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Boles v. Town of Oak Island

Court of Appeals of North Carolina

July 2, 2019

BOBBY G. BOLES, et al., Plaintiffs,
v.
TOWN OF OAK ISLAND, Defendant.

          Heard in the Court of Appeals 17 January 2019.

          Appeal by plaintiffs from order entered 2 May 2018 by Judge James Ammons, Jr., in Brunswick County, No. 15 CVS 2214 Superior Court.

          Smith James Rowlett & Cohen LLP, by Norman B. Smith, for plaintiffs-appellants.

          Parker, Poe, Adams, & Bernstein LLP, by Charles C. Meeker and Stephen V. Carey; and Crossley, McIntosh & Collier, by Brian E. Edes, for defendant-appellee.

          ZACHARY, JUDGE

         Plaintiffs, owners of undeveloped parcels of property in Defendant Town of Oak Island, challenge the sewer service availability fees levied upon them pursuant to a 2004 local act enacted to help service the debt incurred in constructing Oak Island's sewer system. Plaintiffs argue that the fees are unauthorized by statute, unconstitutional, and violative of certain tax principles. After careful review, we conclude that Oak Island exceeded its statutory authority by imposing the sewer service availability fees on Plaintiffs' undeveloped property that could not or does not benefit from the availability of Oak Island's sewer system. Accordingly, we reverse the trial court's order granting summary judgment in favor of Oak Island and remand for further proceedings.

         I. Background

         The Town of Oak Island constructed a sewer system at a cost of $140 million. In 2004, the General Assembly enacted a local act[1] designed to assist Oak Island[2] in reducing its resultant outstanding debt, which was approximately $117 million as of October 2017. 2004 N.C. Sess. Laws 117, ch. 96. Specifically, the General Assembly authorized Oak Island to "impose annual fees for the availability of sewer service within" its sewer treatment district. 2004 N.C. Sess. Laws 117, 117, ch. 96, § 3. The Session Laws authorize Oak Island to impose such sewer service availability fees upon the "owners of each dwelling unit or parcel of property that could or does benefit from the availability of sewage treatment" within the district. 2004 N.C. Sess. Laws 117, 117, ch. 96, § 4.

         Oak Island's sewer lines run in front of each parcel of property on the island, both developed and undeveloped, and, according to Oak Island, its system "has the capacity and ability to serve all parcels, both developed and undeveloped." Oak Island began to assess sewer service availability fees against all properties within the district, both developed and undeveloped.

         Beginning in fiscal year 2009, [3] owners of developed property began paying the availability fees via an additional charge reflected on their monthly sewer bills. Owners of undeveloped parcels began paying the availability fees on an annual basis in fiscal year 2010, with the fees appearing on their property tax bills. The total sewer service availability fees charged to each parcel thus far are as follows:

Fiscal Year

Developed

Undeveloped

2010

$733.26

$146.15

2011

$435.46

$146.15

2012

$324.63

$139.13

2013

$490.81

$576.00

2014

$657.61

$643.68

2015

$714.78

$719.31

2016

$559.74

$803.83

2017

$562.28

$803.83

         These recurring sewer service availability fees are in addition to a one-time special assessment of $4, 200.00, which was imposed upon all parcels of property at the outset of the sewer system's establishment. It is also noteworthy that for the years 2015 through 2017, owners of undeveloped lots were paying more than the owners of developed lots that were connected to and using the sewer system.

         On 11 December 2015, Plaintiffs filed the instant action challenging Oak Island's statutory authority to assess the sewer service availability fees against Plaintiffs' undeveloped property. Plaintiffs sought to recover the fees paid from 2010 to 2014, and interest, together with a declaratory judgment that the fees are unlawful. On 21 April 2017, Plaintiffs moved to certify a class of all undeveloped parcel owners who have paid the sewer service availability fees since 2009.

         The parties filed cross-motions for summary judgment in October 2017. Plaintiffs moved for summary judgment on the issue of liability only, while Oak Island moved for summary judgment on all issues. A hearing on the parties' summary judgment motions was held on 16 April 2018. At the outset of the hearing, Plaintiffs voluntarily dismissed their claim for declaratory judgment without prejudice, leaving only their claim for the recovery of fees paid from 2010 to 2014. At the end of the hearing, Plaintiffs orally moved to amend the pleadings pursuant to Rule 15(b) of the North Carolina Rules of Civil Procedure, or alternatively, to supplement their complaint pursuant to Rule 15(d), in order to bring claims for recovery of sewer service availability fees paid in fiscal years 2015 through 2017. Oak Island objected to the motion.

