NCDOT took their property; Supreme Court must decide how taxpayers should pay for it
More than three years ago, the N.C. Supreme Court ruled that a state law that allowed the Department of Transportation to reserve land for future highways without actually buying it was unconstitutional.
On Monday, attorneys for property owners and NCDOT were back before the Supreme Court in a case that could determine how — and how much — hundreds of owners affected by the Map Act will be compensated by taxpayers.
The case involves a Cumberland County couple whose home was subject to the Map Act in late October 1992. Sarah and Ted Chappell lived in the path of a loop highway that the state planned to build around Fayetteville, and the law restricted them from subdividing or developing their property until the state was ready to buy it.
The Supreme Court ruled in 2016 that the Map Act amounted to a taking of property rights by eminent domain, but said determining how much property owners should be compensated must be made “on an individual, property-by-property basis.”
In the case of the Chappells, a jury ruled that their property had lost all of its market value when NCDOT reserved it for the highway. The jury agreed with the testimony of an appraiser for the couple that the value of the lost property was $143,386.
Then the court added interest, compounded annually, of 8%, coming to nearly $831,000. Including attorney’s fees, expenses and reimbursement for property taxes, the total award came to $1.75 million.
That figure is too high, said Alexander Peters, chief deputy attorney general, because the court ignored details about the Supreme Court’s Map Act decision and other rulings on how damages should be calculated.
“We agree completely that when a taking has happened, the property owner is entitled to just compensation,” Peters told the justices. “But it also must be just to the public that is paying for the property. And that, through its errors, the court did not allow to happen here.”
Couple remained in the house
For starters, Peters said, the jury was instructed to compensate the Chappells as if the highway were already built and the couple had lost all use of their property. In fact, Peters said, the couple continued to live in their home for another 25 years.
“The plaintiffs in this case retained full possessory rights,” he said, “including the rights of exclusion, to exclude anyone from their property, including the Department of Transportation.”
Justice Samuel Ervin IV asked Peters about the part of the court’s Map Act ruling that says owners must be compensated based on the market value of their property before and after it was taken under the act. Appraisers and others who testified in the Chappell case said none of the other properties subject to the Map Act for the Fayetteville loop road had sold, meaning there was essentially no market for a house that would be demolished for a highway.
“How do you have a fair market value when there’s no market?” Ervin asked Peters.
Peters acknowledged that comparable sales are a common way to determine a home’s market value, but said “there can be more to it than that.” He said the right to continue living on the property had value, and said it’s possible the couple could have found a buyer willing to use it as a rental property, knowing NCDOT would eventually take it.
“That could be a value to that hypothetical willing buyer,” he said. “The court here said, ‘No, you’ve got to consider that the highway has been built,’ which is not the case. The highway has not been built.”
Peters said the Map Act restrictions were akin to an easement that limits what the Chappells could do with their property without taking it completely. He also noted that the law included a provision that would let an owner file an application to develop or subdivide their property, giving NCDOT three years to either allow the change or buy the property.
Justice Paul Newby noted that no one had taken advantage of that provision.
“What value can you put on that?” Newby asked Peters. “How does that add to the value of the property if from a practical standpoint no one takes advantage of it?”
“It adds to the value of the property because it removes the restriction,” Peters replied.
Market value is the measure
The Chappells’ attorney, Neil Yarborough, began by referring to the Supreme Court’s finding that the Map Act restricted owners’ “fundamental rights to improve, develop, and subdivide their property for an unlimited period of time” and that those restrictions amounted to a taking of basic property rights by eminent domain. The court said then compensation should be based on the change in the property’s market value.
Justice Ervin asked Yarborough why it made sense to tell the jury to treat the property as if the highway had been built when it hadn’t. Yarborough replied the jury would have reached the same conclusion if it had simply been told that the highway would be built through the property at some point in the future, because in either case the market value was essentially reduced to zero.
Ervin then asked if the fact that the Chappells continued to live in their home did not add some value to the property.
Not when it comes to determining compensation for the taking, Yarborough replied. As the Supreme Court ruled earlier, that should be based on market value, and the evidence presented in the Chappells’ case is that their property had none.
“How would anyone want to live in a house, how would anyone feel comfortable living in a house, that they know one day — maybe tomorrow, maybe 26 days from now, maybe two years from now — somebody’s going to build a road,” Yarborough said. “What do you do? How do you improve it? How do you get that sense of home?
“Secondly, who in the world will buy it? You’re trapped.”
The court gave no indication of when it might issue a ruling in the case.
This story was originally published December 9, 2019 at 5:50 PM.
