Chappell v. N.C. Dep't of Transp.

• Decision Date: 01 May 2020
• Docket Number: No. 51PA19,51PA19
• Parties: Ted P. CHAPPELL and Sarah Chappell v. NORTH CAROLINA DEPARTMENT OF TRANSPORTATION
• Court: North Carolina Supreme Court

374 N.C. 273

841 S.E.2d 513

Ted P. CHAPPELL and Sarah Chappell

v.NORTH CAROLINA DEPARTMENT OF TRANSPORTATION

No. 51PA19

Supreme Court of North Carolina.

Filed May 1, 2020

Yarborough, Winters & Neville, P.A., by Garris Neil Yarborough, Fayetteville, and H. Addison Winters ; and Hendrick, Bryant, Nerhood, Sanders & Otis, LLP, Winston-Salem, by Matthew Bryant and T. Paul Hendrick, for plaintiff-appellees.

Cranfill, Sumner & Hartzog, Raleigh, by George B. Autry Jr., Stephanie Hutchins Autry, and Jeremy P. Hopkins, for amicus curiae Owners’ Counsel of America.

Shiloh Daum, Winston-Salem, and B. Joan Davis, Raleigh, for amicus curiae North Carolina Advocates for Justice.

Joshua H. Stein, Attorney General by James M. Stanley, Alexandra Hightower, and William A. Smith, Assistant Attorneys General; Teague, Campbell Dennis & Gorham, Raleigh, by Jacob H. Wellman and Matthew W. Skidmore ; and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP by Steven A. Sartorio and William H. Moss, Raleigh, for the defendant-appellant.

EARLS, Justice.

Ted and Sarah Chappell first moved to the Raeford Road property in Fayetteville that is at issue in this case in 1962, living there as tenants and raising their family. In 1985, they purchased a house on the property and approximately 2.92 acres of land. Two years later, the North Carolina General Assembly adopted the Roadway Corridor Official Map Act, Act of Aug. 7, 1987, ch. 747, sec. 19, 1987 N.C. Sess. Laws 1520, 1538–43, [hereinafter Map Act] (codified as amended N.C.G.S. §§ 136-44.50 –44.54 (2017)). In 1992 and 2006, various portions of the Chappells’ property were designated as within a roadway corridor pursuant to that statute. On 5 December 2014, the Chappells filed an inverse condemnation complaint against the North Carolina Department of Transportation (hereinafter NCDOT) seeking compensation for the taking of their property caused by NCDOT's recording of a Roadway Corridor Official Map that encompassed part of their property. Following a trial in 2018, a final judgment was issued awarding the Chappells $137,247 for the 1992 taking and $6,139 for the 2006 taking, both with pre-judgment interest at 8% compounded annually, along with reimbursement of property taxes paid, attorney's fees, costs, disbursements, expenses, and expert witness fees.

On direct appeal, pursuant to N.C.G.S. § 7A-27(b), prior to determination by the Court of Appeals, NCDOT raises four issues alleging error by the trial court. First, NCDOT contends the trial court erroneously characterized the nature of the taking in this case as the equivalent of a fee simple taking and therefore instructed the jury to consider "the project in its completed state" as if the road already had been built when, in fact, the taking was much more limited in nature. According to NCDOT, this mischaracterization of the taking also led the trial court to make erroneous evidentiary rulings concerning what expert appraisal testimony would be excluded and what would be admitted.

Second, NCDOT argues that the trial court erred in adding the Chappells’ discounted property taxes to the jury's award of just compensation, thus misinterpreting this Court's directive in Kirby v. N.C. Dep't of Transp. , 368 N.C. 847, 786 S.E.2d 919 (2016), that a trier of fact in these cases must determine the value of the loss, taking into account "any effect of the reduced ad valorem taxes." Kirby, 368 N.C. at 856, 786 S.E.2d at 926. The third issue raised by NCDOT is that the trial court erred in its use of an equity investment strategy to base its calculation of pre-judgment interest on the value of the taking. Finally, NCDOT contends that the trial court erred when it refused to allow NCDOT to exercise its statutory quick-take rights to take the entire property on the eve of trial. NCDOT asks us to vacate the trial court's judgment and remand for a new trial and additional post-judgment proceedings.

Addressing each of these issues, we first hold that as a threshold matter, there was no error in the trial court's exercise of its discretion to proceed to trial on the Chappells’ inverse condemnation complaint notwithstanding NCDOT filing a motion for a permissive counterclaim to assert its quick-take rights on the eve of trial. Second, we hold that any error in the trial court's characterization of the taking was harmless in light of the evidence in this case. Third, on the facts of this case, the trial court's treatment of the reduced property taxes was consistent with this Court's instruction in Kirby . Finally, we reverse the portion of the trial court's order concerning the proper evaluation of the pre-judgment interest rate because it was contrary to this Court's precedents, and we remand for further proceedings to apply a pre-judgement interest rate consistent with our prior cases.

