Finch v. City of Durham, 85PA89

CourtUnited States State Supreme Court of North Carolina
Citation325 N.C. 352,384 S.E.2d 8
Decision Date05 October 1989
Docket NumberNo. 85PA89,85PA89
PartiesVernon FINCH, Juaita Finch, Daniel J. Bullard and Christine Bullard v. The CITY OF DURHAM, North Carolina.

On discretionary review prior to determination by the Court of Appeals pursuant to N.C.G.S. § 7A-31(a) and Rule 15(e)(2) of the Rules of Appellate Procedure of a judgment upon (1) a jury verdict that a taking had occurred; (2) a judicial determination that the taking was not arbitrary or capricious; and (3) an alternative judicial determination that a taking had occurred, which invalidated one city ordinance and waived another, awarded damages and granted attorney's fees and costs to plaintiffs, entered by Bowen, J., at the 14 March 1987 Civil Session of Superior Court, Durham County. Heard in the Supreme Court 9 May 1989.

Mount White Hutson & Carden, P.A. by Richard M. Hutson, II, and Stephanie C. Powell, and Maxwell, Martin, Freeman and Beason, P.A. by James B. Maxwell, Durham, for plaintiff-appellees and cross-appellants.

Office of the City Atty. by Karen A. Sindelar, Asst. City Atty., Durham, for defendant-appellant and cross-appellee.

North Carolina League of Municipalities by S. Ellis Hankins, General Counsel, and Andrew L. Romanet, Jr., Asst. General Counsel, Raleigh, amicus curiae.

City of Charlotte by Henry W. Underhill, Jr., City Atty., Charlotte, and City of Greensboro by Jesse L. Warren, City Atty., Greensboro, amici curiae.

City of Wilmington by Thomas C. Pollard, City Atty., and Robert W. Oast, Jr., Asst. City Atty., Wilmington, amicus curiae.

Erdman, Boggs & Harkins by Harry H. Harkins, Jr., for Watts Hosp.-Hillandale Neighborhood Ass'n, Inc., Durham, amicus curiae.

MEYER, Justice.

This is a dispute over the Durham City Council's rezoning of a 2.6-acre, vacant, undeveloped tract ("the property") near the southeastern quadrant of the intersection of Interstate 85 ("I-85") and Hillandale Road in Durham. The evidence at trial tended to show that until 1979 all the land south of I-85 in this area was zoned R-10 (residential, minimum 10,000 square foot lot). However, from 1979 to 1985, the property in question was zoned O-I (office-institutional). On 6 May 1985, the Durham City Council zoned the property and an adjacent one-acre tract back to R-10.

The property is on the edge of the Watts-Hillandale neighborhood. It is in the shape of a reverse "L," when viewed with its northern boundary abutting I-85 and its western boundary facing Hillandale Road. Across I-85 to the north, there is office-institutional and commercial zoning, including hotels. South of I-85 and surrounding the property to the east, south, and west, there is residential R-10 zoning, in which single-family houses have been built. A church is located across the street from the property, and a Mobil gas station, previously zoned C-1 (neighborhood commercial) but now abandoned and rezoned to R-10, is situated immediately adjacent to the west.

In 1972, an attempt was made to rezone the property from R-10 to O-I, but it failed. In 1979, plaintiffs, who had a contract for an option to lease with the lease to contain an option to purchase the property, initiated a request to rezone it to O-I in order to build a 100-room motel on the site. The Durham City Council approved plaintiffs' rezoning request, and the property was rezoned to O-I. Immediately thereafter, plaintiffs entered into a seven-year lease with the property owner with an option to purchase the property in the final year. Under a subsequent amendment to the lease, plaintiffs paid $15,000 each year from 1 March 1979 through 1 March 1984. The lease ran through 30 June 1985. Plaintiffs had to give notice of their intent to exercise their option by 1 May 1985 and had to close by 30 June 1985 if they wished to purchase the property. The purchase price was $165,000.

Plaintiffs planned to build a motel on the property immediately following the 1979 rezoning to O-I. Although plaintiffs paid for architectural plans and a cash flow study, high interest rates and a lack of partners prevented them from building the motel. No physical developments or improvements were made on the land.

