Swan Beach Corolla, L.L.C. v. County of Currituck

NO. COA13-1272

NORTH CAROLINA COURT OF APPEALS

Filed: 1 July 2014

SWAN BEACH COROLLA, L.L.C., OCEAN
ASSOCIATES, LP, LITTLE NECK
TOWERS, L.L.C., GERALD FRIEDMAN,
NANCY FRIEDMAN, CHARLES S.
FRIEDMAN, TIL MORNING, LLC, and
SECOND STAR, L.L.C.,
Plaintiffs,

v. Currituck County
No. 12-CVS-334
COUNTY OF CURRITUCK; THE CURRITUCK
COUNTY BOARD OF COMMISSIONERS; and
JOHN D. RORER, MARION GILBERT, O.
VANCE AYDLETT, JR., H.M. PETREY,
J. OWEN ETHERIDGE, PAUL MARTIN,
and S. PAUL O’NEAL as members of
the CURRITUCK COUNTY BOARD OF
COMMISSIONERS,
Defendants.

Appeal by plaintiffs from Order entered 24 July 2013 by

Judge Wayland J. Sermons in Superior Court, Currituck County.

Heard in the Court of Appeals 24 April 2014.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P., by Lacy H. Reaves and J. Mitchell Armbruster, for
plaintiffs-appellants.

County of Currituck, by Donald I. McRee, Jr., for
defendants-appellees.

STROUD, Judge.
 -2-
Plaintiffs appeal from an order entered 24 July 2013

dismissing their complaint for declaratory judgment regarding

vested rights they claimed to develop their property

commercially, for violations of constitutional rights under 42

U.S.C. § 1983, and for violation of Article V, Section 2 of the

North Carolina Constitution. We reverse in part, affirm in part,

and remand for further proceedings.

I. Background

Plaintiffs are five companies and three individuals who own

property in the Swan Beach Subdivision in Currituck County. On 6

July 2012, they filed a complaint against the County of

Currituck, the Currituck Board of Commissioners, and the

commissioners themselves in their official capacities.

Plaintiff Ocean Associates was the original developer of the

land and the other plaintiffs purchased their land from it.1

They alleged that they have common law vested rights to develop

commercial uses on their property. They also raised claims of

laches, “easement rights” to commercially develop their

property, state constitutional violations, and violations of

federal equal protection and due process under 42 U.S.C. § 1983.

1
The precise nature of the relationship between Ocean Associates
and the other plaintiffs is not clear from the complaint.
 -3-
According to the complaint, plaintiff Ocean Associates, LP,

purchased approximately 1400 acres of property in the Carova

Beach area of Currituck County in 1966 to develop a residential

subdivision along with related commercial services.2 In 1969,

Ocean Associates created and recorded a plat indicating that it

intended to divide the property into residential and business

lots. At the time, Currituck County had no applicable zoning

ordinance. However, the County asked Ocean Associates to refrain

from developing the business lots until the residential lots

were sufficiently occupied. After filing the plat, Ocean

Associates began to prepare both the residential and business

lots for development. They spent $425,050.00 on services such as

surveying, land geosciences, general engineering, road grading,

canal digging, dune building, filling lots, evacuating ditches,

and landscaping. This infrastructure would serve both the

business and residential lots.

In 1971, Currituck County adopted a zoning ordinance. The

1971 ordinance designated plaintiffs’ property as RA-20. The RA-

20 district allowed for low density residential and agricultural

uses with only limited business uses. Plaintiffs allege that

2
Because this case comes to us on a motion to dismiss, all of
the following facts are from the complaint; we express no
opinion as to their veracity.
 -4-
they did not know that the zoning of their property had changed.

In 1975, the County enacted a new zoning ordinance. This

ordinance zoned plaintiffs’ property in a similar manner to the

previous ordinance. Plaintiffs believed that the County would

still permit them to develop their property for commercial uses

because the County had allowed other property owners to do the

same.

