tag: North Carolina Land Use Litigator: July 2016

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Thursday, July 28, 2016, 4:38 PM

No Doubting Thomases Allowed!

Introduction

Expert appraisers have testified that the proposed development will not adversely affect values of properties adjacent to this new development. Nevertheless, the testimony does not seem right to you.  You remember the Great Financial Crisis – what do appraisers really know?  Based upon your common sense understanding of real estate values and the way real estate markets really work, you suspect that the development will adversely affect adjacent property values.  Can you be a Doubting Thomas and conclude that this admissible evidence simply does not persuade you?

This is one of the questions addressed by the North Carolina Court of Appeals in the case of Dellinger v. Lincoln County,  2106WL3894687(July 19, 2016).  As explained by the Court of Appeals, no Doubting Thomases are allowed in quasi-judicial land use proceedings.


Dellinger v. Lincoln County
1.    Facts

The Dellingers leased land to Strata Solar (SS) for installation and operation of a solar energy farm (New Development).  The New Development is allowed as a conditional use and SS applied for a conditional use permit in July 2013. 

The County conducted two sets of quasi-judicial hearings in connection with SS’s application – one set before the planning board in September and November and another set in December before the Board of Commissioners (Board).  In December 2013, the Board denied SS’s application finding that the application did not satisfy two standards: (1) the New Development will not substantially injure the value of adjoining properties and (2) the New Development will be in harmony with the area.  The Dellingers appealed the denial of the application to Superior Court.

Because the Dellingers did not participate in the quasi-judicial proceeding, the Superior Court limited the Dellingers appeal to two questions: (1) was the Board’s decision supported by the record and (2) was the decision arbitrary and capricious.  Both questions required a review of the whole record.  

The Superior Court determined that the record lacked substantial evidence to support the Board’s determination that the New Development will not be in harmony with the area.  The Board did not make sufficient findings for the Superior Court to review whether the Board’s determination as the standard relating to substantial injury to the value of adjoining properties was supported competent, material and substantial evidence in the record.  Therefore, the Superior Court remanded this issue to the Board for it to make sufficient findings.

On Remand, the Board denied the application again, finding that SS had met its “burden of production” but “the evidence unpersuasive.” p. 6.  In short, the Board doubted the credibility of SS’s appraisal evidence as to no substantial injury to the value of adjoining properties and denied the application for that reason. 

The Dellingers sought review by the Superior Court of this new determination.  The Superior Court affirmed the denial of the application, finding that SS had not submitted substantial, competent evidence to support a conclusion that the New Development would not substantially injure the value of adjoining property.  p. 6-7.  The Dellingers appealed to the North Carolina Court of Appeals. 

2.    North Carolina Court of Appeals

In order to produce a prima facie case, an applicant must produce competent, material and substantial evidence tending to establish compliance with the requirement of the local ordinance.

The Court of Appeals reviewed the evidence presented by SS regarding no substantial injury to adjacent property values.  SS had produced opinion testimony given by two expert real estate appraisers that the New Development would not injure adjoining property values.  Both appraisers had undertaken market studies that were the basis of their opinions.  Accordingly, the Court of Appeals found that SS had produced a prima facie case satisfying the standard of no substantial injury to adjoining property.

The Court of Appeals noted that the North Carolina Supreme Court had stated that (1) a prima facie case entitles an applicant to issuance of the requested permit and (2) a denial of a permit should be based upon findings “which are supported by competent, material and substantial evidence appearing in the record.”  p.5 (quoting Humble Oil, 274 NC. 458, 471 (1974).  Here, the Board’s denial of the permit rested upon a finding that the Board doubted the credibility of a prima facie case – not competent, material and substantial evidence in the record which is contrary to the evidence in SS’s prima facie case.  Therefore, the Court of Appeals reversed the Superior Court’s decision. 

The Court of Appeals remanded the case to the Board “for additional quasi-judicial proceedings, utilizing the proper legal procedures and standards,” which held the applicant and adjacent property owners “to their respective burdens of proof.”  p. 9.

Comments 
   1. Written Findings are Important.  This case began three (3) years ago, when SS filed its application for a conditional use permit.  Now, having held multiple quasi-judicial hearings, two trips to the Superior Court and one trip to the Court of Appeals, the matter requires “further quasi-judicial proceedings.”   Why?

