tag: North Carolina Land Use Litigator: September 2014

BLOGS: North Carolina Land Use Litigator

Click here to receive posts via email.


Follow @NCLandUseLaw


Powered by Blogger
Add to Technorati Favorites

Tuesday, September 30, 2014, 11:43 AM

Academic Paper: Growing Trend of Criminal Prosecution of Actors In Land Use Matters

A recent paper from Professor Patti Salkin (of Law of the Land fame) and her former student Bailey Ince addresses the growing and alarming trend of criminal pitfalls in the land use law and land use entitlement context, and the accordant prosecution of actors falling into those abysses.  The paper is titled It's a Criming Shame: Moving from Land Use Ethics to Criminalization of Behavior Leading to Permits and Other Zoning Related Acts, published this year by the Touro Law Review.

Specifically, Professor Salkin and Mr. Ince discuss how yesterday's ethical issues in the land use context -- conflicts, self-interests, ex parte behaviors, and outright corruption -- are becoming today's criminal acts:
In the past, land use ethics inquiries predominantly involved conflicts of interest or an official holding public office while engaging in a previously held business or law practice.  Now, prosecutors are looking at the underlying criminality of the unethical acts carried out in the context of land use decisions.
The paper reviews anything from bribery for land use actions and entitlements to services in exchange for rezonings to campaign contributions in exchange for permits to extortion by public officials to solicitation of bribes by public officials to expedite permit processes to theft of honest services to, even, conspiracy claims as to attorneys involved in criminal behaviors.

The paper is a keen reminder of the unique intersection between the stakes of land use decisions, the intimacy of local politics and business, the lack of sophistication threatening those without proper resources, and the growing public sentiment against graft, cronyism and corruption.

   
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.

Labels: ,

Dominion's Atlantic Coast Pipeline: Property Owners Are Being Contacted

It was reported back in May 2014 that Dominion Resources, Inc. was considering at the time, an "extremely preliminary" prospect, the construction of a 450-mile underground natural gas pipeline from West Virginia, through Virginia, leading to southern North Carolina, with North Carolina spurs running to Raleigh and Fayetteville.

Now it sounds like a virtual done deal, though we can't quite tell yet who is in the driver's seat.  It was reported this week that Duke Energy and Piedmont Natural Gas "have selected" Dominion Resources, Inc. to build a pipeline.  The 550-mile "Atlantic Coast Pipeline", which will range in diameter from 36-inches (in North Carolina) to 42-inches (in West Virginia and Virginia), will transport natural gas from the Utica and Marcellus shale basins in West Virginia, Ohio and Pennsylvania.  The pipeline is reported to be owned as follows: 45% by Dominion Resources, Inc., 40% by Duke Energy, 10% by Piedmont Natural Gas, and 5% by AGL Resources.

According to North Carolina Governor Pat McCrory, Dominion's Atlantic Coast Pipeline will (1) create jobs (740 workers and 52 operations employees), (2) create "greater availability means" to natural gas, which will moderate rate spikes for the residential, commercial and industrial consumer, (3) generate a "$680 million boost to the [North Carolina] economy", and (4) stabilize power sources and rates, which have been causes of North Carolina losing "some companies".

Dominion's Atlantic Coast Pipeline still needs approval from the Federal Energy Regulatory Commission (FERC), but, pending approval, is expected to go online in 2018.  This seems to us to be a tight timeframe, which brings us to a land use point: necessary easements.  

The pipeline will need to go in the ground, the ground will need to be the ground of others, the ground of others will need easements in the name of the pipeline, and the easements will require gift, negotiated purchase or eminent domain.  We understand that Spectra Energy Partners, LP and Dominion Pipeline Company have already sent notices to some property owners "within a 400-foot wide corridor of the proposed route to ask for permission to survey their land", which will be the first of many steps in the process of building the pipeline.

The final route has not been decided, it's been publicly stated, but that is not far off.  Therefore, if one has received a notice, or has otherwise been approached by one of the companies involved in the process about land, one should begin work as soon as possible to best position for working with and through this process.  Yes, that includes working with counsel.

"We'll call this the 'Andy Dufresne Memorial Highway' Pipeline."

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.

