Quality Built Homes Inc. v. Town of Carthage

• Decision Date: 04 August 2015
• Docket Number: No. COA15–115.,COA15–115.
• Citation: 776 S.E.2d 897 (Table)
• Parties: QUALITY BUILT HOMES INCORPORATED and Stafford Land Company, Inc., Plaintiffs, v. TOWN OF CARTHAGE, Defendant.
• Court: North Carolina Court of Appeals

776 S.E.2d 897 (Table)

QUALITY BUILT HOMES INCORPORATED and Stafford Land Company, Inc., Plaintiffs

v.TOWN OF CARTHAGE, Defendant.

No. COA15–115.

Court of Appeals of North Carolina.

Aug. 4, 2015.

Ferguson, Scarbrough, Hayes, Hawkins & DeMay, PLLC, by James E. Scarbrough, James R. DeMay, and John F. Scarbrough, for plaintiff-appellants.

Cranfill Sumner & Hartzog LLP, by Susan K. Burkhart, for defendant-appellee.

BRYANT, Judge.

Where the Town of Carthage acted within its statutory authority to impose water and sewer impact fees on new developments, we affirm the trial court's grant of summary judgment in favor of the Town of Carthage. As plaintiffs' challenge to the imposition of water and sewer impact fees was unsuccessful, we overrule plaintiffs' request for an award of attorneys' fees and costs.

On 28 October 2013, plaintiffs Quality Built Homes, Inc., and Stafford Land Co., Inc., filed a complaint against defendant Town of Carthage in Moore County Superior Court. In their complaint, plaintiffs asserted that they brought the action under the North Carolina Uniform Declaratory Judgment Act, N.C. Gen.Stat. § 1–253 et seq.,“to determine whether Carthage has authority to enact and enforce portions of its ordinance regulating the collection of impact fees”: specifically, water and sewer impact fees. Plaintiffs alleged that the impact fees for water and sewer service “range from $1,000.00 for each water connection and $1,000.00 for each sewer connection where the meter size is ¾ inches to $30,000.00 for water and $30,000.00 for sewer where the meter size is 6 inches. Said impact fees are in addition to the regular water and sewer tap fees.” The impact fees are “due upon final plat approval from new subdivisions and upon application for building permits, whichever occurs first.” Plaintiffs asserted that defendant was not specifically authorized by law to charge and collect impact fees for water and sewer. Plaintiffs asserted that defendant has illegally collected water and sewer impact fees from each of them in excess of $10,000.00. Plaintiffs sought a declaratory judgment that defendant's water and sewer impact fees are unlawful, a return of all water and sewer impact fees paid to defendant plus 6% interest per annum, and recovery of attorneys' fees.

Defendant answered plaintiffs' complaint and raised defenses, including that plaintiffs' claims were barred by the statute of limitations and that defendant's water and sewer impact fees were authorized by North Carolina's Public Enterprise Statute codified at section 160A–311 et seq.

On 23 June 2014, plaintiffs amended their complaint to add additional claims for relief, alleging equal protection and due process violations under the North Carolina State Constitution. Plaintiffs also alleged improper collection of, or attempt to collect, impact fees in violation of N.C. Gen.Stat. § 160A–314 (Authority to fix and enforce rates) and certain Carthage Town ordinances. Plaintiffs alleged that defendant was using the impact fees assessed upon the development of new subdivisions to offset the expense of maintaining its entire water system, including problems associated with its drinking water, while all other similarly situated new homes were not subject to the ordinance imposing impact fees. Defendant responded to plaintiffs' amended complaint by asserting that “[p]laintiffs' claims are barred by the doctrine of waiver or estoppel through acceptance of benefits.”

Plaintiffs and defendant filed cross motions for summary judgment.

The matter was heard in Moore County Superior Court before the Honorable James W. Webb, Judge presiding, on 21 July 2014. Judge Webb found no genuine issue of material fact and concluded that defendant was entitled to judgment as a matter of law. Plaintiffs' motion for summary judgment was denied, and plaintiffs' complaint was dismissed with prejudice. Plaintiffs appeal.

On appeal, plaintiffs raise the following arguments: (I) defendant acted ultra vires in collecting water and sewer impact fees; (II) plaintiffs' claims for the refund of impact fees are subject to the ten-year statute of limitations; (III) plaintiffs' claims are not barred by the doctrine of estoppel by acceptance of benefits; and (IV) plaintiffs are entitled to an award of attorneys' fees and costs.

