This opinion of the Court of Appeals addresses the rights of third-party landowners to build and maintain docks and other structures on submerged land belonging to another landowner that are a portion of a lakebed subject to Duke Energy's flowage and flooding easements. The facts addressed in the legal analysis of the issues in this case are extensive.
The grandparents of the Kiser defendants in this case, Kiser (the "Kiser Grandparents") acquired the land at issue in fee simple. The opinion states:
In 1960, much of the bed of Lake Norman was dry. By 1961, Duke Power Company ("Duke") intended to flood lands adjacent to the Catawba River, the river that now feeds Lake Norman, with the construction of the Cowan's Ford Dam. Duke obtained fee title and easement rights to those lands that are now submerged under Lake Norman pursuant to the requirements of a Federal Energy Regulatory Commission ("FERC") license. The majority of the owners of the now submerged land sold their property in fee to Duke, while the Kiser Grandparents chose to grant only easements to Duke. The Kiser Grandparents granted Duke the following easements:[A] permanent easement of water flowage, absolute water rights, and easement to back, to pond, to reaise [sic], to 1 In the present case, Duke Energy Carolinas, LLC is the controlling subsidiary of Duke Energy Corporation (previously Duke Power Company) and is likewise referenced as "Duke." flood and to divert the waters of the Catawba River and its tributaries in, over, upon, through and away from the 280.4 acres, more or less, of land hereinafter described, together with the right to clear, and keep clear from said 280.4 acres, all timber, underbrush, vegetation, buildings and other structures or objects, and to grade and to treat said 280.4 acres, more or less, in any manner deemed necessary or desirable by Duke Power Company.
. . . .
And . . . a permanent flood easement, and the right, privilege and easement of backing, ponding, raising, flooding, or diverting the waters of the Catawba River and its tributaries, in, over, upon, through, or away from the land hereinafter described up to an elevation of 770 feet above mean sea level, U.S.G.S. datum, whenever and to whatever extent deemed necessary or desirable by the Power Company in connection with, as a part, of, or incident to the construction, operation, maintenance, repair, altering, or replacing of a dam and hydroelectric power plant to be constructed at or near Cowan's Ford on the Catawba River . . . .
The first easement (the "Flowage Easement") references 280.4 acres of land by metes and bounds, which topographically rested below an "elevation 760 feet above mean sea level," and which would become part of the bed of Lake Norman. The second easement (the "Flood Easement") references land by metes and bounds which topographically rested between 760 feet and "770 feet above mean sea level," that would remain dry land, but subject to flooding, after the creation of Lake Norman.
After Duke flooded the lands creating Lake Norman, the retained dry land of the Kiser Grandparents became an island (the "Kiser Island"). They then subdivided the island into residential waterfront lots and, retaining one lot (the "Kiser Lot") for their personal use, conveyed the lots to others (the "Third Parties").
Duke was authorized by FERC to adopt a plan for permitting the construction of shoreline improvements extending onto the lakebed. Many of the Third Parties on Kiser Island constructed docks and other structures on the submerged Kiser property pursuant to this permitting process. The opinion notes that some of these structures were built prior to the start of Duke's permitting process and were memorialized as existing when the procedure began. In 2015 M. L. Kiser ("M.L."), a grandson of the Kiser Grandparents, erected a bulkhead (the "2015 wall") almost twenty feet from the Kiser Lot into Lake Norman and upon the portion of the Kiser land that Duke holds its easements. M.L. then began to backfill to extend his lot without applying for a permit from Duke.
Duke issued a "Stop-Work Directive", and the North Carolina Division of Water Resources gave notice that the construction of the wall would impact the waters of Lake Norman. Duke filed this action alleging trespass, wrongful interference with an easement and requested injunctive relief. The defendants responded by counterclaiming against Duke, challenging its authority under the easements to demand removal of the 2015 wall, to issue permits to the Third Parties for the construction of docks on their lots, and to open the waters over those lots to recreational use.
The trial court granted partial summary judgment (the "2018 Order"), to have the 2015 retaining wall and the backfilled area cleared. The trial court entered a subsequent order and judgment (the "2020 Order") granting summary judgment in favor of Duke and the Third Parties by quieting title in the lots, improvements, and use of the waters to the Third Parties. The trial court ruled Duke had operated within its "Scope of Authority" when it granted permission for the Third Parties to construct improvements over and into the Kiser's submerged land. The trial court stated, "[T]his Order and Declaratory Judgment does not dispose of all the claims in this action." The Court of Appeals declined to review the 2018 Order as interlocutory and limited its review and analysis to the 2020 Order.
The Kisers contended Duke did not act within its scope of authority when it permitted the use of submerged Kiser lands by the Third Parties without the Kisers' consent and the trial court ultimately erred in quieting title of the lakefront structures to the Third Parties. The Court first defines "cloud upon title" which we deem a useful refresher for those formulating title opinions.
