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JVC Enterprises, LLC v. City of Concord

Court of Appeals of North Carolina

December 17, 2019


          Heard in the Court of Appeals 18 September 2019.

          Appeal by Plaintiffs and cross-appeal by Defendant from an order entered on 10 October 2018 by Judge Joseph N. Crosswhite in Cabarrus County, No. COA19-308 Superior Court.

          Scarbrough & Scarbrough, PLLC, by James E. Scarbrough, John F. Scarbrough, and Madeline J. Trilling, and Ferguson, Hayes, Hawkins & DeMay, PLLC, by James R. DeMay, for Plaintiffs-Appellants.

          Hamilton Stephens Steele Martin, PLLC, by Keith J. Merritt, for Defendant-Appellee.

          INMAN, JUDGE

         JVC Enterprises, LLC, Concord Apartments, LLC, and the Villas of Winecoff, LLC, ("Plaintiffs") appeal the entry of summary judgment in favor of the City of Concord (the "City") and dismissing Plaintiffs' complaint. The City cross-appeals a portion of the summary judgment order, contending the trial court impermissibly ruled on the constitutionality of a session law. After careful review, and able argument on behalf of the parties, we reverse the trial court's entry of summary judgment for the City and remand for further proceedings.


         The record below discloses the following:

         In 2004, the City enacted an ordinance requiring developers of residential subdivisions to pay water and wastewater capacity fees as a prerequisite for development approval by the City. The City assessed these fees at the pre-development stage, and developers were required to pay them before a subdivision plat would be accepted for recordation. The fees were distinct from ordinary installation and meter fees, as they were collected prior to the provision of water and sewer service and were used to fund future improvements to the City's water and sewer systems. Plaintiffs are all developers who built residential subdivisions inside the City prior to October of 2016. Each of the Plaintiffs paid the capacity fees required by the City's ordinance prior to development.

         On 19 August 2016, our Supreme Court decided Quality Built Homes, Inc. v. Town of Carthage, 369 N.C. 15, 789 S.E.2d 454 (2016), and held that although cities could assess fees for water and sewer services actually furnished under the Public Enterprise Statutes, N.C. Gen. Stat. §§ 160A-11 to -338 (2015), those enabling statutes "fail[ed] to give [cities] the essential prospective charging power necessary to assess impact fees." Quality Built Homes, 369 N.C. at 22, 789 S.E.2d at 459. The City subsequently amended its capacity fee ordinance in response to Quality Built Homes in October of 2016, changing the timing of the collection of the fees from before the subdivision plat approval phase to before the issuance of a zoning clearance permit.

         In 2017, Plaintiffs brought suit against the City seeking, among other things, a judgment declaring the fees ultra vires and awarding damages in the amount of fees paid to the City in connection with their developments. Three similar cases[1]were also filed against the City, and all parties filed a Joint Motion for Exceptional Case Designation under Rule 2.1 of the General Rules of Practice for the Superior and District Courts. That motion was granted in April 2018.

         The City moved for partial summary judgement on 17 September 2018 on Plaintiffs' claim that the City lacked authority to levy the fees. To support its motion, the City filed an affidavit by the city clerk which included as exhibits five session laws amending, revising, or consolidating the City's charter between 1959 and 1986. The first such session law authorized a now-defunct Board of Light and Water Commissioners of the City of Concord (the "Board") "[t]o fix and collect rates, fees and charges for the use of and for the services and facilities furnished or to be furnished in the form of electrical and water service." 1959 N.C. Sess. Laws ch. 66, § 1 (emphasis added).[2] Another session law attached to the affidavit revised and consolidated the City's charter, continued the existence of the Board and its powers, and repealed 108 scattered private, public, and session laws that previously composed the City's charter. 1977 N.C. Sess. Laws ch. 744, §§ 1, 5-6 (hereinafter the "1977 Charter"). A third session law-the one on which the City premised its motion for summary judgment-again consolidated the City's charter, dissolved the Board, and provided that "[a]ll powers and duties of said Board shall become powers and duties of the City of Concord[, ]" 1985 N.C. Sess. Laws. ch. 861 § 2 (1986) (hereinafter the "1986 Act");[3] at the same time, that session law also expressly repealed all but two sections of the 1977 Charter. Id. at §§ 2, 6.

         At the summary judgment hearing, the City argued that it was authorized to assess the capacity fees because the session laws: (1) authorized the Board to levy prospective water and sewer fees; and (2) transferred those powers to the City in the 1986 Act. Plaintiffs countered by arguing the 1986 Act: (1) extinguished the Board; and (2) eliminated any power to levy prospective fees allowed in the 1977 Charter by repealing that charter. Plaintiffs further contended that the "powers and duties of said Board" that the 1986 Act transferred to the City were simply those powers that would have otherwise resided in the Board consistent with the general Public Enterprise Statutes. Plaintiffs relied on the doctrine of constitutional avoidance, asserting that the City's interpretation of the pertinent session laws ran the risk of violating the North Carolina Constitution's prohibition against local acts relating to health and sanitation. See N.C. Const. art. II, § 24(1)(a).

         The trial court granted summary judgment in the City's favor and dismissed all of Plaintiffs' claims with prejudice on 10 October 2018. In its order, the trial court construed the 1986 Act as transferring the Board's ability to levy prospective fees to the City; it then interpreted two local act decisions by our Supreme Court, Town of Boone v. State, 369 N.C. 126, 794 S.E.2d 710 (2016), and City of Asheville v. State, 369 N.C. 80, 794 S.E.2d 759 (2016), and concluded that the 1986 Act was constitutional. ...

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