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Montana-Dakota Utilities Co. v. Parkshill Farms, LLC

Supreme Court of South Dakota

December 13, 2017

MONTANA-DAKOTA UTILITIES CO. and OTTER TAIL POWER COMPANY, Plaintiffs and Appellees,
v.
PARKSHILL FARMS, LLC, REUBEN PARKS, VERA PARKS, and ORDEAN PARKS, Defendants and Appellants, and WEB WATER DEVELOPMENT ASSOCIATION, INC., KERMIT PARKS, and ESTATE OF ORION E. PARKS, Defendants.

          ARGUED OCTOBER 2, 2017

         APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT DAY COUNTY, SOUTH DAKOTA THE HONORABLE TONY L. PORTRA Judge

          JASON R. SUTTON THOMAS J. WELK of Boyce Law Firm Sioux Falls, South Dakota, Attorneys for plaintiffs and appellees

          N. BOB PESALL Flandreau, South Dakota, Attorney for defendants and appellants

          GILBERTSON, CHIEF JUSTICE

         [¶1.] Through formal condemnation proceedings, Montana-Dakota Utilities Co. and Otter Tail Power Co. (collectively, "Utilities") obtained easements to construct a powerline across four parcels belonging to Parkshill Farms LLC and Reuben, Vera, and Ordean Parks.[1] The Parkses appeal, arguing that the easements were not taken for a public use and that they are unnecessary. The Parkses also argue the circuit court abused its discretion when it rejected a jury instruction requested by the Parkses. We affirm in part, reverse in part, and remand.

         Facts and Procedural History

         [¶2.] Montana-Dakota Utilities Co. is a public utility that provides electricity to about 135, 000 customers in South Dakota, Montana, North Dakota, and Wyoming. Otter Tail Power Co. is a public utility that provides electricity to over 130, 000 customers in South Dakota, Minnesota, and North Dakota. These utility companies are members of the Midwest Independent Service Operator ("MISO"), which is a nonprofit organization created to regulate the planning, construction, and management of electricity transmission in the upper Midwest, including South Dakota. MISO, in turn, is subject to regulation and control by the Federal Energy Regulatory Commission ("FERC"). Under FERC guidelines, public utilities that participate in the interstate electricity market must provide open access to their transmission lines under nondiscriminatory rates and conditions to anyone participating in the market.

         [¶3.] In order to facilitate electricity generation and to promote reliable service in its geographic area, MISO continually evaluates the needs of its transmission system and considers projects to improve that system. At issue in this case, MISO determined a high-voltage (345 kilovolt) transmission line should be constructed between a substation located south of Big Stone City, South Dakota, and another substation located near Ellendale, North Dakota. The line is 163 miles long, with 10 miles of line located in North Dakota and the rest in South Dakota. This transmission line is commonly referred to as the "Big Stone South to Ellendale" project—or "BSSE."[2] After MISO's board of directors approved the project, the Utilities were required to construct the transmission line. After months of consideration, [3] the Utilities picked a route and began negotiating with the affected property owners. The Utilities successfully negotiated voluntary easements over 91% of the parcels along the BSSE's proposed route. The Parkses were among a few who refused settlement.

         [¶4.] Unable to secure voluntary easements from the Parkses, the Utilities filed a condemnation petition on October 28, 2015. In the petition, the Utilities sought permanent, 150-foot-wide easements "for the purpose of constructing, operating, [and] maintaining an overhead electric transmission line up to but not exceeding 345kV over, under and across" the Parkses' properties. The proposed easements included the right to

construct, operate, maintain, use, upgrade, build, rebuild, relocate, or remove an electric line facility with one or more circuits, with all towers, structures, poles, foundations, crossarms, cables, wires, anchors, guys, supports, counterpoises, fixtures and equipment related to said electric line facility, together with communication equipment relating to the operation of such electric line facility . . . through, over, under and across [the Parkses' property.]

         The circuit court held a hearing on April 5, 2016, to determine the Utilities' right to take the easements. The Parkses challenged both the scope and the duration of the proposed easements. The court approved the petition, and on January 25 and 26, 2017, the case proceeded to a jury trial to determine the amount of compensation due for the easements.

         [¶5.] At trial, the Parkses' real-estate appraiser testified the market value of their properties would diminish by $840, 000 as a result of the proposed easements. The Utilities' real-estate appraiser valued the easements at only $73, 097. Although the easements included the right to construct a number of supporting structures and features, see supra ¶ 4, the Utilities' witnesses testified that it was extremely unlikely the Utilities would exercise these additional rights. In response, the Parkses requested a jury instruction that would have required the jury to "consider all damages, present and prospective, that will accrue reasonably from the taking of the easement, and in so doing must consider the most injurious use of the property reasonably possible under the easement." The court rejected the requested instruction. The jury ultimately awarded $95, 046 to the Parkses and the other landowners.

         [¶6.] The Parkses appeal, raising the following issues:

1. Whether the easements were taken for a public use.
2. Whether the easements were necessary.
3. Whether the circuit court abused its discretion by refusing the Parkses' requested jury instruction.

         Analysis and Decision

         [¶7.] The power to take privately owned property and put it to public use is "an inherent right vested in a sovereign state as a necessary attribute thereof." Darnall v. State, 79 S.D. 59, 63, 108 N.W.2d 201, 203 (1961). In South Dakota, the Legislature has delegated this power of eminent domain to "[a]ny corporation organized under [SDCL] chapter 49-33[, ]" SDCL 49-34-4, which includes electric utilities. When such a public utility seeks to invoke its delegated power, it must show:

(1) [t]hat [it] is within the class to whom the power has been delegated[, ] (2) [t]hat all conditions precedent have been complied with[, ] (3) [t]hat the purpose for which the property is to be taken is one of the purposes enumerated in the statute[, ] (4)[t]hat the property is to be taken for a public use[, and] (5)[t]hat the particular property sought to be taken is necessary to the accomplishment of the public purpose intended.

Ill. Cent. R.R. Co. v. E. Sioux Falls Quarry Co., 33 S.D. 63, 71, 144 N.W. 724, 726 (1913) (emphasis omitted). The Parkses do not dispute the Utilities have met their burden in regard to the first three elements. Instead, this case ...


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