In 1989, Currituck County enacted a Unified Development

Ordinance (UDO). The UDO zoned plaintiffs’ property RO2, which

does not allow business uses except for marinas, campgrounds,

outdoor recreational facilities, and small professional offices.

The business and commercial uses intended by plaintiffs would

not be permitted under this ordinance. Nevertheless, plaintiffs

continued to believe that they would be allowed to commercially

develop their property.

In 2004, plaintiffs decided to move forward with

development of the business lots because the density of the

residential lots had finally become sufficient to support such

use. They wanted to build a convenience store, real estate

offices, a post office, and a restaurant. Around September 2004,

the County informed plaintiffs that such uses would not be

permitted. Plaintiffs asserted that they had vested rights to
 -5-
use their property in this manner, but the County disagreed,

asserting that the UDO barred such uses. Over the next three

years, plaintiffs then attempted to convince the County to

rezone their property so that they could develop their property

for business uses. The parties agreed that such uses would not

be permitted on their property under the UDO.

Plaintiffs allege that despite the County’s assertion that

the UDO prohibits business development in the RO2 district, the

County has permitted other businesses to operate in the area.

They alleged that the County treated plaintiffs differently

without a rational basis, or because the individual plaintiffs

are Jewish.

On 12 September 2012, defendants filed a motion to dismiss

for lack of subject matter jurisdiction under Rule 12(b)(1) and

failure to state a claim under Rule 12(b)(6). Defendants argued

that plaintiffs failed to exhaust applicable administrative

remedies and that they are protected by sovereign, governmental,

and legislative immunity. They further argued that plaintiffs’

complaint is barred by the applicable statutes of limitations.

Plaintiffs filed an amended complaint on 13 February 2013.

The amended complaint added an allegation that the County

adopted a zoning ordinance in 1968, but that there was no map
 -6-
accompanying the ordinance and that their property was not zoned

at that time. The amended complaint also added a claim under

Article V, Section 2 of the North Carolina Constitution.

Plaintiffs alleged that the County had taxed their property as

business property since 1969, so its failure to permit

plaintiffs to develop their property for business uses

contravenes the requirement of taxation by uniform rule.

Defendants then filed an amended motion to dismiss and an

amended brief in support of their motion. The motion was heard

by the superior court on 20 May 2013. By order entered 24 July

2013, the superior court allowed defendants’ 12(b)(1) motion to

dismiss for failure to exhaust administrative remedies and their

12(b)(6) motion for failure to state a claim, though it did not

specify a reason. Plaintiffs timely appealed to this Court.

II. Standard of Review

Defendants moved to dismiss plaintiffs’ complaint for lack

of subject matter jurisdiction under N.C. Gen. Stat. § 1A-1,

Rule 12(b)(1)(2011) and for failure to state a claim under N.C.

Gen. Stat. § 1A-1, Rule 12(b)(6)(2011).

Rule 12(b)(1) permits a party to contest, by
motion, the jurisdiction of the trial court
over the subject matter in controversy. We
review Rule 12(b)(1) motions to dismiss for
lack of subject matter jurisdiction de novo
and may consider matters outside the
 -7-
pleadings. Pursuant to the de novo standard
of review, the court considers the matter
anew and freely substitutes its own judgment
for that of the trial court.

Trivette v. Yount, ___ N.C. App. ___, ___, 720 S.E.2d 732, 735

(2011) (citations, quotation marks, brackets, and italics

omitted).

The standard of review of an order granting
a 12(b)(6) motion is whether the complaint
states a claim for which relief can be
granted under some legal theory when the
complaint is liberally construed and all the
allegations included therein are taken as
true. On a motion to dismiss, the
complaint’s material factual allegations are
taken as true. Dismissal is proper when one
of the following three conditions is
satisfied: (1) the complaint on its face
reveals that no law supports the plaintiff’s
claim; (2) the complaint on its face reveals
the absence of facts sufficient to make a
good claim; or (3) the complaint discloses
some fact that necessarily defeats the
plaintiff’s claim. On appeal of a 12(b)(6)
motion to dismiss, this Court conducts a de
novo review of the pleadings to determine
their legal sufficiency and to determine
whether the trial court’s ruling on the
motion to dismiss was correct.

