Quality Built Homes Inc. v. Town of Carthage

• Decision Date: 19 August 2016
• Docket Number: No. 315PA15,315PA15
• Citation: 789 S.E.2d 454,369 N.C. 15
• Court: North Carolina Supreme Court
• Parties: QUALITY BUILT HOMES INCORPORATED and Stafford Land Company, Inc. v. TOWN OF CARTHAGE

369 N.C. 15
789 S.E.2d 454

QUALITY BUILT HOMES INCORPORATED and Stafford Land Company, Inc.
v.
TOWN OF CARTHAGE

No. 315PA15

Supreme Court of North Carolina.

Filed August 19, 2016

Ferguson, Hayes, Hawkins & DeMay, PLLC, Concord, by James R. DeMay ; and Scarbrough & Scarbrough, PLLC, Concord, by James E. Scarbrough, for plaintiff-appellants/appellees.

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

Law Office of John T. Benjamin, Jr., P.A., Raleigh, by John T. Benjamin, Jr. and William E. Hubbard, for Leading Builders of America, amicus curiae.

Robinson, Bradshaw & Hinson, P.A., Charlottte, by Edward F. Hennessey ; and J. Michael Carpenter, General Counsel, for North Carolina Home Builders Association, Inc., amicus curiae.

Ellis & Winters LLP, Raleigh, by Matthew W. Sawchak and Paul M. Cox ; and F. Paul Calamita, for North Carolina Water Quality Association, amicus curiae.

NEWBY, Justice.

369 N.C. 16

In this case we consider whether the Town of Carthage exceeded its municipal authority under the Public Enterprise Statutes, N.C.G.S. §§ 160A–311 to –338 (2015), by adopting certain water and sewer "impact fee" ordinances. Upon approval of a subdivision of real property, the ordinances trigger 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. As creations of the legislature, municipalities have only those powers delegated to them by the General Assembly. When Carthage adopted the ordinances at issue here, it exercised power that it had not been granted. The impact fee ordinances are therefore invalid and, accordingly, we reverse the decision of the Court of Appeals.

789 S.E.2d 456

In 2003, following a period of rapid population growth, Carthage adopted two similar impact fee ordinances: one pertaining to its water system, and the other pertaining to its sewer system. In their current form, the ordinances state that the impact fees "shall be used to cover the costs of expanding the [water and sewer] system[s]." Carthage, N.C., Code §§ 51.076(F) (water), 51.096(H) (sewer) (2015). These costs include "water treatment plant expansion, elevated storage expansion, and transmission mains" for the water system, id. § 51.076(F), and "gravity mains, force mains, and lift stations" for the sewer system, id. § 51.096(H).

Under both ordinances, a landowner who seeks to subdivide property and receives "final plat approval," id. §§ 51.076(C)(1), 51.096(B),

369 N.C. 17

must pay water and sewer impact fees "based on water meter size according to the town’s fee schedule," id. §§ 51.076(B), 51.096(A), in amounts ranging from $1,000 to $30,000 per connection. Carthage, N.C., Fee and Rate Schedule 4 (July 1, 2016). "If a [property] has received its final plat, then the entire [water and sewer] impact fee[s] shall be paid at the earliest or next occurrence of ... [the] (a) Tap fee; or (b) Development permit." Id. §§ 51.076(C)(2), 51.096(C); see also Fee and Rate Schedule 4 ("Water/Sewer Impact Fees are due upon final plat approval for new subdivisions (major or minor) or upon application for building permit, whichever occurs first."). Tap fees cover Carthage’s costs "to ‘tap’ or access" the "water and/or sewer line that exists in front of the property," whereas "impact fees offset ... costs to expand the system to accommodate development."