A "cloud upon title" arises when there is a claim or encumbrance that affects the ownership of a property. See York v. Newman, 2 N.C. App. 484, 488, 163 S.E.2d 282, 285 (1968) ("A cloud upon title is, in itself, a title or encumbrance, apparently valid, but [is] in fact invalid. It is something which, nothing else being shown, constitutes an encumbrance upon it or a defect in it." (citation omitted)). The elements have been defined by this Court as "(1) the plaintiff must own the land in controversy . . . and (2) the defendant must assert some claim in the land adverse to plaintiff?s title, estate, or interest." Greene v. Trustee Servs. of Carolina, LLC, 244 N.C. App. 583, 592, 781 S.E.2d 664, 671 (2016) (citations omitted); see also York, 2 N.C. App. at 488, 163 S.E.2d at 285; Hensley v. Samel, 163 N.C. App. 303, 307, 593 S.E.2d 411, 414 (2004).
The elements of a "cloud on title" action are the same as those for a "quiet title" claim. See Greene, 244 N.C. App. at 591-92, 781 S.E.2d at 670-71; see also Quinn v. Quinn, 243 N.C. App. 374, 380, 777 S.E.2d 121, 125 (2015) (citation omitted). The purpose of a quiet title or cloud upon title action is to "free the land of the cloud resting upon it and make its title clear and indisputable." Resort Dev. Co. v. Phillips, 278 N.C. 69, 77, 178 S.E.2d 813, 818 (1971) (citation omitted). Here, the land at issue is owned by the Kisers and subject to easements granted to Duke by the Kiser Grandparents. The Third Parties are not parties to the easement.
The Court with ample citation, reviews the nature of an easement as an incorporeal hereditament, and the interpretation of ambiguous easements as contracts to be construed by for the jury. It reviews the characteristics of easements that may be either appurtenant or in gross and concludes that the easement in question is unambiguous and appurtenant with respect to Duke, but not the Third Parties as they are not parties to the easement.
The penultimate question before the Court of Appeals was whether Duke had authority under the Flowage Easement to permit the Third Parties to erect and maintain structures on or over the Kisers' submerged land. The opinion notes that the easement, read liberally, granted "Duke . . . absolute water rights... to treat said 280.4 acres, more or less, in any manner deemed necessary or desirable." The Court observes that this could be construed to "virtually convey a fee simple interest in the property..." In retaining title to the fee, the Kisers were deemed to have intended preserve certain rights. Without using this specific term of art, the Court essentially concluded that one of the retained rights was to prevent Duke from overburdening the easement by permitting the Third Parties, who were "strangers to the easement agreement" and had no easement rights, to place structures over and on the submerged easement lands.
Duke and the Third Parties argued that, even if Duke lacked authority to issue the permits under the easements, Duke's license with the FERC created federally pre-empted authority to unilaterally permit third-party construction. The opinion states:
[We] recognize that this license requires Duke to possess certain authority to manage and control shoreline development of Lake Norman, so as to maintain Duke's license and standing with the Commission, such requirement does not, by itself, beget nor provide delegated authority to overburden or deprive others of their property. Indeed, as we held in Zagaroli v. Pollock, the requirements of a FERC license do "not abolish private proprietary rights." 94 N.C. App. 46, 54, 379 S.E.2d 653, 657 (1989) (citation omitted). Zagaroli is analogous here in that, though the easement in that case was much more limited than the Flowage Easement here, the defendants in that case asserted Duke's authority under its FERC license in a similar situation. This Court held that [a]lthough a FERC licensee may exercise the power of eminent domain over lands which will make up the bed of a lake associated with a hydroelectric dam, neither Duke Power nor its predecessor in title took the land in question by eminent domain. . . . [T]he Federal Power Act does not give Duke Power the authority to grant defendants the right to use plaintiff's property without the assent of the plaintiff. To hold otherwise would in effect authorize the taking of property without just compensation. Id. at 54, 379 S.E.2d at 657-58 (internal citation omitted).
The Kisers argued that Duke should not be allowed to inconsistently prohibit the Kisers' structure, while simultaneously permitting the Third Parties' maintenance of structures. The opinion concludes that "a plain reading of the first easement reveals that Duke possesses an unrestricted right, among others, to "clear, and keep clear . . . all . . . structures" upon the land. Though its actions upon the 280.4 acres are limited to those seemingly inexhaustive rights enumerated in the easement, Duke is not required to show that its use of the 280.4 acres of land is consistent with a greater purpose. Duke may eliminate interferences with its permanent easement rights to the 280.4 acres, consistent with its easement."
