Dep't of Transp. v. Schad

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

NO. COA13-1302
NORTH CAROLINA COURT OF APPEALS

Filed: 4 June 2014

DEPARTMENT OF TRANSPORTATION,
Plaintiff,

v. Stanly County
No. 11 CVS 809; 11 CVS 845
GUS SCHAD,
Defendant.

Appeal by plaintiff from order entered 1 July 2013 by Judge

Kevin M. Bridges in Stanly County Superior Court. Heard in the

Court of Appeals 10 April 2014.

Attorney General Roy Cooper, by Assistant Attorney General
Mary S. Mercer, for plaintiff-appellant.

Singletary & Webster, P.C., by H. Earl Singletary, Jr., for
defendant-appellee.

HUNTER, JR., Robert N., Judge.

Plaintiff North Carolina Department of Transportation

(“DOT”) appeals from an interlocutory order permitting Gus Schad

(“Defendant”) to present evidence in a condemnation action

valuing the land affected by the taking as a subdivision with

individual lots. DOT contends that Defendant’s land is an

“imaginary subdivision” pursuant to Barnes v. N.C. State Highway
 -2-
Comm’n, 250 N.C. 378, 109 S.E.2d 219 (1959), and that, as such,

the jury should only hear evidence valuing Defendant’s property

as one undeveloped tract of land. Despite the interlocutory

nature of DOT’s appeal, DOT claims the trial court’s order

affects a substantial right warranting our immediate review.

However, for the following reasons, we disagree with DOT’s

jurisdictional argument and dismiss DOT’s appeal as

interlocutory.

I. Factual & Procedural History

On 11 and 18 July 2011, DOT filed complaints, declarations

of taking, and notices of deposit in Stanly County Superior

Court condemning real property owned by Defendant near the

Stanly County Airport.1 On 6 March 2012, Defendant filed answers

in both cases wherein Defendant described the property affected

by the takings as a subdivision entitled “Stanly Airport

Industrial Park.” Defendant also alleged that the deposits made

by DOT were inadequate and requested jury trials on the issue of

just compensation. That same day, the trial court entered

orders disbursing DOT’s deposits in both cases—$56,800 and

1
The complaint filed on 11 July 2011 was designated as 11 CVS
809. The complaint filed on 18 July 2011 was designated as 11
CVS 845.
 -3-
$83,000, respectively—as credits against just compensation

determinations obtained by Defendant in future proceedings.

On 1 April 2013, DOT moved for a hearing pursuant to N.C.

Gen. Stat. § 136-108 (2013) to determine any and all issues

raised by the pleadings other than the issue of damages. By

stipulation of the parties, both actions filed by DOT were

combined for hearing. On 11 April 2013, DOT filed a plat

pursuant to N.C. Gen. Stat. § 136-106 (2013) identifying the

property and areas taken in both actions. DOT’s Section 108

motion was heard on 15 April 2013. Evidence presented at the

hearing tended to show the following.

Defendant acquired the land at issue by purchases made in

1987 and 1988. Defendant purchased the property in order to

develop it into an industrial park at the Stanly County Airport.

When Defendant purchased the property, it was zoned as

“rural/agricultural.” Subsequently, however, Defendant applied

for and obtained a “light industrial” zoning classification for

the property.

In 1993, Defendant had a survey performed and a subdivision

plat map drawn dividing the property into 47 individual lots.

On 17 December 1993, Defendant filed the plat map, labeled

“Stanly County Airport Industrial Park,” in the Stanly County
 -4-
Registry. In addition to designating the individual lots, the

plat map has roads laid out and indicates the placement of one-

half inch rebar with plastic caps on each corner of each

individual lot. The roads have not been paved on the property,

but they have been “cut” by a bulldozer and Defendant has

performed some grading work on the roads. Defendant built a

spec building on one of the lots.

On 18 February 1998, Defendant recorded a “Declaration of

Covenants, Conditions and Restrictions for Airport Industrial

Park” with the Stanly County Register of Deeds. The document

defines the covenants, conditions, restrictions, reservations,

and easements benefiting and burdening each lot within the

subdivision. The trial court found as fact that these covenants

were still in effect at the time of the taking.2

Evidence presented at the hearing also revealed that

Defendant sold three lots in the subdivision prior to the

taking. One lot was sold in March 1998 to a private citizen,

2
Paragraph 19 of the declaration states that it will “continue
in full force and effect until January 1, 2010, at which time it
shall automatically expire, unless extended by the affirmative
vote of those owning a majority of the acreage within the
property.” At the automatic expiration date, Defendant was
still the majority owner of the acreage within the property. On
cross-examination, Defendant indicated that, because the takings
took place in July 2011, the covenants would have expired before
the July 2011 takings. On redirect, Defendant stated that he,
as the majority owner, considered the covenants still in effect.
 -5-
and two additional lots were sold to the State of North Carolina

in December 2001.

