N. C. State Highway Commission v. Farm Equipment Co.

189 S.E.2d 272 (1972) 281 N.C. 459

N.C. STATE HIGHWAY COMMISSION
v.
FARM EQUIPMENT COMPANY, Inc., et al.

No. 87.

Supreme Court of North Carolina.

June 16, 1972.

Atty. Gen. Robert Morgan, Deputy Atty. Gen. R. Bruce White, Asst. Atty. Gen. Ladson F. Hart for plaintiff.

McGuire, Baley & Wood by Charles R. Worley, Asheville, for Farm Equipment Company, Inc., defendant appellee.

SHARP, Justice:

At the outset we note that it is immaterial whether the proceeding before Judge Martin be considered (1) a pretrial hearing under G.S. § 136-108 (1965) or (2) a motion to dismiss, converted under G.S. § 1A-1, Rule 12(b) (1969) into a motion for summary judgment by the introduction of "matters outside the pleading." In either event, it was Judge Martin's function to decide all questions of fact and adjudicate Commission's controverted right to condemn Tracts One and Two for the purpose specified. If he concluded that Commission lacked the power it sought to exercise, it was his duty, to dismiss the action as to Tracts One and Two. See Kaperonis v. North Carolina State Highway Commission, 260 N.C. 587, 133 S.E.2d 464 (1963).

The basic questions presented by the exceptions and assignments of error which appellant brings forward are these:

(1) Can Commission, in the exercise of its right to condemn property for highway purposes, take from defendant Tracts One and Two, which will not be used in the construction of Project itself, in order to exchange them for property belonging to Southern which will be a part of Project's right-of-way?

(2) If so, can Commission condemn Tracts One and Two in fee and convey them in fee to Southern?

These questions involve the principle of "substitute condemnation," that is, a transaction in which the State or an agency with the power of eminent domain, A, takes land under an agreement to compensate its owner, B, with land to be taken in condemnation proceedings from a third person, C, instead of with money. The problem is well stated in 2A Nichols on Eminent Domain § 7.226 (3d Ed. 1970):

"Under certain extraordinary conditions the conventional method of compensating an owner whose property is taken by proceedings in eminent domain by paying him the value thereof is completely inadequate. To do complete justice to such an owner and, what is even more important, to meet the practical problems which arise by reason of the taking, it becomes necessary to furnish such owner with other lands as a substitute for the lands which have been taken. The question then arises whether such substituted lands may be acquired by eminent domain by the original condemnor. . . for the use of the owner who has been forced to give up his property for a conceded public use. Is such secondary acquisition of property to be considered for a public use?"

Any exercise of the power of eminent domain is subject to the constitutional prohibition against the taking of property for private uses. "Private property can be taken by exercise of the power of eminent domain only where the taking is for a public use." Vance County v. Royster, 271 N.C. 53, 59, 155 S.E.2d 790, 795 (1967). Due process of law requires that private property be taken under the power of eminent domain only for a public use. Fallbrook Irrigation District v. Bradley, 164 U.S. 112, 161, 17 S. Ct. 56, 64, 41 L. Ed. 369, 389 (1896).

In controversies concerning substitute condemnation the ultimate condemnee, C, will usually contend, as defendant does here, that his land is being taken for a private use and that the taking is not necessary. See the excellent discussion of Substitute Condemnation in 54 Cal.L.Rev. 1097 (1966). See also Annot., 20 A.L.R. 3d 862 (1968).

In ordinary condemnation proceedings the questions of necessity and public use are separable. "Whether the purpose for which private property is taken is a public one is a judicial question, but the question of necessity and of the proper extent of a taking is legislative and is subject to determination by such agency and in such way as the state may designate." North Carolina State Highway Commission v. Young, 200 N.C. 603, 607, 158 S.E. 91, 94 (1931). See 26 Am.Jur.2d Eminent Domain § 114 (1966).

