Bell v. City of New Bern

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NO. COA13-817
NORTH CAROLINA COURT OF APPEALS
Filed: 6 May 2014
ROBERT A. BELL and
JOAN A. BELL,
Plaintiffs,
v. Craven County
No. 12 CVS 1410
CITY OF NEW BERN and
TOWN OF TRENT WOODS,
Defendants.
Appeal by defendant Town of Trent Woods from order entered
17 January 2013 by Judge Benjamin G. Alford in Craven County
Superior Court. Heard in the Court of Appeals 11 December 2013.
Kirkman, Whitford, Brady, Berryman & Farias, P.A., by Neil
B. Whitford and Jane A. Gordon, for plaintiffs-appellees.
Teague, Campbell, Dennis & Gorham, L.L.P., by Bryan T.
Simpson and Natalia K. Isenberg, for defendant-appellee,
City of New Bern.
Turrentine Law Firm, PLLC, by S. C. Kitchen, for defendant-
appellant, Town of Trent Woods.
GEER, Judge.
Defendant Town of Trent Woods appeals from an order denying
its motion to dismiss the claims of Robert A. Bell and Joan A.
Bell for inverse condemnation, negligence, nuisance, trespass,
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and a permanent injunction, arising out of flooding damage
allegedly caused by the construction of a sewer pump station on
an intense watershed overflow lot and inadequate storm drain
pipes. To the extent that Trent Woods argues on appeal that
plaintiffs have failed to state a claim for relief, we dismiss
the appeal as interlocutory and not affecting a substantial
right.
With respect to Trent Woods' claim that it is entitled to
governmental immunity, a review of plaintiffs' complaint
establishes that the actions giving rise to plaintiffs' claims
involve the negligent maintenance of Trent Woods' storm drainage
system. Because it is well established that municipalities are
not performing governmental acts when maintaining storm drains,
governmental immunity does not apply, and the trial court
properly denied the motion to dismiss based on governmental
immunity.
Facts
In 2002, defendant City of New Bern and Trent Woods entered
into an agreement entitled "TRENT WOODS SEWER COLLECTION SYSTEM
AGREEMENT" ("the 2002 Agreement"). Under the 2002 Agreement,
New Bern agreed to finance the construction of a sewer system
for the residents of Trent Woods with an installment loan, and
Trent Woods agreed to reimburse New Bern. The system was to be
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built pursuant to the plans of the Project Engineer, Rivers and
Associates, Inc., and "with input and approval" from Trent
Woods. Once construction was complete, New Bern would bill
Trent Woods residents directly. In consideration for New Bern's
sewer collection and treatment service, Trent Woods agreed to
waive its right to receive $50,000.00 per year for eight years
from New Bern as required by a previous agreement between New
Bern and Trent Woods.
As part of the construction of the sewer system, New Bern
purchased lots 4, 5, and 6 of the Greenside Subdivision in Trent
Woods from G. Brant Cooper and Nancy E. Cooper for $150,000.00.
New Bern purchased these lots subject to restrictive covenants
in the lots' deed that the lots "shall be utilized as an intense
watershed overflow and are currently not approved for
development." Additionally, Trent Woods imposed conditions on
the developer that "[n]o pipe shall be placed in main drainage
ditch with a diameter less than 40" (inches)." As part of the
purchase of the lots, New Bern agreed to install a 42-inch
drainage tile which would run from the end of Greenside Court
underneath Country Club Road to a canal.
In the fall of 2004, New Bern completed construction of a
sewer pump station on lot 4 of the Greenside Subdivision, which
it operates and maintains. In constructing the pump station,
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New Bern increased the elevation of lot 4, brought in
approximately 9,700 cubic feet of fill, and clear cut trees from
the lot in violation of the restrictive covenants. By July
2010, New Bern had not fulfilled its obligation under the 2002
Agreement to install the 42-inch drainage pipe.
