Shell Island Homeowners Ass'n v. Tomlinson

• Decision Date: 20 July 1999
• Docket Number: No. COA98-961.,COA98-961.
• Citation: 517 S.E.2d 406,134 NC App. 217
• Parties: SHELL ISLAND HOMEOWNERS ASSOCIATION, INC., a North Carolina non-profit corporation; Charles B. Casteen and wife Barbara M. Casteen; and Richard R. Schnabel and wife Dorothy L. Schnabel, Plaintiffs, v. Eugene B. TOMLINSON, Chairman North Carolina Coastal Resources Commission; North Carolina Coastal Resources Commission; Department of Environment and Natural Resources for the State of North Carolina; Wayne McDevitt, Secretary of the Department of Environment and Natural Resources; and the State of North Carolina, Defendants, and North Carolina Coastal Federation, Inc., Intervenor-Defendant.
• Court: North Carolina Court of Appeals

517 S.E.2d 406

134 NC App. 217

SHELL ISLAND HOMEOWNERS ASSOCIATION, INC., a North Carolina non-profit corporation; Charles B. Casteen and wife Barbara M. Casteen; and Richard R. Schnabel and wife Dorothy L. Schnabel, Plaintiffs, v. Eugene B. TOMLINSON, Chairman North Carolina Coastal Resources Commission; North Carolina Coastal Resources Commission; Department of Environment and Natural Resources for the State of North Carolina; Wayne McDevitt, Secretary of the Department of Environment and Natural Resources; and the State of North Carolina, Defendants, and North Carolina Coastal Federation, Inc., Intervenor-Defendant.

No. COA98-961.

Court of Appeals of North Carolina.

July 20, 1999.

Shanklin & McDaniel, L.L.P., by Kenneth A. Shanklin and Susan J. McDaniel, Wilmington; Ogletree, Deakins, Nash, Smoak & Stewart, P.C., by C.C. Harness, III, Charleston, for plaintiff-appellants.

Attorney General Michael F. Easley, by Special Deputy Attorney General J. Allen Jernigan, Special Deputy Attorney General Robin W. Smith, and Associate Attorney General Mary Penny Thompson, for defendant-appellees.

Southern Environmental Law Center, by Donnell Van Noppen, III, and Derb S. Carter, Jr., Chapel Hill, for intervenor-appellee.

MARTIN, Judge.

Plaintiffs Casteen and Schnabel are owners of units at the Shell Island Resort Hotel Condominium ("Shell Island Resort"); plaintiff Shell Island Homeowners Association, Inc., is an association of all unit owners at Shell Island Resort, which is located at the north end of Wrightsville Beach, North Carolina, just south of Mason's Inlet. Plaintiffs filed this action on 7 January 1998 against Eugene B. Tomlinson, Chairman of the North Carolina Coastal Resources Commission, the North Carolina Coastal Resources Commission ("CRC"), the Department of Environment and Natural Resources for the State of North Carolina ("DENR"), Wayne DcDevitt, Secretary of DENR, and the State of North Carolina (hereinafter "defendants"), challenging the "hardened structure rule" and variance provision adopted by the CRC and codified at 15A NCAC 7H.0308 and 7H.0301. The rule provides:

Permanent erosion control structures may cause significant adverse impacts on the value and enjoyment of adjacent properties or public access to and use of the ocean beach, and, therefore, are prohibited. Such structures include, but are not limited to: bulkheads; seawalls; revetments; jetties; groins and breakwaters.

15A NCAC 7H.0308(a)(1)(B) (Specific Use Standards for Ocean Hazard Areas); see also 15A NCAC 7H.0310(a)(2) ("Permanent structures shall be permitted at a density of no more than one commercial or residential unit per 15,000 square feet of land area on lots subdivided or created after July 23, 1981").

The factual history giving rise to this controversy is summarized in our opinion in Shell Island Homeowners Assoc., Inc. v. Tomlinson, ___ N.C.App. ___, 517 S.E.2d 401 (1999). Briefly, plaintiffs have sought permits to construct various hardened erosion control structures to protect Shell Island Resort from the southward migration of Mason's Inlet; defendants, enforcing the "hardened structure rule," have denied those applications and refused plaintiffs' requests for variances. Plaintiffs did not seek administrative review of any of defendants' decisions enforcing the hardened structure rules, and they have not applied for a permit for a permanent erosion control structure since their application for a variance was originally denied on 6 February 1996. Instead, on 7 January 1998, over two years after plaintiffs submitted their original permit request, plaintiffs filed the complaint in this action alleging twelve claims for declaratory and injunctive relief by which they (1) challenge the validity and enforcement of the hardened structure rules; (2) seek a declaration that plaintiffs have the right to build a permanent hardened erosion control structure of unspecified design; and (3) seek damages for a taking of their property without just compensation by reason of defendants' denial of their application for a CAMA permit for construction of a permanent erosion control structure.

