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In re DeFacto Condemnation and taking of lands of WBF Associates

April 28, 2009

IN RE: DEFACTO CONDEMNATION AND TAKING OF LANDS OF WBF ASSOCIATES, L.P. BY LEHIGH-NORTHAMPTON AIRPORT AUTHORITY LEHIGH-NORTHAMPTON AIRPORT AUTHORITY WBF ASSOCIATES, L.P. AND C.T. FULLER N/K/A C. THOMAS FULLER LEHIGH-NORTHAMPTON AIRPORT AUTHORITY, APPELLANT
IN RE DE FACTO CONDEMNATION AND TAKING OF LANDS OF WBF ASSOCIATES, L.P. BY LEHIGH-NORTHAMPTON AIRPORT AUTHORITY
APPEAL OF: WBF ASSOCIATES, L.P.
LEHIGH-NORTHAMPTON AIRPORT AUTHORITY LEHIGH VALLEY INTERNATIONAL AIRPORT
v.
C.T. FULLER A/I/A C. THOMAS FULLER AND WBF ASSOCIATES, L.P.
APPEAL OF: C. T. FULLER A/I/A C. THOMAS FULLER



The opinion of the court was delivered by: Senior Judge Friedman

Argued: April 2, 2009

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge.

OPINION

This eminent domain case was initiated on September 30, 1996, and is now before our court for the third time. The case concerns Lehigh-Northampton Airport Authority's (LNAA) de facto taking of property owned by WBF Associates, L.P. (WBF), which occurred as a result of LNAA's planned expansion of the Lehigh Valley International Airport (Airport). Currently before the court is LNAA's appeal from the October 10, 2008, entry of judgment in favor of WBF and against LNAA in the amount of $24,219,887.61, plus continuing accruing mortgage interest, delay damages and attorneys' expenses and appraisal fees. Consolidated with this appeal are LNAA's appeals from the September 3, 2008, order of the Court of Common Pleas of Lehigh County (trial court) denying LNAA's motion for a new trial and the trial court's September 18, 2008, order denying LNAA's motion to mold the verdict,*fn1 which resulted in the October 10, 2008, entry of judgment.

On September 27, 1990, WBF purchased an undeveloped 632-acre tract of land (Property) from C. Thomas Fuller (Fuller). The Property, which spans three townships, (East Allen Township, Allen Township and Hanover Township), is located just north of the Airport operated by LNAA. Fuller retained a first mortgage on the Property and later granted WBF a line of credit secured by a second mortgage. WBF planned to develop the Property into a planned residential development (PRD) of 1,488 residential units (Windwillow). To that end: WBF entered a joint venture agreement with Lanid Corporation (Lanid), a developer that was to supply partial funding for Windwillow; WBF and Lanid obtained zoning changes and final approvals from East Allen and Hanover Townships and were seeking approval from Allen Township; and WBF spent considerable sums on development costs for Windwillow.

However, the Windwillow project was halted in January of 1994, when LNAA publicly announced that it would be acquiring approximately 1,500 acres of land north of the Airport for Airport expansion. The expansion area included all of WBF's 632 acres. The announcement of the Airport expansion received widespread publicity, and LNAA started acquiring properties within the 1,500-acre expansion area. As a direct effect of LNAA's actions, Lanid terminated its participation in the Windwillow project, and WBF was unable to attract new investment partners due to LNAA's condemnation plans. Consequently, WBF was unable to move forward with Windwillow for lack of financing, and WBF defaulted on its first and second mortgages. Fuller filed a successful foreclosure action on the second mortgage in June of 1997, and WBF was just able to avoid an upset tax sale of the Property in September of 1997.

On September 30, 1996, WBF filed a petition for appointment of a board of viewers pursuant to section 502(e) of the Eminent Domain Code (Code), 26 P.S. §1-502(e),*fn2 alleging a de facto taking of its Property due to LNAA's announced Airport expansion plan and the consequential collapse of the Windwillow project. LNAA filed preliminary objections, and, in lieu of an evidentiary hearing, the parties agreed to present evidence before the trial court consisting of deposition testimony, pleadings, affidavits, record papers, discovery responses and numerous exhibits. The trial court made findings based upon the extensive record, briefing and oral argument. Particularly relevant here are Judge James Knoll Gardner's Findings of Fact, Nos. 10 and 16, which provide as follows:

