Signore, LLC D/B/A Derby Lane Mobile Home Community v. Louisville Metro Department of Public Health and Wellness

• Court: Court of Appeals of Kentucky
• Decided: May 29, 2026
• Docket: 2025-CA-0758
• Status: Unpublished

Opinion

RENDERED: MAY 29, 2026; 10:00 A.M. NOT TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals NO. 2025-CA-0758-MR

SIGNORE, LLC D/B/A DERBY LANE MOBILE HOME COMMUNITY APPELLANT

APPEAL FROM FRANKLIN CIRCUIT COURT v. HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 23-CI-01071

LOUISVILLE METRO DEPARTMENT OF PUBLIC HEALTH AND WELLNESS AND COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES APPELLEES

OPINION AFFIRMING

** ** ** ** **

BEFORE: CALDWELL, COMBS, AND EASTON, JUDGES.

EASTON, JUDGE: This is a judicial review of a Final Order of Appellee Cabinet

for Health and Family Services (Cabinet), which affirmed and adopted the

Recommended Order of Appellee Louisville Metro Department of Public Health

and Wellness (Department), revoking Appellant Derby Lane Mobile Home Community’s (Derby Lane) permit because of set back and spacing violations.

After review of the record and applicable law, we affirm.

FACTUAL AND PROCEDURAL HISTORY

According to the parties’ stipulation of facts, Derby Lane is a

residential mobile home park community in Jefferson County. It has had several

owners and operators since its inception in 1949. It was sold to Signore LLC in

January 2018. Department conducted an inspection of Derby Lane in October

2018, resulting in a failing score. Orders were issued to correct sewage exposure

at one of the units as well as to correct the entry to two other units, including Unit

19. After two follow up inspections, the issues were corrected.

A year later, the Department conducted another regular inspection

that resulted in another failing score. The Department issued orders to correct

various problems, including the removal of Unit 19 for failing to meet spacing

requirements. Following these orders, the Department initiated an administrative

conference with Derby Lane. This is the standard procedure after two failed

inspections.

At the administrative conference, Derby Lane presented case law to

support its argument about grandfathered usage with respect to the spacing

requirements. The parties were not able to come to a resolution. The Department

issued a written Notice of Enforcement stating the intent to suspend Derby Lane’s

-2- permit. Derby Lane requested a conference, pursuant to 902 KAR1 1:400,

challenging the Enforcement Notice before the Cabinet.

In December 2019, a conference was held. Ciara Warren, an

inspector with the Department, documented that the last inspection consisted of

violations including water leaks, sewage exposure, accumulation of garbage,

rubbish, or litter, skirting in disrepair, and several items holding water. She

explained that the score during the inspection was 82 and presented photos of

various mobile homes and issues within the mobile home park. Warren presented

photos of Unit 19 showing it does not meet setback requirements and was larger

than the previous mobile home placed there. The photos illustrated that the unit on

lot 19 was six feet away from its neighboring unit, and it continued to have sewage

issues.

Mr. DelSignore with Derby Lane talked about significant sums of

money spent on improvements, including renovations, blacktopping, pressure

washing, and the removal of dead trees and abandoned homes. Several residents

had been removed for breaking the law and committing acts of violent behavior

within the park. Mr. DelSignore further said that each home was owned

individually and that he only leased the lots. Derby Lane did not dispute the

Department’s findings of violations regarding sewage exposure, water leaks, and

1 Kentucky Administrative Regulations.

-3- broken windows. The dispute between the parties concerned only the removal of

Unit 19 because of the spacing concerns.

While Derby Lane acknowledges Unit 19 does not meet spacing

requirements, it maintains the park is a non-conforming use that is “grandfathered

in.” Thus, despite Section 13(3) and (4) of 902 KAR 15.010, Derby Lane believes

it is permitted to place homes according to 1949 law (which was basically none).

This allows Derby Lane to place more homes than lots available and further allows

the units to be located less than 15 feet apart. The Department argues that units

must be 15 feet apart and at least 25 feet from the front property line and 15 feet

away from any other property lines. Additionally, no greater number of units may

be allowed than there are lots available.

