Court Opinion

ID: 4242503
Source: CourtListenerOpinion
Date Created: 2018-02-06 13:13:13.681336+00
Date Added: 2024-06-11T07:48:04.957524
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                    No. COA17-61

                               Filed: 6 February 2018

Cabarrus County, No. 12 CVS 1889

JERRY W. BALLARD and BRENDA K. BALLARD, Plaintiffs,

              v.

MARK E. SHELLEY and VIRGINIA J. SHELLEY, Defendants and Third-Party
Plaintiffs,

              v.

ASHEFORD GREEN PROPERTY OWNERS’ ASSOCIATION, INC. et al., Third-
Party Defendants and Fourth-Party Plaintiffs,

              v.

CABARRUS COUNTY, Fourth-Party Defendant.

        Appeal by third-party plaintiffs from order entered 5 July 2016 by Judge C.W.

Bragg in Cabarrus County Superior Court. Heard in the Court of Appeals 21 August

2017.

        Smith Moore Leatherwood LLP, by Elizabeth Brooks Scherer and Kip David
        Nelson, for third-party plaintiffs-appellants Mark and Virginia Shelley.

        Erwin, Bishop, Capitano & Moss, P.A., by J. Daniel Bishop, and Cabarrus
        County Attorney Richard M. Koch for fourth-party defendant-appellee
        Cabarrus County.

        DIETZ, Judge.
                                BALLARD V. SHELLEY

                                  Opinion of the Court

      This case began as a neighborhood dispute about a fence that Mark and

Virginia Shelley built in their backyard. Some of the Shelleys’ neighbors believed this

fence, which obstructed the view from their own property, was a retaining wall that

violated county building code or permitting requirements. The case evolved over time

into a complicated lawsuit involving various claims, counterclaims, and crossclaims

by the Shelleys, their neighbors, their homeowners’ association, and Cabarrus

County.

      This interlocutory appeal concerns the dismissal of the Shelleys’ crossclaims

against Cabarrus County. As explained below, we affirm the dismissal of the Shelleys’

common law tort claims based on governmental immunity, dismiss the Shelleys’

appeal from the dismissal of their declaratory judgment claim for lack of appellate

jurisdiction, and reverse the dismissal of their procedural due process claim and

remand for further proceedings on that claim.

                          Facts and Procedural History

      In 2009, Mark and Virginia Shelley obtained permits from Cabarrus County

to build a fence to enclose their backyard pool. As construction on the fence

progressed, a dispute arose between the Shelleys and some of their neighbors, who

believed the fence was a retaining wall subject to stricter permitting and building

code requirements.

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                                BALLARD V. SHELLEY

                                  Opinion of the Court

      After several unsuccessful efforts to get Cabarrus County to condemn the fence

for building code violations, Jerry and Brenda Ballard—two of the Shelleys’

neighbors—sued the Shelleys and the Asheford Green Property Owners’ Association,

alleging that the fence violated various neighborhood covenants. The Shelleys filed

an answer, asserting defenses and counterclaims.

      The Property Owners’ Association later filed claims against Cabarrus County,

alleging that the Shelleys’ fence did not comply with county permitting and building

code requirements, and seeking a writ of mandamus and injunction to compel

Cabarrus County to enforce the building code. Cabarrus County then filed a

crossclaim against the Shelleys seeking an order requiring them to comply with the

building code or tear down the fence.

      The Shelleys then asserted crossclaims against Cabarrus County including

various common law tort claims, a due process claim, and a declaratory judgment

claim. The county moved to dismiss the Shelleys’ crossclaims on the grounds of

governmental immunity and failure to state a claim on which relief can be granted.

      After a hearing, the trial court dismissed the Shelleys’ tort claims based on

governmental immunity, finding that the county had not waived its immunity by its

purchase of excess liability insurance. The trial court dismissed the Shelleys’

declaratory judgment and constitutional claims for failure to state a claim under Rule

12(b)(6). The Shelleys timely appealed these interlocutory rulings.

                                         -3-
                                 BALLARD V. SHELLEY

                                   Opinion of the Court

                                       Analysis

   I.      Dismissal of the tort claims

        The Shelleys first challenge the dismissal of their tort claims based on

governmental immunity.

        We begin by addressing our jurisdiction over this issue on appeal. Generally

speaking, governmental immunity, as a form of sovereign immunity, is not merely an

affirmative defense to claims; it is a “complete immunity from being sued in court.”

