Spaugh v. City of Winston-Salem

68 S.E.2d 838 (1952) 234 N.C. 708

SPAUGH et al.
v.
CITY OF WINSTON-SALEM.

No. 746.

Supreme Court of North Carolina.

February 1, 1952.

Ralph M. Stockton, Jr., H. M. Ratcliff, John J. Ingle and Richmond Rucker, all of Winston-Salem, for plaintiffs, appellants.

Womble, Carlyle, Martin & Sandridge, Winston-Salem, for defendant, appellee.

DEVIN, Chief Justice.

The plaintiffs claim compensation for the appropriation by the city of Winston-Salem of the water and sewer lines installed by them in the real estate development known as Konnoak Hills, consequent upon the extension of the corporate limits of the city to include the territory in which this development is situated. They base their claim upon the broad principle that the city having taken exclusive control of their property and denied compensation therefor, they have thus been deprived of property without due process of law in violation of rights assured them by the Constitution of the United States and the Constitution of North Carolina. 14th Amendment Const. U.S.; Art. I, sec. 17, Constitution of North Carolina. They rest their case on the sound principle that private property may not be taken even for a public use without compensation. McKinney v. Deneen, 231 N.C. 540, 58 S.E.2d 107.

The facts in the main are not controverted. No issue of fact is raised. The case was decided below on an issue of law, and the question presented by the appeal is whether the facts as they appear of record are sufficient to show a violation of plaintiffs' rights in the appropriation of their property as claimed for which the city should be held liable for compensation.

The plaintiffs present the view that their claim for compensation is supported by the decisions of this Court in Abbott Realty Co. v. City of Charlotte, 198 N.C. 564, 152 S.E. 686, 688; Stephens Co. v. City of Charlotte, 201 N.C. 258, 159 S.E. 414, and Charlotte Construction Co. v. City of Charlotte, 208 N.C. 309, 180 S.E. 573. The first of these cases, Abbott Realty Co. v. City of Charlotte, was decided in 1930. It appeared in that case that the Realty Co. owned lots within the corporate limits of Charlotte on streets to which sewer lines had not been extended. To enhance sale of these lots plaintiff proposed to the Commissioner of Public Works that it would construct the sewer lines if the city would reimburse plaintiff for the cost. This proposition was accepted by the Commissioner. Relying upon this agreement, plaintiff constructed the sewer lines and connected them with the municipal sewerage system at a cost of $16,000. The city paid a portion, but declined to pay the remainder. Plaintiff sued on the contract. The Court held the contract unenforceable but that plaintiff could proceed upon a quantum meruit. The Court in so deciding used this language [198 N.C. 564, 152 S.E. 688]: "Notwithstanding the failure of plaintiff to sustain its contention that defendant is liable to it on the contract alleged in the complaint, the defendant should be and is liable for the reasonable and just value of the sewers, if the jury shall find that after their construction defendant took them over and incorporated them into its municipal sewerage system."

It is obvious that the facts in that case differ in material respects from those in the case at bar. The decision seems to have been based upon the view that services of value had been rendered and accepted by the city in reliance upon an unenforceable contract.

In Stephens Co. v. City of Charlotte, supra [201 N.C. 258, 159 S.E. 416], plaintiff laid out a residential suburban development known as Myers Park, with paved streets and water and sewer lines, outside the corporate limits of the city. In 1916 the city permitted plaintiff to make connection with city mains. In 1928 the city extended its corporate limits so as to take in Myers Park. The city thereupon took over the water and sewer system. Plaintiff sued for compensation, and recovery had below was affirmed. The Court said: "The second contention made by the defendant is that the plaintiff had nothing to sell to the city, or nothing of value for which the city would be liable for the appropriation so made. This contention is determined adversely to the defendant by the decision of this court in Abbott Realty Co. v. [City of] Charlotte, 198 N.C. 564, 152 S.E. 686." Chief Justice Stacy dissented, but the ground of his dissent is not stated. This case seems to support the plaintiffs' view in our case, but we observe that the decision was based solely on the Abbott Realty Co. case, and without further examination of the facts upon which that decision was predicated.

In Charlotte Construction Co. v. City of Charlotte, supra [208 N.C. 309, 180 S.E. 575], it appeared that plaintiff had constructed, paid for, and owned water mains in Charlotte. In 1934 the city under power of eminent domain took over the water mains and appropriated same to its use and refused to pay for same. There was evidence that pursuant to agreement the city had been in possession of the water lines of plaintiff with plaintiff's permission. The Court said: "This evidence is sufficient to sustain the finding by the court that on or about August 15, 1934, under its right of eminent domain, the defendant took the water mains described in the complaint from the plaintiff, and thereafter appropriated the same to its use as part of its municipal water system." This case does not afford us much help in the determination of the particular questions now presented by the case at bar.

