Swan Beach Corolla, L.L.C. v. Cnty. of Currituck , 234 N.C. App. 617 ( 2014 )

NO. COA13-1272
NORTH CAROLINA COURT OF APPEALS
Filed: 1 July 2014
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. Currituck County
No. 12-CVS-334
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.
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.
-2-
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.
1
The precise nature of the relationship between Ocean Associates
and the other plaintiffs is not clear from the complaint.
-3-
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
2
Because this case comes to us on a motion to dismiss, all of
the following facts are from the complaint; we express no
opinion as to their veracity.
-4-
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
-5-
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
-6-
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
-7-
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, ___ N.C. App. ___, ___, 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
-8-
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).
-9-
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
unless it is calculated to give relief more or less commensurate
with the claim.” Jackson for Jackson v. North Carolina Dept. of
Human Resources, 131 N.C. App. 179, 186, 505 S.E.2d 899, 904
(1998) (citation and quotation marks omitted), disc. rev.
denied, 350 N.C. 594, 537 S.E.2d 213 (1999). Generally,
constitutional claims are not subject to administrative
remedies, so failure to pursue such remedies is not fatal to
those claims. See Meads v N.C. Dep’t of Agric., 349 N.C. 656,
670, 509 S.E.2d 165, 174 (1988); Hardy ex rel. Hardy v. Beaufort
County Bd. of Educ., 200 N.C. App. 403, 409, 683 S.E.2d 774, 779
(2009).3
Here, plaintiffs specifically pled that they were not
required to exhaust administrative remedies and that the
administrative remedies are inadequate. Nevertheless, we must
consider whether the facts as pled justify failure to exhaust
administrative procedures. We hold that plaintiffs sufficiently
3
Exhaustion may be required for procedural due process claims.
See Edward Valves, Inc. v. Wake County, 343 N.C. 426, 435, 471
S.E.2d 342, 347 (1996), cert. denied, 519 U.S. 1112, 136 L.Ed.
2d 839 (1997); Copper ex rel. Copper v. Denlinger, 363 N.C. 784,
788, 688 S.E.2d 426, 428 (2010).
-10-
pled futility because the Currituck County Board of Adjustment
would not be authorized to hear plaintiffs’ common law vested
rights claim.
The ‘vested rights’ doctrine has evolved as
a constitutional limitation on the state’s
exercise of its police power to restrict an
individual’s use of private property by the
enactment of zoning ordinances. A
determination of the ‘vested rights’ issue
requires resolution of questions of fact,
including reasonableness of reliance,
existence of good or bad faith, and
substantiality of expenditures.
Huntington Properties, LLC v. Currituck County, 153 N.C. App.
218, 226, 569 S.E.2d 695, 701 (2002) (citations, quotation
marks, and brackets omitted).
“In reviewing the determination of an administrative
enforcement officer pursuant to N.C. Gen. Stat. § 160A-388, a
board of adjustment sits in a ‘quasi-judicial capacity’ and has
only the authority it is granted under that statute.” Dobo v.
Zoning Bd. of Adjustment of City of Wilmington, 149 N.C. App.
701, 706, 562 S.E.2d 108, 111 (2002), rev’d in part on other
grounds, 356 N.C. 656, 576 S.E.2d 324 (2003). N.C. Gen. Stat. §
160A-388(b) (2011) authorizes boards of adjustment to “hear and
decide special and conditional use permits, requests for
variances, and appeals of decisions of administrative officials
charged with enforcement of the ordinance.” Its role is solely
-11-
related to the interpretation of the ordinances and deciding
whether to grant a variance from those ordinances. See Godfrey
v. Zoning Bd. of Adjustment of Union County, 317 N.C. 51, 63,
344 S.E.2d 272, 279 (1986). Boards of adjustment do not have the
authority to adjudicate constitutional claims. Id.; Dobo, 149
N.C. App. at 706, 562 S.E.2d at 111.
Some common law vested rights cases have been appealed from
boards of adjustment4; others have been brought as civil actions
without prior administrative proceedings.5 These cases do not
announce a clear rule for the proper method to pursue a vested
rights claim. Nevertheless, a rule can be inferred from the
appellate courts’ treatment of those cases and the statutory
authority of boards of adjustment discussed above. Our Supreme
Court has differentiated between interpretations of zoning
ordinances, which are properly considered by boards of
adjustment, and constitutional challenges, which are not. See
4
See, e.g., Application of Campsites Unlimited, Inc., 287 N.C.
