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Kirby v. North Carolina Departement of Transporation

Court of Appeals of North Carolina

February 17, 2015

EVERETTE E. KIRBY and Wife, MARTHA KIRBY; HARRIS TRIAD HOMES, INC.; MICHAEL HENDRIX, as Executor of the Estate of Frances Hendrix; DARREN ENGELKEMIER; IAN HUTAGALUNG; SYLVIA MAENDL; STEVEN DAVID STEPT; JAMES W. NELSON and wife, PHYLLIS H. NELSON; and REPUBLIC PROPERTIES, LLC, a North Carolina company (Group 1 Plaintiffs), Plaintiffs,
v.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION, Defendant

Heard in the Court of Appeals: August 12, 2014.

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[Copyrighted Material Omitted]

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Hendrick Bryant Nerhood & Otis, LLP, by Matthew H. Bryant, T. Paul Hendrick, Timothy Nerhood, and Kenneth C. Otis, III, for Plaintiffs.

Attorney General Roy Cooper, by Special Deputy Attorney General Dahr Joseph Tanoury and Assistant Attorney General John F. Oates, Jr., for Defendant.

McGEE, Chief Judge. Judges BRYANT and STROUD concur.

OPINION

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Appeal by Plaintiffs and Cross-Appeal by Defendant from orders entered 8 January 2013 and 20 June 2013 by Judge John O. Craig, III in Superior Court, Forsyth County, Nos. 11 CVS 7119-20, 11 CVS 8170-74, 8338, 12 CVS 2898. Rule 2.1 Cases.

McGEE, Chief Judge.

Everette E. and Martha Kirby (" Mr. and Mrs. Kirby" ), Harris Triad Homes, Inc. (" Harris Triad" ), Michael Hendrix, as Executor of the Estate of Frances Hendrix (" the Hendrix Estate" ), Darren Engelkemier (" Mr. Engelkemier" ), Ian Hutagalung (" Mr. Hutagalung" ), Sylvia Maendl (" Ms. Maendl" ), Steven David Stept (" Mr. Stept" ), James W. and Phyllis H. Nelson (" Mr. and Mrs. Nelson" ), and Republic Properties, LLC (" Republic" ) (collectively " Plaintiffs" ) appeal from: (1) the trial court's 8 January 2013 order granting Defendant North Carolina Department of Transportation's (" NCDOT" ) motions to dismiss Plaintiffs' claims alleging violations of the Constitutions of the United States and of the State of North Carolina; and (2) the trial court's 20 June 2013 order granting NCDOT's summary judgment motion on (a)

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Plaintiffs' inverse condemnation claims under N.C. Gen. Stat. § 136-111, and (b) Plaintiffs' -- excluding Harris Triad's -- claims seeking declaratory judgments. NCDOT cross-appeals from the same orders. For the reasons stated, we reverse the orders of the trial court and remand this matter for further proceedings consistent with this opinion.

I. Factual Background and Procedural History

This case concerns, in broad terms, challenges to the constitutionality and propriety of legislation related to the proposed development of a thirty-four-mile highway that would loop around the northern part of the City of Winston-Salem (" the Northern Beltway" or " the Northern Beltway Project" ) in Forsyth County, North Carolina. Plaintiffs Mr. and Mrs. Kirby, the Hendrix Estate, Mr. Engelkemier, Mr. Hutagalung, Ms. Maendl, Mr. Stept, and Republic own real property located in the section of the Northern Beltway that would extend from U.S. Highway 52 to U.S. Highway 311 in eastern Forsyth County (" the Eastern Loop" ). Plaintiffs Harris Triad and Mr. and Mrs. Nelson own real property located in the section of the Northern Beltway that would extend from U.S. Highway 158 to U.S. Highway 52 in western Forsyth County (" the Western Loop" ).

Before Plaintiffs filed their respective complaints with the trial court, our Court considered a separate case brought by several plaintiffs who owned real property in both sections of the proposed Northern Beltway Project, and who alleged almost identical claims against NCDOT as those alleged by Plaintiffs in the present case. See Beroth Oil Co. v. N.C. Dep't of Transp. ( Beroth I ), 220 N.C.App. 419, 420, 423-24, 725 S.E.2d 651, 653, 655 (2012), aff'd in part, vacated in part, and remanded, 367 N.C. 333, 757 S.E.2d 466 (2014). Because the challenged legislation and general factual background of the present case are the same as those underlying this Court's and our Supreme Court's respective decisions in the Beroth case -- which we will discuss in further detail later in this opinion -- we rely on those decisions to recount the relevant background of the case now before us.

