Lee, In re
| Citation | 354 S.E.2d 759,85 N.C.App. 302 |
| Decision Date | 21 April 1987 |
| Docket Number | No. 8611SC461,8611SC461 |
| Court | Court of Appeal of North Carolina (US) |
| Parties | In re Proceedings for the Condemnation of a Fee Simple Interest In Land Owned by R.D. LEE, Rachel Lee, W.R. Sorrell, Charles B. Lee, Margaret G. Lee, William D. Lee, Ann McLeod Lee, Johnnie G. Lee, Sherry W. Lee, Hazel F. Young, Isabella McKay Young, Becker Sand and Gravel Company, Inc., Dunn Production Credit Association, Edgar R. Bain, Trustee, and Mrs. Carol P. Parker, Executrix of the Estate of E.A. Parker. |
Bain and Marshall by Edgar R. Bain and Phillip A. Fusco, Lillington, for petitioner-appellee.
Johnson and Johnson, P.A. by W.A. Johnson, Lillington, for respondents-appellants.
Respondents assign as error the denial of their motion for a directed verdict and the denial of their post-trial motions for judgment n.o.v. and a new trial. Respondents also contend that the trial court erred in admitting certain expert testimony for the petitioner and in failing to instruct the jury on the proper measure of damages to be applied.
Respondents first argue that petitioner had no compensable interest in the condemned property. We disagree. The document executed by the Lees and petitioner in 1967 gave Becker the exclusive right to enter onto the land and to mine the land, and to remove and sell the sand and gravel thereon. The duration of this right was for a term of thirty years, renewable for an additional twenty years. The document was designated a "lease" by the parties and was recorded in the Harnett County register of deeds.
The right to enter another's land and take away minerals, or other things of value such as timber or game, is a profit a'prendre. Council v. Sanderlin, 183 N.C. 253, 111 S.E. 365 (1922). Although there is no right to sell the sand and gravel in place and the substance must be severed from the ground before title passes, see 1 Thompson on Real Property § 136 (repl. ed. 1964), such an interest is an estate in the land. Council, supra. Thus, the interest held by petitioner in the land owned by respondents is compensable under our eminent domain statutes, which define "property" as "any right, title, or interest in land ... and any other privilege or appurtenance in or to the possession, use, and enjoyment of land." G.S. § 40A-2(7). This definition is broad enough to include profits a'prendre, requiring just compensation to the owner of that interest when the right to enter upon lands is lost through condemnation. See generally 2 Nichols on Eminent Domain § 5.14(7) (3d ed. 1985).
However, determining that petitioner is an "owner" of condemned "property," as those terms are defined in the statute, is just the first step toward resolving this controversy. More difficult questions arise in determining the proper measure by which to value petitioner's interest and the proper evidence to prove the damages.
General Statute § 40A-64 mandates that the proper measure of just compensation for a taking shall be the fair market value of the property taken. The general rule in valuing the minerals on a tract of land being taken for public use is that the presence of mineable minerals on the land should be taken into consideration when appraising the fair market value of the land, but the minerals should not be valued separately then added onto the fair market value of the land as currently used. Highway Commission v. Mode, 2 N.C.App. 464, 163 S.E.2d 429 (1968). An exception to this rule is recognized where the minerals alone are taken or the rights to the minerals are held by someone other than the holder of the fee. See 4 Nichols, § 13.22(1). Here, however, the first jury has already determined the fair market value of the entire acreage taken to be $94,600. Presumably, that jury considered the value, or lack thereof, of the sand and gravel in determining the highest and best use of the land for valuation purposes.
Petitioner's interest in the property was the right to enter and remove the sand and gravel and sell the same. The consideration for the agreement under which petitioner claims an interest in the property was the royalty to be paid to the fee owners when the sand and gravel were removed and sold. Otherwise, the fee owner received no compensation. The question then is what is the proper measure of compensation to one who loses through eminent domain the right to remove the sand and gravel from the property of another when that right has never been exercised and the sand and gravel remain in the ground untouched.
