In the October 1995 issue of our Statewide Title, Inc. Newsletter and Legal Memorandum we wrote about the then recently released decision in Allen v. Sea Gate Association, Inc., 119 N.C. App. 761, (1995) applying the six-year Statute of Limitations to the attempted enforcement of a Restrictive Covenant setback violation. At that time, we speculated that it “would seem that this holding would also apply to violations of setbacks on plats and even potentially to encroachments in reserved easements.” We also surmised that an “interesting question arises from the reasoning presented. If a prescriptive easement takes twenty years to ripen, can it be cut off by six years of obstruction?” On December 18, 2007, the North Carolina Court of Appeals answered the first question and begged the second in its opinion in Pottle v. Link, COA07-359.

The plaintiffs in this case respectively own Tracts 4 and 6, adjoining properties, on Cedar Island in New Hanover County, North Carolina, and both are the owners of two easements, alleged to be thirty feet in width, which allow access to and from the public road to their respective tracts as well as other lots comprising Cedar Island. The defendants own Tracts 3 and 5 on Cedar Island, which are properties adjacent to the plaintiffs' properties and are the servient lots over which the alleged easements run.

Approximately eleven years before the plaintiffs filed this action, one of the defendants planted numerous trees on Tract 3. In 1996, that defendant planted two additional oak trees, replacing two destroyed by hurricanes. Thereafter, that defendant maintained the trees by installing an irrigation system and planting other landscaping on Tract 3 and in 2005, also constructed a fence on the tract. In 2004, the other defendant installed a post and rope fence on Tract 5. The plaintiffs alleged that all of this landscaping encroached onto their easement.

The plaintiffs initially filed a complaint on 8 February 2005, and Defendant Link filed motions and an answer on 13 April 2005. Plaintiffs then filed an amended complaint on 8 September 2005, adding Defendant Willets, and alleging that “[t]rees, shrubs, and other vegetation have grown up on [Defendant Link's] property . . . within and over the thirty foot easement area[,]” which “impede vehicular traffic, especially large vehicles such as delivery trucks, moving vans, and emergency vehicles.” Plaintiffs further alleged that Defendant Willets “placed a post and rope fence on the property . . . lying within and over the thirty foot easement area[.]” The amended complaint states that the encroachments interfered with Plaintiffs' right to the full use and enjoyment of the easement, and Plaintiffs prayed that the court order a preliminary and permanent injunction prohibiting Defendants from obstructing or interfering with Plaintiffs' right to the thirty-foot easement.   

The following is the Court’s synopsis of the actions giving rise to the action. “Plaintiffs provided the affidavits of Joseph M. James, M.D (James), Plaintiff Thomas Pottle, and Stuart Y. Benson to support their motion. James, a resident of Cedar Island, stated in his affidavit that the Snug Harbor South, LLC , deed conveyed the property with a right of ingress and egress over two thirty-foot roadway easements, ‘[t]he purpose [being] . . . to provide [access] from the public road to the property owners within Cedar Island.’ James stated, ‘[t]here is no other overland route by which I can access my house[,] . . . absent the [e]asements.’ When James began construction of his house, ‘[he] discussed with . . . Defendant [Link], the need to clear trees, shrubs and other vegetation from the [e]asements.’ James stated that he made attempts to remove the trees and encroachments by hiring contractors at his own expense, but Defendant Link consistently refused and ‘physically interposed himself and interfered with all attempts . . . to clear the [e]asements[.]’ James further stated that ‘Defendant [Willets] . . . maintains and continues to erect post and rope fencing around his property and within the [e]asements[,]’ and that James made similar attempts to remove the post and rope fencing, which Defendant Willets consistently refused. James said the encroachments make the right-of-way narrow and ‘create a low overhanging obstruction so as to prevent access to [his] house by any large vehicles[.]’” In the hearing on the motions for Summary Judgment the defendants argued that the applicable statute of limitations for injuries to incorporeal hereditaments, N.C. Gen. Stat. § 1-50(3), had expired, and that the plaintiffs' actions constituted an abandonment of the easement. The trial court entered an order granting the plaintiffs' motion for summary judgment and denying the defendants' motions for summary judgment and dismissal.

