BLOGS: North Carolina Land Use Litigator
Monday, February 8, 2016, 3:22 PM
By John Cooke
It is impossible to know the internal considerations of the North Carolina Supreme Court when it accepted for review the case of City of Asheville v. State of North Carolina and the Metropolitan Sewerage District of Buncombe County, __ N.C. App. ___, 777 S.E. 2d 92 (October 6, 2015). But the tragedy of the State of Michigan taking over and operating the Flint Michigan water system was prominently in the news.
Under basic law, a North Carolina municipality possesses only those powers granted by the General Assembly. Municipal powers are of two types – (1) governmental and (2) proprietary. Proprietary powers authorize municipalities to establish public enterprises, business-like operations, to provide important public services to local citizens, such as drinking water. Without an express grant of authority, the City of Asheville is powerless to establish, own or operate a public drinking supply system. But, pursuant to proprietary powers granted uniformly to all North Carolina municipalities, the City of Asheville has established, owned and operated a drinking water system for over 100 years. The City supplies drinking water to over 100,000 customers.
Although there was no finding of solvency or water quality problems, the North Carolina General Assembly adopted laws in 2013 which appear to target the City of Asheville’s water system. The laws involuntarily transferred ownership and operational responsibility of the City’s water system to a metropolitan sewage district and authorized the sewage district to begin operating a water system.
The City of Asheville challenged the validity of the law transferring assets and operational responsibility of its water system (the “Transfer Law”). The trial court declared the Transfer Law unconstitutional and void. The State of North Carolina appealed the trial court’s declaration to the North Carolina Court of Appeals.
The Court of Appeals’ Decision
Under the North Carolina Court of Appeals analysis, resolution of the legal questions arising from the Transfer Law is elegantly simple. Since the General Assembly possesses discretion to grant powers or withhold powers from municipalities, it possesses the discretionary power to withdraw or modify a proprietary power unless prohibited by a provision of the state or federal constitutions:
[U]nless prohibited by some provision in the state or federal constitution, our General Assembly has the power to create a new political subdivision, to withdraw from Asheville authority to own and operate a public water system and to transfer Asheville’s water system to the new political subdivision. 777 S.E.2d 92, 96 (2015)(italic by the Court of Appeals).
The North Carolina Court of Appeals concluded the Transfer Law did not relate to health, found no constitutional prohibition, reversed the trial court and upheld the validity of the Transfer Law.
The City’s Petition to the North Carolina Supreme Court
In November 2015, the City of Asheville petitioned the North Carolina Supreme Court requesting the North Carolina Supreme Court to review the Court of Appeals’ decision. The Court granted the petition at the end of January 2016.
The City contends that the North Carolina Constitution restricts the General Assembly’s authority (1) to withdraw a proprietary power when it has been exercised for the purpose of supplying drinking water to local citizens and (2) to take municipal assets used for propriety purposes without paying just compensation. Specifically, the City contends that the Transfer Law is a local law relating to health and Article II, section 24 of the North Carolina Constitution forbids adoption of the Transfer Law. More broadly, the City contends that the North Carolina Constitution forbids taking municipal property used for propriety functions, such as operating a water system, without payment of just compensation.
1. Justice Oliver Wendell Holmes wrote: “The life of the law has not been logic; it has been experience.”
Experience is clear. In 21st century urban life, whether you are a developer, business owner or resident, clean drinking water is presumed. Without it, public health, property values, and quality of life drops like a rock.
When a municipal water system fails, health is harmed and sometimes irrevocably damaged. Running municipal water systems may seem simple from afar – move assets, debts and permits around - but it isn’t. Go visit a treatment water plant or study the interplay between types, sizes and ages of pipes pushing drinking water to homes and businesses. People run water systems and people are the difference between good water and bad water. Just ask the citizens of Flint Michigan.
2. The narrow scope of the Transfer Law shows its purpose is not to establish a state-wide plan for regional water and sewer services. The Transfer Law affects ownership of assets and operational control of a single municipal water drinking system providing service to local customers only.
3. The Court of Appeals noted that the Transfer Law does not expressly state that it regulates health. Relying upon North Carolina Supreme Court precedent and the broad recitals of the Transfer Law, the Court of Appeals concluded that the Transfer Law “prioritize[s] concerns regarding the governance over water and sewer systems and the quality of the services rendered.” Therefore, the Court of Appeals held that the Transfer Law did not relate to health.
It is possible that the General Assembly failed to recognize the gravity of the Transfer Law’s risks to health. After all, the General Assembly has no water system operational experience. For example, the Transfer Law didn’t require the startup provider to hire City personnel who had been operating the 100 year old water system.
After the events in Flint Michigan, the general public understands that: People run water systems and people are the difference between good water and bad water. The Transfer Law relates to health.
