Viking Utilities Corp. v. Onslow Water & Sewer Auth.

• Decision Date: 04 March 2014
• Docket Number: No. COA13–597.,COA13–597.
• Citation: 755 S.E.2d 62
• Court: North Carolina Court of Appeals
• Parties: VIKING UTILITIES CORPORATION, INC., Garland W. Tuton, and Sue C. Tuton, Plaintiffs, v. ONSLOW WATER AND SEWER AUTHORITY, Defendant.

755 S.E.2d 62

VIKING UTILITIES CORPORATION, INC., Garland W. Tuton, and Sue C. Tuton, Plaintiffs,

v.ONSLOW WATER AND SEWER AUTHORITY, Defendant.

No. COA13–597.

Court of Appeals of North Carolina.

March 4, 2014.

Appeal by defendant from order filed 18 February 2013 by Judge W. Allen Cobb, Jr., in Onslow County Superior Court. Heard in the Court of Appeals 9 October 2013.

Ward and Smith, P.A., by Ryal W. Tayloe and Jeremy M. Wilson, for plaintiff-appellees.

Turrentine Law Firm, PLLC, by S.C. Kitchen, for defendant-appellant.

STEELMAN, Judge.

Where further development of the record is necessary for determination of whether the defendant is entitled to assert the defense of governmental immunity, the trial court did not err by denying defendant's motion to dismiss under N.C. Gen.Stat. § 1A–1, Rule 12(b)(1), (2), and (6).

I. Factual and Procedural Background

On 16 November 2007, Viking Utilities Corporation, Inc., Garland W. Tuton, and Sue C. Tuton (collectively plaintiffs), entered into an “Asset Purchase Agreement for the Acquisition of the Wastewater System Assets of Viking Utilities Corporation, Inc., by Onslow Water and Sewer Authority.” The parties amended the agreement on 17 April 2008. The agreement provided that Onslow Water and Sewer Authority (defendant) would purchase Viking's wastewater system, including real property owned by plaintiffs, for $5,550,000. Defendant paid plaintiffs $500,000 at closing, and the parties agreed that most of the balance of the purchase price, $4,800,000, would be donated to defendant by plaintiffs. The agreement also contained a specific provision that defendant would receive a credit of $250,000 towards the purchase price in return for allowing plaintiffs to connect over the next five years to the wastewater system at any location served by defendant without payment of a “Tap Fee.” The credit would be used at the rate of $2,500 per connection. The agreement also contained a specific representation by defendant that the transaction did not require “the approval or consent of any federal, state, local or other governmental body or agency that has not been obtained[.]”

On 27 September 2012, plaintiffs filed a complaint alleging that defendant had breached its agreement by refusing to allow plaintiffs to connect with defendant's sewer system without payment of a tap fee. The complaint sought specific performance of the agreement, a declaratory judgment that plaintiffs were entitled to 100 residential tap fees, and in the alternative asked for rescission or reformation of the agreement. On 18 October 2012, defendant filed a motion to dismiss pursuant to Rules 12(b)(1), (2), and (6) of the North Carolina Rules for Civil Procedure, for lack of jurisdiction and for failure to state a claim upon which relief may be granted. On 5 December 2012, plaintiffs filed their First Amended Complaint, which added three additional claims: (1) restitution, quantum meruit, and unjust enrichment; (2) estoppel; and (3) negligent misrepresentation. On 28 December 2012, defendant filed its second motion to dismiss for lack of jurisdiction and failure to state a claim upon which relief may be granted. On 18 February 2013, Judge Cobb denied defendant's motions to dismiss pursuant to Rules 12(b)(1), (2), and (6) of the North Carolina Rules for Civil Procedure

Defendant appeals.

II. Interlocutory Appeal

Defendant's appeal of the denial of its motion to dismiss is interlocutory. However, “this Court has repeatedly held that appeals raising issues of governmental or sovereign immunity affect a substantial right sufficient to warrant immediate appellate review.” Price v. Davis, 132 N.C.App. 556, 558–59, 512 S.E.2d 783, 785 (1999) (citations omitted). To the extent defendant's appeal is based upon the affirmative defense of immunity, this appeal is properly before this Court. See id.

III. Motion to Dismiss

In defendant's only argument on appeal, defendant contends that the trial court erred in denying its motion to dismiss. We disagree.

A. Standard of Review

We review “a trial court's denial of a motion to dismiss that raises sovereign immunity as grounds for dismissal” de novo. White v. Trew, 366 N.C. 360, 362–63, 736 S.E.2d 166, 168 (2013).

B. Governmental Immunity

“Under the doctrine of governmental immunity, a county or municipal corporation ‘is immune from suit for the negligence of its employees in the exercise of governmental functions absent waiver of immunity.’ ” Estate of Williams v. Pasquotank County, 366 N.C. 195, 198, 732 S.E.2d 137, 140 (2012) (quoting Evans ex rel. Horton v. Hous. Auth., 359 N.C. 50, 53, 602 S.E.2d 668, 670 (2004) (internal quotation omitted)). “Nevertheless, governmental immunity is not without limit. ‘[G]overnmental immunity covers only the acts of a municipality or a municipal corporation committed pursuant to its governmental functions.’ Governmental immunity does not, however, apply when the municipality engages in a proprietary function.” Williams, 366 N.C. at 199, 732 S.E.2d at 141 (quoting Evans, 359 N.C. at 53, 602 S.E.2d at 670 (citations omitted), and citing Town of Grimesland v. City of Washington, 234 N.C. 117, 123, 66 S.E.2d 794, 798 (1951)).

In Williams the Court took the “opportunity to restate our jurisprudence of governmentalimmunity,” Williams at 196, 732 S.E.2d at 139, and in so doing focused on the need for courts to engage in a fact-based analysis, considering various relevant factors, rather than applying bright-line rules:

In determining whether an entity is entitled to governmental immunity, the result therefore turns on whether the alleged tortious conduct of the county or municipality arose from an activity that was governmental or proprietary in nature.... [T]he threshold inquiry in determining whether a function is proprietary or governmental is whether, and to what degree, the legislature has addressed the issue.

Williams at 199–200, 732 S.E.2d at 141–42. Williams arose from a drowning at a public park and, although noting the existence of statutory provisions affirming the public benefit of parks and recreation, it declined to hold that these provisions were dispositive. Instead, the Court held that, even if the general operation of a parks program had been statutorily designated as a governmental function, “the question remains whether the specific operation of the [swimming area where the drowning occurred] in this case and under these circumstances, is a governmental function.” Williams at 201, 732 S.E.2d at 142. The Williams Court also offered certain guiding principles for future courts to apply:

[W]hen the particular service can be performed both privately and publicly, the inquiry involves consideration of a number of additional factors, of which no single factor is dispositive. Relevant to this inquiry is whether the service is traditionally a service provided by a governmental entity, whether a substantial fee is charged for the service provided, and whether that fee does more than simply cover the operating costs of the service provider. We conclude that consideration of these factors provides the guidance needed to identify the distinction between a governmental and proprietary activity. Nevertheless, we note that the distinctions between proprietary and governmental functions are fluid and courts must be advertent to changes in practice. We therefore caution against overreliance on these four factors.

Williams at 202–03, 732 S.E.2d at 143. Finally, Williams held:

Analysis of the factors listed above when considering whether the action of a county or municipality is governmental or proprietary in nature is particularly important in light of two points we have previously emphasized.... “First, although an activity may be classified in general as a...