The defendants’ argument on appeal is that the trial court committed reversible error by granting the plaintiffs' motion for summary judgment because their claims are time-barred as argued to the trial judge. The plaintiffs argue that their claims are governed by N.C. Gen. Stat. § 1-40, the twenty-year adverse possession statute of limitations. As Court of Appeals determined that the facts were essentially undisputed, the only question before them was which statute of limitations applies, and that such is a question of law.

The Court set out a reasonably concise analysis of the law which we will quote unedited.

“‘Easements are classified as affirmative or negative.’ Davis v. Robinson, 189 N.C. 589, 598, 127 S.E. 697, 701 (1925) (internal quotation marks omitted) . An affirmative easement ‘is a right to make some use of land owned by another without taking a part thereof.’ Builders Supplies Co. v. Gainey, 282 N.C. 261, 266, 192 S.E.2d 449, 453 (1972) (citations omitted). A negative easement prohibits ‘the owner of a servient estate . . . from doing something otherwise lawful upon his estate, because it will affect the dominant estate.’ Davis, 189 N.C. at 598, 127 S.E. at 701 (internal quotation marks omitted) . ‘A restrictive covenant is a servitude, commonly referred to as a negative easement[.]’ Hawthorne v. Realty Syndicate, Inc., 43 N.C. App. 436, 440, 259 S.E.2d 591, 593 (1979) (citations omitted). Both a restrictive covenant and an easement are incorporeal hereditaments. Id. at 440, 259 S.E.2d at 593.” “ This Court has adopted the following definition of the term ‘incorporeal hereditament,’ which ‘derives from English law’:
        Anything, the subject of property, which is inheritable and not tangible or visible. A right issuing out of a thing corporate (whether real or personal) or concerning or annexed to or exercisable within the same. A right growing out of, or concerning, or annexed to, a corporeal thing, but not the substance of the thing itself. Karner v. Roy White Flowers, Inc., 134 N.C. App. 645, 649, 518 S.E.2d 563, 567 (1999), rev'd on other grounds, 351 N.C. 433, 527 S.E.2d 40 (2000), (citing Black's Law Dictionary 726 (6th ed. 1990)). The 8th edition of Black's Law Dictionary defines ‘incorporeal hereditament’ as ‘[a]n intangible right in land, such as an easement.’ Black's Law Dictionary 743 (8th ed. 2004).”

N.C. Gen. Stat. § 1-50(3) (2005) requires that an action for injury to any incorporeal hereditament be brought within six years. See also Boyden v. Achenbach, 79 N.C. 539, 543 (1878) (stating that “[i]f the right of way is claimed as an incorporeal hereditament . . . then six years is the statute [of limitations]”).   

Plaintiffs cited Karner, and Bishop v. Reinhold, 66 N.C. App. 379, 311 S.E.2d 298 (1984), in support of their argument that the six-year statute of limitations under G.S. § 1- 50(3) does not apply even though easements are incorporeal hereditaments. The plaintiff’s argument as stated by the Court was that the limitation period of twenty years applied as the injury to the easement is similar to an adverse possession claim. To a certain extent, the plaintiffs were correct although the Court of Appeals chose to distinguish the cases because in Bishop the claim involved injuries to the fee simple rather than to an easement and the Court appeared to fail to discern the difference between an attempt to enforce the violation of a restrictive covenant in Karner and that of enjoining the blocking of an easement in the instant case.

