BLOGS: North Carolina Land Use Litigator

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?  

Wednesday, September 16, 2015, 5:14 PM

Do You Have A Duty To Cross The Rubicon?

Property boundaries have great significance in law and life.   Julius Caesar crossed the Rubicon, the boundary between Gaul and Italy in violation of Roman law, and nothing was the same for him thereafter.  

The recent North Carolina Court of Appeals’ decision in the case of Parker, et al. v. Town of Ervin, et al. (September 15, 2015), reaffirms the importance of property boundaries.  They make a difference.

In Parker, the plaintiffs attended the Town of Erwin’s Christmas Parade.  When the Parade was over, they started walking toward a restaurant.  It was after 8:00 p.m. and the sun had set at 5:01 p.m.   Their son was struck and died while crossing a private alley because, allegedly, among other reasons, the alley was unlit.

The plaintiffs sued the owner of the building adjacent to the private alley, alleging that the property owner had been negligent because he had not installed an outside light on his building to light the alley.  The trial court dismissed the claim and the North Carolina Court of Appeals affirmed.

Generally, a property owner’s duty extends only as far as his boundary line.  The owner has a duty to exercise reasonable care to assure his property is free of dangerous conditions.    Land located on the other side of the boundary line is not under the owner’s control and therefore, the owner has no duty, even when he knows a dangerous condition exists on adjacent property, to cross the boundary.  He need not cross the Rubicon to restore order in Rome.

Like Caesar crossing the Rubicon, when the property owner crosses his property line, it has consequences.   The property owner may be liable for injuries occurring on other people’s property.  For example, when syrup from the owner’s candy company flows onto adjacent property causing a dangerous condition, the adjacent property owner is liable. 

In Parker, darkness was not caused by the adjacent property owner; it was dark because the sun had set.   While a light directed toward the alley from the adjacent building might have improved the visibility, the adjacent property owner had no duty to direct light onto his neighbor’s property.

What if the adjacent neighbor had installed and directed a light toward the private alley, could the incident have been avoided?  Perhaps, or perhaps the light causes glare, blinding the driver or the child.  In that situation, the property owner crosses the Rubicon and is responsible.

As Caesar learned, it is safer to stay on your side of a boundary line.

Monday, August 31, 2015, 4:01 PM

Taking and Valuing Raisins

The United States Supreme Court ruled that the United States government cannot take a citizen’s raisins without paying for them.  Horne v. Department of Agriculture, __ US__ (June 22, 2015).  Standing alone, the ruling is unsurprising.

Taking raisins without paying had been occurring for years - many years - under the Agricultural Marketing Agreement Act of 1937.  The Secretary of Agriculture publishes marketing orders for particular agricultural products with the aim of maintaining stable markets.  Under these orders, a reserve requirement is established and a group of raisin growers and others in the raisin business acting as the Raisin Administrative Committee ( the “RAC”) set the percentage allocation of reserves each year.    Reserve raisins are transferred to the government without compensation.   The RAC disposes of the reserved raisins by gift or sale.  The growers retain an interest in the net proceeds, if any.  The Hornes refused to transfer the reserved raisins to the government.

The Taking
In an 8 to 1 decision, the Supreme Court had little trouble concluding that a per se taking occurred.  The government physically took possession of an interest in private property.   The facts that (1) raisins are personal property and (2) the owners continue  to possess an interest in net proceeds were irrelevant. 

Two observations:

  1.        No matter the longevity, proper purpose or general acceptance of a government program, taking physical possession of an interest in private property is potentially a per se taking. 

2           2.       Taking physical possession of an interest in private property in exchange for a valuable governmental benefit, such as a development permit, is a voluntary exchange – not a taking.  But not all governmental benefits – such as an orderly raisin market - are sufficient to avoid a taking.   

Just Compensation

Of the eight Justices finding a taking, five concluded that the just compensation was the fair market value of the raisins.  The calculation of just compensation was easy.  The government had levied a fine in the amount of the fair market value of the raisins. The Hornes’ just compensation was relief from the fine and associated civil penalty.

The other three Justices concluded that enhancement of the fair market value of the raisins caused by the marketing order – controlling the supply of raisins – should be deducted from the fair market value of the raisins.  These Justices observed that the benefit of the marketing order could equal the fair market value of the raisins, causing the taking to not violate the Constitution –just compensation had been paid.

Two observations:

1.       After litigating this case since 2004, the Hornes avoided the fine and civil penalty and kept the reserve raisins.

2.       Had the government not established the fair market value of the raisins by its fine, the case might have been remanded for determination of just compensation. 


A.      A per se taking occurs when the government takes physical possession of an interest in private property unless the government grants a valuable economic benefit, such as a permit or a license.  What constitutes a valuable economic benefit is uncertain.   

B.      Governmental programs may enhance the fair market value of private property by regulating supply.  For example, a government may regulation the number of raisins in the marketplace or size and number of shopping centers in a town.  Whether these enhancements to fair market value of property reduce the amount of just compensation is uncertain.   

C.      If taking of physical possession of a property interest and calculation of just compensation is as nuanced as Horne indicates, then non-physical takings – regulatory takings – are understandable more complex. 

Tuesday, August 4, 2015, 2:32 PM

Three-Judge Panel Invalidates State's Efforts to Spay/Neuter Town's Planning and Development Regulation Powers

Today, a three judge panel of the North Carolina state court declared unconstitutional a State law that blocks a municipality -- one municipality -- from exercising its power to create an extraterritorial planning jurisdiction, or "ETJ".