Podrebarac v. Horack, Talley, Pharr, & Lowndes, P.A., ___ N.C.

App. ___, ___, 752 S.E.2d 661, 663-64 (2013) (citation and

quotation marks omitted).

III. Common Law Vested Rights Claim
 -8-
Plaintiffs argue that the trial court erred in dismissing

their common law vested rights claim under Rule 12(b)(1) for

failure to exhaust administrative remedies. Defendants counter

that even if it was error to dismiss under Rule 12(b)(1),

dismissal was proper under Rule 12(b)(6). We hold that

plaintiffs did not fail to exhaust administrative remedies and

that their common law vested rights claim was sufficiently pled

to survive a motion to dismiss under either Rule 12(b)(1) or

Rule 12(b)(6).

A. Exhaustion of Administrative Remedies

“As a general rule, where the legislature has provided by

statute an effective administrative remedy, that remedy is

exclusive and its relief must be exhausted before recourse may

be had to the courts.” Presnell v. Pell, 298 N.C. 715, 721, 260

S.E.2d 611, 615 (1979). “If a plaintiff has failed to exhaust

its administrative remedies, the court lacks subject matter

jurisdiction and the action must be dismissed.” Justice for

Animals, Inc. v. Robeson County, 164 N.C. App. 366, 369, 595

S.E.2d 773, 775 (2004). Nevertheless, “a party need not exhaust

an administrative remedy where the remedy is inadequate.”

Affordable Care, Inc. v. North Carolina State Bd. of Dental

Examiners, 153 N.C. App. 527, 534, 571 S.E.2d 52, 58 (2002).
 -9-
Facts justifying avoidance of administrative procedure must be

pled in the complaint. Id. at 534, 571 S.E.2d at 58.

“The [administrative] remedy is considered inadequate

unless it is calculated to give relief more or less commensurate

with the claim.” Jackson for Jackson v. North Carolina Dept. of

Human Resources, 131 N.C. App. 179, 186, 505 S.E.2d 899, 904

(1998) (citation and quotation marks omitted), disc. rev.

denied, 350 N.C. 594, 537 S.E.2d 213 (1999). Generally,

constitutional claims are not subject to administrative

remedies, so failure to pursue such remedies is not fatal to

those claims. See Meads v N.C. Dep’t of Agric., 349 N.C. 656,

670, 509 S.E.2d 165, 174 (1988); Hardy ex rel. Hardy v. Beaufort

County Bd. of Educ., 200 N.C. App. 403, 409, 683 S.E.2d 774, 779

(2009).3

Here, plaintiffs specifically pled that they were not

required to exhaust administrative remedies and that the

administrative remedies are inadequate. Nevertheless, we must

consider whether the facts as pled justify failure to exhaust

administrative procedures. We hold that plaintiffs sufficiently

3
Exhaustion may be required for procedural due process claims.
See Edward Valves, Inc. v. Wake County, 343 N.C. 426, 435, 471
S.E.2d 342, 347 (1996), cert. denied, 519 U.S. 1112, 136 L.Ed.
2d 839 (1997); Copper ex rel. Copper v. Denlinger, 363 N.C. 784,
788, 688 S.E.2d 426, 428 (2010).
 -10-
pled futility because the Currituck County Board of Adjustment

would not be authorized to hear plaintiffs’ common law vested

rights claim.

