Ballard v. ShelleyÂ

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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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.
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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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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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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.
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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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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).
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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.
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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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