493, 215 S.E.2d 73 (1975), Browning-Ferris Industries Of South
Atlantic, Inc. v. Guilford County Bd. of Adjustment, 126 N.C.
App. 168, 484 S.E.2d 411 (1997), Kirkpatrick v. Village Council
for Village of Pinehurst, 138 N.C. App. 79, 530 S.E.2d 338(2000).
5
See, e.g., Town of Hillsborough v. Smith, 276 N.C. 48, 170
S.E.2d 904 (1969), Russell v. Guilford County, 100 N.C. App.
541, 397 S.E.2d 335 (1990), MLC Automotive, LLC v. Town of
Southern Pines, 207 N.C. App. 555, 702 S.E.2d 68 (2010), disc.
rev. denied, 365 N.C. 211, 710 S.E.2d 2 (2011).
-12-
Batch v. Town of Chapel Hill, 326 N.C. 1, 11, 387 S.E.2d 655,
661-62 (holding that it was error to join a claim concerning the
interpretation of development ordinances with constitutional
challenges thereto), cert. denied, 496 U.S. 931, 110 L.Ed. 2d
651 (1990). We have noted that where interpretation of an
ordinance is involved the property owner should follow the
administrative procedure of seeking permission for a
nonconforming use from the board of adjustment. See Huntington
Properties, LLC, 153 N.C. App. at 227, 569 S.E.2d at 702; see
also Kirkpatrick, 138 N.C. App. at 87-88, 530 S.E.2d at 343-44(considering a common law vested rights claim in a case first
brought to the board of adjustment, along with issues concerning
interpretation of the ordinances). However, the discretion of a
board of adjustment is not unlimited. Its “power to ‘determine
and vary’ is limited to such variations and modifications as are
in harmony with the general purpose and intent of the ordinance
and do no violence to its spirit.” Lee v. Board of Adjustment of
City of Rocky Mount, 226 N.C. 107, 111, 37 S.E.2d 128, 132
(1946). A plaintiff is not required to request that the board of
adjustment issue a variance that it does not have the authority
to issue. See Smith, 276 N.C. at 57, 170 S.E.2d at 911.
-13-
Where the interpretation of the ordinance is not at issue,
the ordinance prohibits the property owner’s intended use, and
the property owner is claiming a common law vested right to such
a nonconforming use, the only claim is a constitutional one. In
such a case, plaintiffs are not required to first exhaust the
procedures before the board of adjustment. Here, as in Smith,
plaintiffs’ “contention is that they have a legal right to
build, which right the city cannot take from them and for which
no permit is authorized by the ordinance. . . . [T]he law does
not require them to make a vain trip to the City Hall before
exercising it.” Id. at 57, 170 S.E.2d at 911. Plaintiffs
specifically alleged that the meaning of the UDO was not in
dispute and that their desired use was not allowed under the
ordinance.
Therefore, we conclude that plaintiffs were not required to
exhaust administrative remedies before the Currituck County
Board of Adjustment in order to bring the present civil action.
The trial court erred in dismissing plaintiffs’ vested rights
claim under Rule 12(b)(1) for failure to exhaust administrative
remedies.
B. Sufficiency of Claim
-14-
Next, we must consider whether plaintiffs’ common law
vested rights claim was sufficiently pled to state a cause of
action. We hold that plaintiffs sufficiently pled their common
law vested rights claim to survive a motion to dismiss.6
A party’s common law right to develop and/or
construct vests when: (1) the party has
made, prior to the [enactment or] amendment
of a zoning ordinance, expenditures or
incurred contractual obligations substantial
in amount, incidental to or as part of the
acquisition of the building site or the
construction or equipment of the proposed
building; (2) the obligations and/or
expenditures are incurred in good faith; (3)
the obligations and/or expenditures were
made in reasonable reliance on and after the
issuance of a valid building permit, if such
permit is required, authorizing the use
requested by the party; and (4) the amended
ordinance is a detriment to the party.
Browning-Ferris, 126 N.C. App. at 171-72, 484 S.E.2d at 414(citations and quotation marks omitted).
“[W]hen a property owner makes expenditures in the absence
of zoning . . . , subsequent changes in the zoning of the
property may not prohibit the resulting nonconforming use.”