The ‘vested rights’ doctrine has evolved as
a constitutional limitation on the state’s
exercise of its police power to restrict an
individual’s use of private property by the
enactment of zoning ordinances. A
determination of the ‘vested rights’ issue
requires resolution of questions of fact,
including reasonableness of reliance,
existence of good or bad faith, and
substantiality of expenditures.

Huntington Properties, LLC v. Currituck County, 153 N.C. App.

218, 226, 569 S.E.2d 695, 701 (2002) (citations, quotation

marks, and brackets omitted).

“In reviewing the determination of an administrative

enforcement officer pursuant to N.C. Gen. Stat. § 160A-388, a

board of adjustment sits in a ‘quasi-judicial capacity’ and has

only the authority it is granted under that statute.” Dobo v.

Zoning Bd. of Adjustment of City of Wilmington, 149 N.C. App.

701, 706, 562 S.E.2d 108, 111 (2002), rev’d in part on other

grounds, 356 N.C. 656, 576 S.E.2d 324 (2003). N.C. Gen. Stat. §

160A-388(b) (2011) authorizes boards of adjustment to “hear and

decide special and conditional use permits, requests for

variances, and appeals of decisions of administrative officials

charged with enforcement of the ordinance.” Its role is solely
 -11-
related to the interpretation of the ordinances and deciding

whether to grant a variance from those ordinances. See Godfrey

v. Zoning Bd. of Adjustment of Union County, 317 N.C. 51, 63,

344 S.E.2d 272, 279 (1986). Boards of adjustment do not have the

authority to adjudicate constitutional claims. Id.; Dobo, 149

N.C. App. at 706, 562 S.E.2d at 111.

Some common law vested rights cases have been appealed from

boards of adjustment4; others have been brought as civil actions

without prior administrative proceedings.5 These cases do not

announce a clear rule for the proper method to pursue a vested

rights claim. Nevertheless, a rule can be inferred from the

appellate courts’ treatment of those cases and the statutory

authority of boards of adjustment discussed above. Our Supreme

Court has differentiated between interpretations of zoning

ordinances, which are properly considered by boards of

adjustment, and constitutional challenges, which are not. See

4
See, e.g., Application of Campsites Unlimited, Inc., 287 N.C.
493, 215 S.E.2d 73 (1975), Browning-Ferris Industries Of South
Atlantic, Inc. v. Guilford County Bd. of Adjustment, 126 N.C.
App. 168, 484 S.E.2d 411 (1997), Kirkpatrick v. Village Council
for Village of Pinehurst, 138 N.C. App. 79, 530 S.E.2d 338
(2000).
5
See, e.g., Town of Hillsborough v. Smith, 276 N.C. 48, 170
S.E.2d 904 (1969), Russell v. Guilford County, 100 N.C. App.
541, 397 S.E.2d 335 (1990), MLC Automotive, LLC v. Town of
Southern Pines, 207 N.C. App. 555, 702 S.E.2d 68 (2010), disc.
rev. denied, 365 N.C. 211, 710 S.E.2d 2 (2011).
 -12-
Batch v. Town of Chapel Hill, 326 N.C. 1, 11, 387 S.E.2d 655,

661-62 (holding that it was error to join a claim concerning the

interpretation of development ordinances with constitutional

challenges thereto), cert. denied, 496 U.S. 931, 110 L.Ed. 2d

651 (1990). We have noted that where interpretation of an

ordinance is involved the property owner should follow the

administrative procedure of seeking permission for a

nonconforming use from the board of adjustment. See Huntington

Properties, LLC, 153 N.C. App. at 227, 569 S.E.2d at 702; see

also Kirkpatrick, 138 N.C. App. at 87-88, 530 S.E.2d at 343-44

(considering a common law vested rights claim in a case first

brought to the board of adjustment, along with issues concerning

interpretation of the ordinances). However, the discretion of a

board of adjustment is not unlimited. Its “power to ‘determine

and vary’ is limited to such variations and modifications as are

in harmony with the general purpose and intent of the ordinance

and do no violence to its spirit.” Lee v. Board of Adjustment of

City of Rocky Mount, 226 N.C. 107, 111, 37 S.E.2d 128, 132

(1946). A plaintiff is not required to request that the board of

adjustment issue a variance that it does not have the authority

to issue. See Smith, 276 N.C. at 57, 170 S.E.2d at 911.
 -13-
Where the interpretation of the ordinance is not at issue,