10. WBF planned to develop its property into a planned residential development consisting of 1,488 units.

16. The highest and best use of WBF's property is as a planned residential development.

(R.R. at 7a-8a, footnote omitted.) The trial court determined that WBF successfully established a de facto taking of its Property on September 30, 1996, and, by order dated June 15, 1998, dismissed LNAA's preliminary objections and granted WBF's petition for appointment of a board of viewers. In doing so, Judge Gardner noted that Lanid had successfully developed twelve larger PRDs prior to becoming involved in Windwillow and that Lanid was prepared to invest its resources and experience into WBF's development project before learning of the planned Airport expansion. Judge Gardner then added, "[w]e have every reason to believe that if the [P]roperty had been developed, the homes which were built would have been sold." (R.R. at 32a.) Citing these reasons, Judge Gardner found that the damages in the case were not too speculative to be determined by a board of viewers.

Following LNAA's appeal, this court affirmed the trial court's determination of a de facto taking, and our supreme court subsequently denied LNAA's petition for allowance of appeal. Lehigh-Northampton Airport Authority v. WBF Associates, L.P., 728 A.2d 981 (Pa. Cmwlth.) (hereafter, WBF I), appeal denied, 560 Pa. 751, 747 A.2d 372 (1999). Thereafter, WBF filed a motion to compel LNAA to pay estimated just compensation (EJC) to WBF, and Fuller filed a motion for an order requiring LNAA to pay the EJC to Fuller.*fn3 In an effort to settle this dispute, WBF and Fuller executed a Stipulation detailing the history, terms and money due under each of the two mortgages between the parties and setting forth a statement that included the principal amounts, along with the accrued and continuing interest. On November 2, 2000, after the addition of an addendum indicating LNAA's agreement to these terms, the trial court entered the Stipulation as an order. On that same date, LNAA gave Fuller a check for the full EJC payment of $3,150,000.

Prior to the board of viewers' hearings, LNAA sent notices to three individuals who had testified on the issue of highest and best use of the Property in the earlier de facto taking proceedings. LNAA sought to re-depose these people regarding the Property's highest and best use for the purpose of establishing the fair market value of the Property before the board of viewers. WBF objected and filed for a protective order, alleging that Judge Gardner's findings in his June 15, 1998, opinion constituted the "law of the case" with respect to the issue of the highest and best use of the Property. By order dated November 3, 2000, Judge Gardner granted the protective order and barred LNAA "from pursuing discovery, and from attempting to offer evidence at trial, on issues previously ruled on by this Court in its June 15, 1998, opinion, including the findings of fact and conclusions of law set forth therein, and particularly including, but not limited to, Findings of Fact Numbers 10, 15, 16, 25, 26, 40, 41, and 49."*fn4 (November 3, 2000, Order, filed December 13, 2000, emphasis added). Accordingly, at the board of viewers' hearings, LNAA restricted its appraisal testimony to the value of the Property as a PRD.

In a supplemental proceeding, WBF sought recovery of mortgage interest and delay damages pursuant to sections 609 and 611 of the Code,*fn5 26 P.S. §§1-609 and 1-611. The board of viewers awarded WBF $8,500,000 in damages for the value of the Property and awarded mortgage interest and delay damages from September 30, 1996, the day of the taking. Thereafter, WBF, LNAA and Fuller filed appeals from the report of the board of viewers and demanded a jury trial pursuant to sections 515 and 516(a) of the Code, 26 P.S. §§1-515 and 1-516(a). The parties also filed motions for preliminary determinations pursuant to section 517 of the Code,*fn6 26 P.S. §1-517, asking that, prior to the trial de novo, the trial court resolve various legal issues.

Due to the unavailability of Judge Gardner, Judge Carol K. McGinley took over the case and ruled on the preliminary determinations. In an opinion and order dated June 27, 2003, Judge McGinley determined that: (1) LNAA could present evidence at trial regarding the highest and best use of the Property as it relates to a determination of fair market value and just compensation; (2) LNAA was precluded from challenging the validity of the WBF/Fuller mortgages; (3) WBF was entitled to recover mortgage interest from September 30, 1996; (4) WBF was entitled to delay damages from September 30, 1996; (5) LNAA must receive credit for payment of the EJC from November 2, 2000; and (6) WBF was entitled to recover its reasonable attorneys', appraisal and engineering fees.

