Court Opinion

ID: 3159019
Source: CourtListenerOpinion
Date Created: 2015-12-01 20:00:48.508263+00
Date Added: 2024-06-11T11:58:44.621054
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 14-1778

TOMMY DAVIS CONSTRUCTION, INC.,

                Plaintiff - Appellee,

           v.

CAPE FEAR PUBLIC UTILITY AUTHORITY; NEW HANOVER COUNTY,

                Defendants - Appellants.

                               No. 14-2132

TOMMY DAVIS CONSTRUCTION, INC.,

                Plaintiff - Appellee,

           v.

CAPE FEAR PUBLIC UTILITY AUTHORITY; NEW HANOVER COUNTY,

                Defendants - Appellants.

Appeals from the United States District Court for the Eastern
District of North Carolina, at Wilmington.  Malcolm J. Howard,
Senior District Judge. (7:13-cv-00002-H)

Argued:   September 15, 2015                Decided:   December 1, 2015

Before NIEMEYER, GREGORY, and THACKER, Circuit Judges.
Affirmed by published opinion.        Judge Niemeyer wrote   the
opinion, in which Judge Gregory and Judge Thacker joined.

ARGUED: Jeremy M. Wilson, WARD AND SMITH, P.A., Wilmington,
North Carolina, for Appellants.   Bradley Andrew Coxe, HODGES &
COXE, P.C., Wilmington, North Carolina, for Appellee. ON BRIEF:
Ryal W. Tayloe, WARD AND SMITH, P.A., Wilmington, North
Carolina, for Appellants.

                               2
NIEMEYER, Circuit Judge:

       The main question presented in these appeals is whether New

Hanover County, North Carolina, acted ultra vires in collecting

fees    on   behalf      of    the    New   Hanover         County    Water   and   Sewer

District from a subdivision developer, Tommy Davis Construction,

Inc., for water and sewer services that the Water and Sewer

District did not provide and had no concrete plans or immediate

ability to provide.             Davis Construction had arranged to have a

privately       owned    utility,       Aqua       North    Carolina,    Inc.,   provide

water and sewer services to the subdivision.

       The district court ruled that the County acted ultra vires

in collecting the fees on behalf of the Water and Sewer District

and ordered both the County and the successor to the Water and

Sewer    District,       the    Cape    Fear       Public     Utility    Authority,     to

refund    the    fees    in     the    amount       of     $34,268.96,   together   with

prejudgment interest.            The court also awarded Davis Construction

attorneys    fees       and    costs.       For     the     reasons   that    follow,   we

affirm.

                                               I

       In the course of developing Becker Woods, a residential

subdivision with 29 lots, located on Cape Fear in the southern

part of New Hanover County, Davis Construction arranged to have

Aqua NC provide water and sewer services to each lot in the

                                               3
subdivision.       Aqua NC was and remains the only utility offering

those services in that part of the County, and it therefore

provided water and sewer services to the existing subdivisions

surrounding Becker Woods.

        In February 2005, Davis Construction applied for building

permits     from   the     County     for       a   few     of    the   lots    in        the

subdivision.       A County employee advised Davis Construction that

it was required to pay “impact fees” to the Water and Sewer

District before the County would issue the building permits.

The   County    Board    of    Commissioners        had    created      the   Water       and

Sewer District as a public utility in 1983 to provide water and

sewer services to the unincorporated areas of the County.                                 The

Water     and   Sewer     District,      however,         did     not   offer   service

throughout its entire jurisdiction.                       Portions of the County,

including the area where Becker Woods was located, were instead

served by private water and sewer utilities, such as Aqua NC.

Even though the Water and Sewer District did not offer service

to every area within its jurisdiction, it nonetheless assessed,

and the County collected, impact fees for all new development in

every area, including the Becker Woods subdivision, relying on

an    ordinance    that       required   “[a]ll       new        development    .     .     .

obtaining a certificate of occupancy” to pay a “facility fee . .

. based on average daily flow” as a “[o]ne-time sewer charge[].”

New Hanover County, N.C., Code § 56-312(b) (2005).                        According to

                                            4
the County, the impact fees were used “to develop [the County’s]

wastewater infrastructure with the goal of providing expanded

service    coverage     in   the   unincorporated          areas    of     New    Hanover

County.”