Impact fees are assessed "in addition to the regular water and sewer tap fees," and the monthly service charges to water and sewer customers. If a property owner does not pay the impact fees, Carthage "will refuse" to issue building permits. Certain exceptions exist "for temporary or emergency service," id. § 51.076(A)(2)(b), and any service solely for "fire protection," id. §§ 51.076(E), 51.096(G), but in all instances, impact fees are assessed regardless of the property owner’s actual use of the systems or whether Carthage actually expands the systems. In 2014 Carthage’s Town Manager reported that the Town had "neglected to make needed improvements to its water and sewer systems for many years."

Plaintiffs are North Carolina corporations engaged in residential homebuilding. At the time of filing their action, plaintiffs had paid Carthage a total of $123,000 in water and sewer impact fees.

On 28 October 2013, plaintiffs filed their complaint seeking, inter alia , a declaratory judgment and monetary damages.¹ Plaintiffs allege that "Carthage has acted outside the scope of its legal authority" by "charging" the impact fees "without a specific delegation of authority from the General Assembly" and that, accordingly, plaintiffs are entitled to a return of all impact fees paid, plus interest and attorneys’ fees.

Carthage timely answered the complaint, contending that "the water and sewer fees imposed by Defendant were authorized by North Carolina’s Public Enterprise Statute" and asserting various affirmative defenses, including, inter alia , the statute of limitations and estoppel.

369 N.C. 18

All parties moved for summary judgment. On 17 October 2014, the trial court entered an order granting summary judgment for Carthage. Plaintiffs appealed the summary judgment order to the Court of Appeals.

The Court of Appeals affirmed the trial court’s grant of summary judgment in favor of Carthage. Quality Built Homes Inc. v. Town of Carthage , ––– N.C.App. ––––, 776 S.E.2d 897, 2015 WL 4620404 (2015) (unpublished). Applying "broad construction" interpretation principles under N.C.G.S. § 160A–4, the Court of Appeals concluded that Carthage acted within its delegated municipal authority to impose and collect the impact fees under the Public Enterprise Statutes, Quality Built Homes , 2015 WL 4620404, at *4–5 (citing, inter alia , N.C.G.S. § 160A–4 (2013) ;

789 S.E.2d 457

Homebuilders Ass’n of Charlotte v. City of Charlotte , 336 N.C. 37, 43–44, 442 S.E.2d 45, 50 (1994) ; and Town of Spring Hope v. Bissette , 305 N.C. 248, 252, 287 S.E.2d 851, 854 (1982) ), which enable municipalities to "establish and revise ... schedules of rents, rates, fees, charges, and penalties for the use of or the services furnished by any public enterprise," N.C.G.S. § 160A–314(a).²

We allowed both plaintiffs’ petition and defendant’s conditional petition for discretionary review. We review matters of statutory interpretation de novo, In re Ernst & Young, LLP , 363 N.C. 612, 616, 684 S.E.2d 151, 154 (2009) (citations omitted), as well as orders granting summary judgment, viewing the allegations as true and "the presented evidence in a light most favorable to the nonmoving party," Dalton v. Camp , 353 N.C. 647, 651, 548 S.E.2d 704, 707 (2001) (citation omitted).

From the very formation of our State government, municipalities, in their various forms, have been considered "creatures of the legislative will, and are subject to its control." Lutterloh v. City of Fayetteville , 149 N.C. 65, 69, 62 S.E. 758, 760 (1908) ; see King v. Chapel Hill , 367 N.C. 400, 405, 758 S.E.2d 364, 369 (2014) ; Bd. of Trs. of Youngsville Twp. v. Webb , 155 N.C. 379, 384–85, 71 S.E. 520, 522 (1911). Fundamental to our system is the legislature’s ability to confer upon municipalities certain authority needed to effectuate the purposes of government. N.C. Const. art. VII, § 1 ("The General Assembly shall provide for the organization and government ... of counties, cities and towns, and ... may give such powers and duties to ... [them] as it may deem advisable."); White v. Comm’rs of Chowan Cty. , 90 N.C. 437, 438 (1884) ("[Municipalities]

369 N.C. 19

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