All parties appealed from the trial court's June 27, 2003, order, and this court affirmed in part and reversed in part. In re De Facto Condemnation and Taking of Lands of WBF Associates, L.P., 845 A.2d 967 (Pa. Cmwlth. 2004). Thereafter, our supreme court granted allowance of appeal and affirmed in part and reversed in part. In re De Facto Condemnation and Taking of Lands of WBF Associates, L.P., 588 Pa. 242, 903 A.2d 1192 (2006) (hereafter WBF III). Of relevance here, our supreme court held that: (1) WBF is entitled to delay damages from September 30, 1996, to include all mortgage interest actually incurred until the date of payment of the award; and (2) LNAA was not permitted to relitigate the highest and best use in its appeal following the determination of the board of viewers. Id.

After remand to the trial court, the parties filed pre-trial motions concerning the admissibility of testimony from LNAA's expert witnesses that it was not legally or physically feasible to create 1,488 units on the Property. WBF sought to preclude that testimony on the grounds that it was contrary to prior orders in the case or otherwise inappropriate, asserting that Judge Gardner's June 15, 1998, ruling of a de facto taking was premised on the development of the Property pursuant to the 1,488-unit Windwillow project. (See R.R. at 104a-06a.) LNAA countered that WBF's plans for development in Allen Township were never finalized prior to the commencement of this proceeding and, thus, were not governed by the findings in Judge Gardner's June 15, 1998, opinion. (R.R. at 108a-12a.) By order dated October 9, 2007, the trial court quoted Judge Gardner's November 3, 2000, protective order verbatim and granted WBF's motion in limine. In essence, the trial court ruled that, in accordance with Judge Gardner's protective order and our supreme court's decision in WBF III, the Property had to be valued as the 1,488-unit Windwillow PRD for highest and best use purposes, and LNAA could not present evidence referring to a different sized development.*fn7 (R.R. at 145a-46a.)

On March 3, 2008, a jury trial to determine just compensation damages commenced. At the conclusion of the trial, the jury returned a verdict of $10,410,000 as just compensation for LNAA's de facto taking of WBF's Property. (R.R. at 148a.) LNAA, WBF and Fuller each filed post-trial motions requesting a new trial, (R.R. at 178a-86a, 201a-06a, 217a-21a), and motions to mold the verdict. (R.R. at 154a-90a, 188a-96a, 211a-13a, 223a-49a.) In connection with the latter motions, the trial court held an evidentiary hearing on May 2, 2008, to receive evidence on delay damages, mortgage interest and attorneys' fees payable to WBF.

Following that hearing, and after extensive briefing and argument, the trial court, by order dated September 3, 2008, denied the parties' respective motions for a new trial. (R.R. at 1809a-19a.) By order entered September 18, 2008, the trial court granted WBF's motion to mold the verdict, denied LNAA's motion to mold the verdict and awarded WBF: (1) $9,503,426.00 of delay damages, at prime plus 1%, from September 30, 1996, through August 30, 2008, accruing thereafter at the rate of prime plus 1%; (2) $6,898,658.00 of mortgage interest from September 30, 1996, through August 31, 2008, accruing thereafter at the rate of $1,462.81 per day; and (3) $437,125.03 for attorneys', engineering and appraisal fees through March 31, 2008, for a total molded verdict of $24,099,236.02, after deduction of $3,150,000 for the EJC paid. (R.R. at 3840a-42a.) Judgment against LNAA in the amount of $24,219,887.61 (reflecting additional interest that accrued after the September 18, 2008, order) was entered on October 10, 2008. (R.R. at 3838a-39a.)

LNAA now appeals to this court from the trial court's denial of its motion for post-trial relief and its motion to mold the verdict.*fn8 LNAA asks this court to reverse the judgment entered on the jury verdict and remand for a new trial; alternatively, LNAA asks that we mold the verdict in accordance with LNAA's calculations.

I. New Trial

LNAA argues that it is entitled to a new trial because: (a) the trial court erred in concluding that Judge Gardner's opinions established the highest and best use of the Property as the 1,488-unit Windwillow PRD; (b) the trial court erred in excluding portions of LNAA's valuation testimony and evidence, permitting WBF to enter evidence about the Property's 1990 purchase price and denying LNAA's requests to remove a juror for inattentiveness and sleeping during trial; ...


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