On 13 July 2010, Trent Woods entered into an agreement
("the 2010 Agreement") with New Bern that New Bern would
transfer lots 5 and 6 to Trent Woods. As part of the
consideration for the lots, Trent Woods released the City of New
Bern from any requirement to improve or maintain drainage in the
Greenside subdivision. Trent Woods further agreed to obtain
easements for drainage and agreed to indemnify New Bern for
liability arising out of any obligation regarding the
construction of a storm drainage system as provided in the
purchase contract from the developer. Trent Woods also agreed
to release to New Bern the sum of $150,000.00, which was the
amount held by Trent Woods as "retainage for the sewer project,"
as a final payment for the cost of the sewer system.
Plaintiffs own a house located in the Greenside Subdivision
of Trent Woods, approximately 600 feet from the sewer pump
station. On or about 28-30 September 2010, during heavy rains
from Tropical Storm Nicole, plaintiffs' property was flooded,
causing $50,000.00 in property damage. On or about 26-28 August
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2011, plaintiffs' property was again flooded during Hurricane
Irene, causing additional damages of $52,000.00. Prior to
September 2010, plaintiffs' property had never flooded.
Plaintiffs filed suit against New Bern and Trent Woods on
26 September 2012 asserting claims for inverse condemnation,
negligence, nuisance, trespass, and a permanent injunction.
Trent Woods filed a Motion to Dismiss on 19 October 2012 with a
supporting affidavit contending that Trent Woods did not have
insurance to cover plaintiffs' claims and, therefore, was
entitled to governmental immunity.
On 22 October 2012, plaintiffs filed their first amended
complaint alleging a waiver of sovereign immunity. Trent Woods
filed a second motion to dismiss on 14 November 2012 alleging
sovereign immunity, lack of personal and subject matter
jurisdiction, failure to state a claim, and failure to join a
necessary party. The trial court denied Trent Woods' Motion to
Dismiss in an order entered on 22 January 2013. Trent Woods
appealed the 22 January 2013 order to this Court.
Motion to Dismiss Appeal
We first address plaintiffs' motion to dismiss Trent Woods'
appeal. Trent Woods' appeal of the trial court's order denying
the motion to dismiss is interlocutory. "An interlocutory order
is one made during the pendency of an action, which does not
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dispose of the case, but leaves it for further action by the
trial court in order to settle and determine the entire
controversy." Veazey v. City of Durham, 231 N.C. 357, 362, 57
S.E.2d 377, 381 (1950).
"Generally, there is no right of immediate appeal from
interlocutory orders and judgments." Goldston v. Am. Motors
Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990). However,
an appeal from an interlocutory order is permissible "if (1) the
trial court certified the order under Rule 54(b) of the Rules of
Civil Procedure, or (2) the order affects a substantial right
that would be lost without immediate review." Boyd v. Robeson
Cnty., 169 N.C. App. 460, 464, 621 S.E.2d 1, 4 (2005). "[I]t is
the appellant's burden to present appropriate grounds for this
Court's acceptance of an interlocutory appeal[.]" Jeffreys v.
Raleigh Oaks Joint Venture, 115 N.C. App. 377, 379, 444 S.E.2d
252, 253 (1994). The record here does not, of course, contain a
Rule 54(b) certification, and therefore the burden is on Trent
Woods, as the appellant, to show that the interlocutory order
affected a substantial right that would be lost without
immediate review.
Trent Woods moved to dismiss the claims for negligence,
nuisance, trespass, and a permanent injunction based on the
defense of governmental immunity. It is well established that
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"'[t]he denial of a motion to dismiss based upon the defense of
sovereign immunity affects a substantial right and is thus
immediately appealable.'" Carl v. State, 192 N.C. App. 544,
550, 665 S.E.2d 787, 793 (2008) (quoting RPR & Assocs. v. State,
139 N.C. App. 525, 527, 534 S.E.2d 247, 250 (2000), aff'd per
curiam, 353 N.C. 362, 543 S.E.2d 480 (2001)). Thus, denial of
Trent Woods' motion to dismiss based on the defense of
governmental immunity is properly before us.