      Davis Construction objected to the fees because the Water

and Sewer District was not going to be providing water and sewer

services to its subdivision and it had already paid impact fees

to Aqua NC.      After objecting repeatedly, Davis Construction paid

the   fees   under     protest     so   that    it     could      proceed      with   the

subdivision’s development.           Between March 2005 and July 2006, it

paid $34,268.96 in impact fees to build houses on 23 lots.

      In 2007, the County and the City of Wilmington began the

process of consolidating their separate water and sewer systems

with the creation of the Cape Fear Public Utility Authority.

The Authority was incorporated in 2007, and on July 1, 2008, it

assumed all the rights and liabilities of the Water and Sewer

District and began operating the region’s public water and sewer

infrastructure.        During this same period, the Authority and the

County    also   changed     the    prior      impact-fee         policy    and     began

assessing    and      collecting    impact      fees       only    when    a     customer

applied to the Authority for service.                   Accordingly, when Davis

Construction       thereafter      applied     for     a    building       permit     for

another    lot   in    Becker    Woods,   the    County      did    not     collect    an

impact fee because Aqua NC, not the Authority, was going to

                                          5
provide   the     water    and    sewer        services.        Davis     Construction

subsequently requested that the Authority refund the impact fees

that it had previously paid, but, on June 9, 2010, the Authority

denied that request.

     Davis       Construction     commenced        this        action    against    the

Authority    in    the    Superior      Court     of     New    Hanover    County    on

December 2, 2011, seeking a refund of the impact fees it had

paid to the Water and Sewer District in 2005 and 2006, along

with interest and attorneys fees.                 By an amended complaint, it

added the County as a defendant, and the County removed the

action to federal court.          The amended complaint alleged that the

defendants’ actions in collecting impact fees were ultra vires

and violated Davis Construction’s right to due process under the

U.S. and North Carolina Constitutions. *

     On   the     parties’    cross-motions        for      summary     judgment,   the

district court ruled in favor of Davis Construction on July 7,

2014, concluding that the defendants’ collection of impact fees

from Davis Construction for the Becker Woods development was “an

ultra vires act beyond their statutory authority.”                          The court

also rejected the defendants’ defenses that Davis Construction’s

claims    were    barred     by   the     statute      of    limitations     and    the

     * Davis Construction also alleged that the defendants had
violated its rights to equal protection under the U.S. and North
Carolina Constitutions, but it has since abandoned those claims.

                                           6
doctrine of laches.               The court ordered the defendants to refund

to   Davis         Construction         $34,268.96,             together       with     prejudgment

interest       of     6%     from       July      13,       2006,        the     date     of       Davis

Construction’s            last    impact         fee    payment.           The      court      entered

judgment       on     July       8,   2014,       and       subsequently            awarded        Davis

Construction attorneys fees of $20,000 and non-taxable costs of

$270.

       These       appeals       from      the    judgment         and    from      the     award     of

attorneys fees followed.

                                                  II

       As an initial matter, we address the defendants’ contention

that    the    district          court     erred       in       refusing       to   dismiss        Davis

Construction’s            claims      as    untimely.              They    contend         that      the

district court incorrectly concluded that the catchall 10-year

statute       of    limitations          provided        by      N.C.     Gen.      Stat.      §    1-56

applies to Davis Construction’s ultra vires claim.                                        They argue

that the claim is instead barred by the three-year statute of

limitations set out in N.C. Gen. Stat. § 1-52(2) for claims

based upon a “liability created by statute.”                                        Alternatively,

they argue that the ultra vires claim is barred by either the

two-year limitations period that applies to an “action against a

local     unit       of    government            upon       a    contract,          obligation        or

liability arising out of a contract, express or implied,” N.C.

                                                   7
Gen. Stat. § 1-53(1), or the three-year limitations period for

“an action . . . for any other injury to the person or rights of

another, not arising on contract and not hereafter enumerated,”

id. § 1-52(5).          As to Davis Construction’s federal and state due

process claims, they contend that those claims are barred by the

three-year statute of limitations provided by N.C. Gen. Stat.