Standard of review

Summary judgment “sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C. Gen.Stat. § 1A–1, Rule 56(c) (2013). “On appeal, this Court reviews an order granting summary judgment de novo.” Manecke v. Kurtz,222 N.C.App. 472, 475, 731 S.E.2d 217, 220 (2012) (citation omitted).

I

Plaintiffs first argue that defendant has acted ultra vires in collecting its water and sewer impact fees, and that plaintiffs are entitled to a refund of all impact fee payments. More specifically, plaintiffs contend that defendant's water and sewer impact fee ordinances are ultra vires because (A) N.C. Gen.Stat. § 160A–314 does not authorize defendant to collect a water and sewer impact fee for a service to be furnishedand (B) the ordinances provide that the fees shall be used for the expansion of the water and sewer systems, but defendant has used the fees for the maintenance of its systems, instead. We disagree.

A.

Plaintiffs contend that defendant's water and sewer impact fee ordinances are ultra vires and void on their face because N.C. Gen.Stat. § 160A–314 does not authorize defendant to collect a water and sewer impact fee for a service to be furnished.If section 160A–314 was the only statute applicable to defendant's water and sewer impact fee ordinances, we might agree with plaintiffs' ultra vires argument. However, as that is not the case and other statutes are applicable, we disagree with plaintiffs' assertion.

“[T]he term ‘public enterprise’ [as referred to within Article 16 of Chapter 160A of our General Statutes] includes: ... (2)[w]ater supply and distribution systems[;] (3)[w]astewater collection, treatment, and disposal systems of all types, including septic tank systems or other on-site collection or disposal facilities or systems.” N.C. Gen.Stat. § 160A–311(2), (3) (2013). “A city shall have authority to acquire, construct, establish, enlarge, improve, maintain, own, operate, and contract for the operation of any or all of the public enterprises as defined in this Article to furnish services to the city and its citizens.” Id.§ 160A–312(a). “A city may establish and revise from time to time schedules of rents, rates, fees, charges, and penalties for the use of or the services furnished by any public enterprise.” Id.§ 160A–314(a).

Plaintiffs cite Town of Spring Hope v. Bissette,305 N.C. 248, 287 S.E.2d 851 (1982), for the proposition that N.C.G.S. § 160A–314does notprovide a municipality with authority to charge for services “to befurnished” as opposed to services currently furnished. Id.at 251, 287 S.E.2d at 853.

In Town of Spring Hope,our Supreme Court considered whether N.C.G.S. § 160A–314 “authorized [the Town of Spring Hope] to charge an increased sewer rate based upon the expense of replacing an outmoded component of that system prior to the time the new component began operation.” Id.at 251, 287 S.E.2d at 853. Spring Hope had maintained a water and sewer system for its residents for many years. In 1971, the Town was informed by the State Department of Water and Air Resources (the predecessor to the Department of Environment and Natural Resources) that its waste water treatment facility was inadequate and that the Town must take remedial action. The Town needed to construct a new waste water treatment facility in order to meet the new requirement. In June 1979, the Town increased its water and sewer rates “to finance the new water treatment plant, ... its construction, operation and maintenance.” Id.at 249, 287 S.E.2d at 852. The defendant operated a launderette in the Town during the first month the new rates took effect, but although the new waste water treatment facility was substantially completed, it had not yet begun operation. The defendant's launderette went out of business before the facility began operation, and the defendant argued that only the users of the new facility should be required to pay. Id.at 249–50, 287 S.E.2d at 852. Citing N.C.G.S. § 160A–314(a), and for comparison § 162A–9,¹ the Court reasoned as follows:

While we agree that under this statute a municipality may not charge for services “to be furnished,” we fail to see how that proposition governs this case.... When the new plant went into operation, the customers received nothing they had not theretofore received; thus, the increase in the rate did not reflect any services yet to be furnished, but merely the same service which had previously been furnished, i.e.,the efficient removal of waste water. The increase in the rate, far from being a charge for a new service not yet provided by the Town, represented the cost of a necessary improvement to the already existing sewer system without which the Town could not continue to provide sewer service.

Id.at 251–52, 287 S.E.2d at 853 (emphasis added).

Here, plaintiffs contend that the critical distinction between Town of Spring Hopeand the case at bar is that in Town of Spring Hope,the launderette owner was already receiving water and sewer services from the town, whereas here, plaintiffs have yet to access defendant's water and sewer services when they pay the impact fees. Plaintiffs argue that defendant's water and sewer impact fees assess a fee for services to be furnished,a fee not authorized by N.C.G.S. § 160A–314. Moreover, plaintiffs point out that because the fees are due at the time of plat approval, it is not certain that a home will ever be built on any of the lots and, thus, not certain that water and sewer services on that lot will...