Tommy Davis Construction, Inc. v. Cape Fear Public Utility Authority , 807 F.3d 62 ( 2015 )

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.
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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
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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
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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
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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.
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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. § 1-56applies 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
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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.
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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.,
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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
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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
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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.”
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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
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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
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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.
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* * *
For the foregoing reasons, we affirm both the district
court’s July 8, 2014 judgment and its subsequent award of
attorneys fees.
AFFIRMED
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