Bill Clark Homes of Raleigh

• Court: Court of Appeals of North Carolina
• Decided: December 21, 2021
• Docket: 21-79
• Status: Published

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

2021-NCCOA-688

No. COA21-79

Filed 21 December 2021

Wake County, No. 19 CVS 11428

BILL CLARK HOMES OF RALEIGH, LLC, Plaintiff,

v.

TOWN OF FUQUAY-VARINA, Defendant.

Appeal by plaintiff from order entered 9 October 2020 by Judge Vince Rozier

in Wake County Superior Court. Heard in the Court of Appeals 19 October 2021.

Ward and Smith, P.A., by Christopher S. Edwards, Ryal W. Tayloe, and Jordan M. Spanner, for plaintiff-appellant.

Hartzog Law Group LLP, by Dan M. Hartzog, Jr., and Katherine Barber-Jones, for defendant-appellee.

ZACHARY, Judge.

¶1 Plaintiff Bill Clark Homes of Raleigh, LLC, appeals from the trial court’s order

granting Defendant Town of Fuquay-Varina’s motion to dismiss. After careful review,

we reverse and remand for further proceedings.

I. Background

¶2 Plaintiff is a North Carolina limited liability company that develops and builds

planned communities in the Raleigh area. On 7 October 2014, Plaintiff entered into

a development and infrastructure agreement (“the Agreement”) with the Town, BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

Opinion of the Court

permitting Plaintiff to build a residential subdivision (“Sunset Glen”) containing 46

single-family homes. The Agreement principally concerned the Town’s extension of

municipal water and sewer services to Sunset Glen. To facilitate municipal water and

sewer service at Sunset Glen, Plaintiff agreed that it would build water and sewer

lines within the development to the Town’s specifications in exchange for the Town

expanding its water and sewer systems by building a water line to Sunset Glen and

building a sewage pumping station on site. Plaintiff also agreed that it would “pay all

applicable development fees, including capacity fees, recreation unit fees and other

applicable fees as prescribed by the Town’s Code of Ordinances and Annual Budget

Ordinance and Fee Schedule.”

¶3 On 4 February 2016, the Town sent Plaintiff an invoice for $241,500, labeled

“WATER & SEWER CONNECTION/INSPECTION FEES,” which was due prior to

approval of the final plat of the subdivision. Of that amount, $195,000 was for

“CAPACITY FEES” (“the Fees”): a water-capacity fee of $1,500 per unit and a sewer-

capacity fee of $2,750 per unit, which were its usual and standard fees. Plaintiff paid

the invoice balance in full by check dated 1 September 2016.

¶4 On 16 August 2016, our Supreme Court filed its opinion in Quality Built Homes

Inc. v. Town of Carthage (Quality Built Homes I), 369 N.C. 15, 789 S.E.2d 454 (2016).

In Quality Built Homes I, the Court “consider[ed] whether the Town of Carthage

exceeded its municipal authority under the Public Enterprise Statutes, [N.C. Gen. BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

Stat.] §§ 160A-311 to -338 (2015), by adopting certain water and sewer ‘impact fee’

ordinances.” 369 N.C. at 16, 789 S.E.2d at 455.1 The challenged ordinances provided

that “the impact fees ‘shall be used to cover the costs of expanding the [water and

sewer] system[s].’ ” Id. at 16, 789 S.E.2d at 456 (alterations in original). “Upon

approval of a subdivision of real property, the ordinances trigger[ed] immediate

charges for future water and sewer system expansion, regardless of whether the

landowner ever connects to the system or whether Carthage ever expands the

system.” Id. at 16, 789 S.E.2d at 455.

¶5 Recognizing that municipalities are “creations of the legislature” and thus

“have only those powers delegated to them by the General Assembly[,]” our Supreme

Court determined that “[w]hen Carthage adopted the ordinances at issue here, it

exercised power that it had not been granted.” Id. The crux of the issue in Quality

Built Homes I was Carthage’s argument that the imposition of “impact fees” fell

“squarely within its ‘authority to charge “fees” or “charges” ’ under [N.C. Gen. Stat.]

§ 160A-314.” Id. at 19, 789 S.E.2d at 458. Our Supreme Court disagreed, concluding

that “[w]hile the enabling statutes allow Carthage to charge for the contemporaneous

1 “Effective 19 June 2020, the General Assembly consolidated the provisions governing

planning and development regulations by local governments into a new Chapter 160D of the General Statutes.” 85’ & Sunny, LLC v. Currituck Cty., 2021-NCCOA-422, ¶ 18 n.3. As the former Chapter 160A was in effect at all times relevant to this appeal, we address that chapter in this opinion. BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

use of its water and sewer systems, the plain language of the Public Enterprise

Statutes clearly fails to empower the Town to impose impact fees for future services.”

