Starlites Tech Corp. v. Rockingham Cnty.

270 N.C.App. 71

840 S.E.2d 231

STARLITES TECH CORP., Petitioner,

v.ROCKINGHAM COUNTY, Respondent.

No. COA19-406

Court of Appeals of North Carolina.

Filed: February 18, 2020

Nelson Mullins Riley & Scarborough LLP, Winston-Salem, by Stuart H. Russell and Lorin J. Lapidus, for petitioner-appellant.

The Brough Law Firm, PLLC, by G. Nicholas Herman and John M. Morris, for respondent-appellee.

ZACHARY, Judge.

Petitioner Starlites Tech Corp. ("Starlites") appeals from an order of the superior court affirming the Rockingham County Board of Adjustment's determination that the operation of Starlites’ business violated the special use permit requirements set forth in Rockingham County's amended Unified Development Ordinance. After careful review, we reverse.

Background

Starlites Tech Corp. owner and president Maurice Raynor operated multiple electronic gaming businesses. Raynor served as the president of M, M & K Developments, Inc. ("MM&K"), and was the owner and president of Starlites Technology, Inc.

On 30 September 2011, Danny D. Fulp conveyed the property located at 11652 U.S. 220 Highway, Stoneville, North Carolina, (the "Property"), to MM&K. On 1 May 2014, Rockingham County issued a zoning permit to MM&K, enabling it to "operate a sweepstakes business" in accordance with the County's Unified Development Ordinance (the "Ordinance"). The permit designated MM&K as the owner of the property, and "Starlite Technologies" as the applicant and occupant. The permit's description noted a "change of use to sweepstakes business" and the "addition of [a] 28x45 shelter."

A few months later, on 2 September 2014, the County amended the Ordinance, setting forth permit requirements that "severely restricted the general operation of sweepstakes businesses in the county." Article II of the amended Ordinance defined "Electronic Gaming Operations," in pertinent part, as: "[a]ny for-profit business enterprise where persons utilize electronic machines or devices, including but not limited to, computers and gaming terminals, to conduct games of odds or chance, including sweepstakes[.]"

Article IX Section 9-11(ii) set forth new restrictions for electronic gaming operations and, by extension sweepstakes businesses. The restrictions included, in relevant part, a requirement that electronic gaming operations obtain a special use permit, which in turn, required that the facility be "setback[ ] 1500 feet from any protected facility." Protected facilities included, inter alia , single-and multi-family dwellings. The amended Ordinance posed a problem for MM&K and Starlites Technology, Inc. because the Property was "approximately 680 feet from the nearest single family dwelling unit."

On 21 January 2015, articles of incorporation were filed for Starlites in order to turn "the Starlites Technology, Inc. S Corp into a corporation under the advice of [Raynor's] attorney." On 30 January 2015—approximately nine months after the zoning permit was issued—MM&K conveyed the Property to Starlites. Soon thereafter, on 14 July 2015, articles of dissolution were filed for Starlites Technology, Inc. and MM&K. Following MM&K's dissolution, no application was filed to amend the original zoning permit issued to MM&K on 1 May 2014 to indicate that the Property had been conveyed to Starlites.

In November 2016, Officer Ben Curry of the Rockingham County Code Enforcement Division received a complaint about the Property and determined that the business constituted a development without a permit. Officer Curry issued notices of violation to Starlites on 21 November 2016, 9 December 2016, and 3 January 2017.

Starlites appealed the initial notice of violation to the Rockingham County Board of Adjustment ("the Board") on 21 December 2016. Starlites’ appeal came on for hearing by the Board on 14 August 2017. Starlites argued that the notices of violation were defective, that Starlites had never ceased operation and was not subject to the special use permit requirement, and that Starlites ran a "Promotional Gaming Establishment" rather than an "Electronic Gaming Operation." Starlites presented Raynor's testimony along with invoices that Raynor paid in conjunction with the continued operation of his businesses.

On 11 September 2017, the Board entered an order denying Starlites’ appeal. The Board concluded that Starlites’ business operation violated the County's amended Ordinance, that Starlites failed to obtain a special use permit, and that Starlites was not exempt from the requirement to obtain a special use permit.