Labels: , , ,

Monday, September 29, 2014, 9:51 AM

Public Comment Period Closing As To Raleigh's Citywide Zoning District Remapping Project

The City of Raleigh's planning staff is in the final days -- literally, two days -- of the period in which it will accept public comments from citizens on the City's Zoning District Remapping Project, about which we've blogged here and here.  We've also drafted an easily digestible summary of the Zoning District Remapping Project process, available here.

Public comment in this phase of the Raleigh Zoning District Remapping Project closes September 30.

Approximately 30% of Raleigh's land area is proposed to be rezoned under the Zoning District Remapping Project.  The City has mailed 45,354 postcards to property owners within Raleigh's planning jurisdiction (which is beyond the City limits, notably) announcing that their property, or property adjacent to theirs, is proposed to be rezoned.

Public comment closes on September 30, after which the final draft map of the Zoning District Remapping Project will be delivered to the City's Planning Commission on October 14 for its review. A public hearing will be held before the City Council prior to final action on the final draft map, however property owners and neighbors are well advised to "get in" before the process moves too far down the road.


"An ounce of prevention is worth a pound of cure.  Yes, even when it comes to zoning."

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.

Labels: ,

Tuesday, September 23, 2014, 10:05 AM

Land Use and Successful Development Projects: "The Payoff of High Quality Design Can Be Big"

It's the first day of autumn.  We at the North Carolina Land Use Litigator thought we'd take this chance to look at the world of real estate and land use a little differently.

Our study takes us this morning to urban planner Roger Lewis's piece from The Washington Post, entitled "Building a Beautiful, Durable and Sustainable Streetscape Is a Team Effort".  

We've been talking for years about the intricacies of land use planning, the cooperation and complex solutions required for the development of any project.  Well, this piece addresses the nuance, opportunity and challenge real estate development faces with something as seemingly "basic" as street design.  From the article:
Planning, constructing and maintaining streets is not just a utilitarian matter. Streetscapes constitute the public realm we all see, share and use every day.  Designing that realm, like designing good architecture, should aspire to achieve aesthetic as well as practical goals.  A good street is a public space, one that can be visually appealing as well as functional and sustainable.
***
Applying conventional standards may be necessary but is never sufficient.  To achieve quality, to offer aesthetically satisfying experiences for users, street design must go beyond conformance with technical criteria.  Creating a beautiful, durable and ecologically sustainable streetscape requires a multidisciplinary team.  Talented urban designers, landscape architects and graphic designers, in addition to technically proficient civil and environmental engineers, must work collaboratively.
***
Compared with the cost of engaging a team to collaboratively design a street, the cost of construction and then decades of maintenance is enormous.  Yet the payoff of high quality design can be big: a beautiful, sustainable public space through which driving, walking and biking is a delight.
You thought land use and structure design would be the most harrowing decisions?  Not always. Lighting.  Plantings.  Access.  Colors.  And, yes, streetscapes.  These can all matter, and the public and the politics are just as likely to cite federal, state or local law as to cite an article like Mr. Lewis's piece in support of a particular vision.  

Thus, having a good team of planners, engineers, businesspeople and lawyers will ensure that every step of any development project is crafted, tuned and positioned for success.

"Walt Disney should have followed our design, huh?"

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. 

Labels: , , ,

Friday, September 12, 2014, 1:56 PM

N.C. Supreme Court Issues Significant Ruling On Commercial Forbearance Agreements and Spousal Guaranties

On August 20, 2014, the North Carolina Supreme Court issued an opinion giving great weight to properly-drafted forbearance agreements in a commercial loan and guaranty context.   RL REGI N.C., LLC v. Lighthouse Cove, LLC, No. 427PA13 (N.C. Aug. 20, 2014) reverses the Court of Appeals decision from 2013, which focused on a defense pursuant to the federal law Equal Credit Opportunity Act ("ECOA").  


The Supreme Court's decision in RL REGI is a significant victory for lenders in North Carolina not only for what it says (highlighting the immeasurable value of well drafted loan documents) but also for what it abrogates (the lower court's holding that the ECOA is valid defense to a spousal guaranty in a commercial loan context).  

We begin this piece by noting that one of the editors of this blog was involved in this matter at the trial stage on the lender side.  Though that involvement was ultimately only on the behalf of the original lender, which was not involved at the trial stage or the appellate stage. 