After the conference concluded, the Administrative Hearing Officer

submitted Cabinet Recommendations to the Department’s Director. The

Recommendations included the following: conduct a follow up inspection in 30

days; Derby Lane should substantially comply with 902 KAR 15:010 with a

passing inspection score of 85 or higher and no critical violations, including the

removal of Unit 19; if Derby Lane received a passing inspection score and

removed Unit 19, it would be placed back on routine inspection; if Derby Lane

received a score lower than 85, the recommendation was that its permit be

suspended. The Department then modified the Recommendations by adding that

-4- Unit 19 must be removed, or the permit would be suspended, and that any

additional future mobile homes must be approved by the Department and added in

accordance with the spacing requirements set forth in 902 KAR 15:010 and 815

KAR 25:090. Derby Lane timely challenged the Recommendations, but because

no final action had been taken by the Department, the Cabinet’s Hearing Officer

determined the case was not ripe for an appeal.

The Department then performed a follow up inspection. Derby Lane

received an even lower rating of 76 for the property’s current condition. The

Department found several violations for non-compliance, including the failure to

remove Unit 19, as well as the addition of four new units without Department

approval. The Inspection Report noted that Derby Lane is permitted for 60 lots,

and there were 60 mobile homes placed, but the newly added units did not meet the

setback requirements pursuant to 902 KAR 15:010. The Department then issued a

Notice of Enforcement and suspended Derby Lane’s permit effective immediately.2

It was at this point the case became ripe for appeal.

2 During oral argument, counsel informed the Court that Derby Lane is still operating regardless of the affirmed Final Order suspending its permit. We are disturbed to hear of what counsel described as ongoing “chaos” at this location. We find nothing in the record to explain this lack of enforcement. The circuit court was not asked to suspend the effect of its order, and there is no supersedeas or other process utilized to allow the court decision to be ignored. If the enforcement agencies were not serious about protecting the public by suspension of the permit, we are left to wonder why the matter persists.

-5- On appeal before the Cabinet, the parties stipulated that the only issue

in dispute was physical placement. Specifically, was Derby Lane required to place

units at least 15 feet from any other building, structure or trailer, and no closer than

25 feet from the front property line, and 15 feet from any other property line? The

Cabinet determined it was. The Cabinet Secretary adopted and incorporated by

reference the findings of the Administrative Hearing Officer and affirmed the

suspension of Derby Lane’s permit in its Final Order.

The Cabinet considered the laws and regulations concerning mobile

home communities and setback and spacing requirements dating back to 1954.

These regulations contained no “grandfather clause.” As a result, the Cabinet

determined that all mobile home communities are required to follow the

regulations. In addition, the Cabinet considered the current regulations and found

that they do contain a grandfather clause, which allows mobile home communities

to continue operating when they do not meet some requirements, but only if two

conditions are met: (1) the community can be maintained in a safe and sanitary

manner, and (2) it does not present a public health nuisance. The Cabinet further

found that, under the current regulations, if a mobile home is removed it must be

replaced by a home of the same size or otherwise preserve the setback and spacing

requirements in effect.

-6- The Cabinet determined the current grandfather clause did not allow

for unfettered operation, and that a community grandfathered in by the current

regulation must still be deemed capable of being maintained in a safe and sanitary

manner. The Department deemed the set back and spacing at Derby Lane was

unsafe.

The Cabinet affirmed the Department’s suspension of Derby Lane’s

mobile home community permit. The Cabinet confirmed that, under both the

current and the 1954 regulations, Derby Lane was required to comply with the

spacing requirements as they have existed since 1954. Derby Lane then sought

judicial review on grounds that the Final Order was not supported by any evidence,

failed to apply the correct applicable law, and violated Derby Lane’s constitutional

rights.

The parties filed Motions for Summary Judgment for which the trial

court heard oral argument. The trial court granted the motions in favor of both the

Department and the Cabinet, thereby affirming the Final Order. The trial court

rejected each of Derby Lane’s challenges. This appeal followed. All issues have

been properly preserved and the briefs are compliant with the Rules of Appellate

Procedure.

