Summary
holding that the North Carolina Court of Appeals erred by determining the question of the constitutionality of the zoning ordinance when the issue was never raised or considered by the board of adjustment or considered by the superior court and the zoning board of adjustment only decided whether to grant a variance under the zoning ordinance
Summary of this case from Livingston v. Robeson Cnty.Opinion
No. 182PA85
Filed 3 June 1986
1. Municipal Corporations 30.16 — grain facility not nonconforming situation A grain storage facility was not a "nonconforming situation" which could legally be permitted to be continued following a judicial determination that a purported rezoning under which the facility was constructed constituted unlawful "spot zoning" because it was not in existence at the time of either the date of the zoning ordinance or the date of the purported rezoning amendment.
2. Municipal Corporations 30.16 — nonconforming use — judicial declaration not amendment of zoning ordinance A judicial declaration that a purported rezoning constituted unlawful spot zoning did not constitute an "amendment" to the zoning ordinance so as to permit a grain storage facility built in reliance upon the rezoning prior to the date of the judicial action to constitute a "nonconforming situation" which could be continued under the ordinance.
3. Municipal Corporations 30.15 — nonconforming use — arbitrary and capricious action by zoning board of adjustment A zoning board of adjustment acted arbitrarily and capriciously in reaching its conclusion allowing a grain storage facility to continue as a "nonconforming situation" where that conclusion was wholly unsupported by the facts found by the board.
4. Municipal Corporations 30.17 — vested right to continue nonconforming use — issue not before appellate court The Court of Appeals erred in addressing the issue of whether landowners acquired a "vested right" to continue a grain storage facility as a nonconforming use after rezoning which permitted the facility was judicially declared to constitute unlawful spot zoning since the "vested rights" issue was not considered by the county zoning board of adjustment or by the superior court on review by writ of certiorari; 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, and factfinding is not a function of an appellate court; and the landowners are not parties to this proceeding.
5. Municipal Corporations 31 — challenge to zoning amendment — declaratory judgment — injunction not required Plaintiffs were not required to attempt to obtain injunctive relief in order to protect their property interests against unlawful actions of a zoning board but could properly elect to challenge a zoning amendment through a declaratory judgment action.
ON discretionary review of a unanimous decision of a panel of the Court of Appeals, 73 N.C. App. 299, 326 S.E.2d 113 (1985), affirming a judgment entered by Hal H. Walker, J., at the 14 November 1983 Civil Session of Superior Court, UNION County. Heard in the Supreme Court 14 October 1985.
Joe P. McCollum, Jr., for plaintiff-appellants.
Love Milliken, by John R. Milliken, for defendant-appellee.
Justice EXUM concurring in result.
Chief Justice BRANCH joins in this concurring opinion.
Justice MARTIN dissenting.
James Dennis Rape came into ownership and possession of a 17.45-acre tract of land in Union County in 1973. The Union County Board of Commissioners adopted a comprehensive zoning ordinance on 14 April 1975, effective 2 June 1975. On the effective date of the ordinance, Mr. Rape's 17.45-acre tract was being farmed; no business other than farming was operated on this tract prior to 1980. The Rape tract and the surrounding area were zoned low density residential, R-20, by the 1975 ordinance.
On 12 September 1980, Mr. Rape petitioned the county to rezone his tract from R-20 to H-I, "heavy industrial." Mr. Rape's purpose in requesting the zone change was to enable him to construct a grain storage facility and office space on a portion of his tract. The Union County Planning Board voted to recommend the rezoning request, and on 23 November 1980, the County Commissioners, by a vote of three to two, voted to amend the zoning ordinance to rezone the tract as requested by Rape.
Disturbed by this action, three adjoining landowners, within three weeks of the rezoning, filed an action in Superior Court, Union County, on 15 December 1980 seeking a declaratory judgment to the effect that the Commissioners' action in rezoning the Rape tract was null and void because it constituted "spot zoning." Meanwhile, Mr. Rape, pursuant to a "previous arrangement" with Gro-More of Monroe, Inc., obtained a building permit to construct the grain storage facility and began construction of the facility. Gro-More's majority shareholder is Eastern Plant Foods, Inc., of Greenville, South Carolina; Mr. Rape is president and minority shareholder of Gro-More. In May 1981, construction was completed, and pursuant to the arrangement with Gro-More, Mr. Rape transferred 4.25 acres of his 17.45-acre tract containing the grain storage facility and office space to Gro-More. Subsequent to the facility being completed and its transfer to Gro-More, and during the pendency of the action for declaratory judgment, the Union County Board of Commissioners on 25 August 1981 amended the zoning ordinance to make provision for "Nonconforming Situations" (hereinafter, Section 70).