the ordinance prohibits the property owner’s intended use, and

the property owner is claiming a common law vested right to such

a nonconforming use, the only claim is a constitutional one. In

such a case, plaintiffs are not required to first exhaust the

procedures before the board of adjustment. Here, as in Smith,

plaintiffs’ “contention is that they have a legal right to

build, which right the city cannot take from them and for which

no permit is authorized by the ordinance. . . . [T]he law does

not require them to make a vain trip to the City Hall before

exercising it.” Id. at 57, 170 S.E.2d at 911. Plaintiffs

specifically alleged that the meaning of the UDO was not in

dispute and that their desired use was not allowed under the

ordinance.

Therefore, we conclude that plaintiffs were not required to

exhaust administrative remedies before the Currituck County

Board of Adjustment in order to bring the present civil action.

The trial court erred in dismissing plaintiffs’ vested rights

claim under Rule 12(b)(1) for failure to exhaust administrative

remedies.

B. Sufficiency of Claim
 -14-
Next, we must consider whether plaintiffs’ common law

vested rights claim was sufficiently pled to state a cause of

action. We hold that plaintiffs sufficiently pled their common

law vested rights claim to survive a motion to dismiss.6

A party’s common law right to develop and/or
construct vests when: (1) the party has
made, prior to the [enactment or] amendment
of a zoning ordinance, expenditures or
incurred contractual obligations substantial
in amount, incidental to or as part of the
acquisition of the building site or the
construction or equipment of the proposed
building; (2) the obligations and/or
expenditures are incurred in good faith; (3)
the obligations and/or expenditures were
made in reasonable reliance on and after the
issuance of a valid building permit, if such
permit is required, authorizing the use
requested by the party; and (4) the amended
ordinance is a detriment to the party.

Browning-Ferris, 126 N.C. App. at 171-72, 484 S.E.2d at 414

(citations and quotation marks omitted).

“[W]hen a property owner makes expenditures in the absence

of zoning . . . , subsequent changes in the zoning of the

property may not prohibit the resulting nonconforming use.”

Finch v. City of Durham, 325 N.C. 352, 366, 384 S.E.2d 8, 16

(1989). A property owner need not rely on the existence of a

permit authorizing construction if none was required at the time

6
This case involves only common law vested rights; plaintiffs do
not assert statutory vested rights under N.C. Gen. Stat. § 160A-
385.1.
 -15-
the expenditures were made. MLC Automotive, LLC, 207 N.C. App.

at 565, 702 S.E.2d at 75. “To acquire such vested property

right[s] it is sufficient that, prior to the . . . enactment of

the zoning ordinance and with the requisite good faith, he make

a substantial beginning of construction and incur therein

substantial expense.” Campsites Unlimited, 287 N.C. at 501, 215

S.E.2d at 78 (citation and quotation marks omitted). “A party

acts in good faith reliance when it has an honest belief that

the nonconforming use would not violate declared public policy.”

Kirkpatrick, 138 N.C. App. at 87, 530 S.E.2d at 343 (citation,

quotation marks, and brackets omitted).