-7- STANDARD OF REVIEW

“As an appellate court, we stand in the shoes of the circuit court and

review the [agency’s] decision for arbitrariness.” Martin County Home Health

Care v. Cabinet for Health and Family Servs., 214 S.W.3d 324, 326 (Ky. App.

2007) (citations omitted). “The three-part test for determining the arbitrariness of

an administrative agency decision concerns whether the agency’s action was

within the scope of its granted powers, whether the agency provided procedural

due process, and whether the decision was supported by substantial evidence . . . .

If the decision of the administrative agency fails to meet any of these standards, it

must be considered to be arbitrary.” Allen v. Kentucky Horse Racing Authority, 136

S.W.3d 54, 59 (Ky. App. 2004) (internal quotation marks and citations omitted).

If the findings of fact of an administrative agency are supported by substantial evidence of probative value, then they are binding on the reviewing court. The agency’s findings must be upheld if based on substantial evidence even though there exists evidence to the contrary in the record. Substantial evidence is defined as evidence of substance and relevant consequence having the fitness to induce conviction in the minds of reasonable [persons]. If the administrative agency decision was not supported by substantial evidence, then it was arbitrary or clearly erroneous. If there was substantial evidence to support the agency’s decision, it cannot be said to be arbitrary. Furthermore, an [agency] is given great latitude in evaluating the evidence and the credibility of the witnesses appearing before it.

Id.

-8- The interpretation and construction of statutes and regulations are

questions of law that this Court reviews de novo. Steel Creations By and Through

KESA, The Ky. Workers’ Comp. Fund v. Injured Workers Pharmacy, 532 S.W.3d

145, 153 (Ky. 2017) (citing Saint Joseph Hosp. v. Frye, 415 S.W.3d 631, 632 (Ky.

2013)).

ANALYSIS

Derby Lane raises the following issues on appeal: the trial court gave

too much deference to agency conclusions; the trial court incorrectly applied the

law; the Final Order was arbitrary and not supported by substantial evidence; and

the actions of the Department and the Cabinet constituted an unconstitutional

“taking” under the 5th and 14th Amendments of the United States Constitution as

well as under the Kentucky Constitution. We reject each of these arguments.

As a preliminary matter, Derby Lane states that its challenge of the

trial court’s deference to agency interpretations was preserved in the record in its

Counter Motion for Summary Judgment and Response in Opposition to the

Motions for Summary Judgment. The Cabinet responds that this document fails to

mention the trial court’s application of the rule that agencies are entitled to

deference in interpreting their own statutes and regulations. Thus, the Cabinet

contends there is no basis for this Court to review the appropriateness of the trial

court’s use of the deference standard.

-9- A review of Derby Lane’s Memorandum in Opposition to Appellees’

Motions for Summary Judgment reveals references to Kentucky case law requiring

courts to review agency interpretation and construction of statutes and regulations

de novo.3 In addition, the deference issue was raised by the Department and

discussed by the parties at oral argument4 before the trial court. This issue was

properly preserved.

I.) Standard of Review for Agency Decisions Interpreting Statutes and Regulations

At least until recently, appellate courts deferred “to an administrative

agency’s interpretation of the statutes and regulations it is charged with

implementing.” Huxol v. Daviess Cnty. Fiscal Court, 507 S.W.3d 574, 578 (Ky.

App. 2016). Such deference, often referred to as the Chevron doctrine, derived

from the United States Supreme Court decision in Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984).

The Chevron doctrine is a federal doctrine. From a federal

constitutional perspective, Chevron held that there was nothing unconstitutional in

a process that gives deference to an executive branch agency decision. But that

does not mean the states either must or cannot adopt such a policy. Kentucky did

3 Trial Record (TR) at 127. 4 Franklin Circuit Court motion hearing, March 03, 2025, Video Record (VR) at 10:00:05- 10:00:56.

-10- adopt such a policy. The Kentucky Supreme Court has stated that when it is in the

“form of an adopted regulation or formal adjudication,” Kentucky courts “review

an agency’s interpretation of a statute it is charged with implementing” under the

Chevron doctrine. Metzinger v. Kentucky Retirement Systems, 299 S.W.3d 541,

545 (Ky. 2009) (citation omitted).