On 11 December 1981, Judge Kivett entered an order in the declaratory judgment action declaring the Commissioners' rezoning of the Rape tract on 23 November 1980 null and void because such action constituted "spot zoning." The result of this order was that the entire tract remained subject to the original R-20, low density residential designation. Gro-More and Eastern Plant Foods appealed to the Court of Appeals, which affirmed Judge Kivett's order in Godfrey v. Union Co. Bd. of Commissioners, 61 N.C. App. 100, 300 S.E.2d 273 (1983). Pursuant to that opinion, Union County Zoning Enforcement Officer H. Steve Morton notified Mr. Rape by letter of 14 April 1983 that the Gro-More grain storage facility was not in compliance with the R-20 district in which it was located and that Mr. Rape had thirty days to bring the use into compliance.
"Spot zoning amendments are those which by their terms single out a particular lot or parcel of land, usually small in relative size, and place it in an area the land use pattern of which is inconsistent with the small lot or parcel so placed, thus projecting an inharmonious land use pattern. Such amendments are usually triggered by efforts to secure special benefits for particular property owners, without proper regard for the rights of adjacent landowners. These are the real spot zoning situations. Under no circumstances could the tag of validity be attached thereto. ". . . . "Of one thing there can be no doubt. The law is well settled that `spot zoning,' as properly known and understood, and `spot zoning' ordinances, as properly identified, are invalid on the general ground that they do not bear a substantial relationship to the public health, safety, moral and general welfare and are out of harmony and in conflict with the comprehensive zoning ordinance of the particular municipality." 2 E. Yokley, Zoning Law and Practice 13-3 (4th ed. 1978) (footnote omitted). See also Blades v. City of Raleigh, 280 N.C. 531, 187 S.E.2d 35 (1972).
On 4 May 1983, Gro-More and Eastern Plant Foods, by their attorney, petitioned the Union County Board of Adjustment for an allowance of the continuance of the "nonconforming situation" on the 4.26-acre tract. The Board of Adjustment held meetings on 6 June and 11 July 1983 and heard from Mr. Rape, as well as from plaintiffs in this action. Both parties were represented by counsel. On 11 July 1983, the Board of Adjustment approved Gro-More's petition allowing the facility to continue as a "nonconforming situation." Pursuant to N.C.G.S. 153A-345(e), plaintiffs petitioned the Superior Court, Union County, for a writ of certiorari to review the Board's 11 July 1983 order. In their petition for the writ, plaintiffs stated as "Reasons Why the Writ Should Issue" that "the action of the Board of Adjustment was arbitrary and capricious in that there was no showing that a nonconforming use ever existed and further there was [sic] not sufficient findings of fact by the Board to grant any relief."
Upon the review by a superior court upon writ of certiorari issued pursuant to N.C.G.S. 153A-345(e),
the findings of fact made by the Board, if supported by evidence introduced at the hearing before the Board, are conclusive. In re Application of Hasting, 252 N.C. 327, 113 S.E.2d 433; In re Pine Hill Cemeteries, Inc., 219 N.C. 735, 15 S.E.2d 1. The matter is before the Court to determine whether an error of law has been committed and to give relief from an order of the Board which is found to be arbitrary, oppressive or attended with manifest abuse of authority. Durham County v. Addison, 262 N.C. 280, 136 S.E.2d 600; Lee v. Board of Adjustment, 226 N.C. 107, 37 S.E.2d 128. It is not the function of the reviewing court, in such a proceeding, to find the facts but to determine whether the findings of fact made by the Board are supported by the evidence before the Board. It may vacate an order based upon a finding of fact not supported by the evidence.
In re Campsites Unlimited, 287 N.C. 493, 498, 215 S.E.2d 73, 76 (1975). See also Coastal Ready-Mix Concrete Co., Inc. v. Board of Comm'rs of the Town of Nags Head, 299 N.C. 620, 623-27, 265 S.E.2d 379, 381-83, reh'g denied, 300 N.C. 562, 270 S.E.2d 106 (1980).