The defendant's position, on the other hand, is that at the time the city extended its corporate limits the plaintiffs had no private property rights capable of being segregated or susceptible of being appropriated by the city; that the plaintiffs having laid out a real estate development, registered a plan thereof, constructed streets underlaid with water and sewer lines, and sold lots for residential purposes fronting thereon in connection with these facilities and services, had dedicated the means of service of these facilities to the lot owners and residents and to the public. The defendant interposes the further defense that the plaintiffs' action in connecting their water and sewer lines with those of the city, in the light of the city ordinances declaring that in the event of the incorporation of the territory in the city limits the water and sewer system with all fixtures and rights pertaining thereto should become the property of the city, constituted a waiver of the right to recover therefor from the city. Note is made of the fact that since its limits were extended the city has continued to furnish water and sewer service to the residents of this development and collect therefor in the same manner as it had previously been doing for twenty years.

The defendant calls our attention to four cases from other jurisdictions in support of its position. The first of these, taking them in chronological order, is Ford Realty & Construction Co. v. City of Cleveland, 1928, 30 Ohio App. 1, 164 N.E. 62, 63. In this case the plaintiff claimed compensation for water mains and fixtures installed in connection with its real estate division in the village of West Park which was subsequently annexed by the city of Cleveland. Plaintiff based its claim in part on an agreement whereby the village of West Park had the right to use these mains, and that no action taken by the village would be deemed an appropriation, and on the subsequent agreement on the part of the city of Cleveland to become liable for the obligations of West Park, plaintiff claiming equitable assignment. The plaintiff also based its claim on the ground that the city had taken its property without due process of law. The Court held that whether plaintiff claimed by "equitable assignment where there was nothing to assign, or any other way, or whether it claims by virtue of the taking of property without due process of law", the plaintiff was not entitled to recover. The Court also observed that the pipes were laid to enhance the value of lots, and doubtless the enhanced value was charged against the purchasers and included in the price of the lots.

In Suburban Real Estate Co. v. Incorporated Village of Silverton, 1929, 31 Ohio App. 452, 167 N.E. 474, 476, the facts were similar to those in the case at bar. The Real Estate Co. sued the incorporated village of Silverton to recover compensation for water mains and service pipes which it had installed in a subdivision adjacent to and which was subsequently annexed to the village. Plaintiff claimed right to compensation by reason of the appropriation of the water mains. There was no special legislation, arrangement, contract, or reservation with reference to these water pipes. The village continued to furnish water to the residents of the subdivision through the mains which had been laid by the Real Estate Company. The Court said: "This use would not necessarily mean appropriation or conversion of the mains and pipes." The Court held the village not liable, citing Ford Realty & Construction Co. v. City of Cleveland, supra, and used this language: "Let us suppose that, before annexation, all of the lots in the subdivision had been sold to purchasers, none of whom would have purchased but for the installation of the water supply, and the purchasers had erected residences complete throughout the subdivision, could the Suburban Real Estate Company sell and transfer the mains and pipes, etc., thus depriving the purchasers of lots of the benefit of water? We are of the opinion that, having sold the lots on the representation of furnishing water, and a means having been provided therefor, the Real Estate Company would not be heard to claim ownership in the water mains, with right to remove the same."

In City of Danville v. Forest Hills Development Corp., 1935, 165 Va. 425, 182 S.E. 548, 550, the Development Corp. sued to recover for water and sewer mains installed by it prior to annexation by the city of Danville. Recovery was denied. It was said the improvements were constructed in order to make the lots in the development salable and to provide water and sewerage as an inducement to the purchase of its lots. The Court said: "The development corporation had sold at the time of the annexation a large number of high-priced lots in the subdivision which were served by these facilities, in the sale price of which the enhancement in value representing the cost of the improvements had doubtless been included." The Charlotte cases, supra, were referred to but not followed. The Court further said, "when the water mains, pipes, etc., were constructed by the plaintiff as an inducement to the purchase of its lots, the plaintiff thereby dedicated said mains and pipes to the use of the lot owners, and has no right to claim adverse ownership in or remove same without such lot owners' consent."

In Country Club Dist. Service Co. v. Village of Edina, 1943, 214 Minn. 26, 8 N.W.2d 321, a real estate development had been laid out in the village of Edina near Minneapolis, Minnesota. Under contract with the village, plaintiff or its predecessor constructed and paid for water mains, pipes and hydrants. This was done for the purpose of promoting sale of lots. Suit was subsequently brought to recover the value of these improvements. Recovery was denied. In this case it affirmatively appeared that those who laid out the real estate development and sold lots, advertised that the improvements were fully paid for and there would be no assessment therefor. The Court, however, discussed the question of liability of the municipality for water pipes in a real estate subdivision and quoted with approval from the Virginia case, City of Danville v. Forest Hills Development Corp., supra, to the effect that the mains, pipes and means of service to the purchasers of lots had been dedicated to their use and there was no right to remove them or claim adverse ownership. The Ohio cases, supra, were also cited and quotations therefrom inserted. The Charlotte cases, supra were cited but distinguished.