Construing similar agreements, courts in some jurisdictions have concluded that the contract created a profit a'prendre and that the fair market value of the interest entitling the holder to compensation was the value of the sand and gravel in place as it lay undisturbed. See City of Phoenix v. South Bank Corp., 133 Ariz. 90, 649 P.2d 293 (1982); Bates Sand & Gravel Co., Inc. v. Commonwealth, 380 Mass. 933, 404 N.E.2d 81 (1980). In contrast, in U.S. v. 1,070 Acres of Land, 52 F.Supp. 378 (M.D.Ga.1943), applying Georgia law, the United States District Court recognized the claimant's interest in the sand, but analyzed the agreement as an executory contract and concluded that when the government took the land, performance by the fee holder was excused; therefore, claimant had nothing to be paid for in the condemnation proceeding.
The approach taken by the Arizona and Massachusetts courts is consistent with prior North Carolina cases. See Light Co. v. Horton, 249 N.C. 300, 106 S.E.2d 461 (1959); Council v. Sanderlin, supra; Highway Commission v. Mode, supra. In our opinion, the proper measure of damages is the fair market value of the sand and gravel in place. In place, unexcavated, the sand and gravel have only a potential value. While the holder of the profit a'prendre has an interest in the sand and gravel, ownership of the sand and gravel does not pass until the sand and gravel have been removed. The value of the sand and gravel in place would, therefore, be what a willing buyer would pay a willing seller, neither being under compulsion, in an arms length transaction for the contract right to quarry the sand and gravel immediately before the condemnation. Factors bearing on this determination would be (i) potential tonnage, (ii) cost of extracting the sand and gravel, (iii) amount of royalty to be paid under the agreement, (iv) cost of transporting and processing the sand and gravel and (v) an available market for sale of the sand and gravel.
In the instant case, petitioner's evidence to support its claim to the condemnation proceeds was in no way correlated to the $94,600 awarded by the first jury. For example, appellee's first witness was its vice president in charge of finance. This witness testified to the amount of sand and gravel on the condemned tract using the test hole data from the original testing of the site in 1967. Based on this data, which included at least two test holes on the condemned portion, the first witness concluded that there were 323,157 tons of recoverable gravel and 627,906 tons of mineable sand on the condemned tract and an area of approximately four acres surrounding the tract which, as a result of the airport construction, could not be mined. Multiplying these numbers by a price of ten cents per ton for sand and twenty-five cents per ton for gravel, the witness arrived at a value of the condemned tract of $143,573. From this, the witness subtracted $63,708 in royalties payable to the respondents and concluded that the condemned tract was worth $79,865 to petitioner. The witness did not, however, suggest a source for the additional $48,973 needed to make the parties whole under this theory. Another witness for petitioner, certified by the court as an expert in geology, essentially corroborated the earlier witness' testimony with figures varying only slightly. This witness had used data from test holes made in 1981, after the taking. None of these holes were on the condemned land, however.
Petitioner attempted to prove the value of the mineral rights it held by estimating the amount of mineable sand and gravel on the property condemned and multiplying those figures by a set price per unit. However, this "unit times price" method of valuing minerals in place has been soundly rejected by the courts of other jurisdictions and the federal courts with surprising uniformity. See, e.g., United States...
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CHAPTER 2 EVALUATING MINERALS IN CONDEMNATION CASES
...179.26 Acres of Land, 644 F.2d 367 (10th Cir. 1981) [29] United States v. 83.32 Acres of Land, 480 F.2d 1143 (5th Cir. 1973); In re Lee, 354 S.E.2d 759 (N.C.App. 1987) [30] Whitney Benefits, Inc. v. United States, 18 Cl.Ct. 394 (1989) [31] Foster v. United States, 2 Cl.Ct. 426 (1983) [32] S......