On 16 November 1983, Judge Hal H. Walker entered an order finding no error in the proceedings and concluding that the Board's 11 July 1983 order allowing continuation of the nonconforming use was proper. On appeal by plaintiffs, the Court of Appeals affirmed the superior court's decision in its opinion at 73 N.C. App. 299, 326 S.E.2d 113.
The Court of Appeals recognized that, according to Union County Zoning Ordinance, Sections 70.1(1) and 70.2, the grain storage facility is not a "nonconforming use" subject to being continued because the facility was not in existence at the effective date of the ordinance or the effective date of the amendment to the ordinance rezoning the property from R-20 to H-I. However, the Court of Appeals found that the situation became nonconforming as a result of the subsequent judicial declaration that the purported 1980 rezoning to H-I constituted "spot zoning" and was null and void and of no effect. Additionally, the court found that Mr. Rape had incurred "great expense in constructing a large facility valued at $400,000" in "good faith reliance" upon the 1980 zoning amendment and the building permit. Id. at 302, 326 S.E.2d at 115. Relying on Town of Hillsborough v. Smith, 276 N.C. 48, 170 S.E.2d 904 (1969), and its progeny, the court held that "the landowner acquired a vested right to continue using the facility." Godfrey, 73 N.C. App. at 302, 326 S.E.2d at 115. The Court of Appeals, adopting defendant's argument, noted that plaintiffs could have protected their interests by obtaining an injunction when they filed their petition for a writ of certiorari, and the landowners' interest could have been protected by means of a bond. We conclude that the reasoning and the result of the panel below is erroneous, and we therefore reverse.
A.
Following public hearings on 6 June and 11 July 1983, the Union County Zoning Board of Adjustment issued an order in which it concluded that the Gro-More facility constituted a "nonconforming situation" as defined in Section 70 and was entitled to continuation pursuant to Section 70.2. Our review of the record convinces us that the Board erred as a matter of law in concluding that the subject property was a "nonconforming situation" and thus erred in allowing continuation pursuant to Section 70.2.
The 1981 amendment to the Union County Zoning Ordinance, "Section 70. Nonconforming Situations," provides the framework for analysis in the determination of whether the Gro-More facility could legally be permitted to continue as such following the judicial determination that the 1980 purported zoning change under which the facility was constructed constituted unlawful "spot zoning." The relevant portions of Section 70 provide in pertinent part:
70.1 Definitions
(1) Nonconforming Situation. A situation that occurs when, on the effective date of this ordinance or any amendment to it, an existing lot or structure or use of an existing lot or structure does not conform to one or more of the regulations applicable to the district in which the lot or structure is located. Among other possibilities, a nonconforming situation may arise because . . . land or buildings are used for purposes made unlawful by this ordinance.
. . . .
70.2 Continuation of Nonconforming Situations
Nonconforming situations that were otherwise lawful on the effective date of this ordinance may be continued, subject to the restrictions and qualifications set forth in subsections 70.3 and 70.6 of this section.
(Emphasis added.)
By clear definition, a situation may be designated "nonconforming" for purposes of continuation under the ordinance only if it is an existing lot of structure on the effective date of the ordinance or amendment. Section 70.1(1). According to the record the effective date of the comprehensive zoning ordinance was 2 June 1975. On that date, the entire Rape tract was being farmed, and no structure was in existence on the property. The effective date of the amendment purporting to rezone the tract from R-20 to H-I was 23 November 1980. It is uncontroverted that no structure existed on the tract on that date. In fact, the 1980 amendment was enacted for the sole purpose of accommodating Mr. Rape's plan to erect the structure which is the subject of this controversy. Mr. Rape acquired a building permit and began construction some time after 23 November 1980; the facility was completed in May 1981. Thus, as the Court of Appeals recognized the grain storage facility fails to come within the Section 70.1(1) definition of a "nonconforming situation" because it was not in existence at the time of either the date of the ordinance or the date of the purported amendment to it. "Before a supposed nonconforming use may be protected, it must exist somewhere outside the property owner's mind." Cook v. Bensalem Township Bd. of Adjustment, 413 Pa. 175, 179, 196 A.2d 327, 330 (1964).
The plain meaning of Section 70, as applied to these facts, is that the grain storage facility is not a "nonconforming situation" as defined by Section 70.1(1) and therefore cannot be "continued" pursuant to Section 70.2. Thus, the superior court erred in failing to conclude that the Board committed an error of law in authorizing the continuance of the Gro-More facility.
