McDonald's Corp. v. Dwyer

450 S.E.2d 888, 338 N.C. 445, 61 A.L.R. 5th 927, 1994 N.C. LEXIS 706

• Court: Supreme Court of North Carolina
• Decided: December 9, 1994
• Docket: 355PA93
• Status: Published

Opinions

FRYE, Justice.

This case involves the ownership of land formerly subject to a railroad right-of-way easement which was abandoned by Seaboard Coastline Railroad prior to 19 June 1987. Defendants William D. Dwyer and wife, Hester T. Dwyer, have record title to the property at issue and have leased it to defendant Joni-Son Enterprises, Inc. Defendant Branch Banking and Trust Company holds a deed of trust on the Dwyers’ property. Jerone C. Herring is the Trustee pursuant to the deed of trust. Plaintiff, McDonald’s Corporation, is the owner of the property adjacent to the abandoned railroad easement.

Plaintiff does not contend that it has record title to the property at issue. However, plaintiff does contend that defendants lost whatever title they may have had to the property by failing to bring an action in accord with N.C.G.S. § l-44.2(b) within one year after enactment of the statute and that title is now vested in plaintiff pursuant to the statute.

On 19 June 1987, the North Carolina Legislature enacted North Carolina General Statute section 1-44.2 (the “statute”) which is entitled “Presumptive ownership of abandoned railroad easements.” The statute provides in pertinent part:

(a) Whenever a railroad abandons a railroad easement, all right, title and interest in the strip, piece or parcel of land constituting the abandoned easement shall be presumed to be vested in those persons, firms or corporations owning lots or parcels of land adjacent to the abandoned easement, with the presumptive ownership of each adjacent landowner extending to the center-line of the abandoned easement. . . .

(b) Persons claiming ownership contrary to the presumption established in this section shall have a period of one year from the date of enactment of this statute or the abandonment of such easement, whichever later occurs, in which to bring any action to establish their ownership. The presumption established by this section is rebuttable by showing that a party has good and valid title to the land.

N.C.G.S. § 1-44.2 (Supp. 1994).

On 19 June 1990, plaintiff filed this action; as an adjacent landowner within the definition of N.C.G.S. § 1-44.2, to quiet title and eject defendants from the property at issue. Plaintiff alleged that defendants or their predecessors were required by statute to commence an action on or before 19 June 1988 to show good and valid title to the property in order to rebut the statutory presumption of ownership in plaintiff. Plaintiff further alleged that since no such action was filed within the statutory period as required by N.C.G.S. § l-44.2(b), title to the property is vested in plaintiff.

Defendants countered that plaintiff is not entitled to the property pursuant to N.C.G.S. § 1-44.2 because the statute is unconstitutional, failing to provide notice or a hearing and effecting the taking of land without just compensation.

Plaintiff and defendants filed cross motions for summary judgment on the statute’s constitutionality. The Attorney General for the State of North Carolina made a motion to intervene in the action to argue in favor of the statute’s constitutionality. This motion was allowed on 3 June 1991. On 22 October 1991, Judge David E. Reid, Jr., granted plaintiff’s motion for summary judgment and denied defendants’ motion for summary judgment, upholding the constitutionality of the statute.

Defendants appealed to the Court of Appeals which reversed Judge Reid’s order, finding that N.C.G.S. § 1-44.2 is unconstitutional as applied to fee simple landowners in possession of disputed property. The Court of Appeals reasoned that N.C.G.S. § 1-44.2 fails to provide fee simple landowners with adequate notice, an opportunity to be heard, and just compensation. On appeal, plaintiff-appellants contend that the Court of Appeals erred “when it found that defendant Dwyers are fee simple owners in possession and ignored controlling precedent when it held that as applied N.C.G.S. § 1-44.2 effects an unconstitutional taking without due process.”

