, 274 Kan. 194, 205, 50 P.3d 66 (2002). Jurisdiction over subject matter is the power to decide the general question involved, and not the exercise of that power. Babcock v. City of Kansas City, 197 Kan. 610, 618, 419 P.2d 882 (1966). Moreover, subject matter jurisdiction is vested by statute, and parties cannot confer such jurisdiction upon a court by consent, waiver, or estoppel. Kingsley v. Kansas Dept. of Revenue, 288 Kan. 390, Syl. ¶ 1, 204 P.3d 562 (2009).

In Miller v. Bartle, 283 Kan. 108, 113-15, 150 P.3d 1282 (2007), this court had occasion to review the historical nature of an eminent domain action in this state, in conjunction with the statutory procedure for exercising eminent domain set forth in K.S.A. 26-501 et seq. Bartle noted that an eminent domain action is a special statutory proceeding that does not provide a forum to litigate noncompensation issues, such as the necessity and extent of the taking. 283 Kan. at 114. Moreover, Bartle quite clearly stated that "[t]he plain language of K.S.A. 2005 Supp. 26-508 limits the district court's jurisdiction in appeals from eminent domain proceedings to the issue of compensation—that is, to a determination of the fair market value of the property in question, as defined in K.S.A. 25-513(e)." 283 Kan. at 115. Moreover, "[t]he procedure for exercising eminent domain as set forth in K.S.A. 26-501 to 26-518 and K.S.A. 2008 Supp. 26-501a, and 56-501b, and amendments thereto, inclusive, shall be followed in all eminent domain proceedings." K.S.A. 2008 Supp. 26-501(a). Accordingly, the district court's authority in this case was limited to effecting the jury's determination of fair market value by ministerially applying the applicable statutory procedures.

Procedurally in this case, KDOT paid the amount of the appraisers' award to the clerk of the district court, as required by K.S.A. 2008 Supp. 26-507. Then Glacier exercised its right under K.S.A. 26-510(b), which provides: "The defendants may by order of the judge and without prejudice to their right of appeal withdraw the amount paid to the clerk of the court as their interests are determined by the appraisers' report." As required by the statute, the district judge below effected the K.S.A. 26-510(b) withdrawal through its Order of Distribution of Award, dated August 15, 2003. That order clearly did not make any provision for Dean individually, but rather it stated, in relevant part:

"NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED that the said Clerk of the Court, Civil Department, for the District Court of Wyandotte County, Kansas be, and is hereby authorized and directed to pay the law firm of Polsinelli Shalton & Welte, P.C. in trust for Glacier Development Company, L.L.C. the sum of $600,000.00 and the balance of the appraisers' award, after payment of court-appointed appraisers' fees and customary court costs and/or fees, be paid to Glacier Development Company, L.L.C., which sum represents the full amount of the Appraisers' Award deposited in the Court for the Defendant by Plaintiff on August 13, 2003."

After the jury determined that the fair market value of the property was less than the appraisers' award, K.S.A. 26-511(a) provided some guidance for the district court's subsequent ministerial duty. In relevant part, that provision states: "If the compensation finally awarded on appeal is less than the amount paid to the clerk of the court pursuant to K.S.A. 26-507, the judge shall enter judgment in favor of the plaintiff for the return of the difference, with interest."

Interestingly, the statute only speaks about the amount paid to the clerk under 26-507 rather than the amount withdrawn from the clerk under 26-510, and it is silent as to who or what entity is to be subjected to the plaintiff's judgment. Nevertheless, the provision does specifically state that the judgment in favor of the plaintiff shall be for the return of the difference. That language should be read in conjunction with K.S.A. 26-510(b). See State v. Raschke, 289 Kan. 911, 914, 219 P.3d 481 (2009) (appellate courts must consider various provisions of an act in pari materia). Together, the provisions would logically suggest that the plaintiff's judgment for the return of the money it paid into court is against the person or entity that withdrew the money pursuant to the judge's order. To construe the statutes otherwise would bring into play the determination of issues that are beyond the scope of the property's fair market value.

Here, the district court ordered that all the appraisers' award paid in by KDOT was to be distributed to Glacier or for the benefit of Glacier. When the final award turned out to be an amount less than the appraisers' award, K.S.A. 26-511(a) authorized the court to grant plaintiff a judgment against the distributee, Glacier, for the return of the difference, with interest. Dean, on the other hand, had not personally received any of the court-ordered distribution and, therefore, he had no "difference" to "return."

In order to adjudge Dean personally liable for the return of the money received by Glacier, the district court would have had to find some extraordinary reason to hold Dean personally responsible for the LLC debt. The general rule is to the contrary. K.S.A. 17-7688(a) provides:

"Except as otherwise provided by this act, the debts, obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the limited liability company, and no member or manager of a limited liability company shall be obligated personally for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of the limited liability company."

In Bartle, we reiterated that other issues, i.e., issues other than the determination of the fair market value of the condemned property such as the plaintiff's right to exercise the power of eminent domain or the necessity of the particular taking, could only be litigated in a civil action that was separate and apart from the valuation appeal in the eminent domain proceedings. 283 Kan. at 116-17. Certainly, then, the issue of whether the plaintiff can pierce the corporate veil of an LLC to hold a member/manager personally liable for an excess payment to the LLC is one of those "other issues" that exceeds the jurisdictional scope of an eminent domain appeal. Accordingly, the district court lacked jurisdiction in the eminent domain appeal to adjudge Dean personally liable for the debt of Glacier. KDOT should have sought that relief in a separate civil action.


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See: http://www.kscourts.org/Cases-and-Opinions/opinions/SupCt/2011/20111223/101097.pdf

Outcome: A judgment rendered without subject matter jurisdiction is simply void. A motion to set aside a void judgment may be made at any time, because the passage of time cannot cure the defect of a void judgment. See Barkley v. Toland, 7 Kan. App. 2d 625, 630, 646 P.2d 1124, rev. denied 231 Kan. 799 (1982). The district court should have granted Dean's motion for relief from the invalid personal judgment against him for the return of the excess appraisers' award. Accordingly, we reverse the district court and remand with directions to vacate the personal judgment against Dean.

Reversed and remanded with directions.

Plaintiff's Experts:

Defendant's Experts:

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