Defendant argues, however, that there is another relevant "effective date of . . . amendment" to the ordinance prior to which the Gro-More structure had come into existence. Defendant contends that the superior court order of 11 December 1981, affirmed by the Court of Appeals in Godfrey v. Union Co. Bd. of Commissioners, 61 N.C. App. 100, 300 S.E.2d 273, amounted to a "judicial amendment" of the zoning ordinance because its effect was to rezone the tract from the H-I "spot zoning" designation back to the original R-20. Defendant contends that the facility, completed in May 1981, was in existence on the effective date of the December 1981 "judicial amendment" to the zoning ordinance and therefore constitutes a "nonconforming situation" as defined in Section 70.1(1), entitled to continuance pursuant to Section 70.2. This argument is without merit.
"The courts do not possess the power to amend the zoning regulations." 1 R. Anderson, American Law of Zoning 2d 4.26 (1976) (footnote omitted). "While the courts possess the authority to pass upon the validity of a zoning ordinance, this authority does not include the power to determine the ultimate zoning classification." La Salle Nat'l Bank v. City of Chicago, 130 Ill. App.2d 457, 460, 264 N.E.2d 799, 801 (1970). See also Petlin Associates, Inc. v. Township of Dover, 64 N.J. 327, 316 A.2d 1 (1974). Zoning is properly a legislative function, and courts are prevented by the doctrine of separation of powers from invasions of this field. City of Miami Beach v. Weiss, 217 So.2d 836, 837 (Fla. 1969); Board of Supervisors of Fairfax County v. Allman, 215 Va. 434, 445, 211 S.E.2d 48, 55, cert. denied, 423 U.S. 940, 46 L.Ed.2d 272 (1975); 1 R. Anderson, American Law of Zoning 2d 4.26 (1976); 3 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 36.01 (4th ed. 1986).
"[A]n unconstitutional amending statute or ordinance is in reality no law and, in legal contemplation, is as inoperative as if it had never been passed." 2 E. Yokley, Zoning Law and Practice 11-8 (4th ed. 1978), citing Archer v. City of Shreveport, 226 La. 867, 77 So.2d 517 (1955); City of New Orleans v. Levy, 223 La. 14, 64 So.2d 798 (1953), and cases cited therein.
The act of a municipal legislative body which purports to enact or amend a zoning ordinance but which in fact amounts to an unconstitutional "spot zoning" is beyond the authority of the municipality. Blades v. City of Raleigh, 280 N.C. 531, 187 S.E.2d 35 (1972). "If the amending ordinance is beyond the legislative power of the city, whether for the reason that it constitutes spot zoning or on some other ground, its adoption does not remove the designated area from the effect of the comprehensive zoning ordinance previously enacted. In that event, the proposed use remains unlawful." Zopfi v. City of Wilmington, 273 N.C. 430, 437, 160 S.E.2d 325, 333 (1968).
We do not accept defendant's argument that upon "judicial amendment" of the ordinance, the grain storage facility, completed seven months earlier, became a "nonconforming situation" because it was in existence on the date of the 1981 superior court order declaring the 1980 amendment to constitute unlawful "spot zoning." "While a use of land or a building may become nonconforming through circumstances other than the enactment of a zoning restriction causing the use or building to violate the ordinance, nonconformities so caused are not included in the class of protected nonconforming uses or structures." 4 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 51.01[1] (4th ed. 1986). The December 1981 order of the superior court, affirmed by the Court of Appeals, did not constitute an "amendment" to the Union County Zoning Ordinance. The effect of the order was to declare the 23 November 1980 act of the Commissioners null and void as being beyond the authority of that legislative body. The result left the zoning ordinance as it would have been had the purported rezoning never taken place. Consequently, the provisions of the last prior valid zoning ordinance continued to apply to the tract, and thus the property remained subject to the R-20 zone restrictions. See Harris Trust Sav. Bank v. Duggan, 105 Ill. App.3d 839, 847, 435 N.E.2d 130, 137 (1982), aff'd, 95 Ill.2d 516, 449 N.E.2d 69 (1983); In re Concordia Collegiate Inst. v. Miller, 301 N.Y. 189, 197, 93 N.E.2d 632, 636 (1950); 3 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 36.02 (4th ed. 1986).
