Atlantic Marine Corps Commun. v. Onslow County, Nc

• Citation: 497 F.Supp.2d 743
• Decision Date: 26 July 2007
• Docket Number: No. 7:06-CV-35-H.,7:06-CV-35-H.
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: ATLANTIC MARINE CORPS COMMUNITIES, LLC, Plaintiff, v. ONSLOW COUNTY, NORTH CAROLINA and Craven County, North Carolina, Defendants.

497 F.Supp.2d 743

ATLANTIC MARINE CORPS COMMUNITIES, LLC, Plaintiff, v. ONSLOW COUNTY, NORTH CAROLINA and Craven County, North Carolina, Defendants.

No. 7:06-CV-35-H.

United States District Court, E.D. North Carolina, Southern Division.

July 26, 2007.

COPYRIGHT MATERIAL OMITTED

Charles Henry Mercer, Jr., Reed J. Hollander, Stephen D. Martin, Nelson Mullins Riley & Scarborough, LLP, Raleigh, NC, for Plaintiff.

Ronald E. VonLembke, Jacksonville, NC, Bryant Kyle Dickerson, James R. Sugg, Sr., Scott C. Hart, Sumrell, Sugg, Carmichael, Hicks & Hart, P.A., New Bern, NC, for Defendants.

ORDER

MALCOLM J. HOWARD, Senior District Judge.

This matter is before the court on the parties' cross-motions for summary judgment [DE # 28, 31]. Appropriate responses and replies have been filed, and the time for further filings has expired. A hearing was held before the undersigned on June 14, 2007, at the United States Courthouse in Greenville, North Carolina. This matter is ripe for adjudication.

STATEMENT OF THE CASE

Atlantic Marine Corps Communities, LLC ("AMCC"), seeks a declaratory judgment that certain properties located at Marine Corps Air Station New River ("MCAS New River"), Marine Corps Base Camp Lejeune ("MCB Camp Lejeune"), and Marine Corps Air Station Cherry Point ("MCAS Cherry Point") are under exclusive federal jurisdiction and not subject to ad valorem taxation by Onslow and Craven Counties. Defendants counterclaim, seeking a declaration that the properties are subject to local taxation. At issue, according to the counties' tax administrators, is approximately $1.75 million in annual tax revenues beginning in 2006, increasing to more than $2.5 million in 2012. The case is now before the court on the parties' cross-motions for summary judgment.

STATEMENT OF THE FACTS

The United States Constitution, in what is commonly referred to as the Enclave Clause, grants Congress power

[t]o exercise exclusive Legislation in all cases whatsoever, over such District ... as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings.

U.S. Const. art. I, § 8, cl. 17.

On January 24, 1907, referencing the Enclave Clause, the North Carolina General Assembly passed "An Act Ceding to the United States Exclusive Jurisdiction over Certain Lands Acquired for Public Purposes within this State, and Authorizing the Acquisition Thereof," Chapter 25, Public Laws of 1907.

The consent of the state is hereby given, in accordance with [the Enclave Clause], to the acquisition by the United States, by purchase, condemnation, or otherwise, of any land in the state required for the sites for customhouses, courthouses, postoffices, arsenals or other public buildings whatever, or for any other purposes of the government.

Exclusive jurisdiction in and over any land so acquired by the United States shall be and the same is hereby ceded to the United States for all purposes except the service upon such sites of all civil and criminal process of the courts of this state; but the jurisdiction so ceded shall continue no longer than the said United States shall own such lands. The jurisdiction ceded shall not vest until the United States shall have acquired title to said lands by purchase, condemnation, or otherwise.

So long as the said lands shall remain the property of the United States when acquired as aforesaid, and no longer, the same shall be and continue exempt and exonerated from all state, county, and municipal taxation, assessment, or other charges which may be levied or imposed under the authority of this state. (1907, c. 25; C.S. 8059.)

N.C. Gen.Stat. § 104-7 (1943).¹

In 1941, the federal government could obtain exclusive jurisdiction ceded by a state only by acquiring the subject lands and affirmatively accepting exclusive jurisdiction. Acquisition of lands was accomplished by various means, among them purchase, condemnation, and a variety of other conveyances resulting in transfer of a fee interest to the federal government. By federal statute, acceptance was not automatic but could be effected by the head of the department having control over the lands through the filing of a notice of acceptance with the Governor of the ceding state. 40 U.S.C. § 255 (1940).