Additionally, Trent Woods has sought immediate review of
the denial of its motion to dismiss plaintiffs' inverse
condemnation claim, which was not based on the defense of
sovereign immunity. Chapter 40A of the North Carolina General
Statutes governs the procedure for inverse condemnation actions,
N.C. Gen. Stat. § 40A-51 (2013), and provides for a bifurcated
process. First, under N.C. Gen. Stat. § 40A-47 (2013), the
judge must "hear and determine any and all issues raised by the
pleadings other than the issue of compensation, including, but
not limited to, the condemnor's authority to take, questions of
necessary and proper parties, title to the land, interest taken,
and area taken." Then, if the judge determines that a taking
has occurred, the parties proceed to the second stage to
determine how much compensation is due. N.C. Gen. Stat. § 40A-
49 (2013).
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This Court has held that N.C. Gen. Stat. § 40A-47 orders,
although interlocutory, affect a substantial right warranting an
immediate appeal because "[i]t would be an act of futility and
injurious to the interests of [a government] to otherwise compel
it to proceed through trial on the issue of damages if the trial
court's initial determination that a taking had occurred was in
error." Concrete Mach. Co. v. City of Hickory, 134 N.C. App.
91, 96, 517 S.E.2d 155, 158 (1999). See also City of Winston-
Salem v. Slate, 185 N.C. App. 33, 37, 647 S.E.2d 643, 646 (2007)
(holding N.C. Gen. Stat. § 40A-47 order resolving all issues
except issue of just compensation was immediately appealable as
affecting substantial right).
Trent Woods equates the denial of its motion to dismiss the
inverse condemnation claim to an order pursuant to N.C. Gen.
Stat. § 40A-47. However, unlike a N.C. Gen. Stat. § 40A-47
order, denial of a motion to dismiss does not determine any of
the merits of the underlying inverse condemnation claim.
Furthermore, denying immediate review does not result in forcing
the parties to proceed on the issue of compensation even though
there may have been no taking. Trent Woods has provided no
persuasive reason that the order in this case should be treated
like a § 40A-47 order for purposes of an interlocutory appeal.
Because Trent Woods has not identified any other substantial
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right that may be lost absent immediate appeal, we dismiss that
portion of Trent Woods' appeal.
Discussion
Trent Woods argues that the trial court erred in denying
its motion to dismiss plaintiffs' claims for negligence,
nuisance, trespass, and permanent injunction because it is
entitled to governmental immunity. Plaintiffs counter that
Trent Woods is not entitled to governmental immunity because it
was engaged in a proprietary function, and, to the extent that
Trent Woods' actions may be considered governmental, Trent Woods
waived its immunity by purchasing liability insurance.
We review the denial of a motion to dismiss based on the
defense of governmental immunity de novo. White v. Trew, 366
N.C. 360, 362-63, 736 S.E.2d 166, 168 (2013). Additionally,
when reviewing Rule 12(b)(1) motions, we may consider and weigh
matters outside the pleadings. Williams v. Devere Constr. Co.,
215 N.C. App. 135, 138, 716 S.E.2d 21, 25 (2011).
"Governmental immunity prevents municipal corporations from
being sued when they act in a governmental capacity, but does
not apply to actions which are proprietary." Kizer v. City of
Raleigh, 121 N.C. App. 526, 527, 466 S.E.2d 336, 337 (1996).
Therefore, "'[a]pplication of the doctrine depends upon whether
the activity out of which the tort arises is properly
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characterized as governmental or proprietary in nature.'"
Williams, 215 N.C. App. at 138-39, 716 S.E.2d at 26 (quoting
Bostic Packaging, Inc. v. City of Monroe, 149 N.C. App. 825,
826–27, 562 S.E.2d 75, 77 (2002)).
Trent Woods argues that plaintiffs' claims arise out of the
establishment and construction of a sewer system and, therefore,
involve governmental actions. Plaintiffs, however, contend that
their claims are based on Trent Woods' maintenance of a storm
drainage system and, therefore, involve non-governmental -- or
proprietary -- actions not entitling Trent Woods to governmental
immunity.