Nearly 40 years after Chevron was decided, the United States

Supreme Court overruled it in Loper Bright Enterprises v. Raimondo, 603 U.S. 369

(2024). While the Chevron deference doctrine is no longer recognized on the

federal level, the Kentucky Supreme Court has yet to determine if courts in the

Commonwealth will reject Chevron deference as a matter of state law.

Recently, the Kentucky General Assembly determined that courts

cannot follow Chevron. Immediately following the trial court’s May 2025

decision in this case, the legislature statutorily eliminated the Chevron deference

policy by passage of Senate Bill 84. 2025 Ky. Acts Ch. 112 (SB 84) (eff. Jun. 27,

2025) (“An Act relating to judicial review of state agency action.”). The

codification of this Bill is contained in KRS5 13A.247, which provides:

Interpretation of law by administrative body not entitled deference from reviewing court[.]

(1) An administrative body shall not interpret a statute or administrative regulation with the expectation that the

5 Kentucky Revised Statutes.

-11- interpretation of the administrative body is entitled to deference from a reviewing court.

(2) The interpretation of a statute or administrative regulation by an administrative body shall not be entitled to deference from a reviewing court.

Against this backdrop of recent changes in the law, Derby Lane

challenges the trial court’s deference to the Cabinet and the Department’s

interpretation of its own statutes and regulations. Derby Lane argues that such

deference is now inconsistent with Kentucky law.

We need not express an ultimate opinion on whether Kentucky courts

should continue to permit Chevron deference. This appeal concerns administrative

agency review. Aside from the courts’ responsibility to review any arbitrary

governmental action under Section 2 of the Kentucky Constitution, the legislative

branch can provide what means are available for judicial review of administrative

decisions. It may be an open question as to what degree the legislature has the

constitutional authority to tell the courts how to review its cases, even though only

the legislature can provide a means for judicial review of administrative decisions.

We leave those questions for another day and another case. If there was any error

in the circuit court’s giving of deference to the agency interpretation, it was

harmless as we will review the matter de novo.

Our review is first subject to the existing legislative parameters of

KRS Chapter 13B. KRS 13B.150(2) provides the framework within which courts

-12- review administrative decisions of the executive branch of government. This

section provides that, when reviewing an administrative agency’s decision, the

court shall not substitute its judgment for that of the agency as to the weight of the

evidence on questions of fact. The court may only reverse an agency’s final order

if it finds the order is:

(a) In violation of constitutional or statutory provisions;

(b) In excess of the statutory authority of the agency;

(c) Without support of substantial evidence on the whole record;

(d) Arbitrary, capricious, or characterized by abuse of discretion;

(e) Based on an ex parte communication which substantially prejudiced the rights of any party and likely affected the outcome of the hearing;

(f) Prejudiced by a failure of the person conducting a proceeding to be disqualified pursuant to KRS 13B.040(2); or

(g) Deficient as otherwise provided by law.

This court in Aubrey v. Office of Attorney General, 994 S.W.2d 516

(Ky. App. 1998), outlined the standard of review for administrative agency

decisions.

Where the legislature has designated an administrative agency to carry out a legislative policy by the exercise of discretionary judgment in a specialized field, the courts do not have the authority to review the agency decisions

-13- de novo. Judicial review of the administrative action is confined to a determination of whether the action taken was arbitrary. So long as the agency’s decision is supported by substantial evidence of probative value, it is not arbitrary and must be accepted as binding by the appellate court. Substantial evidence is defined as evidence of substance and relevant consequence, having the fitness to induce conviction in the minds of reasonable persons. In its role as a finder of fact, an administrative agency is afforded great latitude in its evaluation of the evidence heard and the credibility of witnesses, including its findings and conclusions of fact. However, this Court is authorized to review issues of law on a de novo basis.

Id. at 518-19 (citations omitted).

