Summary judgment correct in eminent domain action

A trial court appropriately granted summary judgment in an eminent domain action after resolving all issues pleaded and argued related to title and the interests taken as of the date of the taking, the North Carolina Supreme Court has ruled.

The Bloomsbury Estates Condominium Development is on a tract of land in downtown Raleigh, adjacent to Union Station. Development of the property began in 2006, with two phases of construction planned.

Phase I was completed and the condominiums were sold when the North Carolina Department of Transportation initiated a taking action in July 2015. The land the DOT took coincided with the planned location of the Phase II building.

Before the taking action, the developer recorded a Declaration of Condominium for the property, establishing the Bloomsbury Estates Condominium Homeowners Association. The declaration transferred ownership of the property to the association but gave the developer control over the association and reserved the developer’s rights to complete future units.

In addition, the developer recorded multiple amendments to the declaration, including the Fifth Amendment, which extended the developer’s right to complete Phase II until 2017.

The DOT provided an estimate of just compensation for the taking of $779,000.

In a joint filing, the developer and the association objected, arguing that the amount was grossly insufficient.

After mediation, the DOT, developer and association entered a consent judgment establishing that $3.95 million was just compensation for the entire taking. The judgment did not establish how the compensation would be divided between the developer and the association.

The developer and association then each filed a complaint against the other regarding rights to the property, and the cases were eventually consolidated with the taking action.

In an order, the trial court granted summary judgment in favor of the developer, holding that its loss from the taking was $3.35 million, with the remainder of the compensation assigned to the association.

The Court of Appeals reversed, and the developer appealed.

Did the trial court appropriately resolve the interests in the taken property and the allocation of the just compensation settled in the consent judgment such that its order was proper?

Yes, Justice Allison Riggs wrote for the unanimous court.

The developer argued that the validity of the Fifth Amendment was the only issue that affected the rights to the property on the date of the taking, making summary judgment and the distribution of compensation appropriate before the resolution of the other claims and that the association had a duty to present any issues in the other actions that affected the value of the property at the hearing before the court issued its decision.

While the association provided multiple reasons that the other actions needed to be resolved before the compensation was distributed, at the core of its arguments was “the correct but ultimately ancillary argument” that the developer should not be allowed to “double dip” by recouping essentially all of the just compensation for the loss of its development rights and then seek to equitably reform the Fifth Amendment to restore and extend its development rights after the taking.

“Recognizing the inequity in the developer’s position, we nonetheless hold, after consideration of the record and the other claims in the matter at hand, that the trial court properly granted summary judgment in favor of the developer after resolving all issues presented for resolution at the N.C.G.S. § 136-108 hearing, and we trust a later trial court to weigh the developer’s future development rights in equity,” the court wrote.

After entry of the consent judgment, the developer and the association filed separate actions fighting over the validity of the Fifth Amendment, as well as the rights to future development of the property.

However, neither the developer nor the association requested that the trial court address the issue of equitable reformation to the Fifth Amendment at the N.C.G.S. § 136-108 hearing, and the court declined the association’s invitation to rule on the issue, as such a determination would be outside the scope of the hearing, and “a trial court will undoubtedly weigh the equities taking into account this decision,” the court said.

“Because the parties in the developer’s action litigated the validity of the Fifth Amendment, we conclude the trial court in this taking action did not err in concluding that the Fifth Amendment was valid, and the parties were bound by the rights and obligations of the Fifth Amendment.”

When the trial court considered the developer’s motion for summary judgment, the appraisers for both parties agreed that because the Fifth Amendment was valid, the developer should be fully compensated for the development rights which — according to the association’s appraisal — were worth $3.35 million.

“Because the Fifth Amendment was found to be valid and because the appraisers agreed — based upon the validity of the Fifth Amendment — that the developer was entitled to compensation for loss of the development rights, there was no dispute of material facts,” the court concluded, reversing the decision of the Court of Appeals and affirming summary judgment in favor of the developer.

Neither Jay H. Ferguson of Thomas, Ferguson & Beskind in Durham, who represented the developer, nor Greensboro attorney T. Keith Black of Law Firm Carolinas, who represented the association responded to a request for comment.

The case is Department of Transportation v. Bloomsbury Estates, LLC, No. 250PA21-2. •