4. One hopes the judiciary’s examination of the constitutionality of a law is not halted because the General Assembly sets out broad recitals in a narrow law. If the Court of Appeals’ understanding of North Carolina Supreme Court precedent is correct, then the power of the judiciary is quite limited and seems at odds with the People’s restriction on the General Assembly: “T[he General Assembly shall have no power to deprive the judicial department of any power or jurisdiction.” N.C. Constitution, Art IV., sec. 1.
Cases involving suits between a municipality and state government are politically charged. But, respectfully, the judiciary’s role is to drill down to the facts and protect citizens. After all, the life of the law has been experience.
Thursday, January 21, 2016, 10:58 AM
The Thin Line Between Land Litigation and Land Use Controversies
Frequently, land litigation—land boundary and ownership claims - is a controversy concerning the use of land. The recent case of Hedgepeth v. Parker’s Landing Property Owners Association, Inc. ___ N.C. App. ___ ___ S.E.2d ____(2016 WL 47700) illustrates the thin line between land litigation and land use controversies.
In Hedgepeth, plaintiff and Parker’s Landing Property Owners Association (“POA”) are neighbors. Plaintiff desires to develop his property as a residential subdivision, but must possess sufficient access to a public street to secure development approvals from Currituck County. The only access from plaintiff’s property to a public road lies on the POA’s property.
1. The Federal Lawsuit and Claims of Easements Across Plaintiff’s Property
In 2007, plaintiff commenced a federal lawsuit asserting possession of one or more easements across the POA’ property based upon a variety of legal theories: express easement, easement by necessity, implied easement, easement by equitable estoppel and quasi-estoppel – estoppel by acceptance of the benefits. In 2009, the Federal District Court found plaintiff owned two limited historical easements across the POA’s property.
The relief granted by the federal court was unsatisfactory to plaintiff. The easements were limited to agricultural purposes and narrow. Development of plaintiff’s property as a residential subdivision remained impossible. Plaintiff appealed this decision to the Fourth Circuit Court of Appeals and the Fourth Circuit affirmed the decision in 2010.
2. The State Court Lawsuit and Claim of Boundary Line Mislocation
In 2009, plaintiff filed a new land litigation case against the POA and individual Parker’s Landing lot owners in state court. Plaintiff asserted two principal claims. First, plaintiff sought a declaration extending the federal court’s declaration of historic easements to individual lot owners who had not been parties in the federal lawsuit. Second, plaintiff asserted that the common boundary line between his property and the POA’s property was misplaced, giving plaintiff access to a public street because it had been mistakenly built on plaintiff’s property.
This lawsuit triggered a cascade of land litigation lawsuits, claims and dismissals between plaintiff, defendant and individual lot owners. Plaintiff filed a motion for summary judgment on the grounds of res judicata and collateral estoppel, contending that the two easements declared by the federal district court were binding against the POA and various lot owners. The trial court denied plaintiff’s motion and plaintiff appealed to the North Carolina Court of Appeals.
a. The First State Court Appeal
In 2014, the North Carolina Court of Appeals partially affirmed and reversed the trial court’s ruling. Describing the vortex of multiple land litigation cases, claims and dismissals arising from this state court case as a “quagmire”, the Court held that the POA was bound by the federal court’s judgment, held that the lot owners were not bound by the federal court decision because they had not been parties in the federal lawsuit and held that decision in the federal lawsuit did not preclude plaintiff’s boundary law claim on the grounds of res judicata. The parties returned to trial court to litigate the boundary line claim.
b. The Second State Court Appeal
In 2015, the trial court granted the POA’s motion for summary judgment regarding plaintiff’s boundary law claim. Plaintiff appealed to the North Carolina Court of Appeals and in January 2016, the Court of Appeals reversed. The Court of Appeals returned the case to the trial court for further proceedings.
The Court of Appeals’ analysis centered upon application of judicial estoppel, a doctrine formally recognized as part of the common law of North Carolina in 2004. The POA asserted that plaintiff had conceded its ownership of the property on which the road was located in the federal lawsuit and plaintiff was judicially estopped to assert its boundary line claim. The Court of Appeals noted that judicial estoppel does not preclude inconsistent legal theories and in the federal lawsuit “[n]o stipulations were made concerning the underlying ownership or the location of a disputed boundary line.”
1. These cases illustrate the interplay between governmental development approvals and adequate land rights. Without adequate land rights, governmental approvals are unattainable.
2. Land litigation and land use controversies are similar in one respect. These disputes are between neighbors concerning their enjoyment of their land. Once neighbor relationships are frayed, litigation can be long lived. The parties are in their ninth year of litigation and the litigation continues forward.