KRS Chapter 13B contains no provision about deference to agency

legal interpretation. Accordingly, we will determine whether the Final Order in

this case was arbitrary or unsupported by substantial evidence. Following the

process authorized in KRS Chapter 13B and in light of any recent uncertainty in

the law as to deference, we will undertake a de novo review of any issues raised

regarding the Cabinet’s interpretation of the relevant statutes and regulations.

II.) The 1954 Trailer Park Statutes and Regulations

The earliest statutes and regulations relating to mobile homes were

adopted in 1954 as part of KRS Chapter 219: Hotel, Restaurant and Trailer Park

-14- Regulations (1954 Act). They are contained in KRS 219.120 to KRS 219.250 and

are titled “Trailer Parks.”6

Pursuant to KRS 219.130, “[n]o one shall operate a trailer coach park

without having first obtained a permit” from the State Department of Health as

provided for in the Act. Permit applications were required to conform with

department requirements, which may include standards, rules, and regulations.

The State Board of Health (Board) was empowered to establish standards and

requirements for mobile home communities and to promulgate regulations and

rules addressing them. Permits all expired on a yearly basis and were subject to

annual renewal.

KRS 219.140(2) concerns issuance of permits and states:

Any one operating a trailer coach park which is in operation on July 1, 1954, shall be issued a permit to operate, provided that, by January 1, 1955, the trailer coach park shall comply with all requirements of sanitation established under KRS 219.120 to 219.250 including the rules and regulations adopted therefor. However, failure to comply with the required standards within the six months period, shall result in the institution of an action for revocation or suspension of the permit.

6 Administrative Record (AR), Appellee’s Brief, Exhibit 2.

-15- The Board promulgated regulations governing location and layout of

trailers in a regulation referred to as SAN-1.7 This regulation provides in pertinent

part:

2. Location and Layout. Lots for each trailer coach shall be indicated with corner markers and shall not be less than 1000 square feet. No building, structure, or trailer shall be erected or parked in any trailer park or be located closer than 15 feet from any other building, structure or trailer and in no case closer than 25 feet from the front property line and 15 feet from any other property. No greater number of trailers shall be allowed than there are trailer coach spaces available therefor.

A.) The 1954 Act does not contain a “Grandfather Clause”

Derby Lane argues that the express language of the 1954 Act required

mobile home communities in operation on July 1, 1954, to comply with sanitation

laws to obtain its permit. Conversely, Derby Lane insists that mobile home

communities in operation prior to July 1, 1954, were not required to so comply to

obtain its permit. Derby Lane was therefore excepted from this permit requirement

via a “grandfather clause.” We disagree.

A “grandfather clause” is “a provision that creates an exemption from

the law’s effect for something that existed before the law’s effective date; specif., a

statutory or regulatory clause that exempts a class of persons or transactions

7 AR, Brief in Support of Derby Lane Mobile Home Community, Appendix 2.

-16- because of circumstances existing before the new rule or regulation takes effect.”

BLACK’S LAW DICTIONARY (12th Ed. 2024).

The purpose of a “grandfather clause” in initial regulatory legislation

is to satisfy the dictates of fairness by affording relief to previously established

enterprises. Commonwealth Air Transport v. Stuart, 196 S.W.2d 866, 869 (Ky.

1946). In varying degrees, such clauses exempt from regulation those individuals

and enterprises operating in an area prior to its regulation, and who have acquired

rights which would be adversely effected by the legislation. “Grandfather clauses”

are purposeful legislative concessions to those pioneers or established entities in an

area which have actively sought the regulatory legislation. Kentucky Bd. For

Licensing Hearing Aid Dealers v. Rallo, 549 S.W.2d 825, 827-28 (Ky. 1977).

But the express language of the 1954 Act contains no language

whatsoever that exempts mobile home communities in operation prior to July 1,

1954, from the newly established permit requirements. Absent such legislative

expression, there is no “grandfather clause.”

Derby Lane argues that, while the regulations adopted in KRS

Chapter 219 regarding water supply, garbage, sewage and waste disposal relate to

“requirements of sanitation,” provisions relating to mobile home location and

layout (set back and spacing requirements) do not. Derby Lane insists that set back

and spacing requirements are unrelated to the “requirements of sanitation”

-17- referenced in the Act. So, Derby Lane thinks it was grandfathered in under the

1954 Act without regard to the set back or spacing provisions, provided Derby

Lane complies with the “requirements of sanitation.”

