PRIMER ON THE LAW OF INVERSE CONDEMNATION AND RECENT CASE UPDATE

1. North Carolina Municipal Attorney’s Summer Conference Asheville, August 6, 2010 PRIMER ON THE LAW OF INVERSE CONDEMNATION AND RECENT CASE UPDATE

2. Inverse Condemnation – History and Nature of Action • “A taking without formal exercise of eminent domain” Charlotte v. Spratt • “Device to force government to exercise e.d.” Smith vs. Charlotte • Taking = “actual interference or disturbance of property rights resulting in injuries not merely consequential or incidental.” Adams • Damage must “grow out of the ownership of property and be substantial enough to reduce market value.” Long v. Charlotte

3. Action lies only against entity with E.D. powers Galloway • Inverse Condemnation action requires injury to property of an essentially permanent nature. • Burden of proof is on the land owner. Penn Central • Intent to condemn is of no consequence. In Re: Sioux Tribe

4. Fundamental Constitutional Rights Basis of Action • From the U.S. Constitution, Fifth Amendment “…nor shall private property be taken for public use without just compensation.” • There is no “Takings Clause” in N.C. Constitution. • N.C. Constitution Article 1, Section 19 – “Law of the Land Clause” guarantees no taking without compensation

5. N.C. Statutory Framework – Inverse Condemnation against Local Government • Actions against local government condemnors G.S. 40A – 51: “Remedy where no declaration of taking filed…” • See Article 3, Chapter 40A, GS40A – 40 through 40A – 70. • Actions against the State, usually NCDOT, but a few cities GS 136-111: “Remedy where no declaration of taking filed…” • See Article 9, Chapter 136, G.S. 136 – 103 through 136 – 121.1

6. Attorneys’ Fees • No attorneys’ fees in “regular” condemnation actions. McNeely • Attorney’s fees available to successful inverse claimants. • (Hidden in) G.S. 40A-8 and G.S. 136-119 Costs and Appeal

7. Major Categories of Inverse Taking • There is a wide variety of government actions that may support claim “in inverse.” • “Workable rules” are elusive. • Szypszak: 1) “Interweaving and distortion of property and tort law concepts” 2) “Artificial interpretation of eminent domain provisions” 3) “Untidy compilations of legal theory” • It is useful to break down inverse claims into three main categories:

8. Three Categories 1. Direct Physical Appropriation/Expropriation (“Normal” government activity without proper paperwork) 2. Physical Intrusion/Interference (Noise, smoke, odor, flooding) 3. Non-physical, “Regulatory” Takings (Confiscatory zoning, permit denial precluding economic use, development moratoria, unreasonable exactions, regulations “going too far”)

9. 1. Direct Expropriation – De Facto Condemnation • Actual physical entry always a taking. Terminal Warehouse Corp. • Denial of all access a compensable taking. • Preliminary, temporary entries for surveys etc. not a taking. Herndon; G.S. 40A-11, 136-111. • Excess taking arising in conventional action (inverse by counterclaim). Bragg • Damage to remainder ≠ inverse taking. Hollingsworth, Pearce

10. 2. Physical Intrusion/Interference(Flooding, noise, smoke, odor, etc.) • Delineating the boundary between “normal annoyances” and compensable deprivations. • Flooding analogizes best to appropriation of property. Lea Co.,Warehouse Corp. • Nuisance – like activities may be found to constitute inverse taking. Edwards v. Raleigh • “Permanent servitude” having discernable effect on market value vs. single, tortious act. Bynum

11. 3. Regulatory Takings (Non-physical appropriation by government action) • Takings traditionally required physical occupation. • Ultimately S. Ct. recognized that “regulation can effect a taking.” San Diego Gas and Electric • Early Taking cases focused on regulating “nuisance-like” activities. (No property right in noxious activity). Parker • More recently “going too far” analysis.

12. 3. Regulatory Takings • U.S. Supreme Court decisions: • Pennsylvania Coal (1922) – regulations may “go too far.” • Penn Central (1978) – balancing, ends-means test. • First English Evangelical Lutheran (1987) – prohibition against all development in flood area a taking. • Lucas v. S.C. Coastal Comm. (1992) – the “categorical rule.” • City of Monterey v. Del Monte Dunes (1999) • Sierra-Tahoe Preservation Council (2002) – a development moratorium is not a taking under facts of the case.

13. N.C. Regulatory Takings Cases • Schmidt v. Fayetteville (1983) – Property value loss insufficient. • Helms v. Charlotte (1961) – Zoning is confiscatory and a taking if all economic uses of property are prohibited. • Finch v. Durham (1989) – Zoning regulations dramatically reducing value of property upheld. • Responsible Citizens v. Asheville (1983) – Floodplain zoning not a taking.

14. Exactions and Dedications • U.S. Supreme Court, in Nolan and Dolan, required “rational nexus” and “rough proportionality” between exaction and development impact.

15. N.C. Exactions Cases • Riverbirch Assoc. v. Raleigh (1990) – requirement to dedicate open space/parkland as a condition of development approval upheld. • Batch v. Chapel Hill (1989) – parkway dedication requirement as condition of subdivision approval not sufficiently “proportional” to impact/service burden of the development.

16. Exclusivity of Inverse Remedy • Trespass and nuisance superseded by G.S. 40A-51. McAdoo • Negligence claims preserved. Howell v. Lumberton • Action to invalidate regulation still viable. Frank, A-S-P Assoc. v. Raleigh • Sec. 1983 action for constitutional infringement under color of state law. Rodgers, 4th Cir. • Land use disputes still “local.”