§ 1-52(5).        And     finally,       they       contend        that,    even        if       Davis

Construction’s claims are found to have been filed within the

applicable limitations period, the claims are nonetheless barred

by the equitable doctrine of laches.

     To begin, we agree that Davis Construction’s federal due

process claim is barred by the three-year statute of limitations

provided     by    N.C.     Gen.     Stat.          §   1-52(5).            Although             Davis

Construction’s      complaint        does      not      expressly       invoke         42    U.S.C.

§ 1983 in alleging the federal due process claim, that statute

provides the basis for the cause of action when a plaintiff sues

a state actor for the deprivation of rights secured by the U.S.

Constitution,       and    “municipalities              and    other    local         government

entities    [are]       included     among         those      persons      to    whom        §   1983

applies.”      Collins v. City of Harker Heights, 503 U.S. 115, 120

(1992) (citing Monell v. New York City Dep’t of Social Servs.,

436 U.S. 658, 690 (1978)); see also Hughes v. Bedsole, 48 F.3d

1376,   1383      n.6     (4th    Cir.    1995)         (noting      that,           because      the

Fourteenth     Amendment         “does   not       create      a   cause        of    action,”      a

                                               8
plaintiff’s “claim under the Fourteenth Amendment merges into

her § 1983 claim because § 1983 merely creates a statutory basis

to    receive    a   remedy    for      the    deprivation           of   a   constitutional

right”).        The statute of limitations for all § 1983 claims is

borrowed from the applicable state’s statute of limitations for

personal-injury          actions,       even    when      a     plaintiff’s       particular

§ 1983     claim     does   not     involve        personal          injury.      Wilson   v.

Garcia, 471 U.S. 261, 275-80 (1985); see also Wallace v. Kato,

549    U.S.   384,    387     (2007).          And   we       have     applied    Wilson   to

conclude      that   §    1983    claims       arising         in    North     Carolina    are

limited by “the three-year period for personal injury actions

set forth in § 1-52(5).”                  Nat’l Advertising Co. v. City of

Raleigh, 947 F.2d 1158, 1162 n.2 (4th Cir. 1991).

       The limitations period for a § 1983 claim begins to run

when the plaintiff has “a complete and present cause of action”

--    in   other     words,      when    it     could         have    “file[d]     suit    and

obtain[ed] relief.”           Wallace, 549 U.S. at 388 (quoting Bay Area

Laundry & Dry Cleaning Pension Tr. Fund v. Ferbar Corp. of Cal.,

522 U.S. 192, 201 (1997)).                In this case, the period began when

Davis Construction paid the impact fees under protest.                              Because

it filed this action on December 2, 2011 -- some five and one-

half years after it paid the last impact fee at issue in 2006 --

the federal claim was time-barred.

                                               9
      We conclude, however, that Davis Construction’s state law

claims were timely filed.           The North Carolina Court of Appeals

recently addressed the question of which statute of limitations

applies to claims like those brought by Davis Construction, and

its holding guides our disposition of this issue.                       See Point

South Props., LLC v. Cape Fear Pub. Util. Auth., Nos. COA15-371,

COA15-374, 2015 WL 6142998, at *4-5 (N.C. Ct. App. Oct. 20,

2015).       Like in the present case, the plaintiffs in Point South

Properties were developers that sued New Hanover County and the

Cape Fear Public Utility Authority to recover impact fees paid

to the Water and Sewer District, alleging that the defendants

lacked authority to impose such fees.                  As here, sewer and water

services were being provided to the developers’ property by Aqua

NC.      Id.   at   *2.     The   defendants      in    Point   South   Properties

maintained that the plaintiffs’ claims were based on N.C. Gen.

Stat.    §    162A-88,    the   statute   that    grants    a   water   and   sewer

district the authority to levy fees for “services furnished or

to be furnished,” and therefore that their claims were subject

to the three-year statute of limitations provided by N.C. Gen.

