Town of Littleton v. Layne Heavy Civil, Inc.

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA17-1137
Filed: 21 August 2018
Halifax County, No. 16 CVS 30
TOWN OF LITTLETON, Plaintiff,
v.
LAYNE HEAVY CIVIL, INC. f/d/b/a REYNOLDS, INC.; LAYNE INLINER, LLC,
f/d/b/a REYNOLDS INLINER, LLC; and MACK GAY ASSOCIATES, P.A.,
Defendants.
Appeal by plaintiff from orders entered 20 June and 5 July 2017 by Judge
Beecher R. Gray in Halifax County Superior Court. Heard in the Court of Appeals 7
March 2018.
Hedrick Gardner Kincheloe & Garofalo LLP, by Joshua D. Neighbors and
Patricia P. Shields, and Tharrington Smith, LLP, by Rod Malone and
Kristopher B. Gardner, for plaintiff-appellant.
Ellis & Winters LLP, by Stephen D. Feldman, Leslie C. Packer, Steven A.
Scoggan, and Alexander M. Pearce, for defendants-appellees Layne Heavy Civil,
Inc. and Layne Inliner, LLC.
Young Moore and Henderson, P.A., by Walter E. Brock, Jr. and Andrew P.
Flynt, for defendant-appellee Mack Gay Associates, P.A.
BERGER, Judge.
The Town of Littleton (“Plaintiff”) appeals two orders granting summary
judgment in favor of Layne Heavy Civil, Inc. and Layne Inliner, LLC (“Defendant
Layne”) and Mack Gay Associates, P.A. (“Defendant Mack Gay”) in a dispute over a
TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
sewer rehabilitation project. The trial court ruled in favor of all Defendants because
the applicable statutes of limitation barred each of Plaintiff’s claims. Plaintiff argues
that the trial court erred because the sewer project was a governmental function to
which statutes of limitation would not apply under the doctrine of nullum tempus.
However, a municipality’s operation and maintenance of a sewer system is a
proprietary function, not governmental, and thus, the doctrine of nullum tempus is
inapplicable. We therefore affirm the orders of the trial court.
Factual and Procedural Background
In 2004, Plaintiff received grant money from the North Carolina Clean Water
Management Trust Fund (“the Fund”) to rehabilitate its sewer system. One purpose
of the Fund is to “help finance projects that enhance or restore degraded surface
waters; protect and conserve surface waters, including drinking supplies, and
contribute toward a network of riparian buffers and greenways for environmental,
educational, and recreational benefits.” N.C. Gen. Stat. § 143B-135.230 (2017).
Plaintiff contracted with Defendant Mack Gay to provide assistance in applying for
grant funding, design the rehabilitation project, and perform construction
administration and observation services.
The main scope of the project was to eliminate storm water infiltration into
Plaintiff’s sanitary sewer collection system, which would reduce costs and prevent
untreated wastewater spills. Defendant Mack Gay provided construction plans in
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
July 2005. The scope of proposed work included: rehabilitation or replacement of
existing sewer lines, manholes, and an existing pump station; construction of new
pump stations; installation of a generator at a wastewater treatment plant; and other
miscellaneous repairs.
Plaintiff contracted with Defendant Layne for the rehabilitation and repair
work that began in December 2005 and was completed by October 2008. Beginning
in April 2010, residents informed Plaintiff of serious deficiencies with the sewer
rehabilitation. Inspections in October 2010 and March 2011 confirmed significant
issues with the project. Recognizing the seriousness of the deficiencies, on November
7, 2011, Plaintiff’s town commissioners and town attorney discussed holding
Defendants accountable for these deficiencies. The town attorney was authorized to
take actions to ensure the issues were corrected. Plaintiff’s town commissioners
formally authorized the town attorney to file suit on January 3, 2013.