As we are considering a 12(b)(6) motion to dismiss, we must

assume that the facts alleged by plaintiffs are true and

liberally construe the complaint. Mosteller v. Duke Energy

Corp., 207 N.C. App. 1, 11, 698 S.E.2d 424, 431 (2010), disc.

rev. denied, 365 N.C. 211, 710 S.E.2d 38 (2011). The relevant

allegations are as follows:

In 1966, plaintiffs or their predecessors in interest

acquired approximately 1400 acres of property in Currituck

County. The property was not then zoned and commercial

development was allowed. In June 1966, the County adopted a

“Subdivision Ordinance.” On 2 September 1969, consistent with
 -16-
this ordinance, Plaintiff Ocean Associates recorded a plat

showing 577 residential lots and six business areas on the

property. Such commercial uses were permitted in that area at

the time. The County asked that the commercial development not

begin until there was sufficient residential density in the area

to support the businesses and plaintiffs agreed. Plaintiffs

began development in 1969. Between 1968 and 1971, plaintiffs

spent approximately $425,050.00 to prepare both the residential

and the business lots. These expenditures included general

engineering, land geosciences, road grading, canal digging, dune

building, lot filling, evacuating ditches, landscaping, and

surveying. Plaintiffs would not have expended these funds “but

for the fact that business and commercial uses were permitted on

the Property under County law . . . .” In the early 1970s,

plaintiffs completed the infrastructure that would serve both

the business and residential lots.

In October 1971, Currituck County adopted a zoning

ordinance and prepared a map. The map seemed to designate the

property as “RA-20.” The RA-20 district permitted mostly low

density residential and agricultural uses, with only limited

business or commercial uses. The County adopted a second zoning

ordinance in 1975, which seemed to continue designating
 -17-
plaintiffs’ property as RA-20. The County assured property

owners that subdivisions approved prior to adoption of these

ordinances would continue to be allowed.

In 1989, the County adopted a UDO, which is still in

effect. Although unclear, plaintiffs’ property was apparently

zoned RO2. The RO2 district allows only limited business uses.

Plaintiffs’ planned uses for the property are not allowed under

the UDO. Plaintiffs moved forward with further development of

the business lots in 2004. The County informed plaintiffs that

their intended uses were not permitted under the UDO and denied

that plaintiffs had any vested rights to use their property in

that manner.

Taking these facts as true, we hold that plaintiffs

sufficiently pled their claim for common law vested rights to

survive a motion to dismiss. Plaintiffs have alleged that their

property was not zoned at the time they made their expenditures

to prepare the business lots. They have alleged that this use

was lawful at the time the expenditures were made and that the

expenditures were made in good faith reliance on that fact. They

have alleged that they expended over $400,000 on the

development. They allege that they are prejudiced by the zoning
 -18-
ordinance because their intended commercial use would not be

permitted under the ordinance.

In Campsites Unlimited, our Supreme Court held that the

property owners had a vested right because they made substantial

expenditures in reliance on the lack of zoning. 287 N.C. at 502,

215 S.E.2d at 78. In that case, the property owners had cleared

and constructed roadways and staked out lots. Id. The alleged

construction activities here were at least as substantial as

those in Campsites Unlimited, if not more. Plaintiffs’ clearing

of the lots, canal digging, dune building, and road grading were

intended to prepare the site for development. Cf. Russell, 100

N.C. App. at 545, 397 S.E.2d at 337 (holding that the

plaintiff’s expenditures were not substantial where there was

“no evidence of ground breaking, tree clearing or anything else

done to prepare the site for development”). We conclude that

these expenditures were “substantial.”

Additionally, taking the allegations of the complaint as

true, plaintiffs’ reliance on the lawfulness of their project

was in good faith. The required “good faith”

is not present when the landowner, with
knowledge that the adoption of a zoning
ordinance is imminent and that, if adopted,
it will forbid his proposed construction and
use of the land, hastens, in a race with the
town commissioners, to make expenditures or
 -19-
incur obligations before the town can take
its contemplated action so as to avoid what
would otherwise be the effect of the
ordinance upon him.

Campsites Unlimited, 287 N.C. at 503, 215 S.E.2d at 79 (citation

and quotation marks omitted).

Here, plaintiffs filed plats indicating business

development before any zoning ordinance was in place. There is

no indication that they were aware of any plans to zone their

property such that business development would not be allowed.