Stat. § 1-52(2) for “an action . . . [u]pon a liability created

by statute.”        The North Carolina Court of Appeals rejected that

argument,      however,    concluding     “that   plaintiffs’      claims     [were]

not based upon defendants’ alleged breach of a duty or liability

established by N.C. Gen. Stat. § 162A-88.”                  Point South Props.,

                                          10
2015 WL 6142998, at *5.                Rather, the court noted, it was the

“defendants     who   [had]     raise[d]        the   statute    as   a   defense     to

plaintiffs’ claims.”          Id. at *4.          The court also rejected the

defendants’     alternative        argument      that   the     plaintiffs’   claims

were barred by the two-year statute of limitations that applies

to   an   “action     against      a    local    unit    of     government    upon    a

contract, obligation or liability arising out of a contract,

express or implied.”          Id. at *5 (quoting N.C. Gen. Stat. § 1-

53(1)).    Instead, the court ruled that “because no other statute

establishes     the   statute      of    limitations     for     their    claim,     the

residual or ‘catch all’ period of 10 years set out in N.C. Gen

Stat. § 1-56 applies.”          Id.

     Following Point South Properties, we likewise conclude that

the 10-year statute of limitations provided by N.C. Gen. Stat.

§ 1-56    applies     to   Davis       Construction’s     state-law       claims    and

therefore affirm the district court’s ruling that those claims

were filed well within the limitations period.

     The decision in Point South Properties similarly persuades

us to reject the defendants’ argument that, even if not barred

by the applicable statute of limitations, Davis Construction’s

claims are nonetheless untimely under the doctrine of laches.

Considering this same argument, the court concluded that “the

doctrine   of   laches     is    not     applicable     to    this    case”   because

“plaintiffs’ claims are legal,” while “laches is an equitable

                                           11
defense [that] is not available in an action at law.”                                        Point

South Props., 2015 WL 6142998, at *6 (quoting Cater v. Barker,

617 S.E.2d 113, 118 (N.C. Ct. App. 2005)).                              It concluded that

the doctrine of laches was also inapplicable because “defendants

have failed to produce evidence that they were prejudiced by

plaintiffs’          delay        in        bringing      suit,”        emphasizing           that

“[d]efendants          do     not           contend     that        they   undertook           any

expenditures that would not have been otherwise necessary, or

that their legal position has been negatively impacted by the

passage of time.”                 Id.        Here, too, the defendants have not

established          the    kind       of    prejudice        necessary    to     bar        Davis

Construction’s suit under the doctrine of laches.

     In       sum,    we    conclude         that     Davis    Construction’s         state-law

claims are not time-barred.

                                                III

     On the merits, the defendants contend that the district

court erred in concluding that their collection of impact fees

from Davis Construction was ultra vires.                               While the district

court allowed that the defendants could collect impact fees for

water and sewer “services . . . to be furnished,” N.C. Gen.

Stat.     §    162A-88       (emphasis          added),        it    concluded        that     the

defendants      failed       to    demonstrate          that    they    would    be    able     to

furnish such services to Becker Woods within any meaningful time

                                                12
in the future or that they even intended to do so, particularly

in   view   of   the   fact   that   such   services    were   already   being

provided by Aqua NC.          The defendants argue, however, that the

evidence shows that they would furnish those services because

they had longstanding plans to provide such services to the area

in which Becker Woods was being developed.             They note:

      As far back as 1976, the Greater Wilmington Area 201
      Facilities Plan included the southern unincorporated
      areas in its Regional Wastewater Treatment Plan and
      called for expansion of the Southside Wastewater
      Treatment Plant.   Defendants have used such funds to
      prepare for service expansion, including spending
      approximately $8 million on the design of a wastewater
      treatment plant in the southern part of the County.
      Additional planning documents confirm that [the Water
      and Sewer District] and [the Authority] have planned
      to expand service to areas including Becker Woods.

They argue that, in light of those plans, § 162A-88 authorized

them to collect impact fees to fund them.

      The district court recognized that for almost 40 years the

County has, indeed, had plans to expand its water and sewer

services to the southern portion of the County.                 But it also

noted that those “plans [were] at best vague, and some plans

even indicate[d] that water and sewer services [would] not need

to be provided by the government because service [was] already

available through Aqua NC.”          It concluded that the record showed

that the “[d]efendants have not taken concrete steps to actually

provide water and sewer services to Becker Woods.”

