McNeill v. Harnett County

• Decision Date: 05 December 1990
• Docket Number: No. 100PA90,100PA90
• Citation: 327 N.C. 552,398 S.E.2d 475
• Court: North Carolina Supreme Court
• Parties: Celia McNEILL, Charles L. McNeill, Obie L. McLean, Eunice M. Matthews, Genevieve Bryant, Ronald Bryant, Ethearl Morris, Joseph Morris, Henry Smith, Genette Smith, Esterbelle McAlister, Lois Morris, and Della Ray v. HARNETT COUNTY; The Harnett County Board of Commissioners; Bill Shaw, Lloyd G. Stewart, Rudy Collins, Mayo Smith, and Mack Reid Hudson, in their official capacities as members of the Harnett County Board of Commissioners; the Buies Creek-Coats Water and Sewer District; and the Northeast Metropolitan Water District.

Page 475

398 S.E.2d 475

327 N.C. 552

Celia McNEILL, Charles L. McNeill, Obie L. McLean, Eunice M.

Matthews, Genevieve Bryant, Ronald Bryant, Ethearl Morris,

Joseph Morris, Henry Smith, Genette Smith, Esterbelle

McAlister, Lois Morris, and Della Ray v. HARNETT COUNTY; The Harnett County Board of Commissioners;

Bill Shaw, Lloyd G. Stewart, Rudy Collins, Mayo Smith, and

Mack Reid Hudson, in their official capacities as members of

the Harnett County Board of Commissioners; the Buies

Creek-Coats Water and Sewer District; and the Northeast

Metropolitan Water District.

No. 100PA90.

Supreme Court of North Carolina.

Dec. 5, 1990.

East Central Community Legal Services by Leonard G. Green, Smithfield, for plaintiff-appellees McNeills, McLean, McAlister, and Ray.

Jeffrey M. Seigle, Raleigh, for plaintiff-appellees Matthews, Bryants, Ethearl and Joseph Morris, Smiths, and Lois Morris.

Woodall, Felmet & Phelps, P.A., by E. Marshall Woodall and John M. Phelps, II, Lillington, for defendant-appellants.

MEYER, Justice.

As a result of a petition from citizens of the area of Buies Creek and Coats, North Carolina, and the Town of Coats Board of Commissioners, the Harnett County Board of Commissioners (hereinafter the "County Commissioners") held a public hearing on 20 October 1980 and subsequently created the Buies Creek-Coats Water and Sewer District (hereinafter "Sewer District") pursuant to chapter 162A of the North Carolina General Statutes. On 12 February 1982, the North Carolina Environmental Management Commission found unsanitary conditions to exist and gave the Sewer District permission to proceed to construct a sewer system to serve the district.

The County Commissioners, after notice by newspaper, held a public hearing concerning the financing of the proposed construction of the sewer system on 15 March 1982 and approved the Sewer District's application to the Local Government Commission for the financing of the construction of the system. Funds for construction were to come from governmental grants, loan proceeds from the sale of general obligation bonds, and local funds. Since the expenditure of local funds was required to be made prior to expending any grant or loan funds, the County Commissioners, acting on behalf of the Sewer District, considered various methods of raising the local funds, including the use of a special assessment. Initially, the County Commissioners expressed their intention to raise the local funds by levy of a special assessment authorized under chapter 162A and pursuant to chapter 153A, article 9 of the General Statutes. The County Commissioners offered to waive the user's connection charge if the landowner would pay immediately to the Sewer District the sum of $250.00 for a residential user or $500.00 for a commercial user, these sums being referred to as "anticipated assessments." When all needed funds were received from this source, the Board of Commissioners abandoned its original idea of making "assessments" as authorized by chapter 162A, and the funds so collected were thereafter referred to as "connection" charges.

In April 1982, a referendum was held on the proposed general obligation bond issue needed to finance the project. The voters in the Sewer District approved the bond issue, and the County Commissioners financed the project with general obligation bonds. Since these bonds pledge the full faith and credit of the County, the bond order stated that the County agreed to tax to the extent necessary to pay the bonds.

The Sewer District eventually constructed a sewer system to serve the district, which is composed of the Town of Coats, the Village of Buies Creek, and some densely populated areas west of Buies Creek. After construction of the collection lines, the Sewer District entered into an agreement in July 1984 with Harnett County, which was operating its own sewage disposal plant at Buies Creek. The agreement provided for the County to operate the newly constructed collection system as a county-operated system. In July 1984, the County adopted an ordinance mandating connection to the system. A separate ordinance establishing rules and regulations for the use of the system to include a schedule of monthly user fees and connection charges for connections to the system was adopted in August 1984. Although the record is not entirely clear, apparently a portion of the fees and charges collected is used to pay principal and interest on the debt.

