BLOGS: North Carolina Land Use Litigator

Tuesday, December 16, 2014, 2:46 PM

N.C. Court of Appeals: Limitations Period Does Not Apply to Local Government Enforcement of Subdivision Performance Bonds

A post-Great Recession treat, the North Carolina Court of Appeals affirmed today a ruling that the Town of Black Mountain is entitled to enforce subdivision performance bonds originally in the name of Buncombe County, after the Town annexed the land to which the performance bonds applied.

Facts
From March 2005 through February 2007, defendant sureties entered into four subdivision performance bonds related to the development of two residential subdivisions that were, at the time, located within the County's subdivision jurisdiction.  County approval of the two projects was conditioned on the developers obtaining those performance bonds, which named the County (and not the Town) as obligee.

At various points between May 2005 and February 2007, the property related to the bonds was annexed into the Town.

The developers eventually folded.

In 2012, the Town contacted the defendant sureties and asked if they would "consent to an assignment of the bonds to the Town".  Defendant sureties refused consent.

Later in 2012, the County assigned, and the Town accepted assignment of, the bonds despite defendant sureties' lack of consent. The Town then submitted notice of its claims to defendant sureties, and defendant sureties refused payment on the subdivision performance bonds.

Trial Court
The Town and the County brought a breach of contract suit together "because they anticipated that defendants would challenge standing if either party sued separately".  As a result, according to the Court, their claims were "pled in the alternative".

The trial court entered summary judgment in favor of the Town and the County, and the defendant sureties appealed.

Appellate Decision
In Town of Black Mountain v. Lexon Ins. Co., No. COA14-740 (Dec. 16, 2014), the Court of Appeals affirmed.    

The Court held as follows: (1) the annexation of land "that is the subject of a private contract between the county and a private citizen" does not "nullif[y] the contract", and the Court refuses defendant sureties' efforts to read Stillings v. City of Woinston-Salem, 311 N.C. 689 (1984) to that degree; (2) the bonds, themselves, do not at all indicate that assignment from the County to the Town was impermissible or without legal effect; (3) the three-year statute of limitations at NCGS 1-52 does not apply to subdivision performance bonds entered into pursuant to NCGS 153A-331, because that is a governmental activity and so the Town is protected under the doctrine of nullum tempus occurrit regi, relying on Rowan County Bd. of Educ. v. U.S. Gypsum Co., 87 N.C. App. 106 (1987) and Rowan County Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1 (1992).

The defendant sureties are not entitled to a "windfall", the Court opines, a result which any other analysis would create.  The Town will get its funds to complete the subdivision improvements initally promised to the County.

We take special note of the statute of limitations portion of the ruling, which could open the door in North Carolina to a number of suits on unclaimed performance bonds entered into before the real estate development climate turned "south" in 2009.  Time is not, as the Court sees it, of the essence to the local government in enforcing certain of these obligations.

"But we can still enforce the performance bonds to get that traffic light we were promised, right?"

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and "like" us on Facebook here.

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N.C. Court of Appeals: Statutory "Custodian" of Public Records Is "In Charge of" the Relevant Office

Former Durham District Attorney Tracey Cline was removed from office by Court order in the first half of 2012.  The story behind her efforts to return to the office has been detailed at great length by the local Raleigh and Durham press corps.

Ms. Cline recently filed suit against David Hoke -- both, personally and "in his official capacity as assistant director of the North Carolina Administrative Office of the Courts" (the "AOC") -- to obtain certain AOC emails "related to [Ms. Cline's] service as district attorney in preparation to defend a complaint filed against her by the North Carolina State Bar".

The case we're talking about is Cline v. Hoke, No. COA14-428 (Dec. 16, 2014).

The trial court dismissed Ms. Cline's suit against Mr. Hoke in part, and Ms. Cline appealed.

On appeal, the Court first addressed the dismissal of the suit against Mr. Hoke in his individual capacity.  The Court dispenses with this appellate point with a swift stroke of the pen: "In order to compel an unresponsive custodian to fulfill this statutory duty [to permit reasonable inspection of public records pursuant to NCGS 132-6], a party must sue the custodian of those records in the custodian's official capacity."

Ok, so Mr. Hoke must be sued in his official capacity.  Turns out that Ms. Cline covered that base, however.  The question then becomes: is Mr. Hoke, as assistant director of the AOC, the "custodian" to be named in a public records suit?

The AOC argues on two levels.  First, the AOC argues that "each individual employee is the custodian of his/her emails" such that a lawsuit against Mr. Hoke would only cover emails to/from Mr. Hoke, himself, and not with AOC writ large.  The Court disagrees, and notes that the AOC made a similar, losing argument in LexisNexis Risk Data Management, Inc. v. N.C. AOC, __ N.C. App. __, 754 S.E.2d 862 (2014).  The AOC, rather than the individual employee within the AOC, is the custodian.  The AOC's argument fails on this point.