Starlites appealed by filing a petition for writ of certiorari with the Rockingham County Superior Court on 10 October 2017, seeking review of the order for factual and legal errors. Starlites argued, in part, that the Board's decision was erroneous, and that the order was:

b. In excess of the statutory authority conferred upon the Board;

....

d. Unsupported by substantial competent evidence in view of the entire record because there was no evidence contradicting Starlites’ showing that its business operations on the Property had been continuously operated since prior to the 2014 adoption of the disputed amendment to the DSO; e. Unsupported by substantial competent evidence in view of the entire record because there was no evidence to suggest that Starlites was operating an "electronic gaming operation" as defined by the Rockingham County [Unified Development Ordinance];

f. Affected by other error of law; and

g. Arbitrary or capricious since the Board should not have heard the Appeal due to lack of proper service of a Notice of Violation, because the Board was not impartial, and because there was no legal basis for the Decision.

The case came on for hearing before the superior court on 25 September 2018. On 1 October 2018, the superior court entered an order affirming the Board's order and dismissing Starlites’ appeal. The superior court concluded, in pertinent part:

2. On de novo review, upon dissolution of [MM&K] on July 10, 2015, the business ceased and was no longer a legally permitted nonconforming use because [Starlites] never applied for an amended or new zoning permit; and, even if the business resumed as a nonconforming use at some point after dissolution of [MM&K], there was competent evidence under the whole record test for the [Board] to conclude that the business was discontinued for more than one year from and after July 2015 such that [Starlites] was required after this discontinuance to obtain zoning approval under the requirements of the 2014 [Ordinance] amendment for "electronic gaming operations."

Starlites timely filed written notice of appeal to this Court.

Standard of Review

Our review "is limited to determining whether the superior court applied the correct standard of review, and to determin[ing] whether the superior court correctly applied that standard." Overton v. Camden Cty ., 155 N.C. App. 391, 394, 574 S.E.2d 157, 160 (2002). We review a superior court's interpretation of a zoning ordinance de novo, and "apply the same principles of construction used to interpret statutes." Fort v. Cty. of Cumberland , 235 N.C. App. 541, 548-49, 761 S.E.2d 744, 749, disc. review denied , 367 N.C. 798, 766 S.E.2d 688 (2014).

Discussion

On appeal, Starlites argues, in part, that the superior court applied the wrong standard of review in affirming the Board's decision. Specifically, Starlites maintains that the superior court erroneously concluded, under de novo review, that the Property's "change of ownership caused its use to discontinue, which prohibited Starlites from operating as a permissible prior non-conforming use under Rockingham County's Unified Development Ordinance[,]" and that "change of ownership is an impermissible factor to support a determination that the Stoneville property became a non-conforming use under the 2014 amended [Ordinance]." We agree that a change of ownership does not constitute a change of use.

A county board of adjustment sits in a quasi-judicial capacity. Its decisions must "be based upon competent, material, and substantial evidence in the record." N.C. Gen. Stat. § 160A-388(e2)(1) (2019). Every quasi-judicial decision is "subject to review by the superior court by proceedings in the nature of certiorari pursuant to [N.C. Gen. Stat. §] 160A-393." Id. § 160A-388(e2)(2).

In reviewing the decision of a board of adjustment, the superior court sits as an appellate court. Its review is limited to "determinations of whether 1) the board committed any errors in law; 2) the board followed lawful procedure; 3) the petitioner was afforded appropriate due process; 4) the board's decision was supported by competent evidence in the whole record; and 5) ... the board's decision was arbitrary and capricious." Overton , 155 N.C. App. at 393, 574 S.E.2d at 159 (citation omitted). See also N.C. Gen. Stat. § 160A-393(k) (addressing the superior court's scope of review on appeal).

The standard of review applied by the superior court depends upon the substantive nature of each issue presented on appeal. Morris Commc'ns Corp. v. City of Bessemer City Zoning Bd. of Adjustment , 365 N.C. 152, 155, 712 S.E.2d 868, 870 (2011) (citation omitted). "When the petitioner questions (1) whether the agency's decision was supported by the evidence or (2) whether the decision was arbitrary or capricious, then the reviewing court must apply the whole record test." Mann Media, Inc. v. Randolph Cty. Planning Bd. , 356 N.C. 1, 13, 565 S.E.2d 9, 17 (2002) (citation and internal quotation marks omitted). On the other hand, de novo review is proper when the petitioner contends that the board's decision was based on an error of law. Id.

Under de novo review, an appellate "court considers the case anew and may freely substitute its own interpretation of an ordinance for a [board's] conclusions of law." Morris Commc'ns Corp. , 365 N.C. at 156, 712 S.E.2d at 871 ; see id. (noting that this Court has previously determined that "the superior court, sitting as an appellate court, cou...