Finally, the superior court could have found that the action of the Board in entering its 11 July 1983 order was "arbitrary, oppressive, or capricious" or was attended with an abuse of discretion. The Board's "findings of fact" in no way support its conclusions and order which consist, in their entirety, of the following:
The Zoning Board of Adjustment for Union County having held a public hearing on June 6, 1983, which was continued until July 11, 1983, to consider the petition for Gro-More of Monroe, Inc., for the continuation of a Nonconforming Situation as provided in Sec. 70.2 of the Union County Zoning Ordinance as will be more fully shown in the petition filed herein and having heard all of the evidence and arguments presented at said hearings, makes specific findings as follows:
(a) That the subject property was zoned R-20 in September of 1980 when a petition to rezone to H-I was filed.
(b) That in November of 1980 the Union County Board of Commissioners rezoned the subject property to H-I.
(c) That subsequent to said rezoning the then owner obtained a building permit and constructed on the site a grain storage and transfer facility and the offices that go with it at considerable expense.
(d) That in March of 1983, subsequent to the completion of the above construction, the North Carolina Court of Appeals affirmed a Superior Court order that the rezoning was "spot zoning" and therefore invalid.
That the Board concludes from the above findings that a Nonconforming Situation exists with respect to the subject property in accordance with Section 70 of the Union County Zoning Ordinance and that it is entitled to continuation under Section 70.2.
This 11th day of July, 1983.
THE ZONING BOARD OF ADJUSTMENT
G.C. Funderburk, Jr. Charles J. Haywood
Sam Duncan Edd M. Little
A determination made by a board of adjustment at a hearing, if not supported by substantial evidence, constitutes an "abuse" of the discretion vested in the board by ordinance or statute; a determination which is not supported by substantial evidence is an arbitrary decision. Cf. Coastal Ready-Mix Concrete Co., Inc. v. Board of Comm'rs of the Town of Nags Head, 299 N.C. 620, 265 S.E.2d 379, reh'g denied, 300 N.C. 562, 270 S.E.2d 106 (1980) (decisions of town boards regarding special use permits must be supported by "competent, material and substantial evidence in the whole record"). Accord In re Application of Goforth Properties, 76 N.C. App. 231, 233, 332 S.E.2d 503, 504 (1985). A decision which lacks a rational basis — where there is no substantial relationship between the facts disclosed by the record and conclusions reached by the board — is also termed "arbitrary." 3 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 42.07[1] (4th ed. 1986).
The "findings of fact" recited in the Board's 11 July 1983 order are undisputed and are fully supported by the record. Yet these findings neither support the Board's conclusion nor relate to the crucial questions before the Board in determining whether the grain storage facility was "in existence" and was "otherwise lawful" on the relevant dates. Because there is no substantial relationship between the findings of fact and the Board's conclusions, the Board's 11 July 1983 decision was arbitrary and capricious, and the trial court erred in failing to so find.
In summary, therefore, defendant's order of 11 July 1983 is facially erroneous as a matter of law because the grain storage facility was not a "nonconforming situation" as defined in the Union County Zoning Ordinance on the effective date of the ordinance or any amendment to it. Furthermore, defendant may not rely on the judicial action invalidating its purported rezoning as amounting to an "amendment" of the ordinance before the effective date of which the grain storage operation was in existence so as to constitute a "nonconforming situation" (Section 70.1(1)) which may be continued pursuant to Section 70.2. The judicial declaration could not and did not constitute an "amendment" to the zoning ordinance. Moreover, we find that, as a matter of law, defendant acted arbitrarily and capriciously in reaching its conclusion allowing a continuance of the "nonconforming situation" because that conclusion is wholly unsupported by facts as found by defendant.
The Court of Appeals erred in concluding that the superior court judge correctly determined there was no error as a matter of law in the Zoning Board of Adjustment's order allowing continuance of the "nonconforming situation" pursuant to Section 70.2.
B.
Defendant Zoning Board of Adjustment argued before the Court of Appeals, and the panel below concluded, that Mr. Rape acquired a "vested right" in the continued use of the grain storage facility because the permit was issued and construction had been completed after the property had been rezoned from R-20 to H-I and before that rezoning was declared unlawful "spot zoning."
The record before us contains no indication that there was ever any attempt to present the "vested rights" issue to the Zoning Board of Adjustment or that the Board ever considered the doctrine of "vested rights" as a ground for allowing the continuance of the grain storage facility in contravention of the zoning district regulations to which it was subject. The Board based its decision solely on its interpretation of the zoning ordinance and the effect of the later judicial determination that the amendment was "spot zoning." The 11 July 1983 order of the Board clearly states that it purported to allow continuance of the "nonconforming situation" "under Section 70.2." Nor is there any indication that the trial court, reviewing the order upon writ of certiorari, ever considered the "vested rights" issue, limited as it was to review for errors of law appearing on the face of the record. Yet, the Court of Appeals' panel below based its decision on the "vested rights" doctrine which appears to have been raised for the first time before that court.
