Walker v. North Carolina Coastal Resources Com'n

• Decision Date: 01 October 1996
• Docket Number: No. COA95-1037,COA95-1037
• Citation: 124 N.C.App. 1,476 S.E.2d 138
• Court: North Carolina Court of Appeals
• Parties: Richard E. WALKER, et al, Oriental Yacht Club, and Joseph H. Cox, et al, Petitioners, v. NORTH CAROLINA COASTAL RESOURCES COMMISSION, Respondent-Appellant, and Oriental Harbor Development Company, Inc., Intervenor-Respondent.

Page 138

476 S.E.2d 138

124 N.C.App. 1

Richard E. WALKER, et al, Oriental Yacht Club, and Joseph H Cox, et al, Petitioners, v. NORTH CAROLINA COASTAL RESOURCES COMMISSION, Respondent-Appellant and Oriental Harbor Development Company, Inc., Intervenor-Respondent.

No. COA95-1037.

Court of Appeals of North Carolina.

Oct. 1, 1996.

Manning, Fulton & Skinner, P.A. by Howard E. Manning, Sr. and David T. Pryzwansky, Raleigh, for petitioners.

Attorney General Michael F. Easley by Assistant Attorney General, Robin W. Smith, for the State.

JOHN, Judge.

This case is before us for the second time. See Walker v. N.C. Dept. of E.H.N.R., 111 N.C.App. 851, 433 S.E.2d 767, disc. rev. denied, 335 N.C. 243, 439 S.E.2d 164 (1993). Respondent North Carolina Coastal Resources Commission (CRC) contends the trial court erred by awarding counsel fees to petitioners pursuant to N.C.G.S. § 6-19.1 (1986). We agree in part and vacate that portion of the award assigned by the trial court to the " 'administrative review' portion of the case."

Pertinent facts and procedural information are as follows: On 26 September 1989, respondent-intervenor Oriental Harbor Development Company, Inc. (Oriental), applied to respondent CRC for a permit under the former Coastal Area Management Act (CAMA), N.C.G.S. § 113A-100, et seq., to build a commercial marina on Smith Creek in Oriental, North Carolina. Following representation to CRC by the Department of Administration (DOA) that no easement was required for the project, CRC issued a permit to Oriental authorizing construction of a marina encircling 5.9 acres of public trust waters. Walker, 111 N.C.App. at 852-53, 433 S.E.2d at 768.

Petitioners consequently commenced this action 9 May 1990 by filing two Petitions for Contested Case Hearings with the Office of Administrative Hearings pursuant to the former N.C.G.S. § 150B-22 et. seq. Id. at 853, 433 S.E.2d at 768. Petitioners objected to the permit on grounds, inter alia, that issuance was contrary to existing law and regulations because Oriental had not first obtained an easement from the State to use public trust waters and submerged lands. Id.

Following a full evidentiary hearing, Administrative Law Judge Fred G. Morrison agreed with petitioners and recommended the permit be revoked and that no CAMA permit be issued to Oriental. Id. However, by order dated 19 April 1991, CRC rejected the recommended decision, finding the permit had been properly authorized. Id.

Pursuant to N.C.G.S. § 150B-43 et. seq., petitioners sought judicial review in Pamlico County Superior Court. Following a hearing, the trial court entered a 20 December 1991 order upholding issuance of the permit. From this order petitioners appealed to this Court, which reversed. Id. at 853-54, 433 S.E.2d at 768.

Specifically, in Walker we stated "[o]ur reading of the statute and the regulations leads us to the conclusion that the proposed development required an easement from the DOA," id. at 855, 433 S.E.2d at 769, and thus "CRC erred in issuing [the CAMA permit] allowing construction of the marina without the prior granting of an easement by the [DOA], subject to approval by the Governor and the Council of State." Id. at 856, 433 S.E.2d at 770. The matter was remanded for resubmission to DOA and "any other proceedings as become necessary." Id. at 856, 433 S.E.2d at 770. CRC's motion for discretionary review to the North Carolina Supreme Court was denied. Walker v. N.C. Dept. of E.H.N.R., 335 N.C. 243, 439 S.E.2d 164 (1993).

Thereafter, on 30 December 1993, petitioners filed in Pamlico Superior Court the instant petition for counsel fees pursuant to G.S. § 6-19.1 [Attorney's fees to parties appealing or defending against agency decision]. The statute provides in relevant part as follows:

In any civil action ... brought by the State or brought by a party who is contesting State action pursuant to G.S. 150A-43 [now 150B-43] or any other appropriate provisions of law, unless the prevailing party is the State, the court may, in its discretion, allow the prevailing party to recover reasonable attorney's fees to be taxed as court costs against the appropriate agency if:

(1) The court finds that the agency acted without substantial justification in pressing its claim against the party; and

(2) The court finds that there are no special circumstances that would make the award of attorney's fees unjust.