Duke and the Third Parties asserted common law public trust doctrine and riparian rights to use the waters of Lake Norman above the Kiser's submerged land for recreational activities and to erect and maintain docks and other such structures that provide access from the Third Parties' lots to the waters of Lake Norman. Analyzing the 'navigability' criterion underlying those doctrines, the Court presents a thorough summary of the cases treating the doctrines and it may be considered useful to include in full:
Exploring the first claim, the public trust doctrine is a common-law principle recognized by statute that provides for the public use of both public and private lands and resources consistent with certain activities such as "the right to navigate, swim, hunt, fish, and enjoy all recreational activities." Nies v. Town of Emerald Isle, 244 N.C. App. 81, 88, 780 S.E.2d 187, 194 (2015) (citations omitted); N.C. Gen. Stat. § 1-45.1 (2020). This doctrine applies to navigable waters. State ex rel. Rohrer v. Credle, 322 N.C. 522, 527, 369 S.E.2d 825, 828 (1988). When determining whether a body of water is navigable for the purpose of the public trust doctrine, this State has historically adopted several tests over nearly 200 years, that include the "ebb and flow" test, Wilson v. Forbes, 13 N.C. 30, 38 (1828), "sea vessel" test, State v. Glen, 52 N.C. 321, 333 (1859), and "navigable in fact" test, State v. Twiford, 136 N.C. 603, 606, 48 S.E. 586, 588 (1904). Currently, "the test of navigability in fact controls in North Carolina" and is described as follows:"'If water is navigable for pleasure boating it must be regarded as navigable water, though no craft has ever been put upon it for the purpose of trade or agriculture. The purpose of navigation is not the subject of inquiry, but the fact of the capacity of the water for use in navigation.'" . . . In other words, if a body of water in its natural condition can be navigated by watercraft, it is navigable in fact and, therefore, navigable in law, even if it has not been used for such purpose.
Gwathmey v. State of North Carolina, 342 N.C. 287, 299, 301, 464 S.E.2d 674, 682 (1995) (quoting Twiford, 136 N.C. at 608-09, 48 S.E. at 588). This test applies not only to ocean waters but also to inland rivers and lakes. State v. Narrows Island Club, 100 N.C. 477, 481 (1888).
Consistent with the navigable-in-fact test, the "natural condition" element espoused in Gwathmey "reflects only upon the manner in which the water flows without diminution or obstruction." Fish House, Inc. v. Clarke, 204 N.C. App. 130, 135, 693 S.E.2d 208, 212 (2010). Thus, even artificial or man-made bodies of water are subject to navigability for the purpose of the public trust doctrine. Id. When evaluating the navigability of an artificial lake, however, our sparce caselaw on the matter further suggests that an artificial lake is not navigable in its natural condition merely because boats can navigate its surface. Indeed, a party must "show that the [feeding waterway of the lake] is passable by watercraft over an extended distance both upstream of, under the surface of, and downstream from the lake." Bauman v. Woodlake Partners, LLC, 199 N.C. App. 441, 453, 681 S.E.2d 819, 827 (2009).
Artificial bodies of water may be navigable only when they arise from or are connected to already natural, navigable-in-fact waters. When positing navigability, though, "the mere fact that a dam has been placed across a navigable stream, without more, [does not] suffice to render that stream non-navigable." Id. at 451, 681 S.E.2d at 826.
Exploring the second claim, riparian rights are likewise the product of our common law. "Riparian rights are vested property rights that . . . arise out of ownership of land bounded or traversed by navigable water." In re Protest of Mason, 78 N.C. App. 16, 24-25, 337 S.E.2d 99, 104 (1985) (citation omitted). Irrespective of the ownership of submerged land, riparian owners enjoy "the right of access over an extension of their waterfronts to navigable water, and the right to construct wharfs, piers, or landings." Pine Knoll Ass'n v. Cardon, 126 N.C. App. 155, 159, 484 S.E.2d 446, 448 (1997) (quoting Bond v. Wool, 107 N.C. 139, 148, 12 S.E. 281, 284 (1890) (alterations omitted)). As with the public trust doctrine, the existence of riparian rights hinges upon an "identical" navigability test. Newcomb v. County of Carteret, 207 N.C. App. 527, 542, 701 S.E.2d 325, 337 (2010). Similarly, then, a riparian owner may possess access rights to an artificial body of water. Id.
The Court deemed the issue not properly before it because Duke and the Third Parties asserted these issues for the first time on appeal. This absence before the trial court was deemed to present "a genuine issue of material fact to be further determined." Thus summary judgment was improper.
It should be observed that absent a thorough title examination of the underlying fee and a careful review of the easement documents, dock, boat slip, boat house, and bulkhead/seawall rights are generally considered uninsurable unless on completely private lakes where the navigability issue has been adjudicated or legislated.