Sunrise Corp. of Myrtle Beach v. City of Myrtle Beach

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SUNRISE CORPORATION OF MYRTLE 

BEACH; BOULEVARD DEVELOPMENT

LLC; S&H DEVELOPMENT, INC.,

Plaintiffs-Appellants,

v.

THE CITY OF MYRTLE BEACH; MARK

MCBRIDE, Individually; JUDY

RODMAN, Individually; RACHAEL

BROADHURST, Individually; CHARLES  No. 04-2171

MARTINO, Individually; WILSON

CAIN, Individually; CRAIN WOODS,

Individually; LARRY BRAGG,

Individually; TOM CONN,

Individually; TOM DAVIS,

Individually; SALLY HOWARD,

Individually; FRED ROURK,

Individually,

Defendants-Appellees.



Appeal from the United States District Court

for the District of South Carolina, at Florence.

C. Weston Houck, Senior District Judge.

(CA-99-132-12)

Argued: May 25, 2005

Decided: August 26, 2005

Before WIDENER, WILKINSON, and NIEMEYER, Circuit Judges.

Affirmed by published opinion. Judge Widener wrote the opinion, in

which Judge Wilkinson and Judge Niemeyer concurred.

2 SUNRISE CORP. v. THE CITY OF MYRTLE BEACH

COUNSEL

ARGUED: Howell V. Bellamy, Jr., BELLAMY, RUTENBERG,

COPELAND, EPPS, GRAVELY & BOWERS, P.A., Myrtle Beach,

South Carolina, for Appellants. Frances Isaac Cantwell, REGAN &

CANTWELL, Charleston, South Carolina, for Appellees. ON

BRIEF: Douglas M. Zayicek, BELLAMY, RUTENBERG, COPE-

LAND, EPPS, GRAVELY & BOWERS, P.A., Myrtle Beach, South

Carolina, for Appellants. William B. Regan, REGAN & CANT-

WELL, Charleston, South Carolina; L. Gregory Cook Horton,

Adriane Malanos Belton, BUIST, MOORE, SMYTHE & MCGEE,

P.A., Charleston, South Carolina, for Appellees.

OPINION

WIDENER, Circuit Judge:

Plaintiffs, Sunrise Corporation of Myrtle Beach, Boulevard Devel-

opment LLC, and S&H Development, Inc. (collectively Sunrise),1

appeal from the district court’s granting of defendant the City of Myr-

tle Beach’s (Myrtle Beach) motions for summary judgment.2 In the

underlying case Sunrise was seeking damages for violations of the

Due Process, Equal Protection and Takings Clauses of the Constitu-

1

The district court dismissed plaintiffs Sunrise Corporation and S&H

Development, Inc. for lack of prudential standing, which is one of the

issues plaintiffs argue on this appeal. Under Rivanna Trawlers Unlimited

v. Thompson Trawlers, Inc., 840 F.2d 236, 239 (4th Cir. 1988)(citing

Bell v. Hood, 327 U.S. 678, 682 (1946)), when the contested basis for

jurisdiction is also an element of the plaintiff’s federal claim, the claim

should not be dismissed for lack of jurisdiction. The contested basis for

jurisdiction in this case is whether there was an injury in fact, which is

also an element of their federal claim. Accordingly we find that the dis-

trict court erred in dismissing Sunrise and S&H for lack of prudential

standing, and should have addressed the objection as an attack on the

merits, as do we. Rivana, 840 F.2d at 239.

2

There were a number of individual defendants in the case below, Sun-

rise, however, has abandoned the claims against the individual defen-

dants.

SUNRISE CORP. v. THE CITY OF MYRTLE BEACH 3

tion under 42 U.S.C. § 1983, attorney’s fees under 42 U.S.C. § 1988,

and inverse condemnation. Finding that Sunrise is not entitled to any

remedy, we affirm.

I.

In 1996, shortly after all three plaintiffs were formed, plaintiffs

purchased the St. John Inn and surrounding land, an 88-unit hotel and

restaurant located on 2.65 acres in the City of Myrtle Beach, looking

to further development. Sunrise then examined the zoning regulations,

decided on a proposal for a 14-story tower with 98-units, obtained

financing, entered negotiations with a builder, and began to execute

contracts to pre-sell individual units in the new tower.