Thereafter, the County served notice upon the plaintiffs requiring them to connect their improved properties to the county-operated collection system as required by the county ordinance passed pursuant to N.C.G.S. § 153A-284. The plaintiffs were also required to pay the connection charge and monthly user fees as set forth in the county ordinance establishing rules and regulations for operation of the system.

The plaintiffs refused to connect their properties to the system and brought this action for a declaratory judgment and injunction. Most of the plaintiffs have refused to make any payment of charges and fees. The County cut off the water services to one of the plaintiffs for refusal to pay fees due. The Sewer District and the County counterclaimed for an order requiring plaintiffs to connect their properties to the county-owned sewer system and for recovery of the connection charges and monthly user fees as authorized by the County's ordinance setting fees and rates. The trial court ordered plaintiffs to connect their improved properties to the sewer line but refused to grant judgment for the connection charges.

On appeal, the Court of Appeals noted the compulsory character of the county ordinance requiring connection to the sewer system and construed the charges as an "assessment" for which there had been no notice by first-class mail to each owner of property subject to the assessment and no opportunity to be heard as required by N.C.G.S. §§ 153A-191 and -192. As a result, the Court of Appeals partially reversed the trial court. It held the County ordinance requiring connection to the sewer system to be void, ordered the County to reimburse with interest any sums paid by plaintiffs, dissolved the monetary judgments entered, and ordered attorneys' fees for plaintiffs' attorneys. The Court of Appeals affirmed the trial court's holding which relieved the plaintiffs of liability for the connection charge. McNeill v. Harnett County, 97 N.C.App. at 48, 387 S.E.2d at 210-11. We conclude that the Court of Appeals erred and reverse.

I.

Before turning to the validity of the local government action, it is first helpful to review the scope of authority of the Sewer District and the County. The Sewer District is a county water and sewer district created pursuant to chapter 162A, article 6 of the General Statutes, and the Harnett County Board of Commissioners is the governing body of that Sewer District. The legislature has granted broad powers to water and sewer districts, some of which are set forth in N.C.G.S. § 162A-88:

The inhabitants of a county water and sewer district created pursuant to this Article are a body corporate and politic by the name specified by the board of commissioners. Under that name they are vested with all the property and rights of property belonging to the corporation; have perpetual succession; may sue and be sued; may contract and be contracted with; may acquire and hold any property, real and personal, devised, bequeathed, sold, or in any manner conveyed, dedicated to, or otherwise acquired by them, and from time to time may hold, invest, sell, or dispose of the same; may have a common seal and alter and renew it at will; may establish, revise and collect rates, fees or other charges and penalties for the use of or the services furnished or to be furnished by any sanitary sewer system, water system or sanitary sewer and water system of the district; and may exercise those powers conferred on them by this Article.

N.C.G.S. § 162A-88 (1987) (emphasis added).

Other sections of chapter 162A grant additional powers to county water and sewer districts, including the power to issue various types of bonds and notes (N.C.G.S. § 162A-90 (1987)), the power to levy taxes without approval of the voters of the district (N.C.G.S. § 162A-91 (1987)), and the power to make special assessments (N.C.G.S. § 162A-92 (1987)). Each of these grants of authority is permissive and not mandatory.

Water and sewer districts may contract with counties to carry out their purposes. N.C.G.S. § 153A-275 (1987); N.C.G.S. § 162A-88 (1987). The use of interlocal cooperative agreements is sanctioned with respect to public enterprises in N.C.G.S. § 153A-278, which provides that "two or more counties, cities, or other units of local government may cooperate in the exercise of any powers granted by this Article [article 15 of chapter 153A]." A public enterprise includes sewage collection and disposal systems of all types. N.C.G.S. § 153A-274(2) (1987). Specifically, the County is authorized to operate a public enterprise in order to furnish services to its citizens. N.C.G.S. § 153A-275 (1987).

Therefore, pursuant to an interlocal cooperative agreement and pursuant to authority granted in article 15 of chapter 153A, a county may, among other things, operate a water and/or sewer system for and on behalf of another unit of local government, such as a water and sewer district, and in conjunction therewith may exercise those rights, powers, and functions granted to water and sewer districts as found in N.C.G.S. § 162A-88 and those rights, powers, and functions granted to counties in N.C.G.S. ch. 153A, art. 15.

In this case, the Sewer District and Harnett County entered into a contract on 23 July 1984 wherein it was agreed that the Sewer District's sewer system, which had been completed that year, would be operated by Harnett County through its Department of Public Utilities. Such units of local government may contract with each other...