Succinctly stated, "[a] lawfully established nonconforming use is a vested right and is entitled to constitutional protection." 4 E. Yokley, Zoning Law and Practice 22-3 (4th ed. 1979). 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. The doctrine is rooted in the "due process of law" and the "law of the land" clauses of the federal and state constitutions. U.S. Const. amend. XIV, 1; N.C. Const. art. I, 19.
It has been said that the solution to the "vested rights" question
has required the reconciliation of the doctrine of separation of powers with the constitutional requirements of substantive due process, a balancing of the interests of the public as a whole and those of the individual property owners, and, in many cases, the elements of good faith and bad faith and resort to equity and equitable principles.
4 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 50.01 (4th ed. 1986).
The multi-faceted, constitutionally based "vested rights" issue was not properly addressed by the panel below. In Sherrill v. Town of Wrightsville Beach, 76 N.C. App. 646, 334 S.E.2d 103 (1985), the Court of Appeals properly refused to address the petitioner's challenge to the constitutionality of a particular zoning ordinance when the issue was not addressed by the local board or by the superior court on review by writ of certiorari. A unanimous panel wrote:
These arguments are not properly before us. G.S. 160A-388 (e) states in pertinent part: "Every decision of the board [of adjustment] shall be subject to review by the superior court by proceedings in the nature of certiorari." The board of aldermen, sitting in their quasi-judicial capacity as the board of adjustment in this case, only had the authority to grant or deny a variance under the zoning ordinance. G.S. 160A-388(d); [Lee v. Board of Adjustment, 226 N.C. 107, 37 S.E.2d 128 (1946)]. The Board's decision was to deny the variance. Under G.S. 160A-388(e) the superior court, and hence this Court through our derivative appellate jurisdiction, had the statutory power to review only the issue of whether the variance was properly denied. The constitutionality of the zoning ordinance is a separate issue not properly a part of these proceedings since the denial of the variance request never addressed the validity of the zoning ordinance. Furthermore, the superior court sat in the posture of an appellate court, see Concrete Co. v. Board of Commissioners, 299 N.C. 620, 265 S.E.2d 379, rehearing denied, 300 N.C. 562, 270 S.E.2d 106 (1980), so it was not in a position to address constitutional issues that were not before the board.
Id. at 649, 334 S.E.2d at 105.
Moreover, 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. See, e.g., Town of Hillsborough v. Smith, 276 N.C. 48, 170 S.E.2d 904 (1969); Warner v. W O, Inc., 263 N.C. 37, 138 S.E.2d 782 (1964). Fact finding is not a function of our appellate courts.
Nor was it appropriate in this context for the panel below to affirm the decision of the Zoning Board of Adjustment by substituting for its basis a legal theory not relied upon by the Board.
[A] court cannot affirm the administrative action of a board by substituting its own premises in sustaining that action for those which served as the basis of the agency's action. "[A] reviewing court, in dealing with the determination . . . which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis." (Securities and Exchange Commission v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, [ 91 L.Ed. 1995, 1999 (1947)]; Burlington Truck Lines v. United States, 371 U.S. 156, 168-169, 83 S.Ct. 239, [246], 9 L.Ed.2d 207, [216 (1962)]; Matter of Barry v. O'Connell, 303 N.Y. 46, [50,] 100 N.E.2d 127 [129 (1951)]. Golisano v. Town Board [of the Town of Macedon], 31 A.D.2d 85, [___,] 296 N.Y.S.2d 623, 626 (1968).
3 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 42.07[3] (4th ed. 1986). Accord De Maria v. Enfield Planning and Zoning Comm'n, 159 Conn. 534, 541, 271 A.2d 105, 109 (1970). "Nor may the board whose determination is being reviewed urge grounds for affirmance other than and additional to those set forth in its decision." 3 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 42.07[3] n. 38 (4th ed. 1986). See Bernstein v. Board of Appeals, Village of Matinecock, 60 Misc.2d 470, ___, 302 N.Y.S.2d 141, 147 (1969).
