Ballard v. Shelley

• Decision Date: 06 February 2018
• Docket Number: No. COA17-61,COA17-61
• Citation: 257 N.C.App. 561,811 S.E.2d 603
• Parties: Jerry W. BALLARD and Brenda K. Ballard, Plaintiffs, v. Mark E. SHELLEY and Virginia J. Shelley, Defendants and Third-Party Plaintiffs, v. Asheford Green Property Owners’ Association, Inc. et al., Third-Party Defendants and Fourth-Party Plaintiffs, v. Cabarrus County, Fourth-Party Defendant.
• Court: North Carolina Court of Appeals

257 N.C.App. 561

811 S.E.2d 603

Jerry W. BALLARD and Brenda K. Ballard, Plaintiffs,

v.Mark E. SHELLEY and Virginia J. Shelley, Defendants and Third-Party Plaintiffs,

v.Asheford Green Property Owners’ Association, Inc. et al., Third-Party Defendants and Fourth-Party Plaintiffs,

v.Cabarrus County, Fourth-Party Defendant.

No. COA17-61

Court of Appeals of North Carolina.

Filed: February 6, 2018

Smith Moore Leatherwood LLP, by Elizabeth Brooks Scherer, Raleigh and Kip David Nelson, Greensboro, for third-party plaintiffs-appellants Mark and Virginia Shelley.

Erwin, Bishop, Capitano & Moss, P.A., Charlotte, by J. Daniel Bishop, and Cabarrus County Attorney Richard M. Koch, for fourth-party defendant-appellee Cabarrus County.

DIETZ, Judge.

This case began as a neighborhood dispute about a fence that Mark and Virginia Shelley built in their backyard. Some of the Shelleys’ neighbors believed this fence, which obstructed the view from their own property, was a retaining wall that violated county building code or permitting requirements. The case evolved over time into a complicated lawsuit involving various claims, counterclaims, and crossclaims by the Shelleys, their neighbors, their homeowners’ association, and Cabarrus County.

This interlocutory appeal concerns the dismissal of the Shelleys’ crossclaims against Cabarrus County. As explained below, we affirm the dismissal of the Shelleys’ common law tort claims based on governmental immunity, dismiss the Shelleys’ appeal from the dismissal of their declaratory judgment claim for lack of appellate jurisdiction, and reverse the dismissal of their procedural due process claim and remand for further proceedings on that claim.

Facts and Procedural History

In 2009, Mark and Virginia Shelley obtained permits from Cabarrus County to build a fence to enclose their backyard pool. As construction on the fence progressed, a dispute arose between the Shelleys and some of their neighbors, who believed the fence was a retaining wall subject to stricter permitting and building code requirements.

After several unsuccessful efforts to get Cabarrus County to condemn the fence for building code violations, Jerry and Brenda Ballard—two of the Shelleys’ neighbors—sued the Shelleys and the Asheford Green Property Owners’ Association, alleging that the fence violated various neighborhood covenants. The Shelleys filed an answer, asserting defenses and counterclaims.

The Property Owners’ Association later filed claims against Cabarrus County, alleging that the Shelleys’ fence did not comply with county permitting and building code requirements, and seeking a writ of mandamus and injunction to compel Cabarrus County to enforce the building code. Cabarrus County then filed a crossclaim against the Shelleys seeking an order requiring them to comply with the building code or tear down the fence.

The Shelleys then asserted crossclaims against Cabarrus County including various common law tort claims, a due process claim, and a declaratory judgment claim. The county moved to dismiss the Shelleys’ crossclaims on the grounds of governmental immunity and failure to state a claim on which relief can be granted.

After a hearing, the trial court dismissed the Shelleys’ tort claims based on governmental immunity, finding that the county had not waived its immunity by its purchase of excess liability insurance. The trial court dismissed the Shelleys’ declaratory judgment and constitutional claims for failure to state a claim under Rule 12(b)(6). The Shelleys timely appealed these interlocutory rulings.

Analysis

I. Dismissal of the tort claims

The Shelleys first challenge the dismissal of their tort claims based on governmental immunity.

We begin by addressing our jurisdiction over this issue on appeal. Generally speaking, governmental immunity, as a form of sovereign immunity, is not merely an affirmative defense to claims; it is a "complete immunity from being sued in court." Magana v. Charlotte-Mecklenburg Bd. of Educ. , 183 N.C. App. 146, 147, 645 S.E.2d 91, 92 (2007). In other words, this immunity not only prevents courts from entering judgments against our state government, but also protects the government from being haled into court in the first instance. Id.