G.S. § 6-19.1. By order dated 14 June 1995, the trial court awarded counsel fees to petitioners in the amounts of $10,500.00 and $33,041.50 for the "administrative review" and "judicial review" portions of the case respectively, and expenses of $450.88 and $2,091.70 likewise applicable to the two phases of the proceedings. From this order, CRC appeals.

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CRC attacks the award of counsel fees on grounds the trial court erred in concluding that: (1) CRC's position was not substantially justified; (2) there were no special circumstances which would make an award of counsel fees unjust; and (3) administrative contested case proceedings qualify as civil actions within the purview of G.S. § 6-19.1. We discuss each contention in turn below.

In the case sub judice, CRC, the party against whom counsel fees were sought, had the burden of proving substantial justification for its actions in issuing the permit, Tay v. Flaherty, 100 N.C.App. 51, 55, 394 S.E.2d 217, 219 (1990), and further of showing the presence of circumstances which would make an award of counsel fees unjust. Crowell Constructors, Inc. v. State ex rel. Cobey, 114 N.C.App. 75, 80-81, 440 S.E.2d 848, 851 (1994) (Crowell I), reversed on other grounds, 342 N.C. 838, 467 S.E.2d 675 (1996) (Crowell II). For purposes of our review, "[t]he trial court's findings of fact are binding on appeal if there is evidence to support them, even though evidence might sustain findings to the contrary." Tay, 100 N.C.App. at 56, 394 S.E.2d at 220.

I.

Our Supreme Court recently construed the meaning of "substantial justification" under G.S. § 6-19.1 as " 'justified in substance or in the main'--that is, justified to a degree that could satisfy a reasonable person." Crowell II, 342 N.C. at 844, 467 S.E.2d at 679, citing Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550, 101 L.Ed.2d 490, 504 (1988). Continuing, the Court explained

[t]his standard should not be so strictly interpreted as to require the agency to demonstrate the infallibility of each suit it initiates. Similarly, this standard should not be so loosely interpreted as to require the agency to demonstrate only that the suit is not frivolous, for "that is assuredly not the standard for Government litigation of which a reasonable person would approve." [citing Pierce, 487 U.S. at 566, 108 S.Ct. at 2550, 101 L.Ed.2d at 505.] Rather, we adopt a middle-ground objective standard to require the agency to demonstrate that its position, at and from the time of its initial action, was rational and legitimate to such degree that a reasonable person could find it satisfactory or justifiable in light of the circumstances then known to the agency.

Id.

CRC asserts several bases for its contention the trial court erred in determining CRC

acted without substantial justification in granting the permit without the prior grant of an easement from the DOA and subsequently pursuing enforcement of its position through the North Carolina Court of Appeals, contrary to established case law, statutes and regulations providing that an easement is required before a permit may be issued, and contrary to CRC, [DEHNR] and DOA internal study findings and internal policies.

CRC first contends "[t]he fact that the superior court upheld the Commission on every issue on judicial review" shows CRC's "decision to be not only reasonable, but correct." We disagree.

In Tay, 100 N.C.App. at 52-53, 394 S.E.2d at 217-18, petitioner sought judicial review of respondent-agency's termination of food stamp benefits. Following the trial court's order affirming respondent's decision, petitioner appealed to this Court, which held the termination wrongful and reversed. The agency later appealed the trial court's subsequent award of counsel fees to petitioner pursuant to G.S. § 6-19.1. This Court held the evidence before the trial court was

sufficient to allow the court to find that respondent lacked substantial justification in pressing its claim throughout this action regardless of respondent's evidence that the superior court judge ... agreed that respondent rightfully terminated the benefits.

Id. at 57, 394 S.E.2d at 220. See also Pierce, 487 U.S. at 569, 108 S.Ct. at 2552, 101 L.Ed.2d at 507 ("fact that one other court agreed or disagreed with the Government does not establish whether its position was substantially justified"); United States v. Paisley, 957 F.2d 1161, 1166 (4th Cir.), cert. denied, Crandon v. United States, 506 U.S. 822, 113 S.Ct. 73, 121 L.Ed.2d 38 (1992)("[c]ompletely unfounded claims sometimes, for a variety of reasons, survive beyond their just desserts"); and Community Heating & Plumbing v. Garrett, 2 F.3d 1143, 1145-46 (Fed.Cir.1993)(position of government "is not shown to be substantially justified merely because the government prevailed before a lower tribunal").

CRC next maintains its grant to Oriental of a CAMA permit without an easement was substantially justified because "the proper interpretation and application of [statutes] and rules" outlining the circumstance under which easements are required came within the purview of DOA and "was outside [CRC's] quasi-judicial authority." Therefore, CRC continues, it "had no ability to overrule a decision by the [DOA]," and petitioner should have attacked DOA's decision instead of challenging CRC's issuance of the permit. We remain unpersuaded.

In Walker, this court thoroughly discussed the common law, statutes and regulations relevant to the easement issue in the case sub judice, and ultimately determined that the law, which...