A recent Court of Appeals case (High Rock Lake Partners v. NCDOT) illustrates the vulnerable position property owners can find themselves in when dealing with railroads – who answer seemingly to nobody – and the NCDOT, whose statutory powers are expansive, broadly defined, and not subject to easily available or enumerated limitations.

 The Real Facts

             Sidebar: “Real facts” is not a shorthand way of saying the facts outlined in the opinion are wrong.  Rather, it’s a way of saying I’m providing some color and interpretive background to help you understand the context and the backstory.  End sidebar.

             This case began in 2005 at the height of the go-go 00’s when land “values” appreciated at unsustainable rates and waterfront lots appreciated faster than that. High Rock Lake Partners had just bought a gorgeous 188 acres on a peninsula in High Rock Lake that was separated from the world by railroad tracks.  (As a visual, open your hand and hold it palm downward.  Think of your fingers as a broad peninsula with a railroad track running perpendicular across your hand at the knuckles.  You couldn’t get from your fingers (the peninsula) to your wrist without crossing the track at your knuckles).

             If you wanted to access the peninsula in a car, you would get on SR1135 and cross the tracks at a place just before the railroad widened into about 12 rows of horizontal tracks. (Or to maintain the same mental image, you would crawl into your car at your wrist, drive down SR1135 across the back of your hand, cross the tracks at your knuckles and onto the finger peninsula).

             On the peninsula side of the tracks, SR1135 looks more like an ancient Roman cartway than a state highway for about ¼ mile before it reaches and penetrates the lower portion of the peninsula where the developer intended to build 60 homes.

             The developer assumed that the necessary NCDOT-issued driveway permits would be forthcoming either in some straightforward fashion, or, at the least, with some reasonable conditions.  Developers typically make this determination before acquiring title during a phase called “due diligence.”  The assumption was wrong.  But that doesn’t mean the DOT or railroad are in the right.

             More to the point, the developer assumed that NCDOT would have no issue with allowing the developer to improve the portion of SR 1135 that enters the development and using 1135 as an entrance. (As another visual, think of 1135 going down your ring finger as a small, unimproved road from your big knuckle to your middle knuckle, where you would enter the development.  THAT is the point where the development would enter the state road – not ¼ mile away where 1135 crosses the railroad.  There were no concerns raised about safety or design related to the location where the development entered SR1135.  And a driveway permit is issued for that specific connection to be made.

 Getting the Driveway Permit

             NCDOT controls all access points onto state roads.  You cannot create a new entrance without obtaining a “driveway permit.”  Driveway permits can be issued with conditions.

             In this case, there seems to have been no dispute that the driveway connection itself would not be problematic.  The rub was that NCDOT believed the “at grade crossing” ¼ mile from the subdivision entrance had to be widened.

             NCDOT also required, as a condition of obtaining the permit, that the developer get the approval of two different but related third parties – Norfolk Southern, as the operating railroad and NC Railroad, as the owning railroad – thereby outsourcing any approval authority NCDOT had and allowing third parties with no duties to the public to control state highway access.  NCDOT would not assist the developer in acquiring rights to cross the railroad on the state’s right-of-way.

             Norfolk Southern replied, saying it would oppose any changes to the at-grade crossing but would consider conditioning its approval on the developer providing “grade separation.”

             “Grade separation” is railroad-speak for a tunnel or bridge.  And the estimated cost to build a bridge was $3 million (a fact learned not from the opinion but from the developer’s counsel, an attorney I’m currently opposite in a Rutherford County case).

             If you didn’t know it already, here’s something you won’t learn from reading the opinion:  even in the go-go 00’s, there was no way a developer could acquire the land, build the infrastructure, create only 60 perkable lots and sell them for an amount that would pay for a $3 million bridge.  Thus, Norfolk Southern had, for all practical purposes, vetoed a landowner’s access to a state road.

             So High Rock Lake Partners challenged the driveway permit by appealing the permit conditions to an entity called the DOT Driveway Appeals Committee.  The committee upheld the division engineer, and High Rock Lake Partners went to court.

 The Challenge

             The developer/owner claimed that once NCDOT determined that the driveway entrance itself could safely be made, NCDOT lacked the statutory authority to require the developer to make improvements to a railroad/state road crossing ¼ mile up the road and to place the burden of third party approval on the developer.

             The issue before the court, therefore, was whether NCDOT exceeded its statutory authority.  And the point of this post is that NCDOT’s authority is already quite broad and just got broader.