In August 2005, Defendant transferred 1.04 acres to the

City of Albemarle, which placed two large generators on the

property for industrial use. The City also placed a sign on the

property advertising the subdivision as a “Prime Power

Industrial Park.” The Stanly County Economic Development

Commission worked with Defendant prior to the taking and

marketed the property as “the state’s first industrial park

specifically designed to attract new industrial customers with

the need for reliable, uninterruptible electric power.” As a

result of this marketing, soil and environmental tests were

performed on part of the property and a 200,000 square-foot pad-

ready site was developed that is ready for a prospective buyer

to build upon.

In 2008, DOT contacted Defendant about his property for the

first time to discuss the State’s plan for a road project near

the airport. Defendant subsequently signed a right of entry

agreement, and DOT initiated the present condemnation

proceedings in July 2011. Defendant stated that the State’s

plans for the road project “had set him back several years in

moving forward with his plans for the park.”
 -6-
Based on the foregoing and other evidence presented at the

hearing, the trial court entered a written order on 1 July 2013

that characterized the property affected by the taking as

follows:

20. The taking by [DOT] was a taking of
individual lots located in the subdivision
shown in Plat Book 16, Page 8, Stanly County
Registry as the “Stanly County Airport
Industrial Park” and not vacant real
property by the acre.

The trial court concluded:

6. That [Defendant’s] actions were taken
pursuant to his plan to develop the Stanly
County Airport Industrial Park and not in
anticipation of a just compensation
condemnation proceeding.

7. That [Defendant’s] plans to develop the
industrial park were adversely affected by
[DOT’s] plan to build a road through his
property.

8. That it would be unfair and unreasonable
for [DOT] to hinder the development of
[Defendant’s] property and then prevail on
its conclusion that the property was not an
actual, existing subdivision.

9. Based on the facts of this case,
[Defendant] should be allowed to present
evidence to the jury regarding the value of
each individual lot affected by the taking.

. . . .

[Defendant], at the time of trial before the
jury, shall be permitted to present evidence
of the value of each individual lot
 -7-
immediately before the taking herein and
[D]efendant shall be permitted to present
evidence of the value of each individual lot
immediately after the taking by [DOT].

DOT filed timely notice of appeal from the trial court’s order.

II. Jurisdiction

On appeal, DOT contends that the trial court erred in its

order by permitting Defendant to present evidence at trial

regarding the value of each individual lot affected by the

taking. In DOT’s view, the property being condemned should be

valued as one undeveloped tract of vacant land because, pursuant

to Barnes, the property is an “imaginary subdivision” and not an

accomplished fact. See Barnes, 250 N.C. at 388–89, 109 S.E.2d

at 227–28 (stating that “the value to be placed on land taken

under the right of eminent domain must not be speculative or

based on imaginary situations” and that it is “not proper for

the jury . . . to consider an undeveloped tract of land as

though a subdivision thereon is an accomplished fact”); see also

Town of Hillsborough v. Crabtree, 143 N.C. App. 707, 709–10, 547

S.E.2d 139, 140–41 (2001) (discussing and applying the rule in

Barnes).

However, before this Court can reach the merits of DOT’s

contention, we must determine if this Court has jurisdiction to

hear DOT’s interlocutory appeal. See Dep’t of Transp. v.
 -8-
Olinger, 172 N.C. App. 848, 850, 616 S.E.2d 672, 674–75 (2005)

(“[I]f an appealing party has no right of appeal, an appellate

court on its own motion should dismiss the appeal even though

the question of appealability has not been raised by the parties

themselves.” (quotation marks and citation omitted) (alteration

in original)). DOT argues that the trial court’s order is

immediately appealable as affecting a substantial right.

Moreover, DOT believes that given the substantial right

affected, immediate appeal is mandatory, not permissive. For

the following reasons, we hold that no substantial right has

been affected by the trial court’s order and dismiss DOT’s

appeal as interlocutory.

Our condemnation statutes provide that either party to a

condemnation action shall have a right of appeal “in the same

manner as in any other civil actions.” N.C. Gen. Stat. § 136-

119 (2013). Generally, however, there is no right of immediate

appeal from an interlocutory order in a civil action. Atl.

