Tommy Davis Construction, Inc. v. Cape Fear Public Utility

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 7:13-cv-00002-H. [999709236]. [14-1778, 14-2132]

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 1 of 17

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.

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 2 of 17

Affirmed by published opinion.
Judge Niemeyer wrote
opinion, in which Judge Gregory and Judge Thacker joined.

the

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.

2

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 3 of 17

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.
privately

owned

Davis Construction had arranged to have a

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,

refund

the

the

fees

Cape

in

the

prejudgment interest.
attorneys

fees

and

Fear
amount

Public
of

Utility

$34,268.96,

Authority,
together

to

with

The court also awarded Davis Construction

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

3

Appeal: 14-1778

Doc: 40

subdivision.

Filed: 12/01/2015

Pg: 4 of 17

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

subdivision.

the

County

for

a

few

of

the

lots

in

the

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.
Water

and

Sewer

District,

however,

throughout its entire jurisdiction.

did

not

offer

The

service

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).
4

According to

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 5 of 17

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.
the

fees

After objecting repeatedly, Davis Construction paid

under

protest

so

subdivision’s development.

that

it

could

proceed

with

the

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.
County

also

assessing

During this same period, the Authority and the

changed

and

the

collecting

prior

impact-fee

impact

fees

applied to the Authority for service.
Construction
another

lot

thereafter
in

Becker

applied
Woods,

for

the

policy

only

when

and
a

began

customer

Accordingly, when Davis
a

County

building
did

not

permit
collect

for
an

impact fee because Aqua NC, not the Authority, was going to
5

Appeal: 14-1778

Doc: 40

provide

the

Filed: 12/01/2015

water

and

Pg: 6 of 17

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
Authority

Construction
in

the

commenced

Superior

Court

this
of

action

New

against

Hanover

County

the
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.
6

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

doctrine of laches.
to

Davis

interest

6%

Construction’s
judgment

The court ordered the defendants to refund

Construction
of

on

$34,268.96,

from

last
July

Pg: 7 of 17

July

impact
8,

13,
fee

2014,

together
2006,

the

payment.

and

with

prejudgment

date

The

subsequently

of

court

Davis
entered

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

Construction’s

court

claims

erred

as

in

refusing

untimely.

They

to

dismiss

contend

Davis

that

the

district court incorrectly concluded that the catchall 10-year
statute

of

limitations

provided

by

N.C.

Gen.

Stat.

applies to Davis Construction’s ultra vires claim.

§

1-56

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

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 8 of 17

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.

Construction’s

Gen.

complaint

Stat.
does

§
not

1-52(5).

Although

expressly

invoke

42

Davis
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,
entities

and

[are]

applies.”

“municipalities

included

among

and

those

other
persons

local
to

government

whom

§

1983

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

Fourteenth

n.6

(4th

Amendment

Cir.
“does

1995)
not

(noting

create
8

a

that,
cause

of

because

the

action,”

a

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 9 of 17

plaintiff’s “claim under the Fourteenth Amendment merges into
her § 1983 claim because § 1983 merely creates a statutory basis
to

receive

right”).

a

remedy

for

the

deprivation

of

a

constitutional

The statute of limitations for all § 1983 claims is

borrowed from the applicable state’s statute of limitations for
personal-injury
§ 1983

claim

actions,

does

not

even

when

involve

a

plaintiff’s

personal

injury.

particular
Wilson

v.

Garcia, 471 U.S. 261, 275-80 (1985); see also Wallace v. Kato,
549

U.S.

conclude

384,
that

387
§

(2007).

1983

And

claims

we

arising

have
in

applied
North

Wilson

Carolina

to
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,

obtain[ed] relief.”

when

it

could

have

“file[d]

suit

and

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 onehalf years after it paid the last impact fee at issue in 2006 -the federal claim was time-barred.

9

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 10 of 17

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.”
argument,

The North Carolina Court of Appeals rejected that

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.”
10

Point South Props.,

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

2015 WL 6142998, at *5.
“defendants

who

[had]

plaintiffs’ claims.”
defendants’

Pg: 11 of 17

Rather, the court noted, it was the

raise[d]
Id. at *4.

alternative

argument

the

statute

as

a

defense

to

The court also rejected the
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.”
53(1)).

Id. at *5 (quoting N.C. Gen. Stat. § 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
11

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 12 of 17

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

“[d]efendants

do

in

bringing

not

contend

suit,”
that

emphasizing

they

that

undertook

any

expenditures that would not have been otherwise necessary, or
that their legal position has been negatively impacted by the
passage of time.”
established

the

Id.

kind

of

Here, too, the defendants have not
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.

§

defendants

162A-88
failed

(emphasis
to

added),

demonstrate

that

it

concluded

they

would

that
be

able

the
to

furnish such services to Becker Woods within any meaningful time

12

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 13 of 17

in the future or that they even intended to do so, particularly
in

view

of

the

fact

provided by Aqua NC.

that

such

services

were

already

being

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.”

13

Appeal: 14-1778

Doc: 40

We

find

Filed: 12/01/2015

the

district

Pg: 14 of 17

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

furnished’” (emphasis added)).

fees

for

services

‘to

be

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

completes the construction of the houses.

time

after

it

But, as the district

court noted, even 10 years after Davis Construction first sought
its

permits,

neither

the

Water

and

Sewer

District

Authority had taken any steps to provide service.

nor

the

And Aqua NC

stated that it was unaware of any plan of the Water and Sewer
District

or

the

Authority

services to Becker Woods.”

“to

ever

provide

water

and

sewer

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
14

Appeal: 14-1778

vires.

Doc: 40

Filed: 12/01/2015

Pg: 15 of 17

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.’”
WL 6142998, at *10.

Point South Props., 2015

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.”
added).

Id. at *7 (emphasis

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

15

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

Pg: 16 of 17

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

District.

those

fees

on

behalf

of

the

Water

and

Sewer

Accordingly, we conclude that the district court had

authority to award attorneys fees.

16

Appeal: 14-1778

Doc: 40

Filed: 12/01/2015

*
For
court’s

the
July

foregoing
8,

2014

Pg: 17 of 17

*

*

reasons,

we

judgment

and

affirm
its

both

the

subsequent

district
award

of

attorneys fees.
AFFIRMED

17