             As a general proposition, state agencies can only exercise the powers delegated to them by the General Assembly.  And as a general canon of statutory construction, when there are two applicable statutes – one general and one specific – the specific statute controls over the general. 

             The developer pointed out that N.C. Gen. Stat. §136-18(29) (the statute that allows NCDOT to establish its own policies and adopt rules concerning driveway connections and the conditions that can be imposed) was not written broadly enough to encompass this situation where third parties are allowed to require $3 million in off-site improvements.  The developer broke down each phrase of this statute and pointed out that none of them applied.

             The court’s reply, boiled to its essence, was that the developer was right about the specific powers enumerated in N.C. Gen. Stat. §136-18(29).  It did not govern this situation.  But instead of finding for the developer the court determined that the appropriate way to resolve the issue was to look to the “general powers” sections in the statute. (And general powers are always broadly defined).

             One of those general powers is listed in N.C. Gen. Stat. §136-93 (“No opening . . . shall be made in any State Road . . . except with . . . a written permit from [NCDOT] or its duly authorized officers, who shall exercise complete and permanent control over such roads and highways . . .”

             “Complete . . . control.”  This stings.  Instead of looking for a way to carefully delineate the power of one of the state’s largest agencies, the court found, instead, a way to bless the agency’s unbridled power.  And the italicized emphasis in the quote above?  It’s not mine.  It was done by the court.

             Sidebar:  In 26 years of practicing law I’ve seen governmental power abused in many ways.  Some cities and some state agencies seem to breed a culture of arrogance and brute-power decision making.  Other agencies master the art of passive aggressive “approvals” that essentially deny use.  But it would not be fair to NCDOT if I didn’t add that, in my experience throughout many of the state’s DOT divisions, this particular agency has a long history of collaborative approvals and reasonable cooperation with the private sector.  In spite of what seems to be unbridled power by statute, the best check is sometimes the department’s own culture.  Describing NCDOT as having a “culture of humility” certainly overstates the case, but the flavor of the phrase is not inappropriate. End sidebar.

 What’s next for High Rock Lake Partners?

             It’s not clear.  The company has petitioned the N.C. Supreme Court for “discretionary review.” (When a Court of Appeals panel of three judges renders a unanimous opinion, you must seek the higher court’s permission to hear the case).

             NCDOT has filed a response alleging that the developer has failed to show it meets any of the bases for granting review (e.g. matter of significant public interest, conflicting Court of Appeals decisions, etc.). NCDOT also bases its response on the principles established in one of my cases (Town of Spruce Pine v. Avery County).

             Interestingly, NCDOT points out to the court what I pointed out several paragraphs ago, that the developer made assumptions about getting the permit and, well, made a mistake by buying the land before determining whether a driveway permit would be feasible.  But a developer’s assumption or mistake should not have any bearing on a court’s interpretation of an agency’s authority.

             When one case raises issues concerning the power of railroads and the authority of NCDOT to control access to the state’s highway system in the context of citizens’ use of land, the matter should be considered one of significant public interest.  I hope the high court grants certiorari.  I’ll keep my eyes peeled and let you know what the N.C. Supreme Court does.

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Tom Terrell

Terrell_TomMr. Terrell is widely regarded as one of North Carolina’s leading land use attorneys, representing both private and governmental entities in matters related to real estate development. His practice “footprint” covers the state from the mountain counties to the coast and occasionally includes…

Terrell_TomMr. Terrell is widely regarded as one of North Carolina’s leading land use attorneys, representing both private and governmental entities in matters related to real estate development. His practice “footprint” covers the state from the mountain counties to the coast and occasionally includes parts of Virginia and South Carolina. His many clients are involved in commercial and residential real estate, solid waste hauling and disposal, telecommunications, quarries/asphalt and miscellaneous litigation related to permit denials, vested rights and rezonings.

He has published numerous articles and speaks regularly to legal, governmental and business groups on a variety of issues related to land use and zoning.

Mr. Terrell has served as a leader in numerous civic and legal endeavors, including Chairman of the Board of Trustees of the N.C. State Health Plan, Chairman of the Board of Trustees of Winston-Salem State University, and service on the Board of Directors of the UNC-CH General Alumni Association, Board of Directors of the High Point Chamber of Commerce, Board of Visitors of Guilford College and Board of Center Associates of the Center for Creative Leadership, and as a founding member of the N.C. Bar Association Zoning, Planning and Land Use Section.

More information can be found at https://www.foxrothschild.com/thomas-e-terrell-jr/.

Mr. Terrell can be contacted at mailto:tterrell@foxrothschild.com.