In Beroth I, this Court stated: " In 1989, our General Assembly established the North Carolina Highway Trust Fund to finance the construction of 'urban loops' around designated urban areas." Id. at 420 n.1, 725 S.E.2d at 653 n.1. " The Northern Beltway Project has been in the works for more than two decades," id., and " [t]he area encompassed by the Northern Beltway Project was and remains designated for development." Id. Pursuant to the Transportation Corridor Official Map Act (" the Map Act" ), see N.C. Gen. Stat. § § 136-44.50 to -44.54 (2013), NCDOT " recorded corridor maps with the Forsyth County Register of Deeds on 6 October 1997 and 26 November 2008 identifying transportation corridors for the construction of . . . the Northern Beltway." Beroth Oil Co. v. N.C. Dep't of Transp. ( Beroth II ), 367 N.C. 333, 334, 757 S.E.2d 466, 468 (2014).

Pursuant to the Map Act, after a transportation corridor official map is filed with the register of deeds and other notice provisions are met, see N.C. Gen. Stat. § § 136-44.50(a1), 136-44.51(a) (2013), " the Map Act imposes certain statutory restrictions on landowners within the corridor." Beroth I, 220 N.C.App. at 421, 725 S.E.2d at 654. Specifically, N.C. Gen. Stat. § 136-44.51(a) provides that " no building permit shall be issued for any building or structure or part thereof located within the transportation corridor, nor shall approval of a subdivision . . . be granted with respect to property within the transportation corridor." N.C. Gen. Stat. § 136-44.51(a).

The Map Act provides three potential avenues of relief from the statutory restrictions imposed upon affected property located within a transportation corridor. First, as we said in Beroth I, the Map Act provides a maximum three-year limit on the building permit issuance restrictions set forth in N.C. Gen. Stat. § 136-44.51(a). See id. § 136-44.51(b). If an application for a building permit is still being reviewed three years after the date of the original submittal to the appropriate local jurisdiction, the entity responsible for adopting the transportation corridor official map affecting the issuance of building permits or subdivision plat approval " shall issue approval for an otherwise eligible request or initiate acquisition proceedings on

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the affected properties," id., or " an applicant within the corridor may treat the real property as unencumbered and free of any restriction on sale, transfer, or use established by [the Map Act]." Id.

Second, in accordance with the procedures set forth in N.C. Gen. Stat. § 136-44.52, the Map Act allows property owners within the transportation corridor to petition for a variance from the Map Act's restrictions, which may be granted upon a showing that, as a result of the Map Act's restrictions, " no reasonable return may be earned from the land," N.C. Gen. Stat. § 136-44.52(d)(1) (2013), and such requirements " result in practical difficulties or unnecessary hardships." Id. § 136-44.52(d)(2).

Finally, the Map Act provides that, once a transportation corridor official map is filed, a property owner " has the right of petition to the filer of the map for acquisition of the property due to an imposed hardship [('the Hardship Program')]." N.C. Gen. Stat. § 136-44.53(a) (2013). Upon such petition, the entity that initiated the transportation corridor official map " may make advanced acquisition of specific parcels of property when that acquisition is determined by the respective governing board to be in the best public interest to protect the transportation corridor from development or when the transportation corridor official map creates an undue hardship on the affected property owner." Id. The Map Act further provides that this same entity is tasked with the responsibility of " develop[ing] and adopt[ing] appropriate policies and procedures to govern the advanced acquisition of right-of-way and . . . assur[ing] that the advanced acquisition is in the best overall public interest." Id. § 136-44.53(b).

