Posted by: Patricia Salkin | September 17, 2013

North Carolina Appeals Court Finds Town Construction Activities Exceeded Scope of Condemned Easement and Resulted in Additional Regulatory Taking

In February 2009, the Town of Midland, North Carolina, commenced condemnation proceedings against Darryl Keith Wayne seeking to condemn a small portion of Wayne’s 90 acres, which were part of a larger 250-acre tract Wayne had assembled for purposes of creating a residential subdivision called Park Creek. Wayne and Park Creek LLC, corporate holder of the property of which Wayne was a member, had obtained a customized development plan from the County Planning and Zoning Commission in 1997 to develop residential lots in Park Creek, so long as the plan was in effect. To that end, Wayne developed and sold parcels in the first two Phases of the subdivision, but the remaining acreage was left primarily undeveloped.

The Town of Midland initially wanted to take an interest in only three acres of Wayne’s undeveloped property in order to obtain a gas pipeline and fiber optic easement. When the Town commenced this taking action, the Town did not name Park Creek LLC since, at the time, it did not intend the easement to cross any of the property held by the company. Once the Town began work on construction of the gas line, it began driving across other property and leaving construction vehicles parked on the property not included in the condemnation action. In the fall of 2011, Park Creek LLC moved to intervene in the condemnation proceeding and both Wayne and Park Creek counterclaimed, arguing the Town’s construction work on the property amounted to a temporary taking or inverse condemnation of property outside the easement area, and demanding compensation. However, the trial court denied Park Creek’s motion to intervene in the condemnation action and, while the trial court did find inverse condemnation as to some of Wayne’s tracts outside the Town’s easement area, the court also found that no unity of ownership existed between the Wayne and Park Creek tracts necessary to allow Park Creek’s claims or intervention. Here, both the Town and Wayne appealed portions of the trial court’s decision.

The Town challenged the trial court’s finding that it had temporarily taken portions of Wayne’s property and that there had been a regulatory taking of portions of Wayne’s property outside the easement area. The Town argued that its contractor’s use of Wayne’s property for construction along the easement was not an inverse taking and that the trial court had erred in allowing Wayne’s expert to testify as to the impact of construction crews’ activities on Wayne’s ability to use his land. However, the appellate court agreed with the trial court that the construction activities were necessary and essential to construction, and that the Town had failed to obtain a large enough plot of land to accommodate its construction activities, forcing it to appropriate additional portions of Wayne’s land outside the easement, sufficient to sustain an inverse takings claim. The appellate court upheld the trial court’s finding in favor of Wayne.

Further, the appellate court agreed with the trial court that, because of the Town’s construction activities, Wayne was deprived of some practical use of portions of his property, resulting in some level of regulatory taking. However, the appellate court disagreed with the trial court on the extent of the diminution in property value. Because Wayne’s property had been the subject of the 1997 customized development plan, Wayne’s rights to develop the property had vested, and because of the Town’s activities on the property, the trial court had found it was no longer feasible for Wayne to carry out the 1997 development plan in the portions of his property affected by the Town easement, and thus that the property had lost all beneficial value. The appellate court was not willing to go so far as to say that Wayne’s 87 acres impacted by the Town’s activities was rendered completely valueless, and instead charged that evidence should be presented to ascertain the actual diminution in Wayne’s property value. Lastly, the appellate court passed on the vested rights issue, simply holding that Wayne was only entitled to damages equal to his diminution in property value under state statute, not additional damages resulting from the loss of allegedly vested rights. The court remanded the diminution in value issue for a new trial.
Finally, Wayne appealed on the question of unity of ownership between himself and Park Creek LLC, of which he was a member and majority shareholder. Unity of ownership would have allowed Park Creek to join in the condemnation award because the parcels owned by Park Creek and Wayne could have been considered together as a “single tract.” However, the court held that Board of Transp. v. Martin, 249 S.E.2d 390, 395 (1978) prevented them from finding unity of ownership between “a parcel of land owned by an individual and an adjacent parcel of land owned by a corporation of which that individual is the sole or principal shareholder.” The court refused to distinguish between and LLC and a corporation for purposes of applying the the Martin case, holding that where such unity may exist between separate parcels owned by husband and wife, such unity does not exist in Wayne’s case. For those reasons, the court upheld the decision of the court below, finding against Wayne and Park Creek.

Town of Midland v. Wayne, 2013 WL 4714329 (NC App. 9/3/13).

The opinion can be accessed at:

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