We also note that the landowners are not even parties to this proceeding. Only the petitioners, Frank B. Godfrey, Joe N. Sutton, O. Fred Howey, and Billips Hood, on the one hand, and the respondent, the Union County Zoning Board of Adjustment, on the other, are parties to the judicial review of the latter's decision. No judicial determination of the good faith issue necessary to a "vested rights" analysis can bind one whose good faith is in question if that person is not a party to the judicial proceedings which result in the determination.
Whether the landowners may maintain the facility under the "vested rights" doctrine is not a question which is presented in this proceeding. The Court of Appeals erred in addressing the "vested rights" issue.
We acknowledge the dissent of Justice Martin in which it is contended that the "vested rights" issue was properly presented and should be resolved in this opinion. The dissent suggests that the issue should be resolved in Mr. Rape's favor, though he is not a party to this action. While we do not reach the "vested rights" issue, we would point out that if that issue is litigated at some future date, the outcome is not so certain as suggested in the dissent. Our research has revealed no case directly on point in this state, but there is persuasive reasoning in several reported decisions from other jurisdictions which would support a different result. In Omaha Fish Wildlife Club, Inc. v. Community Refuse Disposal, Inc., 213 Neb. 234, 329 N.W.2d 335 (1983), the Nebraska Supreme Court refused to apply the doctrine of "vested rights" for the benefit of defendant landowner. That court found that expenditures made by defendant with knowledge that a lawsuit had been filed challenging his proposed use were not made in good faith. In an analogous situation, the Supreme Court of Hawaii held that a resort developer proceeded at his own risk where he made expenditures despite notice that a petition had been certified for a public referendum which would (and, when passed, did) prohibit the proposed use. The court refused to apply the "vested rights" or "equitable estoppel" doctrines to allow property rights to vest. County of Kauai v. Pacific Std. Life Ins., 65 Haw. 318, 653 P.2d 766, appeal dismissed, 460 U.S. 1077, 76 L.Ed.2d 338 (1982). In Bosse v. City of Portsmouth, 107 N.H. 523, 226 A.2d 99 (1967), the Pace Industrial Corporation had successfully persuaded the local administrative body to rezone its particular tract from residential to light industrial. Adjoining landowners had sought two injunctions to prevent the proposed use, and during the hearings, the trial court had twice warned Pace that it proceeded with construction at its own peril. The New Hampshire Supreme Court held that the designation change procured by Pace constituted unlawful "spot zoning" and stated that Pace had taken a "calculated risk" in proceeding with construction after plaintiffs had twice instituted legal proceedings seeking to enjoin the construction. Quoting from the Master's order below, the court went on to note: "`Under the circumstances, and considering the fact that the Pace Industrial Corporation was aware that this was a Residential Zone at the time the purchase was made, and was aware shortly after the passage of the ordinance that the validity of this particular zone would be attacked, the Master finds that no vested interest accrued to Pace Industrial Corporation.'" Id. at 532, 226 A.2d at 107. Finally, in an often-cited Florida Supreme Court case, Sakolsky v. City of Coral Gables, 151 So.2d 433 (Fla. 1963), that court held that knowledge by a developer that a political contest in which the success of certain candidates might alter the voting pattern of the municipal body did not prevent good faith reliance on an act of the current governing body. However, the court was careful to point out that "[t]he effect of pending litigation directly attacking the validity of a permit or zoning ordinance, or the effect of an eventual determination that such permit was invalid, may present a very different problem. The decision in the instant case was not rested on any showing that petitioner, at the time he acted in reliance on the permit granted him, was a party defendant in legal action directly attacking its validity, that he had any notice that his permit might have been invalid in its inception, or that its revocation was in fact required in the public interest." Id. at 436 (footnote omitted). See generally Heeter, Zoning Estoppel: Application of the Principles of Equitable Estoppel and Vested Rights to Zoning Disputes, 1971 Urban L. Ann. 63, 80. A trial court could conclude that application of the "vested rights" doctrine is inappropriate on the facts of this case and hold that when the landowner here incurred expenses with the knowledge that a lawsuit had been filed challenging the validity of the zoning ordinance amendment under which the landowner had obtained his building permit, he proceeded at his peril and thereby acquired no vested rights in the use of the property which is prohibited as a result of a judicial declaration that the ordinance amendment was invalid. In such a situation, it could not be said that the landowner had expended funds in good faith and in reasonable reliance upon a building permit issued pursuant to the challenged amendment. It is entirely conceivable that a trial court could find that when, in the case at bar, Mr. Rape applied for rezoning in September 1980, he knew that the proposed grain storage facility was not permitted in the R-20 zone; that at the time the Board voted to rezone the property from R-20 to H-I, Mr. Rape knew of the substantial opposition and of the narrow three to two vote in favor of his application, that Mr. Rape knew that, within three weeks of the purported rezoning, the adjoining property owners had filed suit in superior court seeking to nullify the rezoning action by the Board on the basis that the action constituted unlawful "spot zoning"; that, with full knowledge of the pending suit, Mr. Rape obtained a building permit and began construction of the grain storage facility — and thus conclude that he did so at his own risk.
