Court Opinion

ID: 2728975
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:37:57.130913+00
Date Added: 2024-06-11T09:53:15.803576
License: Public Domain

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 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).
                                           -2-
                  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[.]”
                                            -3-
      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.
                                      -4-
                         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,
                                        -5-
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
                                         -6-
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
                                       -7-
           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:
                                         -8-
               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
                                         -9-
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.