Myrtle Beach’s esthetic zoning laws require that every new con-

struction requires approval of the Community Appearance Board

before a building permit would issue, even if the plans complied with

all zoning regulations. Myrtle Beach Code Appx. A § 603.1. Under

this law, the Board is to consider preservation of the landscape; rela-

tion of the proposed buildings to the environment; drives, parking,

and circulation; surface water drainage; utility service; advertising

features; special features; and application of design standards. Myrtle

Beach Code Appx. A § 604. If the Board denies the proposal, the

applicant can appeal to the City Council, Myrtle Beach Code Appx.

A § 606, which reviews the proposal de novo. Myrtle Beach Code

Appx. A § 606.2. If the City Council affirms the Board, the applicant

has the right to appeal to the Circuit Court in and for Horry County.3

Myrtle Beach Code Appx. A § 606.2.

In mid 1998, Sunrise applied for a permit to build the new hotel.

They then submitted to the Board a proposal that complied with all

of the zoning ordinances. The Board suggested changes to the pro-

posal and later held a second hearing. This hearing was attended by

residents of the area who voiced opposition to Sunrise’s proposal.

After the hearing, the Board denied the proposal, citing section 604

of the City Code. Sunrise then appealed the Board’s decision to the

City Council and was granted a hearing where area residents again

3

The Circuit Court may be referred to as the Court of Common Pleas.

They are the same court.

4 SUNRISE CORP. v. THE CITY OF MYRTLE BEACH

voiced opposition to the proposal. Five days later the City Council

denied the proposal because of its view that the proposal violated sec-

tions 601 and 604 of the City Code. Plaintiffs then appealed the deci-

sion of the City Council to the Circuit Court.

While the appeal of the City Council’s decision was still pending,

plaintiffs brought the instant action in the Court of Common Pleas of

Horry County, a state court, seeking to recover their pre-development

costs as well as lost profits from the pre-sale of units in the proposed

tower. The complaint asserted causes of action against the City Coun-

cil as well as several individual members of the Board. The complaint

sought damages under 42 U.S.C. § 1983 for violations of the Due

Process, Equal Protection, and Takings Clauses; 42 U.S.C. § 1988 for

attorney’s fees; and inverse condemnation under South Carolina state

law. The defendants then removed the case to federal district court.

The parties agreed to stay this action until the resolution of the state

court appeal of the City Council’s denial of plaintiffs’ proposal.

On May 13, 1999, the Court of Common Pleas issued an order

reversing the decision of the City Council withholding the permit,

finding that Myrtle Beach’s decision violated the holding of Peterson

Outdoor Advertising v. City of Myrtle Beach, 489 S.E.2d 630 (S.C.

1997)(Board’s denial of proposal must be based on application of the

City Code to the facts of the case), because it was arbitrary, subjec-

tive, without evidentiary support, an abuse of discretion, and a denial

of plaintiffs’ due process and equal protection rights. The court then

determined that re-application would be futile and ordered Myrtle

Beach to issue the permit to Sunrise. At some point in 1999, plaintiffs

sold the site for approximately four million dollars.

Myrtle Beach appealed the Court of Common Pleas’ decision to the

South Carolina Court of Appeals, which affirmed in 2001. An appeal

was then taken by Myrtle Beach to the Supreme Court of South Caro-

lina, which initially granted certiorari, but later dismissed the writ as

improvidently granted. At that point defendants made the permit

available to plaintiffs.

After the Supreme Court of South Carolina dismissed the writ of

certiorari, the district court lifted its stay in this case, and both parties

later filed motions for summary judgment. At the hearing on the

SUNRISE CORP. v. THE CITY OF MYRTLE BEACH 5

motions, the district court denied plaintiffs’ motion for summary

judgment which contended that the South Carolina Court of Appeals

decision was res judicata of their § 1983 due process and equal pro-

tection claims, as well as granted defendants’ motion for summary

judgment on those same claims. The district court also reserved ruling

on the rest of defendants’ motion. Plaintiffs then filed a motion for

reconsideration. The district court held a hearing on that motion, after

which it improvidently dismissed two of the plaintiffs for lack of pru-

dential standing,4 denied plaintiffs’ motion for reconsideration, and

granted the defendants’ motion for summary judgment as to the tak-

ings and inverse condemnation claims.