In controversies concerning substitute condemnation, however, the questions of public use and necessity are so entwined as to be inseparable. "Whether land has been taken for a public use in a substitute condemnation will depend on whether fairness requires that B [whose land has been taken for an undisputed public purpose] be compensated in land and whether there is a close factual connection between the taking of B's and C's land. Whether it is necessary to exercise the power of eminent domain—the first concept of necessity—will turn on whether B can be fairly compensated only in land. Whether it is necessary to take C's property—the second concept—depends on whether there is a close factual connection between the two takings. To argue that C's land has not been taken for a public use is to dispute the necessity of the taking, because the determinance of the two issues are the same." 54 Cal.L.Rev., supra at 1116. In a substitute condemnation, therefore, necessity is justiciable along with public purpose.

Courts have found no denial of due process or other constitutional infirmity in substitute condemnations where the owner of the land first taken (here, Southern) with whom the ultimate condemnee's land (here, defendant's) is to be exchanged, also has the power of condemnation and could itself have condemned the land. See Annot., 20 A.L.R. 3d 862, §§ 4, 6 (1968). "Thus, where part of a railroad right of way is condemned for the purpose of widening a state highway, the state may also condemn other property to be used by the railroad as a substituted right of way for the one originally taken." 2A Nichols on Eminent Domain § 7.226 (3d Ed. 1970). See Dohany v. Rogers, 281 U.S. 362, 50 S. Ct. 299, 74 L. Ed. 904 (1929) (facts parallel to those of this case); Tiller v. Norfolk & W. Railway Company, 201 Va. 222, 110 S.E.2d 209 (1959) (Plaintiff Railroad, seeking to acquire a portion of a highway agreed with State of Virginia that it would condemn C's land for the highway's location.); Langenan Mfg. Co. v. Cleveland, 159 Ohio St. 525, 112 N.E.2d 658 (1953) (City transit system permitted to condemn C's land upon which to relocate railroad tracks removed from land City required.); Fitzsimons & Galvin, Inc. v. Rogers, 243 Mich. 649, 220 N.W. 881 (1928) (facts parallel to those of this case). See also Brown v. United States, 263 U.S. 78, 44 S. Ct. 92, 68 L. Ed. 171 (1923).

In Austin v. Shaw, 235 N.C. 722, 71 S.E.2d 25 (1952), upon the rationale of the preceding decisions, this Court used the principle of "compensation by way of substitution," to justify the expenditure of city funds for extra-territorial construction. In North Carolina State Highway Comm. v. Asheville School, Inc., 276 N.C. 556, 173 S.E.2d 909 (1970), the Court permitted substitute condemnation in order to provide access to private property which otherwise would have been landlocked by the construction of a non-access highway. The owner, whose access route had been taken as an incident to and a requirement for the construction of the highway, could only be made whole by means of a substitute route. The decision was that the taking of defendant's property to provide it served a public purpose.

That the construction of Project affects Southern's entire spur track system along the western boundary of "old Riverside Drive," and requires the relocation of certain portions of it south of defendant's property is not disputed. If any part of defendant's land is required for the necessary relocation and upgrading of the tracks thereon, the law permits Commission to condemn, for the purpose of exchange with Southern, that which is required for the purpose. It does not follow, however, that Commission can condemn defendant's land in fee for this purpose.

"[A] railroad corporation is without power to acquire and hold real estate except by statutory authority, either expressly conferred or necessarily implied from the powers contained in the charter or arising to it under the General Laws." Wallace v. Moore, 178 N.C. 114, 115, 100 S.E. 237, 238 (1919). A railroad corporation has the power of eminent domain. G.S. § 40-2(1), § 40-5 (1966); G.S. § 62-220(2) (1965).

