tag: North Carolina Land Use Litigator: August 2014

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Wednesday, August 6, 2014, 3:10 PM

N.C. Court of Appeals Reviews Commercial and Residential Summary Ejectment Cases

This week, the North Carolina Court of Appeals waded in waters it doesn't often visit: the back pools of summary ejectment.

Summary ejectment, for those who don't know, is a statutory procedure for residential or commercial eviction in North Carolina.  The unique process is governed by Chapter 42, Article 3 of the North Carolina General Statutes.

Two cases are on today's docket: (1) a commercial case involving the question as to whether a breach must be "material" to justify ejectment irrespective of lease language, and (2) a residential case involving the question as to whether the District Court (the appellate court for statutory summary ejectment cases) has jurisdiction to hear an appeal as to a defendant tenant's counterclaims, where the defendant tenant was successful at the ejectment stage.

Commercial Case
In GRE Properties Thomasville, LLC v. Libertywood Nursing Center, LLC COA 13-1180 (August 5, 2014), the Court considered the defendant's argument that North Carolina law "requires breaches of a lease to be material to justify summary ejectment" and defendant's demand that a jury instruction include such a requirement.

The GRE Properties Court affirmed the trial court's refusal to include the "material breach" requirement in an instruction, declining to read such a requirement into the "purely statutory" paradigm of summary ejectment.  Rather, the Court states the law that "a breach of the lease cannot be made the basis of summary ejectment unless the lease itself provides for termination by such breach or reserves a right of reentry for such breach".  In applying that law to the facts, the Court swiftly notes that "Section 19.1 of the lease provided for termination of the lease upon breach of Sections 5.5 and 8.1".

The terms of the lease and State statutory law prevail, in terms of what will permit eviction.  A breach need not be "material" if the landlord and tenant agreed to landlord's reentry and repossession in its event.

Residential Case
In 4U Homes & Sales, Inc. v. McCoy, COA 13-1450 (August 5, 2014), the Court considered cross appeals from plaintiff landlord and defendant tenant regarding judgment in defendant tenant's favor as to her counterclaims.

The facts of this case are involved and sordid, as they often are in residential eviction cases, and are not especially relevant to what we're discussing here.  Rather, procedural posture is what interests us today.

The procedural posture is as follows: (1) plaintiff landlord filed an ejectment action in small claims court, (2) defendant tenant answered in small claims court, denying the ejectment action's allegations and asserting counterclaims, (3) the magistrate judge dismissed plaintiff's summary ejectment suit and entered judgment in defendant's favor as to all of her counterclaims, awarding the jurisdictional maximum of $5,000.00 in rental abatement to defendant, and (4) on appeal from small claims court, the district court entered a judgment dismissing Plaintiff’s claim for summary ejectment, finding in plaintiff landlord’s favor with respect to defendant tenant’s counterclaims for unfair debt collection and unfair
and deceptive trade practices, and awarding defendant tenant $3,705.00 in compensatory damages for plaintiff landlord’s breach of the implied warranty of habitability.

The parties both appealed, though plaintiff landlord did not appeal the dismissal of its ejectment suit.  Rather, plaintiff landlord appealed the judgment as to defendant tenant's counterclaims and the defendant tenant appealed the same.

The 4U Homes Court outlines the two options available to a summary ejectment litigant wishing to assert counterclaims that exceed the $10,000.00 jurisdictional amount: (1) counterclaimants "may either assert their claims on appeal to the District Court from an adverse decision by the magistrate", or (2) counterclaimants may "assert those claims in an entirely separate action".

The 4U Homes Court vacated the District Court's judgment in defendant tenant's favor, which resulted from an appeal from the small claims court, because defendant tenant "received the maximum amount of relief available in that [small claims] forum" such that the appellate court is "unable to see how any of her legal rights were adversely affected" such that defendant landlord had the right to appeal to the District Court.  Essentially, the defendant tenant is limited to the judgment entered at the small claims court level by the magistrate judge, and she is certainly not an "aggrieved party" able to appeal the limited judgment.  Defendant tenant's failure to avail itself of the two options noted above with respect to a counterclaim exceeding the jurisdictional amount limits her recovery.

"I guess we can call this 'deconstructive eviction'."

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.

Tuesday, August 5, 2014, 4:42 PM

N.C. Court of Appeals Speaks On Zoning Issues: Consistency Statements, Legislative Records and Attorney Fees

The North Carolina Court of Appeals has spoken twice in recent weeks on zoning issues.  Let's review.

Zoning Ordinance Amendments and Consistency Statements
First, in Atkinson v. City of Charlotte, COA 13-226 (July 29, 2014), the appellate court addressed an application to a text amendment of the North Carolina Supreme Court's 2012 decision in Wally v. City of Kannapolis, 365 N.C. 449 (2012) .  Specifically, the Atkinson Court addressed the City's argument that Wally stands for the proposition that judicial review is limited to "whether the City Council approved a [consistency] statement" in the course of approving an amendment to the text of the City's zoning laws.