However, three years passed before Plaintiff filed this lawsuit against
Defendants on January 8, 2016. Plaintiff’s unverified complaint alleged negligence,
fraud, negligent misrepresentation, breach of contract, breach of warranty,
professional malpractice, trespass to chattels, conversion, and unfair and deceptive
trade practices. Defendants moved to dismiss all claims pursuant to Rule 12 of the
North Carolina Rules of Civil Procedure, and the trial court dismissed the trespass
and conversion claims, as well as the claim of unfair and deceptive trade practices
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
against Defendant Mack Gay.
On May 8 and May 11, 2016, Defendants filed motions for summary judgment
on all remaining claims by Plaintiff, alleging that all were barred by the applicable
statutes of limitation. Plaintiff filed neither responsive pleadings nor additional
evidence. Since there were no disputes as to the material facts, the trial court granted
summary judgment in favor of Defendant Layne in an order entered June 20, 2017
and Defendant Mack Gay in an order entered July 5, 2017. Both of the trial court’s
orders granted summary judgment against Plaintiff because of the expiration of the
applicable statutes of limitation. Plaintiff timely appealed these orders.
Standard of Review
“Our standard of review of an appeal from summary judgment is de novo; such
judgment is appropriate only when the record shows that ‘there is no genuine issue
as to any material fact and that any party is entitled to a judgment as a matter of
law.’ ” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting
Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007)).
Analysis
Plaintiff argues that the trial court erred in granting summary judgment in
favor of Defendants due to the expiration of statutes of limitation. Plaintiff asserts
that its claims are not barred by the statutes of limitation because the project was a
governmental function and was therefore protected by the doctrine of nullum tempus.
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
We disagree.
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that any party is entitled to a
judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2017). Further,
[w]hen a motion for summary judgment is made and
supported as provided in this rule, an adverse party may
not rest upon the mere allegations or denials of his
pleading, but his response . . . must set forth specific facts
showing that there is a genuine issue for trial. If he does
not so respond, summary judgment, if appropriate, shall be
entered against him.
N.C. Gen. Stat. § 1A-1, Rule 56(e); accord Asheville Sports Props., LLC v. City of
Asheville, 199 N.C. App. 341, 344, 683 S.E.2d 217, 219 (2009).
Causes of action based on negligence, fraud, negligent misrepresentation,
breach of contract, breach of warranty, and professional malpractice are each subject
to a three-year statute of limitation. N.C. Gen. Stat. §§ 1-15(c), -52 (2017). A cause
of action based on unfair and deceptive trade practices is subject to a four-year statute
of limitation. N.C. Gen. Stat. § 75-16.2 (2017). Plaintiff filed its suit more than four
years after all claims arose. Its suit would therefore be barred unless the doctrine of
nullum tempus applies.
Our Supreme Court has described the doctrine of nullum tempus occurrit regi
by stating that:
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
nullum tempus survives in North Carolina and applies to
exempt the State and its political subdivisions from the
running of time limitations unless the pertinent statute
expressly includes the State. . . . Nullum tempus does not,
however, apply in every case in which the State is a party.
If the function at issue is governmental, time limitations
do not run against the State or its subdivisions unless the
statute at issue expressly includes the State. If the
function is proprietary, time limitations do run against the
State and its subdivisions unless the statute at issue
expressly excludes the State.
Rowan Cty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1, 8-9, 418 S.E.2d 648, 653-54
(1992).
As in sovereign immunity cases, whether the subject matter of the suit is
governmental or proprietary will determine whether the courts must apply nullum
tempus or the appropriate statutes of limitation. See id. Generally, “[i]f the
undertaking of the municipality is one in which only a governmental agency could
engage, it is governmental in nature. It is proprietary and ‘private’ when any
corporation, individual, or group of individuals could do the same thing.” Britt v. City
of Wilmington, 236 N.C. 446, 451, 73 S.E.2d 289, 293 (1952). “The law is clear in
holding that the operation and maintenance of a sewer system is a proprietary
function where the municipality sets rates and charges fees for the maintenance of
sewer lines.” Harrison v. City of Sanford, 177 N.C. App. 116, 121, 627 S.E.2d 672,
676, disc. review denied, ___ N.C. ___, 639 S.E.2d 649 (2006); see also Union Cty. v.