Under law, the Board makes findings and the Judicial Branch review findings for errors of law.  The Court of Appeals noted that there were 24 witnesses presenting evidence during the two nights of the hearing before the Board.   In other words, the record contained a lot of evidence.   

Was the defect a mistakenly written finding?  For instance, did the Board rely on admissible evidence in the record produced by opponents to the New Development to deny the permit?

Or, was the evidence produced by the opponents either not admissible or less persuasive than SS’s evidence?  In that case, the original finding was factually correct and legally ineffective.   Only the Board can say.

    2.   Note the Distinction.  The Court of Appeals expressly observed that a “reviewing court should not replace the [Board’s] judgment as between two reasonably conflicting views… [and a reviewing court] may not substitute its judgment for that of the [Board].” p. 4.  In Dellinger, the Court of Appeals declines to substitute its opinion for the Board.  Instead, the Court of Appeals concludes that doubting the credibility of competent, material and substantial evidence in a prima facie case is insufficient grounds for denying a land use permit.  Why? 

Being a Doubting Thomas without an evidentiary basis suggests a lack of impartiality and all parties at a quasi-judicial proceeding are entitled to an impartial decision-maker that bases it decision upon only upon evidence in the record.

   3. The Seamless Web of the Law.  Dellinger does not involve interpreting a land use law. Nevertheless, the Court of Appeals sets out, as the first authority in the Analysis portion of its opinion, a quotation from the North Carolina Supreme Court regarding the controlling canon of interpretation for land use regulations.  Why? 

The controlling canon is that all ambiguities in land use regulations are construed in favor of the free use of land.  It is possible that an applicant for a land use permit entitled to an impartial decision-maker and one which decides evidentiary ties in favor of the free use of land.  As Justice Oliver Wendell Holmes wrote, the law is a seamless web – one relevant area of law informs another. 

In any event, Doubting Thomases are not allowed in quasi-judicial land use proceedings. 


Thursday, July 14, 2016, 3:25 PM

The Long and Short of Interpreting Land Use Regulations

Introduction

State law in North Carolina authorized modern local zoning regulations in the 1920s.   And perhaps, there is no more basic zoning term than “single family detached dwelling.”  In a world of ever-increasing complexity of uses and transitory land planning theories, we hope that a term as omnipresent and basic as single family detached dwelling possesses a clear and certain universal meaning.  Unfortunately, after almost one-hundred (100) years of law our hope has yet to be realized.

In the case of Long v. Currituck County,___N.C. App.___, 2016WL3394346 (June 21, 2016), we discover the meaning of “single family detached dwelling”, at least in Currituck County under the County’s Unified Development Ordinance (County UDO) as it existed when the parties disagreed.  By reading Long, two things are apparent.  First, the meaning of single family detached dwelling, in certain fact patterns, is not simple and apparent; and second, understanding the meaning and application of even the most rudimentary zoning term requires significant effort and analysis.

Long v. Currituck County
Facts

Ms. Letendre owned an ocean-front lot on the Outer Banks in Currituck County. The lot was encumbered with two sets of land use regulations.  The development on the lot had to comply with the state Coastal Area Management Act (CAMA) and the County UDO.  Under CAMA, the larger the structure that was located on the lot, the wider the required setback from the ocean became.  The County UDO allowed “a single-family detached dwelling” on the lot.

Ms. Letendre proposed constructing three buildings on the lot, all of which were individually 5000 square feet in size.  All three buildings contained sleeping and sanitary facilities.  The main building, facing the ocean, contained the common cooking facilities for all three buildings.  The two other buildings were “wings” of the main building and were connected to the main building by conditioned hallways (collectively the “Project”). 

Focusing upon the functionality of the three buildings as a single dwelling unit, the Planning Director determined the Project was a single-family dwelling unit.  The Longs (next door neighbors) appealed the Planning Director’s interpretation to the County Board of Adjustment.  The Board of Adjustment affirmed the Planning Director’s interpretation.  The Longs appealed the Board of Adjustment’s decision to the Superior Court.  The Superior Court affirmed the Board of Adjustment’s decision. 