As an initial matter, we believe it is worth observing:
Our courts have long noted that drawing
the line between municipal operations which
are proprietary and subject to tort
liability versus operations which are
governmental and immune from such liability
is a difficult task. Millar v. Wilson, 222
N.C. 340, 23 S.E.2d 42 (1942) (noting that
maintenance of public roads and highways is
recognized as governmental while imposing
liability on a municipality for negligent
failure to keep its streets and sidewalks in
reasonably safe condition as an "illogical"
but uniformly applied exception); Sides v.
[Cabarrus Mem'l Hosp. Inc.], 287 N.C. 14,
213 S.E.2d 297 (1975) (First, noting that
courts have applied one classification to an
activity in general while applying the
opposite classification to certain phases of
the same activity; Second, noting that
courts have applied a proprietary
classification to the exact activities that
courts have previously determined that
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expenditures for such activities, e.g.
airports, garbage removal and public parks,
are for a public purpose.). The
"application of the [governmental-
proprietary distinction] to given factual
situations has resulted in irreconcilable
splits of authority and confusion as to what
functions are governmental and what
functions are proprietary." Koontz v. City
of Winston-Salem, 280 N.C. 513, 186 S.E.2d
897 (1972).
Pulliam v. City of Greensboro, 103 N.C. App. 748, 751, 407
S.E.2d 567, 568 (1991).
As the parties' arguments demonstrate, courts in North
Carolina have treated municipal action involving a city's sewer
system differently than municipal action involving a city's
storm drainage system. When it comes to drainage systems, this
Court has adopted a bright-line rule that "storm drain
maintenance does not enjoy governmental immunity." Kizer, 121
N.C. App. at 528, 466 S.E.2d at 338. When it comes to sewer
systems, on the other hand, the classification of the activity
as governmental or proprietary is not as cut and dried.
"Historically, the establishment, construction, and
maintenance of a sewer system by a municipality for its
residents was a governmental function . . . ." Williams, 215
N.C. App. at 139, 716 S.E.2d at 26. However, "[i]n more recent
cases before this Court, recognizing the development of
municipal sewer services provided by privately owned public
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utility companies, we have declined to grant immunity on the
sole basis that sewer service was provided by a municipality."
Id. at 140, 716 S.E.2d at 26. Now, the focus has shifted to the
commercial aspect of the activity. "Although a 'profit motive'
is not dispositive in determining whether an activity is
governmental or proprietary in nature, see Schmidt [v. Breeden,
134 N.C. App. 248, 253, 517 S.E.2d 171, 175 (1999)], '[c]harging
a substantial fee to the extent that a profit is made is strong
evidence that the activity is proprietary.'" Bostic Packaging,
149 N.C. App. at 827, 562 S.E.2d at 77 (quoting Hare v. Butler,
99 N.C. App. 693, 699, 394 S.E.2d 231, 235 (1990)).
Here, plaintiffs allege that their property was flooded due
to the construction of a sewer pump station on an intense
watershed overflow lot in their subdivision and due to the
inadequacy of the 18-inch pipe in the main drainage ditch
running from lots 4, 5, and 6 of the subdivision to the nearby
canal. Trent Woods did not own, operate, or construct the lot 4
sewer pump station. The extent of Trent Woods' actions
regarding the sewer system was to reimburse New Bern for the
cost of its development and construction -- an action which, in
and of itself, did not form the basis of plaintiffs' claims
against Trent Woods.
Instead, plaintiffs based their claims on the allegations
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that Trent Woods assumed responsibility to improve and maintain
the storm drain system on the lots purchased for the sewer
system. As part of its drainage plan for the Greenside
subdivision, Trent Woods had imposed restrictive covenants on
lots 4, 5, and 6 that required the lots to be utilized as an
"intense watershed overflow." The construction by New Bern of
the sewer pump on lot 4 altered the natural storm drainage
patterns in the subdivision, and Trent Woods failed to remediate
the drainage problems by replacing the 18-inch culvert under
Country Club Road with a 42-inch culvert, despite having assumed
the duty to do so when it accepted the transfer of ownership of
lots 5 and 6. We conclude that Trent Woods' actions in this
case involved its failure to maintain its storm drainage system.