Coast Conference v. Univ. of Maryland, ___ N.C. App. ___, ___,

751 S.E.2d 612, 615 (2013). “An interlocutory order is one made

during the pendency of an action, which does not dispose of the

case, but leaves it for further action by the trial court in

order to settle and determine the entire controversy.” Veazey
 -9-
v. City of Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950).

Thus, because the trial court’s order merely permitted Defendant

to introduce evidence valuing the affected property as a

subdivision in a subsequent damages trial, the order did not

dispose of the case below and DOT’s appeal is interlocutory in

nature.

However, an “immediate appeal is available from an

interlocutory order or judgment which affects a substantial

right.” Sharpe v. Worland, 351 N.C. 159, 162, 522 S.E.2d 577,

579 (1999) (quotation marks omitted); accord N.C. Gen. Stat. §§

1-277(a), 7A-27(b)(3) (2013). Our Supreme Court has defined a

“substantial right” as “a legal right affecting or involving a

matter of substance as distinguished from matters of form: a

right materially affecting those interests which a [person] is

entitled to have preserved and protected by law: a material

right.” Sharpe, 351 N.C. at 162, 522 S.E.2d at 579 (quotation

marks and citation omitted) (alteration in original).

Whether an interlocutory ruling affects a substantial right

requires consideration of “the particular facts of that case and

the procedural context in which the order from which appeal is

sought was entered.” Waters v. Qualified Personnel, Inc., 294

N.C. 200, 208, 240 S.E.2d 338, 343 (1978). Here, the trial
 -10-
court’s order was entered after a Section 108 hearing. That

statute provides:

After the filing of the plat, the judge,
upon motion and 10 days’ notice by either
the Department of Transportation or the
owner, shall, either in or out of term, hear
and determine any and all issues raised by
the pleadings other than the issue of
damages, including, but not limited to, if
controverted, questions of necessary and
proper parties, title to the land, interest
taken, and area taken.

N.C. Gen. Stat. § 136-108 (2013). Our Supreme Court has

delineated the parameters of the substantial right exception in

this context. In N.C. State Highway Comm’n v. Nuckles, 271 N.C.

1, 14, 155 S.E.2d 772, 784 (1967), the Court stated that the

purpose of a Section 108 hearing is to “eliminate from the jury

trial any question as to what land [DOT] is condemning and any

question as to its title.” Accordingly, the Court held that

“should there be a fundamental error in the judgment resolving

these vital preliminary issues, ordinary prudence requires an

immediate appeal.” Id.

Furthermore, in Dep’t of Transp. v. Rowe, 351 N.C. 172, 521

S.E.2d 707 (1999), following a jury trial on the issue of just

compensation, the Court was presented with the question of

whether the former property owners were required to immediately

appeal the trial court’s pre-trial order unifying their four
 -11-
remaining tracts of land for purposes of valuation. Id. at 173,

521 S.E.2d at 708. The Court held that the pre-trial order did

not affect a substantial right and that the defendants were not

required to immediately appeal. Id. The Court acknowledged

that Nuckles had received expansive treatment in determining

what issues in a Section 108 hearing affect a substantial right,

but explicitly disavowed those cases and limited the holding to

“questions of title and area taken.” Id. at 176, 521 S.E.2d at

709. Thus, the Court reasoned that because the “[d]efendants

contest[ed] only the unification of the four remaining tracts

[and] not what parcel of land is being taken or to whom that

land belongs[,] . . . the trial court’s order [did] not affect

any substantial right” warranting immediate review. Id.

Furthermore, the Court stated:

Although the parties to a condemnation
hearing must resolve all issues other than
damages at the N.C.G.S. § 136-108 hearing,
that statute does not require the parties to
appeal those issues before proceeding to the
damages trial.

Id. at 176, 521 S.E.2d at 710.