In analyzing a due process claim, we first need to determine whether a constitutionally protected property interest exists. To demonstrate a property interest under the Fourteenth Amendment, a party must show more than a mere expectation; he must have a legitimate claim of entitlement. Board of Regents v. Roth, 408 U.S. 564, 33 L. Ed. 2d 548 (1972). The facts in this case clearly indicate that defendants meet this requirement. Defendants are the only holders of record title to the property. Even if there are underlying disputes about the validity of their title, this should have no effect on defendants’ standing to challenge the constitutionality of the statute. Defendants are also in open and full possession of the property. Accordingly, defendants’ property interest cannot be seized without their consent or due process of law. Eason v. Spence, 232 N.C. 579, 61 S.E.2d 717 (1950).

The sole basis for plaintiff-appellants’ ejection action against defendants is North Carolina General Statute section 1-44.2. The general rule is “ ‘that a call for a monument as a boundary line in a deed will convey the title of the land to the center of the monument if it has width.’ ” Goss v. Stidhams, 68 N.C. App. 773, 776, 315 S.E.2d 777, 778 (1984) (quoting J. Webster, Webster’s Real Estate Law In North Carolina §188 (Rev. Ed. 1981)). Subsection (a) of the statute is consistent with this common law presumption insofar as it applies to abandoned railroad easements. The second sentence of subsection (b) appears to also be consistent with the common law since it provides that the presumption is rebuttable by showing that a party has good and valid title to the land. The parties do not contest these provisions of the statute.

The first sentence of subsection (b) of the statute provides that persons claiming contrary to the presumption in subsection (a) must bring a lawsuit within one year of the enactment of the statute or the abandonment of the easement, whichever later occurs, or lose their right to rebut the presumption. It is this portion of the statute, which turns a rebuttable presumption into a conclusive presumption, that defendants contend violates their due process rights.

Notice and an opportunity to be heard prior to depriving a person of his property are essential elements of due process of law which is guaranteed by the Fourteenth Amendment of the United States Constitution and Article 1, section 17, of the North Carolina Constitution. “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 94 L. Ed. 865, 873 (1950).

As early as 1877, this Court determined that notice greater than that provided by operation of law in the nature of a statute of limitations is required prior to divestment of a vested property interest. See Trustees of the Univ. of North Carolina v. North Carolina R.R. Co., 76 N.C. 103 (1877). Trustees involved a North Carolina statute which required corporations to pay unclaimed corporate dividends to the Trustees of the University of North Carolina after five years and forfeit them completely after ten years. The Court, under the United States Constitution and the law of the land clause of the North Carolina Constitution, rejected the argument that a statute of limitations could deprive persons of their vested property rights. The Court stated:

‘We know of no case in which a legislative Act to transfer the property from A to B without his consent has ever been a constitutional exercise of the legislative power in any State in the Union.-’ (Citations omitted).

. . . [T]he Act under review, not only bars the [dividend holder] of his right of recovery, but takes from him his property, transfers it to another and enables that other to recover and own it. The [dividend holder] not only loses his property, but by the magic of this Act and without consideration received, it is vested absolutely in another....

Id. at 107.

Similar to the statute in Trustees, N.C.G.S. § 1-44.2 not only bars a right of recovery by operation of a statute of limitations, but by operation of a presumption, “transfers [property] to another and enables that other to recover and own it. The [holder] not only loses his property, but by the magic of this [statute] and without consideration received, it is vested absolutely in another.” Id. The statute turns a rebuttable presumption into a conclusive presumption which effectively takes defendants’ property without affording notice, an opportunity to be heard and just compensation.

This Court has found due process violations in several other statutes which, without prior notice, purport to effect a forfeiture of property rights. See Henderson County v. Osteen, 292 N.C. 692, 235 S.E.2d 166 (1977) (statute permitting a judgment on a tax lien and sale without notice held unconstitutional); Eason v. Spence, 232 N.C. 579, 61 S.E.2d 717 (requiring that remaindermen receive notice of foreclosure sale of a life estate and opportunity to be heard); Price v. Slagle, 189 N.C. 757, 128 S.E. 161 (1925) (requiring that defaulting taxpayers receive notice before their land is foreclosed).

