tag: North Carolina Land Use Litigator: May 2016

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Friday, May 20, 2016, 1:45 PM

The Problem of Wearing Two Caps Simultaneously – Part I

A favorite teaching tactic in legal ethic courses is putting on and taking off different caps to illustrate the different roles lawyers play in various relationships.  This “on again/off again” routine demonstrates that the ethical rules are different depending upon which cap the attorney is wearing.

Occasionally, a teacher wears two different caps stacked on top of each other.  The teacher’s point is that lawyers look bad and make serious mistakes when they wear two caps simultaneously.  This principle can apply to governments too.

In the recent case of Town of Beech Mountain v. Genesis Wildlife Sanctuary, 2016WL2646664 (May 10, 2016), the North Carolina Court of Appeals encountered a local government wearing two caps simultaneously.  By wearing two different caps stacked on top of each other, the Town of Beech Mountain’s (Town) actions looked bad - it lost the breach of lease claim it asserted against Genesis Wildlife Sanctuary (GWS) and lost GWS’s claim for violation of GWS’s substantive due process rights. 

In Part I, we review the breach of lease claim and in a future Part 2, we will review the substantial due process claim.  
 Town of Beech Mountain v. Genesis Wildlife Sanctuary
1. The Facts
In 1999, the Town formed a 30-year lease with GWS, leasing less than an acre of land adjacent to Buckeye Lake (the “Lease”).   Buckeye Lake (the “Lake”) was the Town’s source of drinking water.  The use of the land leased to GWS was expressly restricted:

To the construction, operation and maintenance of an education center that educates the general public as to how people and wildlife may peacefully co-exist.  It is understood and agreed to by the parties that the Lessee may from time to time house wildlife upon the premises…. Further, the Lessee shall not use or knowingly permit any part of the Leased Premises to be used for any purpose which violates any law.

GWS used the leased premises for the restricted uses and constructed several structures on the leased land for these uses. 

In 2008, the Town’s policy concerning use of the Lake evolved and the Town decided to use the Lake for recreational purposes, in addition to it serving as the Town’s drinking water supply.  Because water supply lakes are subject to state water regulations, the Town received encouragement from state officials to adopt a municipal ordinance to protect the Lake’s water quality. 

In early 2009, the Town adopted a Lake protection ordinance that provided:

No animals can be caged or housed within 200 feet of the Buckeye Lake, or within 2000 feet of any stream that drains into Buckeye Lake.

At trial, evidence showed that the Town’s governing board understood and expected the new ordinance to eliminate GWS’s ability to house animals on the leased land. 

For the next three years, the Town and GWS communicated regarding GWS’s compliance with the ordinance and in March 2012, the Town sent notice of breach of the Lease to GWS, filed a summary ejection action in April 2012 and obtained a judgment of ejectment in May 2012.

GWS appealed the judgment of ejection to Superior Court and filed a number of counterclaims, including a claim that the Town had violated GWS substantive due process rights. 

The Superior Court entered summary judgment in favor of GWS on the Town’s breach of lease claim.  The jury heard evidence regarding GWS’s claim that the Town had violated GWS’s substantive due process rights and returned a damage verdict in favor of GWS of $211,142.10. 

The Town appealed both the rulings to the North Carolina Court of Appeals.  A majority of the Court of Appeals affirmed the Superior Court’s judgment in favor of GWS on the Town’s breach of lease claim, found no error in the substantive due process trial and upheld the damage verdict. 

2. The Court of Appeals' Analysis of the Town's Claim of Breach of Lease 
The majority of the Court of Appeals noted that lease forfeitures are not favored, use restrictions in leases are construed against landlords and use restrictions must be explicit and unambiguous.  Applying these principles, the majority concluded that the restriction prevented GWS “from using the leased property for an illegal purpose.” Beech Mountain p. 5 (emphasis by the Court).    “[T]he purpose of constructing, operating and maintaining a wildlife refuge and educational center “…does not violate any law.” Id.  Accordingly, GWS did not breach the Lease.

Judge Dillon dissented from the majority’s analysis and holding.  Giving the restriction a plain reading, Judge Dillon concluded that the restriction allowed the Town “to declare a default where a tenant purposefully persists in violating zoning, setback, building or other ordinances in the use of the landlord’s property.  Beech Mountain, p. 18 (Emphasis by Judge Dillon).  Accordingly, Judge Dillon would reverse summary judgment in favor of GWS.

1. Zoning laws and use restrictions in leases are both restrictions on the use of land.  The underlying rule of construction applicable to all land use restrictions is strict construction of the restriction in favor of the free use of land.
2. In Beech Mountain, the Court of Appeals encountered an unusual situation where a local government wears two caps simultaneously.  Originally, acting in a proprietary role, the Town leased land and restricted use of the leased land to an educational center permitting animals to be housed.  Thereafter, acting in a legislative role, the Town prohibited caging or housing of animals in a general area that included the land leased by GWS.  When a government wears two different and inconsistent caps simultaneously, problems arise:
·   When the Lease was made, the Town’s zoning laws became part of the Lease.   While a government possesses legislative discretion to change law, it cannot take away a vested contractual right.  Recently, the North Carolina Supreme Court applied this rule in the case of teachers. See here.