The fact that Derby Lane has continuously operated from July 1, 1954,

through the present indicates that it has previously followed all such requirements

sufficiently for seventy years. Still, Derby Lane challenges the fact that neither the

Administrative Hearing Officer, the Cabinet, nor the trial court attempted to

analyze the application of “requirements of sanitation” referenced in KRS

219.140(2). But such an academic debate and detailed analysis about this is

unnecessary considering the clear and unequivocal language of the applicable

regulation, SAN-1, which regulates the layout and location of mobile home units.

KRS 219.140(2) requires mobile home communities to comply not

only with “requirements of sanitation” but also with “rules and regulations adopted

therefor.” SAN-1 is a regulation adopted by the Board as part of the Act and

clearly forbids the set back and spacing of units observed at Derby Lane by the

Department inspector. It is not difficult to see the connection between spacing and

sanitation regulation. Larger homes with the capacity for more people closer

together logically will present more refuse and other sanitation concerns.

We independently agree with the reasoning of the Cabinet that it is

nonsensical for the Department to turn a blind eye to a mobile home community

-18- and allow it to operate carte blanche with essentially no regard for safety and

sanitation at all. The requirements specified in the 1954 Act and regulations

promulgated thereto represent the bare minimum of compliance standards for

Derby Lane, and there is no express legislative exemption relieving Derby Lane

from such compliance.

B.) Current regulations also prohibit the location of Unit 19 and other replacement units

Even if a “grandfather clause” existed which excused Derby Lane’s

compliance with the 1954 Act and SAN-1, current regulations prohibit the spacing

and set back locations of Unit 19 and the four additional units added to the

community while this case was pending.

The unit located at lot 19 is not the original unit. It is a replacement

unit, larger in size than the original, and located only six feet from its neighboring

unit. Derby Lane has also added four additional units, which were discovered by

the Department at its April 2022 inspection. Unit 19 and the additional

replacement units do not meet spacing and set back provisions governed by 902

KAR 15:010, Section 13(3) and (4). This section provides as follows:

(3) A manufactured or mobile home community with a valid operating permit, constructed on or before January 1, 1956, shall be eligible for a permit to continue operation if:

-19- (a) The community does not meet the design and construction requirements of this administrative regulation; but

(b) 1. Community facilities are capable of being maintained in a safe and sanitary manner, in compliance with this administrative regulation; and

2. The community does not present a public health nuisance.

(4) A manufactured or mobile home currently in place at a community shall be allowed to continue to be situated on that lot. If the home is removed, it shall be replaced only by a home:

(a) The same size as the home being removed; or

(b) That preserves the set back and spacing requirements in effect at the time the community was constructed. A setback from an interior street shall be the maximum achievable for the replacement home.

First, the grandfather clause relates specifically under Subsection (3) governing

generally “design and construction requirements.” But Subsection (4) specifically

mandates the spacing limitations. Under this regulation, a replacement mobile

home unit must either be the same size as the pre-existing mobile home or preserve

the set back and spacing requirements. This applies to the replaced mobile home

unit located at lot 19 and the four additional replacement units. Again, there is no

-20- grandfather clause to totally excuse spacing regulations regardless of when the

park was “constructed.”

Derby Lane must also be maintained in a safe and sanitary manner

and not represent a public health nuisance. The Department deems as unsafe the

set back and spacing of these replacement units, citing as an example the

possibility of fire spreading to units located only six feet apart. Derby Lane

challenges the Department’s submission of a photograph of such a fire, although

admittedly it is not a photograph of a mobile home located at Derby Lane.

Derby Lane challenges the authenticity of this photograph, submitted

to the Administrative Hearing Officer in the Department’s Reply Brief, and argues

that the Cabinet improperly relied on this “evidence” in determining the spacing of

Unit 19 created an unsafe condition. But it does not take an expert or even specific

evidence to understand that, if mobile homes are placed too close together, then

this spacing can contribute to the spread of a fire in the community. This is not an

evidentiary issue. It is an illustration of a common sense logical approach to what

could go wrong. And common sense must not be a stranger in the house of the

law. Cantrell v. Kentucky Unemployment Ins. Commission, 450 S.W.2d 235, 237

(Ky. 1970).