Finch v. City of Durham, 325 N.C. 352, 366, 384 S.E.2d 8, 16
(1989). A property owner need not rely on the existence of a
permit authorizing construction if none was required at the time
6
This case involves only common law vested rights; plaintiffs do
not assert statutory vested rights under N.C. Gen. Stat. § 160A-
385.1.
-15-
the expenditures were made. MLC Automotive, LLC, 207 N.C. App.
at 565, 702 S.E.2d at 75. “To acquire such vested property
right[s] it is sufficient that, prior to the . . . enactment of
the zoning ordinance and with the requisite good faith, he make
a substantial beginning of construction and incur therein
substantial expense.” Campsites Unlimited, 287 N.C. at 501, 215
S.E.2d at 78 (citation and quotation marks omitted). “A party
acts in good faith reliance when it has an honest belief that
the nonconforming use would not violate declared public policy.”
Kirkpatrick, 138 N.C. App. at 87, 530 S.E.2d at 343 (citation,
quotation marks, and brackets omitted).
As we are considering a 12(b)(6) motion to dismiss, we must
assume that the facts alleged by plaintiffs are true and
liberally construe the complaint. Mosteller v. Duke Energy
Corp., 207 N.C. App. 1, 11, 698 S.E.2d 424, 431 (2010), disc.
rev. denied, 365 N.C. 211, 710 S.E.2d 38 (2011). The relevant
allegations are as follows:
In 1966, plaintiffs or their predecessors in interest
acquired approximately 1400 acres of property in Currituck
County. The property was not then zoned and commercial
development was allowed. In June 1966, the County adopted a
“Subdivision Ordinance.” On 2 September 1969, consistent with
-16-
this ordinance, Plaintiff Ocean Associates recorded a plat
showing 577 residential lots and six business areas on the
property. Such commercial uses were permitted in that area at
the time. The County asked that the commercial development not
begin until there was sufficient residential density in the area
to support the businesses and plaintiffs agreed. Plaintiffs
began development in 1969. Between 1968 and 1971, plaintiffs
spent approximately $425,050.00 to prepare both the residential
and the business lots. These expenditures included general
engineering, land geosciences, road grading, canal digging, dune
building, lot filling, evacuating ditches, landscaping, and
surveying. Plaintiffs would not have expended these funds “but
for the fact that business and commercial uses were permitted on
the Property under County law . . . .” In the early 1970s,
plaintiffs completed the infrastructure that would serve both
the business and residential lots.
In October 1971, Currituck County adopted a zoning
ordinance and prepared a map. The map seemed to designate the
property as “RA-20.” The RA-20 district permitted mostly low
density residential and agricultural uses, with only limited
business or commercial uses. The County adopted a second zoning
ordinance in 1975, which seemed to continue designating
-17-
plaintiffs’ property as RA-20. The County assured property
owners that subdivisions approved prior to adoption of these
ordinances would continue to be allowed.
In 1989, the County adopted a UDO, which is still in
effect. Although unclear, plaintiffs’ property was apparently
zoned RO2. The RO2 district allows only limited business uses.
Plaintiffs’ planned uses for the property are not allowed under
the UDO. Plaintiffs moved forward with further development of
the business lots in 2004. The County informed plaintiffs that
their intended uses were not permitted under the UDO and denied
that plaintiffs had any vested rights to use their property in
that manner.
Taking these facts as true, we hold that plaintiffs
sufficiently pled their claim for common law vested rights to
survive a motion to dismiss. Plaintiffs have alleged that their
property was not zoned at the time they made their expenditures
to prepare the business lots. They have alleged that this use
was lawful at the time the expenditures were made and that the
expenditures were made in good faith reliance on that fact. They
have alleged that they expended over $400,000 on the
development. They allege that they are prejudiced by the zoning
-18-
ordinance because their intended commercial use would not be
permitted under the ordinance.
In Campsites Unlimited, our Supreme Court held that the
property owners had a vested right because they made substantial
expenditures in reliance on the lack of zoning. 287 N.C. at 502,
215 S.E.2d at 78. In that case, the property owners had cleared
and constructed roadways and staked out lots. Id. The alleged
construction activities here were at least as substantial as
those in Campsites Unlimited, if not more. Plaintiffs’ clearing
of the lots, canal digging, dune building, and road grading were
intended to prepare the site for development. Cf. Russell, 100
N.C. App. at 545, 397 S.E.2d at 337 (holding that the
plaintiff’s expenditures were not substantial where there was
“no evidence of ground breaking, tree clearing or anything else
done to prepare the site for development”). We conclude that
these expenditures were “substantial.”
