Bill Clark Homes of Raleigh, LLC v. Town of Fuquay-Varina

• Decision Date: 21 December 2021
• Docket Number: COA21-79
• Parties: BILL CLARK HOMES OF RALEIGH, LLC, Plaintiff, v. TOWN OF FUQUAY-VARINA, Defendant.
• Court: North Carolina Court of Appeals

281 N.C.App. 1

869 S.E.2d 1

BILL CLARK HOMES OF RALEIGH, LLC, Plaintiff,

v.TOWN OF FUQUAY-VARINA, Defendant.

No. COA21-79

Court of Appeals of North Carolina.

Filed December 21, 2021

Ward and Smith, P.A., by Christopher S. Edwards, Ryal W. Tayloe, Wilmington and Jordan M. Spanner, Raleigh, for plaintiff-appellant.

Hartzog Law Group LLP, Cary, by Dan M. Hartzog, Jr., and Katherine Barber-Jones, for defendant-appellee.

ZACHARY, Judge.

¶ 1 Plaintiff Bill Clark Homes of Raleigh, LLC, appeals from the trial court's order granting Defendant Town of Fuquay-Varina's motion to dismiss. After careful review, we reverse and remand for further proceedings.

I. Background

¶ 2 Plaintiff is a North Carolina limited liability company that develops and builds planned communities in the Raleigh area. On 7 October 2014, Plaintiff entered into a development and infrastructure agreement ("the Agreement") with the Town, permitting Plaintiff to build a residential subdivision ("Sunset Glen") containing 46 single-family homes. The Agreement principally concerned the Town's extension of municipal water and sewer services to Sunset Glen. To facilitate municipal water and sewer service at Sunset Glen, Plaintiff agreed that it would build water and sewer lines within the development to the Town's specifications in exchange for the Town expanding its water and sewer systems by building a water line to Sunset Glen and building a sewage pumping station on site. Plaintiff also agreed that it would "pay all applicable development fees, including capacity fees, recreation unit fees and other applicable fees as prescribed by the Town's Code of Ordinances and Annual Budget Ordinance and Fee Schedule."

¶ 3 On 4 February 2016, the Town sent Plaintiff an invoice for $241,500, labeled "WATER & SEWER CONNECTION/INSPECTION FEES," which was due prior to approval of the final plat of the subdivision. Of that amount, $195,000 was for "CAPACITY FEES" ("the Fees"): a water-capacity fee of $1,500 per unit and a sewer-capacity fee of $2,750 per unit, which were its usual and standard fees. Plaintiff paid the invoice balance in full by check dated 1 September 2016.

¶ 4 On 16 August 2016, our Supreme Court filed its opinion in Quality Built Homes Inc. v. Town of Carthage (Quality Built Homes I ), 369 N.C. 15, 789 S.E.2d 454 (2016). In Quality Built Homes I , the Court "consider[ed] whether the Town of Carthage exceeded its municipal authority under the Public Enterprise Statutes, [N.C. Gen. Stat.] §§ 160A-311 to -338 (2015), by adopting certain water and sewer ‘impact fee’ ordinances." 369 N.C. at 16, 789 S.E.2d at 455.¹ The challenged ordinances provided that "the impact fees ‘shall be used to cover the costs of expanding the [water and sewer] system[s].’ " Id. at 16, 789 S.E.2d at 456 (alterations in original). "Upon approval of a subdivision of real property, the ordinances trigger[ed] immediate charges for future water and sewer system expansion, regardless of whether the landowner ever connects to the system or whether Carthage ever expands the system." Id. at 16, 789 S.E.2d at 455.

¶ 5 Recognizing that municipalities are "creations of the legislature" and thus "have only those powers delegated to them by the General Assembly[,]" our Supreme Court determined that "[w]hen Carthage adopted the ordinances at issue here, it exercised power that it had not been granted." Id. The crux of the issue in Quality Built Homes I was Carthage's argument that the imposition of "impact fees" fell "squarely within its ‘authority to charge "fees" or "charges" ’ under [N.C. Gen. Stat.] § 160A-314." Id. at 19, 789 S.E.2d at 458. Our Supreme Court disagreed, concluding that "[w]hile the enabling statutes allow Carthage to charge for the contemporaneous use of its water and sewer systems, the plain language of the Public Enterprise Statutes clearly fails to empower the Town to impose impact fees for future services. " Id. at 19–20, 789 S.E.2d at 458 (emphases added). Further, the Court noted that "[t]he fees are not assessed at the time of actual use, but are payable in full at the time of final subdivision plat approval—a time when water, sewer, or other infrastructure might not have been built and only a recorded plat exists." Id. at 21, 789 S.E.2d at 458–59.

¶ 6 On 20 August 2019, Plaintiff filed suit against the Town, seeking a declaratory judgment that the Fees were unlawful and demanding a refund. In its complaint, Plaintiff asserted that the Town charged the Fees pursuant to § 5-1016 ("the Ordinance") of the Town's Code of Ordinances. Plaintiff further alleged:

14. Town Ordinance § 5-1016 required Plaintiff to pay said Capacity Fees before the Town would approve the final plat of the subdivision, i.e. , before the Town would approve the development of Sunset Glen.