On the second level, however, the AOC argues successfully that Mr. Hoke, as assistant director of the AOC, is not the official "in charge of an office having public records".  Therefore, Mr. Hoke is "not the designated custodian of the AOC's records per NCGS 132-2".  Ms. Cline's suit fails.

"This is all of my crap, yes.  And no one else should touch my crap.  But, correct, I'm not the custodian of this crap."  

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and "like" us on Facebook here.

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N.C. Court of Appeals: Restrictive Covenant Prohibiting "Store" Does Not Prohibit "Parking" for a Prohibited Store

How broadly will the appellate courts interpret a restrictive covenant applicable to real property? Not so broadly as to prohibit a parking lot to be used by customers for an otherwise expressly prohibited use.

Let's look at Charlotte Pavilion Road Retail Investment, LLC v. North Carolina CVS Pharmacy, LLC, No. COA14-658 (Dec. 16, 2014), decided today.

The Carpenter Tract and the CVS Tract
Mr. Carpenter owned a 15-acre tract of land (the "Carpenter Tract"), a 2-acre portion of which he conveyed to an entity he controlled (the "CVS Tract").  His entity then leased the 2-acre CVS Tract to CVS Pharmacy, and, as a condition of/enticement to that lease with CVS, Mr. Carpenter placed a restriction on the Carpenter Tract prohibiting the location of "a health and beauty aids store, a drug store, a vitamin store, and/or a pharmacy".

Mr. Carpenter's entity later sold the CVS Tract.

The Sale of the Carpenter Tract and the Charter Tract
Plaintiff developers contracted to purchase the Carpenter Tract, encumbered by the restrictive covenant, and contracted to purchase an adjacent tract of land (the "Charter Tract").  The Charter Tract, though adjacent to the Carpenter Tract, is not encumbered by the restrictive covenant.

The Shopping Center
The developers sought to construct a shopping center to be located on both the Carpenter Tract and the Charter Tract, and to lease a portion of the Charter Tract to Walmart.

The Walmart would violate the covenant.  But that's not the rub because the Charter Tract is not encumbered by the covenant.  Thus, the Walmart store is not the issue.

The Parking Lot
The issue is that the developers intend to build a parking lot and access easement on the covenant-encumbered Carpenter Tract, which would be used by the shopping center customers and tenants.  In effect, the covenant-encumbered Carpenter Tract would be used as a parking lot and ingress/egress means for a covenant-prohibited use.

So, the question: does the covenant prohibit a store as well as parking or access to the store?

The Appellate Ruling
The Court of Appeals affirmed summary judgment in the developers' favor as to their declaratory judgment claim, concluding that the proposed parking lot/access use of the covenant-encumbered Carpenter Tract does not violate the restrictive covenant.

The Court hammers the notion that the covenant "must be construed according to the plain ordinary meaning of its words."  Can you see where this is going?

The Court is nonplussed by the citation to out-of-state authority in this particular instance, noting that the Texas case relied upon by defendants is inapposite because the covenant in that case was drafted to prohibit the "business activity of operating a food store", which would also prohibit parking.  On the other hand, the covenant applicable to the Carpenter Tract only prohibits the actual "store", which does not reach far enough to prohibit parking.

The Court's holding is fact-specific, and does not gut all restrictive covenants in this regard.  But, as usual, we see that careful drafting is critical.

"What do you think this means when it says, 'parking'"?

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and "like" us on Facebook here.

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Tuesday, December 2, 2014, 1:49 PM

N.C. Court of Appeals Addresses Limitations Period Applicable to Utility Easement Encroachment Claim

The limitations period in North Carolina is six (6) years within which to bring a lawsuit claiming an encroachment on an easement, which is an injury to an "incorporeal hereditament".  NCGS 1-50(a)(3).  

In Duke Energy Carolinas, LLC v. Gray, No. COA14-283 (December 2, 2014), the N.C. Court of Appeals considered the utility's claim that defendant's home encroached on the utility's easement, and the defendants' statute of limitations defense to the utility's encroachment claim.  


Facts
The facts are quite straightforward as presented by the appellate court.  In May 1951, property owners executed an agreement with the utility granting a 200-foot easement over their property "for purposes associated with the transmission of electric and telephone services".  

In 2006, a homebuilder built a house on a lot that "included a strip of land located within plaintiff's easement".  

In 2007, homebuilder conveyed the lot and house to defendant by general warranty deed "subject to easements 'which may appear of record[.]'".  

In February 2010, utility wrote to defendant "and informed him that a portion of [defendant's] house encroached on its 200-foot right of way".  In December 2012, utility filed suit seeking a mandatory injunction "directing defendant to remove the encroachment from [utility's] easement", and defendant filed a third party complaint against homebuilder. 


Trial Court
Defendant and homebuilder moved for summary judgment on its 6-year statute of limitations defense, which the trial court granted.  Plaintiff appealed.


The Appeal
The North Carolina Court of Appeals affirmed the trial court's decision.  

First, the Court reveals that the 6-year limitations period from NCGS 1-50(a)(3) is correctly applied to this easement.  