                                      13
      We    find    the    district     court’s       observations     to    be     apt.

Surely, the authority conferred by § 162A-88 to collect a fee

for water and sewer services to be furnished to a development

must be construed as the power to collect a user fee from those

who are going to use the system’s services.                        See McNeill v.

Harnett Cnty., 398 S.E.2d 475, 485 (N.C. 1990) (characterizing §

162A-88     as     “authorizing       user     fees     for      services     ‘to    be

furnished’” (emphasis added)).                As such, “to be furnished” can

be construed meaningfully only in the context of the developer’s

needs, such that the developer can expect that it will have

water   and      sewer    services    within    a     reasonable    time    after    it

completes the construction of the houses.                  But, as the district

court noted, even 10 years after Davis Construction first sought

its   permits,      neither    the    Water     and    Sewer     District    nor    the

Authority had taken any steps to provide service.                         And Aqua NC

stated that it was unaware of any plan of the Water and Sewer

District    or     the    Authority    “to    ever     provide    water     and   sewer

services to Becker Woods.”              In these circumstances, we cannot

conclude that the impact fees that the County and the Water and

Sewer District assessed and collected were for services “to be

furnished” to Becker Woods.

      The     North      Carolina     Court    of     Appeals     in   Point      South

Properties addressed this precise factual scenario and similarly

concluded that the impact fees collected in that case were ultra

                                         14
vires.    The court explained that the defendants’ “generalized

goal of extending water and sewer service to unspecified parts

of New Hanover County at an unspecified time in the indefinite

future” was not “sufficient to authorize imposition of impact

fees for services ‘to be furnished.’”      Point South Props., 2015

WL 6142998, at *10.    The court noted that, to survive summary

judgment, the defendants had to present “evidence from which it

might reasonably be found that defendants have ever evidenced a

commitment to extending water and sewer service to the subject

properties, regardless of the timeline.”       Id. at *7 (emphasis

added).   Concluding that there was “no evidence in the record

that defendants have ever planned for water and sewer service

‘to be furnished’ to the subject properties,” id. at *10, the

court affirmed the trial court’s grant of summary judgment to

the plaintiffs on their claim that the defendants’ imposition of

impact fees was ultra vires, id. at *12.

     Like in Point South Properties, the defendants in this case

have a generalized goal of extending water and sewer services to

the entire County, but, as already noted, there is no evidence

in the record that they have taken any steps to extend water and

sewer services to Becker Woods or that they have even made an

official decision to do so.   Accordingly, we conclude that the

defendants exceeded their statutory authority by requiring Davis

                               15
Construction to pay the impact fees and therefore affirm the

district court’s summary judgment in Davis Construction’s favor.

                                         IV

      Finally,     in   their   second    appeal,    the   defendants    contend

that the district court erred in awarding Davis Construction

attorneys fees.         In doing so, the district court relied on N.C.

Gen. Stat. § 6-21.7, which provides:

      In any action in which a city or county is a party,
      upon a finding by the court that the city or county
      acted outside the scope of its legal authority, the
      court may award reasonable attorneys’ fees and costs
      to the party who successfully challenged the city’s or
      county’s action, provided that if the court also finds
      that the city’s or county’s action was an abuse of its
      discretion, the court shall award attorneys’ fees and
      costs.

The defendants argue that the Water and Sewer District and its

successor, the Authority, are the entities that allegedly acted

outside their legal authority and that neither is a “city or

county,” as required for application of § 6-21.7.

      This   argument,      however,      overlooks      the   fact    that    the

district court found that the County acted outside the scope of

its legal authority by requiring Davis Construction to pay the

invalid impact fees as a condition of receiving building permits

and   collecting    those    fees   on    behalf    of   the   Water   and    Sewer

District.    Accordingly, we conclude that the district court had

authority to award attorneys fees.

                                         16
                                 *   *     *

     For   the    foregoing   reasons,    we    affirm   both   the   district

court’s    July   8,   2014   judgment    and   its   subsequent      award   of

attorneys fees.

                                                                      AFFIRMED

                                     17