Magana v. Charlotte-Mecklenburg Bd. of Educ., 183 N.C. App. 146, 147, 645 S.E.2d
91, 92 (2007). In other words, this immunity not only prevents courts from entering

judgments against our state government, but also protects the government from

being haled into court in the first instance. Id.

        As a result, when the State or its subdivisions move to dismiss a tort claim

based on immunity and the trial court denies the motion, that denial unquestionably

affects a substantial right. This is so because, if the governmental agency were forced

to litigate the case to judgment before appealing the immunity ruling, it could deprive

the government of its right not to have to appear in court and defend the case at all.

        The same is not true when the trial court grants a motion to dismiss a tort

claim based on sovereign or governmental immunity. In that circumstance, the losing

party is in the same position as any other litigant whose claim was dismissed for lack

of jurisdiction or for failure to state a claim on which relief can be granted. One might

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                                BALLARD V. SHELLEY

                                  Opinion of the Court

assume, therefore, that an appeal from an order granting a motion to dismiss based

on sovereign or governmental immunity would not automatically affect a substantial

right, simply because the ruling involved immunity.

      But, as is often the case with our jurisprudence, what one might reasonably

assume is not what our case law holds. In a series of cases that we are unable to

distinguish from this one, our Court has held that the grant of a motion to dismiss

based on sovereign or governmental immunity is immediately appealable. See Greene

v. Barrick, 198 N.C. App. 647, 649–50, 680 S.E.2d 727, 729–30 (2009); Odom v. Lane,

161 N.C. App. 534, 535, 588 S.E.2d 548, 549 (2003). Because one panel of this Court

cannot overrule another, we are bound to hold that the Shelleys’ interlocutory appeal

on this issue is permissible. In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 36

(1989). If the holdings in Greene, Odom, and similar cases warrant reconsideration,

it must come from this Court sitting en banc, or from our Supreme Court.

      We thus turn to the merits of the Shelleys’ claim. Counties and other

municipalities, as governmental agencies, enjoy the protections of governmental

immunity. Magana, 183 N.C. App. at 147, 645 S.E.2d at 92. This sovereign immunity

applies unless the county “consents to suit or waives its right to sovereign immunity.”

Hinson v. City of Greensboro, 232 N.C. App. 204, 210, 753 S.E.2d 822, 827 (2014).

      A county may waive its immunity by purchasing liability insurance covering a

particular risk. N.C. Gen. Stat. § 153A-435(a). But that waiver applies only “to the

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                                 BALLARD V. SHELLEY

                                   Opinion of the Court

extent of insurance coverage.” Id. In other words, “immunity is waived only to the

extent that the [county] is indemnified by the insurance contract from liability for the

acts alleged.” Hinson, 232 N.C. App. at 210, 753 S.E.2d at 827. If the liability policy,

by its plain terms, does not provide coverage for the alleged acts, then the policy does

not waive governmental immunity. Id. When this Court examines policy provisions

allegedly waiving governmental immunity, we must strictly construe the provision

against waiver. Magana, 183 N.C. App. at 149, 645 S.E.2d at 92.

       A series of cases from this Court have examined how this waiver rule applies

to an insurance policy like the one in this case, that provides excess liability coverage

above the municipality’s own self-insured retention. These cases uniformly have held

that excess policies do not waive immunity when they are not triggered until the

municipality first pays the entire amount of the self-insured retention.

      As this Court reasoned in Magana, if a municipality “has statutory immunity

from liability for tort claims, it cannot be required to pay any part of the . . . self-

insured amount and, therefore, the excess policy will provide no indemnification.” 183
N.C. App. at 149, 645 S.E.2d at 93. In other words, because the county “is immune

from negligence claims up to [the self-insured amount], it will never have a legal

obligation to pay this self-insured amount and, thus, has not waived its immunity

through the purchase of this excess liability insurance policy.” Hinson, 232 N.C. App.

at 212, 753 S.E.2d at 828.

                                          -6-
                                BALLARD V. SHELLEY

                                  Opinion of the Court

      This case is indistinguishable from Magana and Hinson. The county moved to

dismiss under Rule 12(b)(1) of the Rules of Civil Procedure and submitted evidence

to support its motion. Among those submissions, the county produced an affidavit

from its risk manager attaching the relevant terms of the county’s excess liability

policies. Those policies include a self-insured retention amount of $350,000 that must

be paid by the county before coverage is triggered, and contain the following policy

language:

             [W]e agree to indemnify the Insured for ultimate net loss
             in excess of the retained limit which the Insured becomes
             legally obligated to pay because of bodily injury, personal
             injury, advertising injury, or property damage which
             occurs during this policy period and to which this insurance
             applies. Our indemnification obligation shall not arise until
             the Insured itself has paid in full the entire amount of its
             retained limit. The retained limit must be paid by the
             Insured, and may not be paid or satisfied, in whole or in
             part, by any other source of payment, including but not
             limited to other insurance, or negated, in whole or in part,
             by any form of immunity to judgment or liability. No other
             obligation or liability to pay sums or perform acts or
             services is covered. The Insured’s obligation to pay shall
             have been determined by judgment against the Insured
             after a contested suit or by written agreement, which has
             received our prior approval, between the Insured(s) and the
             claimant(s) or the claimant’s legal representative.

(Emphasis added.)

      We agree with the county that this language demonstrates that the excess

policy does not waive its immunity with respect to the common law tort claims at

issue here. The policy language states that the insurer’s obligation to pay is not

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                                   BALLARD V. SHELLEY

                                    Opinion of the Court

triggered until a judgment is entered against the county or the county agrees to pay

the claim, with the insurer’s approval. The Shelleys have not shown that either of

these triggering events has occurred.

         The Shelleys argue that they were afforded no discovery into the terms of the

policy, and that the trial court relied entirely on the risk manager’s affidavit and the

policy provisions attached to it, without “giving the Shelleys the opportunity to fully

develop the record.” But the Shelleys do not cite any evidence in the record that they

asked for the opportunity to conduct discovery on this issue. We cannot fault the trial

court for deciding this issue based on an uncontested affidavit received without

objection from the Shelleys.

         Accordingly, on the record before this Court, and applying the settled rule from

Hinson and Magana, the terms of this excess insurance policy do not waive the

county’s governmental immunity. The trial court therefore properly dismissed the

Shelley’s common law tort claims under Rule 12(b)(1) of the Rules of Civil Procedure

based on the county’s assertion of immunity.

   II.      Dismissal of the declaratory judgment claim

         The Shelleys next argue that the trial court erred in dismissing their

declaratory judgment claim against the county for failure to state a claim under Rule

12(b)(6).

                                           -8-
                                 BALLARD V. SHELLEY

                                  Opinion of the Court

      The trial court did not dismiss this claim based on governmental immunity.

Thus, we must separately address whether we have jurisdiction to address this

interlocutory ruling on appeal. See Richmond County Bd. of Educ. v. Cowell, 225 N.C.

App. 583, 586, 739 S.E.2d 566, 568 (2013); Bynum v. Wilson County, 228 N.C. App. 1,

6, 746 S.E.2d 296, 300 (2013), rev’d in part on other grounds, 367 N.C. 355, 758 S.E.2d
643 (2014).

      The Shelleys argue that their declaratory judgment claim is immediately

appealable under the substantial rights doctrine because of the risk of inconsistent

verdicts. But the Shelleys concede in their appellate brief that this declaratory

judgment claim is “a reciprocal claim mirroring two other claims” asserted against

them in the action below, both of which remain to be litigated. The dismissal of this

sort of redundant declaratory judgment claim does not implicate substantial rights.

Accordingly, we lack jurisdiction to address this portion of the appeal.

   III.   Dismissal of the constitutional claim

      Finally, the Shelleys argue that the trial court erred in dismissing their

constitutional claim against the county.

      As with the declaratory judgment claim, the constitutional claim was not

dismissed based on governmental immunity, and we must therefore determine

whether some other basis exists for exercising appellate jurisdiction. Richmond

County Bd. of Educ., 225 N.C. App. at 586, 739 S.E.2d at 568.

                                           -9-
                                   BALLARD V. SHELLEY

                                    Opinion of the Court

      The Shelleys argue that their constitutional claim involves issues of fact

intertwined with other claims and defenses that remain in the case. They contend

that, without an immediate appeal, there is a risk “of inconsistent factual

determinations by two different juries.” We agree. The Shelleys’ constitutional claim,

which we describe in more detail below, turns on facts concerning the permit and

building code approval of the Shelleys’ fence. Those fact issues also must be

determined as part of other claims pending below. Accordingly, there is a sufficient

risk of inconsistent verdicts to invoke our appellate jurisdiction under the substantial

rights doctrine. Hamilton v. Mortg. Info. Servs., Inc., 212 N.C. App. 73, 79, 711 S.E.2d
185, 190 (2011).