15. Pursuant to Town Ordinance § 5-1016, the Town used some of the Capacity Fees it collected "to build capital reserve funds for future investment in water and sewer collection, distribution and treatment facilities."

16. Pursuant to Town Ordinance § 5-1016, the Town used some of the Capacity Fees it collected to fund future expansion of its water and sewer system.

Plaintiff then summarized our Supreme Court's holding in Quality Built Homes I before alleging:

21. Pursuant to Town Ordinance § 5-1016, the Town charged Capacity Fees for water and sewer services "to be furnished."

22. Pursuant to Town Ordinance § 5-1016, the Town charged such Fees at the time of final subdivision plat approval.

23. The Capacity Fees collected by the [T]own from Plaintiff on or about September 1, 2016, were unauthorized by legislative act or statute, were ultra vires , and are unlawful.

¶ 7 Plaintiff maintained that the Agreement was unenforceable under Quality Built Homes I "to the extent [that] it required Plaintiff to pay Capacity Fees in connection with the development of Sunset Glen[.]"

¶ 8 On 4 November 2019, the Town filed a motion to dismiss pursuant to Rule 12(b)(6), arguing that Plaintiff's complaint failed to state a claim upon which relief could be granted. Specifically, the Town asserted that because "any fees paid were paid pursuant to [the parties’] voluntary agreement," the Fees were not ultra vires and unlawful:

The Town has met its obligations under the ... Agreement, and Plaintiff accepted said benefits of the ... Agreement, and cannot now challenge the terms of the [A]greement. To the extent Plaintiff contends that the Town did not meet its obligations under the ... Agreement, [Plaintiff's] exclusive remedy lies in a claim for breach of contract[.]

¶ 9 On 22 September 2020, the Town's motion to dismiss came on for hearing in Wake County Superior Court before the Honorable Vince Rozier. On 9 October 2020, the trial court entered its order granting the Town's motion and dismissing Plaintiff's complaint with prejudice. Plaintiff timely filed notice of appeal.

II. Discussion

¶ 10 Plaintiff argues that the trial court erred by granting the Town's motion to dismiss. We agree.

A. Standard of Review

¶ 11 We review de novo a trial court's order on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6). Cheryl Lloyd Humphrey Land Inv. Co., LLC v. Resco Products, Inc. , 377 N.C. 384, 2021-NCSC-56, ¶ 8, 858 S.E.2d 795. "The standard of review of an order granting a Rule 12(b)(6) motion is whether the complaint states a claim for which relief can be granted under some legal theory when the complaint is liberally construed and all the allegations included therein are taken as true." Suarez v. Am. Ramp Co. , 266 N.C. App. 604, 610, 831 S.E.2d 885, 890 (citation omitted), disc. review denied , 373 N.C. 257, 836 S.E.2d 653 (2019).

¶ 12 In reviewing a trial court's Rule 12(b)(6) dismissal "the issue for the court is not whether the plaintiff will ultimately prevail but whether the plaintiff is entitled to offer evidence to support the claim." Howe v. Links Club Condo. Ass'n , Inc. , 263 N.C. App. 130, 137, 823 S.E.2d 439, 447 (2018) (citation and internal quotation marks omitted).

B. Capacity Fees

¶ 13 On appeal, Plaintiff argues that the trial court erred in granting the Town's motion to dismiss because it "incorrectly adopted the Town's argument that the statute governing development agreements, N.C. Gen. Stat. § 160A-400.20, allowed the Town to charge capacity fees, as long as it did so by contract." Plaintiff notes that, pursuant to N.C. Gen. Stat. § 160A-400.20(b) (2019), "a local government may not exercise any authority or make any commitment not authorized by general or local act and may not impose any tax or fee not authorized by otherwise applicable law." Accordingly, Plaintiff reasons that (1) because "[t]he Town's capacity fee ordinance was unlawful" under Quality Built Homes I , (2) "the Town had no authority to assess fees for future water and sewer services,"² and (3) the Town could not contract for capacity fees; thus, (4) the Agreement's provision for the payment of capacity fees was unenforceable.

¶ 14 For the purposes of this appeal, we need not determine the merits of Plaintiff's claim; our task is to ascertain whether the trial court's dismissal of Plaintiff's complaint pursuant to Rule 12(b)(6) was error. Dismissal pursuant to Rule 12(b)(6) "is proper (1) when the complaint on its face reveals that no law supports the plaintiff's claim; (2) when the complaint reveals on its face the absence of facts sufficient to make a claim; or (3) when some fact disclosed in the complaint necessarily defeats the plaintiff's claim." Broad St. Clinic Found. v. Weeks , 273 N.C. App. 1, 5, 848 S.E.2d 224, 228 (citation and internal quotation marks omitted), disc. review denied , 376 N.C. 550, 851 S.E.2d 614 (2020). Reviewing Plaintiff's complaint on its face and in the light most favorable to Plaintiff, construing the complaint liberally and taking all the allegations therein as true, we cannot conclude that any of these standards have been met.

¶ 15 Assuming, as we must on review of a motion to dismiss, that the Town...