         Without ruling on Plaintiffs' motion to amend, the trial court denied Plaintiffs' motion for partial summary judgment and granted Oak Island's motion for summary judgment. In light of these rulings, the trial court also did not rule upon Plaintiffs' motion for class certification. On 2 May 2018, the trial court entered an order memorializing its decision and taxing the costs against Plaintiffs. Plaintiffs filed notice of appeal to this Court on 21 May 2018.

         On appeal, Plaintiffs contend that the trial court erred by granting Oak Island's motion for summary judgment because (1) the statutory phrase "availability of sewer service" precludes Oak Island from assessing sewer service availability fees against undeveloped properties; (2) Oak Island provided a full credit or rebate of the availability fees to owners of developed parcels, thereby violating Plaintiffs' constitutional rights and certain tax principles; and (3) refunds were provided to owners of developed parcels in violation of N.C. Gen. Stat. § l05-380(a). Finally, Plaintiffs argue that the trial court erred in failing to grant their motion to amend the pleadings.

         II. Discussion

         a. Standard of Review

         Summary judgment is proper "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) (2017). Our standard of review on appeal from an order granting summary judgment is de novo. In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008).

         b. Statutory Authority to Assess Sewer Service Availability Fees

         We first address Plaintiffs' argument that the trial court erred in granting summary judgment in favor of Oak Island because Oak Island exceeded its statutory authority under the Session Laws by assessing the sewer service availability fees against Plaintiffs' undeveloped properties. Specifically, Plaintiffs argue that their undeveloped properties are not ones that "could or do[] benefit from the availability" of Oak Island's sewage treatment services. We agree, and therefore reverse the trial court's order granting summary judgment in favor of Oak Island on this ground.

         "As creations of the legislature, municipalities have only those powers delegated to them by the General Assembly." Quality Built Homes, Inc. v. Town of Carthage, 369 N.C. 15, 16, 789 S.E.2d 454, 455 (2016). "The General Assembly delegates express power to municipalities by adopting an enabling statute, which includes implied powers essential to the exercise of those which are expressly conferred." Id. at 19, 789 S.E.2d at 457 (quotation marks and alteration omitted). Otherwise, "[a]ll acts beyond the scope of the powers granted to a municipality are invalid." Id.

         "When determining the extent of legislative power conferred upon a municipality, the plain language of the enabling statute governs." Id. "When the language of a statute is clear and without ambiguity, it is the duty of this Court to give effect to the plain meaning of the statute, and judicial construction of legislative intent is not required." Diaz v. Div. of Soc. Servs., 360 N.C. 384, 387, 628 S.E.2d 1, 3 (2006) (citation omitted).

         In the instant case, although the Session Laws do not define the term "availability" for purposes of imposing the sewer service availability fees, it is clear that the enabling Session Laws do not, as a matter of law, apply to Plaintiffs' undeveloped property.

         "In the event that the General Assembly uses an unambiguous word without providing an explicit statutory definition, that word will be accorded its plain meaning." Fid. Bank v. N.C. Dep't of Revenue, 370 N.C. 10, 19, 803 S.E.2d 142, 149 (2017). The plain meaning of the unambiguous, undefined word "availability" is "the quality or state of being available." Availability, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/availability (last visited May 31, 2019). "Available" means "present or ready for immediate use." Available, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/available (last visited May 31, 2019).

         As noted in Oak Island's answer to Plaintiffs' first set of interrogatories, in order to "benefit from the availability" of Oak Island's sewer system, the owner of an undeveloped parcel of property would first be required to (1) obtain the requisite building permits; (2) construct a dwelling or building with a sewer system connection on the property; (3) have the improvements pass municipal inspection; (4) obtain a plumbing permit; (5) submit an application for service; and (6) meet any additional requirements governing the improvement of property set forth in the Town of Oak Island Code of Ordinances. Should the system have the capacity to add and serve the parcel, an owner of undeveloped property who wished to connect to the system would also have to pay the requisite fees to Oak Island in order to obtain the various permits. The complex, costly additional requirements-many of them conditional- that the owner of an undeveloped lot must fulfill in order to benefit from Oak Island's sewer services foreclose any conclusion that such services are "present or ready for immediate use" by those owners.

