Case Law Update – Vested Rights and Lousy Syntax

            Last week the Court of Appeals published an opinion (MNC Holdings v. Town of Matthews) that analyzed how to interpret poorly written zoning ordinances, especially when a citizen’s property and rights are on the line. 

             Full and complete disclosure: I was lead counsel for the prevailing party.   I have strong opinions about the underlying facts that I will do my best to temper. However, when you don the armor of the zealous advocate, moderation and neutral observation are often sacrificed.

 Facts

             MNC Holdings owns a medical waste incinerator in the Town of Matthews.  Such businesses exist because we need them. You may think otherwise, but only until your child has cancer and needs chemotherapy, and you realize that something must be done with the waste product.

             MNC’s plant existed peacefully near other industrial uses, adjacent to a railroad, and on land zoned for heavy industry until 1991 when the Town of Matthews extended its municipal boundaries and made the plant an involuntary municipal citizen.  Matthews then zoned the facility for residential use and adopted a Table of Permitted Uses that intentionally did not allow medical waste incinerators. 

             Matthews also adopted a zoning ordinance with labyrinthine rules governing nonconforming uses that strictly limited the circumstances under which a nonconforming use could be repaired or expanded.

             In other words, Matthews used its statutory powers to annex this business against its will, and then proceeded to take away its right to make structural alterations and to expand.  Over the next 20 years the town and its citizens took other actions to make it difficult for this lawful and necessary industry to survive and treated it like a pariah.

 What does it mean to be a nonconforming use?

             There are book chapters and lengthy law review articles that attempt to answer this question, but I’ll give you the abridged version in three short paragraphs.

             Cities and counties must have the ability to adopt and revise their zoning ordinances and to change the designation of zoning districts.  However, if your business lawfully existed at the time the law changed – or if you had spent substantial funds to construct your business in reliance on a permit the government had issued – then your rights to continue your use are “vested.”  Vested uses are also called “legal but nonconforming uses.” 

             They are also called “grandfathered” uses, and the laws that have developed around these concepts protect property owners from the strong but unfair hand of government.

             But here’s an interesting rub.  Local governments are free to adopt their own ordinances that define how nonconforming uses will be treated. Accordingly, the local zoning code can be as important as common law principles in understanding a citizen’s rights.

 The Matthews Ordinance

             Matthews adopted a zoning ordinance that said nonconforming uses are disfavored and that their eventual elimination was a goal. However, it adopted several exceptions to this rule, and one of those exceptions pertained to one’s right to make structural alterations when “required by law.”

             As you might imagine from the preceding wind up pitch, the laws regulating medical waste incinerators changed.  In 2009, the EPA adopted tougher air quality rules that required such facilities to make substantial upgrades to meet the new standards.  The same rules were then adopted by the State of North Carolina and Mecklenburg County.  All facilities had until 2014 to comply.

             Matthews then petitioned the county to change the timeline for MNC, requiring it to comply with the rules by 2012, two years ahead of schedule.  The county complied.  MNC’s response was simply to expedite the equipment modifications.

             However, to MNC’s surprise, the town did not consider mandatory rules promulgated by federal, state and county authorities to be legal requirements that triggered the exception  allowed by ordinance (i.e. “required by law”).  After petitioning to require MNC’s expedited compliance, Matthews then denied MNC’s right to make the legally mandated alterations.

             Sidebar:  The zoning administrator actually cited a different ordinance provision to support his decision that MNC could not make the necessary alterations (he said it was a “nonconforming structure”), but after MNC appealed his interpretation to the Board of Adjustment, town attorneys decided they could better defend on another ordinance provision, so the zoning administrator changed his opinion and adopted as his ruling the provision preferred by legal counsel.  End Sidebar.

             At the risk of undue repetition I’ll say this again.  The town successfully petitioned to have the new rules applied to MNC two years ahead of schedule while denying it the right to make the alterations required.  How the heavy staff of governmental power feels to you depends on whether you’re the one swinging that staff or the one being hit.

 What did the Ordinance Say?