It is at this point undisputed that, in 1941, the federal government acquired certain lands located in Onslow County and Craven County for the establishment of Marine Corps Training Areas. (See Compl. ¶¶ 16-34.) The federal government acquired the lands at issue in this case following separate Acts of Congress leading to petitions for and eventual entry of six condemnation orders in the United States District Court for the Eastern District of North Carolina between April 3 and October 1, 1941. By virtue of these condemnation orders, fee simple title to all of the lands at issue in this case vested in the United States. (See Compl. Exs. 6, 9, 12, 15, 18 & 21.) The lands at issue include portions of MCAS New River, MCB Camp Lejeune, arid MCAS Cherry Point (hereinafter collectively referred to as the "Marine Corps Lands").

The federal government's acceptance of exclusive jurisdiction over the lands covered by five of the six condemnation orders is unquestioned. As to these five, in 1941, Acting Secretary of the Navy James Forrestal sent letters to North Carolina Governor J. Melville Broughton accepting jurisdiction "on behalf of the United States in the manner and form provided by an Act of 1907, Ch. 25, N.C.Code 1927, Sec. 8059, over certain lands in Onslow [or Craven] County." (Compl.Exs.22-26.) These letters concerned the lands at MCAS New River and MCB Camp Lejeune. All five letters were countersigned and returned to the Navy.

Plaintiff claims that a sixth letter was sent accepting jurisdiction over the land at MCAS Cherry Point (Compl Ex. 27). Defendants dispute this, pointing to the absence of a countersigned copy as evidence that the letter was never sent. Plaintiff submitted, as additional probative evidence, a document entitled "Summary of activities, method of acquisition, areas and jurisdiction," from the records of Governor J. Melville Broughton, Agencies, Commissions, Departments, and Institutions, 1941-1944, Navy Department, Box 59. (Pl.'s Mem. Supp. Summ. J. Ex. 1.) This document lists a 7582.2 acre portion of MCAS Cherry Point acquired by condemnation on September 26, 1941 (the same date the United States filed its Petition for Condemnation and Declaration of Taking as to the MCAS Cherry Point land). A handwritten notation indicates a "jurisdiction date" for this property of December 16, 1941, the same date plaintiff claims the sixth letter was sent by Secretary Forrestal to Governor Broughton.

Defendants' objections notwithstanding, the confluence of actions detailed above has been widely treated over the past half-century as having vested exclusive jurisdiction over the Marine Corps Lands in the federal government (with the service of process exceptions noted in § 104-7). Ever since the dates of the federal government's purported acceptance of exclusive jurisdiction over the Marine Corps Lands, defendants have not, on said Lands: conducted health inspections of private food vendors; conducted building inspections under the county's building code; provided waste removal services; attempted to enforce criminal laws (with one exception, see State v. Smith, 328 N.C. 161, 400 S.E.2d 405 (1991)); provided fire and police protection, except by interlocal agreement with the United States; or attempted to tax real and personal property of nongovernmental entities, except where authorized by federal statute.²

In 1996, Congress enacted the Military Housing Privatization Initiative ("MHPI") giving authority to the Secretaries of the Armed Forces to acquire or construct family housing units or military unaccompanied housing units on or near military installations within the United States. National Defense Authorization Act for Fiscal Year 1996, § 2601(a)(1), 10 U.S.C. § 2872 (West 2007). Under the MHPI, Secretaries may invest in eligible nongovernmental entities conducting projects "for the acquisition or construction of housing units suitable for use as military family housing or as military unaccompanied housing." Id., 10 U.S.C. § 2875.

Pursuant to the MHPI, after a competitive bidding process, the Department of the Navy selected Actus Lend Lease, LLC ("Actus")³ to engage in a public/private venture with the government to renovate, demolish, and construct military housing units on portions of the Marine Corps Lands (the "Project"). The Department of the Navy and Actus thereafter formed a limited liability company — plaintiff AMCC — and the federal government contracted with AMCC to conduct the Project⁴ The government conveyed to AMCC housing units and the income stream from military personnel renting those housing units through a fifty-year ground lease of the units and related infrastructure. (See Def.'s Mem. Supp. Summ. J. Exs. 1 (Invitation for Offers) & 4 (Ground Lease and Conveyance Agreement).) Fee title to the land remained vested in the government. (See id. Ex. 4, p. 3.) Title to the housing units and infrastructure passed to AMCC, with the proviso that title to these assets and all related improvements would be transferred back to the government, or other then-owner of the land, upon expiration or termination of the lease. (See id. Ex. 1, p. 20; Ex. 4, pp. 3-4.)⁵

The Limited Liability Company Operating Agreement of AMCC ("Operating Agreement") provided that AMCC was organized, among other things, to "own, lease, manage, acquire, operate and maintain Improvements and the Land." (Id. Ex. 3, p. 2.) The government "shall not take part in the management of [AMCC], transact...