In re De Facto Condemnation

• Citation: 903 A.2d 1192
• Parties: In re DE FACTO CONDEMNATION AND TAKING OF LANDS OF WBF ASSOCIATES, L.P. BY LEHIGH-NORTHAMPTON AIRPORT AUTHORITY. C. Thomas Fuller, Intervenor. Appeal of Lehigh-Northampton Airport Authority. In re De Facto Condemnation and Taking of Lands of WBF Associates, L.P. by Lehigh-Northampton Airport Authority. C. Thomas Fuller, Intervenor. Appeal of WBF Associates, L.P. In re De Facto Condemnation and Taking of Lands of WBF Associates, L.P. by Lehigh-Northampton Airport Authority. Appeal of C. Thomas Fuller, Intervenor.
• Decision Date: 22 August 2006
• Court: United States State Supreme Court of Pennsylvania

903 A.2d 1192

In re DE FACTO CONDEMNATION AND TAKING OF LANDS OF WBF ASSOCIATES, L.P. BY LEHIGH-NORTHAMPTON AIRPORT AUTHORITY C. Thomas Fuller, Intervenor Appeal of Lehigh-Northampton Airport Authority In re De Facto Condemnation and Taking of Lands of WBF Associates, L.P. by Lehigh-Northampton Airport Authority C. Thomas Fuller, Intervenor. Appeal of WBF Associates, L.P. In re De Facto Condemnation and Taking of Lands of WBF Associates, L.P. by Lehigh-Northampton Airport Authority. Appeal of C. Thomas Fuller, Intervenor.

Supreme Court of Pennsylvania.

Argued March 8, 2005.

Decided August 22, 2006.

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Carl Robert Shultz, Washington, DC, Charles James Fonzone, Allentown, Michael D. Klein, Pittsburgh, Frances Ann Fruhwirth, Allentown, for Lehigh-Northampton Airport Authority.

Kevin T. Fogerty, Allentown, for WBF Associates, L.P.

Michael Scott Hino, Berwyn, for C. Thomas Fuller.

BEFORE: CAPPY, C.J., CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.

OPINION

Justice NEWMAN.

In these cross appeals, the Lehigh-Northampton Airport Authority (Airport Authority), appeals from an Order of the Commonwealth Court affirming in part and reversing in part an Order of the Lehigh County Court of Common Pleas (trial court). WBF Associates, L.P. (WBF) appeals from the same Order of the Commonwealth Court. C. Thomas Fuller (Fuller) cross-appeals in both instances. The subject of these appeals is the de facto taking of 632 acres belonging to WBF due to the projected expansion of the Lehigh Valley International Airport (Airport). We granted allowance of appeal to consider the damages issues raised by the parties and to examine, once again, the law of the case doctrine and the coordinate jurisdiction rule. Based on the following rationale, we affirm in part and reverse in part the Order of the Commonwealth Court.

FACTS & PROCEDURAL HISTORY

On September 27, 1990, WBF purchased a 632-acre tract of undeveloped farmland from Fuller that was located just north of the Airport. Fuller held a significant first mortgage on the property in the amount of $3,075,850.00 and later granted WBF a $300,000.00 line of credit secured by a second mortgage. WBF planned to build a planned residential development (PRD) of 1,488 residential units. Before taking title, WBF entered into a joint venture agreement with Lanid Corporation (Lanid), a New Jersey developer that had successfully constructed twelve planned residential communities at other locations. Lanid was to supply seed money and $250,000.00, at the time it entered the joint venture. WBF was obligated to raise $1,700,000.00, and then, if Lanid chose to continue the joint venture after five years, Lanid was obligated to supply approximately $1,700,000.00. By early 1994, WBF and Lanid obtained zoning changes and approvals from two of the three townships in which the property is located, and WBF spent considerable sums on development costs including retaining architects, engineers, and designers for the project.

In January of 1994, the Airport Authority publicly announced the proposed expansion of the Airport, which involved acquiring approximately 1,500 acres located north of the Airport. The 1,500 acres included the property of WBF in its entirety. Following the announcement and attendant publicity, the Airport Authority began acquiring properties within the 1,500-acre expansion area. These acquisitions also received considerable publicity. It did not seek to acquire the WBF property, but did acquire nine properties immediately adjoining the WBF property. Because of the announcement and the acquisition of properties by the Airport Authority, Lanid terminated its joint venture agreement with WBF prior to its required infusion of funds, and WBF was unable to attract new investors due to the imminent condemnation of its property. WBF, which had been financially sound prior to the announced airport expansion, could not move forward with its development project due to lack of funding. WBF subsequently defaulted on its first and second mortgages. The mortgagee, Fuller, filed a successful foreclosure action in June of 1997. In September of 1997, the property was listed for upset tax sale, but WBF was able to pay the 1995 taxes to avert the sale.