The Longs appealed the Superior Court’s decision to the North Carolina Court of Appeals.  The Court of Appeals unanimously reversed the Superior Court, concluding that “[t]he project does not fit with the plain language of the definition of Single Family Dwelling and thus is not appropriate in the SF District.” Long, p. 6.  The Court of Appeals remanded the case for further proceedings consistent with its opinion. 

The Court of Appeals’ Analysis

The County UDO defined the term ‘Dwelling, Single-Family Detached’ and the Court of Appeals focused upon this definition.  The Court of Appeals found that the definition had “five elements” and the Project was required to satisfy each element of the definition.  According to the Court of Appeals, three (3) of the elements addressed the physical structure of the proposed dwelling and two (2) of the elements addressed the use and function of the proposed dwelling. 

The County’s interpretation of the term emphasized the use and function of the proposed dwelling as a single family detached dwelling, but overlooked the physical structure requirements of the definition.   The Project included three buildings and the definitional elements of (1) a residential building (2) not physically attached to any other principal structure meant that the Project was not a single family detached dwelling under the County UDO.   Accordingly, the Project was not permitted in the SF Zoning District of the County UDO.

The Court of Appeals bolstered its conclusion by surveying various definitions of other types of dwellings in the County UDO.  The Court of Appeals noted that the other definitions contained primarily functional elements; whereas, the definition of single family detached dwelling was the only definition that included “a residential building.”  Therefore, this language could not be superfluous and must be a necessary element of the definition.

Likewise, the Court of Appeals noted that accessory structures may be attached to a principal structure, but the wings did not satisfy the definition of accessory structures because the definition for accessory structure required these structures to be subordinate in use and square footage. 


Finally, the Court of Appeals considered the County’s argument that the Longs’ interpretation could create absurd consequences. The Court of Appeals concluded that the Planning Director’s interpretation could lead to “a more absurd result” because an unlimited number of large structures could be built on a single lot so long as only one structure contained a common kitchen.  Long, p. 5.  As the Court of Appeals noted, the SF District was established to “accommodate very low density residential development in a manner that preserves sensitive natural resources, protects wildlife habitat, recognizing the inherent limitations on development due to lack of infrastructure and seeking to minimize damage from flooding and catastrophic weather events.”  Id.

Comments

  1.  The parties’ positions in Long were well argued and the Court of Appeals meticulously examined the County’s UDO and the parties’ position.  The literal language of local land use law controls most interpretation questions. The practical point is that ordinances require continuous study, review and refinement.

  2.  Long illustrates the complexity of development today.  It seems probable that the property owner developed this unusual configuration of buildings to minimize the impact of the CAMA regulations and to maximize utilization and value of her ocean-front lot in an area with significant summer rental of “cottages.”  The viability of a creative design turns on close reading of defined terms.

  3.   Long demonstrates that assumptions and methodology may subtlety alter meanings.  The Court of Appeals divided parts of a single integrated extended definition into separate elements for analytical purposes.  However, the definition itself does not set out these parts as separate elements.  If the definition had not been divided into separate elements, did the property owner have a better argument?   For example, was an ambiguity in the extended definition cured by the framework used by the Court?  After all, all ambiguities are construed in favor of the free use of land.    

Friday, July 8, 2016, 2:36 PM

John Cooke, Mike Thelen to Speak on Vested Rights at NCAMA Summer Conference

ASHEVILLE, N.C.—Womble Carlyle Land Use & Zoning attorneys John Cooke and Mike Thelen will be among the speakers at the 2016 North Carolina Association of Municipal Attorneys Summer Conference.  The event takes place Aug. 5th-6th in Asheville.

Cooke and Thelen will speak on “Vested Rights” at the NCAMA Summer Conference.

An affiliate organization of the N.C. League of Municipalities, the North Carolina Association of Municipal Attorneys was founded to encourage a greater degree of cooperation among municipal attorneys; offer opportunities to discuss and exchange information; and offer opportunities to keep informed in the field of municipal law. Active members include full- and part-time municipal attorneys and others who have demonstrated a past or present interest in the practice of municipal law.

John Cooke has more than 30 years of experience in land use/zoning law and real estate litigation. Based in the Raleigh-Durham region, Cooke practices throughout North Carolina. He represents all types of business clients – developers, end users and land owners – when they attempt to use their land or maximize its value through securing entitlements, forming public-private agreements or handling litigation.