Thursday, January 7, 2016, 3:03 PM
Water and Land Part 2
Water and Land
In Part I, we discussed the lawsuit between the State of North Carolina and Alcoa which determined that Alcoa owns a 45 mile portion of the Yadkin River riverbed. State of North Carolina v. Alcoa Power Generating, Inc., 5:13-CV-00633 (E.D.N.C.) (September 28, 2015). In Part II, we turn our attention to the North Carolina public trust doctrine.
Part II: Ocean Beaches and the Public Trust Doctrine
As noted in Part I, Federal law holds that the public trust doctrine is governed by state law. Traditionally, North Carolina’s public trust doctrine establishes public access in inland waters, but not to inland waters. In other words, the bank of a river may be exclusively owned a private citizens and the public has no right to access the river by traveling over this private property.
But what is the law where there is no defined bank, like an ocean beach of shifting sand where the surface of the water expands and contracts according to tides and storm events?
A North Carolina beach, the area from the high water mark of the storm tide waterward is composed of two areas – the wet sand beach and the dry sand beach. Generally, the wet sand beach or foreshore – the area from the mean high water mark to the ocean - is owned by the State of North Carolina. The dry sand beach – the area landward from the mean high water mark to the high water mark of the storm tide is frequently owned privately.
In Nies v. Town of Emerald Isle, ___ N.C. App. ___, ___ S.E.2d ____(2015 WL 8272743), private property owners claimed that they owned the dry sand ocean beach exclusively. Instead of bringing a civil action of trespass against members of the public using this portion of the beach, the Nies sued the Town of Emerald Isle because the Town regulated this area and had issued beach driving permits entitling permittees to drive on this portion of the beach. Therefore, the Nies claimed the Town had taken their property and sought just compensation. The trial court entered summary judgment in favor of the Town against the Nies’ inverse condemnation claim and the North Carolina Court of Appeals affirmed the trial court. Writing for the Court of Appeals, Chief Judge McGee noted that the “public right of access to dry sand beaches in North Carolina is so firmly rooted in the custom and history of North Carolina that it has become a part of the public consciousness.” Relying upon statutes adopted by the General Assembly addressing public rights to use ocean beaches, the North Carolina Court of Appeals held that “ocean beaches of North Carolina include both the wet sand beaches – generally, but not exclusively publically owned- and the dry sand beaches – generally, but not exclusively, privately owned” and the entire beach is generally subject to public trust rights. Accordingly, the Town did not take the Nies’ property by regulating driving on the dry sand beach and issuing beach driving permits.
The North Carolina Court of Appeals did not uncover any prior North Carolina holding establishing the landward extent of North Carolina ocean beaches. Why might that be? In the past, beaches were transitory areas always subject to high winds and sea water. But places where water and land intersect have become important. As environmentally sensitive and valuable recreational and water usage areas, these places receive special attention. This trend is unlikely to abate. To the contrary, these special places are likely to receive more attention.
Is there another reason that cases concerning places where land and water meet might be important? These cases illustrate a division between two strong policy concerns which are polar opposites. On the one hand, preserving and protecting private property rights from unreasonable and unfair governmental intrusion is an important policy concern, but, on the other hand, preserving and protecting public resources and public access to these resources is an important policy concern. Reconciling these principles is a difficult and dynamic process, not unlike the places which give rise to these cases. Therefore it is unsurprising that the losing parties in both cases are appealing.
One phenomenon is reasonably clear. As the State of North Carolina grows and more people live, work and play within the same geographical boundary, places where land and surface water meet will continue to grow in importance.
Tuesday, December 8, 2015, 1:25 PM
Water and Land Part 1
Water and Land
Two recent cases, State of North Carolina v. Alcoa Power Generating, Inc., 5:13-CV-00633 (E.D.N.C.) (September 28, 2015) and Nies v. Town of Emerald Isle, __ N.C. App. ___ (November 17, 2015) address ownership of riverbeds and ocean beaches. These are complicated and increasingly important issues and lead to a two-part blog entitled Water and Land.
Part 1 – “Who Owns a Riverbed?”
A person looking at a North Carolina Transportation Map finds that the water flowing into High Rock Lake is labeled “Yadkin River” and might assume that the State of North Carolina owns the Yadkin River bed within the Lake. But the assumption would be mistaken.
In State of North Carolina v. Alcoa Power Generating, Inc., (September 28, 2015), the United States District Court for the Eastern District of North Carolina considered whether the State of North Carolina or Alcoa owned the forty-five mile long segment of the Yadkin River roughly beginning at High Rock Lake and traveling South along the river. After several hearings, the Federal District Court held that: (1) the State of North Carolina failed to show ownership of the Yadkin River riverbed and (2) Alcoa showed that it owned the riverbed by means of proving title using the North Carolina Marketable Title Act and adverse possession. Accordingly, the Court ruled “that Alcoa has title to the bed” of this forty-five mile segment of the Yadkin River.