The Court of Appeals said: “Furthermore, in Karner, this Court rejected a similar argument and ruled that G.S. § 1-50(a)(3), the statute of limitations for injury to an incorporeal hereditament, was applicable to restrictive covenants. In Karner, the defendants intended to construct a commercial building in a neighborhood developed as a residential subdivision, and the plaintiffs, lot owners in the neighborhood, filed a complaint to enjoin defendants from erecting the structure. Defendants answered with the defense that the statute of limitations for injury to an incorporeal hereditament, G.S. § 1-50(a)(3), had expired. Plaintiffs then argued that the “correct statute of limitation . . . [was] the 'prescriptive period' of twenty years.” Karner, 134 N.C. App. at 649, 518 S.E.2d at 567. The Court distinguished Bishop, stating that “a residential restrictive covenant is at issue rather than [a] . . . prescriptive easement [to property held in fee].” Id. at 650, 518 S.E.2d at 567. Therefore, G.S. § 1-50(a)(3) was the applicable statute of limitations.”
“Here, we find the logic of Karner persuasive . Because an injury to an incorporeal hereditament is at issue, rather than a continuous trespass or a prescriptive easement to property held in fee, as in Bishop and Williams, we conclude that G.S. § 1-50(a)(3) is the applicable statute of limitations, and Plaintiffs' case is barred if the six year statute of limitations is satisfied.”
The problem with this analysis is that the evidence in the case is that the defendants obstructed the plaintiffs’ attempts to remove the obstructions and apparently continue to prevent the removal. That obstruction is a trespass that is present and continuous.

The court in Karner stated that the “present case is distinguishable from Bishop in that a residential restrictive covenant is at issue rather than an encroachment and/or prescriptive easement.(emphasis added, ed.)” Karner v. Roy White Flowers, Inc., 134 N.C. App. 645, 650, 518 S.E.2d 563, 569. The plaintiffs in Karner were relying on the principle espoused in Skvarla v. Park, 62 N.C. App. 482, 488, 303 S.E.2d 354, 358 (1983).where that Court said: "[a]n easement may be extinguished by adverse use by the owner of the servient property for the prescriptive period." This is the principle that the Court of Appeals seems to have failed to address in the instant case.  

The Court of Appeals acknowledges that the fences were constructed less than six years ago and while their location in the easement is contested and thus sufficient to prevent summary judgment, it is implicit that they must be removed if so located. The Court ruled that the trial court erred by granting summary judgment in favor of the plaintiffs and remanded the case for entry of summary judgment for the defendants on all issues for which the statute of limitations has expired. The court excepted the issues of the fences installed in 2004 and 2005. It is unstated, but seems implicit in the opinion that the Court of Appeals recognizes that the six-year limitation period does not cut off the easement rights.

Removing trees, shrubs and fences is one thing; removing part of a partially encroaching structure is another matter altogether. One would expect that the courts would not approve of any self-help remedy with regard to structures due to the inevitable resultant damage to the non-encroaching portion of the structure.

The right of the dominant owner to maintain the easement is so fundamental that maintenance is almost universally alleged and cited as the operative hostile act in prescriptive easement cases that it can fairly be said to have become definitional.  In Stanley v. Laughter, 162 N.C. App. 322, 324, 590 S.E.2d 429, 431 (2004), the Court of Appeals held that the trial court did not err in granting a defendant's motion for directed verdict on the plaintiffs' claims for trespass, negligence and injury to real property, where defendant "removed the trees and shrubbery from his land and [a] thirty-foot strip of land in order to gain access to [a] sixty-foot wide easement from his 1.46 acre tract." Where the right exists it encompasses the right to an injunction to prohibit prevention of such maintenance as declared in Stokes County Soil v. Shelton, 67 N.C. App. 728, (1984). That case also held that summary judgment is appropriate where no genuine issue of fact concerning the right to perform maintenance and to the acts of preventing maintenance existed and the plaintiff was entitled to injunctive relief as a matter of law.

In conclusion, the question begged by the Court of Appeals is whether the Plaintiffs may exercise their common law right to clear the easement of vegetation that prevents the use of the easement to the full width.

            Depending on whom you ask these days America is either beginning a recession, will enter one later in 2008 or has just narrowly avoided one.  Regardless of whether any of these statements are true or not there are some very serious black clouds on the country’s economic horizon.  Much of what is causing concern in economic circles is the fact that we have been driving the economy on credit for the past six or seven years and the bill collectors are now standing at the door. Consider some of these troubling indicators for a moment:

•          New home starts have fallen from 2.1 million in 2005 to just over 1 million.

•         Home prices have declined 11% from their peak.

•         Car and truck sales have fallen to their lowest levels since 1998.

•         Unemployment has risen to over 5% and that figure only counts unemployed actively drawing unemployment benefits, not the actual number without work.