Mike Thelen focuses his practice on land use, local government law and real estate development litigation, having handled rezoning, quasi-judicial proceedings before local governments, negotiation and drafting of development agreements, site plans, land use planning, eminent domain, construction and lien disputes, commercial landlord-tenant disputes, commercial foreclosure and loan litigation, partnership dissolution, business torts, and civil fraud matters.

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Wednesday, July 6, 2016, 3:20 PM

John Cooke to Speak at N.C. Association of DSS Attorneys 2016 Annual Summer Conference

WRIGHTSVILLE BEACH, N.C.—Womble Carlyle attorney John Cooke will be a presenter at the North Carolina Association of DSS Attorneys 2016 Annual Summer Conference. The conference takes place July 7th-9th in Wrightsville Beach.

Cooke will discuss “Representing the Local Government Decision Maker in Quasi-Judicial Proceedings.”

In addition, Womble Carlyle is sponsoring an Officers Reception at the event. The firm is a Platinum Sponsor of the North Carolina Association of DSS Attorneys 2016 Annual Summer Conference.

John Cooke has more than 30 years of experience in land use/zoning law and real estate litigation. Based in the Raleigh-Durham region, Cooke practices throughout North Carolina. He represents all types of business clients – developers, end users and land owners – when they attempt to use their land or maximize its value through securing entitlements, forming public-private agreements or handling litigation.

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Friday, July 1, 2016, 1:28 PM

Classic Private Property Rights and Public Coffers

Introduction

In April 2014, we posted a blog discussing the North Carolina Supreme Court’s opinion in Beroth Oil v. NCDOT, 367 N.C. 33, 757 S.E. 2d 466 (2014).  (See here)  In that post, we compared high frequency stock market trading and the Transportation Corridor Act (the “Act”).  We suggested that the Act and high frequency stock market trading serve the same purpose—manipulating market prices to the advantage of traders and the North Carolina Department of Transportation (NCDOT). 

The Act allowed NCDOT to cast the dark shadow of condemnation blight over targeted properties by recording a map in the land records and indexing the map under the names of all property owners whose property was included in the possible future road corridor (“Recordation Right”).  Thereby, all prospective purchasers were on record notice that the property was targeted for possible future forced acquisition.

The recorded map chilled market value—only those who speculated on monetary recoveries in future condemnation lawsuits were prospective purchasers of the targeted property. 

In that earlier post, we noted that two Justices in Beroth Oil dissented and concurred in part with the majority’s opinion.  These Justices were ready to conclude that when a recorded corridor map had interfered with property owners’ rights, an inverse condemnation had occurred.   


Today, our post discusses Kirby v. NCDOT, 2016WL3221090 (June 10, 2016), a unanimous opinion of the North Carolina Supreme Court written by Justice Newby, the justice who wrote the dissenting and concurring opinion in Beroth Oil.

Kirby v. NCDOT

In addition to the Recordation Right, the Act imposes a duty on local governments forbidding them to issue development approvals for property shown within the corridor of a recorded map (“Permit Duty”).  The duration of Permit Duty could be three (3) years after application for a permit and potentially an indefinite period. 

The legal effect of the Permit Duty is the focus in Kirby v. NCDOT, 2016WL3221090 (June 10, 2016). 

Facts and Trial Court Ruling

In Kirby v. NCDOT, the plaintiffs (property owners) filed numerous claims against NCDOT arising from NCDOT’s recordation of corridor maps for Western or Eastern Loops of the Northern Beltway, a planned loop around Winston-Salem, North Carolina.  One of the claims was a claim of inverse condemnation.  NCDOT sought summary judgment on the inverse condemnation claim and the trial court granted summary judgment in favor of NCDOT and dismissed the plaintiffs’ inverse condemnation claim without prejudice as being unripe. 

The North Carolina Court of Appeals

The North Carolina Court of Appeals reversed the trial court.  The Court of Appeals surveyed the law of inverse condemnation, noting that under the power of eminent domain, the sovereign determined the extent of the taking and its duration.

According to the Court of Appeals, both police powers – the power to regulate property to prevent detriment to the general welfare - and eminent domain powers – the power to take property because of its need for public use - reside in the sovereign.