In Atkinson, the City's consistency statement provided quite simply, "This petition [to amend the zoning laws] is found to be consistent with adopted policies and to be reasonable and in the public interest."

The Atkinson Court determined that the above consistency statement, while "more specific[]" than the "generalized statement" deemed legally insufficient in Wally, still runs afoul of N.C.G.S. 160A-383 and Wally: "The Statement of Consistency adopted by the City Council in the instant case cannot reasonably be said to include an 'explanation' as to why the amendment is reasonable and in the public interest under the plain meaning of that term."

The Atkinson Court reminds that the language of N.C.G.S. 160A-383 and the Supreme Court's decision in Wally are not just about the adoption of a consistency statement, but an adoption of one -- as to "any zoning amendment", text or map -- that "briefly explain[s] why the board considers the action taken to be reasonable and in the public interest."

Spot Zoning and Attorney Fees Pursuant to N.C.G.S. 6-21.7
Second, in Etheridge v. County of Currituck, COA 13-834 (August 5, 2014), the appellate court addressed the illegality of a case of stipulated spot zoning and issued the first true explication of a relatively new attorney fee statute, N.C.G.S. 6-21.7.

The parties agreed that the County's rezoning of a 1.1. acre parcel from agricultural to "Conditional District - Heavy Manufacturing", while the surrounding parcels were virtually all zoned agricultural (with one zoned "general business"), constituted spot zoning.  The County, of course, claimed the spot zoning to have a "reasonable basis" while the plaintiffs disagreed with that position.

A.  Spot Zoning - Benefits Outweigh Detriments
The County argued that the spot zoning is reasonable because its benefits outweigh its detriments.  Specifically, the County argued the proposed recycling center that would result from the spot zoning (upon the issuance of a special use permit, mind you) (1) would "create three to four jobs"; (2) would "allow for dilapidated structures on the property to be rehabilitated"; (3) would "allow county citizens to dispose of their unwanted metals"; and (4) would "make use of a railroad siding".  In addition, a County commissioner stated that he "witnessed support for the rezoning from twenty-eight of thirty-three attendees at a preliminary community meeting regarding" the rezoning.

The Etheridge Court didn't buy the County's benefits/detriments argument, noting that "the benefits from the rezoning proposed by defendants are not supported by any evidence presented at the public hearing".  Instead, the Etheridge Court continued, the record before the legislative body supported the plaintiffs' position opposing the spot zoning, which included the statements of two real estate professionals, the Currituck County Sheriff and a representative from the North Carolina Department of Cultural Resources.

B.  Spot Zoning - Relationship of Uses
The County also argued that the spot zoning is "consistent with the uses allowed or occurring on adjacent properties".  The County insisted that the most recent use of the property as a granary is less consistent with the surrounding property than is the proposed recycling center, and, in any event, the requirement of a special use permit for the intended recycling center gives the County another "pass" to control the use on the property.

The Etheridge Court didn't buy this argument, either.  The Court pointed out that past uses are "immaterial" to a spot zoning analysis, and the Court determined that the County and the property owner "have presented no evidence that the recycling center has been designed to be integrated into the surrounding area".

Note, again, how the record at the legislative stage failed the County and the property owner in an obviously controversial rezoning.

C.  Attorney Fees
We allude above to the importance of this decision as the "the first true explication of a relatively new attorney fee statute, N.C.G.S. 6-21.7."  In the interest of time and space, we'll take a closer look another time.

Suffice it to say, however, that the Etheridge Court affirmed the trial court's denial of the claim for attorney fees in the face of the County's illegal spot zoning of the 1.1 acre parcel.

The plaintiffs argue that (1) “illegal spot zoning is always outside the scope of the County’s legal authority and always an abuse of discretion and, therefore, once it is determined that illegal spot zoning occurred, the Trial Court is required to award attorney’s fees"; and (2) "the undisputed facts of the case sub judice are particularly egregious and further demonstrate the County’s abuse of discretion in approving the rezoning.”  Notably, the plaintiffs appear to have limited their appeal to their right to "mandatory" award of fees, rather than the discretionary award also provided for in the statute.

The Etheridge Court buys neither argument.  As to the first argument, the Court notes the analytical distinction between illegal spot zoning ("outside the scope of [] legal authority") and a mandatory award of fees ("an abuse of [] discretion").  As to the second argument, the Court allows the County the benefit of the few statements in the record supporting the rezoning (which, of course, were not sufficient to overcome the illegal spot zoning analysis).

In short, as to fees, the appellate court's initial in-depth review appears to be a conservative one.

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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