G.S. § 40-5 (Supp.1971) empowers any railroad doing business in this State, when it has been ordered by the Utilities Commission to construct an industrial siding as provided in G.S. § 62-232 (1965), to exercise the right of eminent domain in order to acquire such right-of-way as may be necessary to carry out the orders of the Commission. G.S. § 62-220(3) and (4) (1965) authorized every railroad corporation to take and hold by voluntary grants and by purchase real estate to aid in the construction and maintenance of its railroad and the stations and accommodations necessary to accomplish the objects of its incorporation. Real estate received by voluntary grant "shall be held and used for the purposes of such grant only." Thus, by purchase a railway can acquire a fee in the land over which its tracks run. See Craig v. Southern R.R., 262 N.C. 538, 138 S.E.2d 35 (1964); McCotter v. Barnes, 247 N.C. 480, 101 S.E.2d 330 (1957). However, when a railroad corporation obtains such land in condemnation proceedings it procures merely an easement to be used only for railroad purposes. Condemnation is not to be used as "a means of acquiring property for the benefit of the corporation." Shields v. Norfolk & C. R. R., 129 N.C. 1, 7, 39 S.E. 582, 584 (1901). Accord, Griffith v. Southern R.R., 191 N.C. 84, 87, 131 S.E. 413, 415 (1926); Phillips v. Postal Telegraph Cable Co., 130 N.C. 513, 524, 41 S.E. 1022, 1025 (1902); Raleigh & A. Air Line R.R. v. Sturgeon, 120 N.C. 225, 26 S.E. 779 (1897). It has "no right or authority to use or to let the property for private or nonrailroad purposes." Sparrow v. Dixie Leaf Tobacco Co., 232 N.C. 589, 593, 61 S.E.2d 700, 703 (1950). Such a right-of-way is an easement for railroad purpose and does not deprive the owner of the fee or its use for purposes not inconsistent with its use for railroad purposes. Bivins v. Southern R. Co., 247 N.C. 711, 102 S.E.2d 128 (1958); Carolina & N.W.R.R. v. Piedmont Wagon & Manufacturing Co., 229 N.C. 695, 51 S.E.2d 301 (1948); Virginia & C.S.R.R. v. McLean, 158 N.C. 498, 74 S.E. 461 (1912).

The foregoing authorities notwithstanding, Commission contends that G.S. § 136-18(16) empowers it to condemn Tracts One and Two in fee simple for the purpose of exchange with Southern solely upon its findings (1) that Southern has agreed in writing to accept these tracts "as a substantial portion of just compensation for the taking of its property" and (2) that, in Commission's opinion, an economy in the expenditure of public funds and highway improvement, safety and convenience will result. This section is quoted below:

"The State Highway Commission shall have authority, under the power of eminent domain and under the same procedure as provided for the acquirement of rights of way, to acquire title in fee simple to parcels of land for the purpose of exchanging the same for other real property to be used for the establishment of rights of way or for the widening of existing rights of way or the clearing of obstructions that, in the opinion of the Commission, constitute dangerous hazards at intersections. Real property may be acquired for such purposes only when the owner of the property needed by the Commission has agreed in writing to accept the property so acquired in exchange for that to be used by the Commission, and when, in the opinion of the Commission, an economy in the expenditure of public funds and the improvement and convenience and safety of the highway can be effected thereby."

To accept Commission's interpretation of G.S. § 136-18(16) would require us to hold the act unconstitutional. As Johnson, J., well said in Brest v. Jacksonville Expressway Authority, 194 So. 2d 658, 20 A.L.R. 3d 854 (Fla.App.1967), affd. 202 So. 2d 748 (Fla.1967).

"To hold otherwise would open the door wide open for abuse and would permit a condemning authority to make a deal with the owner of private property to condemn a parcel of more desirable property, maybe in a better neighborhood or on a more economically strategic corner upon which to relocate the private owner's motel or building, in exchange for the parcel needed by the expropriating authority. This would be contrary . . . to both the Federal and State Constitutional provisions safeguarding property rights.

"The Legislature cannot under the guise of exercising sovereign power of eminent domain, which can only be exerted for a public purpose, take a citizen's property without his consent and give or sell it to another for private use, even though compensation is paid therefor, for to do so would be in violation of the Constitution of the United States Amendment 14. Also the power to take private property is in every case limited to such and so much property as is necessary for the public use in question." Id. 194 So.2d at 661.

We hold that substitute condemnation is a valid exercise of a power of eminent domain only when the substitution of other property is the sole method by which the owner of land taken for public use can be justly compensated, and the practical problems resulting from the taking can be solved. The intent and effect of G.S. § 136-18(16) is to require, as a condition precedent to substitute condemnation, (1) a written agreement binding the owner of the land to be used in highway construction to accept substitute property in exchange, and (2) a considered finding by Commission that such an exchange will save public funds and result in a safer and better highway. Obviously, however, the fact that an exchange of C's property for B's will be less expensive than paying B the fair market value of his land cannot be the test for determining whether the taking is necessary or for a public purpose.