-21- III.) The Cabinet’s decision was not arbitrary nor unsupported by substantial evidence

Derby Lane challenges the Cabinet’s decision as arbitrary, arguing

that other violations referenced in the Final Order are irrelevant because this case

only concerns set back issues; the Cabinet never made a finding that the spacing

and set back requirements contained in KRS 219.140(2) were a part of the

“requirements of sanitation” referenced in the statute, and there was no explanation

how Derby Lane’s failure to comply with these set back requirements was

“unsanitary.” Derby Lane also challenges the Administrative Hearing Officer’s

reliance on improper evidence submitted by the Department that Derby Lane’s

failure to comply with set back and spacing provisions created an unsafe condition

due to the possibility of a fire spreading. We disagree. The Cabinet’s Final Order

was not arbitrary; it was supported by substantial evidence.

A.) The Department’s action in suspending Derby Lane’s permit was within the scope of powers granted by KRS 219.380(2)

The Cabinet is charged with administering the statutes which govern

mobile home communities: KRS 219.310 to 219.410. The Cabinet does so

through a local health department. Pursuant to KRS 219.380(2), the Department,

after notice and an opportunity to be heard, is authorized to deny, suspend, or

revoke a permit in any case where it finds that there has been a failure to comply

with the statutes, or the administrative regulations promulgated by the secretary.

-22- SAN-1 is one such regulation promulgated by the secretary, which took effect in

1954 and was amended in 1955. This regulation specified location and set back

restrictions for mobile home communities already in operation, and for those

mobile home communities that began operation after 1954. These regulations

require that units in mobile home communities be spaced 15 feet from any other

building, structure or trailer, and no closer than 25 feet from the front property line,

and 15 feet from any other property line. There is no dispute that Derby Lane has

failed to meet these spacing requirements.

In addition, Derby Lane is also subject to location and set back

restrictions for replacement units as prescribed by 902 KAR 15:010, Section 13(3)

and (4). There is no dispute that Derby Lane has failed to comply with these set

back provisions for replacement units. As a result, the Department had the express

authority to suspend Derby Lane’s permit under KRS 219.380(2).

B.) Derby Lane was afforded due process

Derby Lane was afforded procedural due process in accordance with

KRS Chapter 13B, by participating in the Department’s administrative hearing

process (KRS 13B.050), mediation and prehearing conference (KRS 13B.070), the

Cabinet’s administrative hearing (KRS 13B.080), and by judicial review of the

Final Order (KRS 13B.140).

-23- The facts of this case are not in dispute. They were stipulated. Derby

Lane has failed to comply with the applicable set back and spacing requirements of

both the 1954 Act and 902 KAR 15:010. There is no legal authority to support

Derby Lane’s position that mobile home communities with a valid permit before

1954 do not have to follow any rules or regulations. Indeed, such a finding in this

case would lead to an absurd result. And, as correctly cited by the Franklin Circuit

Court, Kentucky courts avoid interpretations of laws that produce an absurd result.

See, e.g., Commonwealth v. Reynolds, 136 S.W.3d 442, 445 (Ky. 2004).

Derby Lane’s argument that the trial court improperly deferred to the

Department and the Cabinet’s interpretation of the relevant statutes and regulations

has been rendered moot. Under our de novo review, we reach the same conclusion

as the trial court and any possible error by the trial court’s deference is harmless.

IV.) There was no unconstitutional taking

Derby Lane argues that the suspension of its mobile home community

permit, due to the application of set back and spacing requirements, amounts to an

unconstitutional regulatory taking. Derby Lane says that when Signore LLC

acquired Derby Lane in 2018, this acquisition included Signore LLC’s investment-

backed expectations of continued operation, supported by significant sums of

money spent on improvements. Derby Lane believes that the actions of the

Department in suspending Derby Lane’s permit to operate imposes a significant

-24- and devastating effect on the economics of Signore LLC’s ownership, and further

damages the community through the elimination of living opportunities for lower

income individuals within Jefferson County.