Here, DOT contends that the characterization of the

property affected by the taking—i.e., whether it is a

subdivision or an undeveloped tract—is a vital preliminary issue

that must be settled before the question of just compensation is
 -12-
presented to the jury. We disagree. Similar to Rowe, Defendant

is the undisputed owner of the land affected by the taking and

the area being condemned is certain. Accordingly, DOT’s

contention is without merit.3

Nonetheless, as an alternative basis to invoke our

jurisdiction, DOT contends that the existence of easements on

the affected property, which were created when Defendant filed

the declaration of covenants in 1998, raise questions of title

that must be immediately appealed pursuant to Nuckles. See

N.C. Dep’t Of Transp. v. Stagecoach Vill., 360 N.C. 46, 48, 619

S.E.2d 495, 496 (2005) (“The possible existence of an easement,

the basis upon which the trial court ordered joinder of the unit

owners, is a question affecting title; therefore, the trial

court’s order is subject to immediate review.”). While we agree

that the existence of an easement may, under certain

circumstances, warrant immediate review to resolve an issue of

title, that is not the case here. First, Defendant is the

undisputed owner of the land that is affected by the taking and

subject to the recorded covenants. DOT has not alleged that any

other necessary parties should be joined in the instant action

3
We note that our holding on this issue is consistent with an
unpublished decision of this Court in N.C. Dep’t of Transp. v.
Williams, 168 N.C. App. 728, 609 S.E.2d 498, 2005 WL 465557
(2005) (unpublished), which we find persuasive.
 -13-
nor challenged Defendant’s title. Second, and more

fundamentally, the basis of the trial court’s order, from which

DOT appeals, concerns the characterization of the land in

question. The order does not address the issue of additional

easement holders whose interests may be affected by the taking.

Accordingly, DOT’s argument on this point is without merit.

Notably, we acknowledge that in Town of Hillsborough, this

Court addressed the merits of the issue presented in this case

in an interlocutory appeal taken from a pre-trial order.

However, that case did not discuss jurisdiction and therefore

does not stand for the proposition that DOT’s interlocutory

appeal affects a substantial right warranting immediate review.

Thus, in deciding whether to dismiss DOT’s appeal here, we are

not constrained by Town of Hillsborough’s holding. Cf. In re

Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989)

(“Where a panel of the Court of Appeals has decided the same

issue, albeit in a different case, a subsequent panel of the

same court is bound by that precedent, unless it has been

overturned by a higher court.”). However, we are bound to our

Supreme Court’s decision in Rowe. Dunn v. Pate, 334 N.C. 115,

118, 431 S.E.2d 178, 180 (1993) (“[The Court of Appeals] has no

authority to overrule decisions of [the] Supreme Court and [has]
 -14-
the responsibility to follow those decisions until otherwise

ordered by the Supreme Court.” (second and third alterations in

original) (quotation marks and citation omitted)). Pursuant to

Rowe, we hold that a Section 108 order concerning the

characterization of the property at issue does not affect a

substantial right for purposes of interlocutory appellate

review.

III. Conclusion

For the foregoing reasons, we dismiss DOT’s appeal as

interlocutory.

DISMISSED.

Judge STROUD concurs.

Judge DILLON concurs in the result in a separate opinion.

Report per Rule 30(e).
 NO. COA13-1302

NORTH CAROLINA COURT OF APPEALS

Filed: 3 June 2014

DEPARTMENT OF TRANSPORTATION,
Plaintiff,

v. Stanly County
No. 11 CVS 809; 11 CVS 845
GUS SCHAD,
Defendant.

DILLON, Judge, concurring in the result.

I concur in the result reached by the majority, dismissing

the present appeal. I write separately, however, to address

what I believe is a point of confusion between the evidentiary

ruling made by the trial court and a separate issue, not

addressed by the trial court, concerning which lots/land

constitute the “entire tract” pursuant to N.C. Gen. Stat. § 136-

112(1) (2013) to be evaluated by the jury.

Since this matter involves a partial taking, the proper

measure of damages is “the difference between the fair market

value of the entire tract immediately prior to said taking and

the fair market value of the remainder immediately after the

taking[.]” Id. (emphasis added).

Identifying which land constitutes the “entire tract” for

purposes of determining just compensation is not a point of
 -2-
contention where the partial taking involves the only parcel

owned by the landowner. However, this identity of the “entire

tract” can be an issue of contention if the landowner has an

interest in a parcel or parcels in addition to the parcel from

which the taking is made. In some such cases, the North

Carolina Department of Transportation (“DOT”) may seek to

include a landowner’s adjacent parcel as part of the “entire

tract,” believing that, for example, the new road it is building

will increase the value of the landowner’s adjacent parcel,

thereby reducing the amount of the just compensation award.

Conversely, in other cases, the landowner may seek to include an

adjacent parcel into the “entire tract,” believing that the

condemner’s project will diminish not only the value of the

parcel from which the taking is made, but also the value of his

adjacent parcel.

In any event, our Supreme Court has held that the issue of

whether to incorporate a landowner’s additional parcel(s) as

part of the “entire tract” is generally a question of law to be

resolved by the trial court. Barnes v. Highway Comm’n, 250 N.C.