II.

On appeal, plaintiffs advance five arguments as to how the district

court allegedly erred. First plaintiffs assert that the district court erred

by holding that Myrtle Beach was not barred by res judicata from

arguing that it had not violated plaintiffs’ due process, equal protec-

tion and Fifth Amendment rights. Second, plaintiffs argue that the dis-

trict court erred in holding that Sunrise Development and S&H

Development, Inc. did not have prudential standing.5 Third, plaintiffs

assert that the district court erred in dismissing their due process

claims and argue the Board’s actions were illegitimate under the guise

of the esthetic ordinance. Fourth, plaintiffs argue that the district court

erred by dismissing their Equal Protection claim because they failed

to present evidence as to being similarly situated and the victim of

illegitimate discretion. Lastly, plaintiffs assert that the district court

erred in dismissing their takings and inverse condemnation claims by

holding that their intended use of the property was not an antecedent

property right and that the delay was caused by the time required to

get judicial review.

We review de novo a district court’s grant of summary judgment.

Temkin v. Fredrick County Comm’rs, 945 F.2d 716, 718 (4th Cir.

1991). Summary judgment under Rule 56(c) is appropriate "if the

pleadings, depositions, answers to interrogatories, and admissions on

4

See n.1, supra.

5

See n.1, supra.

6 SUNRISE CORP. v. THE CITY OF MYRTLE BEACH

file, together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled to

judgment as a matter of law." Anderson v. Liberty Lobby, 477 U.S.

242, 247 (1986).

III.

Plaintiffs assert that the district court erred by not applying the doc-

trine of res judicata to bar Myrtle Beach from arguing that its actions

did not violate their Constitutional rights. The judgment they argue

should be given res judicata effect is the decision of the Common

Pleas Court which stated that Myrtle Beach’s actions were "arbitrary,

subjective, without evidentiary support, an abuse of discretion, merely

a pretense to stop development, and a denial of Plaintiffs’ due process

and equal protection rights."

Under 28 U.S.C. § 1738, federal courts must give full faith and

credit to state court judgments. This includes the application of state

preclusion rules to determine whether a prior state court judgment has

res judicata effect in a § 1983 action. Dionne v. Mayor and City

Council of Baltimore, 40 F.3d 677, 682 (4th Cir. 1994). Under South

Carolina law, to establish res judicata a party must show "(1) identity

of the parties; (2) identity of the subject matter; and (3) adjudication

of the issue in the former suit." Plum Creek Dev. Co., Inc. v. City of

Conway, 512 S.E.2d 106, 109 (S.C. 1999).

Even if we consider the requirement of identity of the subject mat-

ter to be satisfied, which is not at all certain, the federal Constitutional

rights of due process and equal protection were not adjudicated in the

South Carolina Court of Appeals.6 That proceeding was nothing other

than a court review of an administrative determination by local zoning

authority. That court summarized its decision as follows: "We con-

clude the decision of City Council was arbitrary because it was based,

not on the evidence in the record and the esthetic concerns of the

CAB’s ordinance, but upon the objections of citizens of the neighbor-

hood who wanted to stop further development in the area." JA 425.

This decision is an indication of a mistake by the local zoning authori-

6

We apply that decision, not the decision of the Court of Common

Pleas.

SUNRISE CORP. v. THE CITY OF MYRTLE BEACH 7

ties and hardly conclusive evidence, even if evidence at all, of a viola-

tion of due process and equal protection rights. It is no indication that

such federal Constitutional rights were decided in the decision of the

South Carolina Court of Appeals, and we so hold.

IV.

Plaintiffs next assert that the district court erred in dismissing their

due process claims. To establish a violation of procedural due pro-

cess, plaintiffs must show that (1) they had property or a property

interest (2) of which the defendant deprived them (3) without due pro-

cess of law. Sylvia Dev. Corp. v. Calvert County, Md., 48 F.3d 810,

826 (4th Cir. 1995). To establish a violation of substantive due pro-

cess, plaintiffs must "demonstrate (1) that they had property or a

property interest; (2) that the state deprived them of this property or

property interest; and (3) that the state’s action falls so far beyond the

outer limits of legitimate governmental authority that no process

could cure the deficiency." Sylvia Dev. Corp., 48 F.3d at 827 (citing

Love v. Pepersack, 47 F.3d 120, 122 (4th Cir. 1995))(emphasis in

original).

