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Condemnation Verdict 7.07.08

07 July 2008
Poyner Spruill

Types of Action: Condemnation.

Property Acquired: 685.76 acres

Case Name: USA vs. Moorman Pine Plantations, L.L.C.

Case Number: 07-CV-2-FL (USDC-EDNC)

Court: US District Court – Eastern District of North Carolina

Verdict or Settlement: Settlement

Settlement Date: July 7, 2008

Settlement Amount: $5,800,000.00

Amount of Deposit: $3,565,000.00

Amount of Settlement in Excess of Deposit: $2,235,000.00

Landowner’s Attorneys: David W. Long, J. Nicholas Ellis and Timothy W. Wilson, Poyner Spruill LLP

Description of Case

This eminent domain action was instituted by the federal government to procure additional land for the Harvey Point Naval Base located in Perquimans County, North Carolina. The land condemned was 685 acres that was undeveloped, but did have some frontage on the Albemarle Sound. The subject property had not been approved for a subdivision, although the landowner had considered utilizing the property as a golf/boating type of development.

Moorman Pine acquired the 685 acres in October, 2002 for $848,000.

Appraisal Information

The USA filed this action in January, 2007 and had obtained two appraisals prior to filing its Complaint. Its deposit of $3,365,000 was based on those two appraisals (the government’s appraisals were $2,880,000 and $3,365,000). One of the appraisers updated his after the suit was filed and increased his value to $3,910,000 so that it accurately reflected the date of the case being filed. This was a value of approximately $5,700 per acre.

Moorman Pine had two appraisers who reported values of $6,857,000 ($10,000 per acre, but without any recognition of wetlands) and $6,670,000 (based on $13,500 per acre for the 493 acres that were not impacted by wetlands).

Moorman Pine’s Attempt to Use the “Development Approach”

The second approach taken by Moorman Pine to ascertain value was to apply the “development approach” by utilizing experts from various disciplines to create a Yield Report reflecting the income/expense associated with a proposed development. Essentially, this utilizes a “per lot” value scheme, which is generally not admissible unless the property has been subdivided. Moorman Pine’s property had not been subdivided. Moorman Pine engaged environmental engineers, land planners and a developer to support using this approach to establish value. A critical issue was delineating the amount of wetlands on the property. Of the 685 acres, a survey prepared by the government reflected approximately 493 acres of “uplands” and 192 acres of wetlands. Relying on this information, Moorman Pine’s land planner prepared a site plan and Yield Report that resulted in 777 lots that would sell out over a 10-year period. Expenses for the development would be approximately $73,000,000 with $153,000,000 of income for a net profit of $80,000,000.

Moorman Pine’s developer expert witness, who had extensive experience with another golf/boating resort in Hertford County, had the opinion that a developer would likely pay 10% of the total income that could be generated from this property equating to a value of $15,300,000.

To combat this development approach value, the government ordered an extensive wetlands survey of the property that increased the wetlands from 191 to 305 acres. Significantly, much of the wetlands acreage was the property fronting the Albemarle Sound. Moorman then had its expert team prepare a second version of the land plan to comply with the new wetlands acreage, which resulted in total sales forecast of $97,000,000 leading to the developer witness having an opinion that its fair market value would be $9.7 million dollars under the new wetlands delineation.

Both parties filed extensive motions in the case to strike expert witnesses, opinions as to value and the admissibility of the wetlands delineation surveys. The day before the mediation, the government served a draft of a Motion for Summary Judgment asking that Moorman’s development approach values not be considered at trial. There was substantial risk that the motion would have been granted resulting in Moorman Pine’s development approach evidence not being admitted at trial. Additionally, if the wetlands acreage was increased to 305 acres, Moorman Pine’s appraisals would have decreased to $5,157,000 and its higher appraisal may have been inadmissible since it did not make any distinction for the value of wetlands vs. uplands.

The case settled at a Mediated Settlement Conference presided over by Magistrate Judge David Daniel in April 2008. The parties settled the case for a total of $5,800,000 which yielded an increase of $2,235,000 over the amount deposited by the federal government.

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