Cf. id. The face of the complaint does not reveal that

plaintiffs failed to acquire any other permits required to begin

construction. Cf. Browning-Ferris, 126 N.C. App. at 172, 484

S.E.2d at 414. Indeed, plaintiffs have alleged that the County

was aware of their plans and condoned them.

In sum, plaintiffs’ allegations, if true, show that they

have made substantial expenditures in good faith reliance on the

lack of zoning at the time the expenditures were made. We

conclude that plaintiffs have sufficiently pled a common law

vested rights claim. Accordingly, we hold that the trial court

erred in allowing defendants’ motion to dismiss under Rule

12(b)(6).7

7
There was a question raised at oral arguments concerning
whether the plaintiffs other than Ocean Associates could bring a
 -20-
IV. Equal Protection and Due Process § 1983 Claims

Plaintiffs next argue that the trial court erred in

dismissing their equal protection and substantive due process

claims under 42 U.S.C. § 1983 (2006) for failure to exhaust

administrative remedies and sovereign immunity.8 Although the

basis for its decision is not clear from the trial court’s

order, defendants moved to dismiss plaintiffs’ § 1983 claims on

the basis of failure to exhaust administrative remedies,

sovereign immunity, and legislative immunity. Defendants did not

argue at the motion hearing that the § 1983 claim was improperly

pled or that the claims would be barred by the statute of

limitations. On appeal, defendants do not argue that they are

immune.

“To state a claim under 42 U.S.C. § 1983, a plaintiff must

show that [a person], acting under color of law, has ‘subjected

[him] to the deprivation of any rights, privileges, or

immunities secured by the Constitution and laws.’” Copper, 363

vested rights claim as successors in interest even though they
did not actually expend the funds themselves. The individuals
involved with the property are apparently the same, but the
corporate forms have changed. This issue was not raised in the
pleadings, briefed by the parties, or addressed by the trial
court, so we express no opinion on that question.
8
Defendants did not argue to the trial court and do not argue on
appeal that plaintiffs failed to allege any element of these
claims.
 -21-
N.C. at 789, 688 S.E.2d at 429 (quoting 42 U.S.C. § 1983

(2006)). “[A] municipality is a ‘person’ within the meaning of

section 1983.” Moore v. City of Creedmoor, 345 N.C. 356, 365,

481 S.E.2d 14, 20 (1997).

Plaintiffs alleged that the County has allowed other

similarly situated property owners to operate businesses in the

zoning districts that prohibit commercial buildings while

denying plaintiffs the opportunity to do the same. They have

alleged that the County treated them differently because they

are Jewish. Moreover, plaintiffs allege that the County’s

decision to treat them differently was arbitrary and without any

rational relationship to a valid governmental objective. They

allege that they have been damaged by this discrimination

because they have lost income they could have received from the

commercial development of their property. All of the claims

were brought against the County itself and the individual County

Commissioners in their official capacity.

First, plaintiffs’ § 1983 claims may not be dismissed for

failure to exhaust administrative remedies. While claims for

violation of procedural due process may be subject to exhaustion

requirements, Copper, 363 N.C. at 789-90, at 688 S.E.2d at 430,

substantive constitutional claims are not, Edward Valves, Inc.,
 -22-
343 N.C. at 435, 471 S.E.2d at 347. Here, plaintiffs’ claims are

founded on substantive due process and equal protection. They

were not required to exhaust any administrative process to bring

these claims. See Edward Valves, Inc., 343 N.C. at 435, 471

S.E.2d at 347.

Second, defendants are not protected from § 1983 claims on

the basis of sovereign immunity. Corum v. University of North

Carolina Through Bd. of Governors, 330 N.C. 761, 772, 413 S.E.2d

276, 283 (“[S]overeign immunity alleged under state law is not a

permissible defense to section 1983 actions.”), disc. rev.

denied, 506 U.S. 985, 121 L.Ed. 2d 431 (1992); Glenn-Robinson v.