The borrower and the guarantors defaulted on the forbearance agreement, and debt holder RL REGI foreclosed on the property and filed a lawsuit against the borrower and guarantors.  



Facts
Regions Bank provided over $4 million in financing for the acquisition and development of real property near Wilmington, North Carolina. The loan was secured by the real property, and the loan was backed by personal guaranties of the borrowers’ individual business partners and their spouses.  The wives were not officers of, employees for or otherwise involved in the borrowing entity though nonetheless executed personal guaranties.  

As the economy took a poor turn -- we all remember those days -- the borrower and the guarantors defaulted on the loan.  After default, and before foreclosure on the real property, the borrowing entity and the individual guarantors -- two couples, husbands and wives --  entered into a single, omnibus forbearance agreement. The forbearance provided that the lender would forego exercising its remedies under the loan documents (note and the personal guaranties) for a defined time period in exchange for certain agreements from borrowers and guarantors.  The forbearance agreement acknowledged the validity and enforceability of the loan documents and the agreement included a “Waiver of Claims” section, whereby the borrowers and guarantors specifically waived and released any claims that the lender failed to act in good faith or conduct itself in a reasonable manner and generally released the lender from “any and all claims, defenses and causes of action” that occurred prior to the date of the forbearance agreement.  After the execution of the forbearance agreement, the loan was purchased from Regions Bank by a different entity, debt holder RL REGI North Carolina, LLC.

The Lawsuit and the "Equal Credit Opportunity Act" Defense
The foreclosure was granted, but appealed.  The appeal stayed while the parties litigated the separate lawsuit against the borrower and the guarantors.  Along the way, summary judgment was entered against the borrower (a single asset entity), one of the guarantors filed personal bankruptcy, and the other two guarantors settled with the debt buyer.  Thus, the lawsuit proceeded against the last guarantor, alone, whom we will call the "Spouse Guarantor".  That Spouse Guarantor is the wife of the bankrupt guarantor, and she claimed no leadership, operational or employment role in the borrowing entity.


At trial, the Spouse Guarantor asserted an affirmative defense that her guaranty was obtained in violation of the ECOA.  At its core, the ECOA affirmative defense stated: (1) Spouse Guarantor did not offer to serve nor was she offered by the borrower to serve as a personal guarantor to the loan, (2) Spouse Guarantor was required by Regions Bank to guaranty the loan simply because she was the spouse of an officer of the borrowing entity, and (3) Spouse Guarantor was required to serve as personal guarantor despite that Regions Bank did not first determine the creditworthiness of Spouse Guarantor's husband, a valid guarantor (i.e., Regions Bank did not first determine the financial strength of husband's guaranty before requiring wife's guaranty).

The trial court found that the guaranty violated the ECOA and denied recovery on Spouse Guarantor's personal guaranty.


The North Carolina Court of Appeals
The N.C. Court of Appeals affirmed the trial court.  Most notably, in a case of first impression, the Court held that the ECOA may be asserted as an affirmative defense in the context of a spousal guaranty as opposed to a claim for relief or for recoupment, an issue over which courts are split.  

tThe Court of Appeals:  "A number of other state and federal courts have addressed this question [as to how to treat the ECOA] and have typically resolved it in one of three ways....  The first approach requires that a debtor can only assert an ECOA violation as a claim or counterclaim for damages, a position supported by Plaintiff in its brief....  The second approach allows a debtor to assert an ECOA violation as an affirmative defense in the nature of a 'recoupment.'....   The third approach allows a debtor to assert an ECOA violation as an affirmative defense based on the defense of illegality....  We believe that the third approach above is the most consistent with the law of this State and, therefore, we hold that a guarantor-spouse may assert an ECOA violation as an affirmative defense in an action brought by a lender."  

The significance of this decision for lenders in North Carolina could not have been overstated: in most instances, the limitations period for such ECOA claims had long run, as it did in this case, but the limitations period does not affect the ECOA as an affirmative defense.   In other words, if the ECOA is a valid affirmative defense in North Carolina, as it was determined to be by the Court of Appeals, there is no limitations period applicable to invalidate the ECOA defense.