These are the only decided cases bearing on the questions presented in the case at bar which have been called to our attention by counsel.

From an examination of the cases cited and the decisions based on the particular facts of those cases, it is apparent that no comprehensive rule emerges, and that this case and others of like nature must be considered and determined in the light of the pertinent facts presented by the record in each case.

In our case the plaintiffs in 1928 subdivided their real property adjacent to the city of Winston-Salem into streets and lots suitable for residential purposes and underlaid the streets with pipes and appliances for water and sewer service as appurtenant to the lots sold and to be sold. To procure this service for their development and to promote the sale of lots, the plaintiffs, with the consent of the city, connected their system with the city mains through an adjoining development, and the city thereafter supplied the water from its mains and furnished service through its sewer system to the residents of Konnoak Hills, making collection therefor according to the city ordinances and prescribed regulations, and since January 1, 1949, when the city limits were extended to include this area, has continued to furnish water and sewer service to residents in the same manner as during preceding twenty years. There was no agreement or assumption of obligation for compensation on the part of the city. Numerous lots have been sold and it was stated in the complaint that "scores of residences have been built upon the subdivision and vacant lots therein are in demand as residence sites." The city ordinances were in force at the time advising those outside the city who were permitted to connect with the city mains that whenever the territory in which they were located was incorporated within the city limits the water and sewer lines and "fixtures, equipment, easements, rights and privileges pertaining thereto" should become the property of the city. The plaintiffs' subdivision having been laid out within one mile of the corporate limits of the city, knowledge of its ordinances in the respects set out in G.S. § 160-203 would be presumed.

Upon these facts, we reach the conclusion that the court below has correctly ruled that the plaintiffs were not entitled to compensation for the water and sewer lines in Konnoak Hills now controlled and maintained by the city of Winston-Salem, and that plaintiffs have not been wrongfully deprived of property rights therein by the incorporation of these lines in the city system consequent upon the extension of the city limits.

No error.

BARNHILL, J., concurs.

BARNHILL, Justice (concurring).

The ordinance relied on by defendant, when considered in connection with the contract between plaintiffs and defendant, is significant on the question of title to the water and sewer mains which are the subject matter of this controversy. Under the ordinance and the contract executed pursuant thereto, when the city limits were extended so as to incorporate plaintiffs' development, the mains immediately became the property of defendant. Apparently this is conceded.

The real controversy here is as to the right of plaintiffs to compensation for the property thus acquired by the city. On this question, in my opinion, the ordinance is of no consequence. It has no bearing on the question either one way or the other, for a governmental unit may not, by legislative fiat, appropriate private property without paying just compensation therefor. Hildebrand v. Southern Bell Telephone & Telegraph Co., 219 N.C. 402, 14 S.E.2d 252. It may enact a law declaring that upon the happening of a certain event the title to property shall pass to and vest in such governmental unit. But this does not relieve it of the obligation to pay just compensation for the property so taken.

The plaintiffs had the right to install water and sewer mains in the streets of their development, contract with the city for sewer outlets through its system, purchase water wholesale from the municipality, and then retail these services to the purchasers of their lots as a business undertaking independent of the land development. Had they pursued this course, the extension of the corporate limits of defendant city so as to incorporate the locus might have served to vest in defendant title to the water and sewer system thus maintained by the plaintiffs under the terms of the ordinance and the terms of the contract executed pursuant thereto— assuming, of course, that the contract for sewer outlets and for the purchase of water wholesale contained the same provisions as the one actually executed. However, such was not the course pursued. No doubt the plaintiffs deemed that method of furnishing those services to the purchasers of their lots too costly.

Instead, they installed the water and sewer mains, contracted with the city to furnish the contemplated services, and immediately surrendered possession of the mains to the defendant city. Since that time, and for more than twenty years, the city has operated the mains installed by plaintiffs as a part of its own system. In turn, plaintiffs have profited by the assurance that this valuable public service was available to all purchasers of lots in their development. No doubt they assessed the additional expense as a part of the original cost just as they did the expense of laying out the streets, clearing the property, and developing it for sale as building lots, and priced the lots accordingly. In any event, in my opinion, the surrender of possession to the city under the contract executed by them constituted a dedication to public use and they are now estopped by their conduct from claiming compensation therefor, irrespective of the terms of the ordinance. For this reason and this reason alone, I vote to uphold the verdict and judgment.