According to an affidavit by NCDOT's Right-of-Way Branch Manager, Virgil Ray Pridemore, Jr. (" Mr. Pridemore" ) -- who is responsible for the implementation of right-of-way policies and administration of all phases of NCDOT acquisition work in the NCDOT Raleigh central office -- he makes his decisions with respect to the Hardship Program applications by relying on " the criteria and regulations in the NCDOT Right[-]of[-]Way Manual, the [Code of Federal Regulations], and input and recommendations from various NCDOT staff members from the preconstruction and roadway design branches, NCDOT Advance Acquisition Review Committee members, and representatives from [the Federal Highway Administration]." The Map Act further provides that " [a]ny decision" made with respect to a Hardship Program petition " shall be final and binding." Id. § 136-44.53(a).

Between October 2011 and April 2012, Plaintiffs separately filed complaints against NCDOT alleging that NCDOT's actions " placed a cloud upon title" to Plaintiffs' respective properties, rendered Plaintiffs' properties " unmarketable at fair market value, economically undevelopable, and depressed Plaintiff[s'] property values." Plaintiffs' complaints also alleged that NCDOT treated similarly situated property owners differently by " depriving Plaintiff[s] of the value of their Properties, . . . substantially interfering with the Plaintiff[s'] elemental and constitutional rights growing out of the ownership of the Properties, and . . . restricting the Plaintiff[s'] capacity to freely sell their Properties." Plaintiffs further alleged that the administrative remedies offered by NCDOT were " inadequate and unconstitutional," and, thus, " futile" and not subject to exhaustion. Finally, Plaintiffs alleged that the Hardship Program was " unequal in its treatment of similarly situated persons in the Northern Beltway in that physically unhealthy or financially distressed owners are considered for acquisition yet healthy and financially stable owners are not."

Plaintiffs' complaints set forth the following claims for relief: a taking through inverse condemnation pursuant to N.C. Gen. Stat. § 136-111; a taking in violation of the Fifth Amendment of the United States Constitution, as applied to NCDOT through the Fourteenth Amendment; a violation of the Equal Protection Clause of the Fourteenth Amendment; a taking in violation of Article I, Section 19 (the " Law of the Land" Clause) of the North Carolina Constitution; and a declaration that the Map Act and, specifically, the Map Act's Hardship Program are unconstitutional and " invalid exercises of legislative power as they affect a taking by the

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NCDOT without just compensation and are unequal in their application to property owners." NCDOT answered and moved to dismiss each of Plaintiffs' respective complaints with prejudice pursuant to N.C. Gen. Stat. § 1A-1, Rules 12(b)(1), (b)(2), and (b)(6), asserting various affirmative defenses, including sovereign immunity, statutes of limitation and repose, failure to exhaust administrative remedies, and lack of standing and ripeness.

Given " the identical nature of the causes of action and legal theories, similarity of the subject matter, need for similar discovery, expert testimony, and other factual issues" of the parties in the present action and in a series of companion cases that were or were soon-to-be filed, counsel for Plaintiffs and NCDOT filed a joint motion pursuant to Rule 2.1 of North Carolina's General Rules of Practice for the Superior and District Courts Supplemental to the Rules of Civil Procedure on 27 July 2012. In this joint motion, the parties requested that the trial court recommend to the Chief Justice of our State's Supreme Court that these cases be designated as " exceptional." In an order entered 31 July 2012, the Chief Justice granted the parties' joint motion pursuant to Rule 2.1. For case management purposes, in a subsequent order entered 8 January 2013, the trial court ordered that these exceptional cases be split into three groups. Plaintiffs in the present case were designated by the trial court as " Group 1" Plaintiffs and are the only plaintiffs who are parties to this appeal.

The trial court heard NCDOT's motions to dismiss the complaints of Group 1, Group 2, and Group 3 Plaintiffs, and entered an order on 8 January 2013 disposing of the motions concerning all three groups as follows:

1. Defendant's motions to dismiss with prejudice are DENIED regarding the claims for inverse condemnation, under N.C. Gen. Stat. § 136-111; . . . and claims seeking Declaratory Judgments as to the constitutionality of the Hardship Program and the " Map Act," statutes N.C. Gen. Stat. § § 136-44.50, 136-44.51, 136-44.52 and 136-44.53.
2. Defendant's motions to dismiss with prejudice are GRANTED regarding all remaining claims, including a taking under N.C. Const. art. I, ยง 19, Law of the Land; a taking under the Fifth Amendment of the United States Constitution, as applied to Defendant through the Fourteenth Amendment; and claims for Equal ...

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