United States District Court, E.D. North Carolina, Northern Division
CAMDEN COUNTY, EAST CAROLINA BEHAVIORAL HEALTH, and PASQUOTANK COUNTY, Plaintiffs,
NORTHEASTERN COMMUNITY DEVELOPMENT CORPORATION, UNITED STATES DEPARTMENT OF AGRICULTURE, and UNITED STATES INTERNAL REVENUE SERVICE, Defendants.
C. DEVER III Chief United States District Judge.
March 19, 2015, Camden County, East Carolina Behavioral
Health, and Pasquotank County (collectively,
"plaintiffs") filed an action for declaratory
judgment and to quiet title against the United States
Department of Agriculture ("USDA"), the United
States Internal Revenue Service ("IRS"), the
Northeastern Community Development Corporation
("NCDC"), and Southern Bank & Trust Company
("Southern") in Camden County Superior Court [D.E.
l-l]. On April 16, 2015, the IRS and USDA
removed the case to this court [D.E. 1]. On June 4, 2015, the
IRS answered [D.E. 8]. On June 5, 2015, the USDA answered,
moved to dismiss, and asserted four counterclaims: for a
declaration that the government's exercise of its
possibility of reverter was an unconstitutional taking, for
quiet title to the property at issue, for breach of contract,
and for inverse condemnation [D.E. 9]. On June 16, 2015, the
court granted Charles Thomas Steele, Jr.'s
("Steele") motion to intervene as a
defendant/intervenor and denied as moot the USDA's motion
to dismiss, which it premised on plaintiffs' failure to
join Steele as a necessary party [D.E. 14]. On June 19, 2015,
plaintiffs answered the USDA's counterclaims [D.E. 15].
On July 10, 2015, Steele answered plaintiffs' complaint
and raised the same four counterclaims as the USDA [D.E. 18].
On July 29, 2015, plaintiffs responded to Steele's
affirmative defenses and answered his counterclaims [D.E.
September 20, 2016, Steele and the USDA (collectively,
"defendants") moved for summary judgment [D.E. 39]
and filed a supporting memorandum [D.E. 41], a statement of
material facts [D.E. 42], and supporting exhibits [D.E. 43].
On October 10, 2016, plaintiffs responded in opposition [D.E.
44]. On October 21, 2016, defendants replied [D.E. 45]. As
explained below, the court denies defendants' motion for
and 2002, the Camden County Board of Commissioners and
Pasquotank County Board of Commissioners decided to
facilitate the construction of a child care facility. Riggs
Dep. [D.E. 43-1] 10-12; Griffin Dep. [D.E. 43-2] 10-11.
Between November 29, 2001, and January 9, 2002, the Albemarle
Hospital, the Albemarle Mental Health Center, Albemarle
Regional Health Services, Camden County, and Pasquotank
County (collectively, the "Sellers") negotiated and
signed a land contract with NCDC, under which NCDC would pay
$18, 977.00 for "a fee simple determinable
interest" in 1.66 acres of undeveloped land in Camden
County, North Carolina ("the Property"). [D.E.
18-3] 3. NCDC's fee simple determinable was subject to a
possibility of reverter "in the event [NCDC] fail[ed] to
use the Property for a child care facility for at least
twenty-five (25) years following the closing date."
Id. On June 27, 2002, a deed transferring ownership
from the Sellers to NCDC, including the possibility of
reverter, was recorded in Book 159, Page 388 in the Camden
County Register of Deeds. [D.E. 1-1] 8-18. The deed required
that construction of the child care facility "be
expeditiously completed." Id. at 14. The
Sellers knew that NCDC required financing to construct a
child care facility on the Property. Griffin Dep. at 17 .
December 17, 2002, the USDA loaned NCDC $600, 000 in exchange
for a Deed of Trust on the Property, recorded in Book 166,
Page 420 in the Camden County Register of Deeds. [D.E. 43-3].
