Swan Beach Corolla, L.L.C. v. Cnty. of Currituck

• Decision Date: 01 July 2014
• Docket Number: No. COA13–1272.,COA13–1272.
• Citation: 760 S.E.2d 302
• Court: North Carolina Court of Appeals
• Parties: SWAN BEACH COROLLA, L.L.C., Ocean Associates, LP, Little Neck Towers, L.L.C., Gerald Friedman, Nancy Friedman, Charles S. Friedman, Til Morning, Llc, And Second Star, L.L.C., Plaintiffs, v. COUNTY OF CURRITUCK; The Currituck County Board of Commissioners; and John D. Rorer, Marion Gilbert, O. Vance Aydlett, Jr., H.M. Petrey, J. Owen Etheridge, Paul Martin, and S. Paul O'Neal as members of the Currituck County Board of Commissioners, Defendants.

760 S.E.2d 302

SWAN BEACH COROLLA, L.L.C., Ocean Associates, LP, Little Neck Towers, L.L.C., Gerald Friedman, Nancy Friedman, Charles S. Friedman, Til Morning, Llc, And Second Star, L.L.C., Plaintiffs,

v.COUNTY OF CURRITUCK; The Currituck County Board of Commissioners; and John D. Rorer, Marion Gilbert, O. Vance Aydlett, Jr., H.M. Petrey, J. Owen Etheridge, Paul Martin, and S. Paul O'Neal as members of the Currituck County Board of Commissioners, Defendants.

No. COA13–1272.

Court of Appeals of North Carolina.

July 1, 2014.

Appeal by plaintiffs from Order entered 24 July 2013 by Judge Wayland J. Sermons in Superior Court, Currituck County. Heard in the Court of Appeals 24 April 2014.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by Lacy H. Reaves and J. Mitchell Armbruster, for plaintiffs-appellants.

County of Currituck, by Donald I. McRee, Jr., for defendants-appellees.

STROUD, Judge.

Plaintiffs appeal from an order entered 24 July 2013 dismissing their complaint for declaratory judgment regarding vested rights they claimed to develop their property commercially, for violations of constitutional rights under 42 U.S.C. § 1983, and for violation of Article V, Section 2 of the North Carolina Constitution. We reverse in part, affirm in part, and remand for further proceedings.

I. Background

Plaintiffs are five companies and three individuals who own property in the Swan Beach Subdivision in Currituck County. On 6 July 2012, they filed a complaint against the County of Currituck, the Currituck Board of Commissioners, and the commissioners themselves in their official capacities. Plaintiff Ocean Associates was the original developer of the land and the other plaintiffs purchased their land from it.¹ They alleged that they have common law vested rights to develop commercial uses on their property. They also raised claims of laches, “easement rights” to commercially develop their property, state constitutional violations, and violations of federal equal protection and due process under 42 U.S.C. § 1983.

According to the complaint, plaintiff Ocean Associates, LP, purchased approximately 1400 acres of property in the Carova Beach area of Currituck County in 1966 to develop a residential subdivision along with related commercial services.² In 1969, Ocean Associates created and recorded a plat indicating that it intended to divide the property into residential and business lots. At the time, Currituck County had no applicable zoning ordinance. However, the County asked Ocean Associates to refrain from developing the business lots until the residential lots were sufficiently occupied. After filing the plat, Ocean Associates began to prepare both the residential and business lots for development. They spent $425,050.00 on services such as surveying, land geosciences, general engineering, road grading, canal digging, dune building, filling lots, evacuating ditches, and landscaping. This infrastructure would serve both the business and residential lots.

In 1971, Currituck County adopted a zoning ordinance. The 1971 ordinance designated plaintiffs' property as RA–20. The RA–20 district allowed for low density residential and agricultural uses with only limited business uses. Plaintiffs allege that they did not know that the zoning of their property had changed. In 1975, the County enacted a new zoning ordinance. This ordinance zoned plaintiffs' property in a similar manner to the previous ordinance. Plaintiffs believed that the County would still permit them to develop their property for commercial uses because the County had allowed other property owners to do the same.

In 1989, Currituck County enacted a Unified Development Ordinance (UDO). The UDO zoned plaintiffs' property RO2, which does not allow business uses except for marinas, campgrounds, outdoor recreational facilities, and small professional offices. The business and commercial uses intended by plaintiffs would not be permitted under this ordinance. Nevertheless, plaintiffs continued to believe that they would be allowed to commercially develop their property.