Therefore, under Kizer, Trent Woods is not entitled to
governmental immunity.
Nevertheless, Trent Woods argues that it is entitled to
governmental immunity because the culvert under Country Club
Road is part of the state highway system, and, therefore, it is
the State's responsibility. See Milner Hotels, Inc. v. City of
Raleigh, 271 N.C. 224, 226, 155 S.E.2d 543, 545 (1967) ("[T]he
Highway Commission is under a statutory obligation with
reference to the construction, maintenance and repair of all
city streets, including culverts which support city streets,
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which constitute a part of the State Highway system."). Trent
Woods contends that under Colombo v. Dorrity, 115 N.C. App. 81,
86, 443 S.E.2d 752, 756 (1994), governmental immunity applies to
the negligent maintenance of streets and culverts that are a
part of the State Highway system, even when the city has assumed
a contractual duty to maintain the culvert.
Trent Woods misconstrues the holding of Colombo. The issue
in Colombo was whether the City of Durham was entitled to
immunity for negligently failing to clear vegetation that
obscured a stop sign on a street that was a part of the state
highway system, but ran within the municipal limits of the City
of Durham. Id. at 82, 443 S.E.2d at 754.
The plaintiff argued that the case fell within the common
law exception to the doctrine of governmental immunity that
applies when "a municipality creates a dangerous condition in
its streets that proximately causes injury to a person using the
street." Id. at 85, 443 S.E.2d at 755. This Court determined
that the common law exception did not apply because the street
in question, although within the municipal limits of the city of
Durham, was a part of the state highway system and not the
city's street. Id. at 86, 443 S.E.2d at 756. Although the City
of Durham had contracted with the State to maintain the street,
the contract did not change the status of the street as part of
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the state highway system. Id. Because the common law exception
only waived immunity when the municipality creates a dangerous
condition on its own street, the exception did not apply in that
case, and the City was entitled to immunity. Id. Colombo's
limited holding has no application to this case.
Trent Woods also argues that it is entitled to immunity
because the 2010 Agreement with New Bern was void under N.C.
Gen. Stat. § 159-28(a) (2013). In support of this contention,
Trent Woods cites Data Gen. Corp. v. Cnty. of Durham, 143 N.C.
App. 97, 103, 545 S.E.2d 243, 247-48 (2001), which held that
Durham County was entitled to immunity for Data General's breach
of contract claim because the contract was invalid under N.C.
Gen. Stat. § 159-28(a). The holding in Data General was based
on the rule that "'whenever the State of North Carolina, through
its authorized officers and agencies, enters into a valid
contract, the State implicitly consents to be sued for damages
on the contract in the event it breaches the contract.'" Data
General, 143 N.C. App. at 102, 545 S.E.2d at 247 (quoting Smith
v. State, 289 N.C. 303, 320, 222 S.E.2d 412, 423-24 (1976)).
Here, in contrast to the facts of Data General, Trent Woods
is not being sued for breach of contract, and therefore the
validity of the 2010 Agreement has no bearing on whether Trent
Woods is entitled to governmental immunity. To the extent the
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validity of the 2010 Agreement is relevant to showing that Trent
Woods assumed a duty to maintain the culverts, that issue goes
to the merits of plaintiffs' claims, which is not properly
before us.
In conclusion, we hold that the trial court did not err in
denying Trent Woods' motion to dismiss based on the defense of
governmental immunity. Because plaintiffs' claims for
negligence, nuisance, trespass, and a permanent injunction arose
out of Trent Woods' actions in failing to maintain its storm
drain system, Trent Woods was acting in a non-governmental
capacity and is not entitled to sovereign immunity. Because of
this holding, we need not address whether Trent Woods waived
immunity by purchasing insurance coverage.
Affirmed in part; dismissed in part.
Judges BRYANT and CALABRIA concur.
Report per Rule 30(e).