378, 384, 109 S.E.2d 219, 224 (1959); see also DOT v. Fernwood

Hill Homeowners Ass’n, 185 N.C. App. 633, 638, 649 S.E.2d 433,

436 (2007). In other words, before a jury may properly
 -3-
determine the amount of just compensation based on before and

after values of the subject property, the trial court generally

must first determine which land constitutes the “entire tract”

by considering certain factors, namely “unity of ownership,

physical unity and unity of use[,]” though “the presence of all

three unities [between the parcels] is not essential [for the

parcels to be considered a single tract].” Barnes, 250 N.C. at

384, 109 S.E.2d at 224.

The present case involves a partial taking; that is, the

DOT condemned approximately ten acres out of the 177 acres owned

by Gus Schad (“Defendant”). Defendant claims that this 177

acres is actually part of a 47-lot industrial park that he

created in 1993, when he filed a subdivision plat; that prior to

the DOT’s partial taking, he sold three of the 47 lots; that the

177 acres he owned at the time of the DOT’s taking is actually

44 separate lots; and that the ten acres taken by the DOT runs

directly through 21 of those 44 lots.

The only issue ultimately resolved by the trial court at

the Section 108 hearing was an evidentiary issue; that is, the

decretal portion of the trial court’s order merely orders that

Defendant “be permitted to present evidence of the value of each

individual lot immediately before the taking . . . [and] of the
 -4-
value of each individual lot immediately after the taking[.]”

However, counsel for both parties at oral arguments before this

Court suggested that there may be a dispute regarding which land

actually constitutes the “entire tract,” a different issue

entirely from the evidentiary issue addressed in the trial

court’s order. For instance, counsel for the DOT stated that

the parties disagreed as to whether the condemnation involved a

partial taking of 177 acres (which consists of 44 lots and

proposed roads) or a partial taking of only 21 lots. Likewise,

when asked whether all 44 lots “have been affected by the

taking, counsel for Defendant responded, “No, your Honor. We’re

saying 21 lots have been affected by this taking.” Likewise,

during the Section 108 hearing, counsel for Defendant argued

that “it should be 21 separate lots [that] we should be allowed

to put on evidence for as damages” and produced an appraiser who

testified that he considered the effect of the taking only on

the 21 lots, and not on all 44 lots.

The evidentiary ruling made by the trial court allowing

Defendant to produce before and after values of lots has no real

meaning until the court resolves the conflict – if one, in fact,

exists – concerning which lots/land constitute the “entire

tract.” See id. at 390, 109 S.E.2d at 229 (stating that the
 -5-
parties may introduce relevant evidence to “aid[] the jury in

fixing a fair market value of [the entire tract as well as the

remainder]”). If the trial court determines that the “entire

tract” consists of all 177 acres owned by Defendant, then, based

upon the evidentiary ruling by the trial court – a ruling which

cannot be appealed at this time – Defendant’s evidence for the

jury should be based on the before and after values of all 44

lots, as well as the before and after values of any other land

that make up the 177 acres4. In such case, opinion of value of

the “entire tract” that is based only on the before and after

values of the 21 lots which have been reduced in size by the

taking, without any reference to the effect of the taking on the

value of the other 23 lots and other land comprising the “entire

tract,” would probably not be relevant. Alternatively, if the

trial court determines that the “entire tract” consists of only

the 21 lots which have been reduced in size by the taking, then

evidence regarding the change in value of only these 21 lots

would be relevant; but evidence regarding any effect on the

other 23 lots would not likely be relevant since such evidence

would not “aid[] the jury in fixing the fair market value of

4
Based on Defendant’s 1993 plat, the industrial park includes
proposed roads, in addition to the individual lots.
 -6-
[either the entire tract – as defined by the trial court - or

the remainder].” Id.

Accordingly, I believe the trial court should ascertain

whether there is, in fact, a dispute as to what property

constitutes the “entire tract,” and, if so, rule on that issue

before proceeding with a trial to determine the amount of just

compensation owed. Further, I do not believe that the trial

court’s evidentiary ruling, allowing Defendant to introduce

evidence of individual lot values, precludes the trial court

from exercising its role as gatekeeper to allow the jury to

consider other types of valuation evidence which the parties may

seek to introduce, which do not rely on the value of each

individual lot. Rather, the trial court should allow the jury

to consider and weigh any evidence that comports with our Rules

of Evidence.