In the wake of this Court of Appeals decision, a number of commercial guaranties governed by North Carolina law were, overnight, rendered toothless.


The North Carolina Supreme Court
The North Carolina Supreme Court reversed the Court of Appeals in RL REGI North Carolina, LLC v. Lighthouse Cove, LLC, No. 427PA13 (August 20, 2014).  However, the Supreme Court did not address the Court of Appeals' analysis of the ECOA and how it is to be treated in North Carolina.  Rather, the Supreme Court focused on the forbearance agreement.  

The Supreme Court determined that the trial court improperly allowed the Spouse Guarantor to assert a defense that she waived under the forbearance agreement, thus depriving RL REGI of the benefit of its contractual bargain.  The Spouse Guarantor had previously argued (and ultimately unsuccessfully, to the Supreme Court) that the forbearance agreement lacked consideration as to Spouse Guarantor because the guaranty on which the forbearance was based -- the "only" consideration as to Spouse Guarantor, according to her -- was invalid.

Specifically, the Supreme Court held that parties are free to waive various rights, including those arising under statutes. Although the guarantor did not specifically waive the ECOA defense in the forbearance agreement, the Court found the “comprehensive language contained in the agreement” and “overall expansive language of the waiver” to be sufficient to include any potential claim or defense. Ultimately, the Court stated that “a waiver of potential defenses to the guaranty, including a potential defense for a violation of the ECOA, was a part of defendant’s decision to accept the benefits of the forbearance agreement."



What's It All About, Alfie?
The Supreme Court's decision in RL REGI is as important for what it says as it is for what it abrogates.  The Supreme Court's decision says that a well drafted forbearance agreement is a very good insurance agreement for a lender, it hits the "reset button" and it can cure potential ills with existing loan documents.  The Supreme Court's decision abrogates the Court of Appeals holding as to the ECOA:  "It is unnecessary, however, for us to determine in this case whether a violation of the ECOA occurred and, if so, whether such a violation creates an affirmative defense to the recovery of the indebtedness."

The RL REGI decision sends a clear signal that waivers and releases contained in forbearance agreements, modifications, and other loan documents will be enforced by North Carolina courts.  Lenders should be diligent in properly and fiercely documenting forbearance agreements, modifications, extensions and other restructuring documents to include adequate waiver and release language both to protect from affirmative liability and to limit defenses to foreclosure and collection.

The RL REGI decision is also a reminder to lenders to strategically evaluate the use of forbearance agreements and other modification opportunities as means to obtain lender protections and reduce risk throughout the life of a loan, including protecting the loan's value on the secondary market.

"You told me the forbearance agreement lacked consideration because of that ECOA-thingy!  And why does your mother hate me?"


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.

Thursday, September 11, 2014, 4:55 PM

A Few Zoning Notes: New Caselaw, Oakwood and Beer, Oh My!

We're going to touch on three separate topics today in this post.  First, we'll discuss a recent case from the North Carolina Court of Appeals regarding legal nonconforming uses, burdens of proof and lost zoning maps.  Second, we'll take a look at how a particular North Carolina municipality is attempting to work microbreweries into its zoning laws.  Third, we'll see what's new with the internationally-reported Oakwood home dispute, involving a "modern" house in a Raleigh historic district.


Lost Maps: The Burden of Proving (and Means of Proving) a Legal Nonconforming Use
Landowner's property in the Town of Highlands was "split-zoned" in 1983, prior to his 1993 purchase, with the front 230-foot portion zoned for commercial use and the back portion zoned for residential use.  A 1988 zoning map showing this "split zoning" was made part of the court record.

In 1990, also prior to landowner's 1993 purchase of the property, the Town made "comprehensive changes" to the zoning laws.  The Town contended that, with these "comprehensive changes", landowner's 230-foot commercial portion of the "split-zoned" property was reduced to a 150-foot portion (and, accordingly, the residential portion of the property increased in size).  However, the Town lost the 1990 zoning map showing this change, and it was not a part of the court record.  The only "evidence" of the zoning change to a 150-foot commercial portion is a subdivision plat drawn and recorded -- ironically -- in connection with landowner's 1993 purchase of the "split zoned" property.