C.
We disagree with the suggestion of the panel below that plaintiffs and others similarly situated must resort to obtaining or attempting to obtain injunctive relief in order to protect their property interests against unlawful actions of a zoning board. Plaintiffs were well within their rights in electing to challenge the 1980 amendment through a declaratory judgment action rather than attempting, possibly in vain, to raise sufficient bond in order to procure an injunction.
A suit to determine the validity of a city zoning ordinance is a proper case for a declaratory judgment. G.S. 1-254; Woodard v. Carteret County, 270 N.C. 55, 153 S.E.2d 809. The plaintiffs, owners of property in the adjoining area affected by the ordinance, are parties in interest entitled to maintain the action. Jackson v. Board of Adjustment, 275 N.C. 155, 166 S.E.2d 78; Zopfi v. City of Wilmington, 273 N.C. 430, 160 S.E.2d 325. Blades v. City of Raleigh. 280 N.C. 531, 544, 187 S.E.2d 35, 42. See also 3 A. Rathkopf D. Rathkopf, The Law of Zoning and Planning 35.01[1] (4th ed. 1986).
The adjoining property owners should not be called upon to suffer to protect the financial investment of one who acts at his own peril with forewarning of the possible consequences. If the law were otherwise, there would be no protection from a zoning board which, unlike the situation before us, might act from purely corrupt motives. If one, in a situation such as the one at bar, could be assured that a major investment would be protected regardless of the outcome of his gamble, a comprehensive zoning ordinance would offer little or no protection to those who have relied upon that ordinance.
The ultimate result in cases such as this may indeed be harsh. As this Court said in City of Raleigh v. Fisher, 232 N.C. 629, 61 S.E.2d 879 (1950):
Undoubtedly this conclusion entails much hardship to the defendants. Nevertheless, the law must be so written; for a contrary decision would require an acceptance of the paradoxical proposition that a citizen can acquire immunity to the law of his country by habitually violating such law with the consent of unfaithful public officials charged with the duty of enforcing it.
Id. at 635, 61 S.E.2d at 902.
Though the result be harsh, it cannot be said that Mr. Rape was totally unfamiliar with the possible consequences of his actions. In Atkins v. Zoning Board of Adjustment of Union County, 53 N.C. App. 723, 281 S.E.2d 756 (1981), the same James Dennis Rape had made additions to his grain storage and fertilizer sales facility at another location in Union County without obtaining the necessary permits after having his petition to rezone the property to H-I denied in 1978. There, as here, Mr. Rape had attempted to have additions to his operations in Union County declared to be a nonconforming use. The Court of Appeals, in an opinion by Becton, J., held that the Union County Zoning Board of Adjustment had no authority to grant Mr. Rape a Class A nonconforming status to uses and structures Rape added to his agricultural supply business where these new uses and structures were unlawful at their inception because they were begun after the effective date of the zoning ordinance and because no building permit was issued. In addition, the Board was without authority to grant Class A nonconforming use status to proposed uses and structures which were not in being at the time Mr. Rape filed his petition for Class A nonconforming status. Although the Atkins case arose prior to the 1981 Section 70 amendments to the Union County Zoning Ordinance relevant to this case, the law governing the establishment of nonconforming use status (lawfully in existence at the effective date of the ordinance or amendment) is essentially the same.
In summary, then, we hold that the Court of Appeals erred in affirming the order of the superior court finding no error in the 11 July 1983 order of the Union County Zoning Board of Adjustment which purported to allow a continuance of the Gro-More "nonconforming situation." Accordingly, we reverse the decision of the Court of Appeals and remand the action to that court for further remand to the Superior Court, Union County, with instructions to vacate its order of 16 November 1983 and to enter an order not inconsistent with this opinion.
Reversed and remanded.