Plaintiff-appellants rely on this Court’s decision in Sheets v. Walsh, 217 N.C. 32, 6 S.E.2d 817 (1940), for the proposition that a self-executing statute that requires the owner to file suit and prove his claim does not cause vested property rights to be reduced to a mere cause of action and such statute provides notice and opportunity to be heard in compliance with due process and the law of the land.

In Sheets, the plaintiffs’ land was included on two recorded plats and no one ever possessed the platted land. The platted streets were never built and were unnecessary for ingress and egress to lots sold within the parcel. In 1939, the plaintiffs withdrew the land dedicated for streets from public use pursuant to a newly enacted statute which created a presumption of revocation of a dedication of streets by plat if the streets were not opened for twenty years. The defendants, who wanted to purchase the land, challenged the constitutionality of the statute on due process grounds, arguing that purchasers of lots within the plats were deprived of their vested rights to enforce the easements shown on the plats. The Court held that no vested property right was destroyed by the statute, but merely that the remedy by which those rights could be enforced had changed. The Court further held that the grantees of deeds in which references to maps were made had constructive notice of and a reasonable time in which to challenge the statute. Id. at 39-40, 6 S.E.2d at 821.

We find that Sheets is distinguishable and inapplicable to the facts in this case. First, Sheets only applies where dedicated easements áre revoked before they are accepted and used. The statute in Sheets provided that the land would be conclusively abandoned by the public if it “shall not have been actually opened and used by the public within twenty years from and after the dedication thereof.” Id. at 36, 6 S.E.2d at 819. Here by contrast, there has been no allegation that defendants abandoned the property. In fact, defendants have been in actual possession and enjoyment of the land. Moreover, Sheets only affects the status of easements in a platted subdivision. It does not affect the title to the underlying fee as the statute in this case purports to do.

Plaintiff-appellants also argue that Texaco, Inc. v. Short, 454 U.S. 516, 70 L. Ed. 2d 738 (1982), is controlling. That case, like Sheets, involved non-possessory property interests. In Texaco, a divided United States Supreme Court determined that an Indiana statute, providing for lapse of subsurface mineral rights after twenty years of nonuse, was constitutional. The statute contained a two-year grace period after its enactment to prevent mineral interests subject to lapse from being extinguished. In addition, the statute required notice prior to divestment to owners of ten or more interests. Id.

Texaco is distinguishable from the instant case. The Supreme Court in Texaco held that the statute fulfilled due process requirements because “[i]t is the owner’s failure to make any use of the property — and not the action of the State — that causes the lapse of the property right...Id. at 530, 70 L. Ed. 2d at 752. Unlike Texaco, here it is only the State’s action that causes the lapse. No neglect, failure to use, or abandonment is attributable to defendants. Prior to and after N.C.G.S. § 1-44.2 was enacted, defendants and their predecessors paid for the property, took record title, paid property taxes, maintained and improved the property, operated a business on the property, and successfully defended earlier challenges to their title.

In this case, the statute requires defendants to bring suit within one year or forfeit property to which they have record title and of which they are in open possession. “The right to commence and prosecute an action may be lost by delay, but the right to defend against a suit for the possession of property is never outlawed. The limitation law may, in a possessory action, deprive a suitor of his sword, but of his shield never.” Pinkham v. Pinkham, 61 Neb. 336, 338, 85 N.W. 285, 285 (1901). Therefore, we conclude that the first sentence of subsection (b) of North Carolina General Statute section 1-44.2 is unconstitutional because it does not provide sufficient notice, an opportunity to be heard, and just compensation before divesting owners of a valuable property interest. The remaining portions of N.C.G.S. § 1-44.2 are not challenged in this case and remain in full force and effect.

For the reasons stated herein, the decision of the Court of Appeals, which reversed summary judgment for plaintiffs, is affirmed.

AFFIRMED.