17. Statute of Limitations • G.S. 40A-51 (136-111) requires action within later of 24 months of taking, or “project completion.” • Project may be segmented. McAdoo • Regulatory takings – statute runs upon adoption/effective date. • Two-year stat. period tantamount to title. Smith • “Law of prescriptive easements irrelevant.” (Lawrence) • Courts sympathetic to landowner claims in light of two-year bar. Hoyle

18. CASE LAW UPDATERECENT NC COURT DECISIONSON INVERSE CONDEMNATION

19. (Flood and Stormwater Cases) • Howell v. Lumberton 144 N.C. App. 695 (2001) • Negligence claimed in storm drain maintenance • 40 A-51 Inverse not preemptive of negligence action. • Most recent damage was within three year statute. • Permit issuance = licensee duty owned.

20. Tate v. NCDOT 176 N.C. App. 530 (2006) • Undersized drain in highway flooded P’s house during Hurricane Floyd. • Dismissal of inverse action did not preclude IC action in negligence, and no res judicata. • G.S. 40 A-51 did not preclude IC action.

21. Lakeview Condo Assoc. v. Pinehurst (2007) • Silt passing through street culvert filled P’s pond. • Dismissal of nuisance and trespass action, negligence action remained. • Not necessary for town to cause the silt or own the drainage way. • “Reasonable use doctrine” – no defense. • Town has duty to take reasonable measures to reduce silt passing through its street culvert.

22. Asheville Sports Properties v. Asheville683 S.E.2d 217 (2009) • Negligence claim for sinkhole damage. • Private drainage line on private property collapsed. • Interconnections with City drainage system above and below not sufficient to find “adoption.”

23. First Gaston Bank of N.C. v. Hickory___ N.C. App. ___ (2010) • Private drainage line collapsed, destroying structure—inverse and negligence claimed. • City controlled upstream and downstream connection points. • City issued repair permits to fix line. • City’s approval of upstream developments, resulting in increased drainage flows—no basis for negligence. • No duty to analyze and design drainage systems for anticipated private development.

24. (Statute of Limitation – Related Cases)Stahr v. NCDOT (NCCOA – 2010) (Unpublished) • Road improvements caused severe erosion on p’s property. • Repairs attempted; State gave up on repairs. • Insufficient findings of fact that statute had run. • Statute construed to “favor landowners’ property rights claims.”

25. De Hart v. NCDOT 195 N.C. App. 417 (2009) • Inverse action for “too steep” driveway contrary to consent judgment stipulation. • No inverse taking as no actual, permanent invasion for public use. • Sole remedy in contract breach, and barred by statute of limitations.

26. Peach v. High Point __N.C. App.__ (2009) • Failure to connect new sewer main to residence caused sewage backup and total loss of use/value. • Inverse action allowed in addition to negligence action. • Generalized, not repairable, permanent damages = market value diminution. • G.S. 40A-51: Statute of Limitations construed to favor landowner (date of contractor’s return to repair omission).

27. Town of Red Springs v. Williams163 N.C. App. 358 (2004) • Town built sewer line on D’s property without easement. • Exclusive remedy of owner was in inverse. • Statute had run – owner had a ten-year opportunity to file action. • Two years = good title

28. (Odds and Ends Cases)City of Charlotte v. Long 175 N.C. App. 750 (2006) • Post-judgment septic field mitigation, with owner’s consent, not an inverse taking. • No public appropriation. • Did not “necessarily flow from the project.”

29. 6214 S. Blvd. Holdings LLC v. Charlotte (NCCOA 2006, Unpublished) • Mere “planning and plotting” for light rail project, even if impairs ability to lease property, not an inverse taking.

30. Charlotte v. BMJ of Charlotte___ N.C. ___ (COA 2009) • Railroad easement quitclaimed by N&SRR to Charlotte for light rail use • P claimed inverse from diminished access to property. • Non-use by railroad—no abandonment. • Use and conversion to light rail not an “overburdening.”

31. Frances Austin Ptnshp. v. High Point177 N.C. App. 753 (2006) • Leaving old sewer pipe in ground after abandonment not a taking. • Abandonment may be unilateral and without consequence. • City not required to pay twice for the easement.

32. Al-Nasara v. Cleveland County(N.C. App. 2010) (Unpublished) • P sued county in inverse for demolishing cited building without proper statutory notice. • While building code enforcement is a governmental function, and purchased insurance excluded inverse coverage, sovereign immunity is inapplicable to inverse condemnation claims.

33. Wilfong v. NCDOT 194 N.C. App. 816 (2009) • Another DOT “too steep” driveway case, following R/W settlement. • Interlocutory order finding P was entitled to compensation at G.S. 136-108 preliminary issues hearing. • Not immediately appealable without showing substantial right was at stake.

34. T-Wol Acquisition Co. v. Durham Housing Authority (NCCOA 2006, Unpublished) • P sued housing authority in trespass and inverse over disputed title. • Inverse condemnation was the sole remedy. • Requirement for certificate of convenience and necessity procedural matter only and no defense to authority’s having e.d. power.

35. Natl. RR Museum and Hall of Fame v. Hamlet (NCCOA #08-356, Unpublished 2009) • P sued town over demolition of headquarters building; anticipated leasing rehabilitated depot; lease not consummated. • Remedy of breach of contract and fraud dismissed. • No inverse taking, as plaintiff had not complied with G.S. 40A-51 by failure to file and record memo of action.

36. Cary Creek Ltd. Ptnshp. v. Cary(N.C. App. 2010) • Dec. action challenging stream buffer rules and, alternatively, action in inverse. • So long as appeal from variance denial and declaratory judgment are not finally determined, no inverse condemnation action possible. • No subject matter jurisdiction—inverse dismissed.