We are of opinion that plaintiffs received due process, both proce-

dural and substantive. Plaintiffs claim that their due process rights

were violated because the hearings they received were unfair. Even

if true, which we do not decide, this does not change the fact that

plaintiffs received four levels of review, in each of which they were

permitted to present their side of the controversy.7 In cases such as

this we review the state process as a whole, and do not look only to

what happened in front of the Board. See e.g. Tri County Paving, Inc.

v. Ashe County, 281 F.3d 430, 437 (4th Cir. 2002)(a "due process vio-

lation actionable under § 1983 is not complete when the deprivation

occurs; it is only complete if and when the State fails to provide due

process")(quoting Fields v. Durham, 909 F.2d 94, 98 (4th Cir. 1990)).

While it is true that there were several levels of judicial and adminis-

trative review, plaintiffs received the very remedy they sought, the

permit to develop the property. Indeed, the very extent of review is

7

The decision by the Board was reviewed by the City Council, then the

Court of Common Pleas, then the South Carolina Court of Appeals, and

finally the South Carolina Supreme Court.

8 SUNRISE CORP. v. THE CITY OF MYRTLE BEACH

an indication of the existence of procedural due process, rather than

its absence. Costs incurred securing a permit are part of the process,

and we have never held them to be compensable. Plaintiffs also assert

that the state court’s determination of arbitrariness entitles them to

damages under § 1983. But we have made it clear that a violation of

state law is not tantamount to a violation of a federal right, Sylvia

Dev. Corp., 48 F.3d at 829.8

Accordingly, we find that the district court did not err in dismissing

plaintiffs’ due process claims.

V.

Plaintiffs next assert that the district court erred by dismissing their

equal protection claim by holding that they failed to present evidence

as to being similarly situated and the victim of illegitimate discretion.

Sunrise bases this argument on Tri County Paving, where we said that

a party can bring an equal protection claim by alleging that it had

been intentionally treated differently from others similarly situated

and that there was no rational basis to support the different treatment.

281 F.3d at 439 (citing Village of Willowbrook v. Olech, 528 U.S.

562, 564 (2000)). Plaintiffs essentially argue that because their high

rise building was denied while other high rises were approved, a case

for violation of equal protection exists. Under our rule in Sylvia Dev.

Corp. to support this claim, plaintiffs had to show that the classifica-

tion, that of a high rise, was the basis of Myrtle Beach’s decision, and

that this fact prompted Myrtle Beach to engage in intentional, pur-

poseful discrimination. 48 F.3d at 820. While plaintiffs did present

evidence that there were other high rises in Myrtle Beach, they failed

to present evidence that their project was rejected because it was a

high rise. The evidence in the record explaining why the project was

rejected was the order of the City Council which rejected the project

because of its failure to discourage monotonous, drab or unsightly

development, to conserve natural beauty, to give proper attention to

exterior appearance, and properly relate to its site.

8

Our reasoning in Sylvia applies here, and we apply it: "The fact that

established state procedures were available to address and correct illegal

actions by the Board belie the existence of a substantive due process

claim." Sylvia, 48 F.3d at 829.

SUNRISE CORP. v. THE CITY OF MYRTLE BEACH 9

Even if we were to determine that plaintiffs’ project was similarly

situated to other projects, they would still need to show purposeful

discrimination. If disparate treatment alone was sufficient to support

a Constitutional remedy then every mistake of a local zoning board

in which the board mistakenly treated an individual differently from

another similarly situated applicant would rise to the level of a federal

Constitutional claim. Sylvia Dev. Corp. 48 F.3d at 825 (citing Snow-

den v. Hughes, 321 U.S. 1, 11-12 (1994)). There is no evidence in the

record that Sunrise was subjected to purposeful, invidious discrimina-

tion. At most the evidence shows that the public was opposed to the

project for a number of reasons, some relevant to Board review and

some not. This evidence that the Board and City Council responded

to the public opposition does not rise to the level of a Constitutional

violation, because we have recognized that matters of zoning are

inherently political, and that it is a zoning official’s responsibility to

mediate disputes between developers, and local residents. Sylvia Dev.

