NO. COA13-597

NORTH CAROLINA COURT OF APPEALS

Filed: 4 March 2014

VIKING UTILITIES CORPORATION, 

INC., GARLAND W. TUTON, AND SUE C. 

TUTON,

Plaintiffs,

V. Onslow County

No. 12 CVS 3846

ONSLOW WATER AND SEWER AUTHORITY,

Defendant.

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 defendantappellant.

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). 
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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[.]” 
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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. 
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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, 
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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 governmental immunity,” 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
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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 at 143. Finally, Williams held:

Analysis of the factors listed above when 

considering whether the action of a county 
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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 governmental function, 

liability in tort may exist as to certain of 

its phases; and conversely, although 

classified in general as proprietary, 

certain phases may be considered exempt from 

liability. Second, it does not follow that a 

particular activity will be denoted a 

governmental function even though previous 

cases have held the identical activity to be 

of such a public necessity that the 

expenditure of funds in connection with it 

was for a public purpose.” Consequently, the 

proper designation of a particular action of 

a county or municipality is a fact intensive 

inquiry, turning on the facts alleged in the 

complaint, and may differ from case to case.

Williams at 203, 732 S.E.2d at 143 (quoting Sides v. Cabarrus 

Mem’l Hosp., Inc., 287 N.C. 14, 21-22, 213 S.E.2d 297, 302 

(1975) (internal citations and emphases omitted). 

In Town of Sandy Creek v. E. Coast Contr., Inc., __ N.C. 

App. __, 741 S.E.2d 673 (2013) this Court applied Williams to 

the plaintiff’s allegations that the defendant, the City of 

Northwest, had failed to properly manage its contract with an 

engineering firm for construction of a sewer system. We held 

that, although the operation of a sewer system might be a 

governmental function, the specific allegations of the 

plaintiff’s complaint did not assert acts undertaken in a 

governmental capacity:
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These allegations of breaches of the duty of 

reasonable care do not concern decisions of 

government discretion such as whether to 

construct a sewer system or where to locate 

the sewer system. Instead, the alleged 

breaches concern Northwest’s handling of the 

contract and Northwest’s business 

relationship with the contractor, acts that 

are not inherently governmental but are 

commonplace among private entities. . . . 

[W]we find that Northwest was involved in a

proprietary function while handling its 

business relationship with ECC and the trial 

court did not err in denying Northwest’s 

motion to dismiss based on governmental 

immunity.

Sandy Creek, __ N.C. App. at __, 741 S.E.2d at 676-77. In this 

case, as in Sandy Creek, the plaintiffs’ allegations involve its 

“business relationship” with defendant. 

Based on Williams and Sandy Creek, we hold that 

determination of whether defendant is entitled to assert the 

defense of governmental immunity will require the trial court to 

consider the pertinent statutory provisions as well as factual 

evidence regarding plaintiffs’ allegations, fees charged by 

defendant, whether the fees cover more than the operating costs 

of the water authority, and any other evidence relevant to the 

issue of whether, in executing and interpreting its contract 

with plaintiffs, defendant was acting in a governmental or 

proprietary capacity. Because such evidence was not before the 

court in ruling on a motion to dismiss under N.C. Gen. Stat. § 

1A-1, Rule 12(b)(1), (2), or (6), the trial court did not err by 
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denying defendant’s motion to dismiss at this stage of the 

proceedings. Our decision to affirm the trial court does not 

prevent the parties from seeking summary judgment, at which time 

they may offer documentary or testimonial evidence in support of 

their positions. As we are holding that the trial court did not 

err by denying the motion to dismiss, we do not reach the 

parties’ arguments concerning whether, in the event that the 

court determines that defendant is entitled to assert the 

defense of governmental immunity, the defense has been waived by 

execution of a valid contract with plaintiffs. 

Conclusion

We hold that the trial court did not err in its denial of 

defendant’s motion to dismiss and that its order should be 

affirmed.

AFFIRMED.

Judges HUNTER, ROBERT C., and BRYANT concur.