In 2007 the North Carolina Court of Appeals handed down the decision in Pottle v. Link, 187 N.C. App. 746, 654 S.E.2d 64 (2007), wherein that court deemed N.C.G.S. Section 1-40 inapplicable to actions involving encroachments upon easements and applied the six year limitations of N.C.G.S. Section 1-50(a)(3) for injury to incorporeal hereditaments in an action for injunctive relief. This opinion was widely criticized as having misconstrued the statutes and effectively creating a six years statute of limitations for adverse possession of an easement. The North Carolina Supreme Court has remedied those concerns in this opinion.
The defendant in this action owned real property that adjoins a utility easement owned by plaintiff Duke Energy Carolinas, LLC (plaintiff or Duke) and which explicitly allows construction of and access to power lines within the easement and which contains broad powers allowing Duke to control the easement. A house on the defendant's property encroaches upon easement which defendant has failed to remove after the plaintiff's demand to do so. The defendant successfully contended to the Court of Appeals that the six-year statute of limitations for injury to any incorporeal hereditament of N.C.G.S. Section 1-50(a)(3), bars Duke's claim. Allowing for discretionary review from the unanimous Court of Appeals, the Supreme Court reversed the Court of Appeals, correctly concluding in this opinion that removal of the encroachment is an action for recovery of real property lying outside the scope of subdivision 1-50(a)(3) and as a result, it falls within the twenty-year statute of limitations set out in N.C.G.S. § 1-40.
The defendant's predecessors in title executed and duly recorded an easement agreement with the plaintiff, Duke Power Company (now Duke Energy Carolinas, LLC), in 1951. The agreement granted plaintiff extensive rights in a two hundred-foot-wide strip of land to construct and maintain utilities, significantly including "the right to keep said strip of land free and clear of any or all structures . . . except those placed in or upon same by said Power Company." The agreement also stated that "[t]he right of way and easements hereby granted shall be binding upon and shall inure to the parties hereto, their successors, heirs and assigns." Thereafter, Duke constructed an overhead 100,000 volt electrical transmission line within the easement in 1951 and then a 230,000 volt transmission line in 1957 and 1958.
In 2005, a developer, who was a predecessor in title to the defendant, recorded a plat of subdivision and at the same time, the surveyors physically staked out the boundaries of the surveyed property, including the boundaries of the lot in issue that was subsequently acquired by the defendant Gray after multiple surveys including the builder's foundation survey of the lot. Three years later, in 2010, the defendant received a letter from Duke asserting that a portion of his home encroached within the right-of-way and seeking removal of the encroachment. When defendant did not comply, Duke filed suit seeking injunctive relief.
Each of the defendants filed motions seeking partial summary judgment. Both argued that the six-year statute of limitations for an injury to an incorporeal hereditament set out in N.C.G.S. Section 1-50(a)(3) had run against the plaintiff and the trial court granted the motions for summary judgment on those grounds. The court explicitly found that the limitations periods set out in N.C.G.S. Section 1-40 (twenty years adverse possession) and N.C.G.S. Section 1-47(2) (ten years for sealed instrument) did not apply. Ruling upon the plaintiff's appeal, the Court of Appeals affirmed the trial court, concluding that an action for injury to an easement as an incorporeal hereditament must be brought within six years based on the plain language of N.C.G.S. Section 1-50(a)(3), finding itself bound by its holding in Pottle v. Link, 187 N.C. App. 746 (2007), appeal dismissed, 362 N.C. 509 (2008). In Pottle, the Court of Appeals held that an action by the owner of a dominant estate for injunctive relief against the servient estate owner's encroachment constituted an action for injury to an incorporeal hereditament governed by subdivision 1-50(a)(3 and that the statute of limitations for a claim based on injury to an incorporeal hereditament begins to run "from the time that the claim accrues, even if a plaintiff is not aware of the injury at that time."
The Supreme Court in its opinion stated that the question for their decision was to determine whether this action involved an injury to an incorporeal hereditament or recovery of real property and concluded that the easement in this case, while an incorporeal hereditament, is also real property. The Court came to their conclusion by analyzing the characteristics of an incorporeal hereditament, which it stated has been defined as:
"[a]n intangible right in land, such as an easement." Incorporeal Hereditament, Black's Law Dictionary (10th ed. 2014); see also Davis v. Robinson, 189 N.C. 589, 598, 127 S.E. 697, 702 (1925) ("An easement is an incorporeal hereditament, and is an interest in the servient estate." (citations omitted)). Consistent with this definition, we have observed that "[a]n easement always implies an interest in the land. It is real property, and it is created by grant." Davis, 189 N.C. at 600, 127 S.E. at 703 (citations omitted) (quoting Atl. & Pac. R.R. v. Lesueur, 2 Ariz. 428, 430, 19 P. 157, 158-59 (1888)); see also Real Property, Black's Law Dictionary (10th ed. 2014) ("Real property can be either corporeal (soil and buildings) or incorporeal (easements).").
While the plaintiff had alleged an injury to its rights as possessor of the easement, it did not ask for damages for an injury to the easement. Instead, it sought to regain control over the part of its easement occupied by the defendant's house. The Court thus concluded that the action was for the recovery of real property. The court noted that the six year statute of limitation for damage to an incorporeal hereditament and the ten-year statute of limitations for sealed instruments are found in Chapter 1, Article 5 and these limitations in Article 5 expressly do not apply to the recovery of real property leaving the court to conclude that the plaintiff's claim is subject to the N.C.G.S. Section 1-40 twenty-year statute of limitations.
Importantly, the Supreme Court explicitly overruled the part of the decision of the Court of Appeals in Pottle v. Link, 187 N.C. App. 746, 654 S.E.2d 64 (2007), that deemed N.C.G.S. Section 1-40 inapplicable to actions involving encroachments on easements. The manner in which they did so is significant in that it seems to clearly leave the statute applicable to actions to enforce restrictive covenants. Restrictive covenants are not possessory rights, they are limitations on the use of property and actions to enforce their violation are not actions to recover property. They are typically actions seeking injunctive relief to remove injurious structures or to prohibit further injury. The limitation statute does not limit its enforcement power to recovery of damages, but rather its wording is broader:
1-50. Six years.
(a) Within six years an action ... (3) For injury to any incorporeal hereditament
The effect of these distinctions for real property practitioners will be that they should be able to continue to opine that setback violations become unenforceable after six years while encroachments within easements remain subject to enforced removal for twenty years.