On September 30, 1996, WBF filed a Petition for Appointment of a Board of Viewers alleging a de facto taking of its property as a result of the Airport Authority's announced expansion project, and the Airport Authority filed Preliminary Objections. In lieu of a hearing, the parties submitted record papers, depositions, affidavits, discovery responses, exhibits, and agreements of counsel at oral argument. On June 15, 1998, the trial court dismissed the Preliminary Objections and granted the Petition of WBF for Appointment of a Board of Viewers. The trial judge, James Knoll Gardner, President Judge (Judge Gardner), determined that: (a) a PRD constituted the highest and best use of the property; (b) WBF had established the elements of a de facto taking; and (c) the date of the taking was September 30, 1996, the date on which WBF filed its Petition for Appointment of a Board of Viewers. (Trial Court I)

The Commonwealth Court affirmed in a published Opinion. Lehigh-Northampton Airport Auth. v. WBF Assocs., 728 A.2d 981 (Pa.Cmwlth.1999). As of the time of the Commonwealth Court's Opinion, WBF had not paid the 1996 and 1997 taxes on the property and had no funds with which to do so. This Court denied allowance of appeal on November 3, 1999. In re De Facto Condemnation & Taking of Lands of WBF Assocs., Lehigh-Northampton Airport Auth., 560 Pa. 751, 747 A.2d 372 (1999) (unpublished table decision).

On December 2, 1999, Fuller filed a Petition to Intervene in the proceedings in order to protect his interest as mortgagee. WBF filed a motion to compel payment of estimated just compensation (EJC) and, by letter dated December 22, 1999, the Airport Authority made a written offer to pay EJC in the amount of $3,150,000.00 on January 4, 2000.

In May of 2000, anticipating the scheduled view of the property by the board of viewers, Fuller filed: (a) a Motion to stay proceedings before the board of viewers pending a determination on the Motion to Intervene; and (b) a Motion for an order requiring the Airport Authority to pay the EJC to Fuller as holder of the first mortgage and the second mortgage judgment on the property. In an effort to settle this dispute, WBF and Fuller executed a Stipulation detailing the history, terms, and money due to each entity pursuant to the two mortgages between those two parties. The Airport Authority executed and signed an addendum to the Stipulation indicating that it did not object to the terms of the Stipulation. The Airport Authority then tendered a check to Fuller on November 2, 2000, for the full EJC payment of $3,150,000.00.

Prior to the hearings conducted by the board of viewers, the Airport Authority sent notices to the three individuals who had testified on the issue of the highest and best use of the property in the earlier de facto taking proceedings. The Airport Authority intended to re-depose these individuals on the highest and best use for the purpose of establishing the fair market value of the property. WBF filed for a protective order, alleging that the decision of Judge Gardner constituted the "law of the case" on the issue of the highest and best use of the property. Judge Gardner granted the protective order. Thereafter, the board of viewers conducted its hearings in August of 2001, and the Airport Authority restricted its appraisal testimony to the value of the property as a PRD.

In a supplemental proceeding, WBF sought recovery of mortgage interest and delay damages, pursuant to Sections 609 and 611 of the Eminent Domain Code, 26 P.S. §§ 1-609, 1-611. The board of viewers awarded WBF damages for the value of the property, mortgage interest, and delay damages. All three parties appealed to the trial court, requesting preliminary determinations. Due to the unavailability of Judge Gardner, Judge Carol McGinley (Judge McGinley) heard the matter.

Judge McGinley determined that: (a) the Airport Authority could present evidence at trial regarding the highest and best use of the property; (b) the Airport Authority was precluded from challenging the validity of the WBF/Fuller mortgages; (c) WBF was entitled to recover mortgage interest from September 30, 1996; (d) WBF was entitled to delay damages from September 30, 1996; (e) the Airport Authority must receive credit for payment of the EJC from November 2, 2000; and (f) WBF was entitled to recover reasonable attorney, appraisal, and engineering fees. All parties appealed.

The Commonwealth Court, in a published Opinion, In re De Facto Condemnation, 845 A.2d 967 (Pa.Cmwlth.), petition for allowance of appeal granted, 580 Pa. 708, 860 A.2d 491 (2004), affirmed in part and reversed in part. It concluded that it did not violate the "law of the case" doctrine or the coordinate jurisdiction rule for Judge McGinley to permit testimony from the Airport Authority on the highest and best use of the property during the final hearings, even though Judge Gardner had ruled differently. It opined that evidence of the highest and best use was relative to the issue of fair market value and, therefore, admissible in the damages phase. The court agreed that mortgage interest, damages, and delay damages were to be calculated from September 30, 1996. Finally, the court disagreed with the Airport Authority, which argued that it should receive credit for EJC from the date it offered to pay the EJC, December 22, 1999, instead of November 2, 2000, the date on which it actually paid the EJC. Judge Simpson offered a Concurring Opinion, commending the trial judges for their professionalism and offering comments on the parameters of preliminary determinations. Again, all parties appealed.

DISCUSSION¹

The Airport Authority concedes that...