Id. at 19–20, 789 S.E.2d at 458 (emphases added). Further, the Court noted that

“[t]he fees are not assessed at the time of actual use, but are payable in full at the

time of final subdivision plat approval—a time when water, sewer, or other

infrastructure might not have been built and only a recorded plat exists.” Id. at 21,

789 S.E.2d at 458–59.

¶6 On 20 August 2019, Plaintiff filed suit against the Town, seeking a declaratory

judgment that the Fees were unlawful and demanding a refund. In its complaint,

Plaintiff asserted that the Town charged the Fees pursuant to § 5-1016 (“the

Ordinance”) of the Town’s Code of Ordinances. Plaintiff further alleged:

14. Town Ordinance § 5-1016 required Plaintiff to pay said Capacity Fees before the Town would approve the final plat of the subdivision, i.e., before the Town would approve the development of Sunset Glen.

15. Pursuant to Town Ordinance § 5-1016, the Town used some of the Capacity Fees it collected “to build capital reserve funds for future investment in water and sewer collection, distribution and treatment facilities.”

16. Pursuant to Town Ordinance § 5-1016, the Town used some of the Capacity Fees it collected to fund future expansion of its water and sewer system.

Plaintiff then summarized our Supreme Court’s holding in Quality Built Homes I

before alleging: BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

21. Pursuant to Town Ordinance § 5-1016, the Town charged Capacity Fees for water and sewer services “to be furnished.”

22. Pursuant to Town Ordinance § 5-1016, the Town charged such Fees at the time of final subdivision plat approval.

23. The Capacity Fees collected by the [T]own from Plaintiff on or about September 1, 2016, were unauthorized by legislative act or statute, were ultra vires, and are unlawful.

¶7 Plaintiff maintained that the Agreement was unenforceable under Quality

Built Homes I “to the extent [that] it required Plaintiff to pay Capacity Fees in

connection with the development of Sunset Glen[.]”

¶8 On 4 November 2019, the Town filed a motion to dismiss pursuant to Rule

12(b)(6), arguing that Plaintiff’s complaint failed to state a claim upon which relief

could be granted. Specifically, the Town asserted that because “any fees paid were

paid pursuant to [the parties’] voluntary agreement,” the Fees were not ultra vires

and unlawful:

The Town has met its obligations under the . . . Agreement, and Plaintiff accepted said benefits of the . . . Agreement, and cannot now challenge the terms of the [A]greement. To the extent Plaintiff contends that the Town did not meet its obligations under the . . . Agreement, [Plaintiff’s] exclusive remedy lies in a claim for breach of contract[.]

¶9 On 22 September 2020, the Town’s motion to dismiss came on for hearing in

Wake County Superior Court before the Honorable Vince Rozier. On 9 October 2020, BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

the trial court entered its order granting the Town’s motion and dismissing Plaintiff’s

complaint with prejudice. Plaintiff timely filed notice of appeal.

II. Discussion

¶ 10 Plaintiff argues that the trial court erred by granting the Town’s motion to

dismiss. We agree.

A. Standard of Review

¶ 11 We review de novo a trial court’s order on a motion to dismiss for failure to

state a claim pursuant to Rule 12(b)(6). Cheryl Lloyd Humphrey Land Inv. Co., LLC

v. Resco Products, Inc., 377 N.C. 384, 2021-NCSC-56, ¶ 8. “The standard of review of

an order granting a Rule 12(b)(6) motion is whether the complaint states a claim for

which relief can be granted under some legal theory when the complaint is liberally

construed and all the allegations included therein are taken as true.” Suarez v. Am.

Ramp Co., 266 N.C. App. 604, 610, 831 S.E.2d 885, 890 (citation omitted), disc. review

denied, 373 N.C. 257, 836 S.E.2d 653 (2019).

¶ 12 In reviewing a trial court’s Rule 12(b)(6) dismissal “the issue for the court is

not whether the plaintiff will ultimately prevail but whether the plaintiff is entitled

to offer evidence to support the claim.” Howe v. Links Club Condo. Ass’n, Inc., 263

N.C. App. 130, 137, 823 S.E.2d 439, 447 (2018) (citation and internal quotation marks

omitted).