Town of Marshville, ___ N.C. App. ___, ___, 804 S.E.2d 801, 805 (2017) (municipality
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
not entitled to immunity because operation and maintenance of sewer system is
proprietary in nature), disc. review denied ___ N.C. ___, 814 S.E.2d 101 (2018); Bostic
Packaging, Inc. v. City of Monroe, 149 N.C. App. 825, 829, 562 S.E.2d 75, 79, disc.
review denied, 355 N.C. 747, 565 S.E.2d 192 (2002) (municipality not immune from
tort liability in the operation and maintenance of a sewer system).
Plaintiff contends that the facts of this case compel us to follow McCombs v.
City of Asheboro, 6 N.C. App. 234, 170 S.E.2d 169 (1969). Plaintiff interprets
McCombs as holding that the construction of a sewer system is a governmental
function, thus entitling the City of Asheboro to governmental immunity, and, by
analogy, entitles Plaintiff to the protection of nullum tempus. However, Plaintiff’s
reliance on McCombs is misguided for two reasons. First, McCombs refrained from
deciding whether the City of Asheboro’s construction of a new sewer line was a
governmental or proprietary function. See id. at 242, 170 S.E.2d at 175 (“Conceding,
arguendo, that [Plaintiff’s allegation that the Defendant was engaged in a proprietary
function in the construction of a sewer line] is sufficient to save the complaint from
demurrer on the ground of governmental immunity, we are of the opinion that the
complaint must fail [because there are no facts alleged constituting negligence of the
defendant].”). Second, McCombs is distinguishable from the case sub judice because
the defendant in McCombs was constructing new sewer lines, id. at 237, 170 S.E.2d
at 172, whereas here, Plaintiff was maintaining sewer system assets in need of repair.
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
The final report expressly acknowledged the purpose of the project was to
rehabilitate more than 35,000 linear feet of sewer collection lines and nearly 120
manhole covers; replace or build multiple pump stations; and conduct
“[m]iscellaneous repairs to short line segments.” Defendant Mack Gay’s final report
on the project states that the main purpose of the project was to reduce inflow and
infiltration of storm water into the sewer system. The evidence Defendants
submitted in support of its summary judgment motions established that one of the
purposes of the project was to reduce costs of running the sewer system. This
evidence tended to show that the project would eliminate expenses incurred per
gallon of inflow and infiltration, which were estimated to cost $0.09 per gallon per
year. Additionally, the project would also eliminate Plaintiff’s potential liability for
sewage spills resulting from rainwater penetrating the system, which, under state
law, could have cost up to $25,000.00 per day.
The record before us shows that there is no genuine issue as to any material
fact and Defendants were entitled to a judgment as a matter of law. The evidence
describes a maintenance project on a city-operated sewer system to reduce the
infiltration and inflow of storm water. This maintenance would reduce costs to
Plaintiff in its running of the sewer system and would reduce any waste water spills.
Because the operation and maintenance of a sewer system is a proprietary function,
Plaintiff’s maintenance project was a proprietary function. The doctrine of nullum
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TOWN OF LITTLETON V. LAYNE HEAVY CIV., INC.
Opinion of the Court
tempus does not apply to Plaintiff’s claims. Therefore, the trial court did not err in
granting summary judgment in favor of Defendants.
Conclusion
Defendants properly pleaded the applicable statutes of limitation as a defense
against each of Plaintiff’s claims. The undisputed facts describe a sewer system
maintenance project, which is a proprietary function. Thus, nullum tempus does not
apply to Plaintiff’s claims, and the statutes of limitation control. The trial court did
not err in granting summary judgment to Defendants because of the expiration of the
applicable statutes of limitation. The orders of the trial court are affirmed.
AFFIRMED.
Judges ELMORE and INMAN concur.
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