             The ordinance provision that was considered first by the Board of Adjustment, then by the Superior Court, and then by the Court of Appeals reads as follows:

             “No structural alterations are allowed to any structure containing a nonconforming use except for those required by law or an order from the office or agent authorized by the Board of Commissioners to issue building permits to ensure the safety of the structure.”

             Matthews claimed it read this ordinance to mean that one can make structural alterations only when – as provided in the second clause – it is necessary to ensure the safety of the structure.

             MNC, on the other hand, whose interpretation was favored by a superior court judge and a unanimous court of appeals panel, read this ordinance as having two clauses and two types of exceptions. One, your alterations are “required by law” or two, they are necessary to ensure the safety of the structure.

 What did the Court Say?

             There are 15 judges on the N.C. Court of Appeals.  They work in randomly assigned panels of three judges per case, with one judge assigned to write the panel’s opinion.  While some judges have tendencies (e.g. to be stricter in criminal appeals), the common factor, from an historical perspective, is that North Carolina has attracted excellent appellate judges.

             In this case, the opinion of the three judges was written by Judge Robert N. Hunter (from Greensboro).  Although I think most panels would have reached the same decision, Judge Hunter has built a reputation as a judge who is sensitive to and wary of the strong arm of government and as a judge who respects rights inherent in the ownership of private property.

             Two of his opinions where abuses of power stepped a bit too hard on property owners’ rights come quickly to mind: the Amward Homes case out of Cary and Morris Communications v. Bessemer City, where Judge Hunter’s dissent enabled the petitioner to reach the N.C. Supreme Court, which held in petitioner’s favor in what is now a commonly cited case.

             In the present case, Judge Hunter noted that the court’s analysis of a Board of Adjustment decision begins with two questions.  The first question is always whether the trial used the correct standard of review – de novo versus “whole record” – and then if the court used the correct standard of review it looks to see if it did so correctly.  However, this was an easy analysis:  a board of adjustment’s interpretation of a zoning ordinance is always a legal question subject to de novo review.

             Sidebar:  As a general rule, lawyers prefer to argue cases where the standard is de novo rather than “whole record.”  Courts are not required to defer to boards on legal questions (de novo) but are required to defer when the standard is “whole record.”  End sidebar.

             Judge Hunter then stated, in sum, that there are two ways of interpreting this ordinance provision: the “plain meaning” standard and the “intent” standard.  Both of them favor MNC. 

             Those standards are easy to describe.  Courts first look to the plain meaning of an ordinance.  If the meaning is clear, then courts look no further.  However, if an ordinance is ambiguous, courts look to the ordinance’s intent.  Since the trial court looked at intent, the appellate must as well.

             In this case, the zoning ordinance’s intent was to create an exception to the rule that property owners could not make structural alterations to nonconforming uses, and that exception pertained to situations when state or federal law required certain alterations to be made.

             And since zoning ordinances are legalized forms of interference with private property rights, exemptions or exceptions written into the ordinances are to be liberally construed in favor of the property owner.

 Editorial Comment

             Yes, I strongly believe there was, in this case, a distinct pattern of abusive use of governmental power. However, an exhaustive public records request and tough cross-examination at the Board of Adjustment hearing led me to conclude that the administrator who made the initial interpretation was not responsible for the long series of actions against MNC and that he was a man of integrity who was doing the best job he could. 

             Also, I learned long ago that you don’t vilify your opposing counsel, even though they are defending actions you feel were wrong on many levels.  Such was the case here, where the opposing attorneys were smart, prepared and aggressive. 

             I make that point for one reason.  One of our defenses – which we had an obligation to our client to raise – was that Matthews’ legal counsel had improperly served notice of appeal by email, thus depriving the court of jurisdiction to hear the case.  The court acknowledged that this rule was violated but decided that the proper course of action was to deny our motion to dismiss based on a technical rule violation in order to reach the matter on its merits.  A lawyer who denies ever having made procedural errors is deceiving you.  I’ve made many myself and will likely make more. While the MNC legal team continues to hold the position that the rule violation denied the court jurisdiction, I’m glad for opposing counsel’s sake that the court overlooked her infraction.

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