Opinion ID: 2804699
Heading Depth: 3
Heading Rank: 2

Heading: Amended Complaint and Disbursement of Funds

Text: The court referred ODOT’s condemnation proceeding to a magistrate judge, who appointed three commissioners to estimate the just compensation for the taking. Before the commissioners issued their report, ODOT amended its complaint to take the full 5.16 acres, based on Crow’s representation that it would be physically and functionally impossible for it to operate a car dealership on the remaining acreage if ODOT only took 1.88 acres. The commissioners estimated the just compensation for the full 5.16 acre parcel at $1,856,506.42. In early March 2010, ODOT deposited that sum with the court. Crow, Arvest, the SBA, and ODOT each filed a timely demand for a jury trial on the issue of damages. While the pre-trial proceedings were pending, Crow asked the court to disburse the funds on deposit. As no party objected, on March 29, 2010, the court ordered the deposited funds to be disbursed as follows: $1,259,443.70 to Crow, $468,040.27 to Arvest, and $129,022.45 to the SBA. The court’s order made explicit, however, that “[n]either the deposit previously made, nor the disbursement ordered herein, shall constitute a waiver of any parties’ right to demand a jury trial or right to contest the amount of just compensation for the subject property.” Aplt. App. at 102. In April 2010, Arvest released its mortgage lien on the Crow property in response to a letter from Crow’s attorneys demanding it do so. SBA did not release its mortgage lien. -4- C. Second Amended Complaint and Return of Disbursed Funds In December 2010, ODOT filed a second amended complaint, reducing the amount of land being taken to the original 1.88 acres, having determined Crow could operate its dealership if ODOT acquired only 1.88 acres. The parties consented to the filing, and pursuant to court order the commissioners issued a second report valuing the 1.88 acre parcel at $592,766.00. ODOT then moved for return of the excess disbursed funds, namely, the $1,263,740 difference between the commissioners’ valuation of the 5.16 acre parcel and the 1.88 acre parcel. Crow, Arvest, and the SBA objected, arguing in part that any return was premature in light of the pending jury trial, which would make the final damage award. Arvest and the SBA also argued they should not be required to return the excess funds because their liens would not be fully satisfied by the $592,766.00 valuation. Arvest did not inform the court it had released its lien. Following a hearing, the magistrate judge granted ODOT’s motion in April 2012. He ruled there had been two distinct takings under Oklahoma law during the condemnation proceeding: (1) the taking of the 5.16 acre parcel, effective when the funds were deposited with the court, but which terminated when the parties consented to ODOT’s second amended complaint, and (2) the taking of the 1.88 acre parcel, which was effective when the commissioners filed the second valuation report because ODOT had already paid the just compensation monies into the court. Because the parties had consented to ODOT reducing its condemnation to 1.88 acres, the magistrate judge concluded it would violate Oklahoma’s constitution and -5- condemnation laws to allow Crow, Arvest and the SBA to retain use of the funds disbursed based on a condemnation of 5.16 acres. On April 26, 2012, the magistrate judge ordered Crow, Arvest, and the SBA to return all of the disbursed funds so as to (1) repay directly to ODOT each parties’ proportionate share of the $1,263,740 excess funds and (2) to re-deposit with the court all of the remaining $592,766 pending trial.1 Stating, as it turns out incorrectly regarding Arvest, that neither Arvest or the SBA had released its lien, the magistrate judge required the remaining funds be re-deposited for later determination of the parties’ relative priorities because the $592,766 valuation was likely to be insufficient to fully satisfy both liens. Aplt. App. at 282. Arvest appealed the magistrate judge’s order to the district court, but still did not disclose it had released its lien. The district court affirmed the order. Arvest and the SBA returned their excess funds to ODOT and re-deposited the remaining funds with the court. Crow, however, never returned or re-deposited any of the funds it had received. D. Final Compensation Award and Disbursement of Funds In September 2012, ODOT informed the court a title search revealed Arvest had released its lien in April 2010, and Crow had encumbered the property to Security Bank. Thereafter, based on the parties’ stipulation, the district court entered 1 Thus, Crow was ordered to repay ODOT $857,314.52 and deposit $402,129.18 with the district court; Arvest was ordered to repay ODOT $318,599.17 and deposit $149,441.10 with the court; and the SBA was ordered to repay ODOT $87,826.73 and deposit $41,195.72 with the court. -6- an Agreed Partial Journal Entry of Judgment in December 2012, establishing a final just compensation award of $559,443.70 for the 1.88 acre parcel, granting ODOT a mortgage on Crow’s entire property, and ruling disbursement of the funds on deposit would be determined by subsequent court order. Arvest, ODOT, and the SBA each sought the full amount of the $190,636.81 on deposit with the court. ODOT argued it should receive all the money because Crow’s failure to return the disbursed funds meant it had paid more than the just compensation for the 1.88 acres. The SBA asserted it had first priority on the funds because Arvest had released its lien. Arvest countered that it should be recognized as the equitable holder of a first priority lien, arguing it had been obligated by Okla. Stat. tit. 46, § 15(A) to release its lien when the money was disbursed, and would not have released its lien had it known ODOT would later amend its complaint. The magistrate judge issued a report and recommendation (R&R) rejecting ODOT’s argument, concluding ODOT’s proper remedy was to maintain a suit against Crow to recover the excess monies. The magistrate judge concluded that Arvest’s release of its mortgage lien eliminated its first priority status, and that the SBA was entitled to all the funds on deposit as the first priority lien holder. The district court adopted the R&R on July 28, 2014, and ordered all of the funds be paid to the SBA. Arvest appeals. -7-