Landowner operates a lawn and landscape business on his "split zoned" property.  In 2009, the Town issued a notice of zoning violation on account of his commercial use outside -- to the Town -- the 150-foot portion of his property on which commercial use is permitted.  Landowner appealed to the Board of Adjustment, which emphasized at the outset that it was landowner's burden to prove his business was a legal nonconforming use in light of the 1990 zoning change.  In light of the burden, the Board affirmed the zoning violation and landowner appealed to the Superior Court, which, in turn, affirmed the Board's decision.  The landowner appealed.

In Shearl v. Town of Highlands, No. COA14-113 (September 2, 2014), the Court of Appeals reversed the trial court "[b]ecause the burden of proof was inappropriately placed on [landowner] to establish the location of the zoning line when he began his nonconforming use."

The Shearl Court first notes:  "Ordinarily, once a town meets its burden to establish the existence of a current zoning violation, the burden of proof shifts to the landowner to establish the existence of a legal nonconforming use or other affirmative defense."  The Court continues:  "Here, however, [the Town] has seriously handicapped [landowner's] ability to prove the location of the zoning line in 1993 because [the Town] has lost the Official Zoning Map adopted with the 1990 zoning ordinance....  Thus, [the Town] violated its own ordinance by failing to keep official zoning maps available for public inspection. [citing NCGS 160A-77 and 160A-78]."

As far as the subdivision plat, the Town's ingenuity notwithstanding, the Court gives it the back of the hand as far as its legal significance:  "While we believe that the plat map has some evidentiary value concerning the location of the line, it must be weighed against the evidentiary value of the 230-foot line depicted on the official 1988 Zoning Map [which was in evidence in the whole record]."  Thus, though the matter is remanded and the Board may hear the matter anew, unless the Town can come up with the 1990 zoning map, it will be a difficult, if not impossible, task of proving a zoning violation.


Zoning for Beer
This comes to our attention courtesy of our friend and former colleague Professor Tyler Mulligan of the U.N.C. School of Government.

North Carolina is home to more than one hundred breweries, most of which take hold in the Piedmont and the western part of the State.  Nevertheless, a City in the eastern part of the State -- Wilmington -- is trying to "carve out" some zoning rules to encourage development of this growing industry.

According to reports, "There are now land use classifications for microbreweries, which are under 25 thousand square feet, and small regional breweries, which are under 75 thousand square feet. Large breweries will still be kept in the industrial district."


To us, this illustrates well  (1) how zoning is a living, breathing thing, (2) at its best, how zoning serves to organize, integrate and protect uses of land, and (3) how zoning can aspire to stimulate, rather than deflate, economic growth.



Oakwood House
We've blogged in the past here about the Oakwood saga.  Well, it's not over.  This stage is over, but the saga is not over.  Today, after two long days of argument in late August, it's reported that the Superior Court has indicated it will rule in favor of the landowner and the City -- and against the neighbor and the City's Board of Adjustment -- and will reverse the Board of Adjustment's decision rescinding the certificate of appropriateness.  In other words, the Board's decision will be reversed and the certificate of appropriateness, which entitles homeowners Mr. Cherry and Ms. Gordon to a building permit for their "modernist" home, will be issued.

The neighbor, Ms. Weisner, has 30 days to appeal the Superior Court's decision to the Court of Appeals when it is entered, which the neighbor indicates she "definitely" will do.  In other words, it looks like we're movin' on up.

A word to Mr. Cherry and Ms. Gordon: wait until the 30 days runs without an appeal, or the legal proceeding runs its full course, before you build any more.


"I'd never appeal something against you guys. Well, I'll probably appeal that toupe, Mr. Lion."

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, September 9, 2014, 3:19 PM

Land Use Litigator Video Series: Municipalities in North Carolina

In the latest video installment from the North Carolina Land Use Litigator, John Cooke and Mike Thelen get into the details of that unique political species: the "municipality" (really, the legal name for cities and towns).  In this episode, Mike and John address:

-- What is a "municipality" in North Carolina, and is it different from a "county"?
-- What powers do municipalities possess that general State government lacks, and why is there such a discrepancy between State and municipal powers?
-- What kinds or types of powers do municipalities possess, and how are these powers unique?
-- What are the effective means of working with and/or communicating with a municipality, as a developing entity?

The video can be accessed here.


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.
back to top