B. Capacity Fees BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

¶ 13 On appeal, Plaintiff argues that the trial court erred in granting the Town’s

motion to dismiss because it “incorrectly adopted the Town’s argument that the

statute governing development agreements, N.C. Gen. Stat. § 160A-400.20, allowed

the Town to charge capacity fees, as long as it did so by contract.” Plaintiff notes that,

pursuant to N.C. Gen. Stat. § 160A-400.20(b) (2019), “a local government may not

exercise any authority or make any commitment not authorized by general or local

act and may not impose any tax or fee not authorized by otherwise applicable law.”

Accordingly, Plaintiff reasons that (1) because “[t]he Town’s capacity fee ordinance

was unlawful” under Quality Built Homes I, (2) “the Town had no authority to assess

fees for future water and sewer services,”2 and (3) the Town could not contract for

capacity fees; thus, (4) the Agreement’s provision for the payment of capacity fees was

unenforceable.

¶ 14 For the purposes of this appeal, we need not determine the merits of Plaintiff’s

claim; our task is to ascertain whether the trial court’s dismissal of Plaintiff’s

complaint pursuant to Rule 12(b)(6) was error. Dismissal pursuant to Rule 12(b)(6)

“is proper (1) when the complaint on its face reveals that no law supports the

plaintiff’s claim; (2) when the complaint reveals on its face the absence of facts

2 At oral argument, Plaintiff clarified that it does not argue that the Ordinance is

unlawful in its entirety, but rather that the portion of the Ordinance that authorizes capacity fees for potential future services or expansion costs is unlawful under Quality Built Homes I. BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

sufficient to make a claim; or (3) when some fact disclosed in the complaint

necessarily defeats the plaintiff’s claim.” Broad St. Clinic Found. v. Weeks, 273 N.C.

App. 1, 5, 848 S.E.2d 224, 228 (citation and internal quotation marks omitted), disc.

review denied, 376 N.C. 550, 851 S.E.2d 614 (2020). Reviewing Plaintiff’s complaint

on its face and in the light most favorable to Plaintiff, construing the complaint

liberally and taking all the allegations therein as true, we cannot conclude that any

of these standards have been met.

¶ 15 Assuming, as we must on review of a motion to dismiss, that the Town assessed

fees for services “to be furnished,” Quality Built Homes I supports Plaintiff’s claim

that the fees were unlawful. The Ordinance plainly provides for the payment prior to

plat approval of capacity fees “to build capital reserve funds for future investment in

water and sewer collection, distribution and treatment facilities.” As the Town

conceded at oral argument, a portion of the Ordinance is unlawful under Quality Built

Homes I. Nevertheless, the Town maintains that although the Fees were standard

and not negotiated, the Fees are lawful because they were not assessed pursuant to

the Public Enterprise Statutes, but rather as part of the parties’ bargained-for

exchange, as memorialized in the Agreement. However, liberally construing

Plaintiff’s complaint, for the purpose of our review, we must accept as true Plaintiff’s

allegation that the Town assessed the Fees pursuant to the Ordinance. Accordingly,

the complaint on its face finds support in Quality Built Homes I. BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

¶ 16 Similarly, we cannot conclude that the complaint, on its face, lacks sufficient

facts to state a claim for relief or contains any facts that necessarily defeat Plaintiff’s

claims. Plaintiff alleged that the Town assessed the Fees for future services pursuant

to the Ordinance, and that under Quality Built Homes I, such assessment is

impermissible. Although the Town contends that the Fees were not assessed for

future services, when pressed at oral argument for record evidence supporting that

contention, the Town asserted that the Agreement—which Plaintiff attached as an

exhibit to its complaint—represents the bargained-for exchange between the parties

and does not indicate that the Fees were assessed for future services. Indeed, in its

appellate brief, the Town argues that the Agreement “concerns only provision of

current infrastructure and services that are very specifically described . . . and does

not require Plaintiff to contribute toward ‘future discretionary spending.’ ” The Town

further maintains that the Agreement “does not describe any obligations for future

maintenance or upgrades, any kind of system-wide expansion, or future discretionary

spending.”

¶ 17 However, construing the complaint liberally and taking the allegations therein

as true, we conclude that the Agreement’s terms do not rise to the level of “some fact

disclosed in the complaint [that] necessarily defeats . . . [P]laintiff’s claim.” Id.

(citation omitted). The Agreement does not indicate whether the Fees were, in fact,

assessed for past, current, or future services. Such evidence would presumably be the BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

subject of discovery on remand.