Thurman E. Bumette was named as the initial trustee of the
Deed of Trust. [D.E. 43-3] 5. Steele later replaced Bumette
as the trustee. [D.E. 42] ¶ 19. The USDA's closing
attorney erroneously told the USDA that the Deed of Trust
would be in a first lien position against the Property, and
the USDA relied on its lawyer's erroneous representation.
[D.E. 43-3] 2. Had the USDA asked Camden County to
subordinate its possibility of reverter to the USDA's
Deed of Trust, Camden County would have done so. Riggs Dep.
at 29-30; see Griffin Dep. at 35 (stating that Pasquotank
County could have subordinated its possibility of reverter to
the USDA's interest had it been asked).
the loan funds, NCDC built a child care facility on the
Property. See Riggs Dep. at 23; Griffin Dep. at 22, 47. In
August 2013, NCDC stopped operating a child care facility on
the Property. [D.E. 42] ¶ 22; [D.E. 43-1] 19. After NCDC
stopped operating the child care facility on the Property,
the Sellers asserted that they owned the Property because of
the deed's reversion clause. See Riggs Dep. at
considering defendants' motion for summary judgment, the
court views the evidence in the light most favorable to
plaintiffs and applies well-established principles under Rule
56 of the Federal Rules of Civil Procedure. See,
eg,, Fed. R. Civ. P. 56; Scott v. Harris.
550 U.S. 372, 378 (2007); Celotex Corp. v. Catrett.
477 U.S. 317, 325-26 (1986); Anderson v. Liberty Lobby.
Inc.. 477 U.S. 242, 247-55 (1986); Matsushita Elec.
Indus. Co. v. Zenith Radio Corp.. 475 U.S. 574, 585-87
(1986). Summary judgment is appropriate "if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law." Fed.R.Civ.P. 56(a); see Anderson. 477
U.S. at 247-48. The party seeking summary judgment must
initially come forward and demonstrate an absence of a
genuine issue of material fact or the absence of evidence
supporting the nonmoving party's case. Celotex
Corp.. 477 U.S. at 325. Once the moving party meets its
burden, the nonmoving party then must affirmatively
demonstrate that there exists a genuine issue of material
fact for trial. See Matsushita. 475 U.S. at 586-87.
is no issue for trial unless there is sufficient evidence
favoring the nonmoving party for a jury to return a verdict
for that party." Anderson. 477 U.S. at 249.
Conjectural arguments will not suffice. See Id. at
249-52; Beale v. Hardv. 769 F.2d 213, 214 (4th Cir.
1985) ("The nonmoving party... cannot create a genuine
issue of material fact through mere speculation or the
building of one inference upon another."). Similarly, it
is insufficient to show a "mere... scintilla of evidence
in support of the [nonmoving party's] position...; there
must be evidence on which the [factfinder] could reasonably
find for the [nonmoving party]." Anderson. 477
U.S. at 252.
counterclaims require this court to apply North Carolina law.
In resolving any disputed issue of state law, the court must
determine how the Supreme Court of North Carolina would rule.
See Twin City Fire Tns. Co. v. Ben Arnold-Sunbelt
Beverage Co.. 433 F.3d 365, 369 (4th Cir. 2005). If the
Supreme Court of North Carolina "has spoken neither
directly nor indirectly on the particular issue before,
" this court must "predict how [it] would rule if
presented with the issue." Id. (quotations
omitted). In making that prediction, the court "may
consider lower court opinions[, ]... treatises, and the
practices of other states." Id. (quotation
omitted). When predicting an outcome under state
law, a federal court "should not create or expand [a]
[s]tate's public policy." Time Warner
Entm't-Advance/Newhouse P'ship v. Carteret-Craven
Elec. Membership Corp.. 506 F.3d 304, 314 (4th Cir.
2007) (first alteration in original) (quotation omitted); see
Wade v. Danek Med.. Inc.. 182 F.3d 281, 286 (4th
seek summary judgment on five claims: (1) plaintiffs'
request for a declaration that they own the Property,
unencumbered by the USDA's lien; (2) plaintiffs'
action for quiet title; (3) defendants' request for a
declaration that the transfer of the Property to plaintiffs
via the possibility of the reverter amounted to an
unconstitutional taking; ...