The North Carolina Coastal Federation ("intervenor-defendant") was permitted to intervene as a party defendant on 4 March 1998. Defendants moved to dismiss plaintiff's complaint pursuant to G.S. § 1A-1, Rules 12(b)(1), 12(b)(2), and 12(b)(6). On 14 July 1998, the trial court entered an order dismissing plaintiffs' complaint pursuant to Rule 12(b)(1) because plaintiffs "lack standing to claim that the Court has jurisdiction of the subject matter and the person because they have not made a showing of futility as to seeking full administrative remedy as provided by law," and pursuant to Rule 12(b)(6) for failure of the complaint to state a claim upon which relief may be granted. Plaintiffs appeal.

I.

We must first consider whether the trial court had subject matter jurisdiction to consider the claims alleged in plaintiffs' complaint. Subject matter jurisdiction is a prerequisite for the exercise of judicial authority over any case or controversy, Harris v. Pembaur, 84 N.C.App. 666, 353 S.E.2d 673 (1987).

A.

Plaintiffs argue that the trial court erred when it dismissed plaintiffs' claims for lack of subject matter. An action is properly dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction where the plaintiff has failed to exhaust administrative remedies. Bryant v. Hogarth, 127 N.C.App. 79, 488 S.E.2d 269, disc. review denied, 347 N.C. 396, 494 S.E.2d 406 (1997); Concerned Citizens v. N.C. Environmental Management Comm'n, 89 N.C.App. 708, 367 S.E.2d 13 (1988). "[W]here the legislature has provided by statute an effective administrative remedy, that remedy is exclusive and its relief must be exhausted before recourse may be had to the courts." Presnell v. Pell, 298 N.C. 715, 721, 260 S.E.2d 611, 615 (1979); Jackson v. NCDHR, 131 N.C.App. 179, 183, 505 S.E.2d 899, 903-04 (1998), disc. review denied, ___ N.C. ___, ___ S.E.2d ___ (24 June 1999); Bryant at 83, 488 S.E.2d at 271. Under the Administrative Procedure Act ("APA"),

Any person who is aggrieved by the final decision in a contested case, and who has exhausted all administrative remedies made available to him by statute or agency rule, is entitled to judicial review of the decision under this Article, unless adequate procedure for judicial review is provided by another statute....

N.C. Gen.Stat. § 150B-43 (1998).

Thus, in order to seek judicial review of an adverse administrative decision, a party must show: (1) the party is an aggrieved party; (2) there is a contested case; (3) there has been a final agency decision; (4) all administrative remedies have been exhausted; and (5) no other adequate procedure for judicial review is provided by another statute. Huang v. N.C. State University, 107 N.C.App. 710, 421 S.E.2d 812 (1992). Moreover, this Court has stated,

[t]he policy of judicial restraint acquires the status of a jurisdictional prerequisite when the legislature has explicitly provided the means for a party to seek effective judicial review of a particular administrative action. This procedure is particularly efficient when the subject of inquiry is of a very technical nature or involves the analysis of many records. Accordingly, a statute under which an administrative board has acted, which provides an orderly procedure for appeal to the superior court is the exclusive means for obtaining such judicial review. Furthermore, the policy of requiring exhaustion of administrative remedies does not require merely the initiation of the prescribed procedures, but that they should be pursued to their appropriate conclusion and final outcome before judicial review is sought. We read G.S. § 113A-121.1 to require that a party entitled to its provisions must first challenge a decision to deny or grant a permit by way of a petition to the Coastal Resources Commission.

Leeuwenburg v. Waterway Inv. Ltd. Partnership, 115 N.C.App. 541, 545, 445 S.E.2d 614, 617 (1994) (citations omitted).

In the present case, plaintiffs have not pursued any of the options available to them under CAMA and the APA for timely administrative review of defendants' decisions to deny the permit and variance requests pursuant to the hardened structure rules. Plaintiffs could have sought administrative review of the permit denials pursuant to G.S. § 113A-121.1, and filed for a contested case hearing under G.S. § 150B-23 within 20 days after a denial, thereby obtaining an administrative hearing in which a full record could have been developed to determine whether "the agency (1) exceeded its authority or jurisdiction, (2) acted erroneously, (3) failed to use proper procedure, (4) acted arbitrarily or capriciously, or (5) failed to act as required by law or rule." N.C. Gen.Stat. § 150B-23. Moreover, plaintiffs could have obtained a hearing on any of their applications for a variance pursuant to G.S. § 113A-120.1, or they could have brought an action under G.S. § 113A-123(b) alleging a regulatory taking, and seeking relief from application of the rule. Under this provision, a person may obtain superior court review as to whether the CRC decision,

so restricts the use of his property as to deprive him of the practical uses thereof, being not otherwise authorized by law, and is therefore an unreasonable exercise of the police power because the order constitutes the equivalent of taking without compensation.

N.C. Gen.Stat. § 113A-123(b). If it were determined, upon such review, that the hardened structure rules effect an unconstitutional taking of plaintiffs' property, plaintiffs would be granted relief from application of the rules. Id. Plaintiffs could have also sought a declaratory ruling from the CRC applying and interpreting its rules. N.C. Gen.Stat. § 113A-124(c)(7); N.C. Gen.Stat. § 150B-4. Indeed, plaintiffs have not even applied for a permit for the erosion control structure requested in their...