In late 1984, Red Roof Inns expressed an interest in leasing or buying the property for motel use. Plaintiffs and Red Roof Inns executed an agreement whereby once plaintiffs had purchased the property, Red Roof Inns would construct a motel and then lease the property from plaintiffs. Red Roof Inns submitted some informal schematic sketches to the Durham City Planning Department. The motel could not be built, however, unless the Durham City Council closed the unimproved (and, in fact, never actually opened) Chesterfield Street adjacent to the east side of the property. Plaintiffs submitted a petition to close Chesterfield Street. On 1 March 1985, before the street closing was presented to the Durham City Council, the Watts-Hillandale Neighborhood Association and other individuals living in the general area of the property petitioned to rezone the property and the adjacent gas station tract back to R-10. The street closing was delayed until the rezoning could be acted upon, and plaintiffs withdrew their request to close Chesterfield Street in April 1985.

Rezoning requests in Durham are processed by the planning staff, which prepares an advisory report for the Planning and Zoning Commission. The Commission then holds a public hearing and makes an official recommendation to the City Council. The advisory report and the Commission recommendation then go to the City Council, which holds another public hearing before voting. The report in this instance noted that the existing O-I zoning for the property and C-1 zoning for the Mobil tract were undesirable because of excessive traffic, noise, and light that could be generated. The report recommended two "intermediate" uses--limited office institutional (O-I-L) and medium-density clustered residential development--which would help to buffer the existing neighborhood and at the same time allow for more intense use of the property than R-10. The report noted, however, that these uses would be appropriate only if the property owners were to submit a development plan, which under the Durham City Code and the relevant ordinance would commit the developer to a specific site plan for development. Such a development plan can only be submitted by the property owner. The report noted that despite the planning staff's belief that the two intermediate zones were most appropriate for the property, the staff nevertheless recommended that the zoning of the property that plaintiffs were leasing should remain O-I because a development proposal had already been initiated by the submission of the Chesterfield Street closing petition. The report recommended that the Mobil tract be rezoned to O-I.

On 2 April 1985, after presentation of the report and a public hearing, the Planning and Zoning Commission recommended by a 5 to 2 vote that the property be rezoned to R-10. A hearing before the Durham City Council was scheduled for 6 May 1985.

On 26 April 1985, plaintiffs' agreement with Red Roof Inns expired, without the latter having exercised its option to lease the property. On 29 April 1985, plaintiffs notified the owner of the property that they were exercising their option to purchase the property. On 6 May 1985, after a hearing, the Durham City Council voted 11 to 2 to rezone both the property and the Mobil tract to R-10. It also voted 13 to 0 to deny a request to rezone a separate nearby tract from R-10 to O-I. On 26 June 1985, plaintiffs closed on the property at issue here, paying the purchase price of $165,000. In July 1985, plaintiffs entered into a contract with Red Roof Inns to sell the property for $500,000 if the property were again rezoned to O-I, thus allowing Red Roof Inns to construct a motel. However, no petition for a rezoning back to O-I was filed either by plaintiffs or Red Roof Inns. On 3 September 1985, the Durham City Council passed a general ordinance requiring hotels locating in O-I or C-1 districts to seek a use permit from the Durham City Board of Adjustment.

R-10 zones are the most typical residential zones in the urban area of Durham. Uses permitted in an R-10 zone include single-family houses, athletic fields, cemeteries, mausoleums, child care centers, churches, clubs or private lodges, noncommercial community buildings, family care homes, parking lots, public buildings, libraries, museums, art galleries, parks, recreational facilities, public or private swimming pools, and schools, including nursery schools and kindergartens. Single-family homes are permitted as a matter of right, unless they are located on lots that are too small under the zoning code, in which case a use permit (in similar ordinances, sometimes referred to as a "variance") is required from the Board of Adjustment. The nonresidential uses permitted in an R-10 zone require a use permit, except for churches, which did not require a use permit until 1987.

On 8 November 1985, plaintiffs instituted this action against the City of Durham for a declaratory judgment and damages. Plaintiffs stated six claims: (1) that the zoning ordinance be invalidated as arbitrary, capricious, discriminatory and unreasonable; (2) that the zoning ordinance be invalidated as a "taking" under the state and federal Constitutions; (3) that the City of Durham be found liable for inverse condemnation under N.C.G.S. § 40A-51, and pay damages of $700,000; (4) that the City of Durham be estopped from enforcing the zoning ordinance and the subsequent general ordinance requiring a use permit; (5) that should the zoning ordinance be invalidated, the City of Durham be found liable for a "temporary taking" and plaintiffs be compensated under N.C.G.S. § 40A-51 in the amount of $100,000; and (6) that the City of Durham be found liable under 42 U.S.C. § 1983 for a taking and compensate plaintiffs in the amount...

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