Corp. 48 F.3d at 828.

Similar to the plaintiffs in Sylvia Dev. Corp., the plaintiffs here at

most could prove that similarly situated developers were treated dif-

ferently, without an adequate evidentiary basis for the differing treat-

ment. Even if this is good grounds for an appeal under state law, it

does not give rise to a claim for a violation of equal protection. Sylvia

Dev. Corp., 48 F.3d at 825. Accordingly, we are of opinion that the

district court did not err in dismissing plaintiffs’ equal protection

claim.

VI.

Plaintiffs’ final argument is that the district court erred in dismiss-

ing their takings and inverse condemnation claims by holding that the

lawful use of property was not an antecedent property right, and that

the delay was only an unfortunate by-product of the adjudicatory sys-

tem. Under South Carolina law federal takings law is incorporated as

an element of an inverse condemnation action. Sea Cabins on the

Ocean IV Homeowners Association, Inc. v. City of North Myrtle

Beach, 548 S.E.2d 595, 601 (S.C. 2001). Accordingly these two

issues are both resolved by a finding that the City’s actions here did

not constitute a taking under federal law. There are two distinct types

10 SUNRISE CORP. v. THE CITY OF MYRTLE BEACH

of taking under federal law, categorical and regulatory.9 Because

Myrtle Beach in this case neither physically took possession of any

part of the property, Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982), nor denied plaintiffs all economically viable

use10, Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1016

(1992), this case would not be a categorical taking.

A regulatory taking occurs when a regulation or limitation on land

use interferes with a landowner’s rights but does not deprive the land

of all economically viable use. See generally Penn Central Transp.

Co. v. New York City, 438 U.S. 104 (1978). The analysis in a takings

case necessarily begins with determining whether the government’s

action actually interfered with the landowner’s antecedent bundle of

rights. See Lucus, 505 U.S. at 1027 (discussing how property rights

are a "bundle of rights"). If, as the district court found, there was no

interference with this bundle of rights, there is no taking.

Plaintiffs contend that there was interference with their antecedent

property rights because their proposal complied with all of the zoning

ordinances in force at the time, and thus they were entitled to the per-

mit. But the plaintiffs ignore the fact that under the applicable law

they were required to not only comply with the zoning ordinances, but

also to secure Board approval under Myrtle Beach Code Appx. A

§ 603.1. Myrtle Beach Code Appx. A § 603.1 is as certainly a part of

the City’s zoning law as any other land use ordinance. Accordingly,

they had no right to proceed with the project until they received the

Board’s approval.

As a general rule, a delay in obtaining a building permit is not a

taking but a non-compensable incident of ownership. Agins v. City of

Tiburon, 447 U.S. 255, 263 n. 9 (1980)("Mere fluctuations in value

during the process of governmental decision making, absent extraor-

9

The South Carolina court in Sea Cabins refers to the same as physical

and regulatory. 548 S.E.2d at 601.

10

The City did not deny plaintiffs all economically viable use because

the original inn and restaurant remained open while this case was pend-

ing. Nor were the plaintiffs deprived of any use they sought which con-

formed with the City zoning laws. The sought-for permit issued.

SUNRISE CORP. v. THE CITY OF MYRTLE BEACH 11

dinary delay, are ‘incidents of ownership’"). Plaintiffs contend that

this case is an example of the extraordinary delay referred to in Agins.

But the delay at issue in this case was not extraordinary. Plaintiffs

first applied for Board approval in August of 1998. By that November

they had been through the entire process twice. At no point did defen-

dants take more than 15 days to issue their final decisions. The bulk

of the delay that plaintiffs claim was extraordinary was a result of the

process to appeal the defendants’ decision. There is nothing in the

record to suggest that defendants had any control over how quickly

the case moved under state law through the various judicial appeals

processes, or that the defendants acted in bad faith or engaged in

deliberate delay during that process. Accordingly, any delay was

nothing more than the law’s delay as lamented for some 400 years,

and not an extraordinary delay that could give rise to Constitutional

implications.

The judgment of the district court is accordingly

AFFIRMED.