            Our economy has been extremely resilient since coming out of the last recession 15 years ago, but oil and the subprime mortgage debacle are poised to end that good run.  Although the price of oil is expected to stabilize in 2008 the U.S. needs to begin supporting the dollar.  Oil is traded in dollars, for the present anyway, and each time the dollar is allowed to devalue the price of oil goes up in America.  And as the price of oil increases the cost of consumer goods here rises due to the absorption of transportation costs, heating and cooling costs, plastics and other materials made from petroleum.  It is estimated that each $10 increase over the baseline price of $76 a barrel costs our economy 100,000 jobs.  In addition, each time the dollar loses value the cost of all the imported goods from China and other trading partner nations increases.  The dollar has lost half its value during the past six years. 

            Besides the impact on oil prices and consumer goods why else should we be concerned about the declining dollar?  Because every time the Federal Reserve lowers interest rates the dollar is inversely impacted.  The Federal Reserve during the past two quarters has been cutting rates in an attempt to hold off a recession while at the same time priming the markets with liquidity hoping to avoid a collapse of the banking industry because of the subprime losses that have begun manifesting.  In other words, the Federal Reserve’s remedy for an economy that’s already over leveraged with credit is to offer it more credit.  Lowering interest rates devalues the dollar thereby triggering an increase in the price of oil here as well as imported consumer goods and raw materials. The Fed’s prescription is a two edged sword with serious side effects. 

            And if the falling dollar poses serious problems we haven’t even begun to experience the full impact the subprime loan debacle, but now is the time to hit it head on before it explodes and becomes uncontrollable.  Cutting interest rates and flooding the  markets with more easy credit is only adding fuel to the fire.  And as mentioned above, cutting rates adversely impacts the value of the dollar.  But there is a much larger reason to be concerned with the subprime loans.  These loans have been securitized, that is, packaged into financial investment bundles and sold in the secondary market to pension funds, mutual funds, insurance companies and other banks.  And when they were added to these “investment” packages the banks bundling the subprime loans failed to tell their investors that they contained some very high-risk loans.  If the measure of defaults occur that is expected in the subprime market it could conceivably bring down our pension funds and life insurance companies who have invested heavily in them doing the economy deep and grave damage.  To date banks have been slow to react and come up with a solution.  They are geared to foreclosing when default occurs and getting them to think outside the traditional box has been problematic.  But that is beginning to change.

            Currently there are a number of solutions on the drawing board that may help us work our way out of this morass and avoid a meltdown of our financial systems.  The Treasury Department has put forth a solution that has been accepted by the banking industry that will allow a small number of homeowners to have their variable rate mortgages not reset.  Sheila Bair, Chair of the Federal Deposit Insurance Corp., has offered an extended version of that plan that has the banks automatically modify every subprime loan if the borrower has lived in the house and has been making payments on time.  The modification keeps the borrower’s variable rate where it presently is for another two years.  There are several other options being considered in Congress, one of which would give the bank a tax credit if they would allow homeowners with subprime loans and who have been making their payments on time to refinance at a fixed rate with no cost to the borrower.   Many lenders have already been quietly doing this for the past three months.  If the idea spreads among the banking community there may not be a need for a bill to be passed.  And this is good news for our industry.  Refinancing these variable rate mortgages will generate business for the real estate industry as well as avoid the financial crisis that would come from mass defalcations of variable rate mortgages.  North Carolina ’s real estate economy is much healthier than the nation as a whole.  While the average value of homes decreased nationally for the first time this year since the Great Depression home values have held up in our state.  And in some areas such as the Charlotte metro area and the mountains, they have actually bucked the trend and increased.  Because home values spiral upward during the last decade as they did in the rest of the country houses here remain attractive to retirees from other states.  It is estimated that the migration from other states that began two decades ago will continue for the next decade.  North Carolina doesn’t have as much excess housing inventory as other states either.  Again, this is good news for those of us in the real estate industry.  Combine a healthy real estate economy with an overall healthy economy in our state with steps being made on the national level to find a cure for the subprime mess and you have a prescription for a decent real estate market in North Carolina for the upcoming year.