No. 8: Judge: Currituck must pay developers $39M


From staff reports

Saturday, December 24, 2016

Editor’s note: Our lookback at the top stories of 2016 continues.

CURRITUCK — At year’s end, Currituck County was pinning its hopes on the N.C. Court of Appeals to help it avoid paying a major civil judgment that at last count had Currituck taxpayers on the hook for $53 million in damages.

The county found itself in that predicament after Superior Court Judge Milton “Toby” Fitch ruled in April that the principals in Swan Beach Corolla were entitled to a default judgment in their 2012 lawsuit against Currituck over the county’s long refusal to allow them to develop their property on the Outer Banks.

As part of Fitch’s ruling, Swan Beach Corolla was awarded more than $39 million in damages and lost profits. Fitch also ruled the development firm had a right to develop its property.

Currituck has appealed Fitch’s ruling to the appeals court.

The origins of the lawsuit began in 1966, when Swan Beach Corolla purchased 1,400 acres in the Carova Beach area where it planned to develop a residential subdivision that would include related commercial services.

At the time, Currituck County did not have a zoning ordinance, but the county did ask Swan Beach Corolla to refrain from developing the commercial part of its property until its residential lots were sufficiently occupied.

In 2004, Swan Beach Corolla went to county officials about getting approval for completing the commercial part of its project. They were told, however, that they could not complete that part of the project because the county by then had adopted zoning restrictions affecting the property.

Swan Beach Corolla sued the county in 2012, claiming its unconditional property rights had been violated. The company’s principals, Gerald and Charles “Chip” Friedman, also claimed the county had discriminated against them because of their religion. Both Friedmans are Jewish.

A trial court granted Currituck’s request to dismiss the lawsuit in July 2013. However, a three-judge panel of the N.C. Court of Appeals reversed that decision a year later, finding that Swan Beach had a valid claim that the county had violated its vested property rights.

In April, Fitch agreed with Swan Beach’s attorney, Mitch Armbruster, that the county had defaulted in the case by failing to make a timely response to the appeals court’s 2014 ruling. Fitch’s ruling meant the county had, in effect, admitted the claims in Swan Beach Corolla’s lawsuit.

The county, in a statement issued after Fitch’s April ruling, maintained it has not and does not discriminate against anyone. The county also said that Swan Beach Corolla’s property rights were not violated because commercial business development had never been allowed by county ordinances in the four-wheel drive area of Currituck.

Currituck filed notice that it would ask the Superior Court to set aside Fitch’s ruling. The county also filed an appeal of the ruling with the N.C. Court Appeals. In December, Fitch upheld his earlier ruling, refusing to set aside the $39 million judgment.

Fitch also ruled that, pending the outcome of the county’s appeal, Currituck officials cannot “dissipate” any resources not already earmarked for a public purpose that would affect the county’s ability to satisfy the judgment. Factoring in the 8.6 percent interest that’s accruing daily, Swan Beach Corolla’s judgment against Currituck had, by early December, risen to $53 million.

The week before Christmas, Nick Herman, a Chapel Hill attorney representing the county, filed an appeal with the appellate court, asking it to overrule Fitch’s ruling.

The county is calling for an appellate panel to void the default judgement that Swan Beach Corolla got the Superior Court Clerk’s office to enter into the record in August 2014.

Swan Beach Corolla maintains the county, under the rules of civil trial court procedure, missed a 20-day deadline to respond to an amended lawsuit. This also came up after the N.C. Court of Appeals had sided with the Friedmans, except on one legal point, and sent the case back to the trial court.

The county, in its appeal, argues state law is controlling. Specifically, the county argues that, under state law, the trial court administrator would have been required to set the case before a judge at the first session of Superior Court, with the presiding judge to direct further proceedings.

The county also denies being late in coming back with a response to an amended version of the lawsuit.

The county argues that Judge Cy Grant, at a hearing, erred by ruling against the county’s motion to set aside the entry of default and by failing to decide whether the county had been late in responding. The county also claims Fitch erred by failing to rule the county was never late and by agreeing with Swan Beach Corolla to award the default judgment.

The county also says Swan Beach Corolla’s claims of property development rights – if “totally meritless,” as the county contends – “threaten to completely upend long-standing county ordinances and regulations governing the development of property in the county for the overall health, safety and welfare of the county.”