Next, the Court concludes that the limitations period runs from the date the easement is "injured", "even when the injured party is unaware that the injury exists".  In other words, the Court determines that a cause of action for encroachment on an easement accrues upon the injury regardless when it is discovered or reasonably should be discovered.  The Court makes it clear that the the "apparent or ought reasonably to have become apparent" language of NCGS 1-15(c) does not exist in or otherwise apply to the 6-year limitations period for "incorporeal hereditaments" at NCGS 1-50(a)(3).  The Court:  "[T]here is no such provision in N.C. Gen. Stat. § 1-50(a)(3), and no other statutory basis to delay the accrual of a claim for encroachment on an easement until the encroachment is discovered, or reasonably should be known." 

The Court makes an interesting analysis of plaintiff's claims that summary judgment on the limitations defense "terminated" or "extinguished" the easement and allowed defendant to "obtain property without satisfying the required elements for adverse possession".  The Court's response to these arguments must be quoted:  
Plaintiff’s easement was not terminated or extinguished as a result of the summary judgment order. Plaintiff retains its easement, and may pursue any future claims arising from an encroachment to the easement, whether caused by this defendant or another party. Furthermore, in appropriate circumstances, plaintiff may exercise its power of eminent domain under N.C. Gen. Stat. § 40A-3(a)(1). In addition, defendant did not obtain title to any property he had not previously owned; indeed plaintiff concedes that defendant is “the owner of the underlying property[.]” Thus, the only effect of plaintiff’s failure to file suit before expiration of the statute of limitations was to bar its lawsuit against defendant based upon this specific encroachment.
Essentially, the easement remains -- defendant's home is not "in the clear" -- but the encroachment claim is the one that's barred.  Other avenues remain to remove the structure from the utility's easement, according to the Court. 

Finally, the Court addresses the arguments that (1) the original grant of easement was "under seal", which carries a 10-year limitations period (the Court: defendant was not a "principal" to the original grant of easement, so the "uynder seal" argument is inapplicable) and (2) prior precedent on which the Court relies is incorrectly decided (the Court: "a subsequent panel of the same court is bound by that precedent") and (3) for policy reasons, a six-year window from injury to an easement regardless when it is discovered or reasonably should be discovered will overwhelm utility companies (the Court: these are legislative issues, not judicial ones).  

While a unanimous decision affords no review "as of right" by the State Supreme Court, we anticipate another look by the highest court and/or the legislative change alluded to by the Court of Appeals.   


Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and "like" us on Facebook here.

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If Your Cow Plows Over Your Neighbor and You Aren't There To See It, Are You Liable?

Every law student loves a good negligence case.  Poor Mrs. Palsgraf, the Learned Hand Test, the McDonald's coffee caseMartin v. Herzog and negligence per se.  The list goes on.  Ok, it doesn't really go on all that much, but it's an interesting list.

Today's case isn't about land use, per se (see what we did there?), but it's a great set of facts involving a cow, an identification of a cow, a personal injury, a garden, a sighting of said cow "in the garden", a $350,000 plaintiff's verdict, and a reversal thereof.  That's a jackpot.

So, let's have some fun.

Facts
Basically, one Wednesday night in 2008, plaintiff was rushed by, knocked over by, and injured by defendants' cow.  Almost two weeks later, the cow was hit by a car near plaintiff's house.  Plaintiff identified the cow as the one that rushed him, and he notified defendants of the fact of the loose cow, the car accident, and plaintiff's injury at the horns/head/hoof of the cow.

Almost three years later, within the limitations period, plaintiff filed a negligence suit against defendants on account of the cow attack.  After a trial, the jury awarded plaintiff $350,000 in damages, and defendants appealed.

Legal Standard
Because this is a case about an animal, and the animal owner's liability for negligence, the Court begins with the legal standard applicable to "animal negligence":

The liability of the owner of animals for permitting them to escape upon public highways, in case they do damage to travelers or others lawfully thereon, rest upon the question whether the keeper is guilty of negligence in permitting them to escape. In such case the same rule in regard to what is and what is not negligence obtains as ordinarily in other situations. It is the legal duty of a person having charge of animals to exercise ordinary care and the foresight of a prudent person in keeping them in restraint.
Analysis
The Court notes that plaintiff's theory of liability is not grounded in the fact that the cows escaped, but rather is grounded in the fact that defendants failed "to sufficiently look for the cows once they learned or should have learned that the cows had escaped."

The Court could not sustain plaintiff's verdict on appeal because there was no evidence in the record that defendants knew of the loose cows before the cow attack occurred.  The Court states, "[W]hether defendants’ alleged negligent conduct (their failure to properly search for the cows) occurred before or after plaintiff’s injury is a matter of pure speculation."  Consequently, plaintiff's judgment is reversed and entered for defendants.


"Shhhh.  They'll never find us back here.  
And that should insulate Old MacDonald from liability, too."

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and "like" us on Facebook here.
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