Additionally, taking the allegations of the complaint as
true, plaintiffs’ reliance on the lawfulness of their project
was in good faith. The required “good faith”
is not present when the landowner, with
knowledge that the adoption of a zoning
ordinance is imminent and that, if adopted,
it will forbid his proposed construction and
use of the land, hastens, in a race with the
town commissioners, to make expenditures or
-19-
incur obligations before the town can take
its contemplated action so as to avoid what
would otherwise be the effect of the
ordinance upon him.
Campsites Unlimited, 287 N.C. at 503, 215 S.E.2d at 79 (citation
and quotation marks omitted).
Here, plaintiffs filed plats indicating business
development before any zoning ordinance was in place. There is
no indication that they were aware of any plans to zone their
property such that business development would not be allowed.
Cf. id. The face of the complaint does not reveal that
plaintiffs failed to acquire any other permits required to begin
construction. Cf. Browning-Ferris, 126 N.C. App. at 172, 484
S.E.2d at 414. Indeed, plaintiffs have alleged that the County
was aware of their plans and condoned them.
In sum, plaintiffs’ allegations, if true, show that they
have made substantial expenditures in good faith reliance on the
lack of zoning at the time the expenditures were made. We
conclude that plaintiffs have sufficiently pled a common law
vested rights claim. Accordingly, we hold that the trial court
erred in allowing defendants’ motion to dismiss under Rule
12(b)(6).7
7
There was a question raised at oral arguments concerning
whether the plaintiffs other than Ocean Associates could bring a
-20-
IV. Equal Protection and Due Process § 1983 Claims
Plaintiffs next argue that the trial court erred in
dismissing their equal protection and substantive due process
claims under 42 U.S.C. § 1983 (2006) for failure to exhaust
administrative remedies and sovereign immunity.8 Although the
basis for its decision is not clear from the trial court’s
order, defendants moved to dismiss plaintiffs’ § 1983 claims on
the basis of failure to exhaust administrative remedies,
sovereign immunity, and legislative immunity. Defendants did not
argue at the motion hearing that the § 1983 claim was improperly
pled or that the claims would be barred by the statute of
limitations. On appeal, defendants do not argue that they are
immune.
“To state a claim under 42 U.S.C. § 1983, a plaintiff must
show that [a person], acting under color of law, has ‘subjected
[him] to the deprivation of any rights, privileges, or
immunities secured by the Constitution and laws.’” Copper, 363
vested rights claim as successors in interest even though they
did not actually expend the funds themselves. The individuals
involved with the property are apparently the same, but the
corporate forms have changed. This issue was not raised in the
pleadings, briefed by the parties, or addressed by the trial
court, so we express no opinion on that question.
8
Defendants did not argue to the trial court and do not argue on
appeal that plaintiffs failed to allege any element of these
claims.
-21-
N.C. at 789, 688 S.E.2d at 429 (quoting 42 U.S.C. § 1983(2006)). “[A] municipality is a ‘person’ within the meaning of
section 1983.” Moore v. City of Creedmoor, 345 N.C. 356, 365,
481 S.E.2d 14, 20 (1997).
Plaintiffs alleged that the County has allowed other
similarly situated property owners to operate businesses in the
zoning districts that prohibit commercial buildings while
denying plaintiffs the opportunity to do the same. They have
alleged that the County treated them differently because they
are Jewish. Moreover, plaintiffs allege that the County’s
decision to treat them differently was arbitrary and without any
rational relationship to a valid governmental objective. They
allege that they have been damaged by this discrimination
because they have lost income they could have received from the
commercial development of their property. All of the claims
were brought against the County itself and the individual County
Commissioners in their official capacity.
First, plaintiffs’ § 1983 claims may not be dismissed for
failure to exhaust administrative remedies. While claims for
violation of procedural due process may be subject to exhaustion
requirements, Copper, 363 N.C. at 789-90, at 688 S.E.2d at 430,
substantive constitutional claims are not, Edward Valves, Inc.,
-22-
343 N.C. at 435, 471 S.E.2d at 347. Here, plaintiffs’ claims are
founded on substantive due process and equal protection. They
were not required to exhaust any administrative process to bring
these claims. See Edward Valves, Inc., 343 N.C. at 435, 471
S.E.2d at 347.