The trial court found the permit suspension was appropriate and

further held that Derby Lane does not hold enforceable rights sufficient to support

a taking claim because it voluntarily chose to enter an area subject to governmental

control. We agree.

The “Takings Clause” of the 5th Amendment to the United States

Constitution, made applicable to the States through the 14th Amendment, provides:

[N]or shall private property be taken for public use, without just compensation.

Section 13 of the Kentucky Constitution mirrors that provision:

[N]or shall any man’s property be taken or applied to public use without the consent of his representatives, and without just compensation being previously made to him.

A party challenging governmental action as amounting to an

unconstitutional taking bears a rather hefty burden. Bobbie Preece Facility v.

Commonwealth, Dep’t of Charitable Gaming, 71 S.W.3d 99 (Ky. App. 2001).

As this Court explained in Preece, an interest which depends totally on regulatory

licensing is not a property interest that is compensable under the Takings Clause.

Id. at 104.

-25- As explained in Mitchell Arms, Inc. v. United States, 7 F.3d 212 (Fed. Cir. 1993), cert. denied, 511 U.S. 1106, 114 S. Ct. 2100, 128 L. Ed. 2d 662 (1994), an interest which depends totally on regulatory licensing is not a property interest that is compensable under the Takings Clause.

The chief and one of the most valuable characteristics of the bundle of rights commonly called “property” is “the right to sole and exclusive possession—the right to exclude strangers, or for that matter friends, but especially the Government,” Hendler v. United States, 952 F.2d 1364, 1374 (Fed. Cir. 1991) (citation omitted).

[E]nforceable rights sufficient to support a taking claim against the United States cannot arise in an area voluntarily entered into and one which, from the start, is subject to pervasive Government control. . . . The reason “enforceable rights sufficient to support a taking claim” cannot arise in such an area is that when a citizen voluntarily enters such an area, the citizen cannot be said to possess “the right to exclude. Hendler, 952 F.2d at 1374. And the reason the citizen cannot be said to possess “the right to exclude” is that the citizen is in an area subject to government control.

Mobile home communities are highly regulated. The government not

only promulgates laws governing health and safety concerns in mobile home

communities, but it also has the right to physically enter and inspect the property.

Derby Lane does not possess the right to exclude the government from entering the

Derby Lane mobile home community. Suspension of an operating permit for

failure to comply with laws governing the operation of mobile home communities

-26- simply does not trigger the right to compensation guaranteed by the Takings

Clause of the 5th Amendment of the United States Constitution, or by Section 13

of the Kentucky Constitution.

In addition, Derby Lane’s investment-backed reliance on a mobile

home community permit does not constitute “property” within the meaning of the

Takings Clause of either the United States or Kentucky Constitutions. Lost profits

are “not a proper element of compensation for land taking in condemnation

proceedings.” Siding Sales, Inc. v. Warren County Water District, 984 S.W.2d

490, 494 (Ky. App. 1998).

CONCLUSION

Finding no error in the administrative decision revoking Appellant

Derby Lane’s mobile home community permit for violations of set back and

spacing requirements under the trailer park statutes and regulations in effect since

1954, and current regulations under 902 KAR 15:010; and finding no

unconstitutional taking under the 5th Amendment to the United States Constitution

or Section 13 of the Kentucky Constitution, the Order of the Franklin Circuit Court

affirming the Final Order of Appellee Cabinet for Health and Family Services is

AFFIRMED.

ALL CONCUR.

-27- BRIEFS FOR APPELLANT: BRIEF AND ORAL ARGUMENT FOR APPELLEE CABINET: Donald L. Cox William H. Mooney Jamhal Woolridge Louisville, Kentucky Frankfort, Kentucky

ORAL ARGUMENT FOR APPELLANT: BRIEF AND ORAL ARGUMENT FOR APPELLEE DEPARTMENT: Mathew Cox Louisville, Kentucky Natalie Johnson Louisville, Kentucky

-28-