Properly construed, the statute requires the Commission to take sensible, preliminary steps before resorting to a condemnation which might otherwise turn out to have been a futile, expensive, and oppressive operation. It is well settled that a condemnor cannot force a condemnee to accept compensation in any form other than money. 3 Nichols on Eminent Domain § 8.2, and cases cited therein (3d Ed.1965); 54 Cal.L.Rev., supra, 1107. Furthermore, the condemnation of land for exchange can only be justified when the property for which it is substituted accomplishes the public purpose for which it was taken, and the cost is not disproportionate to the benefit derived.

We hold, therefore, that Commission is without authority to condemn any part of defendant's land in fee simple for the purpose of exchange with Southern. In this situation it may condemn no more land and no greater estate therein than Southern could condemn for itself. In short, it may only do for Southern what Southern itself could do. Southern will not be permitted to accomplish indirectly through Commission that which it could not do directly.

To allow Southern to acquire in fee Tracts One and Two, a narrow strip on each side of its 20-foot easement across defendant's property would divide the land into two separate tracts with no access to each other. Defendant would be placed at the mercy of the railroad and conceivably deprived of any access to its land west of the tracks except by way of the river. The law of this State is calculated to prevent such a situation.

The complaint does not specify the purpose for which Southern would use Tracts One and Two if and when Commission acquired and conveyed them to it. As to the tracks across defendant's property, however, in his finding of fact No. 7 (our enumeration) Judge Martin found that no relocation outside Southern's existing right-of-way was necessitated by Project and that any work required under the contract between Southern and Commission could be done within that easement. This finding, however, cannot be sustained on this record. It is unsupported by the evidence and ignores the uncontradicted Buckner affidavit to the contrary, as well as information disclosed by the two maps.

Buckner asserted that the relocation of certain portions of the track required (1) the upgrading of the entire spur-track system and additional lateral right-of-way on either side of the present right-of-way; and (2) the relocation laterally in a westerly direction 8.47 feet from defendant's south property line to Station 19+91.26, a distance the Price map shows to be 130 feet north of the southern line. From the map it appears that at defendant's southern boundary the western rail of the relocated track is, or will be, outside the right-of-way. However, for an exact interpretation of the map, and a complete understanding of the actual relocation of the tracks on the ground, the testimony of the engineer himself is required. In his affidavit, Buckner says that the entire track across defendant's property has been, or will be, elevated from 3.3 feet at the north end to 6.9 feet at the south end; that "the additional right-of-way" across defendant's property is necessary to provide for the westerly lateral relocation of the tracks; to provide horizontal support required by the elevation of the tracks; and to meet safety standards for tracks paralleling a highway.

Although the judge was not required to accept the Buckner affidavit, he could not ignore its uncontradicted assertions and make contrary findings with no evidence to support them. Neither could he ignore the maps which provided the only evidence as to the relocation of the tracts.

Judge Martin's findings of fact (our enumeration) Nos. 1 through 4 are not controverted on appeal. As to findings Nos. 5 and 6, we find no evidence in the record to support them. However, we deem them immaterial to decision here. Findings Nos. 8 and 10 are conclusions of law. Finding of fact No. 9 relates to Commission's opinion with reference to the condemnation of the fee in Tracts One and Two, and this decision renders those opinions irrelevant.

Judge Martin's conclusions of law Nos. (1) and (2) (our enumeration) are correct. Conclusions Nos. (3) and (4) are based upon factual findings not substantiated by the record and are, therefore, not correct. However, the proper disposition of this case requires that the judgment entered be vacated in its entirety and the case remanded to the Superior Court for a hearing de novo, and it is so ordered.

If, in consequence of Project's construction, additional right-of-way has been, or will be, required for Southern's tracks across defendant's land, and Commission desires to condemn the necessary easement for Southern, it may do so in accordance with the principles of law enunciated in this opinion. That course will necessitate compliance with G.S. § 136-18(16), appropriate amendments to the pleadings and—thereafter—a hearing de novo under G.S. § 136-108.

Judgment vacated and cause remanded.