Second, defendants are not protected from § 1983 claims on
the basis of sovereign immunity. Corum v. University of North
Carolina Through Bd. of Governors, 330 N.C. 761, 772, 413 S.E.2d
276, 283 (“[S]overeign immunity alleged under state law is not a
permissible defense to section 1983 actions.”), disc. rev.
denied, 506 U.S. 985, 121 L.Ed. 2d 431 (1992); Glenn-Robinson v.
Acker, 140 N.C. App. 606, 627, 538 S.E.2d 601, 616 (2000)
(noting that “a municipal entity has no claim to immunity in a
section 1983 suit” (citation and quotation marks omitted)),
disc. rev. denied, 353 N.C. 372, 547 S.E.2d 811 (2001). Indeed,
defendants do not argue on appeal that they are immune from suit
under § 1983.
Finally, defendants argue that plaintiffs’ § 1983 claim is
barred by the statute of limitations concerning challenges to
zoning ordinances. Plaintiffs urge us not to consider this
argument since it was not raised below. Defendants did argue in
their brief to the trial court that the statute of limitation
-23-
barred plaintiffs’ § 1983 claims, but only “[t]o the extent
Plaintiffs[’] due process and equal protection claims are a
based on” a lack of notice of the amendments to the zoning
ordinances. But plaintiffs’ § 1983 claims are not based on any
notice issue. Plaintiffs specifically alleged in their amended
complaint that they are not “attacking a defect in the ordinance
adoption process . . . .” Defendants apparently recognized this
fact as they did not argue at the motions hearing that the
statute of limitations would require dismissal of these claims.
Moreover, it is not clear that they ever received a ruling from
the trial court on this issue. Therefore, they have not
preserved this issue for our review and we will not address it.
N.C.R. App. P. 10(a)(1); Lovelace v. City of Shelby, 153 N.C.
App. 378, 384, 570 S.E.2d 136, 140 (declining to address an
appellee’s argument that was not raised below), disc. rev.
denied, 356 N.C. 437, 572 S.E.2d 785 (2002).
We hold that the trial court erred in dismissing
plaintiffs’ claims under 42 U.S.C. § 1983 because the claims are
not barred by sovereign immunity or failure to exhaust
administrative remedies. Therefore, we reverse the portion of
the trial court’s order dismissing these claims.
V. Tax Claim
-24-
Plaintiffs finally argue that the trial court erred in
dismissing their claim under Article V, Section 2(2) of the
North Carolina Constitution. We disagree.
Plaintiffs alleged that defendant violated Article V,
Section 2(2) of the North Carolina Constitution by refusing to
allow business development on property that it has classified
for tax purposes as business property. The North Carolina
Constitution “requires that taxation must be imposed by a
uniform rule.” HED, Inc. v. Powers, 84 N.C. App. 292, 294, 352
S.E.2d 265, 266, disc. rev. denied, 319 N.C. 458, 356 S.E.2d 4(1987). That requirement is met “if the rate is uniform
throughout each taxing authority’s jurisdiction.” State ex rel.
Dyer v. City of Leaksville, 275 N.C. 41, 49, 165 S.E.2d 201, 206
(1969).
Here, plaintiffs do not actually challenge the tax
classification or the uniformity of the tax rules. Indeed, they
assert that the tax classification of their property as business
property is entirely accurate. They have not alleged that
defendants tax such property in a non-uniform manner. At best,
the tax classification of plaintiffs’ property might be relevant
to the “good faith” element of their vested rights claim. But
their allegations are insufficient to state a claim under
-25-
Article V, Section 2 of the North Carolina Constitution.
Therefore, we affirm the trial court’s dismissal of this claim.
VI. Conclusion
For the foregoing reasons, we conclude that the trial court
erred in dismissing plaintiffs’ vested rights claim and their §
1983 claims, but that it properly dismissed plaintiffs’ tax
claim. Therefore, we reverse those portions of the trial court’s
order dismissing the vested rights and § 1983 claims, affirm the
portion dismissing the tax claim, and remand for further
proceedings.
REVERSED, in part; AFFIRMED, in part; and REMANDED.
Judges HUNTER, JR., Robert N. and DILLON concur.