      We thus turn to the merits of the Shelleys’ constitutional claim. The trial court

dismissed that claim under Rule 12(b)(6) of the Rules of Civil Procedure for failure to

state a claim on which relief could be granted. “This Court reviews the grant of a Rule

12(b)(6) motion to dismiss de novo.” Jackson/Hill Aviation, Inc. v. Town of Ocean Isle

Beach, __ N.C. App. __, __, 796 S.E.2d 120, 123 (2017). “We examine whether the

allegations of the complaint, if treated as true, are sufficient to state a claim upon

which relief can be granted under some legal theory.” Id. “Dismissal is only

appropriate if it appears beyond a doubt that the plaintiff could not prove any set of

facts to support his claim.” Id.

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                                 BALLARD V. SHELLEY

                                   Opinion of the Court

      We note at the outset that, in contrast to the other claims asserted by the

Shelleys, their constitutional claim is quite vague. In the portion of the crossclaim

describing this particular cause of action, the only specific factual allegation is that

the county’s actions “constitute a violation of the Shelleys’ rights and effectively are

an attempt to deprive the Shelleys of their property without due process of law.” That

brief statement provides little insight into what specific governmental acts violated

the Shelleys’ due process rights. But our Supreme Court has emphasized that “North

Carolina is a notice pleading jurisdiction” and courts should not “deny a party his day

in court because of his imprecision with the pen.’’ Mangum v. Raleigh Bd. of

Adjustment, 362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008).

      When we view the allegations in the crossclaim as a whole, including other

allegations that appear earlier in the crossclaim and that are incorporated by

reference into the constitutional claim, we can discern a properly pleaded due process

claim. In essence, the Shelleys allege that the county approved their fence and found

that it complied with applicable building code and permit requirements. Then, after

the time to administratively challenge those code and permitting determinations

expired, and under pressure from other county residents, the county “fabricated” code

or permit violations and used these new violations to challenge the construction of

the fence. The Shelleys further allege that the county pursued these new code or

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                                 BALLARD V. SHELLEY

                                   Opinion of the Court

permit violations outside the normal administrative and judicial review process and

without providing the Shelleys with notice and an opportunity to be heard.

      These allegations, taken as true, are sufficient to state a valid constitutional

claim. To state a claim for violation of procedural due process rights, the complainant

must allege (1) that “the State has interfered with a liberty or property interest” and

(2) that the State did not use “a constitutionally sufficient procedure to interfere with

the liberty or property interest.” Lipinski v. Town of Summerfield, 230 N.C. App. 305,

308, 750 S.E.2d 46, 48–49 (2013). A “constitutionally sufficient procedure” requires

notice and an opportunity to be heard at a meaningful time and in a meaningful

manner. Id. at 308–09, 750 S.E.2d at 49.

      The allegations in the Shelleys’ crossclaim, as summarized above, allege a valid

procedural due process claim under this standard. In short, the Shelleys allege that

the county reconsidered previously approved (and final) permit and code

determinations without notifying the Shelleys or permitting them an opportunity to

contest the decision through available legal means.

      Of course, our holding that the allegations in the complaint, taken as true,

state a valid procedural due process claim does not mean that the Shelleys are likely

to succeed on that claim. In its appellate brief, the county asserts that the Shelleys

misstate the applicable permitting and administrative review processes, and that the

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                                  BALLARD V. SHELLEY

                                   Opinion of the Court

Shelleys had ample notice and many opportunities to be heard, including through

both the administrative process and the claims and defenses available in this action.

      We cannot address these arguments at the motion to dismiss stage. Indeed, at

this stage, the Court cannot even examine the county’s building code and permitting

requirements. See Jackson/Hill Aviation, Inc., __ N.C. App. at __, 796 S.E.2d at 123

(“[O]ur Supreme Court repeatedly has held that courts cannot take judicial notice of

the provisions of municipal ordinances.”). Simply put, at the motion to dismiss stage,

this Court is limited to reviewing the allegations contained within “the four corners

of the complaint.” Id. If, as the county contends in its appellate briefing, the Shelleys’

allegations are plainly false, the county can make that showing in an appropriate

motion for summary judgment.

                                      Conclusion

      For the reasons discussed above, we affirm the trial court’s dismissal of the

Shelleys’ common law tort claims; we dismiss the Shelleys’ appeal with respect to

their declaratory judgment claim for lack of appellate jurisdiction; and we reverse the

trial court’s dismissal of the Shelley’s procedural due process claim and remand for

further proceedings on that claim.

    AFFIRMED IN            PART;     DISMISSED        IN   PART;    REVERSED        AND
REMANDED IN PART.

      Chief Judge McGEE and Judge BERGER concur.

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