The Court of Appeals noted that the title of the enabling legislation for the Act stated that it was “to control the cost of acquiring rights-of-way,” and that the public detriment the Act avoided—increased acquisition costs—arose only when NCDOT actually committed to constructing the road and sought to acquire the property shown on the corridor map.

The Court of Appeals observed that, a “mere plotting or planning in anticipation of a public improvement is not a taking”.  Kirby 769 S.E. 2d 218, 234, quoting Browning v. N.C. State Highway Comm’n, 263 N.C.130, 135(1964).  However, the Permit Duty barred local governments from approving development on the land identified by a corridor map.  Therefore, the legal effect of recording a corridor map pursuant to the Act was different than a mere plotting or planning in anticipation of a public improvement. 

Accordingly, the Court of Appeals concluded that NCDOT exercised its power of eminent domain when it filed the transportation corridor maps.  The Court of Appeals reversed the trial court and remanded the case to the trial court to consider evidence as to the extent of damages suffered by each property owner as a result of the respective takings and the amount of compensation due to each property owner.

The  North Carolina Supreme Court

The North Carolina Supreme Court affirmed the unanimous decision of the Court of Appeals written by Chief Judge McGee and wrote its own opinion.  The North Carolina Supreme Court concluded:

By recording the corridor maps at issue here, which restricted plaintiffs' rights to improve, develop, and subdivide their property for an indefinite period of time, NCDOT effectuated a taking of fundamental property rights.  Kirby p. 6.

The North Carolina Supreme Court cited three authors of classic private property rights—William Blackstone, John Locke and James Madison.  The Supreme Court emphasized that the fundamental right to property and the jealously guarding against governmental taking of property has existed “from the very beginnings of our republic.”  Kirby p. 4. 

The North Carolina Supreme Court recognized that fundamental private property rights are subject to reasonable regulations  and that “[t]he safety of the people is the supreme law.” Id.  However, “[t]he language of the Act plainly points to future condemnation” and “[t]he…Act’s indefinite restraint on fundamental property rights is squarely outside the scope of the police power.”  Kirby, p. 5. 

The North Carolina Supreme Court directed that the valuation of the property owner’s loss was to be determined by calculating the value of the land before the map was recorded and the value of the land afterwards, taking into account any and all pertinent factors.  

Comments

  1. In Kirby, NCDOT contended that the Act was a regulatory statute and not an eminent domain law.  As reflected by decision of 10 appellate court judges and justices (3 North Carolina Court Judges and 7 North Carolina Supreme Court Justices), NCDOT’s position is wholly unpersuasive in 2015-2016. 

It is easy to stop at this “dead loser argument” conclusion and move to the next case.  But stopping at this conclusion goes only skin deep.  Going deeper provides a more nuanced and meaningful understanding:

a.       In 1987, the General Assembly plainly said it was adopting a law to control public costs for acquiring rights-of-way for the state highway system.  It was an honest declaration of legislative intent and made the courts’ job to discern the purpose of the Act quite simple.

Now, to insulate policy decisions from meaningful judicial review, the General Assembly would likely state its intent as something like “Uniform State-Wide Planning for State Highways”.  Today, people have talking points.

b.       If NCDOT’s arguments in 2015-2016 are so feckless, then why did it take 29 years to declare that the effect of recording a map pursuant to the Act triggered a taking? 

Respectfully, I suggest that the law and world is different now.  With nearly three decades of development of the law of individual private property rights, and the law of various species of takings, the Act was ripe for challenge.

c.       NCDOT’s argument that the Act’s interference with property rights was only for three (3) years after a property owner applies for a development permit is mistaken.  Similar to building a road, private development requires substantial sums of money expended on planning and permitting and there are multiple interrelated permits and approvals issued consecutively.  The world moves quickly and a three-year delay on issuance of a threshold development permit kills most good development ideas. 

  2. It would be wise to note that the North Carolina Supreme Court used the word “fundamental” six (6) times in its six (6) page opinion and cited three great political and legal thinkers.  The discipline of political economy is an important study for lawyers in the 21st century who practice land use law—because political economic philosophy lies behind court decisions—like the operating program running in the background of your computer.

  3.  Not only has law changed, but technology and real estate development practices have changed too.  Today, NCDOT could simply post its corridor maps on the internet and let the marketplace work.  In short, one wonders why the Act is necessary in the 21st century.




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