I. Facts

The parties stipulated that the Chappells owned the property at issue along Raeford Road in Cumberland County, with no known encroachments adversely impacting the property prior to the takings at issue here. Between 1985 and 1992, the Chappells put a new roof on the home, remodeled the bathrooms, updated the wiring, and dug a well. On 29 October 1992, in furtherance of a project to build the Fayetteville Outer Loop, NCDOT recorded a Roadway Corridor Official Map pursuant to the Map Act with the Cumberland County Register of Deeds, which covered approximately .58 acres of plaintiffs’ property. (Hereinafter the 1992 Map). Although this was only roughly twenty percent of the property's total land area, the 1992 Map showed the right of way line of the road going through the middle of the Chappells’ house, a two-story, single-family home. On 6 June 2006, a second map was filed by defendant, expanding the area of plaintiffs’ property covered by the corridor by an approximately 1.67 additional acres. (Hereinafter the 2006 Map).

Pursuant to the Map Act, property owners were prevented from developing or subdividing land within the protected corridor without approval from NCDOT. See N.C.G.S. §§ 136-44.51 –44.53 (2017). See also, Kirby, 368 N.C. at 849–50, 786 S.E.2d at 921–22 (describing in detail the Map Act's restrictions, variances, and advance acquisition provisions). However, the Map Act did not permit NCDOT to physically enter or otherwise alter land or buildings in the proposed highway corridor. Landowners, including the Chappells, continued to have the right to use their property in any way that did not require a building permit or subdivision plat, and could sell or otherwise transfer rights to the property subject to the Map Act restrictions. They retained the right to lease or rent the property to others. The Chappells continued to live on their property until 2016.

The Chappells’ expert appraiser testified at trial that the market value of their property in 1992, immediately before the Map Act taking, was $144,888, and the market value immediately after the taking was $7,641. In 2006, the market value of their property immediately before the second Map Act taking was $11,268, and the value immediately after the taking was $5,129. Thus, in his expert opinion, the damages suffered by the Chappells for the Map Act takings of their rights to develop their property were $137,247 in 1992 and $6,139 in 2006. Another real estate expert for the Chappells testified that there was no market for any of the properties in the 1992 corridor map area because there were plenty of alternative properties for sale in Cumberland County that were not encumbered, and prospective buyers would not "want to buy something that does not work for the purpose that its designed." Similarly, there was no market for any real estate within the corridor map that was filed on 6 June 2006.

NCDOT did not present evidence for the jury in this case. The trial court granted the Chappells’ motion in limine to exclude from evidence any expert opinion based on a variety of assumptions, such as assumptions about the duration of the Map Act restrictions or actions the Chappells could take to trigger condemnation of the property. Significantly, the trial court also excluded "[a]ny opinion on the value of the property based on the assumption that there is a market for the property in the corridor at fair market prices ..." The trial court further excluded "any evidence concerning T.B. Harris, Jr. & Associates’ after value appraisal of the Plaintiffs’ property," and denied NCDOT the ability to cross-examine the Chappells’ appraiser "as to the value of continued use, possession, [and] control of the value of the property." Having concluded that NCDOT's expert appraisers failed to comply with the definition of damages as set out in Kirby and further failed to meet the test for expert testimony under Rule 702 of the North Carolina Rules of Evidence, the trial court excluded any testimony from NCDOT's proposed expert witnesses.

Following the jury's verdict as to the amount of just compensation that the Chappells are entitled to recover for NCDOT's Map Act takings on 29 October 1992 and 6 June 2006, the trial court issued a final judgment addressing three additional issues. The trial court awarded the Chappells their attorneys’ fees, costs, disbursements, expenses, and expert witnesses fees; required NCDOT to pay all of the ad valorem taxes actually paid by the Chappells from 2002 to 2016, the years for which evidence was presented as to the taxes they paid on their property; and awarded pre-judgment interest on the values of the two takings at the compounded rate of 8% per annum.

II. NCDOT's Quick-Take Rights

We first address the ruling, made by the trial court prior to trial, denying NCDOT the right to exercise its statutory quick-take rights under N.C.G.S. § 136-104 (2019) to take title immediately to the entire property. The Chappells filed this inverse condemnation action raising constitutional claims and a declaratory judgment claim on 5 December 2014. NCDOT answered the complaint on 6 February 2015, denying...