C. Statute of Limitations

¶ 18 On appeal, the Town presents an alternative argument that this action is time-

barred by N.C. Gen. Stat. § 160A-393.1, in the event that this Court determines that

the Fees were assessed pursuant to the Ordinance, rather than the Agreement.

However, this assertion lacks merit, as it is foreclosed by our Supreme Court’s

decision in Quality Built Homes Inc. v. Town of Carthage (Quality Built Homes II),

371 N.C. 60, 813 S.E.2d 218 (2018).

¶ 19 While the Town disagrees with Plaintiff’s allegation that the Fees were

unlawful capacity fees, the Town maintains that even assuming, arguendo, that

Plaintiff is correct, “Plaintiff’s claim is time-barred because it was brought more than

one year after the regulation was applied to Plaintiff.” The Town asserts that former

N.C. Gen. Stat. § 160A-393.1’s one-year statute of limitations applies to this case

because “the nature of Plaintiff’s challenge and relief sought is to a development

regulation.”

¶ 20 However, in Quality Built Homes II, our Supreme Court considered, inter alia,

whether the plaintiffs’ claims against the Town of Carthage—first addressed in

Quality Built Homes I—were time-barred “by the one-, two-, three-, or ten-year

statute[s] of limitations[,]” and if so, which one applied. 371 N.C. at 61, 813 S.E.2d at

220. Our Supreme Court noted that “the essence of [Quality Built Homes I] was that BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

the Town had acted unlawfully by assessing a water and sewer impact fee not

authorized” by the Public Enterprise Statutes, and concluded that “the claim

recognized in [Quality Built Homes I] was, when viewed realistically, one resting

upon an alleged statutory violation that resulted in the exaction of an unlawful

payment which [the] plaintiffs had an inherent right to recoup.” Id. at 73, 813 S.E.2d

at 228. Accordingly, our Supreme Court concluded that N.C. Gen. Stat. § 1-52(2)’s

three-year statute of limitations for liabilities applied in that case. Id. at 74, 813

S.E.2d at 228.

¶ 21 Although the Town of Carthage “asserted that a number of shorter limitations

periods” should have governed, our Supreme Court disagreed. Of particular relevance

here, our Supreme Court reasoned that it was “unable to conclude that the one-year

statute[s] of limitations set out in N.C.G.S. §§ 160A-364.1 and 1-54(10)” applied

because the plaintiffs’ claims did “not rest upon a challenge to the validity of the

Town’s zoning or unified development ordinances.” Id. at 74 n.7, 813 S.E.2d at 228

n.7 (emphasis added).

¶ 22 Notwithstanding the Town’s arguments on appeal, we are unable to

distinguish the nature of the claim in Quality Built Homes I from the claims that

Plaintiff raises here. As in that case, “the essence” of Plaintiff’s claims is “that the

Town . . . acted unlawfully by assessing a water and sewer impact fee not authorized”

by the Public Enterprise Statutes. Id. at 73, 813 S.E.2d at 228. These claims are thus BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

“resting upon an alleged statutory violation that resulted in the exaction of an

unlawful payment which [Plaintiff] ha[s] an inherent right to recoup.” Id. We

conclude that the reasoning of Quality Built Homes II applies with equal force to the

case before us, and the Town’s argument in the alternative is overruled.

III. Conclusion

¶ 23 After careful review of Plaintiff’s complaint, we cannot say that “no law

supports . . . [P]laintiff’s claim[,]” nor that the complaint “reveals on its face the

absence of facts sufficient to make a claim” or that “some fact disclosed in the

complaint necessarily defeats . . . [P]laintiff’s claim.” Broad St. Clinic Found., 273

N.C. App. at 5, 848 S.E.2d at 228 (citation omitted). Viewing Plaintiff’s complaint in

the light most favorable to Plaintiff, construing the complaint liberally and taking as

true the allegations contained therein, the trial court erred in granting the Town’s

motion to dismiss. Further, the Town’s alternative argument that Plaintiff’s action is

time-barred is specifically foreclosed by Quality Built Homes II and provides no

additional support for the trial court’s order granting the Town’s motion to dismiss.

¶ 24 Accordingly, the trial court’s order is reversed and this case is remanded for

further proceedings. We offer no opinion on the validity of Plaintiff’s claim at this

stage of the litigation, and we anticipate that the development through discovery of

a more fulsome record will provide the trial court with the evidence required to

determine whether Plaintiff’s claims have merit. BILL CLARK HOMES OF RALEIGH, LLC V. TOWN OF FUQUAY-VARINA

REVERSED AND REMANDED.

Judges INMAN and COLLINS concur.