The good news for DOT: It won court ruling

May 21st, 2012
by Sharon McCloskey

To read this story in NC Lawyers Weekly, click here.

 this story.

The bad news? Legal scholars and judges wonder if agency’s land acquisition process is constitutional

It might have looked like a victory for the Department of Transportation last week when the Court of Appeals let the air out of the tires of a group of Forsyth County property owners looking for some recompense as a class.

The court, in Beroth Oil Co. v. N.C. Department of Transportation, told hundreds of property owners in the path of the proposed Winston-Salem Northern Beltway that if they wanted to get bought out or otherwise recover damages as a result of the DOT’s freezing of their land under the state’s Map Act, they’d have to file individual actions, not proceed as a class.

But that decision had the smell of a pyrrhic victory. The court signaled that the state’s Map Act – the law which allows the state to halt development of any property it anticipates needing for an eventual road – might well be found to be unconstitutional. Worse yet for DOT, the Map Act’s original authors now say they never anticipated that the state would tie up private property for decades as it ponders whether roads should be built.

The decision left property owners – many who’ve lived for years with the consequences of having DOT tell the world that a road would soon be rolling through their homes – stranded again and facing further delays, this time at the behest of the court system.

“We do believe that ultimately, when the question is answered whether the act is constitutional or not, it’s going to fail, as it’s failed in other states,” said Matthew Bryant, an attorney for the plaintiffs. “However that’s cold comfort to the people who are currently in the path and are surrounded by DOT properties and cannot sell their properties no matter what they try to do.”

DOT officials have steadfastly refused to address any such concerns except with bland acknowledgements that the issue is under review. Similarly, Noelle Talley, public information officer for the state Department of Justice, said the department’s attorneys were reviewing the court’s ruling and consulting with its clients.

So what’s next?

In Beroth, seven owners of parcels along the Northern Beltway sued the DOT on behalf of themselves, individually and on behalf of a class of other property owners along the Beltway, claiming that the department had in effect “taken” their properties when it placed them on a corridor map and otherwise acted as if a purchase was imminent, only to drag that process out for more than ten years.

They alleged that DOT’s conduct had “placed a cloud upon all real property in the Northern Beltway,” “rendered real properties unmarketable at fair market value and economically undevelopable” and “depressed property values and rents.”  The plaintiffs also challenged the constitutionality of the Map Act, which permits the DOT to file a map with the local register of deeds identifying property where it anticipates putting a road and, with that, protect all land along the corridor from development or any other action that might improve the value of the property.

In May 2011, Forsyth County Superior Court Judge Lindsay R. Davis Jr. denied the plaintiffs’ motion for class certification, finding that issues of fact particular to each parcel and its alleged “taking” defeated the commonality needed for a class action.  And last week, the Court of Appeals agreed.

“The question of whether NCDOT’s actions amount to a taking is a question of law common to all properties within the protected corridor,” wrote Judge Robert N. Hunter, Jr. for the unanimous panel. “[But] because each individual parcel of land is unique and because the owner’s expectations and interest in their individual properties vary, we must conclude that individual issues of fact will predominate in resolving plaintiffs’ inverse condemnation claims.”

The court also agreed that Davis correctly used an ends-means test to evaluate the plaintiffs’ taking claims. The test is typically used in instances where the government is exercising its power through regulation, as opposed to its power of eminent domain, and questions whether use of that power went too far, thus resulting in a taking.

That analysis – to which plaintiffs objected – has their counsel scratching his head.  “We do not think, and cannot understand, how the state of North Carolina is regulating property when it is buying it, making offers on it and announcing that they’re going to condemn sections of it,” Bryant said. “That is not police powers regulation. That is the exercise of their condemnation eminent domain power – which is what they’re anticipating, and planning and are doing to all these owners.”

Bryant said his office was still reviewing the decision and evaluating how to proceed.  The case has seven different property owners as plaintiffs, so the court might have to address each of their respective factual claims separately, he speculated.

Bryant also could not say how many of the hundreds of other affected landowners might commence suit.  But Jeanette Doran of the N.C. Institute for Constitutional Law thinks there will be plenty:  “We are likely to see a lot of litigation from this, and it will be very fact-specific,” she said.  She also noted that those owners who successfully prove a taking of their property by the state are entitled to recover attorneys’ fees and costs, in addition to compensation for their property.

Other aces in the hole?

The court took pains to stress that its ruling had no bearing on the plaintiffs’ constitutional claims. “Plaintiffs may still prevail in obtaining a declaration that Hardship Program and the Map Act ‘are unconstitutional and invalid exercises of legislative power as they affect a taking by NCDOT without just compensation and are unequal in their application to property owners,’ as that claim remains pending before the trial court,” Hunter wrote. “Plaintiffs do not need a class to achieve this objective. If the Map Act is declared unconstitutional to one, it is unconstitutional to all.”

The plaintiffs contend that the Map Act permits the state to freeze all development along protected road corridors for indefinite periods of time, holding down the purchase price for affected parcels until the DOT is ready to buy. And in fact, that is its stated purpose, passed in 1987 as part of an act “to control the cost of acquiring rights-of-way for the state’s highway system.”

That, says Ilya Somin of the George Mason School of Law, makes the Map Act constitutionally suspect.  “There is not a legitimate government interest to suppress development merely so it would make the property cheaper if they condemn it later,” he said.

If the Map Act is found to be unconstitutional, Doran added, then maps filed pursuant to it throughout the state are void.

Two of the co-sponsors of the 1987 bill — Rep. Jim Crawford and Sen. Martin Nesbitt — said that the bill was never intended to have the effect it now has on property owners in Forsyth County and elsewhere.

“That bill came out of the Study Commission on Highways, Bobby Hunter and I were on it,” Nesbitt said. “We were getting ready to embark on a pretty strong program then and figured it would be fair that we let people know we were coming through there, and allow (DOT) to protect it for a period of time.”

When asked about the current situation of property owners being in a protected corridor for 10, 15 years with nothing happening, Nesbitt said: “That shouldn’t happen. The intention was to allow for a short period of time, so nothing, nobody got caught moving into a zone like that.”

Crawford agreed. “There should be a time period involved. We shouldn’t be able to preserve something in perpetuity,” he said.  “We’d been growing so fast, and we needed to preserve some right-of-ways.  But it wasn’t meant to be there forever. You can’t just go in and buy rights of way that you’re speculating on, you’ve got to buy rights of way that you really are planning to build on. Maybe we need to amend the statute again.”