As a result, when the State or its subdivisions move to dismiss a tort claim based on immunity and the trial court denies the motion, that denial unquestionably affects a substantial right. This is so because, if the governmental agency were forced to litigate the case to judgment before appealing the immunity ruling, it could deprive the government of its right not to have to appear in court and defend the case at all.

The same is not true when the trial court grants a motion to dismiss a tort claim based on sovereign or governmental immunity. In that circumstance, the losing party is in the same position as any other litigant whose claim was dismissed for lack of jurisdiction or for failure to state a claim on which relief can be granted. One might assume, therefore, that an appeal from an order granting a motion to dismiss based on sovereign or governmental immunity would not automatically affect a substantial right, simply because the ruling involved immunity.

But, as is often the case with our jurisprudence, what one might reasonably assume is not what our case law holds. In a series of cases that we are unable to distinguish from this one, our Court has held that the grant of a motion to dismiss based on sovereign or governmental immunity is immediately appealable. See Greene v. Barrick , 198 N.C. App. 647, 649–50, 680 S.E.2d 727, 729–30 (2009) ; Odom v. Lane , 161 N.C. App. 534, 535, 588 S.E.2d 548, 549 (2003). Because one panel of this Court cannot overrule another, we are bound to hold that the Shelleys’ interlocutory appeal on this issue is permissible. In re Civil Penalty , 324 N.C. 373, 384, 379 S.E.2d 30, 36 (1989). If the holdings in Greene , Odom , and similar cases warrant reconsideration, it must come from this Court sitting en banc, or from our Supreme Court.

We thus turn to the merits of the Shelleys’ claim. Counties and other municipalities, as governmental agencies, enjoy the protections of governmental immunity. Magana , 183 N.C. App. at 147, 645 S.E.2d at 92. This sovereign immunity applies unless the county "consents to suit or waives its right to sovereign immunity." Hinson v. City of Greensboro , 232 N.C. App. 204, 210, 753 S.E.2d 822, 827 (2014).

A county may waive its immunity by purchasing liability insurance covering a particular risk. N.C. Gen. Stat. § 153A-435(a). But that waiver applies only "to the extent of insurance coverage." Id. In other words, "immunity is waived only to the extent that the [county] is indemnified by the insurance contract from liability for the acts alleged." Hinson , 232 N.C. App. at 210, 753 S.E.2d at 827. If the liability policy, by its plain terms, does not provide coverage for the alleged acts, then the policy does not waive governmental immunity. Id. When this Court examines policy provisions allegedly waiving governmental immunity, we must strictly construe the provision against waiver. Magana , 183 N.C. App. at 149, 645 S.E.2d at 92.

A series of cases from this Court have examined how this waiver rule applies to an insurance policy like the one in this case, that provides excess liability coverage above the municipality’s own self-insured retention. These cases uniformly have held that excess policies do not waive immunity when they are not triggered until the municipality first pays the entire amount of the self-insured retention.

As this Court reasoned in Magana , if a municipality "has statutory immunity from liability for tort claims, it cannot be required to pay any part of the ... self-insured amount and, therefore, the excess policy will provide no indemnification." 183 N.C. App. at 149, 645 S.E.2d at 93. In other words, because the county "is immune from negligence claims up to [the self-insured amount], it will never have a legal obligation to pay this self-insured amount and, thus, has not waived its immunity through the purchase of this excess liability insurance policy." Hinson , 232 N.C. App. at 212, 753 S.E.2d at 828.

This case is indistinguishable from Magana and Hinson . The county moved to dismiss under Rule 12(b)(1) of the Rules of Civil Procedure and submitted evidence to support its motion. Among those submissions, the county produced an affidavit from its risk manager attaching the relevant terms of the county’s excess liability policies. Those policies include a self-insured retention amount of $350,000 that must be paid by the county before coverage is triggered, and contain the following policy language:

[W]e agree to indemnify the Insured for ultimate net loss in excess of the retained limit which the Insured becomes legally obligated to pay because of bodily injury, personal injury, advertising injury, or property damage which occurs during this policy period and to which this insurance applies. Our indemnification obligation shall not arise until the Insured itself has paid in full the entire amount of its retained limit . The retained limit must be paid by the Insured, and may not be paid or satisfied, in whole or in part, by any other source of payment, including but not limited to other insurance, or negated, in whole or in part, by any form of immunity to judgment or liability. No other obligation or liability to pay sums or perform acts or services is covered. The Insured’s obligation to pay shall have been determined by judgment against the Insured after a contested suit or by written agreement, which has received our prior approval , between the Insured(s) and the claimant(s) or the claimant’s legal representative.

(Emphasis added.)

We agree with the county that this language demonstrates that the excess policy does not waive its immunity with respect to the common law tort claims at issue here.

The policy language states that the insurer’s obligation to pay is...