·    On the other hand, when municipality affirmatively promised, acting in a proprietary role, a tenant a right to use property inconsistent with the municipality’s existing zoning laws, the tenant cannot compel the municipality to perform its contractual duty.  See, Lewis v. City of Washington, 63 N.C. App. 552(1983), affirmed in part, reverse in part, 309 N.C. 818 (1983).  
3. The Lease did not contain an express covenant of quiet enjoyment.  Nevertheless, North Carolina law implies a covenant of quiet enjoyment in every lease.  Through this covenant, the landlord promises his tenant that the tenant will enjoy quiet and peaceful use of leased land free from disturbance by a landlord.
Although GWS did not sue the Town for breach of the Lease, it would seem problematic for a government-landlord to adopt and enforce new laws that interfere with its tenant's use of leased land without violating the implied covenant of quiet enjoyment.

4. Zoning laws regulating zoning, setback, building or other ordinances adopted after a use has been established on land do not typically render the use illegal.  Instead, existing uses are typically treated as a lawful nonconformity. 

Thursday, May 5, 2016, 12:25 PM

Searching for the Heart of the Doctrine of Vested Rights Part II

On July 7, 2015, we posted “Searching for the Heart of the Doctrine of Vested Rights.”(See here) In that post, we compared a Court of Appeals’ decision in a public school teachers’ vested rights case with a decision of the North Carolina Supreme Court in a land use vested rights case.  We asked - “What might be the organizing principle of the doctrine of vested rights?” and concluded that fairness was the heart of the Doctrine of Vested Rights.

On April 15, 2016, a unanimous North Carolina Supreme Court affirmed and modified the Court of Appeals’ decision in the teachers’ vested rights case.  We continue our search for the heart of the Doctrine of Vested Rights by comparing and contrasting the teachers’ case with land use cases.    

Essential Ingredients

Unfairness can be an abstraction or a personal feeling, but the law demands more than philosophy or passion.  The essential ingredients in every vested rights case is (1) a right (2) protected by the federal or state constitutions.

Searching for these essential ingredients triggered an important dialogue among Appellate Division judges and justices in the teachers’ case.  The question was:  When does a statute itself create a contract between the State of North Carolina and public employees – a constitutionally protected property right?  The North Carolina Supreme Court concluded that unless the repealed statute contained promissory language like “contract” or “agreement”, no contract was created.  Because the repealed teachers’ statute lacked such language, the statute itself could not supply the essential ingredients for vested rights.

But, as Justice Edmunds wrote for the Court “[the] analysis does not end here.”  If teachers made contracts in reliance upon the repealed law, then a protected property right exists which the new law cannot take away easily. (Limited instances exist where a protected right can be taken – the heart of the Doctrine of Vested Rights is fairness and fairness requires balancing interests).

Comparing Cases

Land use vested rights cases possess some similarities to the teachers’ case.  In both species of cases, the intended consequences of a repealed law caused private citizens to take important steps permitted by it.  For teachers, they stayed in North Carolina, did a good job and gained tenure-like status through a contract.   In land use cases, property owners plan and design uses and buildings permitted by the repealed law. 

Nevertheless, important differences exist.  In land use cases, a protected property interest is always present – the property owner’s land—and a statute containing promissory language never exists.   Consequently, the principal focus in these cases is the extent of steps and activities taken by a property owner in order to enjoy the benefits of the repealed law.  In other words, is retroactive application of the new law to activities already in progress unfair in a constitutional sense?

The Wobble of Land Use Vested Rights

Legal scholars attempt to organize existing land use vested rights decisions into categories, perhaps with the hope of predicting outcomes in new cases.  Ironically, studying past cases confirm that the future is uncertain. 

Nevertheless, early vested rights cases can be instructive as to the sources of uncertainty.  In one early case, the property owner was developing his property and the development did not require a building permit.  Thereafter, the local government adopted its first zoning ordinance and stopped the property owner from completing the development and using his property.  The Court held that the property owner possessed a vested right to complete the development and use his property despite the new law. 

Today, a tall stack of pancaking regulations applies to any significant proposed development.  Within the stack, you are likely to find a variety of pancakes administered by multiple governments at all levels of government – local, state and federal.  The property owner cannot enjoy his property for his intended, use until all permits and approvals required by the entire stack have been secured.   The question now is, how many and what variety of pancaking regulations must the property owner have satisfied to possess a vested right to complete his plan of development and enjoy his property?  

Unfortunately, the answer is not simple or predictable.  Every development is different.  Every local jurisdiction is different and regulations overlap differently. 

The point is not to empathize with property owners and developers.  The complexity of the development process means only the smartest and most diligent folks succeed—competition is limited and the risks and rewards are substantial.

Instead, the point is that discerning unfairness in a constitutional sense in land use cases is complex and evolving.  As long as the stack grows taller, land use vested rights will continue to wobble.  

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