         Our conclusion is supported by Ricks v. Town of Selma, 99 N.C.App. 82, 392 S.E.2d 437 (1990), disc. review improvidently allowed, 328 N.C. 567, 402 S.E.2d 400 (1991), in which this Court addressed the validity of an availability charge in the context of water and sewer treatment services. At issue in Ricks was the validity of the defendant Town of Selma's ordinance that set "rates for . . . sewer service available but not received[.]" 99 N.C.App. at 84, 392 S.E.2d at 438. The plaintiffs were the owners of a 41-unit mobile-home park located inside the Town's limits, which utilized its own private septic tanks instead of the Town's sewer system. Id. at 83, 392 S.E.2d at 438. The Town assessed availability charges against the plaintiffs, who contended that the Town had exceeded the scope of its statutory authority, in that the plaintiffs were not using the Town's services. Id. at 84, 392 S.E.2d at 438-39. We disagreed.

         The authorizing statute in Ricks permitted the Town to enact an ordinance "establish[ing] rates for the use of or the services furnished by any public enterprise." Id. at 84-85, 392 S.E.2d at 439 (quotation marks omitted) (citing N.C. Gen. Stat. § 160A-314(a)). The question presented thus was "whether making sewer service available is 'furnishing a service' within the meaning of the statute." Id. at 85, 392 S.E.2d at 439. We held that the Town's ordinance was statutorily authorized as against the plaintiffs, concluding that "a city's power to set rates for services furnished by a sewer system includes the power to charge for services available but not received," where the property is developed, but the owner chooses not to connect. Id. at 86, 392 S.E.2d at 440.

         While the term "available" was not explicitly defined in Ricks or the relevant statute, the facts that were held to evidence "availability of service" are clearly distinguishable from those of the case at bar. In Ricks, the Town had extended water and sewer service to the plaintiffs' mobile home park; the plaintiffs chose to "tap[] onto the municipal water service, but . . . never connected any of their 41 housing units to the . . . sewer system[, ]" preferring instead to use their existing septic tanks. Id. at 83, 392 S.E.2d at 438. In other words, the Town's sewer services were present and ready for immediate use by the Ricks plaintiffs, who simply opted not to connect to the system. Moreover, unlike the undeveloped property in the present case, the plaintiffs' property in Ricks was already developed and generating sewage, and the Town had authorized the units' connection to the system.

         Our holding finds further support in the circumstances under which property may be subject to an "availability charge" pursuant to N.C. Gen. Stat. § 160A-317, which governs a municipality's authority to require property owners to connect to its sewer facilities and to charge for such connections. Specifically, the statute authorizes municipalities to "require an owner of developed property on which there are situated one or more residential dwelling units or commercial establishments . . . to connect the owner's premises with the [city's] . . . sewer line." N.C. Gen. Stat. § 160A-317(a) (emphasis added). Alternatively, municipalities may subject such owners to "a periodic availability charge" in lieu of connection. Id.

         The Session Laws' language "could . . . benefit from the availability of sewage treatment" follows the same logic of section 160A-317. 2004 N.C. Sess. Laws 117, 117, ch. 96, § 4. The fact that it would be outside the scope of Oak Island's authority under N.C. Gen. Stat. § 160A-317 to charge Plaintiffs an "availability charge" for its sewer services suggests that those services are similarly not "available" to Plaintiffs for purposes of the Session Laws. See, e.g., In re Halifax Paper Co., 259 N.C. 589, 594, 131 S.E.2d 441, 445 (1963) ("[I]t is the duty of the courts to reconcile laws and adopt the construction of a statute which harmonizes it with other statutory provisions.").

         Also instructive, though lacking precedential value, is Holmes Harbor Sewer Dist. v. Holmes Harbor Home Bldg. LLC, 123 P.3d 823 (Wash. 2005), in which the Washington Supreme Court directly addressed the meaning of "availability" of sewer services. 123 P.3d at 825-26. Similar to the statutory scheme at issue in this case, the Washington statute permitted the district to "fix[] rates and charges for furnishing sewer and drainage service and facilities to those to whom service is available." Id. at 824-25. The Washington Supreme Court held in favor of an owner of unimproved property who had refused to pay the availability charges. Id. at 827. Specifically, the Court concluded that "unimproved lots are not properties to which sewer service is available," and therefore, "the charges at issue [we]re not statutorily authorized."[4] Id. at 823.