Acker, 140 N.C. App. 606, 627, 538 S.E.2d 601, 616 (2000)

(noting that “a municipal entity has no claim to immunity in a

section 1983 suit” (citation and quotation marks omitted)),

disc. rev. denied, 353 N.C. 372, 547 S.E.2d 811 (2001). Indeed,

defendants do not argue on appeal that they are immune from suit

under § 1983.

Finally, defendants argue that plaintiffs’ § 1983 claim is

barred by the statute of limitations concerning challenges to

zoning ordinances. Plaintiffs urge us not to consider this

argument since it was not raised below. Defendants did argue in

their brief to the trial court that the statute of limitation
 -23-
barred plaintiffs’ § 1983 claims, but only “[t]o the extent

Plaintiffs[’] due process and equal protection claims are a

based on” a lack of notice of the amendments to the zoning

ordinances. But plaintiffs’ § 1983 claims are not based on any

notice issue. Plaintiffs specifically alleged in their amended

complaint that they are not “attacking a defect in the ordinance

adoption process . . . .” Defendants apparently recognized this

fact as they did not argue at the motions hearing that the

statute of limitations would require dismissal of these claims.

Moreover, it is not clear that they ever received a ruling from

the trial court on this issue. Therefore, they have not

preserved this issue for our review and we will not address it.

N.C.R. App. P. 10(a)(1); Lovelace v. City of Shelby, 153 N.C.

App. 378, 384, 570 S.E.2d 136, 140 (declining to address an

appellee’s argument that was not raised below), disc. rev.

denied, 356 N.C. 437, 572 S.E.2d 785 (2002).

We hold that the trial court erred in dismissing

plaintiffs’ claims under 42 U.S.C. § 1983 because the claims are

not barred by sovereign immunity or failure to exhaust

administrative remedies. Therefore, we reverse the portion of

the trial court’s order dismissing these claims.

V. Tax Claim
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Plaintiffs finally argue that the trial court erred in

dismissing their claim under Article V, Section 2(2) of the

North Carolina Constitution. We disagree.

Plaintiffs alleged that defendant violated Article V,

Section 2(2) of the North Carolina Constitution by refusing to

allow business development on property that it has classified

for tax purposes as business property. The North Carolina

Constitution “requires that taxation must be imposed by a

uniform rule.” HED, Inc. v. Powers, 84 N.C. App. 292, 294, 352

S.E.2d 265, 266, disc. rev. denied, 319 N.C. 458, 356 S.E.2d 4

(1987). That requirement is met “if the rate is uniform

throughout each taxing authority’s jurisdiction.” State ex rel.

Dyer v. City of Leaksville, 275 N.C. 41, 49, 165 S.E.2d 201, 206

(1969).

Here, plaintiffs do not actually challenge the tax

classification or the uniformity of the tax rules. Indeed, they

assert that the tax classification of their property as business

property is entirely accurate. They have not alleged that

defendants tax such property in a non-uniform manner. At best,

the tax classification of plaintiffs’ property might be relevant

to the “good faith” element of their vested rights claim. But

their allegations are insufficient to state a claim under
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Article V, Section 2 of the North Carolina Constitution.

Therefore, we affirm the trial court’s dismissal of this claim.

VI. Conclusion

For the foregoing reasons, we conclude that the trial court

erred in dismissing plaintiffs’ vested rights claim and their §

1983 claims, but that it properly dismissed plaintiffs’ tax

claim. Therefore, we reverse those portions of the trial court’s

order dismissing the vested rights and § 1983 claims, affirm the

portion dismissing the tax claim, and remand for further

proceedings.

REVERSED, in part; AFFIRMED, in part; and REMANDED.

Judges HUNTER, JR., Robert N. and DILLON concur.