Thanks to my colleague Laura DeVivo (author of the incredible Keeping Up With Jones Street blog) for pointing me to the decision.  

The Law
Last summer, the North Carolina General Assembly adopted a law that states as follows:

Notwithstanding any other provision of law, the Town of Boone shall not exercise any powers of extraterritorial jurisdiction as provided in Article 19 of Chapter 160A of the General Statutes.

That's it.  That's the law.  Ordinarily, I'd link to a law.  Or, just maybe, I'd post a portion of the law.  Not here.  This is the entire law.

It's a so-called "local law" because it applies to a specific municipality.  After all, the law is entitled, "AN ACT PROVIDING THAT THE TOWN OF BOONE SHALL NOT EXERCISE THE POWERS OF EXTRATERRITORIAL JURISDICTION".  That's pretty local.  It's Session Law 2014-33.

Ok, What's an ETJ?
Since 1959, North Carolina municipalities have been vested with the power to apply their land development regulations to a perimeter area outside their corporate limits.  This is the extraterritorial planning jurisdiction, or "ETJ".  Once a municipality establishes its ETJ, the municipality has exclusive jurisdiction for development regulations in the ETJ; in short, the municipality's development regulations are to the exclusion of the county's development regulations.  See, generally, N.C.G.S. 160A-360 and about anything from Professor Dave Owens on the subject.

A municipality is not empowered to apply a development ordinance in the ETJ that it is not also applying within the municipal corporate limits.  But municipalities are not required to apply all of their development ordinances that apply within the corporate limits.  In other words, the ETJ can be development regulation light as compared to the corporate limits; but the ETJ cannot be development regulation heavy as compared to the corporate limits.

A number of North Carolina municipalities have adopted ETJs.  Including Boone.

So, What's Going On?
It seems N.C. Senator Dan Soucek (R) did not appreciate the Town of Boone's exercise of its ETJ powers.  Accordingly, in 2014, he sponsored legislation.  That legislation became Session Law 2014-33.

The Town sued, claiming the law violates the State Constitution's prohibition that, "The General Assembly shall not enact any local, private, or special act or resolution ... [r]elating to health, sanitation, and the abatement of nuisances."  N.C. Constitution, Art. II, sec. 24(1)(c).  You can read the Constitution for yourself, here.

On July 29, a three judge panel of the North Carolina courts agreed with the Town:  "The Court herewith enters summary judgment declaring that the revocation of the Town of Boone's power of extraterritorial jurisdiction by Session Law 2014-33 (Senate Bill 865) is unconstitutional pursuant to the prohibition on local acts contained in Article II, Section 24 of the North Carolina Constitution and the Act is therefore enjoined."

There are procedural issues at play, but we'll leave that analysis to someone with more time.  For our purposes, we're interested in the summary judgment decision.

We learned again today that what is usually thought of as a local act -- zoning -- is free from the State's efforts at a, um, "local act".

We'll see if the State appeals.

"And don't forget to have your municipalities spayed or neutered."

Mike Thelen practices in Womble Carlyle's Real Estate Practice Group out of the Firm's Raleigh office. He regularly represents a wide variety of clients, from local governments to businesses, in land use and real estate development litigations and transactions in state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw here and on Instagram at NCLandUseLaw here.

N.C. Court Reminds Litigants of Need to Preserve "Status Quo" When Appealing Denial of Preliminary Injunction

Today, we're looking at Shoeheel Farms v. City of Laurinburg, COA14-1089 (August 4, 2015).  The Court of Appeals dismissed as moot property owners' appeal of a trial court's decision denying a temporary restraining order and preliminary injunction.

The City of Laurinburg and a property owners entered into a Memorandum of Understanding in which property owners authorized the City to drill test wells on their property.  Should the tests reveal that the well locations were suitable for public use, the Memorandum of Understanding continued, the City and the property owners “shall negotiate a mutually agreeable purchase price of the well site.”

After the tests established that the well sites were suitable for public use, the parties were unable to negotiate a mutually agreeable purchase price. Soon after, the City sent property owners a Notice of Condemnation.

Legal Posture
Property owners filed suit seeking to enjoin the City from initiating the condemnation proceedings, and they moved for a temporary restraining order and preliminary injunction to prevent the City from filing a condemnation proceeding and to prevent title and right of possession from vesting in the City upon the filing of the "quick take" condemnation complaint.

The trial court denied the TRO and the PI, and the property owners appealed that denial.  The property owners did nothing more, according to the Court of Appeals, except to notice an appeal.

In the interim -- after the trial court decision and before the Court of Appeals heard the appeal -- the diligent City filed a complaint initiating condemnation proceedings.

As a result of that condemnation complaint, the Court of Appeals dismissed the appeal as "moot".

This case is not about condemnation.  It's about litigation procedure.

The property owners "did not take any action in either the trial court or this Court to preserve the status quo pending the appeal. Consequently, the City filed a complaint initiating condemnation proceedings against plaintiffs in a separate action."  It was this shortfall that allowed the City to file its suit, and, in turn, "moot" the property owners' appeal as to the preliminary injunction to prevent the filing of a condemnation lawsuit.

The case is not over, mind you.  The property owners can still defend within the context of the City's condemnation lawsuit.  It is the opportunity to prevent that suit that has since passed.

Mike Thelen practices in Womble Carlyle's Real Estate Practice Group out of the Firm's Raleigh office. He regularly represents a wide variety of clients, from local governments to businesses, in land use and real estate development litigations and transactions in state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw here and on Instagram at NCLandUseLaw here.
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