Under Federal law, when North Carolina became a sovereign state (1789), ownership of all land underneath navigable waters was automatically vested in the State of North Carolina. After conducting a bench trial on the issue whether this portion of the Yadkin River was navigable-in-fact at the time of statehood, the District Court concluded that the State of North Carolina had failed to prove that the forty-five mile segment of the Yadkin River was navigable-in-fact at the time of statehood. Specifically, the Court noted that approximately three miles of the segment of the river was characterized by the Narrows, which was a gorge that compressed 1000 feet of riverbed to a channel roughly 100 feet wide and at the bottom of the Narrows were two waterfalls each with a roughly seven foot plunge. The State produced no evidence that this portion of the river was navigable at statehood and the State conceded that the Narrows and Falls always had to be portaged. In short, the State could not prove that the entire forty-five mile segment was navigable in-fact and its claim of ownership failed.
On the other hand, Alcoa produced evidence of record title ownership of 99% of the forty-five mile segment and evidence that it adversely possessed the entire segment. Accordingly, the District Court concluded that Alcoa owned the riverbed in this forty-five mile segment of the Yadkin River by the means of record title, North Carolina Marketable Title Act and North Carolina law of adverse possession.
The law of proving title to real property is arcane. The Alcoa decision is quite instructive as to the intricacies of various means to prove title in court and the burden of pleading ownership of real property. Once a party alleges ownership, the party must prove ownership of the property the party alleges it owns.
Because vesting ownership of beds of navigable water bodies is triggered by a state becoming sovereign under the Constitution of the United States, proving ownership by this mode of transfer is controlled by Federal law. Federal law requires a state to prove that at the date of statehood a water body was navigable, in fact as a highway for commerce over which trade and travel may have been conducted in the customary modes of that time. In many cases involving segments of rivers located far from the coast, it will be impossible to satisfy this burden of proof.
On the other hand, the public trust doctrine concerns the public’s access to waters above riverbeds for the purpose of navigation, fishing, and other recreational uses. Federal law provides that the public trust doctrine is controlled by state law and does not depend upon the United States Constitution. States retain residual power to determine the scope of the public trust over waters within their borders.
Part II addresses the recent North Carolina Court of Appeals’ decision applying the North Carolina public trust doctrine to North Carolina beaches.
Thursday, October 22, 2015, 11:05 AM
Planning for the Future and Knowing the Past
Planning for the Future
Planning is words on a page and lines on a map. It is not reality, but a projection of the future. And the future is uncertain – just ask those who predict when the Federal Reserve will raise interest rates.
A North Carolina Water and Sewer District possesses authority to charge fees “for the use of or the services furnished or to be furnished.” In Point South Properties, LLC v. Cape Fear Public Utility Authority, (October 20, 2015), the North Carolina Court of Appeals addresses when a water and sewer district possesses authority to impose fees for services “to be furnished.”
Two facts were prominent in the case. First, the fees were assessed against properties already served adequately by a private water company and the property owners who had paid the fees had no desire to be served by the District, now merged into defendant Cape Fear Public Utility Authority. Second, the District’s plans to furnish services to these properties were general, vague and without a timetable. Accordingly, the Court of Appeals concluded that there was no evidence that the defendants “have ever planned for water and sewer service to be furnished to the subject properties” and affirmed summary judgment for the plaintiffs on their claim that the District’s imposition of impact fees was ultra vires.
But the future is uncertain in so many unknowable ways. Is redundancy of water/sewer services unwise planning? What if, when a district charges a fee, it intends to furnish services in the future but a private water company extends services sooner? Should fees be refunded? What if the private utility fails and citizens need water and sewer services from a district? What if real plans are made but current funding is inadequate to extend services? Recognizing that appropriate and fair application of law in these circumstances is fact specific, the Court of Appeals expressly declined “to state any criteria, guidelines or standards for determination of whether evidence in a particular case is adequate to support assessment of impact fees for services ‘to be furnished.’”
Knowing the Past
The past is known. In Point South, the Court of Appeals holds that (1) a ten year statute of limitation applies to claims where a party asserts a government lacks authority to impose impact fees and (2) the equitable defense of laches (delay) does not apply to such claims.
Consequently, any person paying a governmental fee possesses an option to bring a lawsuit, exercisable solely in the discretion of the payor, at any time for ten years. A decade is a long time and with the benefit of knowing the past - how facts, relationships and law have changed during the option period, the payor makes an informed decision. Perhaps, the payor has sold the property and cares little about the services available to it. Or perhaps a private utility company fails to provide quality services at a reasonable price and the payor demands services from a district. Or perhaps law evolves, improving the party’s odds of success. Real Option Analysis informs us that a ten year option is quite valuable. After all, who knows the future?