In 2004, plaintiffs decided to move forward with development of the business lots because the density of the residential lots had finally become sufficient to support such use. They wanted to build a convenience store, real estate offices, a post office, and a restaurant. Around September 2004, the County informed plaintiffs that such uses would not be permitted. Plaintiffs asserted that they had vested rights to use their property in this manner, but the County disagreed, asserting that the UDO barred such uses. Over the next three years, plaintiffs then attempted to convince the County to rezone their property so that they could develop their property for business uses. The parties agreed that such uses would not be permitted on their property under the UDO.

Plaintiffs allege that despite the County's assertion that the UDO prohibits business development in the RO2 district, the County has permitted other businesses to operate in the area. They alleged that the County treated plaintiffs differently without a rational basis, or because the individual plaintiffs are Jewish.

On 12 September 2012, defendants filed a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) and failure to state a claim under Rule 12(b)(6). Defendants argued that plaintiffs failed to exhaust applicable administrative remedies and that they are protected by sovereign, governmental, and legislative immunity. They further argued that plaintiffs' complaint is barred by the applicable statutes of limitations.

Plaintiffs filed an amended complaint on 13 February 2013. The amended complaint added an allegation that the County adopted a zoning ordinance in 1968, but that there was no map accompanying the ordinance and that their property was not zoned at that time. The amended complaint also added a claim under Article V, Section 2 of the North Carolina Constitution. Plaintiffs alleged that the County had taxed their property as business property since 1969, so its failure to permit plaintiffs to develop their property for business uses contravenes the requirement of taxation by uniform rule.

Defendants then filed an amended motion to dismiss and an amended brief in support of their motion. The motion was heard by the superior court on 20 May 2013. By order entered 24 July 2013, the superior court allowed defendants' 12(b)(1) motion to dismiss for failure to exhaust administrative remedies and their 12(b)(6) motion for failure to state a claim, though it did not specify a reason. Plaintiffs timely appealed to this Court.

II. Standard of Review

Defendants moved to dismiss plaintiffs' complaint for lack of subject matter jurisdiction under N.C. Gen.Stat. § 1A–1, Rule 12(b)(1) (2011) and for failure to state a claim under N.C. Gen.Stat. § 1A–1, Rule 12(b)(6) (2011).

Rule 12(b)(1) permits a party to contest, by motion, the jurisdiction of the trial court over the subject matter in controversy. We review Rule 12(b)(1) motions to dismiss for lack of subject matter jurisdiction de novo and may consider matters outside the pleadings. Pursuant to the de novo standard of review, the court considers the matter anew and freely substitutes its own judgment for that of the trial court.

Trivette v. Yount, 217 N.C.App. 477, 482, 720 S.E.2d 732, 735 (2011) (citations, quotation marks, brackets, and italics omitted).

The standard of review of an order granting a 12(b)(6) motion is whether the complaint states a claim for which relief can be granted under some legal theory when the complaint is liberally construed and all the allegations included therein are taken as true. On a motion to dismiss, the complaint's material factual allegations are taken as true. Dismissal is proper when one of the following three conditions is satisfied: (1) the complaint on its face reveals that no law supports the plaintiff's claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff's claim. On appeal of a 12(b)(6) motion to dismiss, this Court conducts a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct.

Podrebarac v. Horack, Talley, Pharr, & Lowndes, P.A., –––N.C.App. ––––, ––––, 752 S.E.2d 661, 663–64 (2013) (citation and quotation marks omitted).

III. Common Law Vested Rights Claim

Plaintiffs argue that the trial court erred in dismissing their common law vested rights claim under Rule 12(b)(1) for failure to exhaust administrative remedies. Defendants counter that even if it was error to dismiss under Rule 12(b)(1), dismissal was proper under Rule 12(b)(6). We hold that plaintiffs did not fail to exhaust administrative remedies and that their common law vested rights claim was sufficiently pled to survive a motion to dismiss under either Rule 12(b)(1) or Rule 12(b)(6).

A. Exhaustion of Administrative Remedies

“As a general rule, where 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). “If a plaintiff has failed to exhaust its administrative remedies, the court lacks subject matter jurisdiction and the action must be dismissed.” Justice for Animals, Inc. v. Robeson County, 164 N.C.App. 366, 369, 595 S.E.2d 773, 775 (2004). Nevertheless, “a party need not exhaust an administrative remedy where the remedy is inadequate.” Affordable Care, Inc. v. North Carolina State Bd. of Dental Examiners, 153 N.C.App. 527, 534, 571 S.E.2d 52, 58 (2002). Facts justifying avoidance of administrative procedure must be pled in the complaint. Id. at 534, 571 S.E.2d at 58.

“The [administrative] remedy is considered inadequate...