         As Oak Island did, the sewer district in Holmes Harbor initially charged a special assessment to all property owners of both improved and unimproved parcels and later imposed additional availability charges. The availability charges were assessed against unimproved properties, unconnected to the system and generating no sewage, as well as those developed, connected, and actually receiving services. Moreover, as here, owners of unimproved property had "no guaranteed right to connect to the sewer system." Id. at 824. Should there be sufficient capacity, the Washington sewer district reserved the right to authorize any new connections. However, "[b]efore authorizing connection, the [d]istrict [had to] approve the hookup application, and upon approval by the [d]istrict, property owners [then had to] pay for the installation of on-site facilities and connection to the sewer system." Id. at 827. Finding that the initial assessment had compensated the district for "the special benefit of potentially increased property values resulting from the construction of the sewer system," id. at 826 n.5, the Court concluded that justifying the availability charges would require more than a nebulous opportunity to connect to the system at some undetermined future date. See id. at 826-27. Accordingly, the Court held that sewer service was not available where "the properties at issue are not improved, are not connected to the sewer system, and have no guaranteed right to connect upon improvement." Id. at 827.

         Similarly here, Plaintiffs' undeveloped properties are not ones that "could or do[] benefit from the availability of" Oak Island's sewer treatment services. 2004 N.C. Sess. Laws 117, 117, ch. 96, § 4 (emphasis added). The undeveloped properties are not connected to or being served by the municipal sewer service, and "have no guaranteed right to connect." Holmes Harbor, 123 P.3d at 827. Thus, the sewer service is not available to the owners of such properties. Consequently, beyond the initial assessment imposed, Oak Island's additional and ongoing charges to Plaintiffs, as owners of undeveloped properties, for sewer service availability was not a valid exercise of statutory authority pursuant to Session Law 2004-96.

         In light of our decision, we do not address Plaintiffs' additional arguments concerning the tax credit provided to developed property owners and not to undeveloped property owners.

         c. Motions to Amend Pleadings

         Finally, Plaintiffs argue that the trial court erred by failing to grant their oral motions to amend or supplement their complaint pursuant to Rule 15(b) and (d) of the North Carolina Rules of Civil Procedure. However, because Plaintiffs failed to obtain rulings on these motions, there is no judicial action for this Court to review at this time.

         "In order to preserve an issue for appellate review, a party must have presented to the trial court a timely . . . motion, stating the specific grounds for the ruling the party desired the court to make if the specific grounds were not apparent from the context." N.C. R. App. P. 10(a)(1). "It is also necessary for the complaining party to obtain a ruling upon the party's . . . motion." Id.

         At the outset of the hearing, Plaintiffs took a voluntary dismissal of their declaratory judgment claim. At that point, Defendant noted that "[s]ince the damages requested are only from 2010 to 2014, now there's no request for beyond 2015." At the end of the hearing, Plaintiffs moved to amend their complaint, pursuant to Rule 15(b), to include damages for sewer service availability fees paid during fiscal years 2015 through 2017. Plaintiffs argued that damages for these years had been tried by consent because Oak Island's Exhibit D included sewer service availability fees charged to landowners for fiscal years 2010 through 2017. In the alternative, Plaintiffs argued that they should be allowed to supplement their complaint pursuant to Rule 15(d). Oak Island objected to Plaintiffs' motion to amend their complaint, arguing that it did not try the issue of damages in those years by consent.[5]

         After the hearing, the trial court announced its decision to deny Plaintiffs' motion for partial summary judgment and grant Oak Island's motion for summary judgment. However, the trial court did not decide or rule upon Plaintiffs' Rule 15 motions. Because Plaintiffs did not obtain rulings upon their Rule 15 motions, they failed to preserve for appeal any arguments concerning the same. See id.; Gilreath v. N.C. Dep't of Health & Human Servs., 177 N.C.App. 499, 501, 629 S.E.2d 293, 294 (holding that the plaintiff's argument that the trial court erred in failing to grant the plaintiff's motion to strike paragraphs from affidavits was ...


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